DALVAYI KIRAN KUMAR,BHADRACHALAM vs. ITO, WARD-1, KOTHAGUDAM

Succinctly stated, the AO, based on information that the assessee during the subject year had carried out substantial financial transactions, viz., (i) cash deposits in bank account held with SBI: Rs.37,00,500/-; (ii) time deposits held with SBI: Rs.44,93,733/-; and (iii) contract receipts: Rs.37,400/-, but had not filed the return of income for the year under consideration, initiated proceedings under section 147 of the Act. Notice under section 148 of the Act, dated 29/03/2023, was issued and duly served upon the assessee. However, the assessee did not file his return of income in response to the said notice.

During the course of the assessment proceedings, the AO observed that there were credits aggregating to Rs.8,38,429/- (excluding contract receipts) of Rs.37,00,500/- in the bank account numbers 10687782559 and 10687811809 of the assessee held with State Bank of India. On being queried, the assessee failed to provide any explanation regarding the source of the subject deposits. The AO, observing that the assessee was engaged in the business of an electrical contractor, a fact which was gathered by him on a perusal of his return of income for the immediately preceding year, i.e., AY 2015-16, thus estimated the business income of the assessee on the aforesaid cash credits of Rs.8,38,429/- at Rs. 67,074/-.

Apart from that, the AO observed that as the assessee during the subject year had made total deposits of Rs.37,00,500/- in his bank accounts but had failed to come forth with any explanation; thus, held the same as his unexplained money under section 69A of the Act.

Further, the AO observed that the assessee during the subject year had made time deposits of Rs. 44,93,733/- with SBI. However, as the assessee failed to provide any explanation regarding the source of the aforesaid deposits, the AO made an addition thereon under section 69 of the Act.

Accordingly, the AO, based on his aforesaid observations, determined the income of the assessee vide his order passed under section 147 r.w.s 144 r.w.s 144B of the Act, dated 06/03/2024 at Rs. 82,98,707/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A). However, as the assessee had delayed the filing of the appeal by 139 days, he had, at Column No. 15 of “Form-35,” stated the reasons for the delay and sought condonation thereof. Ostensibly, the assessee claimed that, being uneducated, he had a limited understanding of tax matters and had relied on his auditor/consultant for filing his income tax returns and other matters. However, due to negligence on the part of his auditor/consultant, there was a delay in responding to the AO's notices and in filing the appeal against the assessment order. Elaborating further, it was stated that the assessee, who is a law-abiding citizen, had remained oblivious of the aforesaid lapses of his auditor/consultant, and on realizing the same, had, without involving any further loss of time, engaged another auditor /consultant who had assisted him to file the appeal before the CIT(A), which, by that time, involved a delay of 139 days.

However, we find that the CIT(A) did not find favor with the aforesaid explanation of the assessee. He observed that, as ignorance of the law is no excuse, the assessee's claim that the said delay arose from negligence on the part of his auditor/consultant did not constitute a “sufficient cause” to explain the delay in filing the appeal. Apart from that, it was observed that as the assessee had not placed on record any material facts to substantiate his claim that the delay was on account of negligence of his counsel, i.e., details of the auditor and affidavit of the counsel/auditor, therefore, based on the vague and self-serving statements, his unsubstantiated explanation did not merit acceptance. Thereafter, the CIT(A), 5 relying upon a host of judicial pronouncements, declined to condone the delay by exercising the discretion vested in him under section 249(3) of the Act and dismissed the appeal.

The assessee, being aggrieved with the order of the CIT(A), has carried the matter in appeal before us.

We have given thoughtful consideration to the contentions advanced by the Learned Authorized Representatives of both parties in the backdrop of the orders of the authorities below.

Admittedly, it is a matter of fact borne from record that the assessee had delayed the filing of the appeal before the CIT(A) by 139 days. Apart from that, we find that the assessee also failed to comply with the notice issued by the AO under section 148 of the Act, dated 29/03/2023, and did not file his return of income in response thereto. Also, as the assessee had failed to furnish the requisite details and respond to the notices issued by the AO under section 142(1) of the Act during the assessment proceedings, he was visited with a best judgment assessment under section 144 of the Act.

Although, at first blush, the conduct of the assessee right from not filing his return of income either voluntarily or in response to the notice under section 148 of the Act, as well as not responding to the notices issued under section 142(1) of the Act, followed by the delay in filing of the appeal before the CIT(A), gives an impression about his lackadaisical approach qua the income tax matters.

We have given thoughtful consideration and are of the view that the aforesaid explanation of the assessee ought not to have been summarily discarded by the CIT(A). In fact, we are unable to comprehend, as is discernible from the CIT(A) order, why no opportunity was given to the assessee to substantiate his aforesaid claim during the proceedings before him.

Be that as it may, we are of the view that the delay involved in the filing of the appeal before the CIT(A), considering the totality of the facts, ought to have been condoned by him. Our aforesaid view is fortified by the recent decision of the Hon'ble Supreme Court in the case of Vidya Shankar Jaiswal vs. ITO (2025) 305 Taxman 83 (SC). The Hon'ble Apex Court, while setting aside the order of the Hon'ble High Court of Chhattisgarh, which had approved the declining of the condonation of delay of 166 days by the Tribunal, had observed that a justice- oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay involved in filing the appeal.

Resultantly, the appeal filed by the assessee is set aside to the CIT(A) with a direction to condone the delay and dispose of the appeal qua the specific grounds of appeal based on which the assessment order was assailed before him.

In the result, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.