ZIG ZAG INTERNATIONAL,MADURAI vs. ASST.COMMISSIONER OF INCOME TAX, CIRCLE-1, MADURAI

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ITA 4501/CHNY/2026Status: DisposedITAT Chennai15 October 2026AY 2021-227 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal condoned the delay of 658 days in filing the appeals before it, acknowledging the assessee's financial hardship and business closure as sufficient cause. Similarly, it condoned the delay of 223 days in filing the appeal before the FAA, accepting the assessee's explanation of financial hardship and subsequent medical difficulties. On merits, considering the assessee's contentions regarding the discrepancy in turnover, the excessive estimation of income at 8% compared to prior years' profit margins, and the ex-parte nature of the FAA proceedings, the Tribunal set aside the orders of the FAA and the AO. The matter was restored to the file of the AO for fresh adjudication, with a direction for the assessee to cooperate and furnish all necessary details. The penalty order under section 270A was also set aside and restored to the AO for decision along with the quantum appeal. The appeals were allowed for statistical purposes.

What were the facts?

The assessee, M/s. Zig Zag International, filed appeals (ITA Nos. 4498 & 4501/CHNY/2026) for Assessment Year 2021-22 against orders of the Commissioner of Income Tax (Appeals), NFAC, Delhi, dated 16.08.2024 / 20.08.2024. There was a delay of 658 days in filing these appeals. The assessee explained the delay by stating that it incurred substantial business losses, discontinued its business, had no other income, and struggled with basic expenses, leading to difficulty in meeting appeal filing fees. The appeals challenged orders concerning quantum addition and a penalty under section 270A. The First Appellate Authority (FAA) had dismissed the assessee's appeal for quantum addition due to a 223-day delay, deeming the medical treatment explanation insufficient, but also adjudicated the grounds on merits, sustaining the addition.

What were the issues?

1. Whether the Tribunal should condone the delay of 658 days in filing the appeals, considering the assessee's financial hardship and business closure. 2. Whether the Tribunal should condone the delay of 223 days in filing the appeal before the FAA, given the assessee's medical treatment and financial difficulties. 3. On merits, whether the addition made by the Assessing Officer (AO) and sustained by the FAA, based on an estimated income of 8% of turnover, is excessive, especially when the turnover adopted by the AO did not tally with GST returns and prior years' gross profit margins were significantly lower (0.29% to 0.48%). 4. Whether the penalty levied under section 270A should be set aside along with the quantum appeal. Assessee's Arguments: The assessee argued that the delay in both instances was due to genuine financial hardship and medical issues, constituting sufficient cause. For the quantum addition, it contended that the AO's estimated income of 8% was excessive compared to past profit margins and that the turnover figure used was incorrect. It also stated that FAA proceedings were ex-parte and sought an opportunity to present its case before the AO. Revenue's Arguments: The Revenue supported the order of the FAA.

Which sections of the Income-tax Act were involved?

Section 250,Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI GEORGE GEORGE K & SHRI GAGAN GOYAL

Hearing: 13.10.2026Pronounced: 15.10.2026

आदेश/ O R D E R PER GEORGE GEORGE K, VICE PRESIDENT: These appeals filed by the assessee are directed against the orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 16.08.2024 / 20.08.2024, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2021-22.

- 2 - ITA No.4498 & 4501/CHNY/2026 Zig Zag International 2. There is a delay of 658 days in filing the present appeals. The assessee has filed petitions seeking condonation of the delay, duly supported by affidavits, explaining the reasons for the same. It is submitted that the assessee firm incurred substantial business losses and discontinued its business during the financial year 2021-22. Consequently, the assessee had no other source of income and was struggling to meet its basic living expenses. It is further submitted that the assessee was under continuous pressure from the Department to discharge the disputed tax demand and could, with considerable difficulty, save sufficient funds to meet the appeal filing fees before the Tribunal. The delay in filing the appeals is stated to have arisen in these circumstances. On perusal of the reasons stated, we are of the view that no latches can be attributed to the assessee as there is sufficient cause for belated filing of this appeal. Hence, we condone the delay and proceed to dispose off the appeal on merits.

3.

The assessee has filed appeals against the First Appellate Authority (FAA) orders in respect of quantum addition and penalty order. First, let us deal with appellate order in respect of quantum addition in ITA No.4498/CHNY/2026 for assessment year 2021-22.

- 3 - ITA No.4498 & 4501/CHNY/2026 Zig Zag International

ITA No.4498/CHNY/2026 4. At the very outset, we notice that the First Appellate Authority (FAA) dismissed the assessee's appeal without condoning the delay and on merits. The FAA observed that there was a delay of 223 days in filing the appeal. The reason stated by the assessee in Form No.35 for the delay was that the assessee was under medical treatment from January 2023 till August 2023 for various ailments. The FAA held that the explanation was not reasonable and did not constitute sufficient cause for condoning the delay. Accordingly, the FAA declined to condone the delay and dismissed the appeal. However, the FAA also adjudicated the grounds of appeal on merits and sustained the addition made by the AO.

5.

Aggrieved by the order of the FAA, the assessee is in appeal before the Tribunal. The Ld. AR submitted that the FAA declined to condone the delay of 223 days in filing the appeal and also sustained the addition made by the AO on merits. The Ld. AR submitted that the assessee firm had incurred substantial business losses and discontinued its business during the financial year 2021- 22. Following the closure of the business, the partner had no other

- 4 - ITA No.4498 & 4501/CHNY/2026 Zig Zag International business activity or source of income and was struggling to meet the basic needs of his family. The resulting financial hardship and mental stress led to various ailments, for which the assessee underwent medical treatment from January 2023 to August 2023. Consequently, the assessee was prevented by sufficient cause from filing the appeal before the FAA within the prescribed time.

6.

On merits, the Ld. AR submitted that the AO estimated the income at 8% of the total turnover, though the turnover adopted by the AO did not tally with the turnover reported in the GST returns. He further submitted that the assessee had declared gross profit margins ranging from 0.29% to 0.48% in the returns of income for the assessment years 2017-18 to 2020-21 and, therefore, the estimation of income at 8% was excessive. The Ld. AR also submitted that the proceedings before the FAA were ex-parte and that the assessee could not furnish the complete details even during the assessment proceedings. In these circumstances, the Ld. AR contended that the delay was neither wilful nor deliberate but arose from genuine financial hardship and medical difficulties constituting sufficient cause. Accordingly, he prayed that the delay be condoned and the matter be restored to the file of the AO to enable the

- 5 - ITA No.4498 & 4501/CHNY/2026 Zig Zag International assessee to substantiate its case by furnishing the requisite details. The Ld. AR undertook to appear before the AO and furnish the necessary details as and when called upon to do so.

7.

The Ld.DR supported the order of the FAA.

8.

We have heard the rival submissions and perused the materials available on record. The assessee has explained that the delay of 223 days in filing the appeal before the FAA was attributable to severe financial hardship following the closure of its business and the consequent medical difficulties. Considering the facts and circumstances of the case, we are of the view that the assessee was prevented by sufficient cause from filing the appeal within the prescribed time. Accordingly, we condone the delay of 223 days in filing the appeal before the FAA.

9.

On merits, the Ld. AR has contended that the turnover adopted by the AO does not tally with the GST returns and that the estimation of income at 8% is excessive when compared with the gross profit margins declared in the earlier assessment years. It is also evident from the gross profit margin declared in the ITRs for

- 6 - ITA No.4498 & 4501/CHNY/2026 Zig Zag International previous years. The Ld. AR further submitted that the appellate proceedings before the FAA were ex-parte and that, even during the assessment proceedings, the assessee could furnish only partial details and was unable to produce the requisite documents. He submitted that the assessee is now in possession of the necessary details, including the GST returns, and accordingly sought one more opportunity to substantiate its case before the AO. Considering the submissions of the Ld. AR and in the interest of substantial justice, we set aside the orders of the FAA and the AO and restore the matter to the file of the AO for fresh adjudication in accordance with law, after affording a reasonable opportunity of being heard to the assessee. The assessee is directed to co-operate with the Revenue and furnish all requisite details and evidences in support of its contention and shall not seek unnecessary adjournment. It is ordered accordingly.

ITA Nos.4501/CHNY/2026 10. The assessee has filed this appeal against the appellate order confirming the penalty levied u/s.270A of the Act, by the AO. Since, we have already set aside the quantum appeal in ITA No.4498/CHNY/2026 to the files of the AO for denovo adjudication,

- 7 - ITA No.4498 & 4501/CHNY/2026 Zig Zag International we deem it appropriate to set aside the impugned penalty order also to the files of the AO to decide along with the corresponding quantum appeal in accordance with law. It is ordered accordingly.

11.

In the result, the appeals filed by the assessee are allowed for statistical purposes.

Order pronounced in the open court on 15th October,2026 at Chennai.

Sd/- Sd/- (जॉज� जॉज� के) (गगन गोयल) (GAGAN GOYAL) (GEORGE GEORGE K) लेखा सद�य/ACCOUNTANT MEMBER उपा�य� /VICE PRESIDENT चे�नई/Chennai, �दनांक/Dated, the 15th October, 2026 RSR, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु�त /CIT, Madurai 4. �वभागीय ��त�न�ध/DR 5. गाड� फाईल/GF. By Order

Digitally signed by REKHA REKHA SENTHIL RAJ SENTHIL RAJ Date: 2026.10.16 17:04:29 +05'30'

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