SHIVA MADIKATTU KUMAR,HYDERABAD vs. ITO, WARD-11(1), HYDERABAD

At the outset, there is a delay of 193 days in filing the present appeal before the Tribunal. The assessee has filed an affidavit explaining the reasons for the delay. It was submitted that, the assessee was earlier employed with Procter & Gamble (P&G) up to the year 2011 and thereafter commenced a trading business in general products by supplying goods directly to retail stores. Subsequently, during the financial year relevant to the assessment year 2017-18, the assessee obtained distributorship of Colgate products in and around Bowenpally. It was further submitted that due to lack of business experience and difficulties in recovery of credit sales, the assessee incurred losses and was unable to engage competent accounting personnel to manage his tax affairs.

It was further submitted by the assessee that the return of income for the assessment year 2017-18 was filed on 13.12.2017 and the case was selected for scrutiny on account of cash deposits in the bank account. However, due to the aforesaid business difficulties and lack of proper professional assistance, the assessment was completed ex parte under Section 144 of the Income-tax Act, 1961, wherein the entire credits appearing in the bank account amounting to Rs.3,09,13,410/- were treated as income under Section 69A of the Act. Aggrieved by the assessment order, the assessee filed an appeal before the Ld. CIT(A) on 12.01.2020. It was submitted that in Form No.35, the assessee had opted not to receive communications through e-mail. However, notices issued during the appellate proceedings were sent to the e-mail addresses of the Chartered Accountant, who had filed the appeal and the VAT Consultant. Since neither of them informed the assessee about the notices issued by the appellate authority, the assessee remained unaware of the proceedings and the appeal came to be dismissed. It was further submitted that the assessee had no knowledge of the order passed by the Ld. CIT(A) under Section 250 of the Act, on 03.03.2025 and came to know about the same only upon receipt of a copy of the order by post. Thereafter, the assessee consulted various persons for advice and ultimately approached the present counsel, upon whose advice the present appeal was filed before the Tribunal, resulting in a delay of 222 days. The assessee further submitted that the delay occurred due to bona fide reasons beyond his control and not on account of any deliberate negligence or malafide intention. Therefore, it was prayed that the delay of 193 days in filing the appeal may kindly be condoned in the interest of justice.

The learned Sr. A.R. for the Revenue, Shri Mohan Babu, on the other hand, opposed the condonation petition filed by the assessee and submitted that, the assessee has failed to explain the substantial delay with sufficient cause and, therefore, the delay should not be condoned.

We have heard both parties and perused the petition and affidavit filed by the assessee seeking condonation of delay of 193 days in filing the appeal before the Tribunal. We find that, the reasons explained by the assessee appear to be bona fide and constitute reasonable cause for not filing the appeal within the prescribed period of limitation. We further find that, the Hon'ble Katiji reported in 167 ITR 471 (SC), has laid down that a liberal and pragmatic approach should be adopted while considering applications for condonation of delay so as to advance substantial justice. Respectfully following the principles laid down by the Hon'ble Supreme Court and considering the facts and circumstances of the case, we are of the view that, the assessee has shown sufficient cause for the delay. Accordingly, we condone the delay of 193 days in filing the appeal and admit the appeal for adjudication.

The brief facts of the case are that the assessee is an individual engaged in the business of trading in products manufactured by Colgate-Palmolive India Limited. The assessee filed his return of income for the A.Y. 2017-18 on 13.12.2017 declaring total income of Rs.5,36,792/-. The case was selected for limited scrutiny under CASS to examine and verify large cash deposits in bank accounts and high-value cash deposits reported during the year relevant to the A.Y. 2017-18. Accordingly, notice under Section 143(2) of the Income Tax Act, 1961 dated 17.08.2018 was issued and served on the assessee. Thereafter, notices under Section 142(1) of the Act dated 10.01.2019 and 09.05.2019 were issued calling for necessary details and explanations with regard to the cash deposits made in the bank accounts. Since there was no compliance from the assessee, the A.O. also issued a show-cause notice dated 13.06.2019 granting a final opportunity to furnish information and evidences. However, according to the A.O., the assessee failed to respond to any of the notices issued during the course of assessment proceedings.

During the course of assessment proceedings, the A.O., on verification of information obtained from the bank accounts maintained by the assessee, noticed that the assessee had deposited cash aggregating to Rs.3,09,13,410/- during the financial year 2016-17, including cash deposits of Rs.27,52,940/- made during the demonetization period. According to the A.O., since the assessee failed to furnish any explanation regarding the nature and source of the cash deposits despite repeated opportunities, the entire cash deposits amounting to Rs.3,09,13,410/- were treated as unexplained money under Section 69A of the Act. Accordingly, the A.O. completed the assessment under Section 144 of the Act, vide order dated 12.12.2019 determining the total income of the assessee at Rs.3,12,43,980/- as against the returned income of Rs.5,36,792/-.

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee submitted that, he was engaged in the business of trading in products manufactured by Colgate-Palmolive India Limited and that the turnover of the business during the relevant previous year was around Rs.3 crores. The assessee further submitted that, due to lack of proper professional assistance and advice, the books of account were not audited and the return of income was filed under the presumptive scheme. It was further submitted that the case could not be properly represented before the A.O. during the course of assessment proceedings and therefore, the entire credits appearing in the bank accounts were erroneously treated as unexplained money under Section 69A of the Act. The assessee submitted that the cash deposits represented business turnover and, if an opportunity was provided, he was willing to produce books of account and other supporting evidences for verification. Therefore, the assessee submitted that, the addition made by the A.O. under Section 69A of the Act should be deleted.

The Ld. CIT(A), after considering the facts available on record, observed that despite several opportunities provided during the course of appellate proceedings, the assessee remained non- responsive and failed to furnish any documentary evidence in support of the explanations offered in the statement of facts. The Ld. CIT(A) further observed that the assessee had neither furnished any evidence to establish that he was carrying on commission agency business nor produced any material to explain the nature and source of the cash deposits made in the bank accounts. The Ld. CIT(A) also observed that the assessee had failed to respond before the A.O. during the course of assessment proceedings as well as before the appellate authority despite repeated opportunities. Therefore, the Ld. CIT(A) held that, the source of cash deposits remained unexplained and accordingly upheld the action of the A.O. in treating the amount of Rs.3,09,13,410/- as unexplained money under Section 69A of the Act. Thus, the Ld. CIT(A) dismissed the appeal filed by the assessee and sustained the addition made by the A.O.

Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.

The learned counsel for the assessee, Shri Mohd. Afzal, Advocate, submitted that, the A.O. completed the assessment ex parte under Section 144 of the Act, and treated the entire cash deposits of Rs.3,09,13,410/- in the bank accounts as unexplained money under Section 69A of the Act, without properly examining the nature of business carried on by the assessee and the source of the deposits. The learned counsel for the assessee further submitted that, the assessee is engaged in the business of trading in products manufactured by Colgate-Palmolive India Limited and the cash deposits in the bank accounts represent business turnover and business transactions. He further submitted that, due to lack of proper professional assistance and non- representation before the lower authorities, the assessee could not furnish the necessary details and evidences in support of his claim. The learned counsel further submitted that, the Ld. CIT(A), although discussed the non-compliance on the part of the assessee, failed to adjudicate the issues raised by the assessee on merits. Therefore, he submitted that the order passed by the Ld.

The learned Sr. A.R. for the Revenue, Shri Mohan Babu, on the other hand, supported the orders of the lower authorities. However, he fairly submitted that, the issue may be decided in accordance with law on the basis of facts and material available on record.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the A.O. completed the assessment under Section 144 of the Act, ex parte and treated the entire cash deposits of Rs.3,09,13,410/- in the bank accounts as unexplained money under Section 69A of the Act. We further find that, although the assessee preferred an appeal before the Ld. CIT(A), the assessee remained non- responsive during the course of appellate proceedings. On perusal of the order passed by the Ld. CIT(A), we find that, the Ld. CIT(A) has extensively discussed the non-compliance on the part of the assessee during the course of appellate proceedings. However, the Ld. CIT(A) has not properly adjudicated the issues raised by the assessee on merits. It is a settled position of law that the first appellate authority, being a quasi-judicial authority, is required to dispose of the appeal on merits by passing a speaking order after considering the facts of the case and the grounds raised by the assessee.

Considering the facts and circumstances of the case, we find that, the assessment order passed by the A.O. is an ex parte order and further, the Ld. CIT(A), although discussed the non- compliance on the part of the assessee, has not adjudicated the issues raised by the assessee on merits. Therefore, in our considered view, instead of restoring the matter to the file of the Ld. CIT(A), the issue needs to be set aside to the file of the A.O. for fresh consideration. Accordingly, we set aside the order of the Ld. CIT(A) and remand the issue back to the file of the A.O. with a direction to reconsider the issues involved in the assessment de novo after providing reasonable opportunity of hearing to the assessee. The assessee is also directed to cooperate with the A.O. and furnish necessary details and evidences in support of his claim. Further, since the assessee failed to respond before both the authorities below and did not diligently pursue the proceedings, we direct the assessee to pay a nominal cost of Rs.5,000/- (Rupees Five Thousand only) to the Tax Bar Association, ITAT, Hyderabad, and furnish proof of payment to the Registry within 15 days from the date of this order. We order accordingly.

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

The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file