JANTA WAFERS PVT LTD,MUMBAI vs. ITO, MUMBAI

Briefly stated, the assessment was completed under section 144 of the Act on 30.09.2019, determining the total income at Rs.1,16,91,000/- by treating the cash deposits in the assessee’s bank account as unexplained money under section 69A of the Act and applying section 115BBE. Consequent thereto, the Assessing Officer, by order dated 18.09.2021, imposed penalty of Rs.9,03,130/- under section 271AAC(1) of the Act.

The assessee instituted both appeals before the learned CIT(A) on 06.03.2026. The quantum appeal and the penalty appeal were delayed by 2,320 days and 1,601 days, respectively. The assessee attributed the delay to its reliance upon the earlier Chartered Accountant, who had allegedly failed to file the appeals despite assurances. The learned CIT(A) did not accept the explanation and dismissed both appeals as barred by limitation, without adjudicating the grounds on merits.

Aggrieved, the assessee is in appeal before us. The assessee has raised the following grounds of appeal:

During the course of hearing before us, the learned Authorised Representative (AR) submitted that both the appeals were dismissed by the learned CIT(A) solely on the ground of delay and that none of the substantive grounds was adjudicated. It was contended that no effective opportunity of hearing was afforded to the assessee before rejecting the applications for condonation of delay. The learned AR submitted that the explanation concerning reliance upon the earlier Chartered Accountant ought to have been examined from a justice- oriented perspective, having regard to the nature and magnitude of the addition and the fact that the assessment itself had been completed ex parte under section 144 of the Act.

It was further submitted that the addition represented the entire amount of cash deposited in the bank account and that the assessee

The learned Departmental Representative relied upon the orders passed by the learned CIT(A) and pointed out the non-compliance at the stage of assessment proceedings.

We have considered the rival submissions and perused the material available on record. The limited controversy before us is whether, in the facts of the present case, the discretion vested in the learned CIT(A) under section 249(3) of the Act was exercised after taking into account all relevant considerations.

There can be no dispute that the law of limitation serves an important purpose and that an assessee seeking condonation must demonstrate sufficient cause. Equally, the expression “sufficient cause” is required to be applied in a manner that advances substantial justice, subject to the absence of mala fides, deliberate delay or gross and unexplained indifference. The length of delay is material, but it cannot, by itself, become determinative without a proper examination of the explanation and the surrounding circumstances.

The learned CIT(A) has placed considerable emphasis upon the validity of electronic service of the respective orders under Rule 127 of

The explanation of the assessee was that the matter had been entrusted to its earlier Chartered Accountant and that the assessee was continuously assured that the requisite action was being taken. Such an explanation cannot automatically be accepted merely because professional lapse is alleged. At the same time, it cannot be rejected at the threshold on the general premise that a company must, in every situation, bear the consequences of the default of its professional adviser. What is required is a factual examination of the explanation, the assessee’s bona fides, its conduct during the relevant period, the circumstances in which it discovered the default and the promptness of the action taken thereafter.

In Vijay Vishin Meghani v. DCIT, (2017) 398 ITR 250 (Bom.), the Hon’ble jurisdictional High Court considered a delay of 2,984 days attributed to professional advice and observed: “Eventually, an overall view in the larger interest of justice has to be taken. None should be deprived of an adjudication on merits...” 13. The Hon’ble High Court held that reliance upon professional advice could constitute sufficient cause, provided the explanation was bona fide and was not a device to conceal negligence, recklessness or an ulterior purpose. The decision does not lay down that every

In the present case, the learned CIT(A) concluded that the explanation was unsupported by evidence. However, the impugned orders do not disclose the particulars of any effective hearing afforded to the assessee specifically to substantiate the explanation by producing an affidavit of its responsible officer, confirmation or affidavit from the earlier Chartered Accountant, correspondence exchanged with the said professional, the tax arrears notice which allegedly led to discovery of the default, or evidence showing the date on which the new Chartered Accountant was consulted. These are matters capable of factual verification and are directly relevant to the determination under section 249(3) of the Act.

We also find that the applications for condonation were considered substantially in isolation from the nature of the proceedings sought to be pursued. The quantum assessment was completed ex parte under section 144 of the Act and the entire cash deposits aggregating to Rs.1,16,91,000/- were brought to tax under section 69A. The assessment order itself classifies the deposits into pre-demonetisation, demonetisation and post-demonetisation periods, while the paragraph immediately following the table states that cash was deposited only during the demonetisation period. The assessee has also challenged the application of sections 69A and 115BBE and the validity of the assessment under section 144.

We clarify that these observations are not findings on the merits of the addition. They merely demonstrate that the substantive grounds are not ex facie frivolous and that dismissal on limitation would result in those grounds never receiving a first appellate examination. The apparent inconsistencies in the assessment order, the magnitude of the addition, the ex parte nature of the assessment and the absence of any adjudication on the source and character of the deposits constitute relevant surrounding circumstances while exercising judicial discretion. They do not dispense with the requirement of sufficient cause, but they reinforce the need for a careful, evidence- based and justice-oriented consideration of the explanation.

The penalty appeal is integrally connected with the quantum appeal. The penalty order under section 271AAC(1) proceeds entirely upon the addition of Rs.1,16,91,000/- under section 69A and even treats the non-filing of an appeal against the assessment order as indicating acceptance of the addition. The quantum and penalty appeals were, in fact, filed together before the learned CIT(A). Any variation in the quantum addition may have a direct bearing upon the penalty proceedings. The delay in the penalty appeal is also of a different duration and arises from a later order. Its condonation must, therefore, be considered independently, though in the context of the connected quantum proceedings.

Having regard to the totality of the circumstances, we consider it appropriate to set aside both the impugned orders and restore the appeals to the file of the learned CIT(A). The learned CIT(A) shall first

For this limited purpose, the assessee shall be at liberty to place on record an affidavit of its Managing Director or other responsible officer setting out the complete chronology; an affidavit or confirmation from the earlier Chartered Accountant, if available; contemporaneous correspondence or other evidence showing entrustment of the proceedings and subsequent follow-up; a copy of the tax arrears notice which allegedly led to discovery of the non-filing of the appeals; evidence showing the date of consultation with the new Chartered Accountant; and evidence establishing the steps taken after discovering the earlier default.

The learned CIT(A) shall examine the explanation independently in each appeal, having regard to the different dates of the assessment and penalty orders and the distinct periods of delay. The learned CIT(A) shall specifically consider whether the delay was deliberate or mala fide, whether there was gross or incomprehensible indifference on the part of the assessee, whether the explanation concerning professional default is supported by evidence, and whether the assessee acted with reasonable promptitude after acquiring actual knowledge of the default.

If the learned CIT(A), upon such reconsideration, condones the delay in the quantum appeal, all substantive grounds relating to the assessment under section 144, the addition under section 69A and the application of section 115BBE shall be adjudicated on merits by a reasoned and speaking order after permitting the assessee to produce

If the learned CIT(A) reaches a conclusion against condonation in either appeal, the conclusion shall be supported by specific findings upon the evidence and circumstances of that appeal. The decision on condonation in the penalty appeal shall not be made mechanically dependent upon the decision in the quantum appeal.

We make it clear that we have neither condoned the delays ourselves nor expressed any opinion on the merits of the quantum addition or the penalty. All questions are left open for fresh adjudication in accordance with law. The assessee is also directed to cooperate with the first appellate proceedings and not seek adjournment without sufficient cause. In the result, both the appeals are allowed for statistical purposes.