ITAT Restores Income Tax Appeal to CIT(A) After Condoning 115-Day Delay Due to COVID-19 Genuine Hardship:

The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, condoned a 115-day delay in Sea Side Hotel Private Limited's appeal and restored the matter to the first appellate authority for fresh consideration, holding that the assessee company should be given another opportunity to present its case, following the principles of natural justice.

Sea Side Hotel Private Limited (assessee) had declared an aggregate income of Rs 15.95 lakh in the Income Tax Return (ITR) for the Assessment Year 2015-16. The Assessing Officer (AO) had noted that during the year under consideration, the assessee had received Rs 8.50 lakh from a bogus company named M/s RNG Finlease Pvt. Ltd.

When investigated, it was observed that the said company was managed and controlled by one Shri Naval Kishore Jalan, in whose case a search and seizure operation was carried out on May 21, 2018, as the company was alleged to have been involved in providing accommodation entries. Based on information obtained during a search operation conducted against a person associated with the company, the AO treated the amount as unexplained cash credits under Section 68 of the Income Tax Act, 1961, and added it to the company’s income.

The company’s appeal before the CIT(A) was delayed by 115 days. The CIT(A) dismissed the appeal without examining the case on its merits, considering the reasons for the delay insufficient. Before the ITAT, the company explained that its hotel business had remained shut from March 2020 to March 2022 due to COVID-19 restrictions, resulting in severe financial difficulties. It also stated that it had mistakenly believed that arranging the required 20% payment of the disputed tax liability was necessary before filing the appeal.

After considering the explanation, the ITAT noted that the delay was due to genuine reasons and was not intentional. The tribunal relied on the Supreme Court’s decision in the case titled Collector, Land Acquisition v. Mst. Katiji; the tribunal emphasised that delay should be considered liberally where refusing condonation could prevent a potentially meritorious case from being heard.

Accordingly, the tribunal remanded the case back to the CIT(A) for fresh adjudication with instructions to reconsider the appeal afresh and provide the assessee an adequate opportunity to present its case. However, the company withdrew its challenge to the validity of the reassessment proceedings under Section 147, and the tribunal dismissed that ground. The appeal was partly allowed.