Condonation of delay: appeals restored for merits adjudication subject to a protective deposit condition to prevent prejudice to revenue.

Condonation of delay to file appeals before the Commissioner of Income-tax (Appeals) was granted where non-receipt of reopening notices recorded in the tax database coincided with exceptional circumstances (COVID-19); the court balanced the assessee's right to be heard against revenue prejudice and imposed a protective condition requiring a deposit of a portion of the assessed demand before the CIT(A) would consider the appeals on merits. Consequentially, assessment and penalty orders were set aside and remanded to the CIT(A) for fresh adjudication on merits subject to the deposit condition and without reopening statutory return windows.

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Issues: (i) Whether the delay in filing appeals before the Commissioner of Income-tax (Appeals) should be condoned and the appeals restored for adjudication on merits; (ii) Whether the assessment and consequential penalty orders should be set aside/remanded to permit adjudication on merits.

Issue (i): Whether the delay in filing appeals before the Commissioner of Income-tax (Appeals) should be condoned and the appeals restored for adjudication on merits.

Analysis: The notices of reopening were issued to an email ID recorded in the income-tax database; non-reception was attributed to the email account not being accessed by the assessee. The period when notices were issued overlapped with the COVID-19 pandemic, which the Court treated as a relevant circumstance in assessing the sufficiency of the explanation for delay. The Court weighed the consequence of non-participation in assessment proceedings against the statutory requirement to file returns and identified that, while reopening of statutory time-limited opportunities was not warranted, the assessee ought to be given a fair opportunity in appellate proceedings to present its case. The Court observed that condonation of delay in filing appeals may be granted subject to safeguards to prevent undue prejudice to revenue.

Conclusion: Delay in filing the appeals before the Commissioner of Income-tax (Appeals) is condoned and the appeals are restored for adjudication on merits, subject to the assessee depositing twenty percent of the demand before the Assessing Officer; the Commissioner of Income-tax (Appeals) shall consider the appeals on merits only upon such deposit being made.

Issue (ii): Whether the assessment orders and consequential penalty orders should be set aside or remanded to permit adjudication on merits before the appropriate authority.

Analysis: In view of the restoration of appeals to the appellate forum and the need to afford the assessee an opportunity to be heard on merits, the appellate and penalty proceedings were treated as continuations of the assessment process that ought to be considered afresh by the Commissioner of Income-tax (Appeals). The Court declined to reopen the statutory window for filing returns but held that remand of the appeals and consequential penalty orders was necessary to enable adjudication on merits once the conditional deposit is made.

Conclusion: The assessment orders and the consequential penalty orders for the relevant assessment years are set aside and remanded to the Commissioner of Income-tax (Appeals) for fresh adjudication on merits; the appeals are restored to the appellate forum subject to the twenty percent deposit condition.

Final Conclusion: The appeals are allowed to the limited extent of condoning delay and restoring the appeals for merits adjudication before the Commissioner of Income-tax (Appeals) upon fulfillment of the deposit condition; assessment and penalty orders are set aside and remanded for fresh consideration.

Ratio Decidendi: Where non-receipt of notices recorded in the tax database coincides with exceptional circumstances (such as the COVID-19 period), a condonation of delay may be granted to restore appeals for merits adjudication, subject to protective conditions (including a deposit of a portion of the demand) to balance the assessee's right to be heard and the revenue's interest.

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