MOHAMED HUSAIN & CO,MUMBAI vs. ITO 25(2)(1), MUMBAI, MUMBAI

ITA No. 4453/Mum/2026 arises from the quantum proceedings emanating from the assessment framed under section 143(3) r.w.s. 144 of the Income Tax Act, 1961. The principal grievances raised by the assessee are against the confirmation of disallowance of commission expenditure amounting to Rs.7,36,32,000/-, disallowance of remuneration to partners amounting to Rs.30,00,000/-, and disallowance of interest to partners amounting to Rs.37,93,894/-. The assessee has, inter alia, contended that the details of commission expenditure were duly reflected in the books of account and Tax Audit Report in Form No.3CD; that the commission expenditure considered by the authorities included the GST component despite the amount reflected in Form No.3CD being net of GST; and that remuneration and interest paid to partners were in accordance with the terms of the partnership deed and allowable under the provisions of section 40(b) of the Act.

ITA No. 4454/Mum/2026 arises from the penalty proceedings under section 270A of the Act wherein penalty amounting to Rs.5,62,08,052/- has been levied on the allegation of under- reporting and misreporting of income consequent to the additions sustained in the quantum proceedings. The assessee has challenged the levy of penalty on various grounds and has also assailed the action of the learned CIT(A) in dismissing the appeal and rejecting the application seeking condonation of delay filed before him.

We have carefully considered the contents of the condonation petition, the affidavit filed in support thereof and the chronology of events placed before us. The explanation furnished by the assessee appears to be bona fide and supported by the surrounding circumstances. The delay does not appear to be attributable to any

We further note that one of the specific grievances raised by the assessee in both the appeals is that the learned CIT(A) declined to condone the delay before him and proceeded to dispose of the appeals without adjudicating the substantive issues on merits. The assessee has consistently maintained that the circumstances prevailing during the assessment and appellate proceedings, including the absence of effective professional assistance, were beyond its control and resulted in non-representation before the authorities below.

Having examined the record, we find that the orders passed by the learned CIT(A) have culminated without effective adjudication of the issues raised by the assessee. In the quantum appeal, substantial additions aggregating to Rs.8,04,25,894/- have been sustained comprising disallowance of commission expenditure, interest to partners and remuneration to partners. In the penalty appeal, penalty under section 270A amounting to Rs.5,62,08,052/- has been sustained, which is entirely

Considering the entirety of the facts and circumstances, we are of the view that the interest of justice would be best served by affording the assessee one effective opportunity before the first appellate authority. Since the very foundation of the penalty proceedings under section 270A emanates from the additions made in the quantum assessment and since the learned CIT(A) has also rejected the assessee’s request for condonation of delay, we deem it appropriate to set aside both the impugned orders. Accordingly, the delay before the learned CIT(A), as explained by the assessee, is condoned and both the matters are restored to the file of the learned CIT(A) for adjudication afresh on merits. The learned CIT(A) shall first treat the delay before him as condoned and thereafter examine all the grounds raised by the assessee in accordance with law after providing due and effective opportunity of hearing. Insofar as the penalty appeal is concerned, the same shall be adjudicated after considering the outcome of the quantum proceedings and all contentions available to the assessee under law.

The assessee is directed to extend full cooperation in the appellate proceedings and shall promptly furnish all documents,

In the result, the delay in filing both the appeals before the Tribunal is condoned and both the appeals are allowed for statistical purposes.