CHANDRAKANT BABALDAS PATEL,PATAN vs. ASSISTANT COMMISSIONER OF INCOME-TAX CENTRAL CIRCLE 8(1), MUMBAI

These appeals, filed by the assessee for Assessment Years 2015-16, 2016-17, 2017-18 and 2019-20, arise from the respective orders passed by the learned Commissioner of Income-tax (Appeals), Mumbai ["learned CIT(A)"]. Since the appeals involve common facts and a common issue relating to the condonation of delay in filing the appeals before the learned CIT(A), they were heard together and are being disposed of by this consolidated order for the sake of convenience and consistency.

The appeal in ITA No. 5071/Mum/2026 for Assessment Year 2015- 16 is taken as the lead appeal. ITA No. 5073/Mum/2026 for the same assessment year relates to the penalty proceedings under section 271C of the Income-tax Act, 1961 ["the Act"]. ITA No. 5075/Mum/2026 and ITA No. 5078/Mum/2026 relate to Assessment Year 2016-17, the former being the quantum appeal and the latter relating to penalty proceedings under section 271C of the Act. ITA No. 5081/Mum/2026 relates to the quantum proceedings for Assessment Year 2017-18. ITA No. 5097/Mum/2026 and ITA No. 5095/Mum/2026 relate to Assessment Year 2019-20, the former being the quantum appeal and the latter relating to penalty proceedings under section 271AAB of the Act.

The brief background giving rise to the present appeals is that a search and seizure action under section 132 of the Act was conducted on 28.03.2019 at the premises at Room No. 39, Building No. 21, 2nd Floor, 3rd Phopalwadi, Bhuleshwar, Mumbai. During the course of the search, cash amounting to Rs.1,45,70,000/- was found and seized. The assessee was present at the premises and his statement was recorded under section 132(4) of the Act. The assessee explained that he was functioning as an employee/manager in connection with the business of M/s Mectec

Consequent to the search, assessments were completed in the case of the assessee for Assessment Years 2013-14 to 2019-20. In respect of Assessment Years 2015-16, 2016-17 and 2017-18, assessments were framed under section 153A read with section 144 of the Act, whereas the assessment for Assessment Year 2019-20 was completed under section 144 of the Act.

It is an admitted position that the appeals before the learned CIT(A) were filed belatedly. As recorded in the appellate order, the quantum appeals for the relevant assessment years were filed on 03.04.2025 against the assessment orders dated 22.09.2021, involving a delay of 1,289 days. The penalty appeals were also filed with corresponding delays. The learned CIT(A), therefore, first examined the applications filed by the assessee seeking condonation of delay.

Before the learned CIT(A), the assessee explained that, subsequent to the search, his employer, Shri Kamlesh Rajnikant Shah, had taken responsibility for handling the assessee's tax matters. It was specifically submitted that the mobile number and e-mail ID registered in the assessee's Income-tax e-filing profile had been changed to those of Shri Kamlesh Rajnikant Shah. Consequently, notices issued by the Department, including the assessment and penalty orders, were not

The assessee also contended before the learned CIT(A) that the cash of Rs.1,45,70,000/- seized during the search was not the assessee's money but belonged to M/s Mectec, proprietary concern of Smt. Neena Kamleshbhai Shah, and that the addition made in the hands of the assessee was, in substance, protective in nature. It was pointed out that the substantive issue relating to the seized cash was connected with the cases of the employer and the proprietrix of M/s Mectec. It was also submitted that the seized cash had not been adjusted against the demand raised in the assessee's case, which, according to the assessee, further supported his contention that the Department was aware of the ownership of the cash.

The learned CIT(A), however, rejected the assessee's plea for condonation of delay. The learned CIT(A) relied upon the general principles governing condonation of delay and concluded that the assessee had failed to establish sufficient cause for the delay. Having rejected the condonation petition in the lead appeal, the learned CIT(A) applied the same reasoning mutatis mutandis to the other appeals and dismissed them without adjudicating the grounds raised by the assessee on merits. The appellate order specifically records that the arguments relating to

Aggrieved by the aforesaid orders, the assessee is in appeal before us. During the course of hearing, the learned Authorised Representative (“ld.AR”) submitted that the learned CIT(A) was not justified in rejecting the applications for condonation of delay and consequently dismissing the appeals without adjudicating the substantive issues raised by the assessee. It was reiterated that the assessment and penalty orders were not communicated to the assessee through his own mobile number or e- mail ID, since the Income-tax profile was being controlled by his employer, Shri Kamlesh Rajnikant Shah, who was then preoccupied with the treatment of his wife, as she was suffering from cancer, to which she unfortunately succumbed. It was submitted that the assessee had no knowledge of the adverse orders until the orders were subsequently accessed from the Income-tax portal. The ld.AR further submitted that the assessee had thereafter acted with due diligence and approached a professional for preparation and filing of the appeals.

The ld.AR further placed reliance on several decisions including the decisions of the Hon’ble Supreme Court in Collector, Land Acquisition, Anantnag v. Mst. Katiji [167 ITR 471], Rafiq and another v. Munshilal and another [AIR 1981 SC 1400], and N. Balakrishnan v. M. Krishnamurthy [7 SCC 123], and submitted that the expression “sufficient cause” is required to be construed liberally so as to advance substantial justice, that the acceptability of the explanation offered, rather than the length of the delay, is the true test for condonation, and that a litigant who has acted diligently and without any mala fide intent ought not to be shut out from adjudication of his rights on merits on account of delay.

The ld.AR also submitted that the facts concerning the seized cash are inextricably connected with the cases of Shri Kamlesh Rajnikant Shah

The learned Departmental Representative supported (“ld.DR”) the orders of the learned CIT(A). He submitted that the delay was substantial and that the assessee had failed to establish sufficient cause before the first appellate authority. It was accordingly contended that the learned CIT(A) was justified in refusing to condone the delay.

We have carefully considered the rival submissions and perused the material available on record. The controversy before us, at this stage, is confined to the question whether the learned CIT(A) was justified in refusing to condone the delay and dismissing the appeals without adjudicating the substantive grounds raised by the assessee.

On examination of the facts, we find that the explanation furnished by the assessee cannot be brushed aside as being devoid of substance. The assessee has specifically stated that the mobile number and e-mail ID in his Income-tax profile had been replaced by those of his employer and that, consequently, notices and orders issued by the Department were not brought to his knowledge. This factual assertion has been consistently made by the assessee and forms part of the statement of facts furnished during the appellate proceedings. It has further been stated that the assessment and penalty orders were ultimately accessed from the

It is well settled that while considering an application for condonation of delay, the expression "sufficient cause" has to receive a pragmatic and justice-oriented interpretation, as held by the Hon’ble Supreme Court in Collector, Land Acquisition, Anantnag v. Mst. Katiji [(1987) 167 ITR 471 (SC)]. It is a settled principle that refusal to condone delay can result in a meritorious matter being thrown out at the threshold, whereas condonation of delay merely enables the cause to be decided on merits after hearing the parties. The Hon’ble Supreme Court has further held, in N. Balakrishnan v. M. Krishnamurthy [(1998) 7 SCC 123], that the length of delay is not by itself material and that the acceptability of the explanation offered is the sole criterion, and in Rafiq and another v. Munshilal and another [AIR 1981 SC 1400], that an innocent litigant ought not to be made to suffer for circumstances beyond his effective control. The object of limitation provisions is not to confer a benefit upon a party who has acted deliberately or negligently, but to ensure that litigation is pursued with reasonable diligence. At the same time, the law of limitation is not intended to operate as an instrument for shutting out a genuine litigant from adjudication of his rights on merits. The material placed before us does not establish that the assessee deliberately chose to allow the statutory period of limitation to expire with the intention of avoiding the appellate process.

In the present case, the circumstances are somewhat peculiar. The search action had resulted in seizure of substantial cash from premises where the assessee was functioning in his capacity as an employee/manager. The assessee had, even before the learned CIT(A), raised a specific contention that the cash belonged to M/s Mectec and that the same issue was connected with the cases of his employer and the

We are also of the view that the learned CIT(A) ought to have considered the peculiar interconnection between the assessee's case and the cases of the persons to whom the assessee claimed the seized cash actually belonged. The very issue concerning the ownership and assessability of the seized cash has implications across the connected cases. The assessee had specifically contended that the cash of Rs.1,45,70,000/- had been disclosed in the books of M/s Mectec and that the assessment of Smt. Neena Kamleshbhai Shah for Assessment Year 2019-20 had been completed without making any substantive or protective addition in respect of the said cash. These contentions may ultimately succeed or fail on merits, but they are certainly matters requiring adjudication and cannot be rendered infructuous merely by refusing to condone the delay.

It is equally relevant that the learned CIT(A) did not adjudicate the substantive grounds raised by the assessee. The assessee had raised, inter alia, a challenge to the validity of the assessments under section 153A read with section 144, the applicability of the law laid down by the Hon'ble Supreme Court in PCIT v. Abhisar Buildwell (P.) Ltd., and the additions made in the respective assessment years. In respect of Assessment Years 2015-16 to 2017-18, the assessee specifically contended that the assessments were unabated/completed assessments and that no incriminating material pertaining to those years had been found during the search.

We are conscious of the fact that the delay involved is substantial. However, the length of delay, by itself, cannot be the sole determinative factor. The real question is whether the explanation furnished by the

We also find considerable force in the submission of the ld.AR that dismissal of the appeals without adjudication on merits may lead to an anomalous situation. The seized cash constitutes the central issue in the connected proceedings, and the assessee's claim is that the cash did not belong to him but to M/s Mectec. The first appellate authority itself noted that the assessee and his employers had been subjected to search and that the issues were interconnected. In such circumstances, the more appropriate course would have been to adjudicate the connected matters in a coordinated manner rather than shut out the assessee's appeal at the threshold on the ground of limitation.

The appellate jurisdiction under section 250 of the Act is intended to provide an effective remedy against an assessment order. Once the delay is satisfactorily explained and condoned, the assessee becomes entitled to have the grounds raised by him adjudicated in accordance with law. We therefore consider it appropriate, in the interest of substantial justice, to condone the delay in filing the appeals before the learned CIT(A).

Having condoned the delay, the orders of the learned CIT(A), insofar as they dismiss the appeals without adjudicating the grounds on merits, cannot be sustained. We accordingly set aside the impugned orders of the learned CIT(A) in respect of the present appeals and restore the

Needless to say, the learned CIT(A) shall afford the assessee a reasonable and effective opportunity of being heard and shall consider the submissions and evidence that may be furnished by the assessee. The learned CIT(A) shall also consider, in accordance with law, the assessee's contentions concerning the ownership and assessability of the seized cash and the interconnection of the assessee's case with the cases of Shri Kamlesh Rajnikant Shah and Smt. Neena Kamleshbhai Shah, insofar as the same are relevant to the adjudication of the appeals. The assessee shall extend full cooperation in the appellate proceedings and shall not seek unnecessary adjournments.

Since the quantum appeals have been restored to the file of the learned CIT(A) for adjudication on merits, the corresponding penalty appeals also require fresh consideration. The penalty proceedings are consequential to the additions/disallowances forming the subject matter of the quantum proceedings. We, therefore, set aside the impugned orders in the penalty appeals as well and restore the same to the file of the learned CIT(A) for fresh adjudication in accordance with law, after disposal of the corresponding quantum appeals and after affording adequate opportunity of hearing to the assessee.

We make it clear that we have not expressed any opinion on the merits of the additions made by the Assessing Officer, the validity of the assessments, the ownership of the seized cash, or the leviability of the respective penalties. All such issues are left open for adjudication by the learned CIT(A) in accordance with law.

In the result, the delay in filing the appeals before the learned CIT(A) is condoned. The impugned orders of the learned CIT(A) are set

Accordingly, ITA Nos. 5071/Mum/2026, 5073/Mum/2026, 5075/Mum/2026, 5078/Mum/2026, 5081/Mum/2026, 5097/Mum/2026 and 5095/Mum/2026 are allowed for statistical purposes.