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Income Tax Appellate Tribunal, Hyderabad ‘SMC-B’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MANJUNATHA G.
PER VIJAY PAL RAO, VICE PRESIDENT :
1. This appeal by the Assessee is directed against the Order dated 09.03.2023 of the learned CIT(A)--National Faceless Appeal Centre [in short “NFAC], Delhi, relating to the assessment year 2017-2018.
2 ITA.No.995/Hyd./2025 2. There is a delay of 674 days in filing the present appeal before the Tribunal. The assessee has filed an affidavit to explain the cause of delay. The learned Authorised Representative of the Assessee has submitted that the assessee is an Ex-serviceman, retired as Head Constable from CRPF. The assessee is residing at Bangalore. However, the assessee is having ancestral lands in Andhra Pradesh and PAN card was also with the jurisdiction of Andhra Pradesh. He has further submitted that the assessee is having retail outlet as Authorised Dealer for sale of sim cards, recharge coupons etc., on commission basis. The assessee receives only 1% commission from these sales and recharge. The assessee was totally dependent upon his Chartered Accountant who was dealing with the tax matters. However, after the Covid-2019 pandemic, there was a communication gap and assessee did not receive any update from the Chartered Accountant for a long time after filing the appeal before the learned CIT(A) in February, 2020. Thereafter, the assessee changed his Tax Consultant who has verified from the Income Tax Portal that the learned CIT(A) has already
3 ITA.No.995/Hyd./2025 passed the impugned order on 09.03.2023. Therefore, there is a delay of 674 days in filing the present appeal before the Tribunal. The learned Authorised Representative of the Assessee has submitted that the Assessing Officer has made an unjustified addition on the income of the assessee by applying the commission @ 3% instead of 1% received by the assessee as per the agreement between the parties. Further, he has submitted that the Assessing Officer has taken the turnover as the entire credit in the bank account instead of the actual turnover already declared by the assessee in the return of income. The learned Authorised Representative of the Assessee has pointed-out that all the credits and deposits in the bank account are not representing the turnover/sale, but, some of the deposits are sources from the earlier withdrawals as well as non-revenue transactions. Thus, The learned Authorised Representative of the Assessee has submitted that the delay in filing the appeal before the Tribunal is due to the reasons that after filing the appeal before the learned CIT(A), there was a Covid-2019 pandemic and various restrictions on the movement, the assessee lost
4 ITA.No.995/Hyd./2025 the contact and communication with the Chartered Accountant who has also not updated and appraised the assessee about the status of the appeal filed before the learned CIT(A). If the delay is not condoned, it will result in a gross injustice to the assessee subjected to assessment of highly arbitrary income instead of the real income. He has further pointed-out that since there was no representation before the learned CIT(A), the impugned order was passed ex- parte and, therefore, the addition made by the Assessing Officer was also upheld by the learned CIT(A) without deciding the issue on merits.
3. On the other hand, the learned DR has objected to the condonation of delay and submitted that the delay of 674 days is an inordinate delay and assessee has not explained any sufficient cause for such delay, except shifting the lapse on the Chartered Accountant.
We have considered the rival submissions as well as the relevant material on record. The assessee has explained the cause of delay in the affidavit as under :
5 ITA.No.995/Hyd./2025 “AFFIDAVIT I, M.B. Madhava Reddy, son of M.Bayya Reddy, presently residing at: No. 25,Sampangappa Road, Chinagenahalh, Virgonagar Post, Bengaluru-560049, do hereby solemnly affirm and state as follows:
That, I am the Appellant herein and as such, I am aware of the facts of the case.
That, I am a retired Army Personnel from the Indian Army, CRPF. I was previously working as Head Constable in the CRPF.
That, I applied my PAN card at Madanapalle, Andra Pradesh 517325. Since, I owned ancestral lands over there and therefore PAN jurisdiction lies with Andra Pradesh.
4. That, I had been filing my return of income with Chartered Accountant Vinod Kumar Reddy, Madanapalle, Andra Pradesh, whose Mobile Number is 9502470404 and address is as follows: No. 111-145-a8-9, 2nd Main, Prashanth nagar, Madanapalle, Andra Pradesh - 517325.
5. That, for the Assessment Year 2017-18, My case was selected for regular scrutiny under CASS and to represent on my behalf, I entrusted the matter to the above name CA and I was under the bonafide belief that he would take care of the same.
However, during the scrutiny proceedings my CA (V K Reddy) filed the reply to the notices issued during Assessment. It was submitted before the Assessing Officer that he received only 1% commission from sale of SIM Cards and TDS was made. But the Assessing Officer without acknowledging the same, the Assessing Officer concluded the Assessment Ex-Parte under section 144 of 6 ITA.No.995/Hyd./2025 the Act by estimating at 3% of commission received.
7. Aggrieved by the same, I entrusted to the above name CA to file appeal before the CIT (A), Tirupati. As it was during the pre- faceless Appeal scheme period and the appeal was filed Electronically on 13.02.2020.
8. That, immediately in the month of March 2020, the whole country was struck by COVID 19 pandemic and I could not move to my native due to travelling restriction to verify status of the Appeal.
That, thereafter the National Faceless Appeal Scheme (NFAC) was introduced in the year 2020 and all pending appeals were transferred to the NFAC.
Thereafter, I forwarded all the notices of hearing to the A.R. namely V K Reddy from time to time and was under the bonafide belief that he would take care of the same.
But, to my dismay, the A.R. did not upload and submissions or documents in support of my case and an Order under section 250 of the Act came to passed dismissing the Appeal for non- representation, vide order dt: 09.03.2023.
That, as I was not getting proper feedback from the previous CA, I decided to change him and accordingly in 2025 migrated to CA Mr. Rama Linga, who is registered vide membership No: 224414 and has his office at Vijayanagar, Bengaluru.
When Mr. Rama Linga CA, logged into my income tax portal, it was seen that the order in appeal was passed way back in 09.03.2023 where in my appeal was dismissed.
7 ITA.No.995/Hyd./2025 14. By that time, the appeal was delayed by 700 days (Approx). 15. Thereafter, on the advice of Mr. Rama Linga, I approached Mr. Balram R Rao, Advocate, to file appeal before the Income Tax Appellate Tribunal and the same was filed vide ITA No: 995/HYD/2025 on 02.06.2025, before this Hon'ble Income Tax Appellate Tribunal electronically with a delay of 700 days.
It is submitted that, I was under the bonafide belief that, my previous CA Mr. Reddy would appear and provide all the details during the Assessment as well as CIT (A), but the same was not done and my appeal came to be dismissed.
It is submitted that, due to professional negligence of the previous CA my appeal came to be dismissed and now a delay of 700 days has been caused in filing this Appeal.
It is submitted that, I came to know that the Appeal was dismissed only when I started receiving messages and communications asking me to pay the disputed demand for the Assessment Year 2017-18.
The Appellant-Assessee further submits that on merits of the case, the Appellant-Assessee has got a very good chance to succeed in the appeal before the Hon'ble ITAT. On account of the delay which was beyond the control of the Appellant-Assessee as stated above, the Appellant-Assessee should not lose the opportunity to represent the matter before the Hon'ble ITAT.
The Appellant-Assessee did not have any intention of delaying in filing of an Appeal and the Appellant prays to condone the delay of 700 days and admit the appeal and post the same for hearing at 8 ITA.No.995/Hyd./2025 an early date, in the interest of principles of natural justice and equity.”
Considering the peculiar facts of the case of the assessee that assessee is an individual and a retired CRPF personnel as well as the additions made by the Assessing Officer by taking an arbitrary rate of commission instead of giving any basis either the agreement between the parties or otherwise prevailing rate of commission in this line of business/trade. The assessee in the return of income has declared the income from the business by applying 1% commission on the turnover. However, the Assessing Officer has assessed the income by taking the entire credit in the bank account as turnover of the assessee and further adopted the commission @ 3% instead of 1% claimed by the assessee. Therefore, in the facts and circumstances of the case and in the interest of justice, we are taking a lenient view to construe the sufficient cause as explained by the assessee and, therefore, the delay of 674 days in filing the appeal before the Tribunal is condoned, subject to cost of Rs.10,000/- [Rs.Ten Thousand Only] to be paid to Prime Minister’s National Relief
9 ITA.No.995/Hyd./2025 Fund, within a period of one month from the date of this Order.
6. The assessee has raised the following grounds of appeal : 1. “On the facts and in the circumstances of the case, the learned CIT(A), NFAC erred in upholding the additions in the manner in which he did.
2. On the facts and in the circumstances of the case, the learned CIT(A), NFAC erred in upholding the additions of Rs.15,92,487/-as the commission received by the Appellant for the services rendered by him at the commission rate of 3% to the total cash deposited in his Account.
3. On the facts and in the circumstances of the case the learned CIT(A), NFAC falled to provide sufficient opportunity to Appellant to prove that the cash deposited during demonetisation was from online money transfer and ticket bookings services provided by the Appellant.
4. On the facts and in the circumstances of the case the learned CIT(A) and authorities below failed to appreciate the fact that the Appellant had received less than3% of commission for the services rendered him during the Assessment Year under dispute.
5. On the facts and in the circumstances of the case the learned CIT(A) and authorities below without application of mind assessed the Appellant's total income at 3% as commission received by the Appellant during the Assessment year under dispute, whereas the Form 26AS of the Appellant clearly shows that he has received less
10 ITA.No.995/Hyd./2025 than 3% commission for the various types of services rendered by him. 6. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.”
We have heard the learned Authorised Representative of the Assessee as well as learned DR and carefully perused the impugned orders of the authorities below. The Assessing Officer has completed the assessment u/sec.144 of the Act by making addition on account of profit from the business estimated @ 3% of the total cash deposits in the bank account. There is no dispute that the assessee in the return of income has declared income from business as well as salary income [pension]. However, the Assessing Officer without conducting any enquiry, has taken total deposit in the bank account as well as turnover of the assessee and then, applied the profit @ 3%. It is pertinent to note that the assessee in this line of business is getting only the commission as agreed between the parties as per the agreement. Further, against the commission income, the assessee is also incurring the expenditure, which is allowable and, therefore, even the entire commission cannot
11 ITA.No.995/Hyd./2025 be assessed as income of the assessee without allowing the permissible and allowable claims of deduction. Thus, it is apparent from the assessment order that the Assessing Officer has made the addition arbitrarily without giving any basis and particularly on the commission by adopting commission @ 3%. The relevant part of the assessment order is as under :
“When called for the details and sources for cash deposits made during the FY A 2016-17, the assessee failed to furnish any information. It is noticed from the bank statement and return of income filed for the AY 2017-18 that the assessee was agent for Airtel online payment bank, Gold Crest Services Pvt. Ltd., Idea Mobile Commerce Services Lt. Oxigen Services India Pvt. Ltd., and Vodafone MPESA Ltd. rendering online payment services to his clientele. It is also noticed that in this line of business, the average gross commission is between 2% to 3% of the transaction value. As the assessee has not complied to this office letters and in the absence of details, it is but reasonable, if the profit is estimated @ 3% of total cash deposits treating the same as transaction value. Accordingly, the assessment is completed u/s 144 of the I.T. Act, 1961 by estimating the profit as discussed above.”
At the one hand the Assessing Officer has taken the gross commission between 2 to 3%, whereas, the Assessing Officer has adopted the profit @ 3%. This adoption of estimation of profit @ 3% is contrary to the admitted gross
12 ITA.No.995/Hyd./2025 commission between 2 to 3% which is undisputedly subject to the deductions regarding the expenditure incurred wholly and exclusively for the purpose of business of the assessee. Therefore, this approach of the Assessing Officer manifest the gross arbitrariness and unjustified act of making addition. The learned CIT(A) has dismissed the appeal of the assessee while passing the impugned order ex-parte and particularly, for non-prosecution. Therefore, the core issue raised by the assessee has not been considered by the learned CIT(A) while passing the impugned order. The assessee has now filed the copies of the agreement, under which, the assessee was conducted the business of retail outlet of selling sim cards and recharge coupons as well as bank account statements reflecting the deposits as well as withdrawals and transfer of money. The transactions in the bank account could reveal the nature and source of deposits. Accordingly, in the facts and circumstances of the case, we set-aside the impugned order of the learned CIT(A) and remand the matter to the record of the Assessing Officer for fresh adjudication after considering the relevant details/evidences to be filed by the assessee. Needless
13 ITA.No.995/Hyd./2025 to say, the Assessing Officer shall provide adequate opportunity of hearing to the assessee before the passing the order.