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Facts
The assessee, Gangamagrotech, filed an appeal against an order of the CIT(A) related to assessment year 2013-2014. There was a delay of 268 days in filing the appeal. The assessee claimed the delay was due to an oversight and not being conversant with the e-portal.
Held
The Tribunal condoned the delay in filing the appeal, finding the assessee's reasons to be genuine. The Tribunal, referring to its own prior decision, held that since the Firm was not in existence during the assessment year, the additions made and penalties levied were null and void.
Key Issues
Whether the delay in filing the appeal can be condoned, and whether additions and penalties are sustainable if the assessee firm was not in existence during the assessment year.
Sections Cited
147, 148, 68, 271B, 274, 44AB, 271A, 44AA, 271F, 139(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G
ORDER PER MANJUNATHA G. : The above appeal has been filed by the assessee against the Order dated 30.08.2024 of the learned CIT(A)- National Faceless Appeal Centre [in short “NFAC], Delhi, relating to the assessment year 2013-2014.
At the very outset, CA, Ashwani Kumar, Learned Counsel for the Assessee submitted that, there is a delay of 268 days in filing the appeal before the Tribunal. The 2 ITA.No.1217/Hyd./2025 assessee has filed an affidavit explaining the reasons for the delay and pleaded for condonation of delay in filing the appeal before the Tribunal. The reasons explained by the assessee for not filing the appeal within the time allowed under the law are that, the learned CIT(A)- National Faceless Appeal Centre, Delhi, was passed Order in this case on 30.08.2024. Further, the other appeals for the same assessment year were also decided on the same date. However, due to oversight, the said appellate order escaped notice of the appellant. Otherwise also, the appellant is not so conversant with the e-portal. He submitted that only when pointed-out by the learned Assessing Officer that, the demand against the said penalty is still outstanding, the appellant came to know that, this penalty appeal has also been decided. The assessee thus, submitted that, under these peculiar circumstances, there was a delay of 268 days in filing the appeal. He, therefore, prayed that the delay caused due to inadvertent mistake and pleaded for condonation of delay of 268 days in filing the appeal before
3 ITA.No.1217/Hyd./2025 the Tribunal and the appeal be entertained for adjudication on merits.
Sri TV Vamshidhar, learned Sr. AR for the Revenue, on the other hand, strongly opposed for condonation of the delay and submitted that, the assessee could not explain reasons for delay in filing appeal before the Tribunal and, therefore, submitted that, the delay condonation petition filed by the assessee should be dismissed in the interest of justice.
We have gone through the affidavit filed by the assessee. We find that, the reasons explained by the assessee in it’s affidavit are seems to be genuine and bonafide. The Hon’ble Supreme Court in the case of Collector, Land Acquisituon vs., MST Katiji [1987] 167 ITR 471 (SC) has laid down certain principles for condoning the delay and also directed the lower courts to follow a lenient approach for condoning the delay. Going by the principles laid down by the Hon’ble Supreme Court in the case of MST Katiji (supra), there is no dispute if an appeal is dismissed on account of technicalities, a meritorious case may be 4 ITA.No.1217/Hyd./2025 thrown-out of judicial review. Therefore, while condoning the delay, the courts must have a liberal approach or lenient approach considering the reasons given by the petitioners or appellants. Therefore, going by the principles laid down by the Hon’ble Supreme Court in the case of MST Katiji (supra) and also considering the submissions of the assessee, we condone the delay of 321 days in filing the appeal before the Tribunal and admit the appeal for adjudication.
Brief facts of the case are that, the assessee is a Firm and had not filed it’s return of income for the assessment year 2013-2014. As per the Insight portal of the Department, a search and seizure operation was conducted in the case of Sri Nawal Kishore Jalan at Kolkata on 21.05.2018 and it came to light that the assessee had availed accommodation entry of Rs.2,65,00,000/- in the form of loan. Therefore, the case of the assessee company was reopened u/sec.147 of the Income Tax Act, 1961 [in short “the Act”] and notice u/sec.148 of the Act was issued to the assessee on 31.03.2021. The Assessing Officer has completed the assessment u/sec.147 r.w.s.144 r.w.s.144B
5 ITA.No.1217/Hyd./2025 of the Income Tax Act, 1961 vide order dated 25.03.2021 by assessing the income of the assessee at Rs.2,65,00,000/- as unexplained cash credits u/sec.68 of the Act. Thereafter, the Assessing Officer has initiated penalty proceedings u/sec.271B of the Act and a show cause notice u/sec.274 r.w.s.271B was issued on 26.03.2022 for failure to get it’s accounts audited or failed to furnish a report of such audit as required u/sec.44AB of the Act. Further, the Assessing Officer also issued show cause notices dated 26.07.2022 and 01.08.2022 calling the assessee to furnish it’s explanation along with supporting documentary evidences. In response, the assessee has submitted it’s submissions. The Assessing Officer after considering the submissions of the assessee noted that the assessee has not submitted any corroborative/documentary evidence in support of his claim to the effect that the assessee is not having a sufficient cause for failure to get his accounts audited or furnish such audit report within the due date as required u/sec.44AB of the Act. Therefore, the Assessing Officer levied the penalty of Rs.1,32,500/- on the total turnover of Rs.2,65,00,000/- as 6 ITA.No.1217/Hyd./2025 computed by the Assessing Officer in the assessment order dated 25.03.2022 u/sec.271B of the Income Tax Act, 1961.
Aggrieved by the penalty order, the assessee carried the matter in appeal before the learned CIT(A). The learned CIT(A) after considering the submissions of the assessee, upheld the penalty of Rs.1,32,500/- levied by the Assessing Officer.
Aggrieved by the order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.
CA, Ashwani Kumar, Learned Counsel for the Assessee submitted that, this issue is squarely covered by the decision of ITAT, Hyderabad Bench in appellant’s own case in ITA.Nos.845, 889 & 890/Hyd./2024, Order dated 29.11.2024 for the assessment year 2013-2014, where the Tribunal in para-7 of the Order held that, the Firm was not in existence for the assessment year under consideration and, therefore, the additions made by the Assessing Officer towards cash credit u/sec.68 of the Act, cannot be sustained. Since the Firm was not in existence and the 7 ITA.No.1217/Hyd./2025 question of any proceedings including assessment proceedings and consequent penalty proceedings are null and void and liable to be quashed.
Sri TV Vamshidhar, learned Sr. AR for the Revenue, on the other hand, supporting the order of the learned CIT(A) submitted that, the assessee filed relevant audit report in Form-3CD prepared by an Accountant and for non-filing of the said audit report Assessing Officer has rightly levied penalty u/sec.271B of the Act and, therefore, he submitted that, the Order of the learned CIT(A) should be upheld.
We have heard both the parties, perused the material on record and the orders of the authorities below. We find that the Coordinate Bench of ITAT, Hyderabad Bench, Hyderabad in appellant’s own case for the assessment year 2013-2014 (supra) had considered an identical issue of assessment of income and consequent penalty u/sec.271A and 271F of the Act and held that, once the Firm was not in existence for relevant assessment year, any proceedings including assessment proceedings and 8 ITA.No.1217/Hyd./2025 consequent penalty proceedings cannot be initiated and thus, addition made by the Assessing Officer is liable to be deleted. The relevant findings of the Tribunal are as under :
“7. We have heard the rival contentions and also gone through the record in the light of the submissions made on either side. We have also gone through the copy of PAN submitted by the assessee and also the page nos.8 to 14 of the paper book containing the copy of partnership deed and found that the date of constitution of the assessee firm was on 16.04.2013. Therefore, according to these documents, the assessee was not in existence during A.Y. 2013-14. However, the allegation made by the Ld. AO is related tο Α.Υ. 2013-14. The Ld. AO did not bring any evidence on record regarding the existence of the assessee during A.Y. 2013-14. Therefore on this count we are of the considered opinion that no addition can be made with respect to any assessment year in which the assessee is not existing. Therefore the addition made by the Ld. AO for A.Y. 2013-14 is liable to be deleted on this count.
7.1. Further the Ld. AO did not provide the details of the lendor, the date of the loan transaction and the details of bank account in which the impugned loan transaction has taken place. Without providing any such details, the Ld. AO insisted on the assessee to prove the identity, credit-worthiness and genuinity of the impugned loan transactions. In this regard, we are of the considered view that, it was the first obligation of the Ld. AO to provide the details of the impugned loan transaction and then to ask the assessee to prove identity, credit-worthiness and genuineness of impugned loan transaction. The Ld. AO has made the addition of Rs.2.65 Crores in the hands of the assessee
9 ITA.No.1217/Hyd./2025 treating the impugned loan as unexplained cash credit u/s.68 of the Act. As per the provisions contained under provisions of section 68, there must be a cash credit found by the Ld. AO in the books of the assessee before calling any explanation from the assessee. In the present case, the Ld. AO has not established the existence of any loan in the hands of the assessee. Therefore in our considered opinion, no addition can be made on account of a loan, the existence of which has not been established by the Ld. AO. Therefore, on this count also, the addition made by the Ld. AO is liable to be deleted. Therefore we delete the addition made by the Ld. AO.
8. This appeal of the assessee is against the levy of penalty u/s.271A of the Act, which has been made by the Ld. AO for failure to keep and maintain books of account of business in accordance with section 44AA of the Act. As per our discussion and observation in above, the assessee was not in existence during the A.Y. 2013-14. Therefore, we are of the considered opinion that when an assessee is not in existence in a particular year, no question of maintenance of any books of account arises for that particular year. Therefore, we are of the considered opinion that no penalty u/s. 271A of the Act can be levied on the assessee for A.Y. 2013-14. Accordingly, we delete the penalty levied by the Ld. AO. ITA No.890/Hyd/2024 9. This appeal by the assessee is against the levy of penalty u/s.271F of the Act, which has been levied by the Ld. AO for default by the assessee in furnishing ROI u/s. 139(1) of the Act. As per our discussion and observation in ITA No.845/Hyd/2024 above, the assessee was not in existence during the A.Y. 2013-
10 ITA.No.1217/Hyd./2025 14. Therefore, we are of the considered opinion that when an assessee is not in existence in a particular year, no question of filing of any ROI arises for that particular year. Therefore, we are of the considered opinion that no penalty u/s. 271F of the Act can be levied on the assessee for A.Y. 2013-14. Accordingly, we delete the penalty levied by the Ld. AO.”
In the present case, the Assessing Officer levied penalty u/sec.271B of the Act for non-furnishing of audit report u/sec.44AB of the Act. Since the Tribunal held that, Firm was not in existence for the assessment year 2013- 2014, in our considered view, the penalty proceedings initiated by the Assessing Officer and consequent levy of penalty u/sec.271B of the Act is null and void and thus, quashed.
In the result, appeal of the Assessee allowed. Order pronounced in the open Court on 08.10.2025.