2025 (1) TMI 284 - AT - Income Tax

Delay of 503 days in filing the appeal before the CIT (A) - cause of delay as the order passed by the CPC u/s 143(1) as well as u/s 154 were not received by the assessee, despite repeated efforts and only on 14/10/2023 the said order passed u/s 154 was supplied to the assessee - HELD THAT - Prima facie, it appears that the CPC has made addition on account of the amount of Rs. 50.00 lakhs received by the assessee against which TDS u/s 194C was deducted. In the subsequent year, the said amount was refunded by the assessee to the payer which is duly reflected in the bank account statement of the assessee. Therefore, if the assessee s case is not examined on merit, it would result in gross injustice for assessing the income which was not earned by the assessee. Accordingly, when the reasons explained by the assessee are not disputed by the Department that the impugned orders of the CPC passed u/s 143(1) as well as u/s 154 of the I.T. Act, 1961 were not served on the assessee physically and the assessee has explained that he could not even receive these orders digitally, then we find that the assessee has explained a sufficient cause for the delay in filing the appeal before the learned CIT (A). Accordingly, in the facts and circumstances of the case and in the interest of justice, we condone the delay of 503 days in filing the appeal before the learned CIT (A). Matter is hereby remanded to the record of the AO to verify the fact regarding the receipt of the said amount as well as refund of the same by the assessee. Appeal of the assessee is allowed for statistical purposes.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

• Whether the addition of Rs. 50,50,505 to the income of the assessee under "income from other sources" was justified, considering the assessee's claim that it was an advance returned and not income.
• Whether the non-service of the order passed by the Assessing Officer (AO) under Section 154 of the Income Tax Act, 1961, and its non-uploading on the income tax portal, constituted a procedural lapse.
• Whether the assessee was denied a fair opportunity to be heard before the passing of the order.
• Whether the levy of interest under Sections 234A, 234B, and 234C of the Income Tax Act was appropriate.
• Whether the delay of 503 days in filing the appeal before the Commissioner of Income Tax (Appeals) [CIT (A)] could be condoned based on the reasons provided by the assessee.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Addition of Rs. 50,50,505 to Income

• Relevant Legal Framework and Precedents: The addition was made under Section 143(1) of the Income Tax Act, 1961, based on the TDS reflected in Form 26AS.
• Court's Interpretation and Reasoning: The Tribunal noted that the amount was received as an advance and subsequently refunded, which was supported by the bank statements.
• Key Evidence and Findings: The bank account statements showed the receipt and refund of Rs. 50 lakhs.
• Application of Law to Facts: The Tribunal found that the addition was made without considering the actual nature of the transaction.
• Treatment of Competing Arguments: The Tribunal considered the Department's reliance on the TDS entry but prioritized the factual transaction evidence.
• Conclusions: The matter was remanded to the Assessing Officer for verification of the facts regarding the transaction.

Issue 2: Non-Service of Order under Section 154

• Relevant Legal Framework and Precedents: Section 154 deals with rectification of mistakes apparent from the record.
• Court's Interpretation and Reasoning: The Tribunal acknowledged the procedural lapse in not serving the order physically or digitally.
• Key Evidence and Findings: The assessee did not receive the order due to communication gaps exacerbated by the COVID-19 pandemic.
• Application of Law to Facts: The Tribunal found sufficient cause for the delay in filing the appeal due to non-receipt of the order.
• Treatment of Competing Arguments: The Department did not effectively dispute the assessee's claims regarding non-receipt.
• Conclusions: The delay in filing the appeal was condoned.

Issue 3: Opportunity to be Heard

• Relevant Legal Framework and Precedents: Principles of natural justice require an opportunity to be heard.
• Court's Interpretation and Reasoning: The Tribunal noted the lack of opportunity provided to the assessee before the order was passed.
• Key Evidence and Findings: The procedural history indicated no hearing was granted.
• Application of Law to Facts: The Tribunal emphasized the need for a fair hearing.
• Treatment of Competing Arguments: The Tribunal found the Department's procedural actions inadequate.
• Conclusions: The case was remanded for a proper hearing.

Issue 4: Levy of Interest under Sections 234A, 234B, and 234C

• Relevant Legal Framework and Precedents: These sections pertain to interest for defaults in furnishing return, payment of advance tax, and deferment of advance tax.
• Court's Interpretation and Reasoning: The Tribunal did not specifically address this issue in detail due to the remand.
• Key Evidence and Findings: Not directly addressed due to the procedural remand.
• Application of Law to Facts: The issue was left open for reassessment upon remand.
• Treatment of Competing Arguments: The Tribunal focused on procedural fairness rather than substantive interest calculations.
• Conclusions: To be addressed upon reassessment.

3. SIGNIFICANT HOLDINGS

• Preserve Verbatim Quotes of Crucial Legal Reasoning: "Accordingly, in the facts and circumstances of the case and in the interest of justice, we condone the delay of 503 days in filing the appeal before the learned CIT (A)."
• Core Principles Established: The principles of natural justice and procedural fairness were reinforced, emphasizing the necessity of serving orders and providing opportunities to be heard.
• Final Determinations on Each Issue: The delay was condoned, and the case was remanded to the Assessing Officer for verification of the transaction and a fair hearing.