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Facts
The assessee, a school teacher, had her assessment for AY 2012-13 reopened by the AO under Section 147/144 due to cash deposits of Rs. 18 lakhs in her HDFC Bank account, leading to additions for unexplained deposits and bank interest. Her appeal to the CIT(A) was dismissed ex-parte. She filed an appeal before the Tribunal, which was delayed by 251 days, attributing it to her tax consultant's error and her limited knowledge of procedural law.
Held
The Tribunal condoned the delay in filing the appeal, considering it a bonafide error and in the interest of justice. On merits, the Tribunal quashed the re-assessment order, ruling that the notice under Section 148 was not validly served on the assessee's updated address, violating the mandatory procedure outlined in Rule 127 of the Income Tax Rules, 1962, despite the reasons for reopening being valid.
Key Issues
1. Whether the delay in filing the appeal before the Tribunal should be condoned. 2. Whether the re-assessment order passed under Sections 144/147 was valid, particularly regarding the proper service of notice under Section 148 as per Rule 127 of the Income Tax Rules.
Sections Cited
144, 147, 148, 249(3), 253(5), Rule 127, Indian Limitation Act, 1963 Section 5
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Income Tax Appellate Tribunal, DIVISION BENCH, ‘A’ CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
The assessee is in appeal before the Tribunal against the order of the ld. Commissioner of Income Tax (Appeals) [in short ‘the CIT (A)’] dated 02.08.2024 passed for assessment year 2012-13.
2. The Registry has pointed out that appeal is time barred by 251 days. In order to explain the delay, assessee has filed A.Y.2012-13 2 application alongwith her affidavit duly placed on page No. 30 to 34 of the appeal papers. According to the assessee, she is a school teacher who does not have much knowledge of procedural law under the Income Tax Act, therefore, she was dependent upon her Tax Consultant. She has handed over all the papers to her Tax Consultant but he failed to file the appeal in time. She only came to know when recovery notice was served upon her and she immediately filed the present appeal. The ld. counsel for the assessee prayed that the delay in filing the appeal be condoned and appeal be decided on merit.
On the other hand, ld. DR contended that assessee should be more vigilant in prosecuting the income tax proceedings and therefore, she does not deserve any sympathy.
Sub-section 5 of Section 253 contemplates that the Tribunal may admit an appeal or permit filing of memorandum of cross- objections after expiry of relevant period, if it is satisfied that there was a sufficient cause for not presenting it within that period. This expression sufficient cause A.Y.2012-13 3 employed in the section has also been used identically in sub- section 3 of section 249 of Income Tax Act, which provides powers to the ld. Commissioner to condone the delay in filing the appeal before the Commissioner. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for consideration before Hon’ble High Court as well as before the Hon’ble Supreme Court, then, Hon’ble Court were unanimous in their conclusion that this expression is to be used liberally. We may make reference to the following observations of the Hon’ble Supreme Court from the decision in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353:
Ordinarily a litigant does not stand to benefit by lodging an appeal late.
Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties.
A.Y.2012-13 4 3. "Every day’s delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner.
4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay.
5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.
6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.
Similarly, we would like to make reference to authoritative pronouncement of Hon’ble Supreme Court in the case of N. Balakrishnan Vs. M. Krishnamurthy (1998) 7 SCC 123 dated 03.09.1998. It reads as under:
ITA No.895/CHD/2025 A.Y.2012-13 5
“Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life-span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finislitium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words "sufficient cause" under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain Vs. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal Vs. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It A.Y.2012-13 6 would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss”.
In the light of above, if we peruse the record carefully, then it would reveal that assessee has not made the appeal time barred intentionally, rather it happened on account of a bonafide error. The assessee would not gain anything by making this appeal time barred. Thus, it was not adopted as a strategy to litigate with the Revenue.
Considering the explanation of the assessee, we condone the delay and proceed to decide the appeal on merit.
The assessee has taken ten grounds of appeal, however, her grievance revolves around two issues, namely;
a) The CIT (Appeals) has erred in upholding the validity of re-assessment order which was otherwise based on non service of a valid notice u/s 148 of the Income Tax Act. b) The ld. CIT (Appeals) has erred in confirming the addition by dismissing the appeal of the assessee ex-parte.
The brief facts of the case are that assessee does not have any taxable income. She is not filing any return of income. It A.Y.2012-13 7 came to the notice of AO from Annual Information Wing that a sum of Rs. 18 lacs has been deposited in cash with HDFC Bank maintained by her. Therefore, he recorded reasons and reopened the assessment. The AO has passed an ex-parte order u/s 144 read with Section 147 of the Income Tax Act and determined the taxable income at Rs.19,28,760/-. He made three additions :
a) Unexplained deposits in the bank Rs. 18 lacs b) Unexplained time deposits Rs.1,10,000/- c) Estimated Bank Interest Rs. 18,756/-
Appeal to the ld.CIT (Appeals) did not bring any relief to the assessee because her appeal has been dismissed ex-parte for want of prosecution.
While impugning both the orders, ld. counsel for the assessee has apprised us that assessee is the daughter of late Shri Vinod Kumar Bhatia. Her mother and brother are pre- deceased wife and son of Shri Vinod Kumar Bhatia. In other words, her mother and brother expired before her father. Thus, according to the ld. counsel for the assessee, she and her sister inherited the estate of her father who died intestate. There was an ancestral house which was owned by her father A.Y.2012-13 8 alongwith his brothers. Thus, her aunt Smt. Harish Bhatia was co-owner of this residential house bearing No. 150, Near Electricity Board, Samadhi Road, Adarsh Nagar, Khanna. According to the assessee, this house was sold during financial year 2010 and whole of the sale proceed was deposited in her bank account with HDFC. Otherwise, she was earning salary as a school teacher ranging from Rs.10,000/- to Rs.12,000/- and she does not have any taxable income.
11.1 The ld. counsel for the assessee has emphasized that a notice u/s 148 was alleged to be issued on 29.03.2019 . It was sent through Registered Post as well as Notice Server but the address mentioned in the notice was House No. 150, Near Electricity Board, Samadhi Road, Adarsh Nagar, Khanna. She has shifted this residence to her new address at House No. 25, Narottam Nagar, Near Railway Crossing, Khanna. This residence was shifted in 2015 and it was changed in the bank account also. A certificate was issued by the Bank Authorities exhibiting the updation of the address. Thus, on 29.03.2019 assessee was not residing on this address because it was sold in financial year 2010. The ld. counsel for the assessee further contended that assuming in the PAN data, address was available, then Rule 127 of the Income Tax Rules, 1962 A.Y.2012-13 9 contemplate that even notice was not served on the address available, then efforts ought to be made to serve the notice on the address available in the bank account. He submitted that had the AO collected the details from the bank account including address of the assessee, before issuance of a notice u/s 148, then proper service would have been affected upon the assessee. The AO even did not collect the bank statement, rather straight away issued the notice. He drew our attention towards relevant part of Rule 127, which reads as under :
Service of notice, summons, requisition, order and other communication. .(1) For the purposes of sub-section (1) of section 282, the addresses (including the address for electronic mail or electronic mail message) to which a notice or summons or requisition or order or any other communication under the Act (hereafter in this rule referred to as "communication") may be delivered or transmitted shall be as per sub-rule (2). (2) The addresses referred to in sub-rule (1) shall be- .(a) for communications delivered or transmitted in the manner provided in clause (a) or clause (b) of subsection (1) of section 282- (i) the address available in the PAN database of the addressee; or (ii) the address available in the income-tax return to which the communication relates; or (iii) the address available in the last income-tax return furnished by the addressee; or (iv) in the case of addressee being a company, address of registered office as available on the website of Ministry of Corporate Affairs:
Provided that the communication shall not be delivered or transmitted to the address mentioned in item (i) to (iv) where the addressee furnishes in writing any other address for the purposes of communication to the income-tax authority or any person authorised by such authority issuing the communication: Provided further that where the communication cannot be delivered or transmitted to the address mentioned in item (i) to (iv) or any other address furnished by the addressee as referred to in first proviso, the communication shall be delivered or transmitted to the following address:-
A.Y.2012-13 10 .(i) the address of the assessee as available with a banking company or a co-operative bank to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of the said Act); or .(ij) the address of the assessee as available with the Post Master General as referred to in clause (j) of section 2 of the Indian Post Office Act, 1898 (6 of 1898): or .(iii) the address of the assessee as available with the insurer as defined in clause (9) of section 2 of the Insurance Act, 1938 (4 of 1938): or (iv.) the address of the assessee as furnished in Form No.61 to the Director of Income- tax (Intelligence and Criminal Investigation) or to the Joint Director of Income- tax (Intelligence and Criminal Investigation) under sub-rule (1) of rule 114D; or (v) the address of the assessee as furnished in Form N0.6IA under sub-rule (1) of rule 114E to the Director of Income-tax (Intelligence and Criminal Investigation) or to the Joint Director of Income-tax (Intelligence and Criminal Investigation); or (vi) The address of the assessee as available in the records of the Government; or (vii) the address of the assessee as available in the records of a local authority as referred to in the Explanation below clause (20) of section 10 of the Act. (b) for communications delivered or transmitted electronically- (i) e-mail address available in the income-tax return furnished by the addressee to which the communication relates; or (ii) the e-mail address available in the last income-tax return furnished by the addressee; or (iii) in the case of addressee being a company, e-mail address of the company as available on the website of Ministry of Corporate Affairs; or (iv) any e-mail address made available by the addressee to the income-tax authority or any person authorized by such income tax authority. 11.2 He prayed that for want of proper service of notice upon the assessee, this assessment order is not sustainable.
11.3 The ld. DR, on the other hand, contended that on the available address, notice was issued by the AO, therefore, no fault can be imputed to the notice.
We have duly considered the rival contentions and gone through the record carefully. There is no dispute with regard A.Y.2012-13 11 to the proposition that before framing a re-assessment order, it is mandatory to serve a valid notice upon the assessee u/s 148. We can make a reference to the decision of jurisdictional High Court in the case of CIT Vs Avtar Singh passed in ITA 449 of 2007 whose copy has been placed on record by the ld. counsel for the assessee. There is no dispute with regard to the fact that assessee did not file the return, therefore, once an information was percolated to the AO demonstrating the fact that a sum of Rs.18 lacs has been deposited in the Saving Bank Account in cash, then it was a sufficient information for harbouring the belief that income has escaped income. Therefore, as far as recording of reasons and re-opening of the assessment, we do not find any fault at the end of the AO but it is equally important and mandatory that a valid notice has to be served upon the assessee before taking up the re- assessment proceedings. We find that notice was not served on the correct address, rather it was served on the old address. The assessee has updated her bank account and a certificate has been obtained under RTI exhibiting the fact that this account was updated by new address way back in 2015. Thus, had the AO followed the procedure contemplated A.Y.2012-13 12 in Rule 127 second proviso, clause (i), which contemplates that where communication could not be delivered or transmitted to the address mentioned in PAN data, ITR, address of a company registered in the corporate affairs, then the AO has to serve the notice on the address available with a company or co-operative bank to which the Banking Regulations Act, 1949 applies. In other words, when the AO was not able to serve the notice through Speed Post, then before serving the notice through Affixture, he should have collected the complete address with the Bank and issued the notice, but here the AO himself choose last day of the limitation for serving the notice. Thus, we are satisfied that no proper service was affected upon the assessee, hence, re-assessment order is not sustainable. It is quashed.
In the result, appeal is allowed.
Order pronounced on 05.08.2025.