PLUSH,MUMBAI vs. ITO, WARD 7, VAPI

Briefly stated, the facts of the case are such that the assessee is a partnership firm. For AY 2017-18 under consideration, the assessee-firm was having two partners, namely (i) Shri Parul Nilesh Shah and (2) Shri Manish Bhagwanbhai Suthar. However, Shri Parul Nilesh Shah resigned from firm w.e.f. 01.04.2017. For AY 2017-18, the assessee-firm did not file any return u/s 139. The Ld. AO issued a notice dated 29.12.2017 calling the assessee to file return but still the assessee did not comply with. The Ld. AO also issued follow-up notices u/s 142(1) and show-cause notice u/s 144 which also remained uncompiled with. Ultimately, the Ld. AO passed ex-parte assessment order dated 03.10.2019 u/s 144 assessing total income at Rs. 8,54,93,600/-, comprising of cash deposits and credit entries in bank a/c during the relevant year. Further, the Ld. AO also passed ex- parte penalty-order dated 20.10.2021 u/s 271AAC(1) imposing a penalty of

In so far as the filing delays before Ld. CIT(A) is concerned, the Ld. AR drew our attention to the submission made by assessee in the space provided at S.No. 14 & 15 of Form No. 35 filed by assessee to Ld. CIT(A) wherein the assessee has given explanation about the reasoning of delay. The very same explanation has also been noted by Ld. CIT(A) in Para 9 of impugned orders; we extract below the same: “The condonation of delay of 1279 days in filing the appeal needs to be decided. In this case, it is seen from the records that the date of assessment order is 03.10.2019 and the said order has been duly served upon on the appellant on 03.10.2019. The appeal is filed on 06.05.2023 beyond the stipulated time for filing appeal prescribed u/s 249(2) of the Income tax Act, 1961. Thus, there is a delay of 1279 days in filing the appeal. Along with the Form 35 the appellant has stated as under :- "In AY 2017-18 there were two partners in the firm namely 1. Parul Nilesh Shah and 2. Manish Bhagwanbhai Suthar. I Parul N. Shah resigned from the Partnership from 01.04.2017 and therefore was not aware that the assessment proceedings has been initiated for the relevant AY. After 01.04.2017 there were multiple legal issues

Thereafter, Ld. AR also filed following corroborative affidavit from one of the present partners of assessee-firm “Mr. Mahesh Kumar Seventilal Shah”; the same is scanned and re-produced below for an immediate reference:

Accordingly, the crux of Ld. AR’s submission is that impugned assessment-order and penalty-order were passed by Ld. AO against assessee-firm in ex-parte manner and because of disputes between partners of assessee-firm and certain legal matters in courts, there was no one to take the responsibility in the income-tax matters of assessee-firm. Owing to this reason, the non-prosecution during proceedings before Ld. AO as well as the delays in filing appeals before Ld. CIT(A) occurred. However, as of now, the partners have collected details and documents and are ready to make an effective representation before Ld. AO. The Ld. AR further narrated that the assessee has also moved a separate application under Rule 29 of Income-tax (Appellate Tribunal) Rules, 1963 for admission of additional evidences; contents of the application so filed is re-produced below: From:- CA. MAYANK A. OGRIVALA Authorized Representative of PLUSH PAN-AAPFP6313G To, INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT ASSESSEE NAME: PLUSH ASSESSEE PAN:- AAPFP6313G SUB:- APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE IN TERMS OF RULES 29 OF ITAT RULES APPEAL NO. ITA 608/SRT/2025 DATED OF HEARING:- 17/03/2026 Dear Sir, With reference to the above referred subject, I the undersigned, Authorized Representative of above referred client humbly submit as under:- 1. The appellant humbly submits this application for admission of additional evidence under Rule 29 of the Income-tax (Appellate Tribunal) Rules, 1963, as the same is necessary for proper adjudication of the present appeal and goes to the root of the matter 2. The appellant submits that the assessment as well as appellate proceedings before the learned CIT(A) were completed without proper appreciation of facts and surrounding circumstances, particularly the serious dispute between retired and continuing partners, which had a direct bearing on management of the firm and compliance with statutory proceedings. 3. It is respectfully submitted that due to the retirement of the partner who has filed the present appeal and due to serious disputes between the retired and continuing partners, there was no effective control or access to records of the firm. Because of these circumstances, the appellant could not place all the relevant documents before the Assessing Officer and the learned CIT(A). 4. The appellant further submits that the learned AO as well as the learned CIT(A) proceeded to make and sustain additions by doubting the existence of business activity, without appreciating the statutory records and past compliance of the assessee, which clearly establish that the assessee was engaged in genuine business 5. In order to substantiate the above facts and to assist this Hon'ble Tribunal in proper adjudication of the appeal, the appellant seeks to place the following documents on record as additional evidence: a) Copy of the petition filed before the Hon'ble Gujarat High Court by the continuing partners for quashing of FIR lodged by the retired partner, along with annexures, evidencing serious inter-se disputes and disruption of the affairs of the firm, b) VAT return acknowledgement summary, evidencing regular statutory compliance and existence of business activity much prior to initiation of income-tax proceedings; c) Copy of ITR-V for A.Y. 2016-17 along with audited financial statements, evidencing declaration of business income in the immediately preceding year, d) Copy of ITR-V for A.Y. 2015-16 along with Form No. 3CB-3CD, evidencing audited business activity and continuity of operations. 6. The appellant submits that the above additional evidence is highly relevant and directly supports the grounds raised before this Hon'ble Tribunal, particularly with respect to wrongful rejection of business activity, unjustified addition under section 69A, and incorrect application of section 115BBE of the Act.

Ld. DR for revenue though dutifully supported the orders of lower authorities but considering the facts and circumstances prevailing in assessee-firm, did not raise any objection against remanding back. He, however, requested the bench to give stricter direction to asseseee to ensure participation in set aside proceedings.

Upon careful consideration of the facts and material on record, we note that both assessment-order and penalty-order were passed by Ld. AO as ex-parte on account of non-compliances with the notices issued and, thereafter, the appeals before Ld. CIT(A) were also filed belatedly. The assessee has attributed both the non-compliance before Ld. AO and the filing delays before Ld. CIT(A) to the disputes between the partners and certain legal matters in courts, as explained in Form No. 35 and supported

Further, considering the above submissions of parties; having regard to the principle of natural justice and also bearing in mind that no prejudice would be caused to revenue if the present matters are restored at the level of Ld. AO, we restore these matters to the file of Ld. AO for adjudication afresh, at the risk and responsibility of assessee. The Ld. AO shall give necessary opportunity of hearing to assessee and pass appropriate orders uninfluenced by his earlier orders. The Ld. AO shall also consider the additional evidences filed by assessee before us and further evidences, if any, the assessee may file to Ld. AO. The assessee is also directed to remain vigilant and ensure participation in the hearings as may be fixed by Ld. AO without seeking unnecessary adjournments failing which the Ld. AO shall be at liberty to proceed in accordance with law. Ordered accordingly.