ITAT Delhi condone delay in appeal of 1086 days in Sanjay vs. ITO

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

This ruling by ITAT Delhi in Sanjay vs. ITO highlighted the importance of procedural fairness and due process in reassessment cases of every. It again enforces the principle that appeals should not be dismissed merely on technical grounds if there is a genuine delay in filing.

Taxpayers who miss deadlines due to lack of awareness or technical issues should proactively seek legal remedies. The case highlighted the importance of regularly checking registered email IDs, as tax notices and assessment orders are increasingly issued through e-proceedings.

Must Do’s for Assessee/Taxpayer/Return filiers

1. Everyone should file their Income tax return even for non-taxable file, will help in documentation and litigation.

2. Taxpayers should keep clear records of cash transactions, credit card transaction, huge bill payments.

3. Ensure timely responses to tax notices and should Regularly check emails linked to their income tax profile, and

4. Properly classify rural agricultural land sales to avoid unnecessary tax disputes.

If you have received a reassessment notice, consult a tax professional or legal expert to safeguard your rights.

******

Section for ready reference

Section 147 of the Income Tax Act:- If any income chargeable to tax, in the case of an assessee, has escaped assessment for any assessment year, the Assessing Officer may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).

Explanation. — For the purposes of assessment or reassessment or recomputation under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, irrespective of the fact that the provisions of section 148A have not been complied with.

Section 148. Issue of notice where income has escaped assessment.

(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall, subject to the provisions of section 148A, issue a notice to the assessee, along with a copy of the order passed under sub-section (3) of section 148A, requiring him to furnish, within such period as may be specified in the notice, not exceeding three months from the end of the month in which such notice is issued, a return of his income or income of any other person in respect of whom he is assessable under this Act during the previous year corresponding to the relevant assessment year:

Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year:

Provided further that where the Assessing Officer has received information under the scheme notified under section 135A, no notice under this section shall be issued without prior approval of the specified authority.

(2) The return of income required under sub-section (1) shall be furnished in such form and verified in such manner and setting forth such other particulars, as may be prescribed, and the provisions of this Act shall, apply accordingly as if such return were a return required to be furnished under section 139:

Provided that any return of income required under sub-section (1), furnished after the expiry of the period specified in the notice under the said sub-section, shall not be deemed to be a return under section 139.

(3) For the purposes of this section and section 148A, the information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment means, —

(i) any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time; or

(ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or

(iii) any information received under an agreement referred to in section 90 or section 90A of the Act; or

(iv) any information made available to the Assessing Officer under the scheme notified under section 135A; or

(v) any information which requires action in consequence of the order of a Tribunal or a Court; or

(vi) any information in the case of the assessee emanating from survey conducted under section 133A, other than under sub-section (2A) of the said section, on or after the 1st day of September, 2024.

148A Procedure before issuance of notice under section 148

(1) Where the Assessing Officer has information which suggests that income chargeable to tax has escaped assessment in the case of an assessee for the relevant assessment year, he shall, before issuing any notice under section 148 provide an opportunity of being heard to such assessee by serving upon him a notice to show cause as to why a notice under section 148 should not be issued in his case and such notice to show cause shall be accompanied by the information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year.

(2) On receipt of the notice under sub-section (1), the assessee may furnish his reply within such period, as may be specified in the notice.

(3) The Assessing Officer shall, on the basis of material available on record and taking into account the reply of the assessee furnished under sub-section (2), if any, pass an order with the prior approval of the specified authority determining whether or not it is a fit case to issue notice under section 148.

(4) The provisions of this section shall not apply to income chargeable to tax escaping assessment for any assessment year in the case of an assessee where the Assessing Officer has received information under the scheme notified under section 135A.

Explanation.—For the purposes of this section and section 148, “specified authority” means the specified authority referred to in section 151

Section 68 – Cash credits:- Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year :

[Provided that where the sum so credited consists of loan or borrowing or any such amount, by whatever name called, any explanation offered by such assessee shall be deemed to be not satisfactory, unless, —

(a) the person in whose name such credit is recorded in the books of such assessee also offers an explanation about the nature and source of such sum so credited; and

(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

Provided further that] where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless—

(a) the person, being a resident in whose name such credit is recorded in the books of such company also offers an explanation about the nature and source of such sum so credited; and

(b) such explanation in the opinion of the Assessing Officer aforesaid has been found to be satisfactory:

⁸⁵[Provided also] that nothing contained in the first proviso [or second proviso] shall apply if the person, in whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10.

Section 2(14) of the Income-tax Act, the term’ capital asset’ has been defined:

• Property of any kind held by an assessee, whether or not connected with his business or profession.
• Any securities held by an FII which has invested in such securities in accordance with the SEBI Regulations.
• Any unit-linked insurance policy to which exemption under Section 10(10D)​ does not apply on account of applicability of the fourth and fifth proviso [High premium equity oriented ULIPs].

Inclusions in capital asset

All kinds of property, whether movable, immovable, tangible, or intangible, including rights of management or control of an Indian company, is a capital asset.

Exclusions from capital assets

The following assets are excluded from the definition of ‘Capital Assets’.

(c) Agricultural land in India

Agricultural land situated in any rural area in India is not treated as a capital asset. Agricultural land situated beyond the jurisdiction of a municipality or cantonment board having a population of 10,000 or more is not treated as a capital asset if it does not fall within the following distances (to be measured aerially):

1. Up to 2 km from the local limits of the municipality or cantonment board, if the population of such municipality or cantonment board exceeds 10,000 but does not exceed 1,00,000.

2. Up to 6 km from the local limits of the municipality or cantonment board if the population of such municipality or cantonment board exceeds 1,00,000 but does not exceed 10,00,000.

3. Up to 8 km from the local limits of the municipality or cantonment board if the population of such municipality or cantonment board exceeds 10,00,000.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal has been filed by the Assessee against the order dated 14.05.2024 passed by the Ld. CIT(A)/NFAC, Delhi relating to assessment year 2012-13 on the following grounds:-

“1. On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad, both in the eye of law and on the facts.

2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts & in law in confirming the addition despite the fact that learned AO has passed the order without providing reasonable opportunity of being heard to the assessee by violating the principle of natural justice.

3. On the facts and circumstances of the case, the learned CIT(A) has erred in upholding the assessment order passed by the Id.AO despite the fact that no service of notice was made by the Ld.AO during the course of assessment proceedings.

4. On the facts and circumstances of the case and in law, the learned CIT(A) erred in holding that the delay in filing the appeal cannot be condoned. The appellant prays that the delay be condoned and appeal should be taken up for hearing.

5. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in confirming the proceedings under Section 147 read with Section 148, ignoring the fact that the same was bad in the eye of law as the conditions and procedure prescribed under the statute have not been satisfied and complied with.

6. (i) On the facts and circumstances of the case, learned CIT(A) has erred in upholding the reasons recorded for the issue of notice under Section 148 are bad in the eyes of law and are vague.

(i) That the CIT(A) has erred in analyzing the fact that there is no live nexus between the reasons recorded and the belief formed by the Assessing Officer.

7. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts & in law in completely ignoring the fact that that land in question is a rural agricultural land and fall under the ambit of non-capital asset as defined under section 2(14) of the Income Tax Act.

8. (i)On the facts and circumstances of the case, the learned CIT(A) has erred both on facts & in law by treating the cash deposits made by the assessee in his bank account of Rs.28,50,000/- as unexplained cash credit u/s 68 of the Act despite the fact that the same has been sourced from the sale of agricultural land which is exempt by virtue of section 2(14) of the Act.

(ii) That the learned CIT(A) has erred both on facts & in law in confirming the addition of Rs.28,50,000/- without seeking any further clarification and explanation.

9. The appellant craves leave to add, arend or alter any of the grounds of appeal.”

2. The brief facts of the case are that the assesseee deposited cash of Rs. 28,50,000/- in his bank account maintained with Corporation Bank, Rohtak during the AY 2012-13. Since the assessee failed to file the return of income u/s. 139(1), the assessee was required vide letter dated 8.2.2019 to explain the source of cash deposited, but the same remained uncomplied with. Therefore, proceedings u/s. 147 were initiated and notice u/s. 148 of the Act was issued on 28.3.2019 after recording the reasons and obtaining necessary approval from PCIT, Rohtak. Subsequently, several statutory notices were issued to the assessee from time to time and the assessee was required to file his return, but the assessee did not respond. Therefore, AO noted that since the assessee could not explain the source of cash deposits, he framed the assessment at Rs. 28,50,000/- and passed the exparte assessment order u/s. 144/147 of the Act on 06.12.2019. In appeal, Ld. CIT(A) noted that there is a delay of 1086 days in filing the appeal, which he did not condone and dismissed the appeal on account of limitation.

3. Against the aforesaid order, assessee is in appeal before the Tribunal.

4. None appeared on behalf of the assessee, despite issue of notice for hearing. Hence, I am proceeding exparte qua the assessee, after hearing the Ld. DR and perusing the records.

5. I have heard the Ld. DR and perused the records. Upon careful consideration, I note that AO has passed the exparte order in this case and in appeal, Ld. CIT(A) dismissed the appeal of the assessee on account of limitation. I find that the reasons for delay in filing the appeal before the Ld. CIT(A) were that the proceedings before the Ld. CIT(A) were faceless and notices were sent through electronic medium and the assessee is not much technically savvy and the emails used for e-filing activities in the profile sections were never accessed by him. It was the further contention for delay that the recipient of the email never forwarded the same to the assessee and the email account was sparingly accessed by him. I further note that ld. CIT(A) in his order vide para no. 5.5 has observed that the assessee has not submitted any document regarding delay in filing of appeal in response to notice issued by the office of the Ld. CIT(A), however, in the starting of para 5.5 Ld. CIT(A) has observed that the reasons for delay in filing of appeal given in Column no. 15 (by way of separate attachment) of Form no. 35 has been mentioned from which the Ld. CIT(A) was not convinced and dismissed the appeal of the assessee in limine, even without deciding the same on merits of the case. In view of the aforesaid factual matrix, in my considered opinion, reasonable cause has been attributed for delay in filing the appeal before the Ld. CIT(A), whichdeserve to be condoned in the interest of justice. I further find that Ld. CIT(A) has not decided the issues in dispute on merits of the case and dismissed the appeal on account of limitation. Hence, I condone the delay in dispute in filing the appeal before the Ld. CIT(A) and remanded back the matter to the file of the Ld. CIT(A). Ld. CIT(A) shall consider the issues in dispute afresh, and pass a speaking order, after giving adequate opportunity of being heard to the assessee, for which Ld. DR has no objection.

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

Order pronounced in the Open Court on 10.03.2025.

*****

Disclaimer: The suggestions provided in this article are for informational purposes only and do not constitute legal, financial, or professional advice. Readers are encouraged to consult with a qualified expert or professional before making any decisions based on the information shared. The author and publisher are not responsible for any actions taken based on the suggestions presented.