DEVASAGAYAM ARULANANDHU,CHENNAI vs. ACIT, CIRCLE-1 LTU,, CHENNAI

The brief facts borne out from the assessment records are that the assessee is an individual, who is a Director in M/s. Rich India Housing Private Limited and is also engaged in the business of sale of land plots carved out from layouts developed on lands acquired by him. For the assessment year under consideration, the assessee filed his return of income electronically on 25.03.2017 declaring a total income of Rs.3,89,110/-. The case was selected for limited scrutiny assessment and the assessment was completed u/s.143(3) of the Act vide order dated 23.12.2018 accepting the income returned by the assessee.

During the course of assessment proceedings, the AO noticed that the assessee had accepted cash advances aggregating to Rs.52,37,071/- towards sale of land plots, which, according to the AO, was in contravention of the provisions of section 269SS of the Act attracting penalty proceedings u/s.271D of the Act. Accordingly, the AO recorded satisfaction in the assessment order for initiation of penalty proceedings u/s.271D of the Act, observing that the penalty, if any, would be imposed by the Joint Commissioner.

Subsequently, a show cause notice dated 25.11.2019 was issued to the assessee proposing levy of penalty u/s.271D of the Act, followed by several notices. However, except for submitting a reply to the final show cause notice contending that there was no violation of the provisions of section 269SS of the Act, the assessee did not effectively participate in the penalty proceedings. The AO, after considering the material available on record, came to the conclusion that the assessee had accepted cash amounting to Rs.84,42,511/- in violation of the provisions of section 269SS of the Act and consequently levied penalty of an equivalent amount of Rs.84,42,511/- u/s.271D of the Act vide order dated 01.03.2022.

The Ld.CIT(A), however, was not persuaded by the explanation offered by the assessee and declined to condone the delay in filing the appeal. Consequently, the appeal was dismissed in limine on the ground of limitation. At the same time, the Ld.CIT(A), notwithstanding the dismissal of the appeal for non-condonation of delay, proceeded to examine the issue on merits and held that the AO was justified in levying penalty u/s.271D of the Act, observing that the assessee had admittedly contravened the provisions of section 269SS of the Act. Thus, the appeal of the assessee came to be dismissed vide the impugned appellate order dated 25.02.2026.

Being aggrieved by the aforesaid order of the Ld.CIT(A), the assessee is in further appeal before the Tribunal.

The Ld.AR, appearing on behalf of the assessee, assailing the impugned order submitted that the Ld.CIT(A) erred in dismissing the appeal in limine on the ground of delay without properly appreciating the reasons furnished by the assessee for condonation of delay. It was contended that the delay in filing the appeal was neither deliberate nor wilful, but occurred due to the fact that the assessee was unaware of the penalty order dated 01.03.2022 and the same had not been communicated to him by his erstwhile Chartered Accountant.

The Ld.AR further submitted that once the Ld.CIT(A) declined to condone the delay and dismissed the appeal as barred by limitation, he could not have simultaneously adjudicated the issues on merits. It was argued that the findings rendered by the Ld.CIT(A) on the merits of the penalty proceedings are without jurisdiction and contrary to settled principles of law, inasmuch as the appellate authority, having refused to entertain the appeal on account of limitation, became functus officio insofar as adjudication on merits was concerned.

Without prejudice to the above submissions, the Ld.AR contended that the penalty levied u/s.271D of the Act is unsustainable even on merits. It was argued that the authorities below failed to appreciate the true nature and character of the receipts and proceeded to levy penalty merely on account of receipt of cash, without examining whether the impugned transactions fell within the ambit of section 269SS of the Act. Accordingly, it was pleaded that no penalty u/s.271D of the Act could be levied in the facts and circumstances of the case.

On the aforesaid grounds, the Ld.AR prayed that the delay in filing the appeal before the Ld.CIT(A) be condoned, the impugned order passed by the Ld.CIT(A) be set aside.

Per contra, the Ld.DR strongly supported the orders of the authorities below. The Ld.DR submitted that the Ld.CIT(A) was justified in refusing to condone the inordinate delay of more than 36 months in filing the appeal, as the assessee had failed to demonstrate any sufficient and bona fide cause

The Ld.DR further submitted that the assessee had actively participated in the penalty proceedings and had admittedly furnished a reply to the final show cause notice. Therefore, it cannot be presumed that the assessee was unaware of the culmination of the penalty proceedings. According to the Ld.DR, a prudent assessee is expected to be vigilant about proceedings initiated against him and cannot absolve himself of the consequences of limitation by attributing negligence to his authorised representative or consultant.

The Ld.DR submitted that the law of limitation has to be applied with equal force to all litigants and that the assessee had failed to establish sufficient cause preventing him from filing the appeal within the prescribed period. It was argued that the Ld.CIT(A), upon examining the facts and circumstances of the case, had rightly exercised his discretion in declining to condone the delay and dismissing the appeal as barred by limitation.

On merits, the Ld.DR submitted that the assessee had admittedly accepted cash amounts aggregating to Rs.84,42,511/- in connection with sale transactions, in contravention of the provisions of section 269SS of the Act. It was contended that the AO, after due examination of the material available on record, had recorded satisfaction for initiation of penalty proceedings and the competent authority had thereafter levied penalty u/s.271D of the Act in accordance with law.

The Ld.DR further submitted that the assessee had failed to establish the existence of any reasonable cause within the meaning of section 273B of the

In view of the above submissions, the Ld.DR prayed that the order passed by the Ld.CIT(A) be upheld and the appeal preferred by the assessee be dismissed.

We have heard the rival submissions, perused the orders of the authorities below and carefully considered the material placed on record. The primary issue that arises for consideration is with regard to the delay in filing the appeal before the Ld.CIT(A) and the consequential dismissal of the appeal, as well as the validity of the penalty proceedings culminating in the impugned penalty order.

At the outset, it is noticed that the appeal before the Ld.CIT(A) was presented belatedly and the same was not entertained on account of the delay. The assessee has placed on record a petition seeking condonation of delay explaining the circumstances which prevented him from preferring the appeal within the period prescribed under the Act. It is a settled proposition of law that while considering an application for condonation of delay, a liberal and pragmatic approach has to be adopted in order to advance substantial justice. The expression "sufficient cause" occurring in the statute has to receive a liberal construction so as to enable the appellate authority to decide the case on merits rather than shutting the doors of justice on technical considerations. The Hon’ble Courts have consistently held that unless mala fides, deliberate inaction or gross negligence are attributable to the conduct of the litigant, an opportunity ought ordinarily to be afforded for adjudication of the dispute on merits.

In the present case, upon an overall consideration of the facts and circumstances brought on record, we are satisfied that the assessee has shown reasonable and sufficient cause for the delay occasioned in filing the appeal before the Ld.CIT(A). We do not find any material on record suggesting that the

In order to balance the equities and to impress upon the assessee the necessity of adhering to procedural discipline, we deem it appropriate to impose costs. Accordingly, while condoning the delay in filing the appeal before the Ld.CIT(A), we direct the assessee to pay a sum of Rs.20,000/- (Rupees Twenty Thousand only) to the Tamil Nadu State Legal Services Authority, Madras High Court, within a period of thirty days from the date of receipt of this order. The proof evidencing payment of the said amount shall be furnished before the AO at the time of the fresh proceedings. The imposition of costs, in our considered opinion, would adequately meet the ends of justice and strike a balance between the requirement of procedural discipline and the necessity of ensuring that substantial justice is not defeated on technical grounds.

Coming to the merits of the matter, we find from the records that the penalty order has been passed by the AO without a proper appreciation and examination of the explanations and submissions furnished by the assessee during the course of the proceedings. The grievance of the assessee is that detailed submissions had been filed placing reliance upon factual materials and legal contentions; however, the AO proceeded to levy the penalty without adverting to the same in a meaningful manner. A perusal of the impugned order indicates that the explanations offered by the assessee have not been discussed in detail, nor has any reasoned finding been recorded as to why such explanations were considered unacceptable.

It is trite law that an adjudicating authority exercising quasi-judicial functions is required to consider the submissions advanced by the parties, evaluate the evidentiary material produced before it and render findings supported by cogent and intelligible reasons. Recording of reasons is an indispensable facet of the principles of natural justice and constitutes the heartbeat of a judicial or quasi-judicial order. An order which proceeds to determine the rights and liabilities of a party without due consideration of the explanations tendered by such party cannot be sustained in law. The requirement of passing a speaking order assumes greater significance in penalty proceedings, having regard to the penal consequences that ensue upon the assessee.

In the facts of the present case, we are of the considered opinion that the impugned penalty order suffers from the vice of inadequate consideration of the assessee's contentions and, therefore, the matter requires reconsideration at the level of the AO. Since the explanations and evidences furnished by the assessee have not been properly examined and adjudicated upon, we are inclined to restore the matter to the file of the AO so as to provide a fair and effective opportunity to the assessee to substantiate its claim.

Accordingly, in the interest of justice and fair play, we condone the delay in filing the appeal before the Ld.CIT(A), subject to payment of costs of Rs.20,000/- to the Tamil Nadu State Legal Services Authority, Madras High Court, within thirty days from the date of receipt of this order. The impugned penalty order is set aside and the matter is restored to the file of the AO for denovo adjudication. The AO shall examine afresh all the submissions, explanations and evidences that may be produced by the assessee, consider the same in accordance with law and thereafter pass a reasoned and speaking order after affording adequate opportunity of being heard to the assessee. The assessee is also directed to extend full cooperation in the proceedings and furnish all information and documents as may be called for by the AO. We make

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