Mansha Textiles P. Ltd. Vs ITO (ITAT Ahmedabad)
When Fraud Fights Technicality, Justice Wins – When Ex-Directors Looted Rent, CIT(A) Shut the Door- ITAT Condones 1012-Day Delay
The Tribunal condoned a significant 1012-day delay in filing an appeal, accepting that ongoing serious corporate disputes and fraud by former directors constituted “sufficient cause.” Applying the principle of liberal condonation for substantial justice, the ITAT ruled that the CIT(A) erred by dismissing the appeal on technical grounds of delay. The Tribunal found the delay was genuinely caused by pending Company Law Board (CLB) proceedings and a bona fide belief that issues would be settled internally. ITAT emphasized the judicial principle of consistency, following its own earlier orders for the same assessee on identical facts of director disputes and fraud. The 1012-day delay was condoned, and the CIT(A) was directed to hear the tax additions on merits rather than upholding them technically.The Tribunal accepted documentary evidence, including a director’s affidavit and Company Law Board (CLB) orders, as credible proof of sufficient cause for the inordinate delay. The case was restored, ensuring the assessee gets an opportunity to contest the 68 and House Property income additions.
Mansha Textiles Pvt. Ltd., a textile manufacturer, filed its return declaring income of ₹5.75 lakh. During scrutiny, AO noticed that Form 26AS reflected rental receipts of ₹57.57 lakh with TDS of ₹5.75 lakh, while Assessee had credited only ₹5.75 lakh in its books. On inquiry, Assessee explained that former directors fraudulently took control of its Noida property, opened an unauthorized Axis Bank account in the company’s name, collected rent from tenants, & siphoned off the money. Assessee claimed the amounts never reached it & referenced notes in the balance sheet disclosing a fraud of ₹2.30 crore across multiple years.
