ITAT Grants Relief to Taxpayer, Condones 34-Day Delay in Filing Appeals

The Income Tax Appellate Tribunal (ITAT) Hyderabad Bench has provided relief to taxpayer Mahesh Babu Pujala by holding that his appeals should not have been dismissed merely on the ground that they were filed 34 days late. However, the Tribunal held that the delay was justified with bona fide and reasonable grounds, and the matter should be decided on merit and not on technicalities.

The dispute is for Assessment Years 2012-13 to 2014-15. The Income Tax Department added various amounts to the taxpayer’s income after a search operation, including unexplained cash receipts, unexplained investments and capital gains. The matter went through several rounds of litigation before reaching the ITAT.

In an earlier order passed in September 2022, the ITAT had directed the Assessing Officer (AO) to treat cash receipts of Rs 1.07 crore as consideration received from the sale of a capital asset and to compute long-term capital gains after granting the applicable indexation benefit. The Tribunal had also held that only 10% of another cash receipt of Rs 51.80 lakh should be taxed as profit, while upholding an addition relating to unexplained investment in land.

During the fresh assessment proceedings carried out in accordance with the ITAT’s directions, the AO stated that the taxpayer failed to provide sufficient evidence regarding the cost of acquisition of the property. As a result, the AO computed long-term capital gains on the entire sale consideration of Rs 1.07 crore without allowing any indexed cost deduction. The AO also taxed 10% of the Rs 51.80 lakh cash receipt, amounting to Rs 5.18 lakh, and retained the addition of Rs 25.87 lakh towards unexplained investment in land.

The taxpayer requested fresh assessment orders before CIT(A). The appeals, however, were filed 34 days late. The assessee sought condonation of delay, but the CIT(A) found that several opportunities were given, but no affidavit or supporting evidence explaining the delay was filed. The CIT(A) therefore refused to condone the delay and dismissed the appeals at the threshold without going into the merits of the issues.

The taxpayer then went to the ITAT. His lawyer said the delay was not intentional or deliberate. It was said that the taxpayer was suffering from serious health issues, including low back pain and sciatica and was undergoing medical treatment and physiotherapy. The taxpayer was around 71 years old during the relevant period.

After hearing both sides, the ITAT observed that the principles of substantial justice should prevail over technical objections. The Tribunal noted that litigants should not be denied an opportunity to contest their cases on the merits when a reasonable explanation for the delay is available.

The Bench found the taxpayer’s explanation to be bona fide and supported by medical evidence. It held that the CIT(A) should have condoned the delay and decided the appeals on merits instead of dismissing them solely on procedural grounds.

Accordingly, the ITAT condoned the 34-day delay, set aside the orders of the CIT(A), and restored all three appeals to the appellate authority for fresh adjudication. The CIT(A) has been directed to provide the taxpayer a reasonable opportunity of being heard and decide the issues in accordance with the law.

As a result, all the taxpayers’ appeals were allowed for statistical purposes, and the matters have been sent back to the CIT(A) for consideration on the merits.