KHILAN NAVINCHANDRA PATEL,SURAT vs. INCOME TAX OFFICER, CIRCLE-1(3), SURAT

The background facts leading to present appeal are such that the assessee-individual filed his return of AY 2018-19 declaring a total income of Rs. 15,18,200/- and also claiming losses of Rs. 1,84,09,894/-, which was assessed. Subsequently, on the basis of information available in Insight Portal of Income-tax Department, the AO formed a belief that the assessee had undertaken fictitious profits from transactions of equity/derivatives of Stampede Capital Ltd. and Virtual Global Education Ltd. which had escaped assessment. Accordingly, the AO re-opened assessee’s case u/s 147 through a notice dated 27.03.2022. The assessee did not comply with this notice. Thereafter, the AO issued notices u/s 142(1) to which the assessee made submission which is re-produced by AO in Para 3.1 of assessment-order. In his submission, the assessee precisely narrated to AO that the alleged transactions were genuine. It was further submitted that the assessee suffered loss from those transactions and there was no gain. The assessee requested Ld. AO to accept the transactions. However, the Ld. AO rejected assessee’s submission; analysed the financial and historical data of Stampede Capital Ltd. and Virtual Global Education Ltd.; and ultimately disallowed/rejected the loss claimed by assessee partially to the extent of Rs. 1,48,04,238/-. Aggrieved, the assessee carried matter in first-appeal whereupon the Ld. CIT(A) dismissed assessee’s appeal on account of delayed filing as well as non-prosecution. Still aggrieved, the assessee has come in next appeal before us.

Ld. AR for assessee at first addressed the issue of delay in filing appeal before Ld. CIT(A). He drew our attention to an affidavit filed by assessee explaining the reasons of delay. It is averred by assessee in solemnized affidavit that the assessment-order passed by AO was communicated through income-tax portal and since multiple proceedings were on-going for various assessment-years in his case, he was not able to identify the impugned assessment-order passed by AO for AY 2018-19 under consideration. 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 did not stand to derive any benefit because of delay. He submitted that the sole reason of delay was as explained in the affidavit. He submitted that there is a “sufficient cause” for delay and hence the delay should be condoned. Ld. DR for Revenue left the matter to the 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” for delay in filing appeal before Ld. CIT(A). It is 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 averments made by assessee in affidavit and the decision of Hon’ble Supreme Court, we take a judicious view and condone the delay in filing first-appeal before Ld. CIT(A).

Ld. AR next submitted that the Ld. CIT(A) has passed ex-parte order merely upholding the AO’s order without giving his independent and meritorious adjudication to assessee’s grounds. He submitted that the Ld. CIT(A) issued notices of hearing to e-mail id: khilanpatel@gmail.com whereas the assessee specifically mentioned email id: knpatel@kbmarakana.in in the space provided in Form No. 35. Therefore, due to non-service of notices at proper email address, the assessee could not attend hearings fixed by Ld. CIT(A), which has led to the passing of ex-parte order by Ld. CIT(A). In the situation, Ld. AR contended, the impugned order of first-appeal passed by Ld. CIT(A) deserves to be set aside and there is a necessity of meritorious adjudication by Ld. CIT(A).

The Ld. AR further submitted that although the assessee had furnished submissions before the Ld. AO during assessment proceedings, which the Ld. AO has himself re-produced in para 3.1 of assessment-order, the assessee intends to place additional details and documentary evidence on record in support of his submission. He emphasized that the assessee suffered loss from impugned transactions rather than making any profit. Ld. AR, therefore, submitted that it would be appropriate, fair and in the interest of justice to restore the present matter to the file of the Ld. AO for a fresh adjudication instead of remanding the matter to Ld. CIT(A). Ld. AR assured that the assessee is in possession of all relevant details/documents and shall make an effective and meaningful representation before Ld. AO without seeking unnecessary adjournments.

Ld. DR for revenue, though not opposing the prayer of the assessee for restoration of the matter, requested that suitable directions may be issued requiring the assessee to extend full cooperation during fresh assessment proceedings.

We have considered above submissions of parties and perused the material available on record. Having regard to the assurance given by Ld. AR that the assessee shall substantiate the original submission made before AO by filing further documents and evidence and considering that no prejudice would be caused to the Revenue if the matter is restored for fresh adjudication, we deem it appropriate to set aside the impugned orders and restore this matter to the file of the Ld. AO for adjudication afresh, at the risk and responsibility of the assessee. The Ld. AO shall afford adequate opportunity of hearing to the assessee, consider the evidences and submissions that may be furnished, and thereafter pass a speaking order in accordance with law, uninfluenced by the observations contained in the earlier assessment-order. The assessee is also directed to remain vigilant and extend full co-operation in the fresh proceedings without seeking unnecessary adjournments. In the event of failure on the part of the assessee to do so, the Ld. AO shall be at liberty to proceed in accordance with law. Ordered accordingly.

Resultantly, this appeal is allowed for statistical purposes.