NEO INCORPORATION,RAJKOT vs. DCIT CIRCLE- 1(2), RAJKOT, RAJKOT

ITA 471/RJT/2026Status: DisposedITAT Rajkot21 October 2026AY 2012-20137 pages
AI SummaryAllowed

What were the facts?

The assessee, Neo Incorporation, filed an appeal against the order of the CIT(A), NFAC, Delhi, dated 31.07.2023. This order confirmed additions made by the Assessing Officer (AO) under section 143 r.w.s. 147 of the Income Tax Act, 1961, via an assessment order dated 26.12.2017. The appeal pertains to Assessment Year 2012-13. The assessee's appeal was filed with a delay of 917 days. The assessee, a partnership firm that ceased business in AY 2016-17, attributed the delay to internal disputes among partners and the negligence of their tax consultant. The revenue argued that no sufficient cause was shown for the delay. The AO had reopened the assessment based on information from the Investigation Wing regarding M/s. Malhar Exports being a bogus concern providing accommodation entries. The assessee had received an unsecured loan of Rs. 41,83,748/- from M/s. Malhar Exports.

What did the Tribunal hold?

The Tribunal condoned the delay of 917 days in filing the appeal, finding the reasons provided by the assessee, including partner disputes and tax consultant negligence, to be convincing and constituting a reasonable cause. The Tribunal adopted a liberal and pragmatic approach, citing precedents from the ITAT, Supreme Court, and Gujarat High Court, emphasizing that substantive rights should not be defeated by technicalities. Regarding the addition of Rs. 40,00,000/- as unsecured loan and Rs. 2,04,164/- as interest, the Tribunal deleted both additions. The reasoning was that the assessee had duly repaid the loan amount to the lender through banking channels, and interest was paid with TDS deducted. The Tribunal relied on the judgments in CIT vs. Ayachi Chandrashekhar Narsangji (Guj. HC) and Ojas Tarmake (P.) Ltd. (Gujarat-HC), which held that when loan repayment is accepted in a subsequent year and transactions are through banking channels, additions under Section 68 are not justified. The ratio is that repayment of a loan and payment of interest with TDS fortify the genuineness of the loan, and the substantive right of the assessee should not be denied on technicalities, especially when supported by judicial pronouncements.

What were the issues?

1. Whether the appeal filed by the assessee is barred by limitation, and if so, whether the delay of 917 days should be condoned (Question of mixed law and fact, concerning Section 253 of the Income Tax Act, 1961 and principles of natural justice). Assessee's contention: The delay was due to severe disputes among partners and the negligence of the tax consultant, and the assessee should not be penalized for the consultant's mistake. Reliance was placed on ITAT, Kolkata Bench in M/s. Garg Bros. Pvt. Ltd. & Others vs. DCIT and Supreme Court in Investment Trust v. Ujagarsingh, and Gujarat High Court in Gujarat State Fertilizers & Chemicals Ltd. (283 ITR 149) for a liberal approach in condoning delay. Revenue's contention: No "sufficient cause" was shown by the assessee to explain the unreasonable delay, indicating deliberate inaction or negligence. 2. Whether the addition of Rs. 40,00,000/- on account of unsecured loan from M/s. Malhar Exports under Section 68 of the Income Tax Act, 1961, is justified (Question of law). Assessee's contention: The addition should be deleted as the assessee submitted the lender's bank statement, Income Tax Return, confirmation, balance sheet, P&L account, and breakup of loans. TDS was deducted on interest, and the loan was repaid in the subsequent year through banking channels. Revenue's contention: The revenue primarily reiterated the stand taken by the Assessing Officer. 3. Whether the disallowance of interest expenditure of Rs. 2,04,164/- paid on the unsecured loan is justified (Question of law). Assessee's contention: The disallowance should be deleted as it is consequential to the addition on account of the unsecured loan, which the assessee contends is not justified. Revenue's contention: The revenue primarily reiterated the stand taken by the Assessing Officer.

Which sections of the Income-tax Act were involved?

Section 143,Section 147,Section 68,Section 250,Section 148,Section 253

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”

Before: Dr. Arjun Lal Saini

For Appellant: Shri Gaurang Khakhkhar, Ld. AR
For Respondent: Shri Ganesh Iyer, Ld. Sr. DR
Hearing: 19/10/2026

Per, Dr. Arjun Lal Saini, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year 2012- 13, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC) Delhi, dated 31.07.2023, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143 r.w.s. 147 of the Act, on 26.12.2017. 2. The grounds of appeal raised by the assessee are as follows:

“1. On f

The order continues below.

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