VAIBHAV NARENDRA SHAH,QATAR vs. INCOME TAX OFFICER- WARD 2(3)(6), SURAT, SURAT

This Quantum-Appeal is directed against order of first appeal dated 15.01.2026 passed by learned CIT(A), Ahmedabad-13 [“CIT(A)”], which in turn arises out of assessment-order dated 09.12.2019 passed by ITO-Ward 2(3)(6), Surat [“AO”] u/s 144/147 of the Income-tax Act, 1961 [“the Act”] for AY 2012-13.

Briefly stated, the assessee-individual did not file any return of AY 2012-13. The AO, on the basis of information in his possession revealing that there were deposits in assessee’s a/c with HDFC Bank which had escaped assessment, issued notice u/s 148 dated 20.03.2019 and initiated proceeding of assessment u/s 147. The AO also issued subsequent notices u/s 142(1). However, all notices remained uncompiled with by assessee. Ultimately, the AO completed assessment u/s 147 r.w.s. 144 assessing total income at Rs. 39,53,416/-. Aggrieved, the assessee carried matter in first- appeal but the Ld. CIT(A) dismissed assessee’s appeal as time-barred. Still aggrieved, the assessee has come in next appeal before us.

Ld. AR for assessee carried us to the impugned order of first-appeal and demonstrated that the Ld. CIT(A) has dismissed assessee’s appeal on account of delayed filing by 578 days (exclusive of Covid-19 period). Thereafter, he submitted that the AO passed assessment-order on 09.12.2019 and at the time when assessment proceedings were conducted by AO, the assessee was working and residing in Dubai, U.A.E. and not in India. The assessee was not aware of the proceedings conducted by AO and the notices sent by AO, hence there was a non-participation giving occasion of ex-parte assessment u/s 144. Subsequently, when the assessee’s father, resident of India, received penalty notice in the year 2021, the assessee became aware of the assessment-order having been passed by AO but at that time also there was Covid-19 pandemic due to which the assessee could not take legal consultation and immediate action. Subsequently, after normalisation of situation, the assessee filed appeal to Ld. CIT(A). The assessee has mentioned all these facts in Form No. 35 filed to Ld. CIT(A). Therefore, there was a ‘sufficient cause’ for delay in filing appeal which the Ld. CIT(A) ought to have accepted. Ld. AR very humbly submitted that there was no lethargy, negligence, mala fide intention or ulterior motive of assessee in making delay and the assessee does not stand to derive any benefit because of delay. Accordingly, the Ld. CIT(A) ought to have condoned delay and decided appeal of assessee on merit.

Ld. AR next submitted that the AO has passed ex-parte assessment- order assessing total income at Rs. 39,53,416/- solely on account of unexplained credit entries in assessee’s bank a/c with HDFC. However, the said account was an NRE A/c in which the credits came from remittances made by assessee from out of India. He submitted that the assessee is having all contemporary evidences to substantiate the credit entries and filed the same by way of an application under Rule 29 of Income-tax (Appellate Tribunal) Rules, 1963. The first three pages of application, which contain particulars of additional evidences, is scanned and re-produced below:

With these submissions, Ld. AR requested for condoning the delay in first-appeal and also restoring this matter to the file of Ld. AO for a fresh adjudication.

Ld. DR for Revenue left the matter to the discretion and wisdom of Bench without raising any objection.

We have considered the explanation advanced by assessee and in absence of any contrary fact or material on record, the assessee is found to have a “sufficient cause” as narrated by Ld. AR for delay in filing appeal before Ld. CIT(A). It is also a settled position by Hon’ble Supreme Court in Collector, Land Acquisition Vs Mst. Katiji and others 1987 AIR 1353, 1987 2 SCC 387 that whenever substantial justice and technical considerations are opposed to each other, the cause of substantial justice must be preferred by adopting a justice-oriented approach. Thus, taking into account the facts of case and the decision of Hon’ble Supreme Court, we take a judicious view and condone the delay occurred at the stage of filing appeal before Ld. CIT(A). Accordingly, the impugned order of the Ld. CIT(A) dismissing the appeal on the ground of limitation is set aside.

On merit, since the assessment itself has been framed ex parte u/s 144 of the Act; the assessee has claimed that the impugned credits represented remittances received in his NRE bank account while he was residing abroad; and the assessee has also placed on record additional documentary evidences in support of such claim, we are of the considered view that the matter deserves to be restored to the file of the Ld. AO for adjudication afresh in accordance with law. Such restoration would neither prejudice the Revenue nor confer any undue advantage upon the assessee; rather, it would facilitate determination of the correct taxable income after due verification of the evidences and after affording adequate opportunity of hearing to the assessee. This is more so in present case because as per submission of Ld. AR, the assessee was a “non-resident” during the relevant year but the Ld. AO has passed ex-pate assessment-order adopting the status of “resident”. The Ld. AR for assessee has filed details of stay of assessee in India to substantiate correct status of “non-resident”. The residential status of an assessee has a direct bearing on computation of total income and tax liability. Considering the totality of facts, we remand this matter to the file of Ld. AO for a fresh assessment. The Ld. AO shall consider all submissions and evidences that may be furnished by the assessee and thereafter pass a speaking order, uninfluenced by the observations made in the earlier assessment-order. The assessee is also directed to cooperate in the remand proceedings, remain vigilant in attending the hearings fixed by the Ld. AO and refrain from seeking unnecessary adjournments. In case of any failure on the part of the assessee, the Ld. AO shall be at liberty to proceed in accordance with law. Accordingly, this appeal is allowed for statistical purpose.

This Penalty-Appeal is directed against order of first appeal dated 15.01.2026 passed by Ld. CIT(A), which in turn arises out of penalty-order dated 22.02.2022 passed by Ld. AO u/s 271(1)(b) of the Act for AY 2012- 13.

This appeal involves a penalty of Rs. 10,000/- imposed by Ld. AO u/s 271(1)(b) for assessee’s failure to comply with the notice(s) issued by AO u/s 142(1) during assessment-proceeding.

We have heard the rival submissions and considered the material available on record. The penalty u/s 271(1)(b) has been levied solely on account of the assessee's non-compliance with the notices issued by the Ld. AO during the course of reassessment proceedings. We find that the assessment itself was completed ex-parte and has already been restored by us to the file of the Ld. AO for a fresh adjudication and in doing so, we have accepted the assessee's explanation qua the non-participation in assessment proceedings. The assessee has consistently pleaded that he was residing and working in Dubai, U.A.E. during the relevant period and was not aware of the proceedings conducted and notices sent by AO. In these peculiar facts and circumstances, the explanation offered by the assessee constitutes a “reasonable cause” for the alleged non-compliance. We, therefore, deem it appropriate to delete the penalty of Rs.10,000/- levied u/s 271(1)(b) of the Act. Accordingly, this appeal is allowed.

This Penalty-Appeal is directed against order of first appeal dated 15.01.2026 passed by Ld. CIT(A), which in turn arises out of penalty-order dated 23.02.2022 passed by Ld. AO u/s 271(1)(c) of the Act for AY 2012- 13.

This appeal involves a penalty of Rs. 10,69,167/- imposed by Ld. AO u/s 271(1)(c) qua the addition of Rs. 39,53,416/- made in aforesaid assessment-order.

It is agreed by learned Representatives of both sides that the penalty u/s 271(1)(c) is dependent on the outcome of Quantum-Appeal. Since we have already remanded Quantum-Appeal i.e. ITA No. 373/SRT/2026 to Ld. AO in earlier part of this order, this penalty-matter is also remanded to the Ld. AO for adjudication afresh after considering outcome of Quantum- Appeal and also considering submissions of assessee. Accordingly, this appeal is also allowed for statistical purpose.

Resultantly, ITA No. 373/SRT/2026 and 380/SRT/2026 are allowed for statistical purposes; ITA No. 374/SRT/2026 is allowed.