Loading judgment…
Facts
The assessee's return for AY 2013-14 was processed, but the AO re-opened assessment under Section 148, believing an unsecured loan of Rs. 1 Crore to M/s C.J. Solutions Pvt. Ltd. had escaped assessment. The CIT(A) set aside the ex-parte assessment order for a de novo assessment without first adjudicating the validity of the re-opening of assessment or the actual loan amount advanced. The assessee filed an appeal to the Tribunal with a 40-day delay, which was condoned.
Held
The Tribunal condoned the delay in filing the appeal. It held that the CIT(A) erred by not first deciding the jurisdictional issue of whether the re-opening of assessment was valid. The AO lacked a 'live nexus' between information and the belief of escaped income, relying only on portal data without collecting complete bank statements. The Tribunal set aside the CIT(A)'s order and restored the matter to the CIT(A) to first determine the validity of the re-opening of assessment, and only then proceed to adjudicate the issues on merit, noting that prima facie, the loan amount was Rs. 30 lakhs, not Rs. 1 Crore.
Key Issues
1. Condonation of delay in filing the appeal. 2. Validity of the re-opening of assessment by the AO under Section 148. 3. Whether the CIT(A) should have adjudicated the validity of re-opening before setting aside the assessment for de novo proceedings.
Sections Cited
Section 251(1)(a), Section 253(5), Section 249(3), Section 5 of Indian Limitation Act, 1963, Section 139, Section 143(1), Section 148, Section 147, Sections 148 to 153
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DIVISION BENCH, ‘B’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI MANOJ KUMAR AGGARWAL
The assessee is in appeal before the Tribunal against the order of ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 09.01.2025 passed for assessment year 2013-14.
The assessee has taken six grounds of appeal, however, in brief, his grievance revolves around two issues, namely ; A.Y.2013-14 2 a) The ld.CIT (Appeals) has erred in setting aside the assessment order for passing a denovo assessment order by exercising the powers under 1st proviso to Section 251(1)(a) of the Income Tax Act without adjudicating the legal issues vide which assessee has challenged re-opening of assessment. b) In second fold of grievance, he pleaded that ld.CIT (Appeals) has erred in not adjudicating the issue, whether assessee has advanced loan of Rs. One Crore to M/s C.J. Solutions Pvt. Ltd.
The Registry has pointed out that appeal is time barred by 40 days. Assessee has filed an application for condonation of delay and annexed an affidavit alongwith the application. According to the assessee, he only came to know about the impugned ex-parte order on 08.05.2025 when ld. AO has issued notice to him for participating in the denovo assessment proceedings.
The ld. DR, on the other hand contended that assessee should be more vigilant about his income tax litigation and ought to have taken the steps well in advance.
Sub-section 5 of Section 253 contemplates that the Tribunal may admit an appeal or permit filing of memorandum of cross- objections after expiry of relevant period, if it is A.Y.2013-14 3 satisfied that there was a sufficient cause for not presenting it within that period. This expression sufficient cause employed in the section has also been used identically in sub- section 3 of section 249 of Income Tax Act, which provides powers to the ld. Commissioner to condone the delay in filing the appeal before the Commissioner. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for consideration before Hon’ble High Court as well as before the Hon’ble Supreme Court, then, Hon’ble Court were unanimous in their conclusion that this expression is to be used liberally. We may make reference to the following observations of the Hon’ble Supreme court from the decision in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353:
Ordinarily a litigant does not stand to benefit by lodging an appeal late.
Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that A.Y.2013-14 4 a cause would be decided on merits after hearing the parties.
"Every day’s delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner.
When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.
It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
Similarly, we would like to make reference to authoritative pronouncement of Hon’ble Supreme Court in the “Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life-span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finislitium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words "sufficient cause" under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain Vs. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal Vs. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the A.Y.2013-14 6 explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss”.
In the light of above, we are of the view that service of impugned order might have been effected on the Portal and assessee might have not able to lay his hands on the impugned order well in time. It is pertinent to note that assessee will not gain anything by making the appeal time barred. Thus, he has not adopted it as a strategy to litigate with the Revenue. It is a bonafide mistake and accordingly, we condone the delay and proceed to decide the appeal on merit.
The brief facts of the case are that assessee has filed his return of income u/s 139 of the Act on 05.08.2013 declaring total income of Rs.3,84,310/-. This return was processed u/s 143(1) of the Act. Thereafter, AO has issued a notice u/s 148 on 31.03.2021. The AO was of the view that assessee has given unsecured loan amounting to Rs.One Crore to M/s C.J. Solutions Pvt. Ltd. which is disproportionate with the income declared by the assessee, therefore, source of this loan deserves to be examined. The AO has passed an ex-parte A.Y.2013-14 7 assessment order. The ld.CIT (Appeals), by exercising powers u/s 251(a) set aside the impugned order and directed the AO to decide the issues on merit.
The ld. counsel for the assessee, at the very out set submitted that there was no material possessed by the AO which can authorize him to harbour a belief that income of Rs. One Crore has escaped assessment. The only advance given by the assessee is of Rs.30 lacs and therefore, very foundation to form an opinion that income has escaped assessment is not at all available to the AO for re-opening of the assessment. The ld.CIT (Appeals) has committed an error by not deciding this legal issue first. Therefore, he prayed that impugned order be set aside and re-opening of the assessment be declared as bad.
The ld. Sr.DR, on the other hand submitted that w.e.f. 01.10.2024, the ld.CIT (Appeals) has been empowered to set aside an assessment order if impugned order is an ex-parte order. The proviso has been annexed with Section 251(1) of the Income Tax Act. Therefore, ld.CIT (Appeals) has rightly exercised the power because assessee failed to submit any evidence before the AO.
A.Y.2013-14 8 11. We have duly considered the rival contentions and gone through the record carefully. There is no dispute with regard to the fact that ld.CIT (Appeals) has been empowered to set aside any assessment order, if passed ex-parte, by exercising powers under proviso attached to Section 251(1)(a) of the Income Tax Act. But, the question is what will happen to jurisdictional issues, namely, whether re-opening of assessment is good or bad. If we peruse Section 147 of the Income Tax Act, as is applicable in assessment year 2013-14, then it would reveal that it contemplates that if the AO has reasons to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Section 148 to 153, assess or re-assess such income and also any other income chargeable to tax which has escaped assessment which comes to his notice subsequently in the course of re-assessment proceedings. Thus, there should be a live nexus between the information possessed by the AO vis-à-vis formation of belief that income has escaped assessment. What AO has done in the present case is that instead of collecting the complete bank statement, which may exhibit that assessee has advanced a loan of Rs.One Crore to M/s C.J. Solutions Pvt. Ltd., he only analyzed A.Y.2013-14 9 the information available on the Portal. But that would not be sufficient for harbouring the belief. The information available on the Portal is only a triggering point to set the machinery in motion but for harboring the belief that income has escaped assessment, AO has to lay his hands on complete information which apparently appears to be not available on the record. The ld.CIT (Appeals) ought to have first decide the issue, whether in the given facts and circumstances, AO could have recorded such reasons without collecting the full bank statement, out of which, such payments have been made or not. In the second round, AO is not going to entertain the defects in the re-opening. Therefore, we are of the view that impugned order of the ld.CIT (Appeals) is not sustainable. Accordingly, we set aside the impugned order of the CIT (Appeals) and restore all these issues to the file of ld.CIT (Appeals). The ld.CIT (Appeals) would first decide whether re- opening of the assessment is valid or not. Only thereafter, he would examine for adjudicating the issues on merit. One of the main reasons for such a finding is that prima-facie it is discernable that assessee has not advanced a sum of Rs.One Crore and only advanced Rs.30 lacs but this fact is required A.Y.2013-14 10 to be verified because neither of the authorities have adjudicated this aspect in their orders.
The ld. counsel for the assessee has expressed his apprehension that assessment proceeding is going on and AO would pass the assessment order which would give rise to multiplication of litigation. But this apprehension is misplaced because once the impugned order of the ld.CIT (Appeals) is set aside then there will be no foundation to the AO to continue with the assessment proceedings because issues are relegated to the file of ld.CIT (Appeals) to decide it first. With the above observations, this appeal of the assessee is allowed for statistical purposes.
In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced on 03.02.2026.
Sd/- Sd/- (MANOJ KUMAR AGGARWAL) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam”
ITA No.1157/CHD/2025 A.Y.2013-14 11