2026 (3) TMI 1123 - HC - Income Tax

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 ... Non issuance or service of the notices - notices issued on wrong email id -assessee's duty to furnish valid communication details - condonation of delay in filing appeals where pandemic-related non-communication shown - Notices of reopening were issued to wrong email ID - Appellant, submits that the notice issued u/s 148 and the subsequent notices were sent to an email ID maintained by an employee of the Chartered Accountant and at relevant point of time, the said employee had left the office of the Chartered Accountant, and consequently, the notices were not brought to the notice of the assessee for compliance - HELD THAT: - The Court held that notices under Section 148 were issued to the email ID furnished in the income-tax database and therefore non-service cannot be attributed to the Assessing Officer. It is incumbent on the assessee to furnish a valid and accessible email ID for communication; if the email ID is not accessed, the consequences follow. Nevertheless, the Court acknowledged that the assessee should not be denied opportunity to be heard on that sole ground. [Paras 9, 10] Notices issued to the email ID in the tax database were valid in law; the assessee bears responsibility to provide and monitor a valid email ID, but must be afforded an opportunity to be heard notwithstanding non-access of that email. Condonation of delay in filing appeals where pandemic-related non-communication is plausibly shown - HELD THAT: - The Court found that notices were issued during the COVID-19 period and that non-communication and consequent non-compliance for reasons attributable to the pandemic could not be ruled out; therefore the delay in filing appeals to the CIT(A) was condoned. The Court directed that the appeals be adjudicated on merits by the CIT(A) but only after the assessee deposits 20% of the demand with the Assessing Officer; the CIT(A) is to consider the appeals on merits upon such deposit. The Court declined to remand the matter to the Assessing Officer for reopening or fresh assessment, confining relief to appellate reconsideration. [Paras 13, 14] Delay in filing appeals is condoned for pandemic-related reasons and the appeals are remanded to the CIT(A) for adjudication on merits subject to the condition that the assessee deposits 20% of the demand. Final Conclusion: The appeals are allowed to the limited extent of restoring the appeals to the CIT(A) for adjudication on merits; delay in filing those appeals is condoned on pandemic-related grounds subject to deposit of 20% of the demand, the Tribunal. 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.