ITAT Sets Aside Ex-Parte Penalty Order on Natural Justice Grounds

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) condoned a delay of 1,053 days in filing an appeal and restored the matter to the Commissioner of Income Tax (Appeals) for fresh adjudication, holding that procedural lapses attributable to a tax consultant should not deprive an assessee of an opportunity to contest a penalty on merits. The Bench comprising Judicial Member Beena Pillai and Accountant Member Jagadish set aside the ex-parte appellate order passed against Abhijit Anil Kshirsagar for AY 2020-21.

The dispute arose from a penalty of Rs.25.39 lakh levied under Section 270A of the Income Tax Act on the allegation of misreporting of income. The assessee challenged the penalty and sought condonation of a delay of 1,053 days in filing the appeal before the CIT(A). According to the assessee, all tax-related matters had been entrusted to his consultant, who failed to inform him about the notices issued during penalty proceedings and the subsequent penalty order due to oversight and personnel changes in the office. The assessee claimed that he became aware of the penalty order only in December 2025 and thereafter took immediate steps to file the appeal.

Before the Tribunal, it was submitted that the delay was neither deliberate nor attributable to any mala fide intention on the part of the assessee. It was argued that the lapse occurred at the consultant’s end and that the assessee should not be penalised for circumstances beyond his control.

“The lapse that occurred on behalf of the representative cannot be attributed to the assessee for which assessee could be punished.”

The Tribunal examined various judicial precedents on condonation of delay, including the Supreme Court’s decision in Collector, Land Acquisition v. Mst. Katiji and other High Court rulings emphasising that substantial justice should prevail over technical considerations. It observed that a litigant ordinarily does not stand to benefit from filing an appeal late and that refusal to condone delay may result in a meritorious matter being dismissed without examination on merits.

The Bench noted that the Revenue had not filed any counter-affidavit disputing the reasons furnished by the assessee. It further found that the delay was caused by circumstances beyond the assessee’s control and that the explanation offered constituted a reasonable and bona fide cause.

“The expression ‘sufficient cause’ should receive a liberal construction for the purpose of advancing substantial justice.” On merits, the Tribunal found that the order of the CIT(A) was essentially an ex-parte order and that the assessee had not received an effective opportunity to present his case. In the interest of natural justice, it held that the matter required fresh consideration after granting adequate opportunity of hearing.

Thus, the Tribunal condoned the delay, set aside the impugned appellate order, and restored the matter to the file of the CIT(A) for fresh adjudication on merits after providing a reasonable opportunity to the assessee. The appeal was allowed for statistical purposes.

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