K & P ENTERPRISES,BANDRA MUMBAI vs. DCIT 22(1), PIRAMAL CHAMBER,MUMBAI

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ITA 2263/MUM/2025Status: DisposedITAT Mumbai12 August 2025AY 2010-117 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the CIT(A) treated the appeal as invalid solely due to the substantial delay without considering the assessee's submission that the original appeal was filed manually within the prescribed time. The CIT(A) dismissed the appeal based on one-sided observations without giving the assessee an opportunity to explain the delay, thereby violating principles of natural justice. The Tribunal noted that the e-filing system was newly introduced around the time the appeal was filed, and the assessee claimed a human error in overlooking the amendment. The Tribunal emphasized that procedures are meant to advance justice. Following various decisions of coordinate benches, the Tribunal held that a liberal approach is required in such circumstances. Accordingly, the Tribunal set aside the order of the CIT(A) and remanded all issues to the file of the CIT(A) for adjudication on merits. The assessee was directed to e-file its appeal within 10 days, and upon compliance, the delay in e-filing would stand condoned. The CIT(A) was directed to admit the appeal and decide the issues on merits after providing an opportunity of hearing. The issue of reassessment proceedings and disallowance of purchases were not decided on merits by the Tribunal.

What were the facts?

The assessee, K & P Enterprises, filed an appeal against the reassessment order passed by the Assessing Officer (AO) under section 143(3) read with section 147 of the Income-tax Act, 1961, for Assessment Year 2010-11. The appeal was filed before the Commissioner of Income-tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal in limine due to a delay of 705 days in filing. The assessee's explanation for the delay was that the original appeal was filed manually within the time limit, and the e-filing requirement was overlooked due to a human error, as the e-filing system was newly introduced. The assessee contended that the CIT(A) violated principles of natural justice by dismissing the appeal without considering the facts and without providing an opportunity for explanation.

What were the issues?

1. Whether the reassessment proceedings initiated under section 143(3) read with section 147 of the Income-tax Act, 1961, are bad in law, based on borrowed satisfaction, suspicion, third-party statements without corroboration, and without providing an opportunity for cross-examination or verification. - Assessee's contention: The AO erred in passing the reassessment order based on information from DG (Inv) without independent satisfaction, on suspicion, and relying on uncorroborated third-party statements without providing cross-examination opportunities. The approval was mechanical. - Revenue's contention: Not recorded. 2. Whether the disallowance of purchases amounting to Rs. 11,86,489/- made from Daksh Diamonds, treating them as bogus, is justified. - Assessee's contention: The AO erred in disallowing purchases without appreciating the submissions, the confirmation of balances by Daksh Diamonds in response to notices under section 133(6), without issuing summons under section 131, without granting cross-examination, wrongly relying on third-party statements, without establishing a cash trail, and without the assessee's name appearing in third-party statements. Books of accounts were not rejected, and similar additions were deleted by the jurisdictional ITAT. - Revenue's contention: Not recorded. 3. Whether the charging of interest under sections 234A, 234B, 234C, and 234D, and the initiation of penalty proceedings under section 271(1)(c) are justified. - Assessee's contention: The AO erred in charging interest and initiating penalty proceedings. - Revenue's contention: Not recorded. 4. Whether the CIT(A) erred in dismissing the appeal by rejecting the petition for condonation of delay, overlooking grounds on merits and legal submissions, and violating principles of natural justice by not granting a personal hearing. - Assessee's contention: The CIT(A) erred in dismissing the appeal due to delay without considering the manual filing of the original appeal and without providing an opportunity for hearing, violating natural justice. - Revenue's contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 249(2),Section 249(3),Section 5,Section 133(6),Section 131,Section 271(1)(c),Section 234A,Section 234B,Section 234C,Section 234D

AI-generated summary — verify with the full judgment below

Before: SHRI SAKTIJIT DEY & SHRI PRABHASH SHANKAR

For Appellant: Shri Bhupendra Shah, AR
For Respondent: Shri Hemanshu Joshi (Sr. DR)
Hearing: 15.07.2025Pronounced: 12.08.2025

PER PRABHASH SHANKAR [A.M.] :- The present appeal is filed by the Assessee against the order passed by the Learned Commissioner of Income-tax, Appeal, ADDL/JCIT(A)-1, Chandigarh [hereinafter referred to as “CIT(A)"] pertaining to assessment order passed u/s.143(3) r.w.s.147 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 22.02.2016 for the Assessment Year [A.Y.] 2010-11. Page 2 K & P Enterprises

2.

The grounds of appeal are as under:

1.

In the facts and the circumstances of the case and in law, the learned A.O. erred in passing the reassessment order u/s 143(3) r.w.s 147 which is bad in law a. merely on the basis of information received from the DG (Inv), Mumbai who has conducted search operation on Shri Bhanwarlal Jain Group and on the basis of borrowed satisfaction b. merely on the basis of suspicion, surmises and conjectures and without any material on record c. Relying on third party statements and without corroborating evidence d. without providing the statements recorded on the basis of which the additions are made and without giving the appellant an opportunity of cross examination e. Without verification of the details submitted by the Appellant f. approval granted in mechanical way

2.

In the facts and circumstances of the case and in law, the Learned AO erred in disallowing purchases amounting to Rs.11,86,489/-being 100% of purchases made from Daksh Diamonds thereby allegedly treating the same as bogus a. Without appreciating the submissions made by the Appellant b. Without appreciating the fact that reply to notices u/s 133(6) issued by the AO was submitted by the Daksh Diamonds confirming the balances c. Without issuing summons u/s 131 d. Without granting cross examination e. Wrongly relying upon 3rd party statements f. without establishing Cash Trail g. Without any name of the Appellant appearing in the statements recorded of the third parties. h. Without rejecting books of accounts i. Similar additions are deleted by the Jurisdictional Mumbai ITAT in many other cases

3.

In the facts and circumstances of the case and in law, the leaned AO charged interest u/s 234A, B, C and D and initiating penalty u/s 271(1)(c).

4.

In the facts and circumstances of the case and in law, the leaned CIT (A) erred in dismissing the appeal thereby rejecting the petition of condonation by overlooking all the grounds of appeal on merits and legal submissions made and also without granting an opportunity of personal hearing thereby violating principles of natural justice. [B] Relief Prayed: Page 3 K & P Enterprises The appellant therefore prays Your Honour; 1) To quash the reassessment proceedings u/s 147. 2) To delete the disallowance of Rs.11,86,489/- allegedly treated as bogus purchase. 3) To delete the interest charged u/s 234A, B, C and D and initiation of penalty u/s 271(1)(c).

3.

According to the ld.CIT(A), the appeal against the assessment order under section 143(3)/147 of the Act dated 22.02.2016 shown to be served on 21.03.2016 has been filed on 27.03.2018. This shows that the delay in filing the appeal as per the provisions of section 249(2) of the Act was 705 days. On perusal of Form No. 35, it was observed that regarding delay in filing the appeal, the appellant has submitted as under:- “With due respect with reference to above subject, we beg to state that we have filed appeal manually in time limit of 30 days and after that by mistake somehow we overlooked the new amendment of filing e- appeal. Sir it was a pure human error and there is no malafide intention."

3.

1 In view of the above discussion and legal position, the delay of 705 days in filing of appeal in this case was not condoned as no "sufficient cause” has been shown u/s.249(3) of the Act for the appellant's failure to file the appeal within the prescribed period of limitation us.249(2) of the Act r.w.s.5 of Limitation Act and hence the appeal sought to be instituted belatedly was dismissed in limine. Page 4 K & P Enterprises

4.

We have carefully considered the above facts and find that the ld.CIT(A) has treated the appeal invalid on account of substantial delay without considering the fact stated by the assessee that original appeal was filed manually within the prescribed time limit. The ld.CIT(A) has not given due consideration of such a fact which has not been disputed by him. Moreover, he appears to have drawn adverse inference and dismissed the appeal for delay taking into account the Statement of Fact but without giving any opportunity to the assessee to adduce reasons. Thus, he has grossly violated the principles of natural justice in dismissing the appeal on one-sided observations only. Undoubtedly, there is considerable delay but the assessee might have explanation to demonstrate 'sufficient cause' for the delay which the ld.CIT(A) has completely denied.

4.

1 Opportunity needed to be given to the assessee for explaining the delay more so in the light of the fact that the assessee has claimed to have filed appeal within prescribed time albeit manually. There are catena of decisions of various courts of law where even compliance to this extent by the assessee has been considered to be a ground for condonation of delay. We find that that newly introduced system of e- filing of appeals before CIT(A) was introduced w.e.f. 01.03.2016 vide Rule 45 of the Income Tax Rules,1962 while assessee filed appeal with Page 5 K & P Enterprises earlier. Thus, it can be seen that it was an initial period of introduction of new system of filing of appeal electronically. However, the assessee filed original appeal in time u/s 249(2) of the Act but the same was filed manually. In our considered view, tax-payers are bound to follow ITA No.7134/Mum/2017,Estate of Ramniklal Rajmal Mehta vs DCIT in ITA Nos.628 to 632/Mum/2021. 5. Thus, respectfully following the above cited orders and taking into account all the relevant facts of the case, we consider it appropriate to remand all the issues involved in the instant appeal to the file of the ld.CIT(A) to adjudicate on merits in accordance with law. The assessee is directed as well given liberty to e-file its appeal before the ld. CIT(A) within 10 days of receipt of this order. In case, the directions are followed then in that eventuality, the delay in e-filing the appeal shall stand condoned. The ld.CIT(A) is directed to admit and adjudicate the issues raised by the assessee in its appeal on merits in accordance with law after providing opportunity of heard to the assessee.

6.

In the result, the appeal is allowed for statistical purposes. Order pronounced in the open court on 12.08.2025. SAKTIJIT DEY (उपाध्यक्ष / VICE PRESIDENT) ] Place: मुंबई/Mumbai दिनांक / Date 12.08.2025 Lubhna Shaikh / Steno PRABHASH SHANKAR (लेखाकार सदस्य/ACCOUNTANT MEMBER) आदेश की प्रतिलिपि अग्रेषित/

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