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Facts
The assessee, an agriculturist, filed an original return of income showing Rs. 40 Lakhs as agricultural income for bank loan purposes, then an updated return showing business and interest income. The AO added the Rs. 40 Lakhs as unexplained investment and cash deposits as unexplained investment.
Held
The Tribunal held that the CIT(A) order was not a speaking order and lacked sufficient reasoning to deny condonation of delay. The appeals were set aside and remitted back to the CIT(A) for a fresh consideration of the condonation application and a decision on merits.
Key Issues
Whether the CIT(A) was justified in dismissing the appeals on the ground of delay without considering the reasons for condonation and whether the assessment order and penalty were valid.
Sections Cited
139(8A), 69A, 69, 271AAC(1), 115BBE, 234-A, 234-B, 234-C
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Income Tax Appellate Tribunal, ‘A’ BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI, VICE – & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
These are the appeals filed by the assessee challenging the order of the NFAC, Delhi dated 24/01/2025 in respect of the A.Y. 2021-22 in which the assessment as well as the penalty order were challenged and raised the following grounds:
“1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
& 477/Bang/2025 2. The learned CIT[A] in not justified in refusing to condone the delay of 343 days in filing the appeal without appreciating that the appellant was prevented by reasonable cause as explained in the petition for condonation of delay filed before the learned CIT[A] under the facts and in the circumstances of the appellant's case.
Without prejudice to the above, the appellant denies himself liable to be assessed on a total Income of Rs.51,64,200/-as determined by the learned Assessing Officer as against the real taxable income of Rs.2,50,400/- reported by the appellant u/s 139[8A] of the Act that has been declared as non-est after the completion of the assessment for the year under appeal under the facts and in the circumstances of the appellant's case.
4. The learned CIT[A] erred in not disposing the ground raised
regarding the addition made of Rs.40,00,000/- u/s 69A of the Act towards the agricultural income reported by the appellant that has not been claimed as a source for any investment / outgoingsunder the facts and in the circumstances of the appellant's case.
5. The learned CIT[A] erred in not disposing the ground raised regarding the addition of Rs.11,64,200/- u/s 69A of the Act towards cash deposited by the appellant, which deposit is from out of known and explainable sources under the facts and in the circumstances of the appellant's case.
6. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s. 234-A 234-Band 234-C of the Act. which under the facts and in the circumstances of the appellant's case deserves to be cancelled.
7. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
“1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence probabilities facts and circumstances of the case.
& 477/Bang/2025 2. The learned CIT[A] in not justified in refusing to condone the delay of 148 days in filing the appeal without appreciating that the appellant was prevented by reasonable cause as explained in the petition for condonation of delay filed before the learned CIT[A] under the facts and in the circumstances of the appellant's case.
3. Without prejudice to the above, the appellant denies himself liable to penalty imposed u/s 271AAC[1] of the Act of Rs. 3;09,852/- being 10% of the tax payable u/s 115BBE of the Act of Rs. 30,98.520/- under the facts and in the circumstances of the appellant's case.
The learned CIT[A] erred in not disposing off the ground raised
that the penalty u/s 271AAC[1] of the Actis not automatic and that considering the facts and circumstances of the case, the learned AU ought to have exercised his discretion not to levy penalty in a more judicious manner under the facts and in the circumstances of the appellant's case
5. The learned CIT[A] erred in not disposing off the ground raised that mere additions made in the order of assessment would not automatically warrant the penal provisions and therefore, the penalty imposedought to have been cancelled under the facts and in the circumstances of the appellant's case.
6. Without prejudice to the above, the penalty levied is excessive and liable to be reduced substantially.
7. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
2. The brief facts of the case are that the assessee is an agriculturist and also doing some small business and received income from both the sources. Since the income was below the taxable limit, the assessee had not filed any return of income. The assessee owns two acres of agricultural land in which he cultivated coffee along with certain other crops. His main income is only from the agricultural activities. To avail the bank loan, the assessee was advised to file the return of income. Therefore the assessee filed his return of income on 31/03/2022 in which he declared an agricultural income of & 477/Bang/2025 Rs. 40 Lakhs. Since the agricultural income was exempt from the levy of tax, the entire income was claimed as exempted income. Subsequently, on advice from the income tax practitioner, he filed an updated return u/s. 139(8A) of the Act by showing the business income as Rs. 2,50,403/- and interest income of Rs. 2,520/-. In the updated return, the assessee has reported the net agricultural income at Rs. 5,75,680/- as against the gross agricultural income reported in the original return. The assessee in the updated return had given the correct income of the agriculture and in the original return, to get bank loans, he had boosted the income even though the extent of agricultural lands owned by him is 2 acres. The AO not accepted the updated return and treated the same as non-est return since the assessment proceedings were completed. The AO added the agricultural income of Rs. 40 Lakhs as unexplained investment u/s. 69A of the Act and also added the cash deposits made into his bank account as unexplained investment u/s. 69 of the Act. The assessee explained that the agricultural income shown in the original return is not correct and the gross income without giving any deduction to the expenses involved for getting the agricultural income could not be taken as the correct one. Similarly, the assessee submitted that the agricultural income earned were deposited in his bank accounts and therefore the said deposits could not be treated as an unexplained investment u/s. 69A of the Act.
3. The assessee also submitted that the penalty imposed u/s. 271AAC(1) of the Act is also not correct since the addition made by the AO would not be a reason for imposing penalty under the Act.
4. The assessee challenged both the assessment order as well as the penalty order before the Ld.CIT(A) and also filed an application under Rule 46A to admit the additional evidence i.e. the copy of the RTC in support of the agricultural lands owned by the assessee along with the English translation. The Ld.CIT(A) without going into the merits of the issue, had dismissed the appeals on the ground that there was a delay of 343 and 148 days which is not a reasonable delay. The Ld.CIT(A) also mentioned that & 477/Bang/2025 there is no sufficient cause existed to condone the said delay. In both the appeals, the Ld.CIT(A) had given the very same narration while dismissing the appeal on the ground of limitation which reads as follows:
3.1 There is an abnormal delay of 343 days which is not acceptable as it appears to be only due to the lax approach of the appellant. The appellant assessee has forwarded the reason for the delayed appeal which is not acceptable in absence of any cogent evidence. It is nothing else but camouflage for the gross negligence and inaction of the appellant assessee has not given any documentary evidence in support of the delay. The appellant assessee has miserably failed to demonstrate sufficient evidence for non- filing the appeal within due time. Also during the appellate proceedings, the appellant assessee failed to submit the supporting evidence to substantiate its claim. The appellant assessee has failed to file within the due time.
3.1 There is an abnormal delay of 148 days which is not acceptable as it appears to be only due to the lax approach of the appellant. The appellant assessee has forwarded the reason for the delayed appeal which is not acceptable in absence of any cogent evidence. It is nothing else but camouflage for the gross negligence and inaction of the appellant assessee has not given any documentary evidence in support of the delay. The appellant assessee has miserably failed to demonstrate sufficient evidence for non- filing the appeal within due time. Also, during the appellate proceedings, the appellant assessee failed to submit the supporting evidence to substantiate its claim. The appellant assessee has failed to file within the due time.
As against the said orders of the Ld.CIT(A), assessee filed these appeals before this Tribunal.
At the time of hearing, the Ld.AR brought to our notice that the reasons stated by the assessee in the delay condonation application are the real reasons and the assessee being a first time filer and also came from a & 477/Bang/2025 rural background is not conversant with the procedures and therefore the said delay has been occurred. The Ld.AR also submitted that the assessee had earned only agricultural income and in order to get bank loans, he boosted the agricultural income at Rs. 40 Lakhs when the agricultural incomes declared during the subsequent years 2022-23 and 2023-24 were only Rs. 6 Lakhs and Rs. 3,00,200/-respectively. The Ld.AR further submitted that that is why the assessee had filed an updated return.Because the return was filed after the assessment proceedings, the AO had not taken into consideration the said return for the purpose of making assessment. Therefore the Ld.AR submitted that the assessment needs to be revised based on the documents filed before the AO and also based on the additional documents filed before the Ld.CIT(A). If the AO had considered the various records, he could have accepted the returned agricultural income shown in the updated return but unfortunately, the assessee was not able to canvas all the points before the Ld.CIT(A) in view of the order being passed on the ground of limitation.
The Ld.AR therefore prayed that one more opportunity may be granted to the assessee to place all the materials before the AO. The Ld.AR further submitted that since the entire assessment is not validly done, the question of imposing penalty u/s. 271AAC(1) would not arise and prayed to allow the said appeal.
The Ld.DR relied on the orders of the lower authorities and submitted that the reasons given by the assessee for condonation of delay is not valid reasons to condone the said delay and prayed to dismiss the appeals filed by the assessee.
We have heard the arguments of both sides and perused the materials available on record.
The Ld.CIT(A) had not decided the issue on merits even though the assessee filed all the relevant documents and also filed an application to & 477/Bang/2025 admit the additional evidence which was not produced before the AO to substantiate his claim that the assessee had earned agricultural income only and not to the extent as declared in the original return of income. We have also perused the reasons given by the Ld.CIT(A) for not condoning the said delays and the Ld.CIT(A) had given cryptic reasons for not condoning the said delays. We found from the reasons stated in the condonation application that the assessee is a first time filer and he being an agriculturist, hailed from a rural background, for filing the return as well as other connected issues, he was depending upon the income tax practitioner at Madikere. The assessee further stated in the application that because of the ill advice given by the income tax practitioner i.e., instead of filing an appeal before the authorities, had filed a letter before the AO, the assessee was misled and therefore the said appeal could not be filed in time. Further, the assessee also responded to the earlier notices but unfortunately, because of his illiteracy, he had not noticed the show cause notice issued through the email ID of the assessee.
From the above we find that the assessee had explained the circumstances under which the agricultural income was originally shown in a higher figure and subsequently, by filing the updated return, the correct income was reported to the department. We have also considered the fact that the assessee had correctly reported the agricultural income in the subsequent assessment years which are almost equal to the agricultural income reported in the updated return. In such circumstances, the assessment should be made in accordance with law but unfortunately, before the AO, the assessee had not submitted the land records to substantiate his contention that the agricultural income declared in the original return is not a real one.
By taking into consideration all the facts stated above and also by considering the order passed by the Ld.CIT(A), which is not a speaking order, we set aside the order of the Ld.CIT(A) and remit the same to the file of the Ld.CIT(A) to consider the condonation application afresh. The & 477/Bang/2025 assessee is also directed to place the records before the Ld.CIT(A) in support of the said delay condonation application and thereafter the Ld.CIT(A) is directed to pass order on merits and in accordance with law by passing a speaking order.
In the result, both the appeals filed by the assessee are allowed for statistical purposes.
Order pronounced in the open court on 30th May, 2025.