The Income Tax Appellate Tribunal has held that procedural lapses due to compelling personal hardship cannot override the fundamental right to a fair hearing. The Tribunal condoned a significant delay in filing an appeal and restored the assessment proceedings to the Assessing Officer for fresh adjudication, emphasizing that substantial justice must prevail over technicalities.
The Verdict
The assessee won. The Income Tax Appellate Tribunal condoned a 218-day delay in filing the appeal and restored the assessment proceedings to the Assessing Officer for de-novo consideration. The core legal holding is that natural justice requires a fair opportunity to be heard, and technical defaults arising from genuine personal hardship cannot justify dismissal of an appeal on procedural grounds alone. The Tribunal directed the Assessing Officer to re-examine the case afresh with full opportunity to the assessee to present evidence and submissions.
Background & Facts
The assessee, an individual engaged in wholesale cotton trading, filed his income tax return for Assessment Year 2013-14 declaring an income of ₹2,02,070. Subsequently, the Investigation Wing of the Income Tax Department, while probing M/s Shree Vardhman Traders, flagged large bank transactions linked to the assessee. Based on this investigation, the Assessing Officer initiated proceedings under Section 147 of the Income Tax Act, 1961, alleging that the assessee had facilitated bogus accommodation entries and earned unexplained commission income.
The Assessing Officer estimated commission income at 5% of alleged transaction value of ₹13,86,31,900, resulting in an addition of ₹69,31,595. The assessee contested this, submitting that actual sales to the party were only ₹8,42,98,399 and that the transactions were genuine, supported by documentary evidence. Despite participating in the initial assessment proceedings, the assessee failed to respond to multiple notices issued through the ITBA portal during the first appeal before the Commissioner of Income Tax (Appeals). Consequently, the CIT(A) dismissed the appeal ex parte, relying on the principle that an appeal must be effectively prosecuted.
The assessee then filed an appeal before the Income Tax Appellate Tribunal, 218 days after the prescribed 60-day limitation period. He submitted medical certificates showing his daughter suffered from a severe brain-related condition requiring constant care, which prevented him from pursuing the appeal. He sought condonation of delay and restoration of the matter for fresh adjudication.
The Legal Issue
The central question was whether a delay in filing an appeal before the Income Tax Appellate Tribunal, caused by compelling personal circumstances beyond the assessee’s control, can be condoned even when the appellate authority had previously dismissed the case ex parte for non-prosecution. Further, does the principle of natural justice require restoration of proceedings to afford a fair hearing, even after procedural defaults?
Arguments Presented
For the Petitioner
The assessee’s counsel argued that the delay was neither deliberate nor negligent but arose from unavoidable personal hardship - caring for a seriously ill child. He cited judicial precedents supporting liberal condonation of delay in tax matters where substantive justice is at stake. He emphasized that the assessee had actively participated in the assessment stage and had submitted documentary evidence of genuine transactions. The failure to prosecute the appeal before CIT(A) was due to physical and emotional constraints, not indifference. He urged the Tribunal to prioritize the right to be heard over technical compliance.
For the Respondent
The Revenue did not contest the factual basis of the delay but argued that the assessee had been given multiple opportunities to file submissions before the CIT(A) and had chosen not to avail them. The Revenue relied on the Supreme Court’s decision in CIT v. B.N. Bhattacharjee, which holds that filing an appeal is not enough - it must be actively prosecuted. The Revenue contended that allowing restoration would set a precedent undermining procedural discipline in tax administration.
The Court's Analysis
The Tribunal acknowledged the Revenue’s reliance on precedent but distinguished the present case on its unique factual matrix. It held that while procedural compliance is important, it cannot override the foundational principle of natural justice enshrined in Article 14 and Article 21 of the Constitution. The Tribunal noted that the assessee had not merely failed to appear - he had been actively engaged in the assessment stage and had submitted evidence that was never properly evaluated.
"The delay cannot be said to be deliberate, intentional or on account of negligence. It is a settled principle of law that when sufficient cause is shown, a liberal approach should be adopted in the matter of condonation of delay so as to advance substantial justice."
The Tribunal further observed that the CIT(A) had dismissed the appeal ex parte without examining the merits of the claims regarding the genuineness of sales or the validity of the 5% commission estimate. The addition of income was based on assumptions, and the assessee’s documentary evidence had not been rebutted or analyzed. The Tribunal emphasized that the purpose of appellate review is not to penalize procedural lapses but to ensure correct application of law.
It concluded that the interests of justice demanded restoration of the matter to the Assessing Officer, not to re-litigate the same grounds, but to conduct a fresh, fair, and reasoned adjudication. The Tribunal made it clear that the assessee must now fully cooperate and submit all relevant material, but the burden of fair procedure now rests squarely on the revenue authorities.
What This Means For Similar Cases
This judgment reinforces that tax authorities must not treat procedural defaults as automatic grounds for dismissal when compelling personal circumstances are proven. Practitioners should now routinely file detailed affidavits with supporting documentation (medical records, caregiver logs, etc.) when seeking condonation of delay due to personal hardship. The Tribunal’s directive to restore proceedings for de-novo consideration sets a strong precedent for cases where the initial adjudication was ex parte and the merits were never examined.
This ruling also signals that the Revenue cannot rely solely on the principle of non-prosecution to uphold additions based on assumptions. Assessing Officers must now engage meaningfully with documentary evidence submitted by assessees, even in reopened cases. Failure to do so may result in restoration orders on appeal. The judgment does not absolve assessees of their duty to cooperate, but it firmly establishes that procedural fairness must precede finality.
