ISR Clothing Private Limited vs ITO, Ward 12(1)

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 15.10.2025 (DIN & Order No. ITBA/NFAC/S/250/2025-26/1081795440(1)) , which appeal in turn has arisen from the assessment order dated 02.03.2024 passed by the AO u/s 147 r.w.s. 144 read with Section 144B of the Income Tax Act, 1961, for assessment year 2019-20(DIN & Order No.ITBA/AST/S/147/2023-24/1061870718(1)).

At the outset, it is observed that this appeal is filed belatedly by the assessee by 41 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, in which it is stated that the appellate order dated 15.10.2025 passed by ld. CIT(A) was received by the assessee only on 31.01.2026, and until then the assessee was not having any knowledge of the appellate order passed by ld. CIT(A). 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 41 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 41 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 41 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(1) of the 1961 Act, declaring income of Rs. 2,22,640/-. The information was received in accordance with the Risk Management Strategy formulated by CBDT, on insight portal under the head High Risk CRI/VRU information through DDIT/ADIT(Inv.) 6(4), New Delhi, that the assessee has made transactions with suspicious/bogus entities, and the income of the assessee has escaped assessment as the assessee has not disclosed full income. The details are as under:

Aggrieved, the assessee filed first appeal with ld. CIT(A). The said appeal was filed by the assessee before ld. CIT(A) belatedly by 448 days beyond the time stipulated u/s 249(2) of the 1961 Act. The assessee submitted in its condonation application filed before ld. CIT(A) that the Directors are not much educated and are not aware of technicalities of the complex income-tax laws. All the companies and firm 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. . It was further stated that the financial conditions of Directors deteriorated significantly , leaving them unable to afford accountant or a chartered accountant.It was also submitted that the Director Shri Inderpal Singh has to face proceedings before Hon’ble NCLT on daily basis . 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. It was submitted that now the Directors want to pursue its appeal /matter seriously. The affidavit was also filed by the assessee before ld. CIT(A) , and prayers were made to condone the delay in filing the appeal belatedly by 448 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 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. During appellate proceedings, the Ld. CIT(A) issued as many as four notices to the assessee(details recorded in appellate order passed by ld. CIT(A)) , but there was no compliance by the assessee. The Ld. CIT(A) also dismissed the appeal of the assessee ex-parte without discussing the issues arising out of the appeal on merits, on the ground of non prosecution of its appeal by the assessee and that the assessee has not filed any justification/evidence to controvert the findings made by the AO while making additions despite several opportunities given to the assessee.

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 Director Shri Inderpal Singh has to face proceedings before Hon’ble NCLT on daily basis . 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 Director of the assessee 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. It was submitted that the assessee could not file reply during the course of appellate proceedings mainly for the aforestated reasons. The appeal was dismissed by Ld. CIT(A). 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 448 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 much educated and 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 Director Shri Inderpal Singh has to face proceedings before Hon’ble NCLT on daily basis . 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 448 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. The ld. CIT(A) refused to condone the delay. We have observed that even after refusing to condone the appeal and treating appeal un-admitted, the ld. CIT(A) proceeded to dismiss appeal on the ground of non-prosecution ostensibly on merits by upholding the assessment order. We are of the considered view that once ld. CIT(A) refused to condone the appeal and dismiss the appeal being un-admitted, he ought not to have proceeded to adjudicate appeal ostensibly on merits. On consideration of material on record and in the interest of justice, we condone the delay in filing the appeal belatedly by 448 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. Moreover, The appellate order passed by ld. CIT(A) is a non speaking order passed ex-parte without deciding the issue arising in the appeal on merits. The ld. CIT(A) is required and obligated to pass appellate order in compliance with the provisions of section 250(6) of the 1961 Act (Now Section 359(4) of the Income-tax Act, 2025) , as ld. CIT(A) is required to pass reasoned and speaking order on merits in accordance with law. Reference is drawn to provisions of Section 250(6) of the 1961 Act (Now Section 359(4) of the Income-tax Act, 2025), wherein ld. CIT(A) has to state point for determination, his decision and reasons thereof. The ld. CIT(A) even did not made any enquiry as is contemplated u/s 250(4) of the 1961 Act (Now Section 359(3)(b) of the 2025 Act), and not even assessment records were called for by ld. CIT(A). The appellate order passed by ld. CIT(A) is subject to further appeal with ITAT u/s 253 (Now Section 362(1) of the 2025 Act). The appellate order passed by ITAT is subject to further appeal before Hon’ble High Court u/s 260A of the 1961 Act (Now Section 365 of the 2025 Act). The judgment and order passed by Hon’ble High Court is also subject to challenge before Hon’ble Supreme Court. Thus, the appellate order passed by ld. CIT(A) is not a final order, as it is subject to challenge before higher appellate authority. Thus, Reasons which weighed in the minds of the adjudicating authority while adjudicating appeal on merits of the issues are cardinal as the higher appellate authority can then adjudicate appeal on the issues arising in appeal before them, based on decision and reasoning of ld. CIT(A) in deciding the issues. If the ld. CIT(A) simply dismiss the appeal merely because the assessee did not comply with the notices issued by ld. CIT(A) in limine without adjudicating issues arising in the appeal on merits, such order is not sustainable in the eyes of law keeping in view provisions of Section 250(6) of the 1961 Act (Now Section 359(4) of the Income-tax Act, 2025) , and also higher appellate authorities will be deprived to see what weighed in the mind of the ld. CIT(A) while adjudicating appeal as it will be an order passed without reasoning on the issues on merits . The appellate order of the CIT(A) is clearly in violation of section 250(6) of the Act (Now Section 359(4) of the Income-tax Act, 2025), and liable to be set aside. Merely stating the assessment order passed by AO is upheld, and that the assessee has not submitted details/documents/evidences before ld. CIT(A) is not sufficient. The ld. CIT(A) is not toothless as his powers are co-terminus with the powers of the AO, which even includes power of enhancement. It is equally true that the assessee also did not complied with the notices issued by ld. CIT(A) and did not file the requisite details/documents to support its contentions. Thus, the assessee is equally responsible for its woes as the assessee did not comply with the notices issued by ld. CIT(A). 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. 1477/Del/2026 for assessment year 2019-20 is allowed for statistical purposes. We order accordingly.