VIPUL MANHAR PATEL,MUMBAI vs. INCOME TAX OFFICER 41(1)(5), MUMBAI

The brief facts of the case are that the assessee, Shri Vipul Manhar Patel, an individual, was engaged in the business of trading in milk through an Amul dairy parlour. For A.Y. 2017-18, the assessee filed his return of income on 03.11.2017 declaring total income of ₹4,25,350/-. The Assessing Officer selected the case for scrutiny and issued notices under sections 143(2) and 142(1) of the Income-tax Act, 1961 (“the Act”), seeking details of cash deposits made during the demonetisation period and other expenses claimed by the assessee. However, the assessee did not respond to these notices. The Assessing Officer obtained information directly from the Bank of Maharashtra under section 133(6) of the Act and noticed that there were differences between the cash deposits in the bank statements and the deposit slips furnished by the bank. In the absence of any explanation from the assessee, the Assessing Officer treated ₹13,21,121/- as unexplained money under section 69A of the Act. The Assessing Officer also disallowed rent expenses of ₹1,80,000/- and interest on housing loan of ₹1,94,529/-. Accordingly, the Assessing Officer completed the assessment under section 144 of the Act, assessing total income at ₹21,21,000/-.

Aggrieved, the assessee filed an appeal before the learned CIT(Appeals). The assessee submitted that he was running a milk booth and the Government had permitted milk booths to accept old ₹500 currency notes during the demonetisation period. The assessee further submitted that the cash deposits were from sales credited in his books of account, which had been audited, and the Assessing Officer had not rejected those books. The assessee also contended that the difference between the bank deposits and the deposit slips had arisen because the bank had not furnished complete deposit slips. However, the learned CIT(Appeals) observed that the assessee had failed to furnish supporting documentary evidence despite opportunities granted during the appellate proceedings. The learned CIT(Appeals) therefore upheld the addition of ₹13,21,121/- under section 69A and the disallowance of rent expenses of ₹1,80,000/-.

The assessee is in appeal before us against the order passed by the learned CIT(Appeals) dismissing his appeal.

At the outset, we observe that there is a delay of 556 days in filing the present appeal before the Tribunal. The assessee has filed an application for condonation of delay explaining that he had studied only up to the 10th standard and was not familiar with income-tax proceedings. His father, who was managing the dairy business, passed away on 29.11.2019, following which the assessee closed the business in March 2020 and took up salaried employment. The assessee has stated that he was entirely dependent upon his tax consultants and was under the impression that the appeal filed before the learned CIT(Appeals) was sufficient and that no further action was required. According to the assessee, he became aware of the adverse appellate order only when his salary bank account was attached on 07.08.2026. He thereafter immediately approached a Chartered Accountant, Shri Himanshu Gandhi, who advised him to file the present appeal. We have considered the explanation furnished by the assessee, his limited educational background, the death of his father and the circumstances in which he became aware of the appellate order, we find that sufficient cause has been shown for the delay. Accordingly, in the interest of substantial justice, we condone the delay in filing the appeal and admit the appeal for adjudication on merits.

We have heard the rival contentions and perused the material on record. We find that the Assessing Officer completed the assessment under section 144 of the Act because the assessee failed to respond to several statutory notices. The learned CIT(Appeals) also upheld the additions mainly because the assessee did not furnish sufficient supporting evidence during the appellate proceedings. Thus, neither authority had the benefit of examining the complete evidence relating to the assessee's business transactions and the cash deposits made during the demonetisation period. We find that the assessee was engaged in the business of selling milk through a dairy parlour and has specifically claimed that the Government had permitted milk booths to accept old ₹500 currency notes during the relevant period. The assessee has also claimed that the cash deposits were business receipts duly accounted for in his audited books of account. We are of the considered view that these facts require proper verification with reference to the cash book, sales records, bank statements and other supporting documents. Also, the claims relating to rent expenses and housing loan interest also require examination on the basis of relevant evidence.

We further find that the assessee has explained that his father, who was managing the business, passed away in November 2019 and he subsequently closed the business and took up employment. Considering these circumstances and the fact that the assessment was completed ex-parte and the appellate proceedings were also decided without proper examination of the supporting evidence, we are of the view that the assessee deserves one final opportunity to substantiate his claims. At the same time, we cannot overlook the fact that the assessee failed to comply with several notices issued by the Assessing Officer and did not furnish the necessary evidence before the learned CIT(Appeals). Such repeated non-compliance causes unnecessary delay in completing tax proceedings and cannot be encouraged. Therefore, while granting another opportunity in the interest of justice, we consider it appropriate to impose a cost of ₹20,000/- upon the assessee.

Accordingly, we set aside the order of the learned CIT(Appeals) and restore the matter to the file of the Assessing Officer for fresh consideration in accordance with law, subject to the assessee depositing a cost of ₹20,000/- with the Prime Minister's National Relief Fund and furnishing proof of such deposit before the Assessing Officer.

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