ORDER
Anikesh Banerjee, Judicial Member.- The instant appeal of the assessee filed against the order of the NFAC, Delhi [for brevity the “Ld. CIT(A)”], order passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for Assessment Year 2020-21, date of order 08.08.2025. The impugned order emanated from the order of the Assessment Unit Income Tax Department (for brevity the ‘Ld. AO’) order passed under section 143(3) r.w.s. 144B of the Act date of order 20.08.2022.
2. The brief facts of the case are that the assessee filed the return by declaring total income amount to Rs.12,89,600/- and carry-forwarded the loss from house property amounting to Rs.17,41,996/- arising on account of interest on borrowed capital. During the assessment proceeding the Ld. AO restricted the carry-forwarded loss amount to Rs.9,64,387/- by disallowing 50% of the interest solely of assumption that property and loan were jointly held despite the fact that entire loan repayment and interest borne by the assessee himself. The Ld. AR narrated that the legal advisor of the assessee failed to inform the assessee about the passing of assessment order and accordingly, the assessee has no knowledge about the adversity of the order of Ld. AO. Finally the carry-forwarded loss was disallowed amount to Rs.7,77,609/-. The aggrieved assessee filed an appeal before the Ld. CIT(A) with a delay of 524 days. The Ld. AR contended that the explanation for delay in filing appeal was filed by the assessee by an affidavit in a very cryptic manner. But the Ld. CIT(A) rejected the appeal of the assessee on ground of limitation. Being aggrieved assessee filed an appeal before us.
3. The Ld. AR contended that the assessee was completely unaware of the assessment proceedings conducted by the Ld. AO. It was further submitted that the assessee was entirely dependent upon his Chartered Accountant, and consequently, the delay in filing the appeal had occurred. The assessee filed an affidavit before the Bench explaining the reasons for the delay in filing the appeal before the Ld. CIT(A). The said notarized affidavit was duly executed by the assessee on 16.05.2026. The relevant paragraphs of the said notarized affidavit are reproduced below:
“3. That I do not maintain a dedicated accounts or finance team and have, at all relevant times, relied upon qualified practising Chartered Accountants for handling my tax compliances, income tax filings, and related proceedings before the Income Tax Department.
4. That for the relevant Assessment Year (AY) 2020-21, I had engaged Chartered Accountant Ms. Harisha Shetty, bearing membership no. – for filing of my Income Tax Return and for handling related income tax matters and proceedings on my behalf.
5. That while filing the Income Tax Return for the aforesaid Assessment Year, the e-mail address (prapthavi shetty@rediffmail.com), address at 1102, Nisha Residency, LT Road No. 5, Off. M G Road, Goregaon West and contact details +91 9082452305 of CA Harisha Shetty were updated on the Income Tax Portal for communication and correspondence purposes.
6. That the abovementioned email address and phone number do not belong to me and were exclusively that of my authorised consultant;
7. That subsequently the case was selected for scrutiny assessment and notices, including notice issued under section 143(2) of the Income-tax Act, 1961, along with subsequent notices and communications, were issued by the Income Tax Department on her registered e-mail address.
8. That I was not personally aware of the aforesaid notices and subsequent assessment proceedings since the communications from the Department were received directly on the email address of the consultant and responded directly by her without my knowledge.
9. That due to lack of communication and non-intimation regarding the status of the assessment proceedings by CA Harisha Shetty, I remained under the bona fide belief that the matter was being appropriately handled and that no adverse assessment order had been passed or demand had arisen.
10. That thereafter, I filed my income tax return for AY 2023-24 on 31 July 2023 and was expecting a refund of INR 1,26,600/- for the same.
11. That upon not receiving the refund due, I approached Ms. Harisha Shetty for clarification and sought explanation regarding non-receipt of demand for AY 2023-24 of INR 1,26,600/- from CA Harisha Shetty.
12. That as I did not receive any satisfactory clarification regarding the said outstanding demands and non-receipt of refund, I approached another Chartered Accountant, namely Mr. Nimesh Khanna, in January 2024 for independent verification of my income tax records and proceedings.
13. That I was explained by CA Nimesh Khanna that upon verification of details appearing on the income tax portal, it was discovered that an assessment order had been passed for AY 202021 wherein certain losses/claims had been disallowed and tax credit was denied resulting in tax demand.
14. That this was the first occasion on which I became aware of the existence of the said assessment order and the consequential demand raised against me.
15. That I was explained by CA Nimesh Khanna that the said issue could be resolved only through filing of an appeal before Commissioner of Income-tax (Appeals);
16. That upon becoming aware of the said assessment order and suggested next steps, I took prompt steps to obtain necessary documents, seek professional advice, and file an appeal before the Learned Commissioner of Income Tax (Appeals).
17. That on being apprised of the lapses by my earlier consultant, I also promptly appointed CA Nimesh Khanna to undertake my income tax return filing compliance for subsequent years which is evidenced through change of email address in my return of income for AY 2024-25. That I also promptly appointed CA Nimesh Khanna to also address penalty proceedings connected to such assessment order passed for AY 2020-21;
18. That due to the aforesaid bona fide circumstances and lack of knowledge of the assessment order within time, there occurred a delay of 524 days in filing the appeal before the Learned CIT(A).
19. That the Learned CIT(A), however, dismissed the appeal primarily on account of delay without adjudicating the issues involved on merits.
20. That the said delay was neither intentional nor deliberate but occurred solely due to the circumstances stated hereinabove, which were beyond my control and arose due to bona fide reasons.
21. That I respectfully submit that substantial justice may kindly be preferred over technical considerations and an opportunity may kindly be granted for adjudication of the matter on merits.”
4. The Ld. DR argued and heavily opposed for admission of the affidavit of the assessee. The Ld. DR stands in favor of the order of the revenue authorities.
5. We heard the rival submissions and considered the documents available on record. The assessee had filed the return of income declaring total income at Rs.12,89,600/- and carried forward loss under the head “Income from House Property” amounting to Rs.17,41,996/- arising on account of interest on borrowed capital. During the assessment proceedings, the Ld. AO restricted the carried forward loss to Rs.9,64,387/- by disallowing 50% of the interest expenditure merely on the assumption that the property and loan were jointly held, despite the contention of the assessee that the entire repayment of loan and interest burden was borne exclusively by him. Consequently, the carried forward loss to the extent of Rs.7,77,609/- was disallowed. Thereafter, the assessee preferred an appeal before the Ld. CIT(A) with a delay of 524 days. The Ld. CIT(A), however, dismissed the appeal solely on the ground of limitation without adjudicating the issues on merits. Before us, the assessee filed a detailed notarized affidavit explaining the circumstances leading to the delay. On perusal of the affidavit, we find that the assessee was entirely dependent upon his earlier Chartered Accountant for handling tax compliances and income-tax proceedings. The communications issued by the Department were admittedly sent to the email address and contact details of the authorised consultant and not directly to the assessee. The assessee came to know about the impugned assessment order only upon verification by another Chartered Accountant in January 2024, after which prompt steps were taken for filing the appeal.
6. We find that the explanation furnished by the assessee demonstrates sufficient and bona fide cause for the delay in filing the appeal before the Ld. CIT(A). The delay appears neither intentional nor deliberate but attributable to circumstances beyond the control of the assessee. It is a settled proposition of law that substantial justice should prevail over technical considerations, particularly where the litigant has shown reasonable cause supported by affidavit evidence. In our considered view, the Ld. CIT(A) was not justified in dismissing the appeal in limine without granting an opportunity for adjudication on merits.
Accordingly, in the interest of substantial justice, we condone the delay of 524 days in filing the appeal before the Ld. CIT(A). However, the assessee is directed to file the notarized affidavit along with supporting documents before the Ld. CIT(A) with prayer for condonation of delay. The impugned appellate order is hereby set aside, and the matter is restored to the file of the Ld. CIT(A) with a direction to adjudicate the issues afresh on merits after providing adequate opportunity of hearing to the assessee in accordance with law. We are not expressing any view on merit of the case as the appellate proceeding shall be uninfluenced. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
7. In the result, the appeal of the assessee bearing ITA No.6983/Mum/2025 is allowed for statistical purpose.
