STATE BANK OF INDIA( FORMERLY SBS EMPLOYEES PROVIDEND FUND),GANDHINAGAR vs. DCIT CIRCLE 2(2)(1), MUMBAI, MUMBAI

Briefly stated, the facts are that the assessee is a recognised Provident Fund Trust formed for managing the provident fund of the employees of State Bank of Saurashtra. The assessment for the year under consideration was reopened on the basis of information available with the Assessing Officer that the assessee had made time deposits of Rs.1,97,22,631/- and that, as per the TDS statement, interest on securities amounted to Rs.2,13,04,761/-. Accordingly, notice under section 148 of the Act was issued on 30.03.2022. Thereafter, notices under section 142(1) and other opportunities were issued by the Assessing Officer. As recorded in the assessment order, there was no compliance on behalf of the assessee and no return of income was filed for the assessment year under consideration. The Assessing Officer, therefore, proceeded to complete the assessment ex parte under section 144 read with section 147 of the Act and, treating the aforesaid amounts aggregating to Rs.4,10,27,392/- as unexplained money under section 69A of the Act, made an addition of Rs.4,10,27,392/-.

Against the aforesaid assessment order, the assessee filed an appeal before the learned CIT(A) on 19.12.2024. The appeal was filed with a delay of 608 days. In support of the application for condonation of delay, it was submitted that the assessee Trust had originally been formed for managing the Provident Fund of the employees of State Bank of Saurashtra and that, after the merger of State Bank of Saurashtra with State Bank of India in 2008, the affairs of the Trust came to be managed by State Bank of India. It was stated that the Trust was under a bona fide belief that its income was exempt under section 10(25)(i) of the Act and, therefore, there was no requirement to file its return of income. It was further submitted that the transferee bank did not have access to the PAN details of the Trust and, consequently, the Trust was not registered on the e-filing portal. It was also stated that the notices issued by the Assessing Officer at the address of the erstwhile State Bank of Saurashtra remained unattended and that the assessee came to know of the assessment only subsequently, whereafter it took immediate steps to register itself on the e-filing portal and file the appeal.

The learned CIT(A), however, declined to condone the delay of 608 days. The learned CIT(A) was of the view that the reasons furnished by the assessee did not constitute sufficient cause and observed that the merger of State Bank of Saurashtra with State Bank of India had taken place as far back as in 2008. The learned CIT(A) further held that the assessee had failed to demonstrate sufficient diligence and that the delay was attributable to negligence and inaction on its part. Accordingly, without examining the grounds raised by the assessee against the additions made in the assessment, the learned CIT(A) declined to condone the delay and dismissed the appeal in limine as barred by limitation.

Before us, the learned Authorised Representative (ld.AR) submitted that the delay was neither deliberate nor intentional. He reiterated the circumstances explained before the learned CIT(A) and submitted that the assessee is a Provident Fund Trust whose income was claimed to be exempt under section 10(25)(i) of the Act. It was submitted that, following the merger of State Bank of Saurashtra with State Bank of India, the affairs of the Trust were being managed by State Bank of India and the Trust was not registered on the e-filing portal. It was further submitted that the assessment proceedings were conducted ex parte and that the notices issued by the Assessing Officer did not effectively come to the knowledge of the persons managing the Trust. It was submitted that immediately upon coming to know of the assessment, the assessee took steps to pursue the appellate remedy and filed the appeal along with an application seeking condonation of delay. The ld.AR submitted that substantial additions have been made under section 69A of the Act without examining the actual nature and source of the deposits and interest income and, therefore, the assessee deserves an opportunity to contest the assessment on merits.

The learned Departmental Representative (ld.DR), on the other hand, relied upon the orders of the lower authorities and submitted that the delay was substantial and extended to 608 days. It was submitted that the assessee had failed to comply with the statutory notices and had also failed to file the return of income. According to the learned Departmental Representative, the explanation furnished by the assessee did not satisfactorily account for the entire period of delay and, therefore, the order of the learned CIT(A) dismissing the appeal as barred by limitation deserved to be upheld.

We have considered the rival submissions and perused the material available on record. The issue before us, at this stage, is primarily whether, in the facts and circumstances of the present case, the delay of 608 days in filing the appeal before the learned CIT(A) deserves to be condoned. We find that the assessee has placed on record circumstances explaining the delay, including the fact that the assessee is a Provident Fund Trust, that its affairs came to be managed by State Bank of India following the merger of State Bank of Saurashtra, that the Trust was not registered on the e-filing portal and that the assessment proceedings were completed ex parte. It has also been stated that the assessee came to know of the assessment subsequently and thereafter took steps to pursue the appellate remedy. An affidavit in support of the explanation was also furnished before the learned CIT(A).

It is true that the delay is substantial. At the same time, the question of condonation of delay has to be considered having regard to the entire facts and circumstances of the case and, more particularly, whether the assessee had a bona fide reason for not pursuing the appellate remedy within the prescribed period. In the present case, the assessment itself was completed ex parte under section 147 read with section 144 and a substantial addition of Rs.4,10,27,392/- was made under section 69A of the Act. The appeal of the assessee has not been examined on merits at all, solely because the delay in filing the appeal was not condoned.

We are of the view that, considering the nature of the assessee, the explanation furnished regarding the management of the Trust after the merger, the stated absence of access to the PAN/e-filing portal and the fact that the assessment was completed ex parte without effective participation of the assessee, the explanation furnished by the assessee cannot be said to be wholly devoid of substance. The assessee has also demonstrated that, upon becoming aware of the assessment, it took steps to pursue the appellate remedy. In these circumstances, and keeping in view that substantial justice would be served by providing an opportunity to the assessee to have the assessment examined on merits, we consider it appropriate to condone the delay of 608 days in filing the appeal before the learned CIT(A).

Having condoned the delay, we further find that the assessment was completed ex parte and that the addition under section 69A of the Act was made on the basis of the information relating to time deposits and interest on securities, without the assessee having effectively participated in the assessment proceedings. The assessee ought to be provided a reasonable opportunity to place the relevant facts and supporting evidence regarding the nature and source of the amounts considered by the Assessing Officer. Since the learned CIT(A) dismissed the appeal in limine without adjudicating the grounds raised by the assessee on merits, we consider it appropriate, in the interest of substantial justice, to restore the matter to the file of the Assessing Officer for fresh adjudication.

Accordingly, the delay of 608 days in filing the appeal before the learned CIT(A) is condoned. The impugned order of the learned CIT(A) is set aside and the matter is restored to the file of the Assessing Officer for fresh adjudication on merits in accordance with law. The Assessing Officer shall examine the issues afresh after affording adequate and reasonable opportunity of being heard to the assessee and after considering the evidences and explanations that may be furnished by the assessee. The assessee shall also cooperate in the proceedings and furnish the requisite details and supporting evidence within the time allowed by the Assessing Officer. Needless to say, the Assessing Officer shall adjudicate the matter independently on merits, without being influenced by the observations made in the earlier assessment order or by the dismissal of the appeal by the learned CIT(A) on the ground of limitation.

In the result, the appeal of the assessee is allowed for statistical purposes.