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2025 (4) TMI 912 - AT - Income TaxEx parte orders passed u/s 144 - applications for condonation of delay of 1716 days in filing appeals against assessment and penalty orders - income under presumptive taxation provisions (Section 44AD of the Act) at 8% of total incomes for the relevant assessment years - HELD THAT - It is crystal clear that appellant/assessee had failed to comply with the several notices during the assessment proceedings. CIT(A) vide order dismissed the applications for condonation of delay of 1716 days in filing appeals. Appellant/assessee claims that due to custody and mental illness he could not file appeals within period of limitation. In applications dated 24.03.2024 appellant/assessee requested condonation of delay in filing appeals due to custody and mental health setting aside ex parte order under Section 144 of the Act and reassessment income as per section 44AD of the Act and to compute total income at 8% of Rs. 43, 00, 550/- and Rs. 17, 86, 580/- for AYs 2016-17 and 2017-18 respectively.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Appellate Tribunal (AT) in these appeals were:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Condonation of Delay in Filing Appeals Relevant legal framework and precedents: Under the Income-Tax Act, appeals must be filed within prescribed time limits. However, the Tribunal has discretionary power to condone delay if sufficient cause is shown. Precedents establish that physical or mental incapacity, including custody, can constitute sufficient cause. Court's interpretation and reasoning: The appellant contended that delay was due to custody and mental health issues, which prevented timely filing. The Tribunal examined the appellant's submissions and the record of non-compliance with notices. Key evidence and findings: The appellant failed to comply with multiple notices under Sections 142(1) and 143(2) of the Act during assessment proceedings. The delay in filing appeals was 1716 days, a significant period. However, the appellant's claim of custody and mental illness was considered a plausible explanation for non-compliance and delay. Application of law to facts: While the appellant did not assist the department during assessment, the Tribunal recognized that the reasons for delay fell within the ambit of sufficient cause under law. The Tribunal exercised its discretion in favor of condoning the delay to ensure justice. Treatment of competing arguments: The Revenue argued that the appellant's failure to assist the department warranted dismissal of the appeals and rejection of condonation. The Tribunal balanced this against the appellant's health and custody claims and found the latter to be sufficient cause. Conclusion: The Tribunal set aside the order dismissing condonation applications and allowed condonation of delay for filing appeals. Issue 2: Validity of Ex Parte Orders under Section 144 of the Act Relevant legal framework and precedents: Section 144 allows the Assessing Officer (AO) to make best judgment assessments if the assessee fails to comply with notices or furnish information. Courts have held that such orders must be based on material on record and are subject to scrutiny if the assessee was denied opportunity to be heard. Court's interpretation and reasoning: The AO passed ex parte orders for AY 2016-17 and 2017-18 due to non-compliance by the appellant, making substantial additions to income. The Tribunal noted that the appellant's failure to respond justified the AO's exercise of power under Section 144 but also recognized that the appellant's health and custody issues warranted reconsideration. Key evidence and findings: The AO made additions of Rs. 9,31,000/- and Rs. 21,02,250/- for AY 2016-17, and Rs. 14,60,000/- for AY 2017-18. The appellant did not respond to notices issued during assessment proceedings. Application of law to facts: Given the appellant's failure to comply, the AO was empowered to pass ex parte orders. However, the Tribunal found it just to set aside these orders and direct fresh assessment proceedings to allow the appellant to present his case, especially considering the appellant's request for reassessment under presumptive taxation. Treatment of competing arguments: The Revenue emphasized the appellant's non-cooperation as justification for the ex parte orders. The Tribunal balanced this against the appellant's health and custody claims and the interest of justice. Conclusion: The ex parte orders under Section 144 were set aside, and the matter was remanded for fresh adjudication in accordance with law. Issue 3: Penalty Order under Section 271(1)(c) of the Act Relevant legal framework and precedents: Penalty under Section 271(1)(c) is leviable for concealment of income or furnishing inaccurate particulars. Such penalties are consequential to the assessment order and depend on the correctness of the assessment. Court's interpretation and reasoning: The penalty order dated 28.06.2019 for AY 2016-17 was passed consequent to the assessment order. Since the assessment order was set aside, the Tribunal found it appropriate to set aside the penalty order as well. Key evidence and findings: The penalty was directly linked to the additions made in the assessment order. Application of law to facts: As the assessment order was remanded, the penalty order could not stand independently and was set aside. Treatment of competing arguments: No separate arguments on penalty were detailed, as penalty was consequential. Conclusion: The penalty order was set aside. Issue 4: Reassessment of Income under Section 44AD of the Act Relevant legal framework and precedents: Section 44AD provides for presumptive taxation at a prescribed rate (8% in this case) for eligible businesses, simplifying income computation. Court's interpretation and reasoning: The appellant requested reassessment of income on presumptive basis at 8% of total income for AYs 2016-17 and 2017-18. The Tribunal found it appropriate to allow fresh assessment proceedings to consider this claim. Key evidence and findings: The appellant's request was made in applications for condonation of delay, citing health and custody reasons for delay in filing appeals. Application of law to facts: The Tribunal directed the AO to pass fresh orders in accordance with law, including consideration of the appellant's claim under Section 44AD. Treatment of competing arguments: The Revenue's objection to non-cooperation was noted but the Tribunal prioritized the interest of justice. Conclusion: The matter was remanded for fresh assessment considering the appellant's claim under Section 44AD. 3. SIGNIFICANT HOLDINGS The Tribunal held that:
The core principles established include:
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