AMARAVARA INDIGITAL MEDIA SERVICES PRIVATE LIMITED,HYDERABAB vs. DCIT., CIRCLE 1(1), HYDERABAD.

The assessee has raised the following grounds of appeal :

The brief facts of the case are that, the assessee is a company engaged in distribution of television channel networks. On the basis of information available, the Learned Assessing Officer (“Ld. AO”) noticed cash deposits of Rs.1,78,82,525/- in the assessee’s account with Yes Bank Ltd. during F.Y. 2016–17. Statutory notices were issued by the Ld. AO to the assessee calling for explanation and supporting evidence for the said cash deposits. The assessee did not comply to the notices issued by Ld. AO. Therefore, the Ld. AO treated the entire cash deposit of Rs.1,78,82,525/- as unexplained investments.

Accordingly, the Ld. AO completed the assessment ex parte under section 144 of the Income Tax Act, 1961 (“the Act”) on 14.12.2019, assessing the total income of the assessee at Rs.1,78,82,525/-.

Aggrieved with the order of Ld. AO, the assessee preferred appeal before the Ld. CIT(A). There was a delay of 642 days in filing the appeal before the Ld. CIT(A). The Ld. CIT(A) declined to condone the delay and dismissed the appeal in limine.

Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before us. The Learned Authorised Representative (“Ld. AR”) submitted that the date of order of Ld. AO was 14.12.2019, accordingly, the date to file the appeal before the Ld. CIT(A) was due by 12.01.2020. Therefore, there was a delay of 642 days in filing the appeal before the Ld. CIT(A). He further submitted that, the Hon'ble Supreme Court in suo motu proceedings in M.A. no.21 / 2022 in M.A. no.665 / 2021 in SMW (C) no.3 of 2020 by order dated 10.01.2022 held that in cases, where the limitation would have expired during the period within 15.03.2020 and 28.02.2022, not withstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. Accordingly, in the case of the assessee the delay period from 15.03.2020 to date of filing of appeal before the Ld. CIT(A) i.e. 12.01.2020 covers by the relief granted by Hon'ble Supreme Court due to Covid pandemic. Therefore, if the relief period granted by Hon’ble Supreme Court is excluded from the total delay of 642 days, the effective delay is only about 90 days.

5.1 The Ld. AR further submitted that there was a serious management deadlock between two shareholder groups (Hyderabad group and Mumbai group), which hampered participation before the Ld. AO and timely filing of the first appeal. To demonstrate contemporaneous dispute, our attention was invited to the email dated 17.04.2018 (page no.14 of the paper book) wherein the Hyderabad group intimated the Mumbai group that due to non- cooperation the Hyderabad head office was being shut from 01.12.2017, letter sent by the company to the Mumbai group by speed post on 02.01.2018 requesting the Mumbai group for cooperation and details for income-tax proceedings (page no.15 of the paper book), copy of complaint/FIR lodged against one of the Directors (page no.17 of the paper book) and resignation letter of Director Shri Nalamuelil Koshy Rouse (page no.23 of the paper book). Finally, the Ld. AR submitted that, there was no deliberate or mala fide intention on the part of the assessee qua the delay in filing of the appeal before the Ld. CIT(A). Accordingly, he prayed before the bench for condonation of the delay and for admission of the appeal for adjudication. He also submitted that, the case of the assessee was never adjudicated on merits, therefore the case of the assessee may be remanded to the file of revenue authority. The Ld. AR also submitted that the assessment itself was ex parte u/s 144 of the Act and in the interest of natural justice the matter may be restored to the file of the Ld. AO for de novo adjudication, permitting the assessee to file evidences/explanations.

Per contra, the Learned Departmental Representative (“Ld. DR”) opposed for condonation of the delay. He submitted that even after excluding the Covid period, there remains an effective delay of about 90 days, for which, according to him, no sufficient cause has been shown. He emphasized the assessee’s persistent non- compliance before the Ld. AO and argued that negligence in prosecuting its case should not be rewarded. He supported the order of the Ld. CIT(A), noting that at para 5.23 the Ld. CIT(A) had characterized the plea as an “afterthought”. Accordingly, the Ld. DR prayed before the bench that the delay may not be condoned and the appeal of the assessee should be dismissed.

We have considered rival submissions and perused the material available on record. There is no dispute on the facts that the date of order of Ld. AO was 14.12.2019 and the date to file the appeal before the Ld. CIT(A) was due by 12.01.2020. Therefore, there was a delay of 642 days in filing the appeal before the Ld. CIT(A). We find that, the Hon'ble Supreme Court in suo motu proceedings in the case of M.A. no.21 / 2022 in M.A. no.665 / 2021 in SMW (C) no.3 of 2020 by order dated 10.01.2022 held that in cases, where the limitation would have expired during the period within 15.03.2020 and 28.02.2022, notwithstanding the actual balance period of limitation remaining, all persons shall have a limitation period of 90 days from 01.03.2022. It is also a fact that the limitation to file appeal before the Ld. CIT(A) was 12.01.2020, which does not fall within the limitation period granted by the Hon'ble Supreme Court i.e. 15.03.2020 and 28.02.2022. However, it also cannot be denied that there was effect of Covid Pandemic during the delay period of 642 days in the case of the assessee. If we reduce the period of relief granted by the Hon'ble Supreme Court i.e. from 15.03.2020 till the date of filing of the appeal by the assessee before the Ld. CIT(A), the effective residual delay is about 90 days. With regard to the residual delay of 90 days, we note the assessee’s explanation of shareholder dispute/management deadlock. We have gone through the email dated 17.04.2018 (page no.14 of the paper book), the company’s letter dated 02.01.2018 (page no.15 of the paper book) seeking cooperation for income-tax proceedings, the complaint/FIR (page no.17 of the paper book) and the resignation letter of the director (page no.23 of the paper book). On perusal of the same, we find that these are contemporaneous materials indicating a prolonged inter-se dispute affecting management functioning.

We have also gone through para no.5.23 of the Ld. CIT(A)’s order where the explanation was treated as an “afterthought.” In view of the contemporaneous documents referred above, we are unable to agree with that characterization in the facts of this case. The materials cannot be discarded at the threshold; they prima facie support the assessee’s case that internal disputes impeded timely prosecution. Therefore, in light of the relief provided by the Hon’ble Supreme Court directions due to Covid Pandemic and the documented management deadlock, we are satisfied that the assessee has shown sufficient cause for the delay in filing the appeal before the Ld. CIT(A). Accordingly, we condone the delay in filing the appeal before the Ld. CIT(A).

We also note that the case of the assessee has not been adjudicated on merits. Considering the nature of the addition (entire cash deposits of Rs.1,78,82,525/-) and the admitted non- participation earlier, and to subserve the principles of natural justice, we deem it appropriate to set aside the impugned order of the Ld. CIT(A) and restore the entire matter to the file of the Ld. AO for de novo adjudication. Accordingly, we direct the Ld. AO that he shall afford adequate opportunity to the assessee; permit filing of all evidences/explanations on source of cash deposits; and decide the matter afresh on merits in accordance with law, by passing a speaking order.

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