Niravkumar Ramjibhai Patel Vs ITO (ITAT Ahmedabad)
Wrong PAN Allegedly Linked Firm’s Deposits to Partner: ITAT Condones 600-Day Delay, Orders Fresh Examination
Summary: The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) condoned a delay of approximately 600 days in filing an appeal before the CIT(A) and restored a ₹5,15,41,070 addition under Section 69A for fresh examination by the Assessing Officer. The assessee contended that the cash deposits belonged to a partnership firm but had been attributed to him because his PAN was incorrectly quoted instead of the firm’s PAN. The Tribunal held that the substantive issue of taxability in the correct entity’s hands required adjudication.
The assessee, a resident individual, had not filed a return for Assessment Year 2019-20. Information received from State Bank of India in Form 61A reflected cash deposits of ₹5,15,31,070 during Financial Year 2018-19. A further deposit of ₹10,000 brought the aggregate amount under examination to ₹5,15,41,070.
The Assessing Officer initiated reassessment proceedings. Since the assessee did not respond to the statutory notices, the assessment was completed under Section 147 read with Section 144. The entire amount was treated as unexplained money under Section 69A and taxed under Section 115BBE.
CIT(A) Refused to Condone Delay
The assessee approached the CIT(A) with a delay of approximately 600 days. He explained that non-compliance during assessment arose from non-receipt of notices owing to the non-availability of an email address.
He further submitted that the deposits related to the bank account of M/s Sai Petroleum, a partnership firm in which he was a partner. According to him, his PAN had inadvertently been quoted instead of the firm’s PAN, and a separate assessment had already been completed in the firm’s case.
The CIT(A) held that these explanations did not establish sufficient cause under Section 249(3). Treating the circumstances as negligence rather than a bona fide inability to act, the CIT(A) dismissed the appeal as not maintainable without deciding the merits.
Firm’s Records Supported Request for Substantive Hearing
Before the Tribunal, the assessee reiterated that the deposits represented regular business sales and transactions of M/s Sai Petroleum. He also submitted that he was unfamiliar with tax proceedings and electronic assessments and had not received proper and timely legal advice.
The assessee placed the firm’s financial statements, a certificate issued by State Bank of India and the acknowledgement of the firm’s return before the Tribunal.
The Revenue opposed condonation, arguing that the substantial delay lacked a cogent or reasonable explanation.
Correct Entity’s Tax Liability Required Examination
The Tribunal observed that substantial justice should prevail over technical considerations where delay was neither deliberate nor attributable to gross negligence.
It found the assessee’s explanation plausible, particularly the contention that the deposits arose from the firm’s business activities and that the firm had already undergone separate assessment. Considering the supporting documents, the Tribunal held that dismissing the appeal without examining taxability in the correct entity’s hands would result in a miscarriage of justice.
The Tribunal therefore condoned the delay in approaching it as well as the approximately 600-day delay before the CIT(A). It set aside the CIT(A)’s order and restored the matter directly to the Assessing Officer for de novo adjudication.
Addition Remains Subject to Verification
The Assessing Officer was directed to consider all the assessee’s contentions and provide a reasonable opportunity of hearing. The Tribunal clarified that if the assessee failed to appear or furnish relevant documents and submissions, the Assessing Officer could decide the issue on the available record in accordance with law.
Accordingly, the appeal was allowed for statistical purposes. The Tribunal did not finally delete the ₹5,15,41,070 addition or conclusively determine that the deposits belonged to the firm; those questions remain for fresh examination.
FULL TEXT OF THE ORIGINAL ORDER OF ITAT AHMEDABAD
1. The present appeal preferred by the Assessee is directed against the Order passed by the National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 01/03/2024, passed under Section 147 read with Section 144 & 144B of the Act for the Assessment Year 2019-2020.
2. The Assessee has raised following grounds in the present appeal:
“1. That on facts, and in law, the learned NFAC has grievously erred in not condoning the delay in filing the appeal before NFAC and in dismissing the appeal as not maintainable.
2. That on facts, and in law, the delay ought to have been condoned, and the appeal ought to have been decided on merits, as prayed for.
3. That on facts, and in law, the learned AO has grievously erred in not granting sufficient and reasonable opportunity of hearing and in making the addition of Rs.5,15,41,070/- made u/s 69A of the Act in respect of cash deposit in account of Firm, wherein the appellant is a Partner, which is in fact relating to regular business transactions and sales of Firm, and in confirming the levy of tax u/s 115BBE of the Act.”
3. The relevant facts in brief are that the Assessee, a resident individual, not file return of income for the Assessment Year 2019-2020. As per information received by the Assessing Officer from State Bank of India (SBI) in Form 61A, cash deposits aggregating to INR.5,15,31,070/- were made during Financial Year 2018-19 relevant to Assessment Year 2019-2020. Further, a deposit of INR.10,000/- was made on 16/05/2018 in bank account No. 31334332970. Thus, the Assessing Officer had information that cash deposits aggregating to INR.5,15,41,070/- were made by the Assessee. Therefore, reassessment proceedings were initiated. Since the Assessee did not respond to the statutory notices issued from time to time, the Assessing Officer completed the assessment under Section 147 read with Section 144 of the Act. The Assessing Officer treated the total cash deposit of INR.5,15,41,070/- as Unexplained Money under Section 69A of the Act and subjected the same to tax under Section 115BBE of the Act.
4. Being aggrieved, the Assessee preferred appeal before the Learned CIT(A) with a delay of approximately 600 days. Before the Learned CIT(A), the Assessee explained that non-compliance before the Assessing Officer occurred due to non-receipt of notices owing to non-availability of an email address, and that the addition pertained to cash deposits in the bank account of a partnership firm, M/s Sai Petroleum, wherein the Assessee is a partner. It was explained that Assessee’s Permanent Account Number (PAN) was incorrectly quoted instead of the firm’s PAN and that a separate assessment was framed on the firm. However, the Learned CIT(A) was not convinced. The Learned CIT(A) held that the explanation furnished did not constitute “sufficient cause” under Section 249(3) of the Act, observing that non-receipt of electronic communication or incorrect quoting of PAN reflected negligence rather than a bona fide inability. Consequently, the Learned CIT(A) dismissed the petition for condonation of delay and dismissed the appeal in limine as not maintainable without adjudicating the case on merits.
5. Being aggrieved by the above order passed by the Learned CIT(A), the Assessee has preferred the present appeal on the grounds reproduced in paragraph 2 above.
Ground Nos. 1 & 2
6. Ground Nos. 1 and 2 raised by the Assessee directed against the order of the Learned CIT(A) refusing to condone the delay of approximately 600 days in filing the appeal and the consequential dismissal of the appeal in limine as not maintainable.
7. During the course of hearing, the Learned Authorized Representative for the Assessee submitted that the Assessee was prevented by sufficient cause from filing the appeal within the prescribed period of limitation. It was submitted that the cash deposits of INR.5,15,41,070/- pertained to regular business sales and transactions of the partnership firm, M/s Sai Petroleum, in which the Assessee is a partner. It was further pointed out that due to an inadvertent error, the Assessee’s PAN was quoted in place of the firm’s PAN, even though separate assessment proceedings had been completed in the case of the firm. The Learned Authorized Representative contended that dismissing the appeal on technical grounds of limitation without deciding the issue on merits causes grave prejudice to the Assessee, and therefore, the delay ought to be condoned to advance substantial justice. It was submitted that the Assessee was not well conversant with the tax proceedings and e-assessments. Further, the Assessee did not receive proper and timely legal advice and therefore, there was lack of proper representation and delay in approaching the appellate authority.
8. Per contra, the Learned Departmental Representative relied upon the order of the Learned CIT(A) and submitted that there was an inordinate delay of approximately 600 days without any cogent or reasonable justification, and therefore the Learned CIT(A) rightly dismissed the appeal as not maintainable.
9. We have given thoughtful consideration to the rival submissions and perused the material on record. It is a well-settled principle of law that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred, provided the delay is not deliberate or on account of gross negligence. In the present case, the Assessee has put forth a plausible explanation that the underlying transaction of cash deposits relates to regular business activities of a partnership firm (M/s Sai Petroleum) in which the Assessee is a partner, and that a separate assessment has already been framed in the hands of the firm. I our view, dismissing an appeal in limine without addressing the substantive contention regarding taxability in the hands of the correct entity would result in a miscarriage of justice as the Assessee has filed before us the financial statement of the firm, certificate issues by the State Bank of India and acknowledgement of return filed by the firm. In our considered view, the Assessee has demonstrated sufficient cause for condonation of delay in filing the appeals. Therefore, in the interest of justice, we condone the delay of filing appeal before this Tribunal. We also condone the delay of approximately 600 days in filing the appeal before the Ld. CIT(A), and set aside the impugned order passed by the Learned CIT(A). We restore the issue back to the file of the Assessing Officer for denovo adjudication on merits in accordance with law. The Assessing Officer is directed to grant reasonable opportunity of being heard to the Assessee. It is clarified that in case the Assessee failed to appeal before the Assessing Officer or fails to file relevant documents/submission, the Assessing Officer would be at liberty to adjudicate the issue as per law on the basis of material forming part of record. Thus, Ground Nos. 1 and 2 raised by the Assessee are allowed.
Ground No. 3
10. Ground No. 3 pertains to the addition of INR.5,15,41,070/- made under Section 69A of the Act read with Section 115BBE of the Act in respect of cash deposits.
11. Since we have condoned the delay in filing the appeal under Ground Nos. 1 and 2 and restored the matter back to the file of the Assessing Officer for adjudication on merits, Ground No. 3 touching upon the merits of the addition does not call for adjudication at this stage. The Assessing Officer is directed to consider all contentions raised by the Assessee on merits while re-adjudicating the issue. Accordingly, Ground No. 3 is also restored to the file of the Assessing Officer for denovo adjudication. Thus, Ground No. 3 raised by the Assessee is allowed for statistical purposes.
12. In result, the present appeal preferred by the Assessee is allowed for statistical purposes.
13. Order pronounced on 15.10.2026.
