Case Law Details
Shubhada Pradeep Chavan Vs ITO (ITAT Mumbai)
Mumbai ITAT held that substantial additions cannot be sustained merely due to procedural lapses like delay or non-compliance, especially when the matter has not been examined on merits.
The case involved an addition of ₹64.80 lakh u/s 69 for alleged unexplained investment in property, made in an ex-parte reassessment. The CIT(A) further dismissed the appeal in limine due to a delay of 548 days, citing lack of supporting evidence for condonation.
The Tribunal observed:
- Both AO and CIT(A) passed ex-parte orders without proper adjudication
- The assessee (a police personnel) cited practical constraints, lack of tax knowledge, and procedural difficulty
- The assessee claimed that the property investment belonged to her husband and sought opportunity to furnish evidence
The ITAT held that:
- Principles of natural justice require opportunity, especially where substantial additions are made
- Dismissing appeal solely on delay without examining merits leads to miscarriage of justice
Accordingly, the Tribunal:
- Set aside the CIT(A)’s order
- Restored the matter to AO for fresh adjudication
- Directed the assessee to submit documentary evidence and cooperate
The appeal was allowed for statistical purposes, reinforcing that merits must prevail over procedural technicalities.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The present appeal filed by the assessee arises out of the order dated 13/01/2026 passed by the NFAC, Delhi [hereinafter the “Ld.CIT(A)”] for A.Y. 2015-16, on the following grounds of appeal:-
“1. The order dated 13/01/2026 bearing No.ITBA/FAC/S/250/2025-26/1084712456|11 passed by the Hon’ble CIT[A], NFAC, Delhi, is excessive, unreasonable, arbitrary, against the provisions of Income Tax Act, 1961 and therefore liable to be quashed.
2. On facts and circumstances of the case and in law, the Honourable C.I.T.(A) has erred in confirming the addition of Rs.64,80,000/- made by the Assessing Officer under section 69A of Income Tax Act, 1961 on account of purchase of immovable property as unexplained investment.
3. As such, the Honourable C.I.T.(A) has erred in dismissing the appeal filed by the Appellant against the Assessment order under section 147 r.w.s. 144 of Income Tax Act, 1961 dated 23/01/2024 since the Appellant could not filed the appeal within prescribed time, even though there was sufficient and reasonable cause for delay was produced.
4. The appellant craves to alter, add, delete, substitute, or modify and other grounds of appeal.”
2. Brief facts of the case are as under:-
Assessee is an individual. Information was received by the department that the assessee had made investment in purchase of immovable property amounting to Rs. 60,00,000/- during the relevant financial year. Since no return of income was filed, proceedings u/s 147 were initiated. During the course of assessment proceedings, despite issuance of notices u/s 148 and 142(1) on various dates, the assessee failed to furnish the requisite details and evidences. Consequently, the Ld. AO completed the assessment ex-parte u/s 147 r.w.s. 144 r.w.s. 144B of the Act and made addition of Rs. 64,80,000/- u/s 69 on account of unexplained investment including stamp duty and registration charges.
2.1. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). However, the appeal was filed with a delay of about 548 days. The Ld.CIT(A), after considering the explanation furnished by the assessee, particularly as recorded in para 3.2 of the impugned order, held that the assessee failed to substantiate the reasons for delay with any documentary evidence or affidavit and accordingly dismissed the appeal in limine without adjudicating the issue on merits.
Aggrieved by the order of Ld.CIT(A), assesse is in appeal before this Tribunal.
3. The sole issue that arises for our consideration is whether the Ld.CIT(A) was justified in dismissing the appeal in limine on account of delay without adjudicating the issue on merits and whether the addition made by the Ld. AO u/s 69 amounting to Rs. 64,80,000/- requires reconsideration.
3.1. The Ld. AR submitted that both the Ld. AO as well as the Ld.CIT(A) have passed orders ex-parte without granting proper opportunity to the assessee. It was submitted that the assessee is an individual working with Maharashtra Police and due to heavy duty hours and lack of familiarity with income-tax proceedings and e-portal compliances, she could not respond to the notices issued during the course of assessment as well as appellate proceedings. The Ld. AR further submitted that the impugned property was actually purchased by the husband of the assessee and the assessee’s name was included only for convenience, and therefore, no addition is warranted in her hands. It was also submitted that the assessee is in possession of necessary documentary evidences to substantiate the source of investment and prayed that one more opportunity may be granted.
3.2. Per contra, the Ld. DR relied upon the orders of the lower authorities and submitted that despite sufficient opportunities granted by the Ld. AO, the assessee failed to comply with statutory notices and therefore the assessment was rightly completed ex-parte. It was further submitted that the Ld.CIT(A) has correctly dismissed the appeal as barred by limitation considering the substantial delay and absence of supporting evidences for condonation.
We have perused the submissions advanced by both sides in light of the records placed before this Tribunal.
- It is noted that the assessment in the present case has been
completed u/s 147 r.w.s. 144 r.w.s. 144B of the Act, wherein an addition of Rs. 64,80,000/- has been made u/s 69 on account of unexplained investment in purchase of immovable property, primarily on the ground that the assessee failed to furnish any explanation or documentary evidence during the assessment proceedings and did not respond to notices issued u/s 142(1) and 148 of the Act. The assessment order thus clearly reflects that the same has been framed ex-parte.
4.1. It is further noted that the Ld.CIT(A) has dismissed the appeal in limine on account of delay of about 548 days without going into the merits of the case. In para 3.2 of the impugned order, the Ld.CIT(A) has recorded the explanation of the assessee that the delay occurred due to her heavy duty schedule as a police personnel, lack of familiarity with tax procedures and e-proceedings, and also on account of pursuing remedy under section 264 of the Act. However, the Ld.CIT(A) rejected the said explanation on the ground that no documentary evidence or affidavit was filed to substantiate the delay.
5. Considering the entirety of facts, it is evident that both the assessment as well as the first appellate proceedings have culminated in ex-parte orders without adjudication on merits. The assessee has now contended that she possesses relevant documentary evidences to explain the source of investment and has also raised a specific contention that the investment pertains to her husband. In our considered view, when substantial addition has been made and the assessee seeks to place supporting evidences on record, the principles of natural justice require that an opportunity be granted to substantiate such claim.
5.1. Accordingly, in the interest of justice, we set aside the impugned order of the Ld.CIT(A) and restore the matter to the file of the Ld. AO for fresh adjudication. The assessee is directed to file all necessary documentary evidences in support of her contentions and cooperate in the proceedings. The Ld. AO shall afford adequate opportunity of being heard to the assessee and decide the issue afresh in accordance with law.
Accordingly, the grounds raised by assessee are allowed for statistical purposes.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 23/04/2026
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