2025 (5) TMI 2132 - AT - Income Tax

Unexplained cash deposited in the bank account - HELD THAT -Despite having been given ample opportunities the assessee failed to explain the source of cash deposited in the bank account and as there was no valid explanation the addition was made which has been confirmed by the CIT(A). Before us as well neither any written submission has been filed nor anybody has appeared. Therefore we find no reason to interfere with the order of the CIT(A) which is confirmed and the appeal of the assessee is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The Tribunal considered the following core legal questions:

(a) Whether the delay of 326 days in filing the appeal before the Tribunal is liable to be condoned, having regard to the reasons stated by the assessee.

(b) Whether the addition of Rs. 58,23,000/- made by the Assessing Officer (AO) under section 69A of the Income Tax Act, 1961, on account of unexplained cash credits during the demonetisation period, was justified and sustainable.

(c) Whether the imposition of interest under section 234B of the Income Tax Act, 1961, on the alleged unexplained income, was proper and legally tenable.

(d) Whether the assessee discharged the onus cast upon him to explain the source of the cash deposits made during the demonetisation period.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Condonation of Delay in Filing Appeal

Relevant legal framework and precedents: The statutory time limit for filing an appeal before the Income Tax Appellate Tribunal (ITAT) is prescribed under the Income Tax Act, 1961. Delay beyond the prescribed period requires condonation by the Tribunal if sufficient cause is shown. The Tribunal exercises discretion to condone delay where the appellant demonstrates that the delay was neither deliberate nor due to negligence.

Court's interpretation and reasoning: The Tribunal examined the affidavit filed by the assessee explaining the delay of 326 days. The affidavit stated that the assessee did not receive any communication from the Income Tax Department regarding the appellate order or the filing deadline. It also explained that the assessee had engaged a qualified accountant who inadvertently failed to monitor the income tax portal for updates, leading to unawareness of the appellate order and filing deadline. The delay was discovered only upon consultation with another tax consultant, after which immediate steps were taken to file the appeal.

Key evidence and findings: The affidavit provided detailed reasons for the delay, emphasizing the absence of departmental communication and inadvertent omission by the accountant. The delay was not deliberate or due to negligence on the part of the assessee.

Application of law to facts: Considering the facts and the affidavit, the Tribunal found that the assessee had a reasonable and sufficient cause for the delay and was prevented from filing the appeal within the statutory time limit.

Treatment of competing arguments: No competing arguments were presented as no representation was made on behalf of the assessee. The Tribunal relied on the affidavit and the absence of any contrary evidence.

Conclusions: The Tribunal exercised its discretion to condone the delay and admitted the appeal for adjudication.

(b) Legitimacy of Addition under Section 69A of the Act

Relevant legal framework and precedents: Section 69A of the Income Tax Act deals with unexplained cash credits. The burden lies on the assessee to satisfactorily explain the nature and source of such credits. The Supreme Court decisions cited by the AO, including the cases of Chuharmal v CIT and Smt Srilekha Banerjee v CIT, establish that when the assessee fails to prove possession of cash or its legitimate source, the department is entitled to treat such amounts as income from undisclosed sources. The principle that the assessee "started under a cloud" and must dispel it to the satisfaction of the authorities was emphasized.

Court's interpretation and reasoning: The Tribunal noted that the assessee had filed a return showing a modest income but made large cash deposits during the demonetisation period. Despite multiple opportunities and statutory notices, the assessee failed to provide any explanation or documentary evidence regarding the source of the cash deposits. The AO rightly invoked section 69A to add Rs. 58,23,000/- as unexplained cash credits.

Key evidence and findings: The record showed that the assessee did not respond to the show cause notices or final opportunity notices. The assessee claimed before the CIT(A) that the deposits were business income from rice trading but did not furnish evidence to substantiate this claim. The CIT(A) upheld the addition, noting the failure to discharge the onus.

Application of law to facts: The Tribunal applied the settled legal principles that unexplained cash credits without adequate explanation justify addition under section 69A. The absence of any credible explanation or documentary proof by the assessee warranted the addition.

Treatment of competing arguments: No oral or written submissions were made on behalf of the assessee before the Tribunal. The Department's representative supported the addition, emphasizing the failure of the assessee to explain the deposits.

Conclusions: The Tribunal found no reason to interfere with the addition under section 69A and confirmed the order of the CIT(A).

(c) Imposition of Interest under Section 234B

Relevant legal framework and precedents: Section 234B provides for interest on default in payment of advance tax. When an assessee has an income chargeable to tax but fails to pay advance tax or pay insufficient advance tax, interest is leviable.

Court's interpretation and reasoning: The interest was imposed on the additional income determined under section 69A. Since the assessee failed to disclose the source of deposits and pay tax accordingly, the imposition of interest under section 234B was in line with statutory provisions.

Key evidence and findings: The assessee did not contest the interest before the AO or CIT(A) substantively, and no submissions were made before the Tribunal.

Application of law to facts: The Tribunal found the imposition of interest proper, given the undisclosed income and failure to pay advance tax.

Treatment of competing arguments: The assessee's ground challenging the interest was unsubstantiated and unsupported by evidence or submissions.

Conclusions: The Tribunal upheld the levy of interest under section 234B.

(d) Discharge of Onus by the Assessee

Relevant legal framework and precedents: The legal burden to explain the nature and source of unexplained cash credits lies on the assessee. The principle that the assessee must dispel the cloud of suspicion to the satisfaction of the assessing authorities is well established.

Court's interpretation and reasoning: The Tribunal observed that despite repeated opportunities and notices, the assessee failed to provide any explanation or evidence to establish the legitimacy of the cash deposits. The claim of business income from rice trading was unsupported by documentation.

Key evidence and findings: The record revealed non-cooperation by the assessee, absence of replies to notices, and failure to appear or file submissions before the Tribunal.

Application of law to facts: The Tribunal applied the principle that unexplained cash credits without satisfactory explanation justify addition and rejection of the assessee's claim.

Treatment of competing arguments: The assessee did not present any competing arguments or evidence.

Conclusions: The Tribunal concluded that the assessee failed to discharge the onus and upheld the addition.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"Considering the affidavit for condonation of delay and the reasons stated therein, we are satisfied that the assessee had a reasonable and sufficient cause and was prevented from filing the instant appeal within the statutory time limit. We, therefore, condone the delay and admit the appeal for adjudication."

"Despite having been given ample opportunities, the assessee failed to explain the source of cash deposited in the bank account and as there was no valid explanation, the addition was made, which has been confirmed by the Ld. CIT(A)."

"We find no reason to interfere with the order of the Ld. CIT(A) which is confirmed and the appeal of the assessee is dismissed."

Core principles established include:

• The Tribunal has the discretion to condone delay in filing appeals where sufficient cause is shown, including inadvertent omissions and lack of communication from the Department.
• Unexplained cash credits during the demonetisation period, without satisfactory explanation or documentary evidence, justify addition under section 69A.
• The burden lies on the assessee to dispel the cloud of suspicion by providing credible explanations and evidence.
• Interest under section 234B is properly leviable on undisclosed income arising from unexplained cash credits.
• Non-cooperation and failure to respond to notices or appear before authorities can lead to confirmation of additions and dismissal of appeals.

Final determinations:

• The delay in filing the appeal was condoned.
• The addition of Rs. 58,23,000/- under section 69A was upheld.
• The interest under section 234B was confirmed.
• The appeal filed by the assessee was dismissed.