Hebbale Javarappa Santhosh Kumar Vs The Income Tax Officer (ITAT, Bangalore Bench)
Appeal Delayed by Years, but Turnover May Belong to Sister-in-Law: Bengaluru ITAT Orders Fresh Assessment
A liquor trader’s bank accounts reflected turnover higher than the turnover attributed to him in assessment. With no response to the Assessing Officer’s notices, the difference was treated as unreported turnover, and profit was estimated on it. Years later, the assessee contended that part of the transactions belonged to his sister-in-law’s separately accounted and taxed business. The Bengaluru ITAT condoned the delay in the first appeal and sent the matter back for a fresh assessment on the evidence.
Assessment Made Without the Assessee’s Explanation
The assessee ran a liquor shop and filed his return for AY 2017–18. His case was selected for scrutiny. The Assessing Officer issued notices calling for details, but the assessee did not respond. On the material then available, the Assessing Officer treated the excess turnover as turnover omitted by the assessee and estimated net profit at 5.04% of that amount. The estimated profit was added to his returned income.
The assessee filed an appeal before the CIT(A) after a substantial delay. The CIT(A) rejected the appeal on limitation, without deciding the turnover dispute on its merits. The assessee then approached the Tribunal.
Why the Assessee Said the Appeal Was Late
Before the ITAT, the assessee said that he was unfamiliar with the electronic proceedings and had depended on an accountant for return filing and tax matters. According to him, that accountant had not informed him of the assessment notices or the assessment order. He claimed to have learned of the demand only after his bank account was attached, following which another accountant accessed the portal and downloaded the order.
The assessee also relied on the COVID-19 limitation extension ordered by the Supreme Court. The assessment order had been passed on 12 December 2019, shortly before the pandemic period. He submitted that this period had to be taken into account when considering the delay.
The Department opposed condonation, stressing that the delay was far from minor. The Tribunal nevertheless considered the explanation, the limitation extension and the documents placed before it. It held that the delay in filing the appeal before the CIT(A) should be condoned.
The Turnover Dispute Required Verification
On merits, the assessee denied suppressing turnover. His explanation was that receipts of his sister-in-law’s business had also passed through his bank accounts and had been included in the turnover attributed to him. He maintained that her transactions were recorded in her own books, her accounts were audited, and the income had been offered to tax by her. Taxing the same receipts again as his undisclosed turnover, he argued, would result in double taxation.
The assessee produced copies of both sets of books and bank statements before the appellate authorities. The Tribunal observed that these records had not been produced before the Assessing Officer. The Assessing Officer had consequently had no opportunity to compare the entries, verify ownership of the receipts or make a finding on the sister-in-law’s transactions.
That was the reason for the remand. The ITAT did not find that the entire disputed turnover belonged to the sister-in-law. It found that the explanation was supported by documents requiring examination before a proper tax determination could be made.
Tribunal’s Direction
The Tribunal set aside the CIT(A)’s order, condoned the delay before the CIT(A), and also set aside the assessment order dated 12 December 2019. It restored the matter to the Assessing Officer to consider the documents furnished by the assessee, hear him and make the assessment afresh in accordance with law. The appeal was allowed for statistical purposes.
The Assessing Officer must now decide, on the bank entries and books, which transactions belong to the assessee and which, if any, belong to his sister-in-law. The Tribunal has provided an opportunity for that examination; it has not deleted the estimated profit addition on merits.
Author’s Comments
The case shows why a bank credit or turnover difference cannot always be assigned to one taxpayer without examining the underlying transactions. If another person’s business receipts genuinely passed through the assessee’s account, the relevant books, bank trail and evidence of tax treatment in that person’s hands become central. A claim of double taxation requires transaction-level reconciliation, not merely an assertion that the other person has filed a return.
The decision also illustrates the cost of failing to respond during scrutiny. The assessee’s documents reached the appellate stage, but their late production meant that the Assessing Officer had to be given the first opportunity to verify them. The fresh assessment will depend on whether the assessee can now connect the disputed bank entries to the sister-in-law’s recorded turnover.
A caution on the text of the order: it gives differing figures for the appeal delay, referring to 2,540 days in one paragraph and 2,216 days in another before discussing an adjusted delay after the COVID-19 extension. It also refers to a submission dated September 2025 before the CIT(A), although the CIT(A)’s order is described as dated July 2025. These apparent date and calculation inconsistencies should be checked against the appeal records before quoting an exact delay figure. They do not change the stated operative result: the delay was condoned and the turnover issue was remitted for fresh assessment.
Cases Discussed
- In Re: Cognizance For Extension of Limitation (Supreme Court of India) — relied upon in relation to exclusion/extension of the COVID-19 period while considering limitation.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT BANGALORE
This is an appeal filed by the assessee challenging the order of the Ld.Addl/JCIT(A)-4, Hyderabad dated 31/07/2025 in respect of the A.Y. 2017-18.
2. The brief facts of the case are that the assessee is running a liquor shop and he filed his return of income on 05/01/2018. Thereafter the case was selected for scrutiny under CASS and notice u/s. 143(2) was issued. Subsequently, notice u/s. 142(1) was issued. Two more notices were issued to furnish the details called for in the notice dated 06/08/2019. The assessee had not responded to the said notices and therefore the AO considering the materials available before him, had made the assessment in which the excess turnover has been taken as the under reported turnover of the assessee and the net profit has been estimated at 5.04% of the under reported turnover. The AO had made the said addition to the total income reported by the assessee. As against the said order, the assessee filed an appeal before the Ld.CIT(A) with a delay of 2540 days. The assessee filed an application to condone the said delay. The Ld.CIT(A) after considering the reasons stated in the delay condonation application, had dismissed the appeal on the ground of limitation.
3. The said order is under challenge before this Tribunal.
4. At the time of hearing, the Ld.AR submitted that the assessee is not familiar with the faceless proceedings and he is depending on the accountant for filing the return, etc. The said accountant had not intimated anything about the notices issued by the AO and also the order passed by the AO and therefore the assessee has no knowledge about the assessment proceedings. The Ld.AR further submitted that only after the bank account has been attached, the assessee came to know about the assessment order and thereafter through the another accountant, the portal was viewed and the assessment order was downloaded. The Ld.AR also submitted that the assessment order was passed on 12/12/2019 and thereafter from the month of March, 2020, the Government of India had declared lockdown and therefore the lockdown period which was also extended by the Hon’ble Supreme Court could not be taken into consideration while calculating the said delay. The Ld.AR on merits submitted that there is no underreporting of any turnover since the assessee’s sister-in-law’s business income were also deposited in the bank accounts of the assessee and therefore, the excess turnover was available. The Ld.AR further submitted that the said turnover of his sister-in-laws were separately recorded in her books of accounts and the same were also duly audited and the said amount was also offered to tax by the sister-in-law and therefore submitted that the inclusion of the said income into the account of the assessee would amounts to double taxation and prayed to allow the appeal. The Ld.AR also filed a paper book enclosing the documents and prayed to allow the appeal.
5. The Ld.DR submitted that the delay is not a small one and therefore the said delay need not be condoned and prayed to dismiss the appeal.
6. We have heard the arguments of both sides and perused the materials available on record.
7. In the present appeal, the assessment was made by the AO by taking the difference between the turnover reported and the turnover available in the audit report as the underreported turnover and based on that, the income has been estimated by the AO. The AO had arrived the said conclusion since the assessee had not responded to any of the notices. Before the Ld.CIT(A), the assessee filed an appeal with a delay of 2216 days and also enclosed an application to condone the said delay. We have also considered the submission made by the Ld.AR that even though the assessment order was passed on 12/12/2019, the delay period falls under the lockdown period of the covid19. We have also considered the suomto order of the Hon’ble Supreme Court in which the Hon’ble Supreme Court has extended the period of limitation upto 31/05/2022 and therefore if we exclude the said covid19 period, the delay would be about 1771 days. The assessee’s contention that he is not familiar with the faceless proceedings and also because of the covid19 lockdown for almost 2 years, there would be every possibility that the assessee might have missed the deadline for filing the appeal before the Ld.CIT(A). We have also considered the documents filed by the assessee in the paper book in which the assessee had filed the copies of his books of accounts and the copies of the books of accounts of the assessee’s sister-in-law and also bank statements of Bank of Baroda and State Bank of India to show that the turnover of the assessee’s sister-in-law were also treated as the turnover of the assessee.
8. Further, in the paper book, the Ld.AR filed the submissions made before the Ld.CIT(A) and also the copies of the various documents when the appeal was pending before the Ld.CIT(A). Unfortunately, the Ld.CIT(A) in his order, had not considered about the said submissions dated 20/09/2025 which was uploaded on 22/09/2025 before rejecting the application for condonation of delay. From the paper book, we find that the said documents were not placed before the AO but filed before the Ld.CIT(A). Therefore the AO has no opportunity to verify the said documents and gave a finding on the said documents. In such circumstances, in the interest of justice, we have decided to remit this issue to the file of the AO for doing the assessment in accordance with law.
9. We therefore set aside the order of the Ld.CIT(A) by condoning the delay in filing the appeal before it and also set aside the order of the AO dated 12/12/2019 and remit this issue to the file of the AO for doing the assessment afresh after considering the documents filed by the assessee and thereafter make the assessment in accordance with law after hearing the assessee.
10. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced in the open court on 19th February, 2026.
