Finest Fit Impex Private Limited vs ITO, Income Tax Department

PER RAMIT KOCHAR, AM:

This appeal is filed by the assessee against appellate order passed by learned Commissioner of Income Tax (Appeals), NFAC, Delhi [CIT(A), in short] dated 10.07.2025 (DIN & Order No. ITBA/NFAC/S/250/2025-26/1078352397(1)) , which appeal in turn has arisen from the assessment order dated 30.12.2019 passed by the AO u/s 143(3) of the Income Tax Act, 1961, for assessment year 2017-18 (DIN & Order No.ITBA/AST/S/143(3)/2019-20/1023435593(1)).

At the outset, it is observed that this appeal is filed belatedly by the assessee by 134 days beyond the time stipulated u/s 253(3) of the 1961 Act. The assessee has filed application for condonation of delay supported by an affidavit dated 07.02.2026 executd by its Director Shri Inderpal Singh, in which it is stated that the appellate order dated 10.07.2025 passed by ld. CIT(A) came to knowledge of the assessee only on 31.01.2026. The assessee has filed an affidavit dated 07.02.2016 executed by its Director Shri Inderpal Singh to that effect, which is placed on record in file. It is averred in the affidavit that he is 60 years of age and having little or no knowledge of tax laws nor of the Income Tax Portal. It is further averred by said Director in the affidavit that the he is Director of the assessee company and since passing of assessment order till pendency of appeal with ld. CIT(A), he was struggling with immense financial strain and losses. It is averred that the employees and accountant were laid off. The business was discontinued. It is further averred that bank accounts were declared NPA. It is averred that due to financial strain and losses led to delay in filing of this appeal belatedly with the Tribunal. It is prayed that delay of 134 days in filing this appeal belatedly with Tribunal be condoned. After considering the entire materials on record and hearing the arguments. , we condone the aforesaid delay in the interest of justice, and proceed to adjudicate this appeal on merits. When substantial justice is pitted against technicalities, the courts will lean towards advance of substantial justice, unless malice is at writ large or there is gross negligence. We do not see any malice on the part of the assessee or gross negligence on the part of the assessee in filing this appeal belatedly by 134 days beyond the time prescribed u/s 253(3) of the 1961 Act, as the assessee is not likely to gain anything by filing this appeal belatedly by 134 days beyond the time prescribed u/s 253(3) of the 1961 Act. Reliance is placed on judgment and order of Hon’ble Supreme Court in the case of Collector, Land Acquisition, Anantnag v. Mst. Katiji & Ors. 1987 (2) SCC 107.

Brief facts of the case are that the assessee filed its return of income for the impugned assessment year u/s 139 of the 1961 Act, declaring income of Rs. 5,27,536/-. The case of the assessee was selected for framing scrutiny assessment under CASS. Statutory Notices u/s 143(2) ,142(1) of the 1961 Act and SCN were issued by the AO to the assessee, from time to time, during assessment proceedings, details of which are recorded in assessment proceedings. The assessee participated in assessment proceedings. It was observed by the AO during assessment proceedings that the assessee has deposited huge amount of cash in its bank accounts during demonetization period i.e. from 09.11.2016 to 31.12.2016 amounting to Rs. 55,49,000/- . Based on AIR information, notice u/s 133(6) of the 1961 Act was issued by the AO to UCO Bank requiring the bank to furnish bank statements for the period from 01.04.2016 to 31.12.2017 along with copy of KYC form. The UCO bank furnished the requisite details called for by the AO. The assessee submitted details of monthwise cash sales and cash deposits during the period from 01.04.2016 to 08.11.2016, and explanation was sought to be made by the assessee that cash was deposited in the bank from cash withdrawal from its bank accounts. The explanation sought to be made by the assessee were that there are no cash sales, hence cash deposited was from cash withdrawals from its bank account from time to time. It was submitted that the assessee is in export business and hence huge amount of cash is required to be kept for sudden demand of custom duty. The cash was kept to meet emergency expenses. Due to demonetization, the same was deposited back into bank accounts. The AO rejected the contentions of the assessee and observed that the assessee is in export business which does not require keeping huge cash in hand as no wise businessmen will keep such huge cash in hand idle in office/home. As per AO, the assessee deposited cash in bank which is undisclosed income of the assessee. The submissions are merely afterthought to justify its unexplained cash. As per AO, the assessee having failed to justify sources of cash of Rs. 55,49,000/- , the same remained unexplained/unverified. Thus, since the assessee failed to justify the sources of cash of Rs. 55,49,000/- , therefore cash deposit of Rs. 55,49,000/- in old SBN during demonetization period was held by the AO to unexplained/unverified , and an addition of Rs. 55,49,000/- was made by the AO u/s 68 r.w.s. 115BBE of the 1961 Act vide assessment order dated 30.12.2019 passed by the AO u/s 143(3) of the 1961 Act, wherein income assessed was Rs. 60,76,536/- as against returned income of Rs. 5,27,536/-.

Aggrieved, the assessee filed first appeal with ld. CIT(A). The said appeal was filed by the assessee before ld. CIT(A) belatedly by 295 days beyond the time stipulated u/s 249(2) of the 1961 Act. The assessee filed affidavit dated 03.11.2022 through its Director Shri Taranpal Wadhwan stating that the delay was primarily attributable to the impact of Covid 19 disease and the demise of CA of the assessee in January, 2020 due to Corona Virus disease. The assessee also stated in the affidavit that there are other circumstances such as closure of registered office, resignation of employees and consultants owing to non-payment of salaries, absence of business activity, lack of expertise in tax-matters, arrest of father of the Director namely Shri Inderpal Singh by DRI and his detention for 60 days, attachment of immovable properties, declaration of bank loan accounts as NPA , mental distress and deteriorating health including he also being infected by Covid 19 on September, 2020, which led to delay in filing appeal with ld. CIT(A), and prayers were made to condone the delay. Reliance was placed on judgment and order of Hon’ble Supreme Court in the case of Collector , Land Acquisition v. Mst. Katiji & Ors. 167 ITR 471(SC) , and other judgments and orders were also relied upon by the assessee. The ld. CIT(A) refused to condone the delay in filing this appeal belatedly by the assessee as the assessee failed to demonstrate sufficient cause backed with cogent evidences for filing the appeal belatedly with ld. CIT(A) beyond the time prescribed u/s 249(2) of the 1961 Act. Thus, the appeal of the assessee stood dismissed by the ld.CIT(A) as ld. CIT(A) refused to condone the delay in filing the appeal belatedly with ld. CIT(A) by the assessee by 295 days beyond the time stipulated u/s 249(2) of the 1961 Act, and the assessee failed to demonstrate sufficient cause supported by evidence as is required u/s 249(3) of the 1961 Act.

Aggrieved, the assessee has now filed second appeal with the Tribunal. The Ld. Counsel for the assessee submitted that the assessee filed appeal belatedly with ld. CIT(A) mainly due to the financial strains and losses suffered by the assessee and its Directors. All the companies ,firms and concerns in which the Directors have interest were either closed or suffering recurring losses, facing huge bank liabilities and other liabilities and dues and there has been no business activities for last several years. The employees and consultants have left the offices due to their inability to pay their salaries etc. The financial conditions of Directors deteriorated significantly , leaving them unable to afford accountant or a chartered accountant. It was submitted that the existing CA Shri Narendra Pandey also expired in January 2020. The death certificate is now enclosed of Shri Narendra Pandey, CA ( MCD death Regn no. MCDOLIR-3220-005065926 dated 20.06.2020 (date of death 17.01.2020)) .It was also submitted that the father of the Director of the assessee, Shri Inderpal Singh has to face proceedings before Hon’ble NCLT on daily basis . It was also submitted that Shri Inderpal Singh was shareholder of the assessee, and he faced criminal proceedings also wherein he was arrested and sent to Judicial Custody. It was also submitted that his health also deteriorated. The father of Shri Inderpal Singh expired after prolonged illness, which also impacted their ability to manage affairs. The details of medical records and death certificate of father of the Shri Inderpal Singh i.e Shri Harmohinder Singh Wadhawan is now filed ( date of death 19.11.2024 / MCD Death Registration No. MCDOLIR-0224-1221113635518 dated 23.11.2024) , which is placed on record in file in PB/page 3-11. It was submitted that delay be condoned as Directors want to pursue its appeal / matter seriously. The affidavit was also filed before ld. CIT(A). The ld. CIT(A) did not condone the delay and dismiss the appeal of the assessee being un-admitted. It was submitted that the prejudice has been caused to the assessee by dismissal of the appeal by Ld. CIT(A). It is stated by Ld. Counsel for the assessee that if one more opportunity is granted to the assessee, and matter is restored back to the file of Ld. CIT(A), the assessee will make due compliance and file all necessary details before the Ld. CIT(A). Thus, the Ld. Counsel for the assessee prayed that the matter may be restored back to the file of the Ld. CIT(A) for fresh adjudication of the appeal of the assessee on merits in accordance with law.

We have considered the contentions of both the parties, and perused the materials on record. Brief facts of the case are enumerated in the preceding para’s of this order , and are not repeated . The assessee filed appeal with ld. CIT(A) belatedly by 295 days beyond the time stipulated u/s 249(2) of the 1961 Act. The assessee submitted in its condonation application before ld. CIT(A) that the Directors are not aware of technicalities of the complex income-tax laws. All the companies , firms and concerns in which Directors have interest are either closed or suffering recurring losses, facing huge bank liabilities and other liabilities and dues and there has been no business activities for last several years. The employees and consultants have left the offices due to their inability to pay their salaries etc. The financial conditions of Directors deteriorated significantly , leaving them unable to afford accountant or a chartered accountant.It was also submitted that the Shri Inderpal Singh has to face proceedings before Hon’ble NCLT on daily basis . It was submitted that he has also to face criminal proceedings and was arrested and send to Judicial Custody. It was also submitted that his health also deteriorated. The father of Shri Inderpal Singh namely Shri Harmohinder Singh Wadhawan expired after prolonged illness, which also impacted their ability to manage affairs. It was submitted that now the Directors want to pursue its appeal /matter seriously. The affidavit was also filed before ld. CIT(A) and prayers were made to condone the delay in filing the appeal belatedly by 295 days. Reliance was placed on judgment and order of Hon’ble Supreme Court in the case of Collector , Land Acquisition v. Mst. Katiji & Ors. 167 ITR 471(SC) , and other judgments and orders. The assessee has now filed death certificate of CA Shri Narendra Pandey as well death certificate of father of Director Shri Inderpal Singh along with his Medical records. The some of legal proceedings with respect to loans etc are also now filed (placed in paper book), to buttress the financial difficulties faced. Some of the details of criminal proceedings launched against Shri Inderpal Singh father of Shri Tarampal Wadhwan are also filed. The ld. CIT(A) refused to condone the delay and dismissed the appeal of the assessee. On consideration of material on record and in the interest of justice, we condone the delay in filing the appeal belatedly by 295 days by assessee with ld. CIT(A) beyond the time stipulated u/s 249(2) of the 1961 Act , as in our considered view sufficient cause is shown by the assessee. Keeping in view the entire factual matrix as culled out above in the preceding para’s of this order, it will be fair to both the parties as well in the interest of justice, that the appellate order of ld. CIT(Appeals) be set aside and the matter be remanded back to the file of ld. CIT(Appeals) for fresh adjudication after giving proper opportunity of being heard to both the parties w.r.t. the issues arising in the appeal.The assessee is directed to comply with the notice issued by ld. CIT(Appeals) during the appellate proceedings in set aside remand proceedings, otherwise ld. CIT(A) shall be free to decide the appeal ex-parte on merits in accordance with law, after complying with provisions of Section 250(6) of the 1961 Act (Now Section 359(4) of the 2025 Act). We clarify that we have not commented on merits of the issues. Thus, the appellate order passed by ld. CIT(A) is set aside and matter is restored back to the file of ld. CIT(A) for fresh adjudication. The appeal of the assessee is allowed for statistical purposes. We order accordingly.

The Appeal of the assessee in ITA no. 1475/Del/2026 for assessment year 2017-18 is allowed for statistical purposes. We order accordingly.