ITAT Mumbai Restores Appeal in Section 68 Dispute: Bona Fide Misconception and COVID Hardship Justify Delay Condonation

Overview of the Case

Case Name: Sea Side Hotel Private Limited Vs ITO (ITAT Mumbai)
Appeal Number: ITA No. 7336/MUM/2026
Date of Order: 08/10/2026
Assessment Year: 2015-16
Relevant Provisions: Section 68, Section 147, Section 144B, Section 148, Section 249(3), Section 249(4) of the Income Tax Act, 1961

Background and Facts of the Case

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) was called upon to adjudicate an appeal filed by Sea Side Hotel Private Limited against an order of the Commissioner of Income-tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi, dated 17.04.2026. The underlying assessment order had been passed under Section 147 read with Section 144B of the Income Tax Act, 1961, on 25.03.2022, for Assessment Year 2015-16.

The assessee, engaged in the hospitality sector, had originally filed its return of income declaring a loss of ₹15,95,250. The matter was subsequently reopened for reassessment under Section 148 after the Assessing Officer (AO) received intelligence that the assessee had received a sum of ₹8,50,000 from M/s RNG Finlease Pvt. Ltd., a company alleged to be a shell entity managed and controlled by one Shri Naval Kishore Jalan.

The Section 68 Addition: How It Arose

A search and seizure operation was conducted in the case of Shri Naval Kishore Jalan on 21.05.2018. During the course of that search, it emerged that Jalan was allegedly engaged in providing accommodation entries to various beneficiaries — including bogus investments in unquoted shares and bogus long-term capital gains. Statements recorded during the search purportedly admitted to such activities.

Based on this information, the AO identified that the assessee had received ₹8,50,000 from RNG Finlease Pvt. Ltd. During the reassessment proceedings under Section 148, the assessee was asked to explain and substantiate the nature of this receipt. According to the assessment order, the assessee was unable to provide a satisfactory explanation. The AO accordingly treated the amount as unexplained cash credit and made an addition of ₹8,50,000 under Section 68 of the Income Tax Act, 1961.

The assessee contested this addition on the following grounds:

  • The receipts were already explained and formed part of its declared turnover.
  • The AO had relied upon unsubstantiated information that the assessee had never confirmed.
  • No opportunity was provided to cross-examine the individual whose statement was the basis of the addition.

CIT(A) Dismissed Appeal at the Threshold

The assessee filed an appeal before the CIT(A), but that appeal was filed 115 days beyond the prescribed limitation period. The assessee attributed this delay to disruptions caused by the COVID-19 pandemic and the related nationwide lockdown.

The CIT(A), however, was not persuaded that sufficient cause had been demonstrated and dismissed the appeal in limine — meaning the substantive grounds were never examined. The dismissal was solely on account of the delay, leaving the merits of the addition untouched.

Grounds of Appeal Before ITAT

Before the Tribunal, the assessee raised the following grounds: