GAJANAN PAPER MILLS (P) LTD,BULDHANA, MAHARASHTRA vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 7(1)(1), MUMBAI, AAYAKAR BHAWAN MUMBAI, MAHARASHTRA

The brief facts of the case are that the assessee, Gajanan Paper Mills (P) Ltd., engaged in the business of manufacture and sale of Kraft Paper, filed its return of income for A.Y. 2016-17 on 10.10.2016 declaring loss of ₹92,83,694/-. The case was selected for complete scrutiny. During the assessment proceedings, the Assessing Officer noticed that the assessee had received unsecured loans OF to ₹78,63,119/- received from five parties. The Assessing Officer asked the assessee to establish the identity and creditworthiness of the lenders and genuineness of the transactions and also issued a show-cause notice dated 03.12.2018. Since the Assessing Officer did not receive a reply in response to the show-cause notice and the required evidence was not furnished, the Assessing Officer treated the unsecured loans of ₹78,63,119/- as unexplained cash credits under section 68 of the Act. The Assessing Officer also added interest of ₹15,175/- received under section 244A of the Act.

The assessee carried the matter in appeal before the learned CIT(Appeals). During the appellate proceedings, CIT(Appeals) issued notices on 22.03.2023, 23.09.2024, 08.05.2025 and 18.06.2025. However, there was no compliance on behalf of the assessee. The learned CIT(Appeals), therefore, proceeded to decide the appeal on the basis of the material available on record. He observed that the assessee had not produced any evidence to rebut the findings of the Assessing Officer or to establish the nature and source of the unsecured loans. He accordingly upheld the addition made under section 68 and dismissed the appeal.

The assessee is in appeal before us against the order passed by the learned CIT(Appeals) dismissing the appeal of the assessee.

There is a delay of 260 days in filing the present appeal. The assessee has filed an application for condonation of delay supported by an affidavit of Shri Mahendra Prasad Jindal, Resolution Professional. It has been explained that the assessee company was undergoing Corporate Insolvency Resolution Process and there were serious operational and managerial difficulties during implementation of the resolution plan. Subsequently, vide order dated 06.04.2026, the CIRP was reinstated by the Hon'ble NCLT and Shri Mahendra Prasad Jindal was appointed as Resolution Professional. After taking control of the management and examining the records and liabilities of the company, the Resolution Professional noticed the impugned appellate order passed by CIT(Appeals) and took steps to file the present appeal. The appeal was thereafter filed on 01.06.2026.

Considering these peculiar facts, we are satisfied that the delay was not deliberate or intentional. The company was passing through insolvency proceedings and there was a change in the person having control over its affairs. The Resolution Professional acted after taking charge and examining the records. Following the principles laid down by the Hon'ble Supreme Court in Collector, Land Acquisition, Anantnag v. Mst. Katiji [(1987) 2 SCC 107], that substantial justice should ordinarily prevail over technical considerations where sufficient cause is shown, we condone the delay of 260 days and admit the appeal for adjudication.

Coming to the merits, we find that both the assessment and the first appellate proceedings were concluded without the assessee placing the complete supporting evidence on record. The addition under section 68 of the Act is substantial and relates to unsecured loans received from five persons. We also take note of the subsequent developments under the Insolvency and Bankruptcy Code and the appointment of the Resolution Professional, who has now taken control of the affairs and records of the assessee company.

In these circumstances, and in the interest of justice, we consider it appropriate to provide one opportunity to the assessee to place all relevant evidence before the Assessing Officer. We accordingly set aside the impugned order of the learned CIT(Appeals) and restore the matter to the file of the Assessing Officer for de novo consideration. The assessee, through the Resolution Professional, shall furnish the confirmations, bank statements, income-tax particulars and such other evidence as may be required to establish the identity and creditworthiness of the lenders and genuineness of the transactions. The Assessing Officer shall examine the evidence afresh and decide the issue in accordance with law after granting reasonable opportunity of hearing to the assessee.

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