Case Law Details
Marate Venkateshkumar Vs ITO (ITAT Bangalore)
Condonation of delay in filing of appeal by Senior Citizen assessee should be allowed if he was unfamiliar with digital systems and faceless scheme
Conclusion: Assessee had shown sufficient cause for the delay in filing the appeals before the Tribunal as he was old and not well acquainted and conversant with the digital system in order to follow up with the income tax notices, which were posted in IT portal. Accordingly, the delay in filing appeal was condoned.
Held: Assessee had deposited a sum of Rs.27,87,500/- into his bank account during demonetization period. Same had been considered as income u/s 69A. Against this assessee went in appeal before NFAC, who had confirmed it. Against this, assessee was once again in appeal. There was a delay of 424 days in filing the appeal before this Tribunal. Assessee had explained that assessee was of 74 years old and not well acquainted and conversant with the digital system in order to follow up with the income tax notices, which were posted in IT portal. Assessee was not aware about any faceless scheme of assessment followed by the department. Assessee had not seen the NFAC’s order in its portal and the same had been came to knowledge of assessee when it received a message about penalty notice issued u/s 270A & 270AAC directing him to file reply in response to the notice issued. Consequent to this, assessee consulted his advocate and taken steps to file the appeal before this Tribunal. Thus, it caused 424 days delay in filing the appeal before the Tribunal and prayed to condone the delay. Department strongly opposed the admission of appeal and submitted that assessee was habitual in filing appeal belatedly as the appeal before NFAC also filed belatedly. Hence, no liberal view to be taken on this case and appeals should not be admitted for adjudication. It was held that the courts were empowered to condone the delay, provided the litigant was able to demonstrate that there was “sufficient cause” in preferring appeal beyond the limitation period. The Courts had also held that the expression “sufficient cause” should receive liberal construction so as to advance substantial justice. Hence, the question of condonation of delay was a factual matter and the result would depend upon the facts of the case and the cause shown by the assessee for the delay. It had also been opined that generally delays in preferring appeals were required to be condoned in the interest of justice, where no gross negligence or deliberate inaction or lack of bona fides was imputable to the party seeking condonation of the delay. Therefore, assessee had shown sufficient cause for the delay in filing the appeals before the Tribunal. Accordingly, the delay in filing appeal was condoned.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal by assessee is directed against order of NFAC passed u/s 250 of the Income-tax Act, 1961 [‘the Act’ for short] for the assessment year 2017-18 dated 28.6.2022. The assessee has raised following grounds of appeal:
1. “The assessment in the instant case is bad in law on facts of the case as well on the statutory provisions of the Income Tax Act. Further, the impugned order passed by the learned CIT (A) confirming the additions made by the assessing officer is in violation of the principals of natural justice.
2. The learned CIT (A) has erred both in law and on the facts in confirming the action of the Ld. AO by making high pitch addition of Rs. 27,8 7,500/- on account of cash deposit made during the demonetization period (08-11- 2016 to 30-12-2016) and thereby raised demand of Rs. 29,14,015/-without considering the submission made by the Appellant and rejecting the explanation and requisite documents already submitted during the course of assessment proceedings.
3. The learned CIT(A) has erred both in law and on the facts in confirming the addition of Rs.27,87,500/- u/s.69A r.w.s.115BBE of the Act, on account of alleged Unexplained Money Ignoring the profession of the Appellant and/or without appreciating the fact that the same is the part of gross receipts from his profession and the net income on such receipts have already been offered to tax as income in the ROI filed for the preceding previous years.
4. The learned CIT (A) has erred both in law and on the facts in confirming the impugned addition to the total income of the Appellant by wrongly invoking section 69A r.w.s. 115BBE of the Act. The learned CIT (A) failed to take note of the fact that the provisions of Section 69A was not applicable where assessee had duly recorded transaction of cash deposit in bank during demonetization period in books of account. Section 69A applies only to those unaccounted assets which are not recorded in books of account [Sunny Kapoor Vs. Income-tax Officer [2022] 142 taxmann.com 577 (Lucknow – Trib.)]
5. The learned CIT(A) as well as the assessing authority are well aware of the fact that the Appellant has maintained by the books of accounts and his books accounts have been duly audited by a chartered accountant and furnished Tax Audit Report for the relevant year under consideration. When transactions are recorded in the books of accounts maintained by the Appellant, the additions cannot be made under section 69A of the Act. The act of the AO in making addition is bad in law on the principles and legal provisions.
6. Both the lower authorities have passed the orders without properly appreciating the facts and further erred in grossly ignoring submissions, explanations and information submitted by the Appellant which ought to have been considered before passing the impugned order. This action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore the impugned order is liable to be set aside, as illegal.
7. The Appellant refers to and rely upon the decisions of the Hon’ble ITAT, Bangalore in the case of SOT/. Teena Bethala Vs. ITO (ITA No1383/Rang/2019, dtd 28.08.2019, wherein it was held that: “On reading of section 69A, it is clear that the onus is upon the Assessing officer to find the assessee to be the owner of any money, bullion, je
wellery or valuable article and such money, bullion jewellery or valuable article was not recorded in the books of account, if any, maintained by the assessee for any source of income. In these circumstances, the Assessing Officer can resort to making an addition under section 69A of the Act only in respect of monies /assets /articles or things which are not recorded in the assessee ‘s books of account. In the case on hand, the cash deposits are recorded in the books of account and are reportedly made on the receipt from a creditor. Further, the PAN and address of the creditor as well as ledger account copies of the creditor in the assessee’s books of account have also been filed before the Assessing Officer. In these circumstances, it is evident that the Assessing Officer has not made out a case calling for an addition under section 69A of the Act. Probably, an addition under section 68 of the Act could have considered: but then (hat is not the case of Assessing Officer. The assessee, apart from raising several other grounds, has challenged She legality of the addition being made under section 69A of the Act. In support of the assessee’s contentions, the AK placed reliance on the decision on the decision of the ITAT- Mumbai Bench in the case of Dy. CIT v. Karthik Construction Co. In ITA No.22292/Mum/2016, dated 23-2-2018 [2018 Taxpub (DT) 1507 (Mum-Trib)], wherein ‘the ‘Bench at para 6 thereof has held that addition under section 69A of the Act cannot be made in respect of those assets I monies /’entries which are recorded in the assessee’s hooks of account. As regards ITA Nos. 1383 and 1384/’Bang/’201’9, my considered view is that the aforesaid decision of the ITAT — Mumbai Bench (supra) is squarely applicable to the facts of the case on hand, where the entries are recorded in the assessee’s books of account. In this view the matter, I am of the opinion that the addition of Rs. 6,30,000 made under section 69A of the Act is bad in law in the facts and circumstances of the case on hand and therefore, delete the addition of Rs. 6,30,000 made thereunder. The Assessing Officer is according directed”.
8. The Appellant further submits that the both the lower authorities has not brought on record any evidence to show that the cash deposits are not out of the withdrawals from the bank account of the assessee and cash received from the professional services rendered by him i.e., from singing. In this reference attention is invited to the decision of the Hon ’ble ITAT, Delhi in the case of Gordhan, Delhi V, Dy.CIT dated 19.10.2019, wherein it was held that “no addition can be made under section 68 on the sole reason that there is a time gap between the date of withdrawals from the bank account and re-deposit the same in the bank account. Unless the Assessing officer demonstrates that the amount in question has been used by the assessee for any other purpose. In my view, addition is made on inferences and presumptions which is bad in law”.
9. The Appellant further submits that the learned CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in levying interest u/s “234/234B/234C” of the Act. Also, the learned CIT(A) has erred in law and on facts of the case in confirming action of the Id. AO in initiating penalty u/s 271AAC of the Act.
10. The Appellant craves leave to add, amend, modify alter or delete modify or change all of any of the grounds of appeal during the course of the present appeal proceedings.”
2. Facts of the issue are that assessee has deposited a sum of Rs.27,87,500/- into his bank account during demonetization period. Same has been considered as income u/s 69A of the Act. Against this assessee went in appeal before NFAC, who has confirmed it. Against this, assessee is once again in appeal before us.
2.1 There was a delay of 424 days in filing the appeal before this Tribunal. The assessee has explained that assessee is of 74 years old and not well acquainted and conversant with the digital system in order to follow up with the income tax notices, which are posted in IT portal. The assessee is not aware about any faceless scheme of assessment followed by the department. The assessee has not seen the NFAC’s order in its portal and the same has been came to knowledge of assessee when it received a message about penalty notice issued u/s 270A & 270AAC of the Act directing him to file reply in response to the notice issued. Consequent to this, assessee consulted his advocate and taken steps to file the appeal before this Tribunal. Thus, it caused 424 days delay in filing the appeal before this Tribunal and prayed to condone the delay.
3. The ld. D.R. strongly opposed the admission of appeal and submitted that assessee is habitual in filing appeal belatedly as the appeal before NFAC also filed belatedly. Hence, no liberal view to be taken on this case and appeals shall not be admitted for adjudication.
4. We have heard the rival submissions and carefully perused the record. While considering a delay in filing the appeal, the Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down six principles. For the purpose of convenience, the principles laid down by the Apex Court are reproduced hereunder:
(1} Ordinarily, a litigant does not stand to benefit by lodging an appeal late.
(2) Refusing to condone delay can result in a meritorious’ matter being thrown 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.
(3) ‘Every day’s delay must be explained’ does not mean that a pedantic approach should be made. Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational, commonsense and pragmatic manner.
(4) When substantial justice and technical consideration 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.
(5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.
(6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
4.1. When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non-deliberate delay. Moreover, no counter- affidavit was filed by the Revenue denying the reasons advanced by the assessees. It is not the case of the Revenue that the appeals were filed deliberately with delay. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. As observed by Apex Court, if the application of the assessee for condoning the delay is rejected, it would amount to legalise injustice on technical ground when the Tribunal is capable of removing injustice and to do justice. Therefore, this Tribunal is bound to remove the injustice by condoning the delay on technicalities- If the delay is not condoned, it would amount to legalising an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto. Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorised by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalise an illegal and unconstitutional order passed by the lower authority. Therefore, in our opinion, by preferring the substantial justice, the delay has to be condoned.
4.2. The next question may arise whether delay was excessive or inordinate. There is no question of any excessive or inordinate when the reason stated by the assessees was a reasonable cause for not filing the appeals. We have to see the cause for the delay. When there was a reasonable cause, the period of delay may not be relevant factor. In fact, the Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the condonation of delay and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Accordingly, the Madras High Court condoned nearly 21 years of delay in filing the appeal. When compared to 21 years, 71 days cannot be considered to be inordinate or excessive. Furthermore, the Chennai Tribunal by majority opinion in the case of People Education and Economic Development Society (FEEDS) v. ITO (100 ITD 87) (Chennai) (TM> condoned more than six hundred days delay. It is pertinent to mention herein that the view taken by the present author in that case was overruled by the Third Member.
4.3. The Madras High Court in the case of Sreenivas Charitable Trust (280 ITR 357) (Mad) held that no hard and fast rule can be laid down in the matter of condonation of delay and the Court should adopt a pragmatic approach and the Court should exercise their discretion on the facts of each case keeping in mind that in construing the expression “sufficient cause” the principle of advancing substantial justice is of prime importance and the expression “sufficient cause” should receive a liberal construction. Therefore, this Judgment of the Madras High Court (supra) clearly says that in order to advance substantial justice which is of prime importance, the expression “sufficient cause” should receive a liberal construction. In this case, the issue on merit regarding granting of deduction u / s. 80IB was covered in favour of the assessee by the Judgment of the Madras High Court. Therefore, for the purpose of advancing substantial justice which is of prime importance in the administration of justice, the expression “sufficient cause” should receive a liberal construction. In our opinion, this Judgment of the Madras High Court is also squarely applicable to the facts of this case. A similar view was taken by the Madras High Court in the case of Venkatadri Traders Ltd. v. CIT (2001) 168 CTR (Mad) 81 : (2001) 118 Taxman 622 (Mad).
4.4. The Mumbai Bench of this Tribunal in the case of Bajaj Hindusthan Ltd. v. Jt. CIT (AT) (277 ITR 1) has condoned the delay of 180 days when the appeal was filed after the pronouncement of the Judgment of the Apex Court. Furthermore, the Revenue has not filed any counter-affidavit opposing the application of the assessee for condonation of delay. The Apex Court in the case of Mrs. Sandhya Rani Sarkar vs. Smt. Sudha Rani Debi (AIR 1978 SC 537) held that non-filing of affidavit in opposition to an application for condonation of delay may be a sufficient cause for condonation of delay. In this case, the Revenue has not filed any counter-affidavit opposing the applications of the assessees, therefore, as held by the Apex Court, there is sufficient cause for condonation of delay. The Supreme Court observed that when the delay was of short duration, a liberal view should be taken. “It does not mean that when the delay was for longer period, the delay should not be condoned even though there was sufficient cause. The Apex Court did not say that longer period of delay should not be condoned. Condonation of delay is the discretion of the Court/Tribunal. Therefore, it would depend upon the facts of each case. In our opinion, when there is sufficient cause for not filing the appeals within the period of limitation, the delay has to be condoned irrespective of the duration/period. In this case, the non-filing of an affidavit by the Revenue for opposing the condonation of delay itself is sufficient for condoning the delay in filing the appeals before the Tribunal.
4.5. In the judgment rendered by the Supreme Court in the case of Esha Bhattacharjee vs. Managing Committee of Raghunathpur Nafa Academy & others (Civil Appeal Nos. 8183 – 8184 of 2013), the Supreme Court has referred to some of the decisions rendered by Hon’ble Courts on the principles to be followed while adjudicating the issue of condonation of delay. For the sake of convenience, some of the judgments are extracted as follows:
“a) In Collector, Land Acquisition, Anantnag and another v. Mst. Katiji and others (supra), a two-Judge Bench observed that the legislature has conferred power to condone delay by enacting Section 5 of the Indian Limitation Act of 1963 in order to enable the courts to do substantial justice to parties by disposing of matters on merits. The expression “sufficient cause” employed by the legislature is adequately elastic to enable the courts to ^.apply the law in a meaningful manner which subserves the ends of justice, for that is the life-purpose for the existence of the institution of courts. The learned Judges emphasized on adoption of a liberal approach while dealing with the applications for condonation of delay as ordinarily a litigant does not stand to benefit by lodging an appeal late and refusal to condone delay can result in a meritorious matter being thrown out at the very threshold and the cause of justice being defeated. It was stressed that there should not be a pedantic approach but the doctrine that is to be kept in mind is that the matter has to be dealt with in a rational commonsense pragmatic manner and cause of substantial justice deserves to be preferred over the technical considerations. It was also ruled that there is no presumption that delay is occasioned deliberately or on account of culpable negligence and that the courts are not supposed to legalise injustice on technical grounds as it is the duty of the court to remove injustice. In the said case the Division Bench observed that the State which represents the collective cause of the community does not deserve a litigant-non grata status and the courts are required to be informed with the spirit and philosophy of the provision in the course of interpretation of the expression “sufficient cause”.
(b) In G. Ramegowda, Major and others v. Special Land Acquisition Officer, Bangalore (1988)(2 SCC 142), Venkatachaliah, J. (as his Lordship then was), speaking for the Court, has opined thus: “The contours of the area of discretion of the courts in the matter of condonation of delays in filing appeals are set out in a number of pronouncements of this Court. See : Ramlal, Motilal and Chhotelal v. Rewa Coalfield Ltd.(1962)(2 SCR 762); Shakuntala Devi Jain v. Kuntal Kumari(1969)(l SCR 1006); Concord of India Insurance Co. Ltd. V. Nirmala Devi(1979)(3 SCR 694); Lala Mata Din v. A. Narayanan(1970)(2 SCR 90); Collector, Land Acquisition v. Katiji etc. There is, it is true, no general principle saving the party from all mistakes of its counsel. If there is negligence, deliberate or gross inaction or lack of bonafide on the part of the party or its counsel there is no reason why the opposite side should be exposed to a time-barred appeal. Each case will have to be considered on the particularities of its own special facts. However, the expression ‘sufficient cause’ in Section 5 must receive a liberal construction so as to advance substantial justice and generally delays in preferring appeals are required $o be condoned in the the interest of justice where no gross negligence or deliberate inaction or lack of bona fides is imputable to the party seeking condonation of the delay.”….
(c) In this context, we may refer with profit to the authority in Oriental Aroma Chemical Industries Limited v. Gujarat Industrial Development Corporation and another (2010)(5 SCC . 459), where a two-Judge Bench of this Court has observed that the law of limitation is founded on public policy. The legislature does not prescribe limitation with the object of destroying the rights of the parties but to ensure that they do not resort to dilatory tactics and seek remedy without delay. The idea is that every legal remedy must be kept alive for a period fixed by the legislature. To put it differently, the law of limitation prescribes a period within which legal remedy can be availed for redress of the legal injury. At the same time, the courts are bestowed with the power to condone the delay, if sufficient cause is shown for not availing the remedy within the stipulated time. Thereafter, the learned Judges proceeded to state that this Court has justifiably advocated adoption of liberal approach in condoning the delay of short duration and a stricter approach where the delay is inordinate, (d) In Improvement Trust, Ludhiana v. Ujagar Singh and others^ 010)(6 SCC 786), it has been held that while considering an application for condonation of delay no straitjacket formula is prescribed to come to the conclusion if sufficient and good grounds have been made out or not. It has been further stated therein that each case has to be weighed from its facts and the circumstances in which the party acts and behaves.”
4.6. The principles that emanate from the above said decisions are that, in the matter of condonation of delay in filing appeals beyond the limitation period, the courts are empowered to condone the delay, provided the litigant is able to demonstrate that there was “sufficient cause” in preferring appeal beyond the limitation period. The Courts have also held that the expression “sufficient cause” should receive liberal construction so as to advance substantial justice. Hence, the question of condonation of delay is a factual matter and the result would depend upon the facts of the case and the cause shown by the assessee for the delay. It has also been opined that generally delays in preferring appeals are required to be condoned in the interest of justice, where no gross negligence or deliberate inaction or lack of bona fides is imputable to the party seeking condonation of the delay. In view of the foregoing, we are of the view that the assessees have shown sufficient cause for the delay in filing the appeals before the Tribunal. Accordingly, we condone the delay in filing this appeal before us and admit the appeal for adjudication.
4.7 After condoning the delay, the issue on merit of the additions is covered by the judgement of coordinate bench in the case of Bhoopalam Marketing Services Ltd. in ITA No.375/Bang/2022 dated 15.9.2022, wherein held as under:
“7. We have carefully considered the rival contention and perused the orders of the lower authorities.
Admittedly the assessee has deposited Rs.298, 08,080!- during the post-demonetization between 09/11/2016 and 3/12/2016.
Therefore, Ld.AO made addition of INR 5,82,76,300/- as income of the assessee u!s. 68 of the income tax act, by passing assessment order u/s. 144 of the Act. The Ld.AO made such addition as the assessee could not file requisite details as the notice was issued to the email address that was not functional. In the interest of justice, we deem it proper to remand the issues back to the Ld.AO for a de novo verification.
7.1 We have carefully gone through the various standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean. The 1st of such instruction was issued on 21!02!2017 by instruction number 03!2017. The 2nd instruction was issued on 03!03!2017 instruction number 4!2017. The 3rd instruction was in the form of a circular dated 15!11!2017 in F.No. 225!363!2017-ITA.II and the last one dated 09!08!2019 in F.no.225!145!2019-ITA.II. These instructions gives a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases.
8. In one of such instructions dated 09!08!2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money.
8.1 The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not.”
4.8 In view of the above order of the Tribunal, we inclined to remit the issue in dispute to the file of AO to examine the issue in the light of various circulars issued by CBDT on addition relating to deposit of demonetized currency to the bank account of the assessee.
5. In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 6th Dec, 2023
Author Bio
