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Facts
The assessee, a Civil Contractor, filed its ITR for AY 2018-19. The assessment was completed with disallowances, and subsequently, the PCIT set aside the assessment under Section 263, directing a fresh assessment on certain loan issues. The assessee filed a belated appeal (66 days delay) against this reassessment order before the CIT(A), who dismissed it in limine without condoning the delay or providing an opportunity of being heard.
Held
The Income Tax Appellate Tribunal (ITAT) held that the right to appeal is a valuable substantive right that should be viewed liberally. It noted that the CIT(A) failed to provide a specific opportunity of being heard before dismissing the appeal on limitation. The ITAT, therefore, set aside the CIT(A)'s order and remanded the matter for a fresh decision after providing the assessee a reasonable opportunity to be heard regarding the delay condonation and subsequently on merits.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal in limine for delay without condoning it or providing a reasonable opportunity of being heard, and the scope of the right to appeal.
Sections Cited
250, 263, 144, 143(3A), 143(3B), 142(1), 250(6B)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY, JM & SHRI AVDHESH KUMAR MISHRA, AM
आदेश / O R D E R Per Avdhesh Kumar Mishra, AM:
1. This appeal for Assessment Year (‘AY’) 2018-19 filed by the assessee is directed against the order dated 22.09.2025 of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (‘NFAC’), Delhi [‘CIT(A)’] passed under section 250 of the Income Tax Act, 1961 (‘Act’).
2. The assessee has challenged the impugned order on the ground that the Ld. CIT(A) has dismissed the appeal in limine without condoning the delay in filing the appeal and affording reasonable opportunity of being heard. Further, the Ld. CIT(A) Das Processors vs. ITO-1, Rajnandgaon did not decide the appeal on merit. The assessee has also raised the issue that the Ld. Assessing Officer (‘AO’) has not carried out the requisite enquiries/investigation/ verification as directed by the Ld. Principal Commissioner of Income Tax (‘PCIT’) under section 263 of the Act and made the disallowance of Rs.1,39,84,332/-.
3. The relevant facts giving rise to this appeal are that the assessee, a Civil Contractor, filed its Income Tax Return (‘ITR’) of the relevant year on 31.10.2018 declaring income of Rs.94,72,460/-. The case was picked up for scrutiny and consequential assessment order was passed under section 144 rws 143(3A) & 143(3B) of the Act as under: “4. On perusal of the profit and loss account, it is observed that during the year gross receipts of Rs.18,63,73,694/- were offered resulting in net Profit of Rs.94,72,461/-only with huge closing stock to the tune of Rs. 5,54,45,130/-. It is seen that very high expenditure was claimed relating to the closing stock as appearing in the contract account for the financial year under consideration. In this regard a detailed questionnaire u/s, 142(1) was issued on 07.01.2021, the extract of which is reproduced below:
With reference to the pending scrutiny proceedings for the Asst. Year 2018-19, no reply received for the notices u's 142(1) dated 08.02.2020 and 06.05.2020. You are required to submit the following information by 15.01.2021 With reference to the issue of Real Estate Business with high closing stock/ income from real estate business", you are required to submit the following information:
Please give detailed note on your business activities of real estate involving various projects/sites as a going concern for the year and last 2 years Das Processors vs. ITO-1, Rajnandgaon
Give detailed working of finished goods involving various purchases with computation of closing stocks and inventory as reflected in the books of accounts from time to time during the year and last 2 years. Detailed working of closing stock is to be computed as per correct accounting method with all supporting ledger extracts of relevant purchases/material consumed with supporting proofs
Please give complete details of revenue from Sale of services/B.T works etc. during the year with reconciliation of gross sales as made during the year and last 2 years and also reconcile the gross receipts of services with supporting GST returns/filings if any as applicable with detailed note of arithmetic workings. Accordingly, reconcile closing stock as appearing in the relevant year closing stock and of last 2 years.
Further, with reference to working of closing stock, please reconcile the material stock and work in progress etc. (as offered in schedule H' as annexure to the statement of accounts in the return of income) as appearing in closing stock with supporting advances received, if any, against these stock for which receipts are yet to be recognized
5. Please give detailed working of total income computation with head wise workings and proofs in support of the claims made in the return of income/computation as applicable along with ledger extracts of major expenses debited in the P&L a/c
5. However, the assessee has failed to substantiate this closing stock and expenditure claimed with supporting ledger extracts by duly reconciling head-wise workings of various expenses/materials consumed as forming part of this closing stock. In the absence of supporting proofs of closing stock with relevant workings as reconcilable with opening stock, purchases and expenses/work in progress included in this closing stock, it would be difficult to ascertain the correctness of assessee's claim as made in the P&L account / return of income. Apparently, closing stock is very high in comparison to the sales/revenue recognized during the year as attributable to this real estate business activity of the assessee resulting in Das Processors vs. ITO-1, Rajnandgaon quantification of such high closing stock. Further, no basic details have been provided by the assessee to know the nature of closing stock so as to reconcile its correlation with relevant business expenses as debited in the P&L a/c with explainable sources etc. As the assessee is into real-estate business and execution of civil contract works, the closing stock can be considered as laying of CC roads, RBM work and petty contract works,
As the assessee has failed to submit any details pertaining to working of closing stock, it is reasonable to estimate income @12% on entire amount shown as expenditure which includes purchases, labour payment and material, BT work, CC road and concrete work, moorum and RBM work, petty contract work and time extension expenses.”
3.1 Later, the Ld. PCIT, invoking the provisions of section 263 of the Act, set aside the above mentioned scrutiny assessment order passed under section 144 rws 143(3A) & 143(3B) of the Act and directed the Ld. AO to make fresh assessment after conducting requisite inquiries with respect to loan of Rs.70,60,000/- received from following persons: S. No. Name of Lender Amount 1. Baba Furniture Rajnandgaon 15,00,000/- 2. Kavita Agrawal Rajnandgaon 4,00,000/- 3. Rina Sharma, Rajnandgaon 10,00,000/- 4. Santosh Kr Sharma, Rajnandgaon 5,00,000/-
5. Pratap Singh Maravi, Rajnandgaon 20,00,000/- 6. VRSV Buildicon, Rajnandgaon 16,60,000/- Total 70,60,000/- Das Processors vs. ITO-1, Rajnandgaon 3.2 Aggrieved with the reassessment order passed under section 144 rws 263 of the Act, the assessee filed belated appeal (66 days) before the Ld. CIT(A), who did not condone the delay and dismissed the appeal.
4. Before us, the assessee was not represented by anyone. Therefore, we heard Dr. Priyanka Patel, Ld. Sr. DR, who argued the case vehemently and prayed for dismissal of the appeal.
We have heard the Ld. Sr. DR at length and have perused the material available on the record. We have perused the Central Board of Direct Taxes (CBDT) notification bearing F. No. S.O. 3296 (E), dated 25-9-2020 issued in exercise of the powers conferred under section 250(6B) of the Act. We have also taken note of the categorical observation of the Ld. CIT(A) that the assessee’s justification for condonation of delay was not satisfactory. After thoughtful consideration of the impugned order, we are unable to infer that whether the Ld. CIT(A) has provided any specific opportunity of being heard to the assessee before non-admitting the appeal on the issue of limitation. The right of appeal is a valuable right and unless expressly taken away or abandoned, it could not be held that the appellant had abandoned or lost such right by implication [Indian Aluminium Co Ltd. Vs. CIT 162 ITR 788 (Cal.)]. The right to appeal is not merely a matter of procedure. It is a substantive right. The Act read with the Notification F. No. S.O. 3296 (E), dated 25-9-2020 put specific restrictions and limitations on the scope and manner of Das Processors vs. ITO-1, Rajnandgaon exercise of the right of filing appeal and also limitations & powers of the Appellate Authorities. Considering the importance of the right to appeal of the appellant assessee, since it bestows upon him an opportunity of getting a wrong undone and to mitigate the possibility of financial loss, the right to appeal should be viewed from a broad-based liberal perspective and not by applying a strict, constricted and myopic view. The decision whether the right to appeal is available in a particular circumstance should be guided by the form and not substance of the order appealed against [CIT Vs. Ashoka Engineering Co. 63 Taxman 510/194 ITR 645 (SC)].
6. After thoughtful consideration of the material available on the record, we are of the view that the appellant assessee deserves reasonable opportunity of being heard to make shortcomings or non-compliance if any. Therefore, considering the facts of the case, afore-stated observations and without offering any comment on merit of the case, we, in the interest of justice, deem it fit to set aside the impugned order and remit the matter back to the file of the Ld. CIT(A) to provide an opportunity of being heard to the assessee before deciding the fate of the delay condonation application in accordance with the law and the Notification F. No. S.O. 3296 (E), dated 25-9-2020. The case on merit thereafter, if required, shall be decided as per the law. We order accordingly. The appellant assessee should ensure compliances during the remitted appellate proceeding before the Ld. CIT(A). Needless to say that the Ld. CIT(A) is also required to provide reasonable opportunities of being heard to the appellant assessee.
In the result, the appeal of assessee is allowed for statistical purposes as above. Order pronounced in the open court on 12/03/2026.