SHRI JIGAR KISHOR MEHTA ,MUMBAI V. ITO WARD 41(4)(2), MUMBAI

ITA 107/MUM/2025

AI Insights

This case involves an appeal by Shri Jigar Kishor Mehta against the order of the Commissioner of Income-tax (Appeals) - National Faceless Appeal Centre, which had deleted the addition of Rs. 88,26,000 as deemed dividend under section 2(22)(e) of the Income Tax Act, 1961. The appeal was initially delayed due to professional differences between the assessee and his authorized representative, which led to a lack of awareness about the CIT(A)'s order. The ITAT found sufficient cause for the delay and admitted the appeal. The main legal issue was the treatment of a loan from a company in which the assessee had substantial shareholding as deemed dividend. The Tribunal directed a re-assessment based on the company's accumulated profits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 773378 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 08-01-2025
• Other Referred Cases: Collector, Land Acquisition v. Mst. Katiji (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITA KAUSHIK
• Assessee Lawyers: ABHISHEK KHANDELWAL
• Keywords: Condonation of delay; Opportunity of being heard; Reasonable cause; Deemed dividend; Principle of natural justice
• Section: 143(3); 2(22)(e)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “F” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI RAJ KUMAR CHAUHAN (JUDICIAL MEMBER) ITA No. 107/MUM/2025 Assessment Year: 2013-14 Shri Jigar Kishor Mehta, 50/5, Dhanji Street, 1st Agairy Lane, Masjid Bunder, Mumbai-400 003. Vs. The ITO-41(4)(2), Kautilya Bhavan, Bandra Kurla Complex, Bandra (East), Mumbai-400051. PAN NO. AFOPM 9328 Q Appellant Respondent Assessee by : Mr. Abhishek Khandelwal, Adv. Revenue by : Ms. Kavita Kaushik, Sr. DR Date of Hearing : 16/09/2025 Date of pronouncement : 22/09/2025 ORDER PER OM PRAKASH KANT, AM This appeal by the assessee is directed against order dated 14.06.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2013-14, raising following grounds: In the facts and circumstances of the case and in present law, the Ld. CIT (A) has erred in deleting the addition of Rs.88,26,000/-being deemed dividend u/s.2(22)(e) of the Income Tax Act, 1961. Printed from counselvise.com 2. At the outset, the Ld. counsel for the assessee submitted that there was a delay of 130 days in filing the appeal. The Ld. counsel for the assessee referred to affidavit filed by the assess submitted that delay was mainly due to professional differences that arose between the authorized representative of the assessee and the assessee due to which the assessee was not regarding passing the order of the Ld. CIT(A). The relevant the affidavit is reproduced as under: Hence, the appellant is making this application for condonation of delay in filing of appeal. I respectfully submits that said delay has risen due to reasons beyond its control, inadvertently and due to I submit that the said matter was being monitored and being attended to and monitored by its Authorized Representative, CA Rahul Khanderia. He was assigned the responsibility to make the relevant compliances and advise the Company on this also duly represented the assessee before the Ld. AO as well as the Ld. CIT(A). Unfortunately, certain differences arose between me and the said Authorized Representative, CA Rahul Khanderia, because of which he was relieved of his professional It is humbly submitted that I was unaware of the orders passed by the CIT(A) since the same was being monitored by the abovementioned counsel. I only came to know of the same, at the time of perusing through the Income Tax Portal in the month of December. Due to such professional differences that arose between me and the authorized representative and I being unaware of the order being passed by the Ld. CIT(A), I was unable to file necessary appeal before the ITAT, the appellant has subsequently app counsel for taking necessary action for the same. However, in the meantime, the time limit for filing further appeal before the Hon'ble ITAT has elapsed and hence this petition and ITA No. 107/MUM/2025 t the outset, the Ld. counsel for the assessee submitted that there was a delay of 130 days in filing the appeal. The Ld. counsel for the assessee referred to affidavit filed by the assess submitted that delay was mainly due to professional differences that arose between the authorized representative of the assessee and the assessee due to which the assessee was not regarding passing the order of the Ld. CIT(A). The relevant the affidavit is reproduced as under: Hence, the appellant is making this application for condonation of delay in filing of appeal. I respectfully submits that said delay has risen due to reasons beyond its control, inadvertently and due to reasonable cause. I submit that the said matter was being monitored and being attended to and monitored by its Authorized Representative, CA Rahul Khanderia. He was assigned the responsibility to make the relevant compliances and advise the Company on this also duly represented the assessee before the Ld. AO as well as the Unfortunately, certain differences arose between me and the said Authorized Representative, CA Rahul Khanderia, because of which he was relieved of his professional duties. It is humbly submitted that I was unaware of the orders passed by the CIT(A) since the same was being monitored by the abovementioned counsel. I only came to know of the same, at the time of perusing through the Income Tax Portal in the month of Due to such professional differences that arose between me and the authorized representative and I being unaware of the order being passed by the Ld. CIT(A), I was unable to file necessary appeal before the ITAT, the appellant has subsequently appointed a fresh counsel for taking necessary action for the same. However, in the meantime, the time limit for filing further appeal before the Hon'ble ITAT has elapsed and hence this petition and Jigar Kishor Mehta 2 ITA No. 107/MUM/2025 t the outset, the Ld. counsel for the assessee submitted that there was a delay of 130 days in filing the appeal. The Ld. counsel for the assessee referred to affidavit filed by the assessee and submitted that delay was mainly due to professional differences that arose between the authorized representative of the assessee and the assessee due to which the assessee was not informed regarding passing the order of the Ld. CIT(A). The relevant part of Hence, the appellant is making this application for condonation of I respectfully submits that said delay has risen due to reasons reasonable cause. I submit that the said matter was being monitored and being attended to and monitored by its Authorized Representative, CA Rahul Khanderia. He was assigned the responsibility to make the relevant compliances and advise the Company on this matter. He also duly represented the assessee before the Ld. AO as well as the Unfortunately, certain differences arose between me and the said Authorized Representative, CA Rahul Khanderia, because of which It is humbly submitted that I was unaware of the orders passed by the CIT(A) since the same was being monitored by the abovementioned counsel. I only came to know of the same, at the time of perusing through the Income Tax Portal in the month of Due to such professional differences that arose between me and the authorized representative and I being unaware of the order being passed by the Ld. CIT(A), I was unable to file necessary appeal ointed a fresh However, in the meantime, the time limit for filing further appeal before the Hon'ble ITAT has elapsed and hence this petition and Printed from counselvise.com prayer for condonation of delay, which has occurred for rea beyond the control of the Appellant Company. I would like to submit that I am not well versed with tax laws and was totally relying on external consultant for the same. Therefore, this application submitted for condonation of delay be allowed in the i allowed cause of justice will suffer, as balance convenience lies in favour of the appellant. I humbly pray before Your Honour to condone the delay in filing Form 36 and grant me the principles of natural justice and as the delay was beyond my control. 3. The Ld. Departmental Representative (DR) objected for condoning the delay in filing the appeal. 4. We have heard the rival submissions and carefully perused t material available on record in relation to the assessee’s application for condonation of delay. The short issue that arises for consideration is whether the delay in filing the present appeal, occasioned on account of the assessee’s reliance upon belat professional advice and subsequent circumstances, constitutes “sufficient cause” within the meaning of section 5 of the Limitation Act, 1963, read with the provisions of the Income 4.1 It is a well-settled principle of law that the expression “sufficient cause” should receive a liberal construction, so as to advance the cause of substantial justice. The Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji (SC) has enunciated that when substantial justice and tec ITA No. 107/MUM/2025 prayer for condonation of delay, which has occurred for rea beyond the control of the Appellant Company. I would like to submit that I am not well versed with tax laws and was totally relying on external consultant for the same. Therefore, this application submitted for condonation of delay be allowed in the interest of justice and equity, and if the same is not allowed cause of justice will suffer, as balance convenience lies in favour of the appellant. I humbly pray before Your Honour to condone the delay in filing Form 36 and grant me an opportunity of being heard according to the principles of natural justice and as the delay was control. The Ld. Departmental Representative (DR) objected for condoning the delay in filing the appeal. We have heard the rival submissions and carefully perused t material available on record in relation to the assessee’s application for condonation of delay. The short issue that arises for consideration is whether the delay in filing the present appeal, occasioned on account of the assessee’s reliance upon belat professional advice and subsequent circumstances, constitutes “sufficient cause” within the meaning of section 5 of the Limitation Act, 1963, read with the provisions of the Income-tax Act. settled principle of law that the expression sufficient cause” should receive a liberal construction, so as to advance the cause of substantial justice. The Hon’ble Supreme Collector, Land Acquisition v. Mst. Katiji (1987) 167 ITR 471 (SC) has enunciated that when substantial justice and tec Jigar Kishor Mehta 3 ITA No. 107/MUM/2025 prayer for condonation of delay, which has occurred for reasons I would like to submit that I am not well versed with tax laws and was totally relying on external consultant for the same. Therefore, this application submitted for condonation of delay be nterest of justice and equity, and if the same is not allowed cause of justice will suffer, as balance convenience lies in I humbly pray before Your Honour to condone the delay in filing heard according to the principles of natural justice and as the delay was The Ld. Departmental Representative (DR) objected for We have heard the rival submissions and carefully perused the material available on record in relation to the assessee’s application for condonation of delay. The short issue that arises for consideration is whether the delay in filing the present appeal, occasioned on account of the assessee’s reliance upon belated professional advice and subsequent circumstances, constitutes “sufficient cause” within the meaning of section 5 of the Limitation tax Act. settled principle of law that the expression sufficient cause” should receive a liberal construction, so as to advance the cause of substantial justice. The Hon’ble Supreme (1987) 167 ITR 471 (SC) has enunciated that when substantial justice and technical Printed from counselvise.com considerations are in conflict, the cause of substantial justice must prevail, for no party can be permitted to claim a vested right in the perpetuation of injustice merely by reason of a non 4.2 In the case before us, the assessee differences with his authorised representative, he could not secure a copy of the order of the learned CIT(A). At a later stage, upon accessing the portal of the Income came to know of the said orde promptitude in filing the present appeal. The explanation so furnished is consistent, duly supported by an affidavit, and does not disclose any element of mala fides or culpable negligence. On the contrary, it manifests bona fid assessee. 4.3 In view of the foregoing, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed time. Accordingly, the delay of 130 days in filing the appeal stands cond adjudication on merits. 5. We have heard rival submissions of the parties and perused the relevant materials on record concern of the assessee has company namely M/s Purvi Gems & Jewellery India Pvt. Ltd which the assessee was having substantial shareholding. The ITA No. 107/MUM/2025 considerations are in conflict, the cause of substantial justice must prevail, for no party can be permitted to claim a vested right in the perpetuation of injustice merely by reason of a non-deliberate delay. In the case before us, the assessee has explained that owing to differences with his authorised representative, he could not secure a copy of the order of the learned CIT(A). At a later stage, upon accessing the portal of the Income-tax Department, the assessee came to know of the said order and thereafter acted with promptitude in filing the present appeal. The explanation so furnished is consistent, duly supported by an affidavit, and does not disclose any element of mala fides or culpable negligence. On the contrary, it manifests bona fide conduct on the part of the In view of the foregoing, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed time. Accordingly, the delay of 130 days in filing the appeal stands condoned, and the appeal is admitted for adjudication on merits. We have heard rival submissions of the parties and perused the relevant materials on record. In the case, the proprietary concern of the assessee has obtained loan from a private limited namely M/s Purvi Gems & Jewellery India Pvt. Ltd which the assessee was having substantial shareholding. The Jigar Kishor Mehta 4 ITA No. 107/MUM/2025 considerations are in conflict, the cause of substantial justice must prevail, for no party can be permitted to claim a vested right in the deliberate delay. has explained that owing to differences with his authorised representative, he could not secure a copy of the order of the learned CIT(A). At a later stage, upon tax Department, the assessee r and thereafter acted with promptitude in filing the present appeal. The explanation so furnished is consistent, duly supported by an affidavit, and does not disclose any element of mala fides or culpable negligence. On e conduct on the part of the In view of the foregoing, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed time. Accordingly, the delay of 130 days in filing the oned, and the appeal is admitted for We have heard rival submissions of the parties and perused . In the case, the proprietary a private limited namely M/s Purvi Gems & Jewellery India Pvt. Ltd in which the assessee was having substantial shareholding. The Printed from counselvise.com Assessing Officer has accordingly treated the said loan of Rs.88,26,000/- as deemed dividend u/s 2(22)(e) of the Income Act, 1961 (in short ‘the Act’) in the assessment order passed u/s 143(3) of the Act dated 22.03.2016. Before us, the Ld. counsel for the assessee filed a copy of ledger account of the assessee in the books of account of the company and also filed annual report of the company and submitted that deemed dividend may be the accumulated profit of the company M/s Purvi Gems & Jewellery India Pvt. Ltd. We find that the Ld. CIT(A) also issued identical direction to the assessing Officer is reproduced as under: “4.5. Thus from the above, it is clear that the intent of the legislature was the same when enacting the provisions of the Companies Act as well as the Income Tax Act, being that interest of the minority shareholders must be sa against muscle, might and cartelization of the majority shareholders. However the calculation of deemed dividend depends on the quantum of accumulated profit as discussed supra in the Honourable Bombay high court order. AO is directed to re the accumulated profit of the pvt limited company. view of the above the grounds of the appellant 5.1 Since assessee is not aggrieved with the above direction of the Ld. CIT(A) and requested for restricting the addition for deemed dividend to the extent of accumulated profit of the company, we direct the Assessing Officer to take into consideration the accumulated profit of the company on the date of the peak of loan advanced to the assessee and accordingly restrict the addition to ITA No. 107/MUM/2025 Assessing Officer has accordingly treated the said loan of as deemed dividend u/s 2(22)(e) of the Income rt ‘the Act’) in the assessment order passed u/s 143(3) of the Act dated 22.03.2016. Before us, the Ld. counsel for the assessee filed a copy of ledger account of the assessee in the books of account of the company and also filed annual report of the ny and submitted that deemed dividend may be the accumulated profit of the company M/s Purvi Gems & Jewellery India Pvt. Ltd. We find that the Ld. CIT(A) also issued identical to the assessing Officer. For ready reference said direc is reproduced as under: 4.5. Thus from the above, it is clear that the intent of the legislature was the same when enacting the provisions of the Companies Act as well as the Income Tax Act, being that interest of the minority shareholders must be safeguarded against muscle, might and cartelization of the majority shareholders. However the calculation of deemed dividend depends on the quantum of accumulated profit as discussed supra in the Honourable Bombay high court order. Hence the AO is directed to re-quantify the deemed dividend as per the accumulated profit of the pvt limited company. view of the above the grounds of the appellant is dismissed. Since assessee is not aggrieved with the above direction of the IT(A) and requested for restricting the addition for deemed dividend to the extent of accumulated profit of the company, we direct the Assessing Officer to take into consideration the accumulated profit of the company on the date of the peak of loan to the assessee and accordingly restrict the addition to Jigar Kishor Mehta 5 ITA No. 107/MUM/2025 Assessing Officer has accordingly treated the said loan of as deemed dividend u/s 2(22)(e) of the Income-tax rt ‘the Act’) in the assessment order passed u/s 143(3) of the Act dated 22.03.2016. Before us, the Ld. counsel for the assessee filed a copy of ledger account of the assessee in the books of account of the company and also filed annual report of the ny and submitted that deemed dividend may be restricted to the accumulated profit of the company M/s Purvi Gems & Jewellery India Pvt. Ltd. We find that the Ld. CIT(A) also issued identical . For ready reference said direction 4.5. Thus from the above, it is clear that the intent of the legislature was the same when enacting the provisions of the Companies Act as well as the Income Tax Act, being that feguarded against muscle, might and cartelization of the majority shareholders. However the calculation of deemed dividend depends on the quantum of accumulated profit as discussed Hence the quantify the deemed dividend as per the accumulated profit of the pvt limited company. In dismissed.” Since assessee is not aggrieved with the above direction of the IT(A) and requested for restricting the addition for deemed dividend to the extent of accumulated profit of the company, we direct the Assessing Officer to take into consideration the accumulated profit of the company on the date of the peak of loan to the assessee and accordingly restrict the addition to Printed from counselvise.com that extent. For ready reference, ledger account of the assessee in books of the company is reproduced as under: 5.2 In view of the above, the purposes. ITA No. 107/MUM/2025 that extent. For ready reference, ledger account of the assessee in books of the company is reproduced as under: In view of the above, the ground is partly allowed for statistical Jigar Kishor Mehta 6 ITA No. 107/MUM/2025 that extent. For ready reference, ledger account of the assessee in is partly allowed for statistical Printed from counselvise.com 6. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on Sd/ (RAJ KUMAR CHAUHAN JUDICIAL MEMBER Mumbai; Dated: 22/09/2025 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA No. 107/MUM/2025 In the result, the appeal of the assessee is partly allowed for ounced in the open Court on 22/09/2025. Sd/- Sd/ (RAJ KUMAR CHAUHAN) (OM PRAKASH KANT JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Jigar Kishor Mehta 7 ITA No. 107/MUM/2025 In the result, the appeal of the assessee is partly allowed for /09/2025. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "