The Income Tax Appellate Tribunal, Bangalore, has held that a 74-day delay in filing an appeal before the Commissioner of Income Tax (Appeals) may be condoned even in the absence of formal documentation proving engagement of a tax consultant, where the assessee’s explanation reflects genuine ignorance and reliance on third-party representation. This ruling reinforces a pragmatic approach to procedural compliance in tax litigation involving individual taxpayers.
Background & Facts
The Dispute
The appellant, Shyam Beriwal, a salaried employee of Flipkart Internet Private Limited, filed his income tax return for Assessment Year 2020-21 on 02.02.2020, declaring total income of ₹12,794,640. He reported ₹8,024,317 as short-term capital gains and ₹2,150,160 as long-term capital gains arising from the buyback of vested stock options granted by Flipkart. However, the Assessing Officer (AO) identified an unreported salary income of ₹3,974,477, which was reflected in Form 16 and Form 26AS as a perquisite under Section 192. The AO reassessed the income under Section 147 read with Section 144B, reclassifying the entire amount as undisclosed salary income.
Key Facts
- The appellant received stock options from Flipkart prior to its acquisition by Walmart
- The buyback of these shares occurred before the acquisition was completed
- The appellant reported the profit as capital gains, relying on the decision in Mr. R Krishnan v. Assistant Commissioner of Income Tax (ITA No. 590/Bangalore/2017)
- Form 16 and Form 26AS clearly showed the ₹3,974,477 as salary income
- The AO issued notices under Section 133(6) and Section 142(1) before initiating reassessment
- The reassessment order was passed on 26.03.2025
Procedural History
- 02.02.2020: Assessee filed income tax return for AY 2020-21
- 26.03.2025: Reassessment order issued by AO under Section 147 read with Section 144B
- 26.03.2025: Assessment order served via email to the assessee’s registered email ID
- 25.06.2025: Assessee became aware of the order through a new tax consultant
- 08.07.2025: Appeal filed before CIT(A) - 74 days after the order date
- 26.08.2025: CIT(A) dismissed the appeal for delay without condonation
- 12.02.2026: Hearing before ITAT Bangalore
- 25.03.2026: ITAT order pronounced
The Parties' Positions
For the Assessee: The delay was due to reliance on a consultant who failed to inform him of the assessment order. The assessee, being a salaried employee unfamiliar with tax procedures, did not monitor his email or follow up on proceedings. He submitted a condonation application, explaining that the delay was beyond his control.
For the Revenue: The delay of 74 days was inexcusable. No documentary evidence - such as an engagement letter, correspondence, or affidavit from the consultant - was produced to substantiate the claim of reliance. The CIT(A) was correct in refusing condonation.
Relief Sought
The assessee sought restoration of the appeal before the CIT(A) for adjudication on merits, with the argument that the issue is settled in his favor by the Karnataka High Court in Manjit Singh Chawla v. Deputy Commissioner of Income Tax (Writ Petition No. 20212 of 2023, dated 02.06.2025).
The Legal Issue
Can a delay of 74 days in filing an appeal under Section 249A of the Income Tax Act be condoned when the assessee claims ignorance due to reliance on a tax consultant, but fails to produce documentary proof of such engagement?
Arguments Presented
For the Appellant
The authorized representative, Shri Abdul Mushqeet Pasha, argued that the assessee is a salaried employee with no expertise in tax law. He engaged a consultant to handle scrutiny proceedings and was unaware of the assessment order because the consultant failed to inform him. The email notifications were not monitored, and the assessee only discovered the order upon consulting a new representative on 25.06.2025. He cited Manjit Singh Chawla to show the legal issue is settled in his favor. He contended that requiring an engagement letter or affidavit from a consultant is impractical for individual taxpayers and that ignorance of procedure, when coupled with genuine reliance, constitutes sufficient cause under Section 249A.
For the Respondent
The departmental representative, Shri Subramanian, JCIT, submitted that the CIT(A) was justified in rejecting the condonation application due to lack of corroborative evidence. The assessment order was sent to the assessee’s registered email ID, and the burden lies on the assessee to prove that the delay was not due to negligence. The absence of any documentary proof - such as engagement letters, payment receipts, or communication with the consultant - rendered the explanation unsubstantiated. The Revenue argued that the merits of the case should not be examined until the procedural defect is cured.
The Court's Analysis
The Tribunal examined the explanation provided by the assessee for the 74-day delay and contrasted it with the rigid approach adopted by the CIT(A). It noted that while the CIT(A) rightly emphasized the need for evidence, the requirement for an engagement letter, affidavit, or correspondence from a consultant is unreasonable for a salaried individual who is not versed in tax procedures.
"In case of an individual assessee, it is highly impractical to ask for the engagement letter, correspondence or affidavit of the consultant."
The Tribunal observed that the assessee’s explanation - that he relied on a consultant during scrutiny, the consultant did not inform him of the order, and he only became aware of it through a new representative - was consistent and plausible. The fact that the order was sent via email does not absolve the Revenue of the obligation to consider the human element of non-technical taxpayers. The Tribunal held that the CIT(A) erred in adopting a pedantic approach, especially when the issue raised is of substantial legal importance and has been decided in the assessee’s favor by the jurisdictional High Court.
The Tribunal further clarified that while ignorance of law is generally not an excuse, in the context of condonation of delay under Section 249A, the focus is on whether the delay was caused by circumstances beyond the control of the assessee. The absence of formal documentation does not automatically negate the credibility of the explanation, particularly where the facts are not disputed and the delay is not excessive.
The Verdict
The appeal was allowed for statistical purposes. The ITAT set aside the CIT(A)’s order dated 26.08.2025 dismissing the appeal for delay. The appeal is restored to the CIT(A) for adjudication on merits. The CIT(A) is directed to consider the decision in Manjit Singh Chawla v. Deputy Commissioner of Income Tax and decide the issue of taxability of stock option buyback proceeds in light of the jurisdictional High Court’s ruling.
What This Means For Similar Cases
Ignorance of Procedure Can Constitute Sufficient Cause
- Practitioners representing individual taxpayers may now argue that lack of technical knowledge, coupled with reliance on a third-party consultant, constitutes sufficient cause for delay under Section 249A
- The burden of proof for condonation does not require formal documentation if the explanation is plausible and unchallenged
- Revenue authorities must assess the reasonableness of the explanation in context, not apply rigid evidentiary standards
Jurisdictional Precedents Override Procedural Defects
- When a jurisdictional High Court has ruled on the substantive issue, the CIT(A) must reconsider the appeal on merits after condonation
- ITATs are likely to restore appeals where the legal question is settled in the assessee’s favor, even if procedural lapses exist
- Tax professionals should advise clients to retain even informal communications with consultants as a precaution
Practical Takeaways for Practitioners
- Advise clients to maintain records of all engagements with tax consultants, even if informal
- Recommend setting up email alerts or auto-forwarding for official tax communications
- File condonation applications with detailed affidavits explaining the chain of events, even without formal documents
- Cite jurisdictional High Court rulings early in proceedings to strengthen the case for restoration
