The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has set aside the penalty under Section 271(1)(c) of the Income Tax Act, 1961, after the assessee demonstrated “sufficient cause” for the 326-day delay in filing the quantum appeal and the 1-day delay in filing the penalty appeal, thereby satisfying the tribunal with the reasonable cause explained.
The assessee, Ravindrabhai Lakshmanrav Mane has appealed against the order dated January 17, 2018, issued by the Commissioner of Income Tax (Appeals). This order stems from an assessment conducted under section 143(3) read with section 153B(1)(b) of the Income Tax Act, 1961, pertaining to the Assessment Year 2015-16. Additionally, ITA Nos. 140/Ahd/2020 has been filed by the assessee against the ex-parte appellate order dated November 21, 2019, which upheld the penalty levied under section 271(1)(c) of the Income Tax Act for the same assessment year. Due to the common issues in these appeals, the tribunal has decided to address both through a consolidated order.
The Registry reported a delay of 326 days in filing the quantum appeal and a delay of 1 day in filing the penalty appeal by the assessee.
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Mr. Aseem L. Thakkar, representing the assessee, argued that his client, a small business owner involved in share trading, was subjected to a warrant of authorization on September 4, 2014, following the seizure of cash from two individuals at the Valsad State Bus Transport Depot. Consequently, notices under section 153A were issued, and the assessee filed his returns, with the assessment finalized by Chartered Accountant R.K. Jindal, leading to an addition on account of unexplained cash credits.
The assessee, aggrieved by the assessment, appealed to the CIT (A), who dismissed the appeal. The former Chartered Accountant failed to inform the assessee about the dismissal. Subsequently, the Assessing Officer initiated penalty proceedings and passed an ex-parte penalty order on September 7, 2018. The assessee, unaware of the prior appeal’s dismissal, filed a penalty appeal with a 79-day delay before the CIT (A), who rejected it for failure to condone the delay.
The assessee explained that the delays in filing both the quantum and penalty appeals were due to misguidance by the former Tax Consultant, leading to the late submission. The assessee paid the appropriate appeal fees on January 11, 2019, but only filed the appeal on March 6, 2019, due to the same misguidance. After this, the assessee retained new counsel to manage both appeals and requested that the Tribunal condone the delays and instruct the CIT (A) to decide the appeal on its merits.
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On behalf of the revenue, Kamlesh Makwana strongly opposed the condonation petition, arguing that the assessee had not provided an affidavit from the former Tax Consultant to justify the 326-day delay. He cited the Madras High Court judgment in Royal Stitches Pvt. Ltd. v. DCIT (2023) and the Jaipur Bench ITAT decision in Ajay Kumar Jain v. ACIT (2020), contending that the assessee had not established sufficient cause for the delay, thus the appeals should be dismissed.
After careful consideration, the bench reviewed the materials on record. The assessment order indicated that Chartered Accountant R.K. Jindal represented the assessee during the assessment and in the quantum appeals before the CIT (A). However, during the penalty proceedings, no one appeared before the Assessing Officer, resulting in an ex-parte penalty order. Subsequently, the assessee engaged new counsel, which led to the 326-day delay in filing the quantum appeal and a 1-day delay in filing the penalty appeal. The Tribunal recognized that condonation of delay is a delicate matter requiring careful consideration.
The tribunal acknowledged that the assessee demonstrated a reasonable cause for not filing the appeals within the statutory limitation period due to the former Tax Consultant’s misrepresentation.
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Therefore, the two-member bench of the tribunal, comprising Annapurna Gupta (Accountant Member) and T.R. Senthil Kumar (Judicial Member), concluded that the assessee had shown “sufficient cause” for the 326-day delay in filing the quantum appeal and the 1-day delay in filing the penalty appeal. Consequently, the ITAT condoned the delays and proceeded to address the appeals on their merits.
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