Muthusamy Selvaraj Vs ITO (ITAT Chennai)
SEO Title: ITAT Chennai Condones 785-Day Delay and Restores Assessment for Fresh Adjudication
SEO Description: ITAT Chennai condones 785-day delay, restores ex-parte assessment for fresh adjudication and directs penalty under Section 270A to be reconsidered.
ITA Nos. 3608/CHNY/2026 & 3609/CHNY/2026 — Assessment Year 2018-19
Summary: These appeals were filed by the assessee against orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 22.04.2026 and 30.04.2026 under Section 250 of the Income-tax Act, 1961, for AY 2018-19. ITA No.3608/CHNY/2026 concerned the quantum addition, while ITA No.3609/CHNY/2026 concerned the penalty imposed under Section 270A.
In the quantum appeal, the FAA had dismissed the assessee’s appeal in limine on account of a 785-day delay without adjudicating the issues on merits. The assessee explained that his textile business, carried on under the name and style of Sri Gayathri Spinning Mills, had suffered continuous losses, resulting in discontinuation of the business in December 2017 and closure of the administrative office. The statutory notices and reassessment order were sent to the erstwhile business e-mail ID, which was no longer monitored. The assessee therefore remained unaware of the proceedings. The reassessment was ultimately completed ex parte under Sections 147 read with 144 and 144B on 16.01.2024.
The assessee submitted that he became aware of the reassessment proceedings upon receipt of summons from the Department in August 2025. He thereafter consulted legal and tax professionals regarding the appropriate remedy and eventually filed the appeal before the CIT(A) with a petition for condonation of delay. The Tribunal also considered the assessee’s submissions concerning civil proceedings initiated in 2020 relating to cancellation of sale deeds for immovable properties sold during the relevant period. Considering the closure of the business and administrative office, the dormant e-mail ID, the pending civil proceedings and the steps taken by the assessee after becoming aware of the proceedings, the Tribunal held that the delay arose from bonafide circumstances and was not wilful or deliberate. It therefore condoned the delay of 785 days.
Since the assessment itself had also been completed ex parte for the same reasons, the Tribunal set aside both the orders of the FAA and the AO and restored the matter to the AO for de novo adjudication in accordance with law, after providing the assessee a reasonable opportunity of being heard. The assessee was directed to cooperate with the Revenue, furnish the requisite details and evidence and avoid unnecessary adjournments.
In ITA No.3609/CHNY/2026, concerning the penalty imposed under Section 270A, the Tribunal noted that the quantum appeal had been restored to the AO for fresh adjudication. It therefore set aside the penalty order to the AO for fresh decision along with the quantum appeal. Consequently, both appeals were allowed for statistical purposes. The order was pronounced in the open court at Chennai on 20 August 2026.
List of Cases Discussed / Relied Upon
- None were discussed or relied upon in the supplied material.
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Chennai ITAT Condones 785-Day Delay: Notices Sent to Dormant Business Email After Closure Constituted Bona Fide Cause; Ex-Parte Assessment Remanded
In Muthusamy Selvaraj v. ITO, ITA Nos. 3608 & 3609/Chny/2026 (AY 2018-19), order dated 20.08.2026, the Chennai ITAT considered a 785-day delay in filing the appeal before the CIT(A). The CIT(A) had refused to condone the delay and dismissed the quantum appeal in limine without adjudicating the merits.
The assessee was engaged in the textile business, which had suffered continuous losses; bank loans became NPAs and the business and administrative office were closed in December 2017. During the relevant year, he sold immovable properties for ₹9.29 crore and utilised the proceeds towards settlement of bank dues. Since no return had been filed, reassessment proceedings were initiated. However, the statutory notices and subsequent assessment order were sent to the erstwhile business email ID, which was no longer being monitored after closure of the office. Consequently, the reassessment was completed ex parte under Sections 147/144/144B.
The assessee became aware of the proceedings only upon receiving departmental summons in August 2025. The Tribunal also took note of the fact that the assessee had already instituted civil proceedings in 2020 seeking cancellation of the property sale deeds, alleging that the properties had been sold at distress value and that the consideration had not been fully received.
Considering the closure of the business and administrative office, notices being sent to a dormant email ID, pending civil litigation concerning the property sales, and the steps taken by the assessee after becoming aware of the tax proceedings, the ITAT held that the delay arose from bona fide circumstances and was not attributable to wilful or deliberate negligence. In the interest of substantial justice, it condoned the entire 785-day delay.
Importantly, since the assessment itself had also been completed ex parte for substantially the same reason, the Tribunal did not merely restore the matter to the CIT(A). It set aside both the CIT(A)’s order and the AO’s assessment and remanded the case directly to the AO for de novo adjudication, after giving the assessee reasonable opportunity to produce the necessary evidence.
The connected Section 270A penalty order was also set aside and restored to the AO to be reconsidered along with the fresh quantum proceedings. Both appeals were therefore allowed for statistical purposes
FULL TEXT OF THE ORDER OF ITAT CHENNAI
These appeals filed by the assessee are directed against two orders of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 22.04.2026 & 30.04.2026 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19.
2. The assessee has filed these appeals against the First Appellate Authority (FAA) orders in respect of quantum addition and penalty order. First, let us deal with appellate order in respect of quantum addition in ITA No3608/CHNY/2026 for assessment year 2018-19.
ITA No.3608/CHNY/2026
3. At the very outset, we notice that the First Appellate Authority (FAA) dismissed the assessee’s appeal in limine without adjudicating the issues on merits. The FAA observed that there was a delay of 785 days in filing the appeal. The reason stated by the assessee in its petition for condonation of delay was that due to continuous losses in business, the business was discontinued and the administrative office was closed. The e-mail ID of the assessee was earlier monitored by the administrative staff and, consequent to closure of the administrative office, the notices sent to the said e-mail ID went unnoticed. The assessee, therefore, remained unaware of the proceedings and the order passed by the AO. It was only upon receipt of summons from the Department in August, 2025, that the assessee came to know about the order and thereafter consulted a lawyer and tax counsel and filed the appeal. The FAA held that the explanation was not acceptable and did not constitute sufficient cause for condoning the inordinate delay of 785 days. Accordingly, the FAA
4. Aggrieved by the order of the First Appellate Authority (FAA), the assessee is in appeal before the Tribunal. The Ld. AR submitted that the assessee is an individual who was engaged in textile business under the name and style of Sri Gayathri Spinning Mills. Due to continuous losses, the bank loans became NPA and the business was discontinued in December, 2017, resulting in closure of the administrative office. During the year under consideration, the assessee sold immovable properties for Rs.9.29 crores and utilised the sale proceeds for settling the bank dues. It was submitted that, as the assessee had not filed the return of income, the assessment was reopened and the statutory notices were sent to the erstwhile business e-mail ID, which was originally monitored by the administrative staff. Since the business and administrative office had already been closed, the said e-mail ID was no longer monitored and the notices sent through e-mail as well as by post went unnoticed. Consequently, the assessee could not respond to the notices and the reassessment was completed ex-parte u/s.147 r.w.s. 144 r.w.s. 144B of the Act on 16.01.2024. The assessment order was also sent to the same dormant e-mail ID and, therefore, remained unnoticed. The Ld. AR further submitted that the assessee became aware of the reassessment proceedings only upon receipt of summons from the lawyer and, subsequently, consulted various tax counsels regarding the appropriate remedy. Since differing opinions were received, including filing a writ petition or approaching the jurisdictional CIT under section 264, the assessee was initially unsure of the appropriate course of action. Finally, on the advice of a senior counsel, the assessee was advised to file an appeal before the CIT(A) along with a petition for condonation of delay. The Ld. AR further submitted that the assessment order passed by the AO u/s.144 of the Act was also an ex parte order, as the assessee had no knowledge of the statutory notices issued during the course of the assessment proceedings. It was contended that the delay in filing the appeal before the FAA was occasioned by sufficient and bona fide reasons and was neither wilful nor deliberate. The Ld. AR, therefore, prayed that the delay be condoned and the matter be restored to the file of the AO for fresh adjudication after affording the assessee a reasonable opportunity of being heard. The Ld. AR also undertook that the she would fully co-operate with the proceedings and furnish all necessary details and evidences as and when called upon to do so.
5. The Ld.DR supported the orders of the AO & the FAA.
6. We have heard the rival submissions and perused the material the assessee before the FAA was dismissed in limine on account of delay, without adjudicating the issues on merits. We have considered the reasons stated by the assessee in the petition for condonation of delay and the submissions of the Ld. AR. It is an admitted fact that the assessee’s business had been discontinued in December, 2017 and the administrative office was closed. The Ld. AR submitted that the statutory notices as well as the reassessment order were sent to the erstwhile business e-mail ID, which was no longer being monitored. Consequently, the assessee remained unaware of the reassessment proceedings and the order passed by the AO. The Ld. AR further submitted that, in respect of the immovable properties sold during the relevant period, the assessee had already initiated civil proceedings in 2020 seeking cancellation of the sale deeds, alleging that the properties were sold at distress value and that the sale consideration had not been fully received. The assessee became aware of the reassessment proceedings only upon receipt of summons from the Department in August, 2025. Being unaware of the provisions of the Income-tax Act, he immediately approached a lawyer, who advised him to await the outcome of the proceedings relating to cancellation of the sale deeds. Accordingly, the assessee addressed a letter to the JAO seeking the reasons for issuance of the summons. Since no response was received from the JAO, the steps to file the appeal. Considering the totality of the facts and circumstances, particularly the closure of the business and administrative office, the fact that the notices and reassessment order were sent to the dormant e-mail ID, the pending civil proceedings concerning the sale of the immovable properties and the steps taken by the assessee upon becoming aware of the proceedings, we are of the considered view that the delay was occasioned by bonafide circumstances and cannot be attributed to wilful or deliberate negligence. In the interest of substantial justice, we are inclined to condone the delay of 785 days.
7. We further notice that the assessment order was also passed ex-parte for the very same reasons, as the assessee could not respond to the statutory notices issued by the AO. Therefore, in the interest of substantial justice, we set aside the order of the FAA as well as the AO and restore the matter to the file of the AO for denovo adjudication in accordance with law, after affording reasonable opportunity of being heard to the assessee. The assessee is directed to co-operate with the Revenue and furnish all requisite details and evidences in support of its claim and shall not seek unnecessary adjournment. It is ordered accordingly.
ITA No.3609/CHNY/2026
8. The assessee has filed this appeal against the appellate orders confirming the penalty levied by the AO u/s. 270A of the Act. Since, we have already set aside the quantum appeal in ITA No.3608/CHNY/2026 to the files of the AO for fresh adjudication, we deem it appropriate to set aside the penalty order to the files of the AO to decide along with the quantum appeal afresh. It is ordered accordingly.
9. In the result, the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open court on 20 August,2026 at Chennai.
