RAGHUVEER SINGH KHANGAROT,JAIPUR vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-7, JAIPUR

Briefly stated, the facts of the case are that the assessment in this case was completed u/s 144 vide order dated 21.03.2013 wherein the Assessing Officer brought to tax an amount of Rs. 39,59,443/- as unexplained deposits in the bank account of the assessee. On appeal, the ld. CIT(A) observed that assessee filed manual appeal which is delayed by 1165 days and reason/ explanation given by the assessee for delay in filing the appeal is not beyond the control of the assessee. Therefore, it was held that the assessee did not file appeal intentionally in time without considering the provisions of law. Hence, he rejected the condonation petition filed by the assessee and the appeal was dismissed at admission stage itself. Aggrieved with the said order, the assessee is in appeal before us.

During the course of hearing, the ld. AR submitted that the appellant is an illiterate person with a village background having no knowledge about the 2 Raghuveer Singh Khangarot, Jaipur Vs. DCIT, Circle-07, Jaipur Income Tax matters etc. In the financial year 2007-08 i.e. on 10.7.2007, he had sold a piece of his agricultural land measuring 7.02 Hectare for Rs.11.50 crores. Except agricultural holdings and income therefrom, the appellant had no other source of income. Due to his ignorance about the Income Tax matters, he did nothing except depositing the sale proceeds in the Bank A/c opened for this purpose only. On getting information about such bank deposits, the case of the appellant was opened by the Income Tax Deptartment and Income tax proceedings were initiated u/s 148 of the Act for the A.Y. 2008-09. As the appellant was totally ignorant about such taxation obligations, so on the advice of his friends and well-wishers, he had handed over such notice to a Chartered Accountant stationed at Jaipur and felt 'end' of the matter. Because of his casual approach in the matter, the Authorized Representatives had also become careless and did not attend the proceedings properly and regularly, resulting in ex-parte order u/s 144 of the Act. Due to lack of representation in the case, the penalty u/s 271(1)(c) was also imposed. In the appeal proceedings before the ld. CIT (A) and Hon’ble ITAT also, the case could not be taken up in right earnest, resulting in ex-parte orders passed by the Appellate Authorities to confirm the addition made on account of such sale proceeds of the `agricultural land' without going into the merits of the case. Due to lack of representation, the ITAT, Jaipur Bench was also pleased to dismiss the appeal of the appellant in limine without going into the merits of the facts. The appellant had been ignorant throughout these proceedings and the fate of appeal orders etc. As a result of such ex-parte appeal order passed by the ITAT, Jaipur Bench, Jaipur, coercive measures of recovery were initiated and the agricultural holdings of the appellant were attached to recover such disputed demand. At this stage only, the appellant had come to know the gravity of the Income tax matters and 'lack of representation' by his ARs before the Appellate Authorities including before the ITAT, Jaipur Bench, Jaipur. In the circumstances, a misc. application was filed before the Bench with a request to 3 Raghuveer Singh Khangarot, Jaipur Vs. DCIT, Circle-07, Jaipur recall their ex-parte order. Having considered the bonafide ignorance of the appellant and the facts and circumstances which prevented the appellant from making proper representation before them, the ITAT, Jaipur Bench, Jaipur was pleased to recall the ex-parte order passed by them and directed the Lower Authorities to decide the matter afresh on the basis of documentary details and documents which could not be considered due to communication gap between the appellant and his ARs. Thereafter, the appellant had become very careful and meticulous in getting the set-aside and other pending proceedings completed religiously. In the 'set-aside' proceedings of the Asstt. Yr. 2008-09, the claim of the appellant was accepted. Like-wise, the assessment proceedings for the Asstt. Year. 2009-10 were also got completed by furnishing all the required details and documents. Copy of these assessment orders are placed in the PB at pages No. 6 to 10. From these assessment/appeal orders, it is seen that now the appellant had become very careful in discharging his legal, taxation and other statutory obligations.

It was further submitted by the ld AR that at this stage, the appellant had come to know the fate of the assessment proceedings for the impunged assessment year, i.e, A.Yr. 2010-11 also, which were completed ex-parte u/s 144 of the Act due to non-representation by his AR and also non-filing of appeal against the said ex-parte order. The facts and circumstances of this assessment year were identical. The case for this year was taken up for scrutiny on the basis of information regarding cash deposits in his Bank A/c. In absence of proper representation by the ARs., the assessment was completed ex-parte u/s 144 of the Act on 21.3.2013 at Rs. 39,59,443/- (treating all the credit entries as un-explained) against which no appeal was filed by them. The appellant was totally ignorant about the ex-parte order so passed and non- filing of the appeal by his ARs. till the set-aside proceedings in the assessment year of 2008-09 were taken up for re-assessment. An affidavit to this effect is 4 Raghuveer Singh Khangarot, Jaipur Vs. DCIT, Circle-07, Jaipur submitted herewith for your kind perusal and record at page No. 11 & 12. Thus the appellant was prevented by bona-fide and honest reasons from non-filing the appeal in time as stated above. Accordingly, the appellant had immediately changed his ARs and had authorized the AR to take appropriate remedial actions for filing appeal etc.

On merits, the ld AR submitted that the addition made by the ld AO is not maintainable factually and legally. On going through the assessment order, it can be noted that the addition had been made by him on the basis of his personal 'whims' only. As mentioned in the body of the assessment order itself, the addition has been made in respect of the entire credit entries of Rs.39,59,443/- appearing in the Bank A/c, treating the entire deposits as `un- explained', without examining the nature of such entries and the rotation of the funds withdrawn from the same bank account itself. In the assessment proceedings, it was informed by the A.R. that the cash deposits were made out of the sale proceeds of the agricultural land sold in the A.Yr. 2008-09 as per 'Cash Flow Statement' plus the funds rotated out of the bank withdrawals as evident from the Bank Statement. The ld. AO had however rejected such explanation on the plea that the appellant had been non-co-operative throughout the assessment proceedings, and the reply was filed at the `fag end of the year' to cover up the source of the cash deposits superficially, no Power of Authority was filed by the AR, so the reply furnished by ‘him’ was not considered, the demand for the Asstt. Yr. 2008-09 had not been paid so far, this fact shows non-co-operative attitude of the appellant and during this year also, the appellant had been trying to ‘some-how’ cover up his ‘mischief’. It was submitted by the ld AR that the above observations of the ld. AO are irrelevant, immaterial and devoid of merits; based on his personal whims. In the process, the ld. AO had failed to spell out as to how the explanation filed by the AR was superfluous. Thus these findings are not maintainable. On the face of the 'Cash Flow Statement' and 'Bank Statement' being the documentary evidences, the 6 Raghuveer Singh Khangarot, Jaipur Vs. DCIT, Circle-07, Jaipur contentions of the appellant could not be negated summarily; particularly when these contentions of the appellant were accepted by Department in the Asstt. Yr. 2008-09 and 2009-10 (Copy of Cash Flow Statement and Bank Statement are placed on record). In the process, the ld. AO had failed to spell out as to how the explanation filed by the AR was superfluous. Accordingly, the addition so made is factually and legally incorrect and the same deserves to be deleted.

The ld DR is heard who has opposed the contentions so advanced by the ld AR. The ld DR submitted that the appeal has been filed with a considerable delay of 1165 days and the assessee has failed to explain the cause of such delay and how the same was beyond his control. It was accordingly submitted that the ld CIT(A) has rightly rejected the appeal at the admission stage itelf and the said order of the ld CIT(A) may kindly be confirmed.

We have heard the rival contentions and perused the material available on record. The ld AR has explained the cause of delay in filing the appeal on ignorance of the assessee about the taxation matters and blind reliance on the authorized representative who has been authorized to take care of his tax matters. It has been stated by the ld AR that only when the Income tax Department attached the assessee’s agricultural land holdings, he came to know about the negligence on part of his authorized representative and has thereafter taken corrective steps in terms of regularizing his tax and related appeal matters and has since changed his authorized representative and in support of the said contentions, an affidavit has been filed which is placed on record. We find that right from AY 2008-09 onwards, there has been consistence non-compliance on part of the assessee and/or his authorized representatives as the assessment orders have been passed u/s 144 and there are delays in filing the appeals and the appeals are dismissed in limine including for the impugned assessment year. For AY 2008-09, there was non- 7 Raghuveer Singh Khangarot, Jaipur Vs. DCIT, Circle-07, Jaipur appearance before the Coordinate Bench as well and the matter was dismissed in limine. Subsequently, the matter was recalled by the Coordinate Bench and set-aside to the file of the AO. In the present case, the assessee has appointed his authorized representative to look after his taxation matters and from the perusal of the assessment order, we find that two persons appeared on behalf of the assessee before the Assessing officer. The one person was not carrying a valid authorization and by the time the second person was appointed, it was towards the fag end of the assessment proceedings. We therefore find that the assessee has been casual in his approach towards handling his taxation matters atleast at the assessment stage. Ignorance of law cannot be an excuse for non-compliance. Once the notice has been issued by the Department, it is incumbent on part of the assessee to respond either by himself or appoint an authorized representative in a timely manner. Further, once an authorized representative is appointed, he is guided by the terms of his appointment and the professional ethics in terms of timely attending to the proceedings and advising the client from time to time. Similarly, once the assessment order has been issued by the Assessing officer assessing certain income in hands of the assessee and the assessee is aggrieved with such order, the law has given an opportunity whereby the assessee can file an appeal before the ld CIT(A) and make the necessary representation. In the present case, we find that once the assessment order was received by the assessee, there has been considerable delay in filing the appeal before the ld CIT(A). The assessee has attributed the delay on his authorized representative stating that as in the past years, the assessee has handed over the assessment order to his authorized representative and has authorized the latter to take the next steps including filing the appeal on behalf of the assessee, however, the latter has failed in discharging his professional duties towards him as reflected from delay in filing the appeal. To our mind, these are serious allegations and we are not an authority to comment on this. All we can say is that once a professional is 8 Raghuveer Singh Khangarot, Jaipur Vs. DCIT, Circle-07, Jaipur appointed to handle a client’s matter and for any reason, the professional is not in a position to handle the client’s matter, he should reach out to the client and inform the latter. This will help the client in taking corrective steps in regard to his matters. However, when the client is kept in dark and not even informed about the non-filing of appeal or attending to the appeal proceedings, it is professionally not correct on part of the authorized representative. In the instant case, we therefore find that though the authorized representative has been appointed by the assessee to help him in attending to his tax matters, however, there has been delay in filing the present appeal. It is a settled legal proposition that an assessee should not be penalized for delay and latches on part of the authorized representative. Further, where substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred. Here, useful reference can be drawn to the decision of the Hon’ble Supreme Court in case of Collector Land Acquisition Anantnag & Anothers vs MST. Katji & Ors. 1987 AIR 1353 where the Hon’ble Supreme Court was pleased to held as under:

Ordinarily a litigant does not stand to benefit by lodging an appeal late.

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.

In light of above discussions, we hereby condone the delay in filing the appeal before the ld CIT(A) and the matter is set-aside to the file of the ld CIT(A) to decide the same on merits. Raghuveer Singh Khangarot, Jaipur Vs. DCIT, Circle-07, Jaipur In the result, appeal of the assessee is allowed for statistical purposes.