Sold property but did not file ITR? ITAT gives taxpayer another chance to contest ₹90.09 lakh income tax penalty

The Income Tax Appellate Tribunal (ITAT), Pune Bench, has given a taxpayer another opportunity to challenge a ₹90.09 lakh penalty imposed after he failed to file an income tax return following a property sale. The tribunal’s order, dated 9 September 2026, does not cancel the penalty but sends the matter back for fresh consideration.

The ruling came in Gnyanoba Dagadu Masurkar vs Income Tax Officer, Ward 6(5), Pune (ITA Nos. 2462 and 2463/PUN/2026) for assessment year 2016-17. It highlights the consequences of not filing an income tax return or responding to departmental notices after a property transaction, while showing that taxpayers whose appeals are dismissed because of delay may still get an opportunity to contest an assessment if they establish sufficient cause.

How a property sale led to a ₹90 lakh tax penalty

According to the tribunal’s order, the Income Tax Department received information that Masurkar had sold an immovable property during financial year 2015-16 and that tax had been deducted at source under Section 194-IA of the Income-tax Act, 1961. However, he had not filed an income tax return for assessment year 2016-17.

The Assessing Officer issued a notice under Section 148 on 17 February 2023, followed by notices under Section 142(1) seeking information and explanations. The department also sought information from the builder under Section 133(6). The taxpayer did not respond to these notices, according to the order.

The Assessing Officer subsequently completed the assessment under Sections 147 and 144, read with Section 144B, on 19 March 2024. The officer added ₹2.65 crore as short-term capital gains and ₹1,14,925 as interest income, taking the taxpayer’s assessed total income to ₹2,66,14,925.

The department also initiated penalty proceedings under Section 271(1)(c) and imposed a penalty of ₹90,09,013 through an order dated 1 September 2024.

Why the ITAT restored the taxpayer’s appeals

Masurkar challenged both the assessment and the penalty before the Commissioner of Income Tax (Appeals). However, the appeals were dismissed because they had been filed late and the delay had not been adequately explained.

He then approached the ITAT, arguing that the delay was neither deliberate nor intentional and that circumstances beyond his control had prevented him from filing the appeals on time. He sought an opportunity to present evidence in support of his case.

The tribunal considered the request to condone the delay and referred to Supreme Court judgments on adopting a pragmatic, justice-oriented approach when deciding whether delayed appeals should be admitted.

The ITAT concluded that there was sufficient cause to condone the delay. It set aside the orders passed by the Commissioner of Income Tax (Appeals) and sent both the assessment and penalty disputes back for fresh adjudication, directing that the taxpayer be given an adequate opportunity to present his case. The appeals were allowed for statistical purposes.

The ruling does not mean that taxpayers can ignore income tax notices without consequences. Nor does it establish that the property-sale gains or the penalty were incorrectly calculated. The tribunal addressed the procedural issue of delayed appeals, leaving the underlying tax dispute to be reconsidered.

For taxpayers facing a disputed assessment, the case highlights the importance of responding to departmental notices, preserving documents relating to property transactions and explaining any delay when seeking to appeal an adverse order.