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Facts
The assessee firm, engaged in seed production, had an appeal before the CIT(A) concerning an amount received from a termination agreement. The assessee opted for the Vivad Se Vishwas (VSVS) scheme and believed their appeal would be automatically withdrawn upon compliance, leading to their non-appearance before the CIT(A).
Held
The Tribunal held that the assessee firm acted under a bona fide belief that their appeal would be automatically withdrawn due to compliance with the VSVS scheme. The non-appearance was due to this mistaken belief, not a lackadaisical approach. Therefore, the ex-parte order of the CIT(A) was set aside in the interest of justice.
Key Issues
Whether the CIT(A)'s ex-parte order was valid when the assessee failed to appear due to a bona fide belief in automatic appeal withdrawal under the VSVS Act.
Sections Cited
143(3), 28(va), 10, 4(2), 4(7)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
करदाताका""त"न"ध"व/ : Ms. Sumitra Nandan, CA Assessee Represented by राज"वका""त"न"ध"व/ : Shri S. Arun Kumar, Sr. AR Department Represented by सुनवाईसमा"तहोनेक""त"थ/ : 17/12/2025 Date of Conclusion of Hearing घोषणा क" तार"ख/ : 07/01/2026 Date of Pronouncement ORDER
PER RAVISH SOOD, JM:
The present appeal filed by the assessee firm is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 24/01/2024, which in turn arises from the order passed by the Assessing Officer (for short, “AO”) under section 143(3) of the Income Tax Act, 1961 (for short, “the 2 Rasar Biogenetics vs. ITO Act”), dated 28/12/2018 for the Assessment Year (AY) 2016-17. The assessee firm has assailed the impugned order of the CIT(A) on the following grounds of appeal before us:
“1. That the impugned ex-parte order is liable to set aside on grounds of being violative of the provisions of the Direct Taxes Vivad Se Viswas Act, 2020 and also being violative of the principles of natural justice.
That the Appellant having filed his declaration and undertaking in Form 1 and Form 2, and having received Form 3 on 18/12/2020 from the Designated Authority (DA), is deemed to have to have withdrawn his appeal before the CIT (A) on the very same day the certificate in Form 3 is issued in view of Sec 4(2) 3. That the impugned ex-parte order is violative of the Act and is void ab initio, in view of Sec 4(7) read with Sec 4(2).
That Non-withdrawal of appeal is not fatal to the provisions of the Direct Taxes Vivad Se Viswas Act, 2020 5. That Non-withdrawal of appeal is merely procedural and failure to withdraw the same does not dis-entitle the LD PR CIT from issuing Form 5 6. That the penalty order passed on 31/03/2025, dropping penalty proceedings in respect of the impugned order, has implicitly and effectively, acknowledged the null & void effect of the impugned order under the provisions of VSVS Act.”
Succinctly stated, the assessee firm, which is engaged in seed production services on agricultural land taken on lease, had e-filed its return of income for AY 2016-17 on 15/03/2017, declaring an income of Rs. 58,300/-. Subsequently, the case of the assessee firm was selected for scrutiny assessment under CASS to verify, viz., (i) whether the claim for deduction of interest expenses is admissible; (ii) whether the direct receipts/fees are correctly offered for tax; and (iii) whether sales turnover/receipts are correctly offered to tax.
3 Rasar Biogenetics vs. ITO 3. During the course of the assessment proceedings, the AO observed that the assessee firm was engaged in seed production on agricultural land taken on lease, which involved production and harvesting of crop from seeds supplied by M/s. E.I. Dupont India Pvt Ltd. (EIDPL). On a perusal of the record, the Ld. AO observed that M/s. E.I. Dupont Pvt Ltd (EIDIPL) had entered into a Mutual Rescission and Release Agreement with the assessee firm, wherein, as per the said agreement, dated 14/03/2016 and the supplement agreements dated 01/07/2013 and 24/06/2015, the arrangement between the assessee firm and EIDIPL was terminated w.e.f 31/03/2016, pursuant where to EIDIPL had paid to the assessee firm a lump sum amount of Rs. 4,15,40,000/- on 28/03/2016 towards termination charges.
The AO observed that the assessee firm had disclosed the aforementioned amount of Rs. 4.15 crores (approx.) as part of its farm operation account and claimed the same as its income from agricultural operations.
On being queried, it was claimed by the assessee firm that the amount of Rs. 4.15 crores (supra) was its agricultural income and thus, exempt under section 10 of the Act. Alternatively, it was the claim of the assessee firm that as the termination of the agreement with EIDIPL had hit at the structure of the assessee’s business, which, thus, had resulted 4 Rasar Biogenetics vs. ITO to the loss of its source of income, therefore, the amount so received was a capital receipt and not liable for tax.
However, the AO did not find favour with the either of the claims of the assessee firm, and thus, after treating the amount of Rs.4.15 crores (supra) as a revenue receipt under the provisions of section 28(va) of the Act, assessed its income vide his order under section 143(3) of the Act, dated 28/12/2018 at the same amount.
Aggrieved, the assessee firm carried the matter in appeal before the CIT(A).
In the meantime, the assessee opted for Vivad-Se-Vishwas- Scheme (VSVS) as per the Vivad Se Vishwas Act, 2020, and duly filed the declaration in Form-2, Page No.21 to 30 of APB, within the stipulated time for the subject year. Also, we find that the assessee firm had received Form-3 on 18/12/2020 from the designated authority. Thereafter, the assessee firm intimated the department in Form-4, wherein it provided the details of tax payments, Page No.34 of APB.
As stated before us by the Ld. AR, the assessee firm remained under a bona fide belief that pursuant to Form-3 issued by the department and making of full and final payment of taxes within the prescribed period, its appeal pending before the CIT(A) would be automatically withdrawn and rendered as infructuous as per section 4(2)
5 Rasar Biogenetics vs. ITO of VSVS Act. The Ld. AR submitted that the assessee firm remaining under the aforesaid bona fide belief had not withdrawn its appeal that was filed before the CIT(A), as it was of the view that from the date of issuance of Form-3 itself and the payment of the tax arrears under the scheme, the appeal so filed would be deemed to have been withdrawn. The Ld. AR submitted that on the one hand, the assessee firm, having intimated the department in Form-4 about the details of the tax payment under VSVS Act, remained under a belief that Form-5 settling the dispute under the VSVS Act would be issued to it, but on the other hand the CIT(A) had disposed of the appeal vide an ex-parte order, dated 24/01/2024. Elaborating further on his contention, the Ld. AR submitted that the assessee firm had learnt about the disposal of the appeal by the CIT(A) only when a penalty notice, dated 24/02/2025, was served upon it. The Ld. AR submitted that as the assessee firm remained under a bona fide belief that issuance of Form-3 by the department under the VSVS Act and subsequent intimation of the payment of tax resulted to an automatic withdrawal of the appeal that was pending before the CIT(A), but the fact that the CIT(A) had proceeded with and disposed of the appeal came both as shocking and unexpected despite the full compliance that was carried out by the assessee firm under the VSVS Act.
The Ld. AR submitted that the assessee firm, on learning about the dismissal of its appeal by the CIT(A), had thereafter carried the 6 Rasar Biogenetics vs. ITO matter by preferring the present appeal, which, by the time involved a delay of 97 days. The Ld. AR submitted that as the delay in filing of the present appeal had crept in because of bona fide reasons, i.e., the fact that the assessee had remined under a mistaken belief that having complied with the requisite conditions under the VSVS Act, the certificate of final settlement in Form-5 putting the tax dispute to rest would be issued, therefore, the same in all fairness and in the interest of justice be condoned.
Per contra, Shri S. Arun Kumar, the Learned Senior Departmental Representative (for short, “Ld. Sr. DR”) objected to the seeking of condonation of the delay involved in the present appeal.
We have given thoughtful consideration and in the totality of the facts involved in the present case read in the back drop of the “affidavit” filed by Sri Arun Reddy, Managing Partner of the assessee firm are of firm conviction that the delay of 97 days in filing the present appeal is backed by bona fide reason, i.e., the assessee firm had remained under a bonafide belief that as the requisite conditions had been fulfilled and the tax arrears under the VSVS Act deposited, thus, Form-5 towards final settlement of the dispute with the department would be issued. We, thus, are of the view that the delay in filing the present appeal merits to be condoned.
7 Rasar Biogenetics vs. ITO 13. Coming to the issue in hand, we are of a firm conviction that the entire sequence of events involved in the present case, viz., (i) filing of declaration and undertaking in Form-1 & 2 by the assessee firm; (ii) receipt of Form-3 on 18/12/2020 from the designated authority; and (iii) intimation of the payment of tax arrears in Form-4 to the department, reveals that the assessee firm had remained under a bona fide belief that the needful that was required to be done on its part under the VSVS Act, for the final settlement of the tax dispute, had been done, and as a consequence thereto the appeal that was filed before the CIT(A) stood automatically withdrawn. In our view, the assessee firm, for the aforementioned bonafide reasons, had failed to participate in the appellate proceedings before the CIT(A), which, thus, had gone unattended. As the failure on the part of the assessee firm to participate in the proceedings before the CIT(A) is backed by bona fide reasons and does not smack of any lackadaisical approach on its part, therefore, we find substance in the Ld. AR’s contention that the ex-parte order passed by the CIT(A), in all fairness and in the interest of justice, merits to be set aside. We, thus, in terms of our aforesaid observations, set aside the order of the CIT(A) and restore the matter to his file. The Ground of appeal No. 7 is allowed in terms of our aforesaid observations.
8 Rasar Biogenetics vs. ITO 14. As we have set aside the order passed by the CIT(A) in terms of our aforesaid observations, therefore, we refrain from adverting to the Grounds of appeal Nos.1 to 6, which, thus, are left open.
Resultantly, the appeal filed by the assessee firm is allowed for statistical purposes.
Order pronounced in the open court on 07th January, 2026. S - /- (मधुसूदन साव"डया) (रवीश सूद) (MADHUSUDAN SAWDIA) (RAVISH SOOD) लेखासद"य/ACCOUNTANT MEMBER "या"यकसद"य/JUDICIAL MEMBER d/- Hyderabad, dated: 07/01/2026 **OKK/sps आदेशक"""त"ल"पअ"े"षत/ Copy of the order forwarded to:- 1. "नधा"रती/The : Rasar Biogenetics, Plot No.36 & 37, SV Reddy Complex (First Floor), Tadbund, Secunderabad, Assessee Telangana-500003. 2. राज"व/ The Revenue : Income Tax Officer, Ward-10(1), IT Towers, AC Guards, Masab Tank, Hyderabad, Telangana- 500004.
The Principal Commissioner of Income Tax, Hyderabad. 4. "वभागीय""त"न"ध, आयकरअपील"यअ"धकरण /DR,ITAT, Hyderabad.