2025 (7) TMI 879 - AT - Income Tax

Delay of 2037 days in filing of appeal - As alleged assessee has failed to show any sufficient cause u/s 249(3) for assessee s failure to file the appeal within the prescribed period of limitation u/s 249(2) HELD THAT - We are of the considered view that income of the assessee is required to be computed and assessed according to law by following due process. In the instant case both at the original stage of assessment proceedings before Ld. A.O and so also at 1st appellate stage before CIT(A) due to default of earlier counsel who was engaged by the assessee no effective steps were taken . Old counsel s affidavit dated 14.06.2025 is self explanatory wherein he has accepted lapses on his part resulting into serious prejudices to the assessee. Further email correspondences exchanged between assessee and old counsel too proves this fact of lapses on part of earlier counsel of the assessee. In the premises set out herein above we set aside the impugned order and remand the case back to the file of Ld. A.O to pass a fresh assessment order on denovo basis according to law as soon as possible preferably within a period of six months from the date of receipt of this order.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

(a) Whether the delay of 2037 days in filing the first appeal against the assessment order under Section 144 of the Income Tax Act, 1961, can be condoned on grounds of sufficient cause under Section 249(3) read with Section 5 of the Limitation Act;

(b) Whether the impugned assessment order passed under Section 144 of the Act and the appellate order dismissing the appeal on the ground of delay are legally sustainable and in accordance with principles of natural justice;

(c) Whether the addition made by the Assessing Officer towards unexplained investment in immovable property is justified given the assessee's source of income and borrowings;

(d) Whether the penalty order under Section 271(1)(c) of the Act, which is consequential to the quantum assessment, requires reconsideration in light of the remand of the quantum proceedings.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Condonation of Delay in Filing Appeal

Relevant Legal Framework and Precedents: The filing of an appeal before the Commissioner of Income Tax (Appeals) under Section 246A is subject to strict limitation prescribed under Section 249(2) of the Income Tax Act. However, Section 249(3) empowers the appellate authority to admit an appeal after the expiry of the prescribed period if sufficient cause is shown for the delay, in consonance with Section 5 of the Limitation Act, 1963. The principles governing condonation of delay require the appellant to demonstrate bona fide reasons beyond his control and absence of negligence or willful default.

Court's Interpretation and Reasoning: The Tribunal noted that the assessee, a commercial pilot employed with a foreign airline, was frequently traveling and was unaware of the assessment order passed under Section 144 due to non-receipt of physical communication and lack of access to the Income Tax e-filing portal. The assessee became aware of the order only after checking the portal years later and promptly applied for a copy and filed the appeal. The assessee's earlier counsel, who was responsible for filing the appeal within time, admitted to lapses in professional duty and tendered an unconditional apology by affidavit, which was uncontroverted by the Revenue.

Key Evidence and Findings: The Tribunal relied on the affidavit of the earlier counsel admitting negligence, email correspondences between assessee and counsel showing attempts to manage the case, and the detailed explanation of the assessee's professional commitments and relocation impacting timely receipt of notices. The CIT(A) had rejected the condonation petition primarily on the ground that the assessee was aware of the assessment proceedings as evidenced by an adjournment letter filed without power of attorney and the timely filing of appeal against penalty order.

Application of Law to Facts: The Tribunal found that the CIT(A) did not adequately appreciate the genuine difficulties faced by the assessee, including his occupation as a commercial pilot and the admitted lapses of the earlier counsel. The principles of natural justice and the requirement to consider sufficient cause in a broad and liberal manner were not followed. The Tribunal emphasized that the delay was neither intentional nor deliberate and that the assessee acted promptly once aware of the assessment order.

Treatment of Competing Arguments: The Revenue contended that the assessee was aware of the proceedings and that the delay was inordinate and unexplained. However, the Tribunal gave weight to the affidavit of the earlier counsel and the evidence of the assessee's professional constraints, finding the Revenue's arguments insufficient to deny condonation.

Conclusions: The Tribunal concluded that the delay in filing the appeal was due to sufficient cause and should have been condoned. The rejection of the appeal on the ground of delay was therefore not sustainable.

Issue (b): Legality and Validity of the Impugned Assessment and Appellate Orders

Relevant Legal Framework and Precedents: Assessment under Section 144 is ex-parte and is generally passed where the assessee fails to comply with notices or does not file return. The principles of natural justice require that the assessee be given an opportunity to be heard and that the assessment be based on relevant material and proper procedure. The appellate authority must consider the appeal on merits if admitted.

Court's Interpretation and Reasoning: The Tribunal observed that both the assessment order and the appellate order were not decided on merits but were the result of procedural defaults and non-appearance caused by the earlier counsel's lapses. The Tribunal found that the principles of natural justice were violated as the assessee was deprived of an opportunity to present his case effectively at both stages.

Key Evidence and Findings: The Tribunal noted that the AO had completed assessment ex-parte due to non-filing of return and non-cooperation, and the CIT(A) dismissed the appeal solely on the ground of delay without considering the merits. The affidavit of the earlier counsel and email exchanges demonstrated that the assessee had intended to contest the proceedings but was prejudiced by professional lapses.

Application of Law to Facts: The Tribunal held that the assessment and appellate orders were incomplete and legally unsustainable as they were not founded on substantive examination of the facts or law. The denial of opportunity to the assessee to contest the additions amounted to violation of natural justice.

Treatment of Competing Arguments: The Revenue's suggestion to remand the matter for fresh adjudication was accepted by the Tribunal as appropriate remedy to cure the procedural defects and ensure adjudication on merits.

Conclusions: The Tribunal set aside both the impugned assessment and appellate orders and remanded the matter to the Assessing Officer for fresh adjudication according to law and on merits.

Issue (c): Addition on Account of Unexplained Investment in Immovable Property

Relevant Legal Framework and Precedents: Under the Income Tax Act, additions on account of unexplained investments can be made if the assessee fails to satisfactorily explain the source of funds for acquisition of assets. However, if the assessee demonstrates sufficient source of income or legitimate borrowings, such additions are liable to be deleted.

Court's Interpretation and Reasoning: The Tribunal did not undertake a detailed analysis of this issue at this stage as the matter was remanded for fresh adjudication. It noted that the assessee had contended that the investment was funded through salary income, borrowings from father, and home loan from bank.

Application of Law to Facts: Since the assessment was set aside for fresh consideration, the AO was directed to examine the evidence regarding source of funds and make a reasoned decision in accordance with law.

Conclusions: The issue of addition on unexplained investment was left open for fresh adjudication by the AO on merits.

Issue (d): Penalty under Section 271(1)(c)

Relevant Legal Framework and Precedents: Penalty under Section 271(1)(c) is leviable for concealment of income or furnishing inaccurate particulars. However, penalty proceedings are consequential to the quantum assessment and depend on the outcome of the assessment proceedings.

Court's Interpretation and Reasoning: Since the quantum assessment was remanded for fresh adjudication, the Tribunal held that penalty proceedings must also be remanded to the AO for fresh consideration in light of the fresh assessment order.

Conclusions: The penalty appeal was allowed for statistical purpose and remanded for fresh adjudication.

3. SIGNIFICANT HOLDINGS

"We are of the considered opinion that the 'impugned assessment order' as well as 'impugned order' are not on merits. We are of the considered view that income of the assessee is required to be computed and assessed according to law by following due process."

"The delay was neither intentional nor deliberate and that the assessee acted promptly once aware of the assessment order."

"The affidavit of the earlier counsel is self explanatory wherein he has accepted lapses on his part resulting into serious prejudices to the assessee."

"Both at the original stage of assessment proceedings before Ld. A.O and so also at 1st appellate stage before CIT(A) due to default of earlier counsel who was engaged by the assessee no effective steps were taken."

"The 'impugned order' is set aside and matter is remand back to the file of Ld. A.O to pass a fresh order which order should be reasoned one on denovo basis."

"In result appeal of the assessee is allowed for statistical purpose."

Core principles established include the necessity to condone delay where sufficient cause is shown, especially when delay arises from circumstances beyond the assessee's control and professional lapses by authorized representatives; the requirement that assessments and appeals be decided on merits respecting principles of natural justice; and the propriety of remanding matters for fresh adjudication where procedural defects and non-meritorious orders have prejudiced the assessee.