JALAK TRADING PRIVATE LIMITED,NAVI-MUMBAI vs. DCIT- CC 8(1), MUMBAI

The learned Authorised Representative (AR) submitted that there was a delay in filing the present appeal. Reiterating the averments contained in the petition for condonation of delay and the affidavit of the Director of the assessee company, he submitted

On the substantive issue, the learned AR submitted that the Assessing Officer had issued the show-cause notice dated 19.11.2022 requiring the assessee to explain the allowability of expenditure aggregating to Rs.18,87,426/- by 23.11.2022. The assessee sought an adjournment of one week, which was declined on the ground that the assessment was getting barred by limitation. The assessee thereafter furnished a detailed submission dated 29.11.2022 explaining the nature and necessity of the expenditure, but the same was not considered by the Assessing Officer. He further submitted that, on account of non-compliance during the first appellate proceedings, the learned CIT(A) confirmed the disallowance without the supporting evidence being examined on merits.

The learned AR fairly submitted that the allowability of the impugned expenditure requires verification of the books of account, ledgers, invoices, vouchers and other supporting documents. He accordingly requested that, instead of adjudicating the factual controversy for the first time at the stage of the second appeal, the

The learned Departmental Representative did not object to the condonation of delay, having regard to the explanation furnished in the condonation petition and the supporting affidavit. He also did not object to the matter being restored to the file of the Assessing Officer for fresh adjudication, subject to the assessee furnishing the necessary evidence and the Assessing Officer being permitted to examine the allowability of each item of expenditure independently in accordance with law.

Regarding the delay in fining appeal before us, the explanation furnished by the assessee is that the impugned order dated 03.12.2025 was uploaded on the income-tax portal, but the assessee was not aware of its passing. According to the sworn affidavit of the Director, the assessee came to know about the disposal of the quantum appeal only when it received the show- cause notice dated 28.04.2026 proposing penalty under section 270A of the Act. The said notice referred to the order of the learned CIT(A) dated 03.12.2025 and recorded that the disallowance made by the Assessing Officer had been upheld. Upon becoming aware of the appellate order, the assessee forwarded the matter to its counsel for preparation and filing of the present appeal.

Section 253(5) of the Act empowers the Tribunal to admit an appeal after the expiry of the prescribed period where it is satisfied that there was sufficient cause for not presenting the appeal within time. The expression “sufficient cause” must receive a justice-

In Collector, Land Acquisition, Anantnag v. Mst. Katiji [1987] 167 ITR 471 (SC), the Hon’ble Supreme Court observed: “When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred...” 11. In N. Balakrishnan v. M. Krishnamurthy [1998] 7 SCC 123, the Hon’ble Supreme Court explained: “Length of delay is no matter, acceptability of the explanation is the only criterion.” 12. More pertinently, in Senior Bhosale Estate (HUF) v. ACIT [2019] 419 ITR 732 (SC), the Hon’ble Supreme Court condoned a considerably longer delay where the assessee pleaded lack of knowledge of the earlier order and acted after acquiring such knowledge. The relevant observation reads: “Unless that fact was to be refuted, the question of disbelieving the stand taken by the appellant(s) on affidavit, cannot arise...” 13. Applying the aforesaid principles, we find that the explanation furnished by the assessee is specific and supported by a sworn affidavit. The date on which the assessee claims to have acquired knowledge, namely 28.04.2026, is referable to a departmental penalty notice and is, therefore, capable of verification from the records of the Revenue itself. The explanation is not vague or founded merely upon an unsubstantiated assertion of inadvertence.

We further find that, after allegedly acquiring knowledge on 28.04.2026, the assessee took steps to obtain professional advice, prepare the appeal and file the same by the end of May 2026. The intervening period cannot, in the circumstances, be regarded as unreasonable. No advantage could have accrued to the assessee by

The discrepancy between 89 days and 91 days relates to the computation and the stated filing date. It does not affect the central explanation that the assessee became aware of the impugned order only upon receipt of the penalty notice dated 28.04.2026. Even otherwise, we have considered the application by adopting the longer period of 91 days. The Revenue suffers no irreparable prejudice if the matter is heard on merits, since it will have a full opportunity to contest the claim of the assessee. Refusal to condone the delay, on the other hand, would foreclose adjudication of the substantive controversy without its merits being properly examined.

Having regard to the totality of the circumstances, the moderate length of the delay, the sworn explanation, the identifiable event through which knowledge was acquired, the steps taken thereafter and the absence of any apparent mala fide advantage, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed period. Accordingly, in exercise of the power conferred under section 253(5) of the Act, the delay of 91 days is condoned and the appeal is admitted for adjudication.

The assessee filed its original return of income on 08.02.2021 declaring a loss of Rs.7,61,482/- and thereafter filed a revised return on 30.03.2021 declaring a loss of Rs.19,27,569/-. During

The Assessing Officer issued a show-cause notice dated 19.11.2022 requiring compliance by 23.11.2022. The assessee sought an adjournment of one week on 23.11.2022. The Assessing Officer declined the request on the ground that the assessment was getting barred by limitation on 28.11.2022 and proceeded to disallow the entire expenditure under section 37(1) of the Act. The assessment order, however, bears the date 24.03.2023. This apparent inconsistency between the stated date of limitation and the actual date of the assessment order remains unexplained from the material before us.

The assessee maintained before the learned CIT(A) that it had furnished a detailed submission dated 29.11.2022 explaining the nature and necessity of the expenditure. The learned CIT(A), however, found that the assessee had not produced any acknowledgement, ITBA reference number or other evidence establishing that the submission dated 29.11.2022 had been filed before the Assessing Officer. It is also a matter of record that the assessee did not respond to the notices issued by the learned CIT(A). The learned CIT(A), therefore, initially dismissed the appeal for non-prosecution and thereafter confirmed the disallowance on the basis that the assessee had failed to produce the books of account, invoices, vouchers or evidence establishing the business nexus of the expenditure.

The controversy requires factual examination of the nature of each item of expenditure, the subsistence or cessation of the assessee’s business, the statutory and corporate obligations requiring the expenditure, and the nexus of each expense with the business of the assessee. The mere absence of business receipts during a particular year, though relevant, cannot by itself conclude whether the business had permanently ceased or was merely dormant and whether expenditure necessary for maintaining the corporate and business establishment was allowable. Conversely, the description of an expenditure in the accounts does not establish its admissibility unless the assessee substantiates its nature, genuineness and business nexus. These matters cannot appropriately be decided without examining the underlying evidence.

In these circumstances, and in the interest of substantial justice, we set aside the impugned order of the learned CIT(A) on the issue of disallowance of Rs.18,87,426/- and restore the matter to the file of the Assessing Officer for fresh adjudication in accordance with law.

We clarify that we have not expressed any opinion on the ultimate allowability of the expenditure. All factual and legal contentions are left open for examination by the Assessing Officer.

Accordingly, the substantive ground raised by the assessee is allowed for statistical purposes.

In the result, the appeal of the assessee is allowed for statistical purposes.