NUSRATH BANU,HYDERABAD vs. ACIT, CENTRAL CIRCLE -2(3), HYDERABAD

There is a delay of 27 days in filing the present appeal. The assessee has filed petition for condonation of delay which is supported by the affidavit of the assessee. The learned Authorised Representative of the Assessee has submitted that the assessee was in the process of filing the appeal against the impugned order of the learned CIT(A) but her husband met with an accident on 11.11.2025 and consequently, the assessee could not meet her Counsel before the limitation period for filing the appeal and only after some recovery of her husband, the assessee met the Counsel in the third week of December along with her husband which has resulted a delay of 27 days in filing the appeal. The learned Authorised Representative of the Assessee has referred to the medical record of the husband of the assessee placed at Page nos.151 to 157 of the paper book. Thus, he has pleaded that the delay of 27 days in filing the appeal may be condoned.

On the other hand, the learned DR has not seriously objected to the condonation of delay by considering the reasons of accident of the husband of the assessee and subsequent undergoing treatment.

We have considered the rival submissions as well as carefully perused the reasons explained by the assessee in the petition for condonation of delay which is also supported by the affidavit of the assessee. The assessee has produced medical record of her husband undergoing the treatment as per which the assessee’s husband met with an accident and got fracture his knee which was operated upon by fixing some metal support to the leg bones. Thus, we are satisfied that the assessee was having ‘sufficient cause’ for delay of 27 days in filing the appeal. Accordingly, the same is condoned and the appeal of the assessee is admitted for hearing and adjudication.

The assessee has raised the following grounds of

The assessee is an individual and proprietor of M/s. KGN Traders, engaged in the business of trading of Live Stock. The assessee filed her return of income for the year under consideration on 25.12.2020 declaring total income of Rs.5,76,040/-. The return was processed u/sec.143(1) of the Income Tax Act [in short "the Act"], 1961 on 13.03.2021. Thereafter, a search and seizure operation u/sec.132 of the Act was conducted in the case of M/s. SM Agri group and related entities on 03.01.2023. During the search proceedings, it was found that the assessee received unaccounted interest income from M/s. Maharashtra Food Processing and Cold Storage [in short “MFPCS”] during the financial year 2019-2020 relevant to the assessment year under consideration. Accordingly, the case was selected for scrutiny under Compulsory Manual Selection and notice u/sec.148 of the Act was issued on 30.03l2024. Based on the incriminating material found and seized during the course of search and seizure action in the case of MFPCS in the shape of extracts from the Pen drive the Assessing Officer made an addition of Rs.54 lakhs on account of interest income under the Head “Income from Other Sources”. The assessee challenged the action of the Assessing Officer before the learned CIT(A) but could not succeed.

Before the Tribunal, the learned Authorised Representative of the Assessee has submitted that the Assessing Officer has made the addition based on the data taken from the Pen drive seized from the searched party as well as the statement of the searched party however, the assessee denied of receiving any interest from the searched party. The learned Authorised Representative of the Assessee has further contended that the addition is made solely on the basis of the extracts from the computer and statement without giving an opportunity of cross-examination of the witnesses to the assessee. He has further contended that the transactions with M/s. SM Agri group are duly recorded in the books of account so far as actual transactions between the parties as per the ledger account placed at Page no.43 of the paper book however, when the assessee has not received any alleged interest income, there is no question of recording the said income in the books of account. He has further contended that the Assessing Officer has alleged that the interest income is received mostly through banking channel and only a small amount in cash however, there is no such transaction reflected in the bank account of the assessee towards the alleged interest income. He has referred to the bank account of the assessee placed at Page nos.46 to 53 of the paper book and submitted that the transactions between the parties are duly reflected in the bank account but there is no amount received as alleged by the Assessing Officer. He has also referred to the confirmation of M/s. SM Agri Exports Pvt. Ltd., and submitted that once the assessee has produced the relevant record and also filed confirmation then, the addition made by the Assessing Officer based on the statement of the third party without giving an opportunity to the assessee to cross-examine the witnesses is not sustainable in law. In support of his contention, he has relied upon the Judgment of Hon'ble Supreme Court in the case of Anvar P.V. vs. P.K. Basheer and others in Civil Appeal No.4226 of 2012, dated 18.09.2014. He has further contended that even otherwise the incriminating material as relied upon by the Assessing Officer is not admissible as evidence in view of sec.65B of the Evidence Act for want of certificate u/sec.65B of the Evidence Act. In support of his contention, he has relied upon the Judgment of Hon'ble Supreme Court in the case of Arjun Panditrao Khotkar vs. Kailash Kushanrao Gorantyal & Ors in Civil Appeal Nos.20825-20826 of 2017, dated 14.07.2020.

On the other hand, the learned DR has submitted that the Assessing Officer has made the addition based on the incriminating material wherein the transactions between the assessee and the searched parties are recorded. However, only part of the transactions are recorded by the assessee in the books of account and rest of the transactions are not accounted by the assessee therefore, the interest income to the extent of Rs.54 lakhs is found to be unaccounted income as detected from the seized material. The learned DR has further submitted that once assessee has not disputed the majority of the transactions in the seized material then, the correctness of the seized material cannot be disputed by the assessee. The seized material cannot be held as partly admissible evidence and partly not and once the assessee has accepted the other transactions as found in the seized material then, the transactions which are not recorded in the books of account are rightly added by the Assessing Officer as income on account of interest income under the head “Other Sources”. He has further contended that during the course of assessment proceedings the assessee has not demanded any cross-examination despite the fact that the Assessing Officer has issued show cause notice to the assessee giving all the details and copy of the seized material vide show cause notice dated 05.03.2025. The assessee has not responded to the said show cause notice and therefore, there was no request on behalf of the assessee demanding the cross-examination of the witnesses. She has relied upon the Orders of the authorities below.

In rejoinder, the learned Authorised Representative of the Assessee has submitted that the assessee was not given sufficient opportunity to respond to the show cause notice dated 05.03.2025 which was a period of Ramjan and assessee could not file the reply to the show cause notice before the impugned order was passed. He has further submitted that the assessee has duly filed reply to the notice issued by the Assessing Officer u/sec.142(1) of the Act dated 23.07.2024, 13.09.2024 and 26.09.2024, however, the said replies were not considered by the Assessing Officer.

We have considered the rival submissions as well as relevant material on record. The Assessing Officer has issued show cause notice dated 05.03.2025 and then made addition on account of interest income as under:

Before the learned CIT(A), the assessee has explained the cause of non-responding to the show cause notice as it was Ramjan period and further contended that the assessee filed reply in response to the notice issued u/sec.142(1) of the Act. This fact is also acknowledged by the Assessing Officer in Para no.3 of the assessment order as under:

Though the assessee responded to the notice u/sec.142(1) and filed the reply however, the relevant seized material was given to the assessee as part of the show cause notice dated 05.03.2025 and assessee has not responded to the said notice. Therefore, it cannot be said that the Assessing Officer has not given an opportunity to the assessee or confronted the seized material to the assessee rather due to Ramjan period the assessee could not respond to the said notice before the assessment order was passed on 15.03.2025. Thus, in the facts and circumstances of the case, we find that the assessee ought to have been given one more opportunity to file the response to the show cause notice. Further, the Assessing Officer has stated in the show cause notice that only Rs.14 lakhs is paid by the searched party in cash to the assessee and the remaining amount of Rs.40 lakhs was paid through banking channel. Therefore, this fact is also required to be verified and examined from the relevant record whether the entire alleged payment is in cash or part of the sum is through banking channel and to find out from the relevant bank accounts of the parties. Accordingly, in the facts and circumstances of the case and in the interest of justice, the impugned order of the learned CIT(A) is set aside and the matter is remanded to the record of the Assessing Officer for proper verification and examination of the relevant record to give the specific finding as to how the alleged interest income is received by assessee i.e., through banking channel or in cash. The assessee is at liberty to ask for cross examination of the witnesses as well as for Certificate u/sec.65B of the Evidence Act, if necessary. Needless to say, the assessee be given an appropriate opportunity of hearing before passing the fresh order.

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