Facts of the Case

The assessee, Kalpana Narware, filed her return of income for Assessment Year 2017-18. The case was selected for scrutiny based on information under Operation Clean Money relating to cash deposits during the demonetisation period. The Assessing Officer completed the assessment ex parte under Section 144 on 25.10.2019, treating entire cash deposits as unexplained money under Section 69A and taxing the same at the rate applicable under Section 115BBE, resulting in an addition of ₹1,02,14,380. The assessee filed the first appeal before the CIT(A) with a delay of 508 days, which was dismissed as time-barred by the NFAC. The assessee then filed an appeal before the Tribunal with a further delay of 112 days, supported by medical evidence and affidavits.

Issues Involved

Whether the delay of 112 days before the Tribunal and 508 days before the CIT(A) deserved condonation, whether dismissal of the first appeal on technical grounds was justified in light of counsel negligence and COVID-19 disruptions, and whether the ex parte assessment under Section 144 required to be set aside and remanded for fresh adjudication.

Petitioner’s Arguments

The assessee contended that the delay in filing the first appeal occurred due to gross negligence and misrepresentation by the earlier counsel, who falsely assured that the appeal had been filed. It was further submitted that the assessee is a homemaker residing in a remote village, was not well-versed with income-tax procedures, and the delay period substantially overlapped with the COVID-19 pandemic during which the Supreme Court had granted blanket extensions for limitation. The assessee placed reliance on affidavits, medical records, and WhatsApp communications to demonstrate due diligence and bona fide conduct. It was argued that the assessment was passed ex parte despite part compliance and without considering documentary evidence submitted.

Respondent’s Arguments

The Revenue did not seriously oppose the condonation of delay and also did not object to remand of the matter, subject to a direction that the assessee must cooperate fully during fresh assessment proceedings and not seek unnecessary adjournments.

Court Order / Findings

The ITAT Indore condoned the delay of 112 days in filing the appeal before the Tribunal and also condoned the delay of 508 days in filing the first appeal before the CIT(A), holding that sufficient cause was established due to counsel negligence, bona fide conduct of the assessee, and the extraordinary circumstances arising from the COVID-19 pandemic, relying on the Supreme Court judgment in Collector, Land Acquisition vs. Mst. Katiji and the suo motu extension orders passed during the pandemic. On merits, the Tribunal observed that the assessment was completed ex parte under Section 144 and that no prejudice would be caused to the Revenue if the matter was restored for fresh adjudication. Accordingly, the Tribunal set aside the orders of the lower authorities and remanded the matter to the file of the Assessing Officer with a direction to adjudicate the case afresh after granting due opportunity of hearing to the assessee and without being influenced by the earlier order.

Important Clarification

The Tribunal clarified that when delays occur due to bona fide reasons such as counsel negligence and extraordinary situations like the COVID-19 pandemic, technicalities should not override substantial justice. It further clarified that ex parte assessments, particularly in cases involving demonetisation cash deposits, should ordinarily be examined on merits after granting effective opportunity to the assessee.

Final Outcome

The appeal filed by the assessee was allowed for statistical purposes, the delays at both appellate stages were condoned, the ex parte assessment order passed under Section 144 was set aside, and the matter was remanded to the Assessing Officer for fresh adjudication in accordance with law after providing due opportunity of hearing to the assessee.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769158762_KALPANANARWAREBETULVS.INCOMETAXOFFICERBETUL2.pdf

 

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