Case Law Details
S. V. Distilleries Private Limited Vs DCIT/ACIT (ITAT Bangalore)
ITAT Bangalore Sets Aside Dismissal of Appeal as Time-Barred, Remands Matter to CIT(A) for Merits Adjudication
The assessee appealed against the order dated 24.06.2025 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (CIT(A)/NFAC) under Section 250 of the Income-tax Act, 1961 for Assessment Year 2018-19. The grounds of appeal challenged, among other things, the dismissal of the first appeal as barred by limitation, the disallowance of business expenditure of ₹1,02,14,492, disallowance of ₹13,75,271, addition of ₹14,56,51,759 as unexplained cash credit under Section 68 read with Section 115BBE, and levy of interest under Section 234B.
The assessee had filed its return of income on 19.09.2018 declaring a loss of ₹89,54,703. The case was selected for complete scrutiny under CASS on the issue of “Business Loss.” During assessment proceedings, the Assessing Officer observed that although the assessee had stated in its return that it was engaged in manufacturing activities, it subsequently informed the department by letter dated 16.03.2021 that there had been no business activity during the relevant year. Since the assessee had nevertheless claimed business expenditure of ₹1,02,14,492, the Assessing Officer disallowed the entire amount. The Assessing Officer also examined unsecured loans of ₹14,56,51,759 received from related parties. As the assessee did not furnish income-tax returns, bank statements or other evidence to establish the identity, creditworthiness and genuineness of the lenders, the amount was treated as unexplained cash credit under Section 68 read with Section 115BBE. The assessment under Section 143(3) was completed on a total income of ₹14,69,11,548 as against the returned loss.
The assessee challenged the assessment before the CIT(A)/NFAC. However, the CIT(A)/NFAC dismissed the appeal in limine, observing that Form No. 35 had been filed on 06.04.2022 against the assessment order dated 26.04.2021. After excluding the COVID-19 period from 15.03.2020 to 28.02.2022, the CIT(A)/NFAC held that the appeal had been filed with a delay of 36 days. It further observed that the assessee had neither sought condonation of delay in Form No. 35 nor shown sufficient cause under Section 249(3) of the Act read with Section 5 of the Limitation Act, and therefore declined to admit the appeal on merits.
Before the Tribunal, the assessee relied upon an affidavit dated 13.08.2025 filed by its Director stating that, on the advice of its tax consultant, it had genuinely believed that where the limitation period expired during the period from 15.03.2020 to 28.02.2022, an additional period of 90 days from 01.03.2022 was available pursuant to the Supreme Court’s order in the suo motu proceedings relating to extension of limitation. On that understanding, the assessee believed there was no delay and accordingly stated “No” against the query regarding delay in Form No. 35. The Revenue supported the order of the CIT(A)/NFAC.
The Tribunal examined the record and observed that the CIT(A)/NFAC had ignored the directions issued by the Supreme Court in Miscellaneous Application Nos. 21/2022 and 665/2021 in SMW (C) No. 3/2020, reported in (2022) 441 ITR 722 (SC). Referring to paragraph III of the Supreme Court’s order, the Tribunal noted that where the limitation period would have expired between 15.03.2020 and 28.02.2022, every person was entitled to a limitation period of 90 days from 01.03.2022, subject to the longer balance period being available where applicable.
Applying those directions, the Tribunal held that the limitation period for filing the appeal before the CIT(A)/NFAC had expired during the specified period and that the assessee, having filed its appeal on 06.04.2022, had filed it within the extended period of 90 days commencing from 01.03.2022. Consequently, the Tribunal held that there was no delay in filing the appeal and found the CIT(A)/NFAC’s conclusion that the appeal was delayed by 36 days to be illegal and bad in law. It also endorsed the assessee’s declaration in Form No. 35 that there was no delay and held that, since no delay existed, there was no occasion to seek condonation or furnish an explanation for delay.
Since the CIT(A)/NFAC had dismissed the appeal solely on the ground of limitation without examining the issues on merits, the Tribunal set aside that order and remitted all the issues to the file of the CIT(A)/NFAC for fresh adjudication in accordance with law after granting the assessee a reasonable opportunity of being heard. The assessee was also directed to produce all relevant documents and records in support of its claims. The appeal was partly allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 24/06/2025 vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1077728107(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2018-19.
2. The assessee has raised the following grounds of appeal:-
1. That on facts and circumstances of the case and in law, the Order u/s 143(3)rws14413 ot the Income-tax Act, 1961 (‘Act’) is had in law;
2. That on facts ittrid circumstances of the case and in law, the Commissioner ot Income-tax Appeals/ NTAk erred in dismissing the appeal of the Appellant as being barred by limitation despite the appeal being tiled within the limitation period as stipulated by Hon’ble Supreme Court in Miscellaneous Application Nos.2 I/2022 and 665/2021 in SMW (C) No.3/2020 (Pam 5 (111);
3. That on the facts and circumstances of the case, the Ld.AO/NFACerred in disallowing the entile expenditure incurred by the Appellant during the year ended March 31, 21/18 amounting to Rs. 1,02,14,492for the reason that Appellant had not carried out any business activity, ignoring the fact that Appellant had not closed down the business and that it continued to maintain its Office, infrastructure, paid electricity charges and continued to employ and pay salaries to critical staff;
4. That on the facts and circumstances of the case, the Ld.AO/NFAC erred in disallowing expenditure incurred by the Appellant during the year ended March 31, 2018 amounting to Rs. 13,75,271 ignoring the fact that Appellant had disallowed the same in the income-tax return;
5. That on the facts and circumstances of the case, the LI:\ 0/ NFAC erred in carrying out an Addition on account of unexplained cash credit amounting to Rs.14,56,51,759 under Section 68rws 115BBE of the Act;
6. That at on the facts and circumstances ot the case, the I d AO/ NFAC have erred in levy ot interest under Section 234B of the Act.
7. The Appellant craves leave to add, amend, alter, vary and / or withdraw any or all the above grounds of appeal.
Each of the Grounds are without prejudice to each other
3. Brief facts of the case are that the assessee company filed its return of income on 19/09/2018 by declaring total current year loss of (Rs.89,54,703/-). Thereafter, the case was selected for complete scrutiny under CASS on the issue of “Business Loss”. Accordingly, the notice u/s. 143(2) of the Act as well as notices u/s. 142(1) of the Act along with detailed questionnaire were sent to the assessee through ITBA Portal. In response to said notices, the assessee filed the details which were verified carefully with reference to issue under scrutiny.
3.1 During the course of assessment proceedings, the AO observed that although the assessee in its return of income had mentioned to be engaged in business of other manufacturing activity, however, the assessee vide letter dated 16/03/2021 stated to have no business activities during the year under consideration. The AO observed that the assessee had claimed business expenses amounting to Rs.1,02,14,492/- in its profit and loss account. The AO held that as the assessee company itself accepted that there was no business activity during the year under consideration, however claimed business expenses of Rs.1,02,14,492/- in its profit & loss account, and accordingly disallowed the entire business expenditure of Rs.1,02,14,492/- and added back the same to the total income of the assessee.
3.2 Further, the assessee was asked to furnish the details of loan taken during the year under consideration. In response, the assessee company furnished its reply and submitted that the assessee company had taken unsecured loan of Rs.14,56,51,759/-from the related parties. The AO further asked the assessee company to furnish ITR, Bank statement of lender to prove identity, creditworthiness and genuineness of the loan creditors. However, the assessee did not submit any evidences. In the absence of documentary evidences, the AO held that the assessee had not fully discharged its onus to prove the creditworthiness of the parties from whom the loans have been taken. Accordingly, a sum of Rs.14,56,51,759/- accepted under the grab of unsecured loan was treated as income of the assessee from undisclosed sources u/s. 68 of the Act r.w.s 115BBE of the Act. Thus, the AO completed the assessment proceedings on a total assessed income of Rs.14,69,11,548/- against the returned loss of (Rs.89,54,703/-).
4. Aggrieved by the aforesaid order of the AO dated 26/04/2021 passed u/s. 143(3) of the Act, the assessee preferred an appeal before the ld.CIT(A)/NFAC.
5. The ld. CIT(A)/NFAC dismissed the appeal of the assessee by observing that the Form No.35 was filed on 06/04/2022, whereas the date of the order is 26/04/2021. Thus, leaving the exempted Covid pandemic period from 15/03/2020 to 28/02/2022, the appeal in present case has been filed after delay of 36 days. Further, the assessee has also not sought any condonation of delay in Form 35. The ld. CIT(A)/NFAC after being satisfied that the appeal has not been presented within the period prescribed u/s 249(2) of the Act, i.e. 30 days from the date of service of the notice of demand relating to the assessment year and also being satisfied that the assessee has not able to show any “sufficient cause” for not presenting the appeal within the said prescribed period , within the meaning of section 249(3) of the Act read with section 5 of the limitation Act, did not admit the appeal for adjudication on merits & dismissed in limine.
6. Again aggrieved by the order of the ld. CIT(A)/NFAC dated 24/06/2025, the assessee company has filed the present appeal before this Tribunal. Before us, the Director of the assessee company has also filed an Affidavit dated 13/08/2025 sworn before the notary public stating that the assessee company as advised by the tax consultant was under the genuine belief and understanding that as the assessee’s limitation period for filing of appeal was expiring during the period between 15/03/2020 to 28/02/2022, further time of 90 days was available from 01/03/2022 to the assessee and thereby the assessee had filed the appeal by 06/04/2022, which is within the 90 days period. Thus, considering the above understanding, the assessee was of the belief that there is no delay in the filing of Appeal.
7. Before us, the ld. A.R. of the assessee reiterated the same as stated by the Director in the Affidavit dated 13/08/2025 and vehemently submitted that the assessee was under an honest and bonafide believe that as the assessee’s limitation period for filing the appeal before the ld.CIT(A)/NFAC was expiring during the period 15/03/2020 till 28/02/2022, the assessee will get further time of 90 days from 01/03/2022 to file the appeal before the ld.CIT(A)/NFAC and accordingly the assessee had filed the appeal on 06/04/2022 which is within the 90 days period. Considering the above understanding, the assessee was of the genuine believe that there is no delay in filing of appeal and accordingly in Sl. No. 14 of Form No.35 also, the assessee in response to whether there is delay in filing the appeal, had stated ” NO”. The ld. A.R. of the assessee accordingly prayed that as there is no delay in filing the appeal before the ld. CIT(A)/NFAC and considering the fact that ld.CIT(A)/NFAC had not considered the appeal on merits, the case may be remitted back to the file of ld.CIT(A)/NFAC in the interest of justice & fairplay.
8. The ld. D.R. on the other hand supported the order of the ld.CIT(A)/NFAC.
9. We have heard the rival submissions and perused the material available on record. On perusal of Form No.35, we observed that at Sl. No. 14, the assessee in response to whether there is delay in filing the appeal has categorically mentioned as “NO”. Undisputedly, the assessment order u/s. 143(3) of the Act was passed on 26/04/2021. On perusal of the order of ld. CIT(A)/NFAC, we noticed that the appeal was instituted by assessee on 06/04/2022 against the assessment order dated 26/04/2021. The ld. CIT(A)/NFAC held that leaving the exempted Covid pandemic period from 15/03/2020 to 28/02/2022, the appeal in present case has been filed after delay of 36 days. The ld. CIT(A)/NFAC further held that assessee had not been able to show any “sufficient cause” for not presenting the appeal within the prescribed period u/s. 249(3) of the Act r.w.s section 5 of the Limitation Act and accordingly did not admit the appeal for adjudication on merits & dismissed the appeal in limine. Before us, the Director of the assessee company by way of an Affidavit dated 13/08/2025 as well as the ld. A.R. of the assessee submitted that the assessee was under an honest and bonafide believe that as the assessee’s limitation period for filing the appeal before the ld.CIT(A)/NFAC was expiring during the period 15/03/2020 till 28/02/2022, the assessee will get further time of 90 days from 01/03/2022 to file the appeal before the ld.CIT(A)/NFAC and accordingly the assessee had filed the appeal on 06/04/2022 which is within the 90 days period. Considering the above understanding the assessee was of the believe that there is no delay in filing of appeal and accordingly in Form No.35 also in response to whether there is delay in filing the appeal, the assessee had categorically stated ” NO”.
9.1 We are of the considered opinion that the ld.CIT(A)/NFAC in holding that the assessee filed the appeal after delay of 36 days had completely ignored the directions of the order of the Hon’ble Supreme Court in suo motu cognizance for extension of limitation as reported in (SC)(2022) 441 ITR 722 wherein the Apex Court directed as under-
“5. Taking into consideration the arguments advanced by learned counsel and the impact of the surge of the virus on public health and adversities faced by litigants in the prevailing conditions, we deem it appropriate to dispose of the M.A. No. 21 of 2022 with the following directions :–
I. The Order, dated 23-3-2020 is restored and in continuation of the subsequent orders dated 8-3-2021, 27-4-2021 and 23-9-2021, it is directed that the period from 15-3-2020 till 28-2-2022 shall stand excluded for the purposes of limitation as may be prescribed under any general or special laws in respect of all judicial or quasi[1]judicial proceedings.
II. Consequently, the balance period of limitation remaining as on 3-10-2021, if any, shall become available with effect from 1-3-2022.
III. In cases where the limitation would have expired during the period between 15-3-2020 till 28-2-2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 1-3-2022. In the event the actual balance period of limitation remaining, with effect from 1-32022 is greater than 90 days, that longer period shall apply.
IV. It is further clarified that the period from 15-3-2020 till 28-2-2022 shall also stand excluded in computing the periods prescribed under sections 23 (4) and 29A of the Arbitration and Conciliation Act, 1996, section 12A of the Commercial Courts Act, 2015 and provisos (b) and (c) of section 138 of the Negotiable Instruments Act, 1881 and any other laws, which prescribe period(s) of limitation for instituting proceedings, outer limits (within which the court or tribunal can condone delay) and termination of proceedings.”
Thus, the Hon’ble Supreme Court of India in paragraph III as above has categorically stated that in cases where the limitation would have expired during the period between 15/03/2020 till 28/02/2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01/03/2022. Further, in the event the actual balance period of limitation remaining, w.e.f. 01/03/2022 is greater than 90 days, that longer period shall apply. Thus, in our considered opinion, the paragraph III of the above Apex Court order dated 10/01/2022 categorically talks about the cases where the limitation period would have expired during the period between 15/03/2020 till 28/02/2022.
9.2 In the present case, undisputedly the limitation period for filing the appeal before the ld. CIT(A)/NFAC had expired during the period between 15/03/2020 till 28/02/2022 and accordingly as per the above direction, the assessee shall have a limitation period of 90 days from 01/03/2022. We take a note of the fact that the assessee had filed the appeal before the ld. CIT(A)/NFAC on 06/04/2022 & therefore in view of the aforesaid directions, there is no delay in filing the appeal before the ld. CIT(A)/NFAC. In view of the above, the observation of the ld. CIT(A)/NFAC that the appeal is found to have been filed delayed by 36 days is illegal & bad-in law. In holding so, we also endorse the action of the assessee in giving declaration in form 35 by stating in Sl. No. 14 of form 35 that there is no delay in filing the appeal. In our considered view when there is no delay in filing the appeal in view of the above directions of the Hon’ble Apex court in Order dated 10/01/2022, then question of filing the explanation for the delay or request for condonation does not arise at all in the case of the assessee.
9.3 Further, now having held that there was no delay in filing the appeal before the ld. CIT(A)/NFAC and considering the fact that the ld. CIT(A)/NFAC dismissed the appeal in limine, we deemed it fit and proper to remit the entire issues in dispute to the file of ld.CIT(A)/NFAC to decide on merits of the case afresh in accordance with law. Needless to say, reasonable opportunity of being heard must be granted to the assessee. The assessee is also directed to produce all the relevant documents/record to substantiate its claim. It is ordered accordingly.
10. In the result, the appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 29th June, 2026
Author Bio
