KOLARA MAHAMMED AZEEM USHAN,HOSADURGA vs. INCOME-TAX OFFICER, WARD-1, CHITRADURGA, CHITRADURGA

PER WASEEM AHMED, ACCOUNTANT MEMBER: The present appeal filed by the assessee is directed against the order under section 250 of the Income Tax Act, 1961 (hereafter the Act) passed by the learned Commissioner of Income Tax (Appeals) under the National Faceless Appeal Centre, Delhi (hereafter the Ld. CIT(A)) for A.Y. 2017-18 bearing DIN & Order No.: ITBA/NFAC/S/250/2023-24/1055324855(1). 2. At the outset, we note that the present appeal has been filed before with a delay of 843 days. In this regard, the assessee has filed an application dated 11.02.2026 seeking condonation of the delay on the ground that the Chartered Accountant of the assessee died, and the assessee faced difficulties in finding a new professional to guide the assessee in income tax matters. It was submitted that the delay was neither intentional nor deliberate, and the assessee prayed that the delay be condoned. 3. The Ld. DR, on the contrary, vehemently opposed the condonation of delay and submitted that the assessee had failed to explain the delay satisfactorily. The Ld. DR accordingly prayed that the appeal may be dismissed as barred by limitation. 4. We have considered the rival submissions of both the parties and perused the materials available on record. We have also considered the application filed by the assessee seeking condonation of delay. Admittedly, there is a delay of 843 days in filing the present appeal. The delay is substantial. The assessee has explained that the Chartered Accountant who was handling its income-tax matters had passed away and thereafter it faced difficulty in finding another professional to guide and assist in pursuing the appeal. In our considered view, such explanation, by itself, may not satisfactorily explain the entire delay of 843 days. A delay of such magnitude cannot ordinarily be attributed merely to the time taken in engaging a new counsel after the death of the earlier professional. 4.1 At the same time, while considering the application for condonation of delay, the entire facts and circumstances of the case are required to be considered. From the materials on record, we find that the assessee contested the matter before the lower authorities and did not abandon its claim. Further, the issues raised by the assessee are arguable and require consideration on merits. Thus, this is not a case where a stale claim is sought to be revived after remaining completely inactive before the lower authorities. 4.2. In this regard, we find support & guidance from the decision of the Hon'ble Supreme Court in the case of Senior Bhosale Estate (HUF) v. ACIT, Civil Appeal Nos. 6671- 6676 of 2010, order dated 07.11.2019, reported in 112 taxmann.com 134, wherein the Hon'ble Supreme Court dealt with appeals arising from income-tax and wealth-tax proceedings involving a delay of as much as 1,754 days. The Hon'ble Supreme Court, considering the facts of that case, held that the High Court ought to have shown indulgence and condoned the delay so that the appeals could be considered on merits. Though the facts of that case were different, However, the decision in our humble understanding shows that even a substantial delay by itself is not an absolute bar to condonation where the facts and circumstances justify adjudication of the dispute on merits. 4.3 We also take note of the well-settled principles laid down by the Hon'ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Others (1987) 167 ITR 471 (SC). The Hon'ble Supreme Court has held that the expression "sufficient cause" should receive a liberal and justice-oriented construction. It was further observed that ordinarily a litigant does not benefit from filing an appeal belatedly, and that refusing to condone delay may result in a meritorious matter being thrown out at the very threshold. Thus, where substantial justice and technical considerations are opposed to each other, the cause of substantial justice deserves due consideration.

4.5 Further, in N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123, the Hon'ble Supreme Court has held that the length of delay by itself is not decisive and that the acceptability of the explanation is the relevant consideration. The Hon'ble Supreme Court further observed that the primary function of the Court is to adjudicate disputes between the parties and advance substantial justice, and that the law of limitation is not intended to destroy the rights of parties. The relevant observation of the Hon’ble Supreme Court in the case of N. Balakrishnan v. M. Krishnamurthy is extracted as under: “11. Rules of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finis litium (it is for the general welfare that a period be put to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. 12. A court knows that refusal to condone delay would result in foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words "sufficient cause" under Sec.5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi Jain V/s. Kuntal Kumari, AIR 1969 SC 575 and State of West Bengal V/s. The Administrator, Howrah Municipality, AIR 1972 SC 749. 13. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put-forth as part of a dilatory strategy the Court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the Court should lean against acceptance of the explanation. While condoning delay the Court should not forget the opposite party altogether. It must be borne in mind that he is a loser and he too would have incurred quite a large litigation expenses. It would be a salutary guideline that when Courts condone the delay due to laches on the part of the applicant the Court shall compensate the opposite party for his loss." 4.5. The Hon'ble Supreme Court in Ram Nath Sao @ Ram Nath Sahu & Others v. Gobardhan Sao & Others, (2002) 3 SCC 195 has also held that there cannot be any straight jacket formula for determining "sufficient cause" and that the matter has to be examined in the facts of each case. It was further observed that a hyper-technical approach should be avoided, particularly where arguable questions of fact or law are involved and rejection on limitation would prevent the dispute from being examined on merits. 4.6 Applying the above principles to the facts before us, we are conscious that the explanation offered by the assessee regarding the death of its earlier Chartered Accountant and the subsequent difficulty in finding another professional does not satisfactorily account for every part of the long delay of 843 days. However, the question of condonation cannot be decided merely by looking at the number of days of delay in isolation. The conduct of the assessee in the underlying proceedings and the nature of the issues raised in the appeal are also relevant considerations. 4.7 In the present case, the assessee had contested the matter before the lower authorities. The material placed before us also shows that the assessee has an arguable case on merits which deserves adjudication. There is also nothing on record to suggest that the appeal was filed belatedly with any mala fide intention or as a deliberate dilatory tactic. On the other hand, refusing to condone the delay would result in the issues raised by the assessee being shut out without examination on merits. 4.8 Considering the totality of the facts and circumstances of the case, and respectfully following the principles laid down by the Hon'ble Supreme Court in the decisions discussed above, we are of the view that the cause of substantial justice would be better served by adjudicating the appeal on merits rather than terminating the proceedings merely on the ground of limitation. Accordingly, in the peculiar facts and circumstances of the case and in the interest of justice, we deem it appropriate to condone the delay of 843 days in filing the present appeal. The delay is accordingly condoned, and the appeal is admitted for adjudication on merits. 5. In the memo of appeal, the assessee has raised various grounds which are interconnected and pertain to the addition of Rs. 12,00,000/- made by the AO u/s 69A of the Act on account of cash deposited during the demonetisation period. 6. The brief facts of the case are that the assessee is an individual engaged in the business of a commission agent in the Agricultural Produce Market Committee (APMC). The assessee did not file his ROI for the captioned AY 2017-18 on the ground that his income was below the taxable limit. The case of the assessee was selected for scrutiny to verify the cash deposits made during the demonetisation period. 6.1 During the assessment proceedings, the AO observed that the assessee had deposited cash of Rs. 2,15,44,000/- in his bank accounts out of which Rs. 23,18,000/- was deposited during the demonetisation period. Out of the cash deposits of Rs. 23,18,000/- during the demonetisation, an amount of Rs. 12,00,000/- was in the form of specified banking notes of Rs. 1000 and Rs. 500. The assessee explained that he is a commission agent and trades agricultural produce on behalf of the farmer in APMC yard, Hosadurga for which he holds a license from the Department of Agricultural Marketing. The cash deposits were made out of cash generated in the course of trading of agricultural produce on behalf of the farmers. 6.2 However, the AO observed that the assessee was not authorised to accept Specified Bank Notes (SBNs) after they ceased to be legal tender with effect from 09.11.2016 for the purpose of general public transaction. The AO held that the assessee was not authorised to accept such demonetised currency (SBN). Therefore, the value of such currency (SBN) is to be held as zero in the books of the assessee. Accordingly, the AO treated the deposit SBN of Rs. 12,00,000/- as unexplained money u/s 69A of the Act and added the same to the income of the assessee.

“5.2 During the course of present proceedings the assessee has not made any argument or submission. On going through the impugned order particularly para 4 to para 10 it is apparent that the assessee did not offer any explanation in respect of the source of cash deposit in specified bank notes in his bank account. The only explanation recorded in the impugned order relates to the nature of the trade the assessee is engaged into and the fact that commission income of the assessee for the AY was below taxable limit. The plea taken by the assessee appears to have been accepted by the AO under direction of his JCIT/Addl. CIT u/s 144A. Therefore, from perusal of the order of assessment it is apparent that no detail or explanation or documentary evidence to the satisfaction of the AO was ever made by the assessee during the course of assessment proceedings. 5.3 At this juncture it is pertinent to refer to form 35 filed by the assessee. As per the entry made by him at item Sr. No. 12 of form 35 the assessee does not intend to file any fresh documentary evidence in support of his grounds of appeal during the present proceedings. At item Sr. No. 11 against the entry for documentary evidence relied upon by the assessee for the present appeal, the assessee has mentioned that documents are as per Annexure-C. It is matter of record that assessee has merely referred to the impugned order of assessment at Annexure-C filed by him. It will not be out of place to mention that Annexure-C is merely, a line entry at the bottom of statement of facts submitted by the assessee. Meaning thereby the during the course of present proceedings the assessee desires to argue his case on the basis of impugned order of assessment alone. As we have already seen in the previous paragraph of this order that assessee did not file any evidence or explanation in respect of the deposit of Rs. 12,00,000/- in cash in specified bank notes in his bank account. Therefore, the facts which emerges that assessee does not have any evidence in respect of the above deposit in his bank account. 5.4 Section 69A is similarly worded with section 68 so far as the onus of explanation for the unexplained money is concerned. In the case of CIT vs. P. Mohanmonakala [2007] 161 Taxman 169, 291 ITR 278 (SC) the Hon’ble Apex Court after referring to its earlier decision in the case of CIT vs. Durga Prasad More [1971] 82 ITR 540 (SC) and Sumati Dayal vs. CIT [1995] 80 Taxman 89 (SC) has decided that the expression “the assessee offers no explanation” means that the assessee offers no proper, reasonable and acceptable explanation as regard the sum found credited in his books. Following the same ratio it is decided that assessee has not offered any explanation in respect of the sum deposited in his bank account.”

11.5 It is also relevant that the AO had accepted the nature of the assessee's business and the commission income earned therefrom. Once the business activity itself is accepted, the explanation that cash was generated in the course of such business cannot be rejected merely on suspicion, unless some material is brought on record to show that the cash did not arise from the stated source. 11.6 Furthermore, the provision of section 69A of the Act can be invoked where money is found to be owned by the assessee and the assessee offers no explanation about its nature and source, or the explanation offered is not satisfactory. In the present case, the assessee has given a specific explanation regarding the source of the cash and has also shown availability of sufficient cash balance in the cash book. The Revenue has not brought any positive material to disprove the same. 11.7 In view of the above facts, we are of the considered opinion that the addition of Rs. 12,00,000/- has been made merely on presumption and without disproving the explanation furnished by the assessee. Accordingly, the addition made u/s 69A of the Act is not sustainable. We therefore set aside the order of the Ld. CIT(A) on this issue and direct the AO to delete the addition of Rs. 12,00,000/-. Thus, the grounds of appeal raised by the assessee are allowed. 12. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 7th October, 2026.

Sd/- Sd/- SANDEEP SINGH KARHAIL WASEEM AHMED JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated: 7th October, 2026 Vms Copy to: KOLARA MAHAMMED AZEEM USHAN, PROP. S S FOOD PRODUCTS, NEAR BHARATH PETROL BUNK, HULIYAR 1 ROAD, HOSADURGA, CHITRADURGA-577527, KARNATAKA INCOME-TAX OFFICER, WARD-1, CHITRADURGA, 2 TAMATKAL ROAD, MEDEHALLI, CHITRADURGA, CHITRADURGA-577502, KARNATAKA 3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE

By Order ASSISTANT REGISTRAR / I.T.A.T., BANGALORE

Digitally signed P G by P G RAJANI Date: RAJANI 2026.10.22 15:49:45 +05'30'