NELLORE VENKATESWARA REDDY,CHENNAI vs. COMMISSIONER OF INCOME TAX APPEALS, CHENNAI

The brief facts of the case emanating from the records are that the assessee is an agriculturist, cultivating lands at Buchireddy Palem Mandal, Kalayakagollu Village Farm, Andhra Pradesh. The assessee had not filed his return of income for the AY 2020-21. As per the information available with the department, the assessee had sold the said land on 08.07.2019 by executing a registered sale deed for Rs.45,44,000/- and also purchased an immovable property for Rs.54,00,000/-. Accordingly, the case of the assessee was reopened for assessment by issuing statutory notices to the assessee. Since the assessee did not respond to any of the notices issued by the AO, the AO has left with no option, completed the assessment ex parte by passing an order u/s.147 r.w.s. 144 of the Act dated 16.01.2025 by making following additions:-

Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A) on 16.04.2025 with a delay of 59 days along with petition for condoning the delay and prayed for adjudicating the appeal on merits. However, the ld.CIT(A) did not condone the delay of 59 days and confirmed the order of the AO by passing an order dated 15.01.2026.

Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us. The Ld.AR submitted that the assessee is an agriculturist and had sold an agricultural land during the relevant assessment year for a total consideration of Rs.45,44,000/-. It was contended that the land so transferred did not constitute a “capital asset” within the meaning of section 2(14) of the Act and therefore, the consideration received on such transfer was not exigible to tax

The Ld.AR further submitted that the ld.CIT(A) erred both on facts and in law in dismissing the appeal without condoning the delay of 59 days. It was contended that the assessee had duly explained the reasons for the delay in the memorandum of appeal filed in Form No. 35 and had demonstrated sufficient cause warranting condonation of the delay. It was, therefore, prayed that the impugned order of the ld.CIT(A) be set aside and the matter be restored to the file of the AO by affording the assessee one final and effective opportunity to place all relevant facts, documents and evidences on record for adjudication in accordance with law.

Per contra, the Ld.DR supported the orders passed by the lower authorities and submitted that the AO as well as the ld.CIT(A) had rightly appreciated the facts and the applicable provisions of law while passing the impugned orders. It was, therefore, contended that no interference is called for with the findings of the ld.CIT(A), and accordingly, the appeal preferred by the assessee deserves to be dismissed.

We have heard the rival submissions, perused the orders of the lower authorities and carefully considered the material available on record. The primary issue that arises for our consideration is whether the ld.CIT(A) was justified in declining to condone the delay of 59 days in filing the appeal and in confirming the assessment without adjudicating the issues raised by the assessee on merits.

It is an admitted position that the assessment in the present case was completed ex parte u/s.144 r.w.s 147 of the Act on account of non-compliance by the assessee to the statutory notices issued by the AO. It is equally undisputed that the appeal before the ld.CIT(A) was filed with a delay of only 59 days accompanied by a petition seeking condonation of delay, wherein the assessee had explained the reasons which prevented him from preferring the appeal within the prescribed period. However, the ld.CIT(A), without condoning the delay, proceeded to confirm the assessment order.

The principal contention of the assessee is that the property transferred during the relevant previous year was an agricultural land situated in a rural area and, therefore, did not fall within the ambit of the expression "capital asset" as defined u/s.2(14) of the Act. According to the assessee, the consideration received on transfer of such agricultural land could not have been subjected to tax under the head "Capital Gains". The assessee has also contended that the entire sale consideration received from the transfer of the agricultural land was utilised for purchasing a residential property and, therefore, the investment made therein could not have been treated as unexplained investment. These contentions go to the very root of the additions made by the AO and require examination on the basis of documentary evidence relating to the nature and location of the land, the sale deed, revenue records and the source of investment in the residential property.

We find that neither the AO nor the ld.CIT(A) had the benefit of examining these factual aspects since the assessment was framed ex parte and the first appellate authority declined to entertain the appeal on account of delay. Consequently, the issues raised by the assessee have remained unexamined on merits. It is a settled proposition of law that tax liability should be determined on the basis of correct facts and in accordance with law, after affording a reasonable opportunity to the assessee to substantiate his claim.

So far as the delay of 59 days is concerned, we are of the considered view that the ld.CIT(A) ought to have adopted a pragmatic and justice-oriented approach while considering the petition for condonation. The Hon'ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Others [(1987) 167 ITR 471 (SC)] has held that substantial justice deserves to be preferred over technical considerations and that a liberal approach should ordinarily be adopted while considering applications for condonation of delay. Likewise, in N. Balakrishnan v. M. Krishnamurthy [(1998) 7 SCC 123], the Hon'ble Apex Court has held that the length of delay is not decisive and that the acceptability of the explanation is the governing factor. Unless the delay is deliberate, mala fide or attributable to gross negligence, the litigant should ordinarily be afforded an opportunity to have his case decided on merits.

In the present case, the delay involved is only 59 days, which cannot, by any standard, be regarded as inordinate. The assessee had filed a petition explaining the reasons for such delay along with Form No.35. In our considered opinion, the ld.CIT(A) ought to have examined the explanation in its proper perspective and, keeping in view the settled principles governing condonation of delay, should have admitted the appeal for adjudication on merits. Dismissing the appeal on a technical ground, particularly when the assessment itself had been completed ex parte and substantial additions have been made, defeats the very object of the appellate remedy provided under the Act.

We further observe that the assessee's claim regarding the agricultural character of the land and the consequent non-applicability of the provisions relating to capital gains is a mixed question of fact and law. The determination of such claim requires verification of the location of the land, its classification in the revenue records, the distance from the nearest municipality or municipal limits, and other relevant statutory parameters prescribed u/s.2(14) of the Act. Similarly, the source of investment in the residential property also requires

Having regard to the totality of the facts and circumstances of the case, the relatively short delay involved, the principles laid down by the Hon'ble Supreme Court on condonation of delay, and in order to advance the cause of substantial justice, we are inclined to condone the delay of 59 days in filing the appeal before the ld.CIT(A). Consequently, the impugned order of the ld.CIT(A) is set aside.

Since the assessment itself was completed ex parte and the issues raised by the assessee require detailed factual verification, we consider it just and proper, in the interest of justice, to restore the entire matter to the file of the AO for framing the assessment afresh. The AO shall examine the nature and location of the agricultural land, the applicability of section 2(14) of the Act, the claim of the assessee regarding the utilisation of the sale consideration for purchase of the residential property, and all other contentions raised by the assessee, after affording him a reasonable and effective opportunity of being heard. The AO shall thereafter pass a speaking order in accordance with law, uninfluenced by any observations made in this order.

The assessee is directed to appear before the AO as and when called upon, produce all relevant records and evidences in support of his claims, and extend full cooperation for expeditious completion of the proceedings. It is made clear that in the event of any failure on the part of the assessee to cooperate with the proceedings or to furnish the requisite details, the AO shall be at liberty to proceed in accordance with law on the basis of the material available on record.

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