SRINIVAS REDDY YEDLA,NALGONDA vs. INCOME TAX OFFICER, WARD-1, SURYAPET

As the assessee had failed to file his return of income in compliance to the notice issued under Section 142(1) of the Act, therefore, the AO gathered information vide letters issued to A.P.G.V. Bank, Ramannapet Branch under Section 133(6) of the Act. As per the details furnished by the bank, the assessee during the demonetization period had in his bank account made cash deposits of Rs.14,46,500/-. Also, the AO was informed that the assessee during the entire year had made cash deposits of Rs.42,08,000/- while for total credits in the said bank account during the subject year aggregated to Rs.70,19,136/-.

The AO, holding a conviction that the assessee had failed to discharge the onus that was cast upon him i.e to explain, based on irrefutable documentary evidence, the source of cash deposits of Rs.14.46 lacs (approx.) made in his bank account during the demonetization period, thus, held the same as having been sourced out of his unexplained money under Section 69A of the Act.

Apart from that, the AO held the balance credits in the assessee’s bank account, i.e., Rs.55,72,636/- [Rs.70,19,136/- (-) Rs.14,46,500/-] as the turnover of the assessee’s business of retail trading of fertilizers that was carried out under the name and style of “M/s. Gopi Krishna Traders”. Accordingly, the AO taking cognizance of the profit that was admitted by the assessee on turnover of his aforesaid retail business for the preceding two years i.e., for A.Y 2015-16 and 2016-17, estimated the business income of the assessee on sales of Rs.55.72 lacs @ 8%, i.e., at Rs.4,45,810/-. Accordingly, the AO, after making the aforementioned additions, vide his order passed under Section 144 of the Act, dated 19-11-2019, determined the income of the assessee at Rs.18,92,310/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success. Ostensibly, the CIT(A), observing that the assessee, despite having been put to notice about the fixation of hearing of the appeal, had neither sought an adjournment nor participated in the appellate proceedings, thus holding a conviction that the assessee was not interested in pursuing the appeal, dismissed the same for want of prosecution. For the sake of clarity, the observations of the CIT(A) are culled out as under:

We have heard the learned authorized representatives of both parties, perused the orders of the lower authorities and the material available on record.

Ms. S. Sandhya, Advocate, the learned Authorized Representative (for short, “ld.AR”) for the assessee, at the threshold of hearing, submitted that the present appeal involves a delay of 443 days. Elaborating on the reasons leading to the delay, the ld. AR submitted that the same had occasioned for certain unavoidable reasons. The Ld. AR submitted that the CIT(A)’s order was dropped in the e-mail account of his Income- Tax Consultant, who was regularly filing his return of income. Elaborating further, the Ld. AR submitted that as the assessee was not physically served with a copy of the order of the CIT(A) and, was also not conversant with viewing his Income-tax Portal Account, therefore, for bonafide reasons he had failed to keep a track of his appeal that was pending before the first appellate authority. The Ld. AR submitted that though the order of the CIT(A) had come to the assessee’s notice in the month of August, 2024, and he was contemplating entrusting the matter for filing of an appeal before the Tribunal to a counsel preferably based at Hyderabad, but during the said period having suffered a fracture had remained busy seeking medical treatment. The Ld. AR submitted that the assessee had thereafter suffered recurring chest pain and was advised complete bed rest for a period of three months i.e from 16-10-2024 onwards. The ld.AR to fortify the aforesaid factual position, had drawn support from the affidavit of the assessee along with copies of the medical reports/certificates. The ld. AR submitted that, as the delay involved in filing of the appeal had crept in because of bonafide reasons, therefore, the same, in all fairness, be condoned.

Per contra, the Ld. DR objected to the seeking of the condonation of the delay involved in filing of the present appeal by the assessee.

The Ld. DR submitted that as the delay involved in the present appeal is inordinate, therefore, the same did not merit to be condoned.

We have given thoughtful consideration to the explanation of the assessee regarding the delay of 443 days involved in filing of the present appeal. Although we are not oblivion of the fact that the delay in filing of the present appeal is inordinate but at the same time cannot brush aside the explanation of the assessee, which as deposed by him in his “affidavit” had resulted to the said delay. After considering the multiple reasons resulting to the delay in filing of the present appeal, we are of the view that the same not occasioned on account of any lackadaisical approach or any intentional lapse on the part of the assessee. Considering the aforesaid facts, we are of a firm conviction that the delay involved in the present appeal merits to be condoned. Our aforesaid view is fortified by the recent decision of the Hon'ble Supreme Court in the case of Vidya Shankar Jaiswal vs. The Income Tax Officer, Ward-2, Ambikapur in Specia Leave Petition (Civil) Nos. 26310-26311/2024, dated 31st January, 2025. The Hon'ble Apex Court while setting aside the order of the Hon'ble High Court of Chhatisgarh, 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 involved in filing of the appeal.

Apropos, the merits of the case, it transpires that the assessee, on being queried about the cash deposits of Rs.14.46 lacs (supra) in his bank account No.1340100000894 held with A.P.G.V. Bank, Ramannapet Branch, had claimed that the same were sourced out of the sale proceeds of his petty business of trading in fertilizers. As is discernible from the record, the assessee had during the assessment proceedings, vide his reply dated 17-10-2019, claimed that the cash deposits in his bank account aggregating to Rs.14.46 lacs (supra) were sourced from the sale proceeds of his aforesaid his business. It transpires on perusal of the assessment order that the Assessing Officer had summarily rejected the aforesaid explanation of the assessee, for the reason, that the latter had failed to substantiate his claim that the cash deposits in his bank account was the turnover of his business of retail trading in fertilizers. Although, we concur with the AO that if an assessee fails to irrefutably substantiate his explanation as regards the source of cash deposits in his bank account, then, he is not obligated to accept the same. At the same time, we find that there is no whisper in the assessment assessee to substantiate his aforesaid claim i.e., the subject cash deposits were sourced from the sale proceeds of his aforementioned business by placing on record any supporting documentary evidence/material. Rather, we find that the assessee had after furnishing his reply dated 17-10-2019 (supra), filed before the A.O. another reply wherein having reiterated his aforesaid claim he had sought for determination of his income from the aforesaid retail business of trading in fertilizers as per the presumptive provisions of section 44AD of the Act. Nothing is either discernible from the assessment order; nor brought to our notice by the Ld. DR which would reveal that the A.O. had in the course of the assessment proceedings directed the assessee to produce supporting documentary evidence to corroborate his aforesaid claim regarding the source of cash deposits in his bank account. We, thus, find substance in the Ld. AR's claim that the assessee had been visited with the impugned addition of the entire amount of cash deposits of Rs.14.46 lacs (supra) without having been afforded any sufficient opportunity to substantiate his claim.

Although, we are not oblivion of the fact that the assessee had failed to substantiate his claim in the course of the proceedings before the CIT(A), but then as observed by us hereinabove, as there were justifiable reasons for the assessee in not participating in the proceedings before the first appellate authority, therefore, he had remained divested of an opportunity to substantiate his claim even before the said appellate authority.

Be that as it may, we are of the firm conviction that as the impugned addition of Rs.14.46 lacs (supra) had been made by the AO vide his order passed U/s.144 of the Act, dated 19-11-2019, without affording of a sufficient opportunity to the assessee to substantiate his claim regarding the source of the cash deposits in his bank account, therefore, the addition so made cannot be summarily approved on our part. We, thus, in terms of our aforesaid observations, set aside the matter to the file of the AO with a direction to re-adjudicate the case after affording a reasonable opportunity of being heard to the assessee who will remain at liberty to substantiate his claim based on fresh documentary evidence, if any.

Resultantly, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations. for A.Y. 2018-19

As the facts and the issue involved in the present appeal remain the same as were there before us in the assessee’s appeal for A.Y. 2017-18 in therefore, the order therein passed shall apply mutatis mutandis for disposing of the present appeal i.e A.Y. 2018-19.

In the result, both the captioned appeals are disposed of in terms of the aforesaid observations.