Filing Rectification U/s 154 First Is Valid Reason for Delay – Bangalore ITAT Revives Appeal in Demonetisation SBN Deposit Case

Smt. Srujana Padma Vs ITO (ITAT Bangalore)

Filing Rectification U/s 154 First Is Valid Reason for Delay – Bangalore ITAT Revives Appeal in Demonetisation SBN Deposit Case

The Bangalore ITAT held that pursuing a rectification application u/s 154 before filing an appeal constitutes a valid and bona fide reason for delay in filing appeal before the CIT(A). Accordingly, the Tribunal condoned a 73-day delay and restored the matter back to the CIT(A) for adjudication on merits.

The assessee’s case had been selected for limited scrutiny to examine cash deposits during the demonetisation period. The AO partly accepted the assessee’s explanation for deposits but treated ₹5 lakh received in Specified Bank Notes (SBN) from M/s Rangaswamappa and Sons towards repayment of loan as unexplained money u/s 69A on the ground that the assessee was not authorized to receive SBN after 09.11.2016.

Instead of immediately filing appeal against the assessment order, the assessee first filed an application u/s 154 seeking rectification. After rejection of the rectification application, the assessee proceeded with filing appeal before the CIT(A), resulting in a delay of 73 days. However, the CIT(A) refused to condone the delay and dismissed the appeal.

The ITAT observed that the delay occurred because the assessee was bona fide pursuing rectification proceedings and thereafter took steps to file appeal after receipt of the rejection order. The Tribunal held that this explanation constituted sufficient cause and therefore the delay deserved condonation.

Accordingly, the Tribunal condoned the delay and remitted the matter back to the CIT(A) for fresh consideration in accordance with law without raising limitation objections.

FULL TEXT OF THE ORDER OF ITAT BANGALORE

This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 12/01/2026 in respect of A.Y. 2017-18.

2. The brief facts of the case are that the assessee is an individual and filed her return of income. The assessee’s case was selected for limited scrutiny through CASS for examining the cash deposits made during the demonetization period. Notices u/s. 143(2) and 142(1) were issued. The assessee filed her responses to the notices issued u/s. 142(1). The assessee had given the reasons for the cash deposits made during the demonetization period. The AO had partly accepted the contention and not accepted the deposits made during the demonetization period in SBN. The reason given by the AO is that the assessee is not authorized to receive SBN after 09/11/2016. Therefore, the AO had treated the SBN receipts of Rs. 5,00,000/- received from M/s. Rangaswamappa and Sons towards the discharge of their loan as unexplained money u/s. 69A of the Act.

3. As against the said order, the assessee filed an appeal before the Ld.CIT(A) with a delay of 73 days. In the delay condonation application, the assessee submitted that as against the assessment order, the assessee had filed an application u/s. 154 of the Act and after the said application was rejected by the authority, the present appeal has been filed and therefore prayed to condone the said delay. The Ld.CIT(A) had not accepted the reasons and dismissed the appeal.

4. As against the said order, the present appeal has been filed by the assessee before this Tribunal.

5. At the time of hearing, the Ld.AR submitted that the Ld.CIT(A) had not properly appreciated the reasons given in the delay condonation application which is a fact and therefore prayed to set aside the order of the Ld.CIT(A).

6. The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeal.

7. We have heard the arguments of both sides and perused the materials available on record.

8. We have considered the application filed by the assessee for condoning the delay of 73 days in filing the appeal before the Ld.CIT(A). The assessee instead of filing an appeal, had filed an application u/s. 154 of theAct to rectify the assessment order which was rejected on 22/01/2020. Thereafter the assessee had took steps to file the appeal before the Ld.CIT(A). The pendency of the 154 application increased the delay in filing the appeal before the Ld.CIT(A). The assessee on receipt of the rejection order had made arrangements for filing the appeal before the Ld.CIT(A) which took some time. Therefore, we are of the view that the assessee has valid explanations for filing the appeal with a delay of 73 days. We therefore, condone the said delay of 73 days in filing the appeal before the Ld.CIT(A) and remit this issue to the file of the Ld.CIT(A) for fresh consideration in accordance with law without raising the limitation.

9. In the result, the appeal filed by the assessee is allowed for statistical purposes.

Order pronounced in the open court on 21st May, 2026.