MARIAPPAN RAJENDRAN,TIRUVARUR vs. ITO, WARD-1,, THIRUVARUR

Since the issues involved in both the appeals arise out of the same assessment proceedings and are interconnected, these appeals were heard together. Accordingly, for the sake of convenience, brevity and to avoid repetition of facts, they are being disposed of by this consolidated order.

At the outset, it is noticed that both the appeals are barred by limitation by 29 days. The assessee has filed an affidavit explaining the reasons for the delay in preferring the appeals. Having considered the averments made therein and upon being satisfied that the assessee was prevented by sufficient and reasonable cause from filing the appeals within the prescribed period of limitation, we deem it fit to condone the delay of 29 days in filing the appeals. Accordingly, the delay is condoned and both the appeals are admitted for adjudication on merits.

During the reassessment proceedings, the AO obtained information from the Sub-Registrar Office, Muthupettai, which revealed that the assessee had, in fact, sold an immovable property for an apparent sale consideration of Rs.70,00,000/-, whereas the stamp duty value adopted for the said transaction was Rs.89,35,714/-. Thus, the information originally reflected in the ITBA/Insight Portal regarding sale consideration of Rs.2,10,00,000/- was found to be factually incorrect. Nevertheless, in the absence of any explanation or supporting evidence from the assessee, the AO treated the stamp duty value of Rs.89,35,714/- as representing the assessee's short-term capital gains for the year under consideration.

The AO further observed that the assessee had made cash deposits aggregating to Rs.2,83,39,140/- in his bank accounts maintained with Lakshmi Vilas Bank. Since the assessee failed to offer any explanation regarding the nature and source of the said cash deposits despite repeated statutory opportunities, the AO treated the entire amount as unexplained money u/s.69A of the Act and brought the same to tax at the rate prescribed u/s.15BBE of the Act. Accordingly, the assessment was completed ex parte u/s.147 r.w.s 144 of the Act vide order dated 05.03.2024, determining the total income of the assessee at Rs.3,72,74,854/-, after making additions of Rs.89,35,714/- towards short-term capital gains and Rs.2,83,39,140/- as unexplained money u/s.69A r.w.s 115BBE of the Act.

The Ld.CIT(A), however, was not satisfied with the explanation offered by the assessee and declined to condone the delay of 588 days. Consequently, the appeal was dismissed as barred by limitation. Notwithstanding the dismissal of the appeal on the ground of limitation, the Ld.CIT(A) proceeded to adjudicate the issues involved on merits. Upon such adjudication, the Ld.CIT(A) upheld the additions made by the AO towards the consideration received on sale of immovable property and the addition made on account of unexplained money. However, insofar as the computation of capital gains arising from the sale of the immovable property was concerned, the Ld.CIT(A) directed the AO to verify and determine the correct period of holding and, thereafter, compute the capital gains after allowing the eligible cost of acquisition in accordance with law. Accordingly, the Ld.CIT(A) passed the impugned appellate order dated 07.01.2026.

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

The Ld.AR further submitted that the assessment had been completed ex parte under the provisions of the Act without affording the assessee an effective and meaningful opportunity of being heard. It was contended that, owing to the circumstances explained by the assessee, no proper compliance could be made during the course of the assessment proceedings, resulting in the AO completing the assessment solely on the basis of the material available on record, without examining the nature of the assessee's business activities or the supporting evidences relevant to the issues involved. It was thus argued that the additions sustained in the assessment were made without proper appreciation of the factual matrix and that the assessee was in possession of relevant documentary evidences which, if afforded an opportunity, could be produced before the AO. The Ld.AR, therefore, prayed that, in the interest of substantial justice, the delay in filing the appeal before the Ld.CIT(A) be condoned and the matter be restored to the file of the AO for fresh adjudication on merits after providing the assessee with an adequate and reasonable opportunity of being heard.

Per contra, the Ld.DR strongly supported the orders passed by the AO as well as the Ld.CIT(A). It was submitted that the assessee had failed to furnish any convincing or satisfactory explanation either for the prolonged delay in

We have heard the rival submissions and carefully considered the material available on record. The short controversy that arises for our consideration is whether the Ld.CIT(A) was justified in declining to condone the delay of 588 days in filing the appeal and, consequently, whether the assessment completed ex parte deserves to be sustained on the facts and circumstances of the present case. The factual matrix reveals that the assessment has been completed u/s.147 r.w.s 144 of the Act entirely on account of non-compliance on the part of the assessee. It is equally an admitted position that the appeal before the Ld.CIT(A) was preferred belatedly with a delay of 588 days. The explanation put forth by the assessee is that the statutory notices issued during the reassessment proceedings as well as the assessment order did not come to his knowledge and that he became aware of the assessment only upon receipt of the recovery notice, whereafter he immediately approached the appellate authority. Although the Ld.CIT(A) was not persuaded by the explanation and declined to condone the delay, it is noteworthy that the appellate authority nevertheless proceeded to adjudicate the issues on merits, thereby indicating that the dispute raised by the assessee involved substantial issues requiring examination on facts and law.

It is a settled proposition of law that while considering an application for condonation of delay, the approach of the appellate authority should ordinarily

In the present case, we find that the additions made by the AO are substantial. The assessment order itself records that the original information available on the Department's Insight Portal regarding the alleged sale consideration of immovable property at Rs.2,10,00,000/- was factually incorrect and that, upon verification from the Sub-Registrar Office, the apparent sale consideration was found to be only Rs.70,00,000/- with the stamp duty value being Rs.89,35,714/-. Likewise, the addition of Rs.2,83,39,140/- representing cash deposits has been made solely on account of absence of any explanation from the assessee. It is the consistent stand of the assessee before us that he is in possession of relevant documentary evidence explaining the transactions and that the same could not be produced before the AO for the reasons stated in the condonation petition. These factual aspects, in our considered opinion, deserve proper verification by the AO after granting adequate opportunity to the assessee. Denial of such opportunity would result in adjudication of substantial tax liability without examination of the relevant evidence and the true factual position.

At the same time, we cannot overlook the conduct of the assessee. The assessment records clearly reveal repeated non-compliance with the statutory notices issued during the reassessment proceedings. Even thereafter, the

Considering the totality of the facts and circumstances, we are of the considered opinion that the ends of justice would be adequately served by condoning the delay in filing the appeal before the Ld.CIT(A), while simultaneously compensating the inconvenience caused to the Revenue and the judicial process by directing the assessee to pay appropriate costs. Such a course would balance the equities between the parties by safeguarding the right of the assessee to establish his case on merits without permitting him to derive any advantage from his own negligence. Accordingly, the delay of 588 days in filing the appeal before the Ld.CIT(A) is condoned, subject to the condition that the assessee shall pay costs of Rs.10,000/- (Rupees Ten Thousand only) to the Tamil Nadu State Legal Services Authority, Madras High Court, within a period of 30 days from the date of receipt of this order. The assessee shall produce the original challan evidencing such payment before the AO within the aforesaid period.

Since we have condoned the delay, the impugned order of the Ld.CIT(A) dismissing the appeal as barred by limitation cannot be sustained. Consequently, the assessment order passed u/s.147 r.w.s 144 of the Act is set aside and the entire matter is restored to the file of the AO for framing a fresh assessment in accordance with law. The AO shall afford the assessee reasonable and effective opportunity of being heard, permit the assessee to file such documentary evidence as may be relevant in support of his contentions,

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

We have already, while adjudicating the connected quantum appeal in ITA No.2488/Chny/2026, set aside the reassessment order passed u/s.147 r.w.s 144 of the Act and restored the matter to the file of the AO for framing a fresh assessment in accordance with law after affording adequate opportunity of being heard to the assessee. Once the very foundation on which the impugned penalty has been levied has been set aside, the penalty order cannot survive independently at this stage. It is a settled proposition of law that where the quantum assessment itself has been restored for fresh adjudication, the consequential penalty proceedings founded upon such assessment also require to be restored, since the ultimate liability to penalty would necessarily

Having regard to the above factual and legal position, we are of the considered opinion that the ends of justice would be adequately met by setting aside the impugned penalty order as well and restoring the matter to the file of the AO. The AO shall reconsider the issue of levy of penalty u/s.270A of the Act, if so warranted, only after completing the fresh assessment pursuant to the directions contained in the quantum appeal and shall decide the same independently in accordance with law, after providing the assessee with a reasonable opportunity of being heard. Needless to observe, all contentions available to the assessee on the merits of the penalty proceedings are kept open for adjudication.

Accordingly, the impugned penalty order is set aside and the matter is restored to the file of the AO for fresh consideration in the light of the outcome of the reassessment proceedings.

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