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Facts
The assessee filed a penalty appeal for Assessment Year 2011-12 against a penalty of Rs. 1,38,00,000/- levied under Section 271D of the Income Tax Act for accepting cash loans in contravention of Section 269SS. The appeal, filed with a delay of approximately 960 days, was initially dismissed as infructuous by the Ld. CIT(A) because the assessee had opted for the Vivad Se Vishwas (VSV) Scheme for the original quantum addition.
Held
The Tribunal condoned the significant delay, emphasizing that substantive justice should prevail over procedural technicalities and finding no mala fide intention on the assessee's part. It held that penalty proceedings under Section 271D are independent of quantum additions settled under the VSV Scheme. Consequently, the Tribunal remitted the appeal back to the Ld. CIT(A) for a fresh consideration on the merits of the penalty, ensuring a proper opportunity of hearing for the assessee.
Key Issues
Whether the delay in filing the appeal should be condoned and whether penalty proceedings under Section 271D are independent of quantum additions settled under the Vivad Se Vishwas Scheme, thus requiring separate adjudication.
Sections Cited
271D, 269SS, 253, 250, 144, 147, 154
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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & MS. PADMATHY S.
Per Smt. Beena Billai, JM: Present penalty appeal filed by the assessee arises out of order dated 03/11/2022 passed by NFAC, Delhi [hereinafter “the Ld. CIT(A)”] for assessment year 2011-12 on the following grounds:-
“1. The Penalty Older passed U/s 27ID of the Income Tax Act 1961 la illegal, invalid and bad in law.
On the facts and circumstances of the case as well in law the Learned Assessing officer erred leaving the penalty U/s 271D at Rs 1,38,00,000/- is unjustified. unwarranted and excessive.
3. The Learned Assessing officer erred in law by levying the penalty U/s 27ID without considering the facts and circumstances of the case. The same may be deleted.
4. That learned AO has erred in proponing the penalty Us 271 D of the Income Tax Act 1961 that assessee had accepted cash loans exceeding Rs 20000/- in contravention of the section 269 SS of the I T Act 1961 without considering the facts, circumstances of the case and expediency of the transaction.
5. That the learned assessing officer has erred in law and not justified in proceeding with the assessment without giving proper and reasonable opportunity of being heard in this matter and the principles of natural justice thereby rendering the order void ab-initio.
That interest charged under the Income tax Act, 1961 may kindly be deleted.
The appellant craves leave to amend, add or take a new ground or grounds at the time of hearing.” 2. At the outset, we note from the records that there is delay of about 960 days in filing the present appeal before this Tribunal. Assesse has furnished an application seeking condonation of delay vide letter dated 16/09/2025, which has been filed online stating as under:-
1. “BEFORE THE HON’BLE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH, MUMBAI ASSESSES NAME- SATBIR KUMAR SARLIA PAN NO. - AIOPS1883K A.Y. - 2011-2012
Subject: - Application for Condonation of Delay filing of ITAT Hon’ble Sir, The appellant most respectfully submits this application seeking condonation of delay in filing the appeal before the Hon’ble Income Tax Appellate Tribunal under section 253 of the Income Tax Act, 1961, on the following grounds: 1. That the applicant is an assessee under the Income-tax Act, 1961 and the present appeal is being filed against the order passed by the Ld. Commissioner of Income Tax (Appeals) under section 250 of the Act dated 03/11/2022 in relation to the penalty order under section 271D pertaining to the assessment year" 2011-2012 and the appeal is delayed by 989 days.
2. That the appellant humbly submits that there has been a delay in filing the present appeal before the Hon’ble Tribunal. The delay has occurred due to bonafide reasons which were beyond the control of the appellant, as detailed hereunder.
3. The appellant opted for the Vivad Se Vishwas (VSV) Scheme under the VSV Act, 2020 in relation to the quantum order passed under section 144 r.w.s. 147 for AY 2011-12 by duly filing Form-1 and making full payment through Form-4, resulting in issuance of Form-5 on 05/07/2022. The appellant has also filed CIT appeal against the penalty order under section 27ID on 21/12/2020 and was dismissed by the CIT(A) on 03/11/2022 citing the VSV settlement, prompting the appellant to file a rectification application under section 154 on 09/08/2025, which is still pending before the CIT(A).
The appellant, under the bonafide belief that the rectification would be processed but it is still pending for disposal and therefore the appellant did not approach the Hon’ble Tribunal earlier. The present appeal before the ITAT is being filed as a protective measure to safeguard the appellant’s interest.
5. The appellant is hereby enclosing a copy of the affidavit in support of the present application for condonation of delay.
6. The delay in filing the appeal is purely caused by exceptional circumstances, and is not attributable to any negligence, inaction, or deliberate default on the part of the appellant. PRAYER In view of the foregoing, the appellant most humbly prays that this Hon’ble Tribunal may graciously be pleased to: a) Condone the delay in filing the appeal supported with affidavit b) Admit and hear the appeal on merits SATBIR KUMAR SARLIA (PAN: AIOPS1883K)
Place: Thane Date: 16/09/2025”
2.1. Assessee has furnished affidavit in support of the same reiterating same reasons as above that caused delay in filing the present appeal before this Tribunal. None has appeared on behalf of the assessee today. However, from the e-filing portal of this Tribunal, it is noted that the assessee has filed all necessary submission to decide the issue in hand. Considering the fact that all necessary materials are already available on record, we are disposing off this appeal ex parte by observing as under:-
2.2. It is noted from the record that, assessee has submitted that, the Ld.CIT(A) dismissed the appeal treating it as infructuous in terms of VSVS Act. However, it is submitted by the assessee that the said VSV application pertains to original quantum appeal and not in respect of the penalty proceedings u/s 271D of the Act.
On perusal of the condonation petition, it is noted that, assessee had opted for VSV Scheme, 2022, in respect of original quantum order passed u/s 144 r.w.s. 147 of the Act, dated 27/06/2019. The assessee accordingly made full and final payment by furnishing Form 4 in lieu of which Form 5 dated 05/07/2022, was issued by the authorities for assessment year 2011-12.
3.1. The assesse submitted that, in view of the above the assessee had also filed an application u/s 154 of the Act on 09/08/2025, which is pending before the Ld.CIT(A)/NFAC, requesting to rectify the mistake that is apparent from record. The assessee has submitted that, since the 154 application was filed, assessee did not immediately file appeal before this Tribunal against the impugned order. However, as a way of abundant caution and to protect his interest, the present appeal was filed with a delay of about 960 days. It is submitted by the assessee in his submission that, he was under bonafide belief regarding the rectification to be processed but the same is still pending for disposal.
3.2. The assessee has pleaded for a sympathetic approach under the circumstances as there was no malafide intention on behalf of the assessee in not filing the present appeal before this Tribunal within the period of limitation.
3.3. On the contrary, the Ld.DR though objected to the submissions that are available on record filed by the assessee, could not controvert the reasoning that caused the delay on behalf of the assessee in filing the present appeal before this Tribunal.
We have perused the submissions advanced by both the sides in light of the records placed before us.
4. It is noted that, assessee has furnished elaborate submissions in respect of the delay as well as filed its submissions in respect of the fact that, the Ld.CIT(A)/NFAC has erroneously dismissed the appeal as infructuous. As all material facts are available on record to dispose of the present appeal, we are hearing the present appeal ex parte based on the submissions made in the paper book filed on 18/11/2025.
4.1. It is noted that there is no malafide intention on behalf of assessee in not filing the present appeal before the Ld.CIT(A), within the period of limitation. Nothing to establish any such intention has been filed by the revenue before this Tribunal. In our opinion there was sufficient cause for condoning the delay as observed by Hon’ble Supreme Court in case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471 in support of his contentions. 4.2. We refer to the Third Member decision of Hon’ble Chennai, ITAT in the case of People Education & Economic Development Society Vs/ ITO reported in 100 ITD 87 (TM) (Chen), wherein it was held that "when substantial justice and technical consultation are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of non-deliberate delay".
4.3. It is also necessary to ascertain whether there was excessive or inordinate delay in the present facts of the case. Hon’ble Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered a situation of condonation of delay and held that where there exists a reasonable cause, period of delay may not be a relevant factor. Hon’ble Madras High Court relying on this principle had condoned the delay of nearly 21 years.
4.4. We also refer to the decision of Co-ordinate Bench of this Tribunal in the case of Bajaj Hindusthan Ltd. v. Jt. CIT (AT) (277 ITR 1) wherein this Tribunal has condoned the delay of 180 days when the appeal was filed after the pronouncement of the Judgment of the Hon’ble Supreme Court. It was noted that, the revenue had not file any counter-affidavit opposing the application of the assessee for condonation of delay. The Hon’ble Supreme Court under similar circumstances had noted in case of Mrs. Sandhya Rani Sarkar vs. Smt. Sudha Rani Debi (AIR 1978 SC 537) held that non-filing of affidavit in opposition to an application for condonation of delay may be a sufficient cause to condone the delay.
4.5. In the present facts of the case, we note that no such affidavit has been furnished by the revenue countering the condonation application of the assessee. At this juncture, we also take assistance and support from the observation of Justice Krishna Iyer wherein he has quoted at various occasion while dealing with technicalities that "any interpretation that alludes substantive justice is not to be followed and that substantive justice must always prevail over procedural technicalities". Similar is the observation by Hon’ble Supreme Court in the case of Collector Land Acquisition Vs. Mst. Katiji & Ors., reported in (1987) 167 ITR 471.
Based on the above discussions, in the interest of justice, we condone the delay in filing the present appeal before this Tribunal.
On merits of the case, the submissions by the assessee are very well taken. There is no dispute that the assessee had settled the quantum addition for the year under consideration that arose out of assessment order completed u/s 144 of the Act. However, penalty u/s 271D of the Act is independent of the quantum addition and is not in consequence of whether the quantum addition is sustained or not. Thus, even though assessee settled the quantum addition under VSV Scheme, the penalty proceedings has to be independently considered unless assessee filed VSV even for the penalty proceedings, which is not the situation in hand.
5.1. The Ld.CIT(A) has thus erred in treating the penalty appeal as infructuous based on the VSV settlement by the assessee in respect of the quantum addition. We, therefore, remit this appeal back to the Ld.CIT(A) and direct the Ld.CIT(A) to consider the claim of the assessee in accordance with law. Needless to say that proper opportunity of hearing, must be granted to the assessee, in accordance with law.
Accordingly, the grounds raised by the assessee stand partly allowed for statistical purposes.
In the result, appeal filed by the assessee stands partly allowed for statistical purposes.
Order pronounced in the open court on 05/12/2025