SHRI SURESH KUMAR JAYARAJU,BENGALURU vs. ITO WARD 4(3)(3), BENGALURU

PER KESHAV DUBEY, JUDICIAL MEMBER:

This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 27.02.2025 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1073771233(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2018-19.

ITA No.2545/Bang/2025 Shri Suresh Kumar Jayaraju, Bengaluru Page 2 of 12 ii The. Commissioner of Income-tax Appeals dismissed the appeal solely on the ground that the appellant has not appeared for hearing before the Commissioner (Appeals). The Appellant contends that the Appellate authority grossly erred in passing order without considering the case merits. In this regard the appellant relies on the judgment of the Hon'ble High Court of Bombay in the case of CIT (Central) v. Prevnkumar Arjundas Luthra (HUF) [2016169 taxmann.com 407/240 Taxman 133 (Bom), whereas it has raised substantial question of law as to whether the Commissioner of Income-tax (Appeals) is empowered under [he Income-tax Act to dismiss an appeal merely on the ground of non-prosecution (non- appearance) by the appellant, or is he obliged to decide the appeal on merits? And the Hon'ble High Court of Bombay upheld the Tribunal's approach and held that the CIT(A) does not have the power to dismiss an appeal for non-prosecution. Once an appeal under section 246A (or before the CIT(A)) is filed, the appellate authority is obliged to decide the appeal on merits (and to pass a speaking order stating points for determination, the decision and reasons), rather than simply dismissing it because the appellant failed to appear. The HC therefore affirmed the ITAT order restoring the appeal to the CI'I(A) for de novo adjudication.

iii The Hon'ble Court further emphasizes that Statutory scheme requires merits adjudication and the Court examined Sections 250 and 251 (CIT(A) powers) and Section 246A (right of appeal). Section 250(6) in particular requires that the CIT(A)’s order be in writing, state the points for determination and give reasons for the decision. The scheme therefore contemplates adjudication on the issues raised and a speaking order not summary dismissal for non-appearance. Therefore the Ex parte assessment is bad in law, The order passed u/s 147 r.w,s. 144 is void ab initio and unsustainable in law, having been completed without proper service of notices and in violation of the principles of natural justice and Section 144 procedures.

iv The appellant further alleges that the assessing officer grossly erred reopening of assessment u/s 147 of the act, The Assessing officer and the Commissioner of Appeals failed to adhere to the principles laid in the case of M/S CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC). The reopening of assessment without tangible material and mere reliance on Form 26AS data constitutes change of opinion and not a valid "reason to believe”. The pre-condition of "failure to disclose, fully and truly all material facts" was not satisfied, Further the notice under section 148 was not validly served and the additions made on mere surmises and conjectures relying on third party information without verification. Hence reassessment proceedings are void ab initio

v The appellant alleges that the assessing officer grossly erred treating salary as taxable income. The amount of Rs.35,97,527/- represented termination compensation and not salary for services rendered, hence a capital receipt is

ITA No.2545/Bang/2025 Shri Suresh Kumar Jayaraju, Bengaluru Page 3 of 12 outside the ambit of Section 15 read with Section 17(1) of the act. Therefore the assessing officer treating compensation as income from salary and making additions without any basis is liable to be deleted in full. In this regard. the petitioner relies on the judgement of the Hon'ble High Court of Delhi in the case of CIT Vs Sharada Sinha, ITA 471 of 2003, whereas it has held that the compensation was being paid "Due to the loss of his work place and in consideration of his long term association", These factors have a. bearing on the character of the receipt in the hands of the Assessee, Indeed this was compensation for loss of an income generating asset. What appears to be the ratio of the judgment is that if the receipt represents compensation for the loss of a source of income, it would be capital and it matters little that the assessee continues to be in receipt of income from its other similar operations. In the considered view of the Court the ratio of the above decision applies to the case on hand on all fours, The court is satisfied that the question framed has to be answered in affirmative i.e. in favour of the Assessee and against the Revenue. he, appeal is accordingly dismissed. vi As regards to the arbitrary addition of rental income on appellant's total income, the appellant contends that the rental income of Rs.71,941/- pertains to HUF property, and the mere deduction of TDS in the appellant's PAN does not justify assessment in his hands. vii The interest income of Rs.84,181, relates to family/ HUF deposits and is wrongly taxed in the individual hands. The AO Failed to allow lawful deductions (Standard Deductions) under section 16(ia) of the act, further section 24(b) interest on housing loan and chapter VI-A, thereby inflating taxable income.

viii Further the appellant submits that the Appellate Authority fails to consider the procedural lapses as regards to the assessment proceedings initiated by the assessing officer. The appellant alleges that when the appellant has not filed any return of income for the concerned assessment year, there cannot be any earlier proceedings that could be reopened. Therefore invoking section 147 of the act to reopen assessment was grossly misapplied, as the assessing officer can reopen assessment what was previously assessed. In this present case the assessee has not filed return of income and thereby assessment never assessed, In other words, if the case was never assessed at all, the proper section should have been section of the act and not reopening under section 147 of the act. The Assessing officer grossly erred invoking section 147 of the act, and the CIT (A) without considering these facts has passed the order.

ix Further the appellant challenges invocation of section 144 vvithou.t clarifying its "Limb" section 144 (Best judgement assessment has three limbs) i.e it can be invoked if no returns is furnished 'by the assessee, and returns is filed but assessee fails to comply with notice under section 142(1) or 142(2A), or the assessee fails to comply with directions under section 143(2).The assessing officer has to pass the order specifying which limb of

ITA No.2545/Bang/2025 Shri Suresh Kumar Jayaraju, Bengaluru Page 4 of 12 section 144 was invoked to pass the order under section 144 of the act, just merely stating the order under section 147 r.w.s. 144 without reasoning is legally unsustainable and defective.

x The assessment and appellate proceedings are mechanical, arbitrary, and against the settled judicial principles, hence the appellant humbly prays that che reassessment order and CIT(A) order be annulled or alternatively remanded back to the assessing officer for de-novo proceedings

xi The appellant craves leave to add, amend, modify, withdraw or substitute any of the above grounds of appeal and to raise additional grounds at the time of hearing if necessary in the interest of justice

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ITA No.2545/Bang/2025 Shri Suresh Kumar Jayaraju, Bengaluru Page 8 of 12 also could not represent his case before the Authorities below. Further, the ld. A.R. also submitted that the delay is unintentional and no benefit can be attributed to the assessee in filing the appeal belatedly. He thus prayed to condone the delay and requested to consider the issues raised by the assessee on merits.

6.1 While considering a similar issue the Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471)

ITA No.2545/Bang/2025 Shri Suresh Kumar Jayaraju, Bengaluru Page 9 of 12 laid down six principles. For the purpose of convenience, the principles laid down by the Apex Court are reproduced hereunder:

(1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late.

(2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner.

(4) When substantial justice and technical consideration 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 a nondeliberate delay. (5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so.

6.2 When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non-deliberate delay. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. As observed by Apex Court, if the application of the assessee for condoning the delay is rejected, it would amount to legalize injustice on technical ground when the Tribunal is capable of removing injustice and to do justice. Therefore, this Tribunal is bound to remove the injustice by condoning the delay on technicalities. If the delay is not condoned, it would amount to legalizing an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto.

ITA No.2545/Bang/2025 Shri Suresh Kumar Jayaraju, Bengaluru Page 10 of 12 Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorized by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalize an illegal and unconstitutional order passed by the lower authority.

6.3 Further, in the case of People Education & Economic Development Society Vs/ ITO reported in 100 ITD 87 (TM) (Chen), wherein 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”.

6.4 The next question may arise whether delay was excessive or inordinate. There is no question of any excessive or inordinate when the reason stated by the assessee was a reasonable cause for not filing the appeal. We have to see the cause for the delay. When there was a reasonable cause, the period of delay may not be relevant factor. In fact, the Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the condonation of delay and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Accordingly, the Madras High Court condoned nearly 21 years of delay in filing the appeal. When compared to 21 years, 189 days cannot be considered to be inordinate or excessive. Furthermore, the Chennai Tribunal by majority opinion in the case of People Education and Economic Development Society (PEEDS) v. ITO (100 ITD 87) (Chennai) (TM) condoned more than six hundred days delay. Therefore, in our opinion, by preferring the substantial justice, the delay of 189 days

ITA No.2545/Bang/2025 Shri Suresh Kumar Jayaraju, Bengaluru Page 11 of 12 has to be condoned and accordingly we condone the delay and admit the appeal for adjudication.

Order pronounced in the open court on 31st July, 2026

Sd/- Sd/- (Waseem Ahmed) (Keshav Dubey) Accountant Member Judicial Member

Bangalore, Dated 31st July, 2026. VG/SPS

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Copy to:

Asst. Registrar, ITAT, Bangalore.