Facts of the Case

The assessee, Premilaben Bhavuji Thakor, an illiterate individual, did not effectively pursue income-tax proceedings for Assessment Year 2016-17 due to reliance on a Registered Income Tax Practitioner who failed to act diligently. Consequently, reassessment proceedings were completed ex parte by the Assessing Officer under Section 147 read with Section 144.

The assessee filed an appeal before the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi with a delay of 289 days. Although an application for condonation of delay was filed explaining that the assessee was misguided by the tax practitioner and was unaware of the proceedings, the CIT(A) refused to condone the delay and dismissed the appeal in limine. A consequential penalty under Section 271(1)(c) was also levied by the Assessing Officer. Aggrieved, the assessee preferred appeals before the Tribunal against both the quantum and penalty orders.

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 the assessee deserved another opportunity in view of her illiteracy and dependence on a tax practitioner, and whether the consequential penalty under Section 271(1)(c) could survive once the quantum assessment was set aside.

Petitioner’s Arguments

The assessee submitted that she was an illiterate lady and was completely dependent upon the Registered Income Tax Practitioner, who neither pursued the matter before the Assessing Officer nor filed the appeal before the CIT(A) within time. It was argued that the delay was neither intentional nor deliberate and that denial of adjudication on merits caused grave prejudice. The assessee prayed for restoration of the matter to enable her to present her case properly.

Respondent’s Arguments

The Revenue contended that the assessee had been negligent in pursuing the proceedings and supported the orders of the lower authorities, but did not seriously object to granting one more opportunity subject to appropriate safeguards.

Court Order / Findings

The ITAT Ahmedabad observed that the assessee was indeed negligent in not monitoring her tax affairs, and mere blame on the tax practitioner could not fully absolve her. However, the Tribunal also noted that the CIT(A) dismissed the appeal purely on technical grounds of limitation without examining the merits, despite the assessee being an illiterate individual.

Balancing the principles of natural justice with the conduct of the assessee, the Tribunal held that substantial justice would be served by granting one more opportunity. The Tribunal imposed a cost of ₹5,000 payable to the Prime Minister’s National Relief Fund and set aside the order of the CIT(A). The matter was restored to the file of the Assessing Officer for de novo assessment with directions to provide proper and adequate opportunity to the assessee.

Regarding the penalty appeal, the Tribunal held that since the quantum assessment itself was set aside, the consequential penalty under Section 271(1)(c) had no legs to stand and was liable to be deleted at this stage, with liberty to the Assessing Officer to initiate fresh penalty proceedings, if warranted, after completion of the set-aside assessment.

Important Clarification

The Tribunal clarified that while negligence of an assessee cannot be ignored, appeals involving substantive additions should not be dismissed 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 relating to quantum addition was allowed for statistical purposes. The order of the CIT(A) was set aside, and the matter was remanded to the file of the Assessing Officer for de novo assessment, subject to payment of cost of ₹5,000 by the assessee. The appeal relating to penalty under Section 271(1)(c) was allowed, and the penalty was deleted at this stage, with liberty to the Assessing Officer to initiate fresh penalty proceedings, if so advised, after completion of the reassessment.

 Link to download order https://www.mytaxexpert.co.in/uploads/1769062021_PREMILABENBHAVUJITHAKORAHMEDABADVS.THEITOWARD321AHMEDABAD.pdf

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