2025 (6) TMI 1218 - AT - Income Tax

364-day delay in filing appeal condoned due to inoperative registered email preventing receipt of notices

Shri Bhaveshkumar Ganshyam Patel Versus ITO, Ward-1 (2) (1) Vadodara.

ITAT Ahmedabad condoned a 364-day delay in filing appeal where assessee's registered email became inoperative, preventing receipt of departmental notices. ... Delay in filling appeal before ITAT - delay of 364 days in filing the present appeal - delay primarily resulted from the fact that the email address registered by the assessee on the income-tax portal had become inoperative over a period of time, thereby preventing effective communication of departmental notices and orders - HELD THAT:- Appellate authorities must adopt a liberal and pragmatic approach while deciding applications for condonation of delay, particularly where no gross negligence, deliberate inaction, or absence of bona fides is imputable to the assessee. As in Shree Asandas B Murjani Education Trust [2024 (7) TMI 492 - ITAT AHMEDABAD] has also condoned substantial delay in analogous circumstances where similar procedural lapses had occurred without any element of mala fide conduct. Thus, we are satisfied that the delay in filing the present appeal deserves to be condoned. Accordingly, we condone the delay and admit the appeal for adjudication on merits. On merits, we find that the CIT(A) has dismissed the appeal without adjudication on merits solely for want of prosecution. The assessee was unable to effectively participate before the CIT(A) due to the procedural lapses already narrated above - Thus, we restore the matter back to the file of the CIT(A) for fresh adjudication. Having regard to the facts that there was lack of diligence on part of the assessee resulting into avoidable litigation and wastage of judicial time, we deem it appropriate to impose a cost of Rs. 5,000/- on the assessee. The core legal questions considered by the Tribunal in this appeal are:1. Whether the penalty order under section 271(1)(c) of the Income Tax Act, 1961, levied on the assessee for furnishing inaccurate particulars of income, is legally sustainable.2. Whether the Commissioner of Income Tax (Appeals) erred in dismissing the appeal for want of prosecution without adjudicating the penalty on merits.3. Whether the Assessing Officer and the CIT(A) properly specified the charge of penalty in the assessment and penalty orders as required under law.4. Whether the penalty imposed was justified in light of the facts, including the revised valuation and rectification order reducing the quantum of capital gains and consequential tax demand.5. Whether the delay in filing the appeal before the Tribunal should be condoned, considering the procedural lapses and bona fide reasons advanced by the assessee.Issue-wise Detailed Analysis1. Validity and Sustainability of Penalty under Section 271(1)(c)Legal Framework and Precedents: Section 271(1)(c) of the Income Tax Act empowers the Assessing Officer to levy penalty where the assessee is found to have furnished inaccurate particulars of income or concealed income. The penalty is discretionary but must be founded on clear evidence of concealment or misreporting. Judicial precedents emphasize that penalty cannot be imposed merely on differences of opinion regarding valuation or income computation unless mala fide or willful misreporting is established.Court's Interpretation and Reasoning: The Tribunal observed that the penalty was levied on the basis of the original assessment order which computed capital gains on a higher valuation, whereas subsequently a rectification order under section 154 significantly reduced the quantum of capital gains and tax demand. The penalty was not revised accordingly. The Tribunal noted that the Assessing Officer did not specify the precise charge or particulars of concealment in the penalty order, which is a procedural lapse.Key Evidence and Findings: The assessee initially declared a long-term capital loss based on indexed cost of acquisition. Upon notice under section 133(6), a revised computation was filed offering long-term capital gains. The AO rejected the valuation reports submitted by the assessee and made his own estimate of FMV as on 01.04.1981, resulting in a higher capital gain and tax demand. Later, the AO accepted the DVO's valuation and passed a rectification order reducing the capital gains and tax demand. However, the penalty was imposed based on the original higher addition.Application of Law to Facts: The Tribunal found that the penalty was levied without proper appreciation of the rectification order and without specifying the nature of inaccurate particulars. The assessee's bona fide reliance on valuation reports and subsequent cooperation negated any intent to conceal. The imposition of penalty on the higher addition without revision was not justified.Treatment of Competing Arguments: The Revenue contended that furnishing of incorrect valuation reports amounted to furnishing inaccurate particulars. The assessee argued absence of concealment, bona fide belief in valuation, and procedural lapses in penalty proceedings. The Tribunal favored the assessee's position, emphasizing the absence of mala fide and the procedural irregularities.Conclusion: The penalty under section 271(1)(c) was not sustainable on the facts and was liable to be reconsidered after proper adjudication on merits.2. Dismissal of Appeal by CIT(A) for Want of ProsecutionLegal Framework and Precedents: The appellate authority has discretion to dismiss appeals for want of prosecution where the appellant fails to appear or file submissions despite notices. However, principles of natural justice require that dismissal should not be mechanical and must consider reasons for non-participation. Courts have held that dismissal without adjudication on merits should be avoided where bona fide reasons exist.Court's Interpretation and Reasoning: The Tribunal noted that the assessee failed to respond to multiple notices from the CIT(A) due to procedural lapses, including an inoperative registered email address and non-service of physical copies of orders. The assessee was under the bona fide impression that the rectification order would lead to automatic revision of penalty. These circumstances justified a liberal approach.Key Evidence and Findings: The assessee's affidavit and submissions established that the delay and non-response were not deliberate but due to lack of effective communication and genuine misunderstanding. The Tribunal also noted the absence of any mala fide or deliberate inaction.Application of Law to Facts: The Tribunal applied the principle that delay and non-appearance caused by bona fide reasons must be condoned to ensure adjudication on merits. It relied on judicial precedents advocating liberal and pragmatic approach in condonation of delay and restoration of appeals.Treatment of Competing Arguments: The Revenue did not oppose condonation of delay and restoration of appeal, recognizing the factual matrix. The assessee's arguments for restoration were accepted.Conclusion: The dismissal of appeal for want of prosecution was set aside and the appeal was restored for fresh adjudication on merits.3. Specification of Charge of Penalty in Assessment and Penalty OrdersLegal Framework and Precedents: It is a settled legal requirement that the charge or grounds for levy of penalty under section 271(1)(c) must be clearly specified in the penalty order and the assessment order or notice to enable the assessee to understand and defend the case. Absence of such specification vitiates the penalty proceedings.Court's Interpretation and Reasoning: The Tribunal observed that the AO did not specify the precise charge or particulars of inaccurate particulars in the penalty order or assessment order. This procedural deficiency undermined the validity of penalty proceedings.Key Evidence and Findings: The penalty order merely referred to furnishing inaccurate particulars without detailing the nature of concealment or misreporting. The assessee was thus deprived of a fair opportunity to contest the charge.Application of Law to Facts: The Tribunal held that such omission was fatal to the penalty proceedings and required reconsideration with proper specification of charges.Treatment of Competing Arguments: The Revenue did not provide justification for the omission. The assessee's contention was accepted.Conclusion: The penalty order was defective for lack of clear charge specification and required fresh adjudication.4. Justification of Penalty in Light of Facts and Rectification OrderLegal Framework and Precedents: Penalty under section 271(1)(c) is discretionary and must be based on clear evidence of concealment or inaccurate particulars. Subsequent rectification reducing the quantum of income and tax demand must be considered in penalty proceedings to ensure fairness.Court's Interpretation and Reasoning: The Tribunal emphasized that the rectification order substantially reduced the capital gains and tax demand, which the AO failed to consider while imposing penalty. The assessee's bona fide reliance on valuation reports and cooperation negated any intent to conceal.Key Evidence and Findings: The DVO's valuation report led to a significant downward revision of capital gains. The penalty was levied on the original higher addition without revision.Application of Law to Facts: The Tribunal found that penalty imposition without considering the rectification order was unjustified. The assessee was entitled to have penalty proceedings reconsidered in light of revised facts.Treatment of Competing Arguments: The Revenue's insistence on penalty based on original addition was rejected.Conclusion: The penalty was not justified without fresh consideration of facts post-rectification.5. Condonation of Delay in Filing AppealLegal Framework and Precedents: Courts and Tribunals have consistently held that delay in filing appeals should be condoned if caused by bona fide reasons and absence of mala fide or deliberate inaction. The overriding consideration is to advance substantial justice.Court's Interpretation and Reasoning: The Tribunal accepted the assessee's explanation that delay was due to inoperative email address, lack of physical service of orders, and bona fide misunderstanding regarding rectification and penalty revision. The assessee acted promptly upon becoming aware of the order.Key Evidence and Findings: Affidavit and submissions established procedural lapses and bona fide conduct.Application of Law to Facts: The Tribunal applied settled principles and relevant precedents to condone the delay.Treatment of Competing Arguments: The Revenue did not oppose condonation.Conclusion: The delay was condoned in the interest of justice.Significant Holdings'The delay in filing the present appeal arose due to bona fide and inadvertent circumstances, which were beyond the control of the assessee... absence of mala fide or deliberate inaction... the delay in filing the present appeal deserves to be condoned.''The penalty under section 271(1)(c) was levied without proper appreciation of the rectification order and without specifying the nature of inaccurate particulars, which is a procedural lapse.''Dismissal of the appeal by the CIT(A) for want of prosecution without adjudication on merits is not justified where the assessee was prevented from effective participation due to procedural lapses.''The penalty order is defective for lack of clear specification of charge, which is necessary to enable the assessee to defend the case.''In view of the above, the impugned order is set aside and the matter is restored to the file of the CIT(A) for fresh adjudication on merits with directions to the assessee to cooperate and furnish necessary submissions.'Core principles established include the necessity of specifying penalty charges clearly, the requirement to consider rectification orders in penalty proceedings, the importance of adjudicating appeals on merits rather than dismissing for procedural defaults where bona fide reasons exist, and the liberal approach to condonation of delay in absence of mala fide.Final determinations are that the penalty order is not sustainable as it stands; the appeal was improperly dismissed for want of prosecution; the delay in filing the appeal before the Tribunal is condoned; and the matter is remanded to the CIT(A) for fresh adjudication on merits with a direction to the assessee to cooperate. Additionally, a cost of Rs. 5,000/- was imposed on the assessee for lack of diligence causing avoidable litigation.