RADHIKA DIAMONDS MANUFACTURING LLP,MUMBAI vs. INCOME TAX OFFICER, AAYKAR BHAVAN

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ITA 3839/MUM/2026Status: DisposedITAT Mumbai14 October 2026AY 2022-236 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that both the assessment order and the CIT(A)'s order were passed ex parte, without effective participation from the assessee. The assessee provided an affidavit explaining that non-compliance was due to bona fide administrative circumstances, including the cessation of business operations after a slump sale and the abrupt discontinuation of practice by their Chartered Accountant. The Tribunal acknowledged that it is a settled principle of natural justice that an assessee should not be condemned unheard when a bona fide cause is shown for non-appearance. Since neither the AO nor the CIT(A) had an effective opportunity to examine the merits of the case, the Tribunal, in the interest of natural justice and fair play, decided to set aside the impugned orders and restore the proceedings to the file of the AO for fresh adjudication on merits. A cost of Rs. 5,000/- was imposed on the assessee, payable to the Prime Minister's National Relief Fund. The AO was directed to frame the assessment afresh after affording a reasonable opportunity of being heard. The assessee was directed to update its communication details and cooperate fully, with liberty to the AO to complete the assessment based on available material if the assessee failed to cooperate. The Tribunal explicitly stated that this decision did not express any opinion on the merits of the dispute.

What were the facts?

The assessee, Radhika Diamonds Manufacturing LLP, filed an appeal against the order of the CIT(A) NFAC for Assessment Year 2022-23. The appeal challenged the confirmation of additions amounting to Rs. 3,61,34,993 made by the Assessing Officer (AO) on account of sale consideration received on a slump sale, and the classification of this consideration as short-term capital gains instead of long-term capital gains. The assessee also contended that the CIT(A) passed an ex-parte order without providing sufficient opportunity to be heard, violating principles of natural justice. The assessee explained that non-compliance before the lower authorities was due to the cessation of business operations after a slump sale, leading to irregular monitoring of the e-filing portal and statutory notices. The Chartered Accountant handling the case surrendered his Certificate of Practice, resulting in unattended notices. Both the assessment order and the CIT(A) order were ex-parte.

What were the issues?

1. Whether the CIT(A) erred in confirming the AO's action of making an addition of Rs. 3,61,34,993 being sale consideration received on slump sale without perusing the details on record, rendering the addition unjust, unreasonable, and unfair, and thus deserving deletion (related to Section 143(3) of the Income Tax Act, 1961)? 2. Whether the CIT(A) erred in confirming the AO's action of treating the consideration received on slump sale of Rs. 3,61,34,993/- as short-term capital gains instead of long-term capital gains, making the addition bad in law and deserving deletion (related to capital gains provisions)? 3. Whether the CIT(A) erred in passing an ex-parte order without providing sufficient opportunity of being heard, thus violating the principles of natural justice and warranting quashing of the order (related to principles of natural justice)? 4. Whether the CIT(A) erred in upholding the AO's action of initiating penalty proceedings under Section 270A in respect to the addition made? Assessee's Contentions: The assessee argued that the CIT(A) confirmed the AO's hasty assessment and large addition without perusing available details. They contended that the consideration from the slump sale was wrongly treated as short-term capital gains instead of long-term capital gains. The assessee also argued that the CIT(A) passed an ex-parte order, violating natural justice. The initiation of penalty proceedings under Section 270A was also challenged. Revenue's Contentions: The judgment records that the counsel for both parties were heard, but specific contentions of the revenue are not detailed.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 270A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: SANDEEP GOSAIN & SHRI BIJAYANANDA PRUSETH

Pronounced: 14.10.2026

PER SANDEEP GOSAIN, JUDICIAL MEMBER:

This appeal is filed by the Assessee against the order of Ld. CIT(A) NFAC vide DIN: ITBA/AST/S/143(3)/2023-24/1062242904(1) dated 31- Jan-2026 for the Assessment Year 2022-23. The Assessee has raised the following grounds of appeal:

1) In law and as per facts and in the circumstances of the appellants case honble CIT(A) has erred in confirming the action of the ld.

A.O. in passing the assessment order in haste and inflicting huge addition of Rs.3,61,34,993. 2) In law and as per facts and in the circumstances of the appellants case, the honble CIT(A) has erred in confirming the action of the ld. A.O. in making an addition of Rs. 3,61,34,993 being sale consideration received on slump sale without perusing the details available on record. Thus, the addition sustained is unjust / unreasonable / unfair and deserves to be deleted. 3) In law and as per facts and in the circumstances of the appellants case, the honble CIT(A) has erred in confirming the action of the ld. A.O. of treating the consideration received on slump sale of Rs. 3,61,34,993/- as short term capital gains instead of long term capital gains. Thus, the addition sustained on misplaced conclusion is bad in law and thus deserves to be deleted 4) In law and as per facts and in the circumstances of the appellants case, the honble CIT(A) has erred in passing an ex-parte order without providing sufficient opportunity of being heard in the matter. Thus the order passed is against the principles of natural justice and thus shall be quashed. 5) In law and as per the facts and in the circumstances of the appellants case, the honble CIT(A) has erred in upholding the action of the Ld. A.O. of initiating penalty proceedings u/s 270A in respect to the addition made above to the total income. 6) The appellant craves leave to add, amend, alter OR modify the ground OR grounds of Appeal on OR before the hearing.

2.

At the outset, it is observed from the record that both the assessment order passed by the Assessing Officer under the Income-tax Act, 1961 (“the Act”) and the appellate order passed by the Ld. CIT(A) were rendered ex parte, without any effective representation or participation on behalf of the assessee.

3.

The assessee has placed on record written submissions accompanied by an affidavit sworn on 05.08.2026 by its erstwhile Chartered Accountant, Shri Abdul Nabi Memon (Firm Registration No. 145495W), explaining the reasons for the non-compliance before the lower authorities. It has been submitted that the assessee had ceased its business operations pursuant to a slump sale undertaken during Financial Year 2021-22, on account of which there was irregular monitoring and tracking of the income-tax e-filing portal and statutory notices. The statutory notices, including the notice issued under section 143(2) of the Act dated 02.06.2023, were forwarded to the assessee’s then Chartered Accountant. However, prior to finalising and uploading the complete reply along with the requisite supporting documentation, the said Chartered Accountant surrendered his Certificate of Practice in July 2023 upon joining another firm, resulting in the statutory notices remaining unattended. Consequently, the notices issued electronically were neither effectively monitored nor responded to before the Assessing Officer or the Ld. CIT(A), leading to the aforesaid non- compliance.

4.

We have heard the counsel for both the parties and perused the material available on record, including the orders passed by the Revenue authorities. It is a settled principle of natural justice that an assessee should not be condemned unheard where sufficient and bona fide cause is shown for the failure to appear and furnish the necessary details before the authorities.

5.

On perusal of the affidavit filed by the erstwhile professional and the written submissions placed on record, we find that the non-compliance on the part of the assessee before the AO as well as the Ld. CIT(A) was neither deliberate nor contumacious, but appears to have arisen on account of bona fide administrative circumstances and the abrupt discontinuance of practice by the authorised professional.

6.

We further note that neither the AO nor the Ld. CIT(A) had an effective opportunity to examine the merits of the case, including the books of account and supporting documentary evidence, on substantive grounds. In these circumstances, and in the interest of natural justice and fair play, we are of the considered view that the matter deserves to be restored to the file of the AO for fresh adjudication on merits.

7.

Accordingly, we set aside the impugned orders of the Ld. CIT(A) and the AO and restore the assessment proceedings to the file of the AO for de novo adjudication in accordance with law, subject to a cost of Rs. 5,000/- being imposed upon the assessee. The said amount shall be deposited with the Prime Minister’s National Relief Fund, and a copy of the receipt evidencing such payment shall be furnished to the AO within 30 days from the date of receipt of this order.

8.

The AO shall frame the assessment afresh after affording the assessee a reasonable and effective opportunity of being heard, in accordance with law.

9.

The assessee is directed to immediately update its active registered e- mail address and other communication details on the income-tax e-filing portal. The assessee shall extend full cooperation during the remand proceedings, respond promptly to all statutory notices, and furnish all requisite explanations, books of account and supporting documentary evidence. The assessee shall not seek adjournments on frivolous grounds.

10.

In the event the assessee fails to cooperate or defaults in complying with the directions of the AO without justifiable cause, the AO shall be at liberty to complete the assessment in accordance with law on the basis of the material available on record.

11.

Before parting, we make it clear that our decision to restore the matter to the file of the AO shall not be construed as expressing any opinion whatsoever on the merits of the dispute. All issues shall remain open and shall be adjudicated independently by the AO in accordance with law.

12.

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

Order pronounced in the open court on 14.10.2026.

Sd/- Sd/- BIJAYANANDA PRUSETH SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 14.10.2026 RY-SrPS Copy to: RADHIKA DIAMONDS MANUFACTURING LLP, CC 3100 BHARAT DIAMOND BOURSE 1 BANDRA KURLA COMPLEX BANDRA EAST, MUMBAI-400051, MAHARASHTRA

INCOME TAX OFFICER, ITO WARD 14(1)(1) AAYAKAR BHAVAN 2 MUMBAI, MUMBAI-400020, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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