Income Tax Appeal Delay Condoned Due to Non-Receipt of Notice – ITAT Allows Relief When Notices Never Reached Assessee

In the complex terrain of Indian income-tax litigation, procedural compliance often becomes as pivotal as substantive tax liability. One recurrent issue before appellate authorities and courts is whether a delay in filing an appeal or responding to tax proceedings should be excused when statutory notices failed to reach the assessee.

Facts and Issue of the Case

In the case of Sreemath Khadri Lakhsmi vs ITO, heard by the Hyderabad Bench of the Income-tax Appellate Tribunal (ITAT), the assessee (a trust) faced multiple assessments for various assessment years, including 2016-17, 2022-23, and 2023-24. The Assessing Officer (AO) initiated reassessment proceedings under Section 147 of the Income-tax Act, 1961 by issuing notices under Sections 148, 142(1) and 144 after the assessee failed to file returns for the relevant years. Subsequently, as no response was received, the AO passed ex-parte assessment orders, effectively determining income without the assessee’s participation.

The assessee filed appeals before the Commissioner of Income-tax (Appeals) [CIT(A)] challenging these orders, but with significant delay beyond the statutory limitation period. The important issue that arose in these proceedings was whether the delay could be condoned on account of non-receipt of statutory notices, given that all communications and notices were sent to the email ID of a Chartered Accountant (CA) who had passed away and were never brought to the assessee’s attention. The CIT(A) dismissed the appeals in limine on the ground of limitation without adjudicating on merits.

Thus, the central questions before the Tribunal were:

• Whether the delay in filing appeals before the CIT(A) could be condoned as “sufficient and reasonable cause”.
• Whether non-receipt of statutory notices constitutes a valid ground for excusing delay.
• Whether the ex-parte assessments should be remitted back to the AO for fresh adjudication after condonation of delay.

Observation by the Tribunal

After considering the facts and submissions, the ITAT analyzed the legal principles governing condonation of delay. The Tribunal referred to the Supreme Court’s liberal approach in Collector, Land Acquisition vs MST Katiji (167 ITR 471 (SC)), which underscores that procedural technicalities should not defeat substantial justice if the cause for delay is genuine and beyond the control of the appellant.

The Tribunal found the assessee’s explanation plausible and bonafide. It noted that:

• The statutory notices and communications issued by the AO were sent only to the email address of the deceased CA, which remained in the Income-tax department’s database.
• There was no active engagement or coordination between the trust and the deceased CA’s firm after his death, resulting in a genuine lack of knowledge about the proceedings.
• The assessee first came to know about the orders and subsequent appeal timelines only when recovery actions were initiated, at which point they promptly filed the appeals, albeit belatedly.

On these facts, the Tribunal concluded that the reasons for the delay constituted “sufficient and reasonable cause”, as required under the law for condoning delay. The Tribunal also observed that it would be unjust to penalize taxpayers for failures in communication that were entirely outside their control.

Importantly, the Tribunal held that since the assessments were ex-parte due to non-appearance resulting from lack of knowledge, the matter should not be allowed to stand on technical grounds. Instead, the appeals were restored, and the cases were remitted back to the AO for de-novo adjudication after giving the assessee a fair opportunity to be heard.

3. Law Applicable

The Tribunal’s reasoning is rooted in well-established principles of tax jurisprudence and appellate procedure:

a. Condonation of Delay — “Sufficient and Reasonable Cause”

Under the Income-tax Act, delay in filing appeals before appellate authorities can only be condoned if the appellant proves “sufficient cause” beyond mere negligence. Courts and tribunals have interpreted this requirement liberally, particularly where reasons for delay are bona fide and unavoidable. Principles from MST Katiji support that substantial justice prevails over procedural technicalities.

b. Non-Receipt of Notice — Impact on Limitation

In tax proceedings, limitation for filing appeals starts from the date when the order or notice is communicated to the assessee. If the assessee never receives the notice or communication, it logically follows that the limitation clock cannot be deemed to have started running. Therefore, non-receipt is a valid ground for condoning delay if demonstrated with satisfactory evidence.

c. Principles of Natural Justice

Tax proceedings must comply with principles of natural justice, including the right to be heard. Passing orders without effective communication of notices to the assessee violates this principle. Remitting the matter back to the AO ensures that the assessee gets the opportunity to present evidence and arguments on merits.

d. Procedural Framework Under Income-tax Act

Though not mentioned explicitly in the TaxGuru article, in general cases, the limitation and procedural compliance are governed by sections such as:

• Section 249(2) for appeals to ITAT.
• Limitation periods prescribed in the Income-tax Act.
• Sections prescribing notice requirements.

These provisions are interpreted in light of judicial precedents that allow flexibility if non-receipt of notices is established as a cause beyond the assessee’s control.

4. Conclusion by the Tribunal

In conclusion, the ITAT Bench held that the delay in filing appeals before the CIT(A) was condonable, because the non-receipt of statutory communications due to notices being sent to an incorrect or defunct email address was a sufficient and reasonable cause. The Tribunal also recognized that allowing ex-parte orders to stand solely on technical grounds would be contrary to the interests of justice.

Accordingly, the Tribunal:

• Condoned the delay in filing appeals for the relevant assessment years.
• Set aside the CIT(A) orders that dismissed the appeals on limitation grounds.
• Remitted the matters back to the AO for fresh, de-novo adjudication while granting the assessee an opportunity to be heard on merits.

This decision reinforces a fair and balanced approach — upholding the right of taxpayers to have their cases adjudicated on merits and not be defeated by procedural lapses when the default is attributable to circumstances beyond their control.