INCOME TAX OFFICER, WARD-1, MAHABUBNAGAR vs. DADIVELA GOVIND GOUD, MAHABUBNAGAR

On the other hand, the assessee has challenged the impugned order on the following grounds of appeal.

Succinctly stated, the A.O. based on information that though the assessee had made cash deposits of Rs.6,13,65,625/- in his bank account but had not filed his return of income for the subject year i.e. A.Y. 2013-14, initiated proceedings u/s 147 of the Act. Notice u/s 148 of the Act, dt.29.03.2021 was issued to the assessee. However, the assessee failed to comply with the aforesaid notice and did not file his return of income. Also, the notice(s) issued by the A.O. u/s 142(1) of the Act, wherein the assessee was called upon to submit documents to substantiate the source of the aforesaid cash deposits of Rs.6.13 crores (approx.) viz. sources of his income, copies of the bank accounts, computation of income, Trading and Profit and Loss account, Balance-Sheet etc., remained uncompiled with. The A.O. in the absence of any explanation regarding the source of cash deposits of Rs. 6.13 crore (supra) was constrained to treat the entire amount as the assessee’s unexplained money under Section 69A of the Act. Accordingly, the A.O. vide his order passed under Section 147 r.w.s. 144 r.w.s. 144B of the Act, dated 14.02.2022, determined the income of the assessee at Rs.6,13,65,630/-. Govind Goud, Dadivela, Mahabubnagar.

Aggrieved, the assessee carried the matter in appeal before the CIT(A), who after considering the contentions of the assessee in the backdrop of the documents/material that were filed in the course of the proceedings before him, partly allowed the appeal.

Ostensibly, the assessee in the course of the proceedings before the CIT(A), had claimed that the cash deposits made in his bank account during the subject year aggregated to Rs.4,17,83,927/- and not Rs.6,13,65,625/- as was taken by the A.O., which was accepted by the CIT(A). Elaborating further on the source of the subject cash deposits, the assessee had claimed before the CIT(A) that the same were the proceeds of the liquor business that was carried out by him during the subject year. The assessee to substantiate his aforesaid claim had filed before the CIT(A) a copy of the Trading, Proft and Loss account, Balance- Sheet etc., wherein a turnover/gross receipts of Rs.4,68,15,238/- from the aforementioned liquor business was disclosed. The CIT(A), based on the aforesaid facts, was of the view that the profit of the assessee from its aforesaid turnover of Rs.4.68 crores (approx.) of liquor business could safely be estimated on a Govind Goud, Dadivela, Mahabubnagar. presumptive basis by applying the provisions of Section 44AD i.e. 8% of its total turnover/gross receipts of Rs. 4.68 crore (approx.). Accordingly, the CIT(A) based on his aforesaid deliberations worked out the business profits of the assessee at Rs.37,45,219/- i.e .@8% of his gross receipts of Rs.4.68 crores(supra) as against that disclosed by the assessee based on his profit & loss account at Rs. 13,91,451/-. Also, the CIT(A) directed the A.O. to give a credit of the amount of TCS/TDS of Rs.4,08,648/- (Rs.4,05,711/- + Rs.2,937/-) while giving effect to his order. For the sake of clarity, the observations of the CIT(A) are culled out as under:

Therefore, it is established that cash generated and deposited in the bank account is from the appellant's liquor business only. Further, it is claimed by the appellant that the cash deposited in the bank account is Rs.4,17,83,927/- only & not Rs.6,13,65,625/- as claimed in the assessment order as the same is verifiable from the bank account statement submitted during the appellate proceedings. 5.4. During the appellate proceedings the appellant has filed copy of P & L account & Balance sheet also as per which total turnover of the appellant during the year was Rs.4.68,15,238/- and net profit derived out of that was Rs. 13,91,451/-. However, the various expenses claimed is not verifiable for the reason that neither the appellant has filed any return u/s.139 or in response to notice u/s.148 of the Act. Also, he has not got his books audited despite of having turnover of more than the prescribed limit as per Income Tax Act. Therefore, only option available is to estimate the income of the appellant considering the facts of the case. 5.5. As per appellant's own submission total turnover of the appellant during the year was Rs. 4,68,15,238/-. It would be just & proper to determine profit and gains of appellant's business on presumption basis is applying the provisions of sec. 44AD as per which 8% of the Govind Goud, Dadivela, Mahabubnagar. total turnover or gross receipts of the appellant can be estimated as the profit and gains of such business chargeable to tax under the head business or profession. Accordingly, the profit & gains of appellant is estimated at Rs. 37,45,219/-being 8% of gross receipts of Rs.4,68,15,238/- 5.6. In view of the above, the addition made of Rs. 6,13,65,625/- u/s. 69A is restricted to Rs. 37,45,219/- instead of Rs. 13,91,451/- as declared by the appellant in P & L A/c. Further, the AO is directed to give credit of TCS/TDS of Rs.4,08,648/-(Rs.405711 + Rs.2937) while giving the effect to the order and determining tax liability. Above direction is being issued u/s. 251(1)(C) of the Act. Thus, appeal is partly allowed.”

Both the Revenue and the Assessee being aggrieved with the order of CIT(A) have carried the matter in appeal before us.

Before proceeding any further, we may herein observe that the appeal filed by the assessee involves a delay of 54 days. On perusal of the record, it transpires that the assessee has filed an application requesting for condoning the delay involved in filing the present appeal. It is claimed by the assessee that the delay in filing of the appeal had crept in for the reason that he had during the relevant period undergone knee surgery, and thus, could not file the same within the prescribed period.

We have thoughtfully considered the reasons leading to the delay in filing the present appeal. We are of the view that as the delay involved in filing the appeal is not inordinate and there is a justifiable reason explaining the same, therefore, the same merits to be condoned. Our aforesaid view that a liberal approach should be adopted while considering an application filed by an appellant seeking condonation of the delay involved in filing the appeal is supported by the judgment of the Hon'ble Supreme Court in the case of Vidya Shankar Jaiswal vs. The Income Tax Officer, Ward-2, Ambikapur in Special Leave Petition (Civil) Nos. 26310-26311/2024, dated 31st January, 2025, wherein the Hon'ble Apex Court while setting aside the order of the Hon'ble High Court of Chhattisgarh, which had approved the declining of the condonation of delay of 166 days by the Income Tax Appellate Tribunal, Raipur Bench, had observed, that a justice oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay in filing the appeal. We thus, in terms of our aforesaid Govind Goud, Dadivela, Mahabubnagar. observations, condone the delay of 54 days involved in filing of the present appeal by the assessee before us.

Apropos the grievance of the department, we find that the same lies in a narrow compass, viz. the admission of certain additional documentary evidence by the CIT(A) at the back of the AO, i.e without confronting the same to the A.O. as required by the mandate of Rule 46A of the Income-Tax Rules, 1962.

We find on a perusal of the record that the assessee had failed to comply with the notice(s) issued by the A.O u/s 142(1) of the Act, and had not furnished the documentary evidence which were specifically called for by him to verify the source of the cash deposits of Rs.6.13 crores (supra) made during the subject year in the assessee’s bank account, viz. Trading and Profit and Loss account, Balance Sheet, computation of income, bank statements etc. As is discernible from the record, the assessee had stated before the CIT(A) that the actual cash deposits in his bank account during the subject year amounted to Rs.4,17,83,922/- only and not Rs.6,13,65,625/-, which was verifiable on a perusal of the bank account statement that was submitted by him before the Govind Goud, Dadivela, Mahabubnagar. first appellate authority. Apart from that, the assessee had filed before the CIT(A) the copy of the Trading, Profit and Loss Account, Balance-Sheet of the liquor business that he claimed to have carried out during the year under consideration. Ostensibly, the observations of the CIT(A), viz. (i). that the cash deposits in the assessee’s bank account aggregated to Rs.4,17,83,922/- and not Rs.6,13,65,625/-; and (ii). that the assessee during the subject year had garnered a turnover/gross receipts from his liquor business of Rs. 4,68,15,238/-, were arrived at based on the documents that were filed by the assessee for the first time in the course of the appellate proceedings before him.

We find substance in the ld. DR’s claim that as the aforesaid documentary evidence were filed by the assessee before the CIT(A) for the first time, viz. (i). Bank statement; and (ii). Trading, Profit and Loss Account, Balance-Sheet, were additional documentary evidence, therefore, as per the mandate of sub-rule (3) of Rule 46A of the Income Tax Rules, 1962, he was obligated to have allowed a reasonable opportunity to the A.O. to examine the said documents and file his objections to the admission of the same, if Govind Goud, Dadivela, Mahabubnagar. any. Apart from that, the CIT(A) as per sub-rule (2) of Rule 46A was obligated, to have recorded in writing the reasons for admission of additional documentary evidence. For the sake of clarity, we herein cull out Rule 46A which reads as under:

Resultantly, both the appeals of the revenue and assessee are allowed for statistical purposes in terms of our aforesaid observations.