PANNALAL H. GULECHA HUF ,MUMBAI vs. INCOME TAX OFFICER WARD 23(2)(6), MUMBAI

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ITA 95/MUM/2026Status: DisposedITAT Mumbai27 April 2026AY 2010-117 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal condoned the delay, citing the principle of substantial justice over technicalities. It set aside the CIT(A)'s ex-parte order and remanded the case back to the CIT(A) for a fresh adjudication after granting the assessee a reasonable opportunity of being heard.

What were the facts?

The assessee's appeal against an assessment order was dismissed by the CIT(A) due to a significant delay of 687 days. The delay occurred because notices from the CIT(A) were sent to an old email address of a former employee, and the assessee was unaware of the proceedings until a demand notice was received.

What were the issues?

Whether the delay in filing the appeal before the CIT(A) was sufficiently explained and whether the CIT(A) erred in passing an ex-parte order without proper notice to the assessee.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 10(38),Section 234B,Section 234C,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “C” BENCH, MUMBAI

[ Per Rahul Chaudhary, Judicial Member:

1.

The present appeal preferred by the Assessee is directed against the Order, dated 20/12/2023, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 29/12/2016, passed under Section 143(3) read with sections 147 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], for the Assessment Year 2010-2011. 2. The Assessee has raised following grounds of appeal:

“1. On the facts and in the circumstances of the case and in law, the ld. AO erred in re-opening the assessment u/s.147 of the Income Tax Act, 1961. The re-opening of the assessment is incorrect and invalid.

2.

On the facts and in the circumstances of the case and in law, the ld. AO erred in re-assessing the total income of the Appellant at 1,77,66,867/- as against originally assessed income of ₹ 5,02,310/- The Appellant disputes wrongful variations and submits that his assessed income be accepted as correct.

3.

a) On the facts and in the circumstances of the case and in law, the ld. AO erred in making an addition of 1,72,89,293/- to the income of the Appellant on account of unexplained investment representing Long term capital gains on sale of shares of Prraneta Industries Ltd., a listed company, after rejecting the claim of the Appellant in respect of Long term capital gains being exempt u/s.10(38) treating the Long term capital gains as bogus on the basis of information in possession of the Investigation Wing, Kolkata that certain operators and intermediaries had provided accommodation entries of bogus Long term capital gains using certain penny stock companies. The Id. AO further erred in holding that alternatively the capital gains represents "Income from other sources". The addition made to the income of the Appellant is incorrect and invalid.

b) The ld. AO failed to appreciate that:-

(i) the Appellant has earned Long term capital gains of ₹1,72,89,293/-on sale of shares of Prraneta Industries Ltd. and the same is supported by independent and admissible evidences; (ii) the shares were purchased and sold in the open free market of Bombay Stock Exchange on BOLT; (iii) there were no off market transactions nor any preferential allotment in these shares; (iv) the payments for purchase of shares and receipts for sale of shares are through banking channels; and (v) the delivery of shares are taken and given from the Demat account of the Appellant.

c) The ld. AO did not provide copy of materials and statements relied upon by him nor allowed any opportunity to the Appellant to cross examine those parties who have been suspected to provided accommodation entries to the Appellant.

d) In reaching to the conclusion and making such addition the ld. AO omitted to consider relevant factors, considerations, principles and evidences while he was overwhelmed, influenced and prejudiced by irrelevant considerations and factors.

4.

The ld. AO erred in charging interest u/s. 234B and 234C of the Income Tax Act, 1961. 5. The ld. AO erred in initiating the penalty proceedings u/s.271(1)(c) of the Income Tax Act, 1961.”

3.

There was delay of 687 days in filing the present appeal. When the appeal was taken up for hearing Learned Authorized Representative for the Assessee appearing before us submitted that the delay in filing the present appeal be condoned and in this regard reliance was placed upon the affidavit filed by the Assessee along with application seeking condonation of delay in filing the appeal which reads as under:

“I, Pannalal H. Gulecha, Karta of Pannalal H. Gulecha HUF, residing at 1602, C Gulecha Garden, 16th Floor, Gas Co Lane, Lalbaug, D. K. Marg, Mumbai-400012, do hereby solemnly affirm and state on oath as under:

1.

I say that I am the Karta of the Appellant-HUF and am fully conversant with the facts and circumstances of the present matter. I am, therefore, competent and duly authorised to affirm this affidavit.

2.

I say that the present appeal is preferred against the appellate order passed under section 250 of the Income-tax Act, 1961 by the learned CIT(A)-NFAC, Delhi dated 20.12.2023 for Assessment Year 2010-11, arising from the assessment order passed under section 147 read with section 143(3) dated 29.12.2016. 3. I say that being aggrieved by the assessment order, the Appellant had filed an appeal in Form No. 35 on 16.01.2017 before the learned Commissioner of Income-tax (Appeals).

4.

I say that at the time of filing the said appeal, the appeal records/ Form No. 35 reflected the email ID of Shri Lakshmi Kannaniyer, who was then associated with and attending to the taxation / accounting work of the Appellant. I further say that the Form No. 35 also indicated that notices/communications were not to be sent on email. A copy of the said Form No. 35 is annexed to the application for condonation dated 22nd April 2026 and marked as Exhibit A.

5.

I say that Shri Lakshmi Kannaniyer ceased to be in employment/association with the Appellant in or about March 2019. After that date, he was no longer handling the Appellant's affairs and was not authorised to receive or respond to tax communications on behalf of the Appellant. The supporting documents showing that no salary/payment was made to Shri Lakshmi Kannaniyer after 30.03.2019 are annexed to the application for condonation dated 22nd April 2026 and marked as Exhibit B.

6.

I say that during the pendency of the appellate proceedings before the learned CIT(A)-NFAC, notices were issued from time to time. I say that such notices were sent to the said email ID of the erstwhile accountant, Shri Lakshmi Kannaniyer. Copies of such notices and the screenshots reflecting the email ID on which such notices were sent are annexed to the application for condonation dated 22nd April 2026 and marked collectively as Exhibit C.

7.

I say that because the notices were sent to the said old email ID, the same were neither effectively received by me nor brought to my knowledge. I therefore remained unaware of the notices issued during the appellate proceedings and could not cause compliance to be made before the learned CIT(A)-NFAC.

8.

I say that the appellate order dated 20.12.2023 was also not brought to my knowledge at the relevant time. I did not receive any effective intimation of the passing of the said order by email, SMS or otherwise.

9.

I say that I became aware of the impugned appellate order only when a notice/communication was received from the Assessing Officer in relation to the outstanding demand on 18.11.2025. It is only upon receipt of the said notice / communication from the CPC/Assessing Officer that I came to know that the appeal before the learned CIT(A)-NFAC had been disposed of. A copy of the said notice / communication is annexed to the application for condonation dated 22nd April 2026 and marked as Exhibit D.

10.

I say that upon becoming aware of the same, I immediately contacted my Chartered Accountant and took steps for filing an appeal before the Hon'ble Income Tax Appellate Tribunal, Mumbai.

11.

I say that thereafter some time was required for retrieving the necessary records from the portal, collecting the relevant notices and supporting documents, obtaining material showing that Shri Lakshmi Kannaniyer had ceased to be associated with the Appellant from March 2019, and preparing the appeal along with the application for condonation of delay and this affidavit.

12.

I say that the present appeal is being filed with a delay of 687 days.

13.

I say that the said delay has occurred due to bona fide and sufficient cause and on account of circumstances beyond my control. I say that the delay is neither deliberate, intentional nor due to any negligence or mala fides on my part.

14.

I say that immediately upon acquiring knowledge of the appellate order, I acted diligently and bona fide in taking steps to file the present appeal.

15.

I say that I am filing this affidavit in support of the accompanying application seeking condonation of delay in filing the appeal before this Hon'ble Tribunal and in support of the documents exhibited thereto.

16.

I say that what is stated hereinabove is true to my own knowledge and belief and nothing material has been ancealed therefrom.”

4.

In the application seeking condonation of delay the Assessee has explained that the delay in filing the appeal is purely inadvertent and occurred due to bonafide reasons. In the memorandum of appeal in From 35 filed before the Learned CIT(A), through the email address of employee of the Assessee-company was mentioned, the Assessee had opted for physical service of notice. It was stated that the aforesaid employee also left the Assessee-company. The appeal was migrated to NFAC and notices were issued electronically. The Assessee did not have the knowledge of the notice of hearing and the impugned order passed by the Learned CIT(A). On receiving the notice of demand on 18/11/2015, the Assessee became aware of the impugned order. In the aforesaid facts and circumstances the Assessee failed to make proper representation before the Learned CIT(A) and filed the present appeal after a delay of 687 days. We find that the material on record supports the aforesaid submission advanced on behalf of the Assessee. In the case of Collector of Land Acquisition Vs. Mst. Katiji & others AIR 1987 1353 (SC) the Hon’ble Supreme Court has, while dealing with the issue of condonation of delay, emphasized that substantial justice should prevail over technical considerations. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. In the present the Appellant has provided sufficient explanation for delay in filing the appeal before the Tribunal. In our view, no benefit would have accrued to the Appellant by delaying filing of appeal. When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred. Therefore, we condone the delay of 687 days in filing the present appeal. Since the Assessee could not make proper representation before the Learned CIT(A), accepting the contention of the Assessee, we grant another opportunity to the Assessee to make proper representation before the Learned CIT(A). Accordingly, we set aside the impugned ex-parte Order, dated 20/12/2023, passed by the Learned CIT(A) with the directions to adjudicate the grounds raised by the Assessee afresh after granting Assessee a reasonable opportunity of being heard. Accordingly, Ground No.1 raised by the Assessee is allowed for statistical purposes. Since we have restored the appeal back to the file of Learned CIT(A), all the other grounds raised by the Assessee are dismissed as having being rendered infructuous. All the rights and contentions of the Assessee are left open. The Assessee would be at liberty to raise all legal contentions before the Learned CIT(A).

5.

In terms of the paragraph 4 above, appeal preferred by the Assessee is partly allowed.

Order pronounced on 27.04.2026. (Vikram Singh Yadav) Judicial Member मुंबई Mumbai; िदनांक Dated : 27.04.2026 Milan,LDC आदेश की "ितिलिप अ"ेिषत/Copy of the Order forwarded to : अपीलाथ" / The Appellant

1.

""थ" / The Respondent. 2. आयकर आयु"/ The CIT

3.

"धान आयकर आयु" / Pr.CIT 4. िवभागीय "ितिनिध ,आयकर अपीलीय अिधकरण ,मुंबई / DR, ITAT,

5.

Mumbai गाड" फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, स"ािपत "ित //// उप/सहायक पंजीकार /(Dy./Asstt.

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