Delay cannot override justice: ITAT Mumbai restores ex-parte u/s 69 addition for de novo assessment

Background and Context

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Shubhada Pradeep Chavan Vs ITO has reiterated that procedural lapses such as delay in filing appeal or non-response to notices cannot, by themselves, justify sustaining substantial additions when the merits have never been examined.

In this matter, a sizeable addition of Rs. 64,80,000 was made by the Assessing Officer (AO) as unexplained investment under Section 69 in respect of an immovable property. The assessment was completed ex-parte in a reassessment proceeding. Subsequently, the appeal before the CIT(A) was dismissed in limine on the sole ground of delay of 548 days in filing, without entering into the substantive issues.

The ITAT intervened, emphasizing the need to uphold principles of natural justice and directed a fresh examination by the AO.

Facts of the Case

Basic profile and triggering of reassessment

  • The assessee is an individual, stated to be employed with the Maharashtra Police.
  • Departmental information indicated that the assessee had purchased an immovable property for approximately Rs. 60,00,000 during the relevant financial year corresponding to A.Y. 2015-16.
  • Since no return of income had been filed for that year, the AO initiated reassessment proceedings under Section 147.

Non-compliance and ex-parte assessment

  1. Notices were issued under:

    • Section 148 (reopening of assessment), and
    • Section 142(1) (calling for details and information),
      on multiple dates.

  2. The assessee did not furnish the required details or respond effectively to these statutory notices.

  3. In absence of any explanation or supporting records from the assessee, the AO proceeded to complete the reassessment ex-parte under:

    • Section 147 read with Section 144 and Section 144B of the Income Tax Act 1961.

  4. The AO treated the investment in the property, together with stamp duty and registration charges, as unexplained investment and made an addition of Rs. 64,80,000 under Section 69.

Appeal before the CIT(A) and dismissal due to delay

Filing of appeal with substantial delay

  • The assessee preferred an appeal against the reassessment order before the CIT(A), NFAC, Delhi.
  • The appeal, however, was filed with a delay of about 548 days beyond the prescribed time limit.
  • Along with the appeal, the assessee placed on record an explanation for the delayed filing.

Reasons cited for delay

As captured in para 3.2 of the CIT(A)’s order, the assessee had explained the delay broadly as follows:

  • She was serving as a police personnel, working long and irregular hours, which constrained her ability to attend to tax proceedings.
  • She lacked familiarity with income tax procedures, including e-filing and online compliance requirements.
  • Time was consumed in exploring remedy under Section 264 of the Income Tax Act (revision before the Principal Commissioner/Commissioner), which contributed to the delay in filing the appeal before the CIT(A).

View of the CIT(A)

  • The CIT(A) observed that the assessee did not file any documentary evidence or sworn affidavit to corroborate the reasons set out for the delay.
  • Taking the view that the explanation remained unsubstantiated, the CIT(A) refused to condone the delay.
  • As a result, the appeal was dismissed in limine, i.e., at the threshold, without going into the merits of the addition under Section 69.
  • Consequently, the addition of Rs. 64,80,000 stood confirmed without any factual or legal adjudication on substance.

Aggrieved, the assessee carried the matter in further appeal before the ITAT, Mumbai.

Grounds raised before ITAT

The assessee’s grounds before the Tribunal, in essence, challenged:

1.