Nidhiben Mrugeshkumar Shah Vs ACIT (OSD) (ITAT Ahmedabad)
The ITAT Ahmedabad set aside an addition of ₹10 lakh under Section 69A after finding that the CIT(A) mistakenly treated jewellery sale invoices as purchase invoices. The case was remanded for fresh adjudication, with directions to supply the remand report and consider new evidence in line with natural justice.
The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, adjudicated an appeal filed by the assessee, Nidhiben Mrugeshkumar Shah, against the order of the Commissioner of Income Tax (Appeals) [CIT(A)]. The dispute centered on an addition of ₹10,00,100 made by the Assessing Officer (AO) under Section 69A of the Income-tax Act, 1961, treating the amount as unexplained cash deposits. The ITAT ultimately allowed the appeal for statistical purposes, remanding the matter for fresh adjudication.
Condonation of Delay
At the outset, the ITAT addressed a 32-day delay in filing the appeal. The assessee submitted an affidavit explaining that the delay occurred due to the initial failure of a local tax consultant to file the appeal despite receiving the fee, followed by a delay with a second consultant preoccupied with time-barring scrutiny assessments.
Judicial Precedent on Sufficient Cause
The Tribunal, relying on the landmark Supreme Court decision in Collector, Land Acquisition v. Mst. Katiji, accepted the explanation. This precedent holds that the expression ‘Sufficient Cause’ in condonation of delay applications must be interpreted liberally to sub-serve the ends of justice. The Supreme Court emphasized that refusing to condone a non-deliberate delay can defeat a meritorious case, while condoning it merely ensures the cause is decided on its merits. Finding no deliberate intention to delay, and noting the assessee’s attempt to file the appeal fee within the due date, the ITAT condoned the delay and admitted the appeal.
Facts of the Case and Assessment
The AO initiated reassessment proceedings under Section 147 after receiving information that the assessee, despite having a savings bank account with significant deposits, had not filed a return of income for AY 2011-12. Following repeated non-compliance with statutory notices under Section 148 and 142(1), the AO finalized the assessment ex parte under Section 144 read with Section 147.
The AO found that the assessee had deposited cash aggregating ₹10,00,100 during the relevant financial year. In the absence of any explanation from the assessee, the entire amount was treated as unexplained money under Section 69A and added to the total income.
Appellate Proceedings
Before the CIT(A), the assessee challenged both the validity of the reopening and the addition on its merits.
1. Reopening Validity: The assessee argued that the reassessment was bad in law due to the non-fulfillment of mandatory requirements, such as the proper recording and communication of reasons for reopening.
2. Merits of Addition: The assessee, claiming to be a housewife with no independent taxable income, explained the cash deposits as being sourced from:
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- Sale proceeds of agricultural produce belonging to her father.
- Sale of jewellery belonging to her mother.
- Supporting documents, including land records, agricultural sale invoices, and jewellery sale bills, were filed during the appellate stage.
The CIT(A), however, dismissed the appeal. He noted the assessee’s non-cooperation during the original assessment and held that the explanation provided in the appeal lacked credibility. The claims of agricultural income and sale of jewellery were deemed unsubstantiated and non-genuine, respectively. The CIT(A) also referred to a remand report that allegedly failed to justify the assessee’s contentions. The addition of ₹10,00,100 under Section 69A was confirmed.
ITAT’s Findings and Remand
The ITAT reviewed the CIT(A)’s order and the submissions by the Authorized Representative, who contended that the evidence was not duly considered and that the assessee was deprived of an opportunity to rebut the adverse findings in the remand report.
The Tribunal identified two major flaws in the CIT(A)’s order:
1. Factual Error and Improper Appreciation of Evidence: The CIT(A)’s concluding paragraph was found to contain a clear factual error. The assessee had submitted invoices for the sale of jewellery, but the CIT(A) erroneously referred to them as invoices for the purchase of jewellery. The ITAT held that this misreading of evidence went to the root of the matter, indicating that the documentary evidence was not properly appreciated.
2. Violation of Principles of Natural Justice: The CIT(A) had referred to and relied upon a remand report, but a copy of this report was never supplied to the assessee. The ITAT ruled that the denial of an opportunity for the assessee to rebut the findings in the remand report constituted a clear violation of the principles of natural justice.
The ITAT further asserted that once documentary evidence is filed, the Revenue must either accept it or objectively disprove it with cogent reasons and independent verification, rather than summarily dismissing it as “bogus.”
Conclusion
In light of the errors and the violation of natural justice, the ITAT set aside the CIT(A)’s order. The matter was restored to the file of the CIT(A) for fresh adjudication. The Tribunal directed the CIT(A) to:
- Consider all evidence afresh, including additional evidence filed before the ITAT (like confirmation letters).
- Supply the remand report to the assessee for comments.
- Pass a speaking order after affording adequate opportunity of hearing to both parties.
- The ITAT explicitly clarified that it had not expressed any opinion on the merits of the addition, directing the CIT(A) to decide the issue independently in accordance with the law. The appeal was thus allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal by the assessee is directed against the order of the Additional / Joint Commissioner, from the office of Commissioner of Income Tax (Appeals)-1, Mumbai [hereinafter referred to as “CIT(A)”], dated 16.01.2025, passed under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “ the Act”], arising from the assessment order dated 26.11.2018 framed by the Assistant Commissioner of Income-tax (OSD), Ward-5, Anand [hereinafter referred to as “ the Assessing Officer or AO”), under section 144 read with section 147 of the Act for the Assessment Year 2011-12.
2. Condonation of Delay
2.1 At the outset, it is noticed that there is a delay of 32 days in filing the present appeal before us. The assessee has moved a petition for condonation of delay accompanied by a duly sworn affidavit explaining the reasons. In the petition, it has been stated that after receipt of the appellate order, the assessee had initially approached a local tax consultant at Anand, who assured that the appeal would be filed. The appeal fee was deposited on 17.03.2025, but the consultant failed to file the appeal and also did not respond appropriately to reminders. Thereafter, the assessee approached another consultant, who was preoccupied with time-barring scrutiny assessments up to 31.03.2025, and consequently the appeal could not be filed in time. The assessee has affirmed that the delay was neither deliberate nor intentional but occurred due to circumstances beyond her control. The learned Departmental Representative raised no objection for the condonation of the delay.
2.2 We have carefully considered the rival submissions and perused the material placed on record. The explanation tendered by the assessee, supported by affidavit, demonstrates that the delay in filing the appeal was occasioned by bona fide circumstances arising from reliance on tax consultants. There is nothing on record to suggest that the assessee stood to benefit by delaying the filing of the appeal. The assessee had, in fact, attempted to file the appeal within the prescribed due date as is evident from the challan of appeal filing fee dated 17.03.2023. This, in our considered view, demonstrates the bona fides of the assessee and rules out any deliberate intention to delay the filing of the appeal. The Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji [TS-5008-SC-1987-O] has held that that the expression ‘Sufficient Cause’ employed by the legislature is adequately elastic to enable the Courts to apply the law in a meaningful manner to sub-serves the ends of justice that being the life-purpose of the existence of the institution of Courts. SC further held that such liberal approach is adopted on one of the principles that refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. SC further notes that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of male fides. A litigant does not stand to benefit by resorting to delay.
2.3 Accordingly, the delay of 32 days in filing the appeal is condoned and the appeal is admitted for adjudication on merits.
3. Facts of the Case
3.1 The Assessing Officer (AO) received information that the assessee was maintaining a savings bank account with Karur Vysya Bank, Anand, and had not filed her return of income despite having income above the taxable limit. Letters issued on 19.03.2014 and 15.03.2018 remained un-complied. Thereafter, proceedings under section 147 were initiated after obtaining approval from the Pr. CIT-2, Vadodara, and notice under section 148 dated 27.03.2018 was duly served. The assessee, however, did not respond to the said notice nor to subsequent notices issued under section 142(1) on different dates.
3.2 On verification of bank information obtained under section 133(6), it was found that the assessee had deposited cash aggregating to Rs. 10,00,100/- during the financial year 2010-11. A show cause notice was issued but no explanation was filed. The AO, therefore, completed the assessment ex parte under section 144 r.w.s. 147 of the Act and treated the cash deposits of Rs. 10,00,100/- as unexplained money under section 69A, assessing the total income at Rs.10,00,100/-. Interest under sections 234A, 234B and 234C was levied, demand notice was issued, and penalty proceedings under section 271(1)(c) were separately initiated.
3.3 The assessee preferred an appeal before CIT(A). In appeal before the Commissioner of Income-tax (Appeals), the assessee raised grounds challenging the validity of the reopening as well as the addition of Rs. 10,00,100/- sustained by the Assessing Officer. It was contended that the reopening was bad in law, as the mandatory requirements of recording and communication of reasons and proper service of notice had not been fulfilled. On merits, the assessee submitted that she was a housewife with no independent taxable income and that the deposits in her bank account were sourced from the sale proceeds of agricultural produce belonging to her father and from sale of jewellery belonging to her mother. In support, she filed land records, copies of sale invoices issued by agricultural traders, and bills of jewellers evidencing sale of ornaments. She further argued that the deposits were genuine capital receipts and not taxable income.
3.4 The learned CIT(A), however, did not accept the contentions of the assessee. He observed that the assessee had failed to file any explanation before the Assessing Officer during the assessment proceedings and that the explanation offered in appellate proceedings lacked credibility. The claim of agricultural income was held to be unsubstantiated, while the alleged sale of jewellery was considered to be non-genuine. The learned CIT(A) also noted that even in remand proceedings the assessee could not furnish satisfactory justification for the source of cash deposits. Accordingly, the addition of Rs. 10,00,100/- made by the Assessing Officer under section 69A of the Act was confirmed, and the appeal of the assessee was dismissed.
4. Aggrieved by the order of CIT(A), this appeal is preferred by the assessee raising following grounds:
1.0 ADDITION OF RS. 10,00, 100/- U/S 69A OF ACT:
1.01 On the facts and in the circumstances of your appellant’s case and in law, the Id.CIT(A) had grossly erred in confirming addition made by Id. AO without giving reasons how the details and documents submitted by your appellant proving source of cash deposited into bank account is bogus.
1.02 Your appellant prays before your Honour to hold so now and treat the action of ld.CIT(A) as erroneous and direct the ld. AO to delete the additions made to returned income.
2.00 Your appellant craves leave to add, alter and / or amend the grounds herein above raised.
5. During the course of hearing, the learned Authorised Representative (AR) submitted that the CIT(A) had not duly considered the evidences placed on record by the assessee. It was further submitted that although the CIT(A) had referred to the remand report, a copy of the same was never furnished to the assessee, thereby depriving the assessee of an opportunity to rebut the findings therein. The AR pointed out that detailed evidences in support of the explanation of cash deposits, including invoices and supporting documents relating to the sale of agricultural produce and jewellery, were duly filed before the CIT(A). These details were also compiled in the form of a summary of invoices, which demonstrated that the source of cash deposits aggregating to Rs. 10,00,100/- stood fully explained. Copies of the said evidences and summary of invoices were placed before us as part of the paper book. It was thus contended that the addition sustained by the CIT(A) under section 69A of the Act was unjustified in the face of such corroborative material, and the order of the CIT(A) deserved to be set aside.
6. On the other hand, the learned Departmental Representative (DR) placed reliance upon the order of the learned CIT(A).
7. We have carefully considered the rival submissions and perused the material available on record. Before we proceed, it is relevant to reproduce the concluding para of the order of the learned CIT(A), which reads as under:
Here the main issue relates with the addition of Rs. 10,00,100/- u/s. 69A made on account of cash deposited. In this regard, during the course of assessment proceedings the assessee failed to reply, thereby the AO made above addition Rs.10,00,100/- u/s. 69A of the Act. Now the assessee has submitted the written submission which reproduced above under heading submissions. The submission made by the assessee is found to be viable for the assessee has failed to justify the sale of agriculture product with evidences such as invoices. So, the sale of agriculture products and purchase of jewelry is bogus. Moreover, the remand report also mentioned that the assessee could not justify its contention. Therefore, the AO has rightly made addition of Rs.10,00,100/- u/s. 69A made on account of cash deposited. In light of the above discussion appeal of the assessee is dismissed.
7.1 From the above extract, it is evident that the learned CIT(A) has committed a clear factual error. The assessee had filed invoices relating to the sale of jewellery, whereas the learned CIT(A) has erroneously referred to them as invoices for purchase of jewellery. This misreading of evidence goes to the root of the matter and shows that the evidences furnished by the assessee were not properly appreciated.
7.2 Further, though the CIT(A) has made reference to a remand report, the same was not supplied to the assessee for rebuttal. Denial of such opportunity constitutes violation of the principles of natural justice. The assessee had specifically placed reliance on documentary evidence including sale invoices of agricultural produce, sale invoices of jewellery, and supporting bank statements. In our opinion, once documentary evidence is filed, the same must either be accepted or objectively disproved by the Revenue with cogent reasons and cannot be brushed aside summarily. In the present case, the CIT(A) has dismissed the evidences filed by the assessee as “bogus” without bringing on record any cogent reason or independent verification. Such an approach cannot be upheld.
7.3 In these circumstances, we are of the considered view that the matter requires fresh adjudication at the level of the CIT(A). Accordingly, we set aside the impugned order and restore the issue back to his file with a direction to consider all the evidences afresh, supply the remand report to the assessee for comments, and pass a speaking order after affording adequate opportunity of hearing. The assessee shall cooperate and furnish all documents as may be required.
7.4 We also note that during the course of hearing, the assessee has placed on record confirmation letters from parties including M/s Ambica Traders in support of the source of cash deposits, which form part of the paper book. Since these confirmations go to the root of the matter and are relevant for proper adjudication of the issue, we admit the same as additional evidence. The learned CIT(A) is directed to consider these evidences along with other material already on record, after affording adequate opportunity to the assessee as well as to the Assessing Officer.
7.5 We make it clear that we have not expressed any opinion on the merits of the addition, and the learned CIT(A) shall decide the issue independently in accordance with law.
7.6 In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Court on 24th September, 2025 at Ahmedabad.
