Loading judgment…
Facts
The assessee, a coffee planter and trader, filed a return for AY 2017-18 declaring income. The AO made additions for undisclosed income (difference in bank credits and turnover), disallowed interest payment, and added advances received. The CIT(A) deleted some additions but upheld the addition for the difference in bank credits and turnover.
Held
The Tribunal held that the assessee's claim that the difference in bank credits represented agricultural receipts, due to a clerical error in reporting, required further verification. The Tribunal also noted that the assessment was completed hastily without sufficient opportunity for the assessee.
Key Issues
Whether the difference between bank credits and declared turnover constitutes unexplained income, and whether further verification of agricultural receipts is required.
Sections Cited
250, 143(1), 143(2), 142(1), 143(3), 115BBE, 253(5)
AI-generated summary — verify with the full judgment below
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, “B’’ BENCH: BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI KESHAV DUBEY
PER KESHAV DUBEY, JUDICIAL MEMBER:
This appeal at the instance of the assessee is directed against the order of the ld. CIT(A)/NFAC dated 23.11.2024 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1070581350(1) passed u/s 250 of the Income Tax Act, 1961 (in short “the Act”) for the assessment year 2017-18.
The assessee has raised the following grounds of appeal:
At the outset, there is a delay of 20 days in filing the appeal before this Tribunal. The ld. A.R. of the assessee drew our attention to an affidavit dated 19.02.2025 sworn by the assessee before the notary public stating the reasons for the delay, which is reproduced below for ease of reference and record:
On going through the affidavit as above, we find that the assessee could not file the appeal within time i.e. by 31.1.2025 as the assessee was suffering from the health issues. Hence, the ld. A.R.submitted that the delay was unintentional and no benefit can be attributed to the assessee in filing the appeal belatedly. He thus
On the contrary the ld. D.R. leaves the decision to the discretion of the Bench.
We have perused the details filed by the assessee to justify the short delay and we are satisfied that there is no malafide intention on the part of the assessee in filing the appeal belatedly before us. It is to be noted that u/s 253(5) of the Act the Tribunal may admit the appeal filed beyond the period of limitation where it has established that there exists a sufficient cause on the part of the assessee for not presenting the appeals within the prescribed time. The explanation therefore, becomes relevant to determine whether the same reflect sufficient and reasonable cause on the part of the assessee in not filing this appeal within the prescribed time.
6.1 While considering a similar issue the Apex Court in the case of Collector, Land Acquisition v. Mst. Katiji and Ors. (167 ITR 471) laid down six principles. For the purpose of convenience, the principles laid down by the Apex Court are reproduced hereunder:
(1) Ordinarily, a litigant does not stand to benefit by lodging an appeal late. (2) Refusing to condone delay can result in a meritorious matter being thrown at the very threshold and cause of justice being defeated. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. (3) 'Every day's delay must be explained' does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational, commonsense and pragmatic manner.
(4) When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other MarasanigeChinneGowdaSanthoshChikmagalur Page 6 of 13 side cannot claim to have vested right in injustice being done because of a nondeliberate delay. (5) There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. (6) It must be grasped that the judiciary is respected not on account of its power to legalise injustice on technical grounds but because it is capable of removing injustice and is expected to do so. 6.2 When substantial justice and technical consideration are pitted against each other, the cause of substantial justice deserves to be preferred, for the other side cannot claim to have vested right for injustice being done because of non deliberate delay. Therefore, we have to prefer substantial justice rather than technicality in deciding the issue. As observed by Apex Court, if the application of the assessee for condoning the delay is rejected, it would amount to legalize injustice on technical ground when the Tribunal is capable of removing injustice and to do justice. Therefore, this Tribunal is bound to remove the injustice by condoning the delay on technicalities. If the delay is not condoned, it would amount to legalizing an illegal order which would result in unjust enrichment on the part of the State by retaining the tax relatable thereto. Under the scheme of Constitution, the Government cannot retain even a single pie of the individual citizen as tax, when it is not authorized by an authority of law. Therefore, if we refuse to condone the delay, that would amount to legalize an illegal and unconstitutional order passed by the lower authority.
6.3 Further, in the case of People Education & Economic Development Society Vs/ ITO reported in 100 ITD 87 (TM) (Chen), wherein held that “when substantial justice and technical consultation are pitted against each other, the cause of substantial justice deserves to be preferred for the other side cannot claim to 6.4 The next question may arise whether delay was excessive or inordinate. There is no question of any excessive or inordinate when the reason stated by the assessee was a reasonable cause for not filing the appeal. We have to see the cause for the delay. When there was a reasonable cause, the period of delay may not be relevant factor. In fact, the Madras High Court in the case of CIT vs. K.S.P. Shanmugavel Nadai and Ors. (153 ITR 596) considered the condonation of delay and held that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Accordingly, the Madras High Court condoned nearly 21 years of delay in filing the appeal. When compared to 21 years, 20 days cannot be considered to be inordinate or excessive. Furthermore, the Chennai Tribunal by majority opinion in the case of People Education and Economic Development Society (PEEDS) v. ITO (100 ITD 87) (Chennai) (TM) condoned more than six hundred days delay. Therefore, in our opinion, by preferring the substantial justice, the short delay of 20 days has to be condoned and accordingly we condone the delay and admit the appeal for adjudication.
Brief facts of the case are that the assessee is a coffee planter & farmer as well as carrying out trading in coffee under the name & style of M/s Dakshinakashi Coffee Plantation crop traders. The assessee filed his return of income for the assessment year 2017-18 on 02.11.2017 declaring net taxable income of Rs.7,79,230/-. The assessee had also declared agriculture income of Rs.4,00,000/-. The return of income had been processed u/s 143(1) of the Act accepting the returned income. Subsequently, the case was selected for scrutiny to examine the issues (i) Cash Deposit during MarasanigeChinneGowdaSanthoshChikmagalur Page 8 of 13 the year and (ii) Cash withdrawals and accordingly notices u/s 143(2) as well as 142(1) of the Act was issued. In response to the notices issued the assessee furnished certain information/written submissions but without any documentary evidences. After examination of submissions filed, the assessment has been completed determining the total income at Rs.2,08,05,180/- against the retuned income of Rs.7,79,230/-. While doing so the assessing officer has made the following additions/disallowances. (a) Undisclosed Income of Rs.77,69,619/- During Assessment proceedings, Assessee was asked to reconcile the total credits in Bank accounts with turnover declared in return of Income. While reconciling the same, there was difference of Rs.77,69,619/- which was not related to the business income. The Assessee submitted that the assessee is having 22 acres of coffee, pepper & arecanut plantation & 10 acres of coffee plantation and the sale proceeds of agriculture produce are also routed through this account & thus Rs.77,69,619/- pertains to his agricultural receipts. The assessee submitted that most of coffee was sold to M/s. S V Coffee, Bangalore. The assessing officer asked to furnish the details to whom the coffee was sold and also asked to produce sale receipts of the same in the month of October. It is submitted that the assessee made all possible efforts to contact M/s. SV Coffee and requested sale receipts from M/s. SV coffee, Bangalore in the month of November. Meanwhile the assessing officer completed the assessment on 23-12-2019 on the ground that the case will be barred by time by 31-12-2019 and the copy of sale receipts from the party reached to the Assessee only after 23-12-2019. (b) Disallowance of Rs.7,56,324/- During the financial year 2016-2017, interest payment of Rs.7,56,324/- made in respect of CC/OD loan Account was claimed as business expenses. The said loan was availed by mortgaging the agricultural property owned by the Assessee and it was used for business purpose. But the MarasanigeChinneGowdaSanthoshChikmagalur Page 9 of 13 Assessing Officer disallowed the same and added back to business income. (c) Addition of Rs.98,00,000/- An amount of Rs.98,00,000/- was received from M/s. SV coffee, Bangalore as advance and the assessee had also given advances to different planters. The assessing officer asked to furnish complete details of the same in the month of October. The assessee made all possible efforts to contact M/s. SV Coffee and requested confirmation letter from M/s. SV coffee, Bangalore in the month of November. Meanwhile the assessing officer completed the assessment on 23-12-2019 on the ground that the case will be barred by time by 31-12-2019 and the copy of receipts from the party reached the Assessee after 23-12- 2019. (d) Addition of Rs.17,00,000/- An Advance amount of Rs. 17,00,000/-was received from Mr. Bhaskar K K which was not for business purposes and to meet personal financial commitment and hence same was not declared in the business Balance Sheet. The assessing officer asked for the complete details of the same in the month of October and the assessee made all possible efforts to contact Mr. Bhaskar K K and requested him to provide the confirmation letter along with his PAN. But Mr. Bhaskar K K did not provide the details before the completion of assessment proceedings and the confirmation letter from the party reached the Assessee after 23-12-2019.
The AO accordingly completed the assessment u/s 143(3) of the Act on 23/12/2019. Further as the assessee could not explain the Income of Rs. 1,92,69,619/- which in the opinion of AO is chargeable to tax U/s 115BBE of the Act.
Aggrieved by the order of AO dated 23/12/2019, the assessee preferred an appeal before the ld. CIT(A)/NFAC.
The ld. CIT(A)/NFAC deleted the additions of Rs. 98,00,000/- received by the assessee as advance from M/s SV Coffee. With regard to the personal loan received by the assessee from Bhaskar K K amounting to Rs. 17,00,000/-, the ld. CIT(A)/NFAC directed the AO to verify and allow the same as it is not for the business purposes. Further with regard to disallowance of interest paid amounting to Rs.7,56,324/- the ld. CIT(A)/NFAC deleted this addition also on the ground that the AO did not bring on record any evidence to disprove the claim of the assessee.
9.1 The ld. CIT(A)/NFAC, however affirmed the additions made due to the difference of total credits in Bank accounts with turnover declared in return of Income amounting to Rs. 77,69,619/- by contending that the quantum of the discrepancy is admitted by the assessee. Besides the Gross & Net agriculture Income was declared in the return amounting to Rs.4,00,000/-. Now the explanation of the assessee that it represents sale of agricultural produce & the assessee had due to mistake could not reported the same in the return was not convincing & accordingly held that no interference is called for.
Thus the ld. CIT(A)/NFAC partly allowed the appeal of the assessee.
Aggrieved by the order of ld. CIT(A)/NFAC dated 23/11/2024, the assessee has filed the present appeal before this Tribunal.
We have heard the rival submissions and perused the materials available on record. The sole ground raised by the assessee before us is the addition on account of difference in total credits in the bank account and turnover declared in the return by the assessee which is affirmed by the ld. CIT(A)/NFAC. On going through the order of assessment, we take note of the fact that the MarasanigeChinneGowdaSanthoshChikmagalur Page 11 of 13 assessee had stated to have 22 acres of land in which coffee, pepper & arecanut plantation & 10 acres in which coffee plantation are being grown & sold but the assessee could not produce the property records before the AO. The assessee also submitted that the sale proceeds of agriculture produce were also routed through his same bank account & thus Rs.77,69,619/- pertains to his agricultural receipts. The AO had also not disputed the agriculture income of Rs.4,00,000/- declared by the assessee. The assessee also submitted that most of coffee was sold to M/s. S V Coffee, Bangalore, however the confirmations from the party reached only after the completion of assessment.
11.1 The ld. CIT(A)/NFAC on the other hand held that the explanation of the assessee that the difference amount of Rs.77,69,619/- represents sale of agricultural produce & the assessee due to clerical mistake could not report the correct agriculture income in the return was not convincing and accordingly sustain the addition. The ld. CIT(A)/NFAC failed to demonstrate with reasons on what ground he was not convinced. The assessee had produced all the RTC copies in evidence of having agriculture land & all the receipts towards the sale of agricultural produce before the ld.CIT(A)/NFAC. We are of the opinion that the claim of the assessee needs further examination/verification. Thus if the source of the agriculture income of the assessee is not doubted by the either of the Authorities below, then taking into consideration the quantum of agriculture land the assessee owned & the submissions/claims of the assessee that (i) The difference of total credits in Bank A/c and turnover as declared in the return represents his agriculture Income (ii) Due to clerical mistake the agriculture income were wrongly reported in the return MarasanigeChinneGowdaSanthoshChikmagalur Page 12 of 13 (ii) Most of his agriculture produce/coffee was sold to M/s S V Coffee, Bangalore (iii) Both business transactions as well as Sale proceeds of agricultural produce were routed through his Bank Account since the assessee is a proprietor. (iv) The agriculture income for the current year includes accumulated agriculture receipts of earlier years (v) The assessment order was passed at the fag end that too without giving opportunity to the assessee. we cannot altogether reject the contention of the assessee without proper verification/investigation especially when the AO called for the details at the fag end of the assessment proceedings.
11.2 Before us also the assessee filed copies of RTC, Statement of income from sale of agricultural produces, Copy of sale receipts and copy of submissions made before the ld. CIT(A). In our considered opinion, the claims of the assessee as above & the documents/record produced before us needs examination/ verification which had not been done by the lower Authorities. Being so, in our considered view, in the given facts and circumstances of the case as well as in the interest of justice and fair play, we deem it fit to remit this issue to the file of AO to decide afresh in accordance with law after taking into consideration the claims/submission as above made by the assessee along with the documents/records produced before us. Needless to say, a reasonable opportunity of hearing must be granted to the assessee. The assessee is also directed to furnish all the documents/ details/record/information to substantiate his claim and in case of further default, the assessee shall not be entitled for any leniency. It is ordered accordingly.
In the result, appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 22nd July, 2025