Sanjay Vs ITO (ITAT Delhi)
ITAT Delhi condone delay in appeal of 1086 days in Sanjay vs. ITO: Key Ruling on Reassessment Under Section 147 & 148
Introduction
The Income Tax Appellate Tribunal (ITAT) Delhi, in the case of Sanjay vs. ITO, Ward-2, Rohtak (ITA No. 3243/Del/2024), has set aside an EX PARTE reassessment order by the CIT(A) under Section 147/148 of the Income Tax Act, 1961. The Income Tax Tribunal ruled that the delay in filing the appeal before the CIT(A) should be condoned on the basis of merit and ordered for remanded the case for fresh consideration on merits as observed by the Tribunal.
Case Facts & Background of the Case
1. The assessee deposited ₹ 28,50,000 in cash in his bank account with Corporation Bank, Rohtak during AY 2012-13. Since the assessee did not file any return under Section 139(1), the Income Tax Department asked to submit an explanation for the source of cash deposits.
2. AO issued a letter to the assessee on 08.02.2019 via email, requiring him to explain the source of cash deposited by the assessee in his saving bank account.
3. Assessee did not respond to the notice; accordingly, department started the reassessment proceedings, and a notice under Section 148 was issued on 28.03.2019 after obtaining the necessary approval from the PCIT, Rohtak and also several statutory notices were issued to the assessee from time to time to file his return, but the assessee did not respond to any of the notice sent via email.
4. Despite issuing multiple notices by the AO, the assessee failed to respond or file a return.
5. The AO accordingly completed the assessment as per their knowledge and records and passed an EX-PARTE order under Sections 144/147(Section given below for ready reference) and determined the income at ₹28,50,000 as unexplained cash credit under Section 68(Section given below for ready reference) and accordingly final assessment order was passed on 06.12.2019.
6. Appeal to CIT(A): Against the order, the assessee filed an appeal after 1086 days before the Commissioner of Income Tax (Appeals) [CIT(A)], explaining the delay due to lack of awareness and technical issues in Form No 35 column 15 of the Appeal form. The CIT(A) refused to condone the delay of 1,086 days and dismissed the appeal on account of limitation (i.e. Time Barred).
7. Appeal to ITAT Delhi: Aggrieved by the order of CIT(A), the assessee appealed before ITAT Delhi, arguing that the delay was unintentional and due to lack of awareness of e-proceedings of the income tax portal. He had never received any physical copies of the notices issued by the department and was also unaware of the assessment proceedings. Assessee also said that the CIT(A) failed to consider the case on merits and simply dismissed the appeal based on delay.
8. ITAT View: The Tribunal ruled that reasonable cause was there for the delay in filing the appeal before CIT(A) as assessee was technologically savvy, emails were not frequently accessed by him, e-notices not forwarded to the consultant for remedy which should be constituted a “reasonable cause” under the law. The Tribunal relied on the principle of natural justice, stating that litigation should be decided on merits rather than on mere technicalities.
9. The Tribunal noted that CIT(A) has erred both on facts & in law in completely ignoring the fact that ₹28.5 lakhs of cash deposited by the assessee in his saving bank account is not unexplained cash under Section 68, also land in question is a rural agricultural land and fall under the ambit of noncapital asset as defined under section 2(14) of the Income Tax Act. Thus, rejected the assesses claim that cash of Rs. 28.5 lakhs were generated from the sale of agricultural land which is exempted by virtue of Section 2(14) of the act being a non-capital asset and will also not taxable under any other head.
10. The CIT(A) dismissed the appeal solely on limitation grounds (Time Barred), without addressing whether the reassessment was justified as assessee or not.
11. The ITAT Delhi observed that notices should be properly served and acknowledged by the assessee merely sending of email without proper opportunity to explain the actual reason of delay was just not right and not in the best interest in the eyes of Law.
12. The ITAT remanded back to AO the case to verify if the land was rural agricultural. If proven, then the cash deposits (sale proceeds) cannot be taxed under Section 68 as unexplained cash.
Conclusion
