2025 (7) TMI 866 - AT - Income Tax

Unexplained money u/s.69A - d elay of 198 days in filing of the appeal before ld.CIT(A) - Case of the assessee was scrutinised for examining the sources of cash deposit - HELD THAT - We condone the delay of 198 days occurred before CIT(A) as the non-representation on part of the tax consultant should not be fatal to the assessee depriving the assessee to hear on merits of the case. Considering the facts and circumstance of the case and in the larger interest of justice deem it proper to restore the issues to the file of ld.CIT(A) for necessary adjudication. Assessee is directed to provide latest email id and contact detail to the department for receiving the notices from ITBA portal. Assessee is also directed to remain vigilant and not to take unnecessary adjournment unless otherwise required for reasonable cause.

Summary

The core legal questions considered in this appeal are:

1. Whether the addition of Rs. 29,60,000/- to the returned income on account of unexplained cash deposits in the Bank of Maharashtra was justified under section 69A of the Income-tax Act, 1961, or whether these deposits were legitimately sourced from the sale proceeds of immovable property.

2. Whether the delay of 198 days in filing the appeal before the Commissioner of Income Tax (Appeals) [CIT(A)] can be condoned, considering the appellant's claim of non-receipt of the assessment order due to communication being sent to the erstwhile tax consultant's email ID.

3. Whether the CIT(A) erred in dismissing the appeal in limine on account of delay without adjudicating the merits of the case.

4. Ancillary issue of procedural compliance and ensuring proper communication channels between the assessee and the tax authorities.

Issue-wise Detailed Analysis:

1. Legitimacy of Addition under Section 69A on Cash Deposits

Legal Framework and Precedents: Section 69A of the Income-tax Act provides that where any sum is found credited in the books of an assessee maintained in the form of cash or bank deposits and the assessee fails to explain the nature and source of such sum to the satisfaction of the Assessing Officer (AO), the sum shall be deemed to be the income of the assessee. The burden lies on the assessee to satisfactorily establish the source of cash deposits.

Court's Interpretation and Reasoning: The AO conducted scrutiny proceedings under sections 143(2) and 142(1) and found that the appellant failed to satisfactorily explain the source of Rs. 29,60,000/- cash deposits in the Bank of Maharashtra. The addition was therefore made under section 69A as unexplained money. The appellant contended that these deposits were proceeds from sale of immovable property, which would be a legitimate source exempt from addition.

Key Evidence and Findings: The record shows that the appellant made submissions before the AO regarding the source of cash deposits. However, the AO did not accept these explanations. The appellate authority below did not adjudicate on the merits due to dismissal on delay grounds. The Tribunal, while condoning delay, did not decide on the substantive issue but restored the matter for fresh adjudication.

Application of Law to Facts: Since the CIT(A) did not decide the issue on merits, the Tribunal directed the CIT(A) to examine the appellant's claim that cash deposits were from sale proceeds and to verify documentary evidence such as sale deeds, bank statements, and other corroborative material. The AO's addition under section 69A is prima facie valid unless convincingly disproved by the assessee.

Treatment of Competing Arguments: The appellant argued legitimate source and non-communication of assessment order; the revenue relied on unexplained cash deposits and procedural timelines. The Tribunal balanced these by condoning delay and remanding for merits, ensuring fair adjudication.

Conclusion: The issue of addition under section 69A is remitted to CIT(A) for fresh adjudication on merits, allowing the appellant to prove the source of deposits.

2. Condonation of Delay in Filing Appeal

Legal Framework and Precedents: The time limit for filing an appeal before CIT(A) is stipulated under the Income-tax Act. However, courts and tribunals have consistently held that delay can be condoned if the appellant demonstrates 'sufficient cause' or 'reasonable cause' preventing timely filing. Non-receipt of assessment order due to communication errors has been accepted as a valid ground in various precedents.

Court's Interpretation and Reasoning: The Tribunal noted that the delay of 198 days was caused because the assessment order was sent to the email ID of the erstwhile tax consultant, who failed to communicate the receipt to the appellant. The appellant became aware of the order only upon receiving the demand notice and immediately filed the appeal.

Key Evidence and Findings: The appellant submitted Form No. 35 explaining the reasons for delay. The Tribunal found this explanation to constitute 'reasonable cause' and held that penalizing the appellant for the tax consultant's non-communication would be unjust.

Application of Law to Facts: The Tribunal applied the principle of equity and justice, condoning the delay to enable adjudication on merits rather than technical dismissal.

Treatment of Competing Arguments: The revenue did not oppose the condonation, indicating acceptance of the appellant's explanation.

Conclusion: Delay of 198 days in filing appeal is condoned in the interest of justice.

3. Dismissal of Appeal by CIT(A) Without Merits

Legal Framework and Precedents: Appeals should ordinarily be adjudicated on merits unless procedural bars are absolute and unexcused. The principle of natural justice mandates hearing on substantive issues unless delay is unreasonable and unexplained.

Court's Interpretation and Reasoning: The CIT(A) dismissed the appeal in limine due to delay without considering the appellant's explanation or the merits of the addition. The Tribunal found this approach erroneous and prejudicial to the appellant's right to be heard.

Key Evidence and Findings: The appellant's explanation for delay was documented and reasonable. The Tribunal emphasized the need to hear the appellant on the substantive issue of unexplained cash deposits.

Application of Law to Facts: The Tribunal set aside the order of CIT(A) and remanded the matter for fresh adjudication on merits after condoning delay.

Treatment of Competing Arguments: No opposition from the revenue on condonation was noted, reinforcing the Tribunal's decision.

Conclusion: The CIT(A)'s dismissal for delay without merit adjudication was set aside.

4. Procedural Directions and Compliance

The Tribunal directed the appellant to provide updated email ID and contact details to the department to ensure proper receipt of notices in future. The appellant was also cautioned to avoid unnecessary adjournments unless for reasonable cause, emphasizing procedural discipline.

Significant Holdings:

"We find that there was 'reasonable cause' which prevented the assessee in filing the appeal within the stipulated time. We therefore condone the delay of 198 days occurred before ld.CIT(A) as the non-representation on part of the tax consultant should not be fatal to the assessee, depriving the assessee to hear on merits of the case."

"Considering the facts and circumstance of the case and in the larger interest of justice deem it