Facts of the Case

The assessee, Meenaba Divyavirsinhji alias Digvijaysinhji Jadeja, did not file a return of income for Assessment Year 2019-20. Based on financial transactions reported in the system, the case was reopened under Section 147. During reassessment proceedings, the assessee failed to comply despite several opportunities granted by the Assessing Officer.

The Assessing Officer found that the assessee had made investments in bonds, debentures and shares amounting to ₹1,90,77,592, which were treated as unexplained under Section 69. Further additions were made towards speculation income, other unexplained income and interest, and the provisions of Section 115BBE were invoked. The assessment was completed under Section 147 read with Section 144 on 25.02.2024 determining total income at ₹2,76,02,532.

The assessee filed an appeal before the Commissioner of Income Tax (Appeals), NFAC with a delay of 87 days. The CIT(A) refused to condone the delay and dismissed the appeal in limine without adjudicating the grounds on merits.

Issues Involved

Whether the CIT(A) was justified in dismissing the appeal solely on the ground of limitation without adjudicating the issues on merits, whether delay caused due to alleged lapse of the consultant could be accepted without scrutiny, and whether large additions under Sections 69 and 115BBE warranted examination on merits in the interest of justice.

Petitioner’s Arguments

The assessee submitted that non-compliance before the Assessing Officer and delay in filing appeal before the CIT(A) occurred due to default on the part of the consultant, who failed to inform the assessee about the assessment order in time. It was contended that the assessee should be granted another opportunity to explain the nature of investments and other additions, and the matter should be restored either to the Assessing Officer or to the CIT(A) for adjudication on merits.

Respondent’s Arguments

The Revenue supported the orders of the lower authorities and argued that the assessee was negligent, having failed to comply before the Assessing Officer despite seven opportunities and having filed the appeal before the CIT(A) belatedly without sufficient cause.

Court Order / Findings

The ITAT Ahmedabad observed that the assessee had been highly negligent and could not escape responsibility by merely blaming the consultant for non-compliance and delay. The Tribunal noted that it is settled law that mistake of counsel does not automatically constitute sufficient cause, and the assessee has a duty to watch his affairs.

However, the Tribunal also observed that the CIT(A) dismissed the appeal purely on limitation without examining the merits, despite the fact that the assessee was a non-filer individual and huge additions aggregating to ₹2.76 crore had been made. Relying on the judgment of the Hon’ble Gujarat High Court in Vareli Textile Industries, the Tribunal held that a potentially meritorious matter should not be thrown out on technical grounds of limitation.

Balancing the conduct of the assessee with the principles of natural justice, the Tribunal imposed a cost of ₹10,000 payable to the Prime Minister’s National Relief Fund within 15 days and set aside the order of the CIT(A). The matter was restored to the file of the CIT(A) with directions to adjudicate the appeal on merits after condoning the delay. The assessee was permitted to file additional evidence, and the CIT(A) was granted liberty to call for a remand report from the Assessing Officer.

Important Clarification

The Tribunal clarified that while negligence and repeated non-compliance by an assessee cannot be ignored, appellate authorities should not dismiss appeals involving substantial additions solely on technical grounds of limitation. Conditional remand with imposition of cost is an appropriate mechanism to balance procedural discipline with substantive justice.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes. The order of the CIT(A) dismissing the appeal on limitation was set aside, and the matter was remanded to the file of the CIT(A) for adjudication on merits subject to payment of cost of ₹10,000 by the assessee within the stipulated time.

 

Link to download order https://www.mytaxexpert.co.in/uploads/1769061945_MEENABADIVYAVIRSINHJIALIASDIGVIJAYSINHJIJADEJABHAVNAGARVS.THEDY.CITCIRCLE1BHAVNAGAR.pdf

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