A taxpayer who failed to respond to income-tax department notices over payments running into nearly ₹3.8 crore has got another opportunity to explain why tax was not deducted at source. The tribunal restored the matter for fresh examination after finding that the original proceedings had been completed without the taxpayer being heard on merits.
In Jayagopal Rathish vs Income Tax Officer, TDS Ward, Tambaram, the Chennai ITAT bench comprising Judicial Member Manu Kumar Giri and Accountant Member S. R. Raghunatha passed its order on 8 September 2026 for assessment years 2021-22 and 2022-23.
Tax department flagged payments of nearly ₹3.8 crore
Rathish, an individual engaged in the transport and logistics business, had reported payments of ₹98.09 lakh for AY 2021-22 and ₹2.81 crore for AY 2022-23 in Form 3CD under payments on which TDS had not been deducted. Together, the payments amounted to about ₹3.79 crore.
The assessing officer issued statutory notices seeking details from the taxpayer. However, according to the ITAT order, the taxpayer failed to furnish the information requested and did not respond to the notices.
The assessing officer therefore passed ex-parte orders under Sections 201(1) and 201(1A) of the Income-tax Act on 19 September 2024.
For AY 2021-22, the officer raised a TDS demand of ₹5.06 lakh along with interest of ₹2.13 lakh. For AY 2022-23, the TDS demand was ₹16.96 lakh, with interest of ₹5.09 lakh.
Appeals were also dismissed for delay
The taxpayer subsequently filed appeals before the Commissioner of Income Tax (Appeals), but those appeals were filed 60 days late.
The CIT(A) dismissed the appeals on the ground of delay without examining the underlying TDS issue on merits. Rathish then approached the ITAT.
The tribunal noted that the assessing officer had passed the orders ex-parte because the taxpayer had not responded to the notices. It also noted that the CIT(A) had dismissed the appeals because of the delay without deciding the substantive issues.
ITAT restores case for fresh examination
The Chennai ITAT decided to give the taxpayer another opportunity.
The tribunal accepted the reasons for the delay stated in Form 35 and held that they constituted sufficient cause for condoning the delay. It consequently set aside the CIT(A)’s orders and restored the matter to the assessing officer for fresh adjudication in accordance with law.
The taxpayer has now been directed to cooperate with the proceedings and submit the required written submissions and supporting evidence within the prescribed process.
Importantly, the ITAT did not decide whether the taxpayer was actually liable to deduct TDS on the payments. The tribunal only restored the matter so that the substantive issue can be examined after giving the taxpayer a reasonable opportunity to present his case.
The two appeals were therefore allowed for statistical purposes.
What taxpayers should know
The ruling highlights the importance of responding to tax notices and filing appeals within the prescribed time. Failure to respond can result in an ex-parte order based on the information available with the tax department.
At the same time, the ITAT’s order shows that a delayed appeal can be considered when the taxpayer demonstrates sufficient cause for the delay. However, getting the delay condoned does not automatically cancel the underlying tax demand. The substantive TDS issue still has to be examined by the assessing officer.
The case is particularly relevant for businesses and professionals because TDS disputes can arise from payments reported in tax audit reports, even where the taxpayer disputes the applicability ofTDS provisions.
