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Facts
The assessee, an agriculturist, filed an appeal against a Section 143(3) assessment order for AY 2017-18 with a 385-day delay, attributing it to being unaware of tax proceedings, relying on a friend who engaged a consultant, and the friend's subsequent failure to communicate the CIT(A) order and demise. The core issue was an addition of Rs. 12,10,230/- as unexplained cash deposit under Section 69A, which the assessee claimed was sourced from agricultural income and labour contracting.
Held
The Tribunal condoned the 385-day delay, finding sufficient cause under Section 5 of the Indian Limitation Act. It held that the cash deposits attributed to agricultural income, supported by bills, could not be rejected merely due to non-response to Section 133(6) notices. It also accepted the source from labour contracting income, noting its acceptance by the AO in the return of income. However, the claim for opening cash balance was rejected. The Tribunal directed the deletion of addition to the tune of Rs. 10 lakhs, attributing it to agricultural and labour contracting income.
Key Issues
Whether there was sufficient cause to condone a 385-day delay in filing an appeal. Whether cash deposits could be attributed to agricultural income and labour contract income despite non-response to Section 133(6) notices by billers.
Sections Cited
143(3), 271AAC, 69A, 133(6), 5 (Indian Limitation Act, 1963)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Ms. Annapurna Gupta
Assessee by: Shri Rushin Patel, A.R. Revenue by: Shri Nitin Kulkarni, Sr. D.R. Date of hearing : 16-04-2025 Date of pronouncement : 23-04-2025 आदेश/ORDER The present appeal has been filed by the Assessee against the order passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)’] dated 09.08.2023 arising out of assessment order passed u/s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2017-18.
The appeal is delayed for filing by 385 days. The application seeking condonation of delay has been filed before me duly substantiated with an affidavit of the assessee explaining the reason for the delay as being an agriculturist residing in rural area of Gujarat and the assessee neither being aware of income tax proceedings nor the technology used in the assessment proceedings. That a friend of his had introduced him and had offered to get his return filed through a tax consultant who had in turn filed the assessee’s return for the preceding year i.e. assessment year 2016-17 and also handled the income tax proceedings for the impugned year i.e. assessment year 2017-18 with the email id of the tax consultant being provided to the department, who in turn therefore received all the notices which were further communicated to the assessee through his friend. That since the consultant had not succeeded before the CIT(A), his friend delayed and procrastinated communicating this fact to him. In the meantime the friend of the assessee passed away on 29th June, 2024 and it was only when penalty proceedings were initiated on the assessee u/s. 271AAC of the Act, the tax consultant communicated with the assessee regarding the same and informed him of the passing of the impugned CIT(A) order and immediately thereafter the assessee filed the appeal against the said order, though resulting in a delay of 385 days. All these facts were stated on oath, along with the death certificate of his friend who had purportedly connected him to the tax consultant and had not communicated the passing of the CIT(A) order to the assessee.
The ld. Departmental Representative objected to the condonation of delay.
However on considering the explanation of the assessee I find, that the assessee has adduced sufficient cause for the delay. The fact that the assessee is an agriculturist returning very low income to tax and residing in village are all facts on record and undisputed. Therefore I see no reason to disbelieve the explanation of the assessee that he was not aware of the complex laws of income tax and had engaged tax consultant to 2 do the necessary in his case through a friend of his and who in turn had not informed him about the passing of the appellate order.
The term “Sufficient cause” used in section 5 of the Indian Limitation Act 1963, has come up for construction and interpretation by the Hon’ble apex court as well as Hon’ble High courts who have been unanimous in their conclusion that this expression is to be used liberally. Reference is made to the decision of the Hon’ble apex court in the case of Collector Land Acquisition Vs Mst. Katiji & Others, 1987 AIR 1353 and in the case of N .Balakrishnan Vs M. Krishnamurthy wherein the Hon’ble court held that law of limitation is founded on public policy but are not meant to destroy the rights of litigants but only not ensure that parties do not resort to dilatory tactics but seek remedy promptly. That in every case there must be some lapse on the part of the litigant but that alone is not enough to turn down his plea. That if the explanation does not smack of malafides the court must show utmost consideration to the plea. Courts thus have been unanimous in their approach to propound that whenever the reasons assigned by an applicant for explaining the delay, then such reasons are to be construed with a justice oriented approach.
Clearly the assessee does not benefit by not filing an appeal and having adduced sufficient cause for the delay, therefore in the interest of justice, I consider it fit to condone the delay of 385 days in filing of the present appeal.
The order was pronounced in the open court. Thereafter, the appeal was proceeded to be adjudicated. The grounds raised by the assessee reads a under:- 3
“1. The ld. CIT(A) has erred in law and on facts of the case, in sustaining addition of Rs. 12,10,230/- as unexplained cash deposit u/s. 69A. 2. The appellant craves leave to add, amend, alter or delete the grounds of appeal at the time of hearing, if need arise. Total tax effect: Rs. 9,34,900/-”
8. As is evident, the solitary issue in the present case, relates to the addition made to the income of the assessee on account of cash deposit in the bank account remaining unexplained. The assessee had attributed cash as being sourced from his agricultural income and also income earned as a contractor of labour supplier, both of which were rejected by the authorities below in the absence of any substantiation of the same with evidence and holding it to be a fabricated story. I have noted the assessee’s explanation of the source of cash being agricultural income was duly substantiated with copies of bills of sale of agricultural produce. But this evidence was rejected and dismissed as having no evidentiary value for the reason that letters issued to the billers by the Assessing Officer u/s. 133(6) of the Act remained un-responded.
9. I am not in agreement with the findings of the ld. CIT(A) that in the absence of any response given by the billers to the inquiry conducted by the Assessing Officer, the genuineness of the bills was doubtful and liable to be rejected. Mere non- cooperation of a party to a transaction, over which the assessee has no control, cannot impinge upon the character of the transaction being genuine or not. There can be many reasons for the said parties not responding to queries and investigation, the parties may not be available at the stated address or for reasons best known to them they may not be responding to the queries of the income tax department. It is not the case of the Revenue 4 that the letters issued u/s. 133(6) have returned back un-served. The fact therefore remains that the persons/ billers to whom notices were issued were existing parities since notices were served. Merely because they did not confirm the transaction conducted with the assessee cannot be the reason for treating the transaction to be not genuine. The Assessing Officer was required to conduct further inquiry to find out why the letters were not responded to by the billers and only thereafter could he have taken a call on the genuineness of the said parties. Further inquires could have been conducted from the assessee also in this regard. In the absence of the same, merely because the billers did not respond to queries raised by the Assessing Officer, I hold, cannot be the basis for treating the transactions as not genuine.
I therefore hold that considering the fact that the assessee had substantiated having earned agricultural income by furnishing copies of bills issued in this regard, the explanation of the assessee cannot be rejected out rightly and some credence needs to be given to the same.
Further, I have noted that the assessee had also stated to have earned income from labour contract and attributed cash deposit to the said source also. This, I have noted, has been rejected by the authorities below since the same remained un- substantiated. This, I find, is contrary to the facts on record. The assessment order records the fact of the assessee having filed return of income for the impugned year showing total income 2,30,430/-. The copy of the return of income was filed before me with the computation of income which reflected the income returned to have been generated from the labour income 5 of the assessee. This income returned by the assessee has been accepted by the Assessing Officer, in the final computation of income assessed, making addition to this returned income of the cash deposit in the bank account remaining unexplained. Therefore, having accepted the fact of the assessee being earned income from labour contract, the source of cash deposit being attributed to this income cannot be rejected by the revenue authorities for want of substantiation.
For this reason, therefore, I do not agree with the ld. CIT(A) that the assessee had failed to substantiate the source of cash deposit as being from its activity of being the labour contractor.
The assessee has also attributed the cash deposit to opening balance of Rs. 4,95,500/- which was also rejected by the revenue authorities noting that the same was not reflected as closing balance in the return filed for the previous year. Now before me, it has been submitted by the ld. counsel for the assessee that during demonetization period the CBDT Instruction No. 3/2017 dated 21-02-2017 specified a certain limit for attributing the cash deposit during demonetization period to be out of the opening balance of cash in hand, fixing the limit at Rs. 2.5 lakhs in case of individuals not having any business income and Rs. 5 lakhs in case of taxpayers above 70 years of age. That similarly such tax limits have been specified in case of other assessees also requiring no verification to be made of cash deposited during demonetization period as attributable to the opening cash balance.
I have perused the contents of the CBDT circular and find that in case of persons engaged in business , as is the case of the 6 present assessee, it states that no additional information is required to be submitted if the total cash claimed to be deposited out of saving is not more than cash balance as on 31- 03-2016. In the facts of the present case, since the closing balance of cash for the preceding year i.e A.Y 2016-17, the assessee has shown no cash balance , the assessee is not eligible to any benefit from the said CBDT Circular.
Considering the entire facts and circumstances of the case and also more particularly noting that the assessee had income from labour contracting of around Rs. 10 Lakhs and had returned agricultural income of approximately Rs. 3 lakhs for which bills were submitted also, cash deposits in bank can safely be attributed to these sources to the tune of Rs. 10 lakhs. Accordingly, the addition to this extent is directed to be deleted.
In effect, the appeal of the assessee is partly allowed in above terms.