GUMMIDELLI RADHA KISHORE, HYDERABAD vs. ITO, WARD-15(1), HYDERABAD

Succinctly stated, the AO, based on information that the assessee, who had not filed his return of income for the subject year, filed “Form 61” with the Sub-registrar, Uppal RR District regarding a property transaction of Rs. 35 lacs, initiated proceedings under Section 147 of the Act. Thereafter, the AO passed an order under Section 148A(d) of the Act, dated 06/04/2023. Notice under Section 148 of the Act, dated 07/04/2023, was issued by the AO calling upon the assessee to file his return of income for the subject year. However, the assessee failed to comply with the aforesaid notice and did not file his return of income.

Thereafter, the AO taking cognizance of the fact that the assessee had neither complied with the notice issued under Section 148 of the Act, dated 07/04/2023, nor complied with the notices issued under Section 142(1) of the Act, dated 28/06/2024 and 26/09/2024 and the “Show Cause Notice” (SCN) issued under Section 144 of the Act, dated 27/12/2024, was constrained to frame the assessment vide his order passed under Section 147 r.w.s. 144 r.w.s. 144B of the Act, dated 28/01/2025, wherein he, by treating the entire amount of investment made by the assessee towards allotment of land as an unexplained investment under Section 69 of the Act, determined his income at Rs.35,00,000/-.

Aggrieved, the assessee preferred an appeal before the CIT(A). However, as the appeal was filed beyond the period prescribed under Section 249(2) of the Act, the assessee filed a petition seeking condonation of delay explaining that the assessment order was never served upon him and that he became aware of the existence of the assessment order only on 02/07/2025 upon verification of his tax records. It was further explained by the assessee that immediately thereafter, he had approached his Chartered Accountant and filed the appeal. The CIT(A), however, was not satisfied with the assessee's explanation and declined to condone the delay. Consequently, the appeal was dismissed in limine without adjudicating the issues raised on the merits.

The assessee, aggrieved with the CIT(A) order, has carried the matter in appeal before us.

We have heard the Ld. Authorised Representatives of both parties, perused the orders of the authorities below and the material available on record.

As is discernible from the record, the CIT(A) has dismissed the appeal solely on the ground that the assessee had failed to establish sufficient cause for condonation of delay under Section 249(3) of the Act. Admittedly, the CIT(A) has not examined any of the grounds challenging the assessment order on the merits.

We find on a perusal of the record that the assessment itself was framed ex parte under Section 147 r.w.s. 144 of the Act. Ostensibly, the explanation furnished by the assessee before the CIT(A) was that the assessment order was never served upon him and that he came to know about the same only on 02/07/2025 while verifying his tax records, and on learning about the same, he had immediately thereafter filed the appeal along with a petition seeking condonation of delay. However, we find that the CIT(A) rejected the explanation mainly on the ground that the assessee failed to produce any documentary evidence to establish the date of knowledge of the assessment order. At the same time, there is no finding recorded in the impugned order that the explanation offered by the assessee was false, mala fide or lacking in bona fides.

It is a settled proposition of law that the right of appeal is a valuable statutory right and ordinarily an assessee should not be denied an opportunity of prosecuting the appeal on the merits unless there is deliberate inaction, gross negligence or want of bona fides. In our view, the power vested in the appellate authority under Section 249(3) of the Act is intended to advance the cause of substantial justice and not to defeat it on technical considerations. We are of the firm conviction that an appellate authority should adopt a justice-oriented and liberal approach when considering an application by the appellant seeking condonation of delay in the appeal filed by him. Our aforesaid view is fortified by the recent decision of the Hon'ble Supreme Court in the case of Vidya Shankar Jaiswal vs. ITO (2025) 305 Taxman 83 (SC). The Hon'ble Apex Court, while setting aside the order of the Hon'ble High Court of Chhattisgarh, which had approved the declining of the condonation of delay of 166 days by the Income Tax Appellate Tribunal, Raipur Bench, had observed that a justice-oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay involved in filing the appeal. We are thus of firm conviction that, considering the explanation of the assessee regarding the reason leading to the delay, which has not been proved to be false, the CIT(A) should have adopted a justice-oriented approach and decided the lis on the merits instead of terminating the proceedings on technical grounds. Accordingly, respectfully following the ratio laid down by the Hon'ble Apex Court in the case of Vidya Shankar Jaiswal Vs ITO (supra), wherein it is emphasized that the approach of the appellate authorities while considering applications for condonation of delay should be guided by the principles of substantial justice rather than by adopting a hyper-technical approach, we are of the considered view that the CIT(A) ought to have liberally considered the explanation offered by the assessee and condoned the delay.

We further find that the assessee has challenged the addition of Rs. 35 lacs made under Section 69 of the Act by specifically contending that there was no investment in the purchase of any immovable property and that the land in question was allotted by the Hyderabad Metropolitan Development Authority in lieu of the acquisition of ancestral land. The assessee has further challenged the validity of the reassessment proceedings and alleged violation of the principles of natural justice. In our view, the aforesaid issues go to the root of the assessment and necessarily require adjudication by the first appellate authority.

Having regard to the totality of the facts and circumstances of the case and respectfully following the law laid down by the Hon'ble Supreme Court in Vidya Shankar Jaiswal v. ITO (supra), we are of the considered view that the ends of justice would be met by restoring the matter to the file of the CIT(A). Accordingly, we set aside the impugned order of the CIT(A) and restore the matter to his file with a direction to condone the delay involved in filing the appeal before him and adjudicate the same afresh on the specific grounds of appeal raised by the assessee challenging the impugned assessment order, by passing a speaking order in accordance with law. Needless to say, the CIT(A) shall, in the course of the set aside proceedings, afford a reasonable opportunity of being heard to the assessee. However, before parting we may herein observe that the assessee since inception of the present proceedings had adopted a lackadaisical approach, viz., (i) not filed his return of income despite having carried out substantial financial transactions during the subject year; (ii) not filed a return of income in response to notice issued under section 148 of the Act, dated 07/04/2023; (iii) not participated in the assessment proceedings resulting to an ex-parte order under section 147 r.w.s 144 r.w.s 144B of the Act, dated 28/01/2025; and (iv) delayed the filing of the appeal before the CIT(A) by 204 days, therefore, we though have in all fairness and in the interest of justice set aside the matter to the file of the CIT(A) with a direction to re- decide the same, but considering the past record of the assessee we deprecate his conduct and lackadaisical approach qua the income tax proceedings and impose a cost of Rs.20,000/- upon him which he is directed to deposit within a period of 15 days from the date of receipt of this order with the Prime Minister's National Relief Fund.

As we have restored the matter to the file of the CIT(A), we refrain from expressing any opinion on the merits of the additions made by the AO, which, thus, are left open to be adjudicated by the CIT(A) in accordance with law.

In the result, the appeal of the assessee is allowed for statistical purposes in terms of our aforesaid observations.