Sivan Suratha Madasamy Vs ITO (ITAT Chennai)
Quarry Agent’s Cash Deposits and Property Sale: Chennai ITAT Condoned 124-Day Delay, Restores Appeal for Examination
A person who receives money from clients and pays it to the Government on their behalf may have substantial deposits in his bank account, although only his commission belongs to him. But that explanation must be supported by the underlying transactions. In Sivan Suratha Madasamy, the Chennai Tribunal gave a quarry contract facilitator another opportunity to establish precisely that, while also directing examination of a property sale reported in AIS.
The immediate issue before the Tribunal was procedural. The CIT(A) had dismissed the assessee’s appeal because it was filed 124 days late, without deciding either addition on merits. The Tribunal condoned the delay and restored the issues to the CIT(A) for a fresh decision.
Why were additions made?
The assessee, an individual engaged in commission-based activity, filed his return for AY 2024–25 declaring income of ₹4,97,530. During scrutiny, the AO noticed substantial cash deposits in his bank account and asked him to explain them.
The assessee stated that he worked in stone quarry and contract facilitation. In the course of that work, parties gave him money for payment into the Government treasury towards lease premium, royalty and other statutory amounts connected with their quarry contracts. His case was that these collections belonged to the parties, and that he had correctly offered only the commission earned as income.
The AO also noticed an AIS entry for sale of property for ₹13,07,116, which had not been reported in the return. He made additions towards commission income and short-term capital gains, assessing total income at ₹21,65,345.
Why was the first appeal late?
The appeal before the CIT(A) was filed 124 days beyond the prescribed time. The assessee explained that he had limited financial resources and could not immediately arrange professional help to prepare and file the appeal. He also said that the property issue required him to obtain and verify documents, including the registered sale deed and encumbrance certificate, which took time to collect.
The CIT(A) did not accept the explanation for delay and dismissed the appeal at the threshold. Consequently, the first appellate authority did not decide whether the quarry-related deposits were client funds or whether the AO had correctly computed income from the property transaction.
Tribunal gives another opportunity
The Tribunal considered the explanation in the circumstances of this assessee’s case and held that there was sufficient cause for the delay. It therefore condoned the 124 days in the interest of natural justice.
The Tribunal also noted that the assessee had not appeared before the AO and CIT(A), and that the disputed matters had not been properly examined on merits. It sent the issues back to the CIT(A) with a direction to call for the necessary details and decide them in accordance with law. The assessee was directed to produce the documents sought and cooperate in the proceedings.
The appeal was allowed for statistical purposes. The Tribunal did not delete the additions or accept the assessee’s explanation as proved.
Author’s comments
The order is significant for the opportunity it restores, rather than for any final ruling on the taxability of the deposits. The assessee’s claim that he was handling money on behalf of quarry clients will have to be tested against evidence showing who paid him, why each amount was received, when it was deposited and how it was paid to the Government treasury. A general statement that the money belongs to others will not, by itself, trace the individual deposits.
The property issue similarly calls for the sale deed and acquisition details. An AIS entry showing ₹13,07,116 of sale consideration does not alone establish the amount of short-term capital gain; the transaction and computation have to be examined. The Tribunal has now directed the CIT(A) to do that examination after giving the assessee a further opportunity.
The ruling also illustrates that a delay of 124 days need not prevent an appeal from being heard where the appellate forum accepts the explanation as sufficient cause. That finding was made on the facts of this case. The assessee must now use the opportunity granted by the Tribunal to substantiate both parts of his appeal.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, (in short “CIT(A)”) passed u/s. 250 of the Income Tax Act, 1961 (in short “the Act”) dated 27.05.2026 for Assessment Year (AY) 2024-25.
2. The assessee is an individual and engaged in commission-based activity. The assessee filed the return of income for AY 2024-25 on 31.03.2025 declaring total income of Rs.4,97,530/-. The case was selected for scrutiny, and the statutory notices were duly served on the assessee. Since the assessee had substantial cash deposits into his bank account, the A.O called on the assessee to furnish the details pertaining to the same. The assessee submitted that he is acting as a commission agent in the field of stone quarry, contract facilitation and in his line of activity he receives amount from parties to be paid on their behalf to Govt. treasury as lease premium, royalty or statutory payments for finalization of their stone quarry contracts. Accordingly, the assessee submitted that the amount deposited does not belong to him and that he has offered only the commission income while filing the return of income. The A.O also noticed during assessment proceedings that as per AIS information the assessee had sold property for a considerable of Rs. 13,07,116/- which has not been offered in the return of income. The A.O accordingly made addition towards commission income and short-term capital gains to assess the income at Rs.21,65,345/-. Aggrieved, the assessee filed further appeal before the CIT(A). There was a delay of 124 days in filing the appeal before the CIT(A). The CIT(A) did not condone the delay and dismissed the appeal in limine. The assessee is in appeal before the Tribunal against the order of the CIT(A).
3. We have heard the parties and perused the material available on record. We notice that the assessee before the CIT(A) has submitted the following reasons for the delay:
“2. That there has been a delay in filing the present appeal beyond the prescribed time limit. The delay is neither intentional nor deliberate but has occurred due to genuine and unavoidable circumstances.
3. The appellant submits that he is an individual with limited financial resources and was facing severe financial constraints during the relevant period. Due to such constraints, the appellant was unable to immediately arrange professional assistance and comply with the procedural requirements for filing the appeal within the prescribed time.
4. The appellant further submits that the issues involved in the present case required collection and verification of relevant documentary evidences, including the registered sale deed, encumbrance certificate, and other supporting documents relating to the property transaction.
5. The process of obtaining and compiling the above documents from the concerned authorities took considerable time. The delay was further aggravated due to practical difficulties in accessing records and ensuring correctness of the information.
6. It is submitted that the appellant has now obtained all necessary documents and has prepared the appeal with complete and correct facts supported by documentary evidence. 7. The appellant submits that the delay has occurred due to bona fide reasons beyond his control and there is no element of negligence, inaction or lack of diligence.”
4. Considering the facts and circumstances peculiar to assessee’s case, we are of the view that the there is a sufficient cause for the delay in filing the appeal before the CIT(A). Hence, in the interest of natural justice, we condone the delay in filing the appeal before the CIT(A). Considering that the assessee has not appeared before the AO & CIT(A) also and that the lower authorities have not examined the impugned issues on merits, we are inclined to give one more opportunity to the assessee to substantiate the claim by producing the required details. Accordingly, we remit the impugned issues back to the CIT(A) with a direction to call for necessary details and decide the issue in accordance with law. The assessee is required to submit the necessary details as may be called for and cooperate with the proceedings. It is ordered accordingly.
5. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced on 22nd day of September, 2026 at Chennai.
