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Facts
The assessee filed an appeal against an order that dismissed their appeal on the grounds of delay without considering the merits. The delay was attributed to the assessee being an army personnel posted in a remote area with connectivity issues.
Held
The Tribunal held that the CIT(A) erred by dismissing the appeal solely on the ground of delay without considering the merits. The Tribunal found that the additions made by the Assessing Officer were unwarranted and unsubstantiated.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal on the ground of delay without adjudicating the merits of the case. Whether the additions made by the Assessing Officer regarding retirement benefits and alleged investment in mutual funds were based on correct facts and reasons.
Sections Cited
147, 148, 144B, 151, 144, 133(6), 69, 80C, 10
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘A’, CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT & SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ �नधा�रण वष� / Assessment Year : 2019-20 Hakam Singh, The ITO, बनाम C/o Tej Mohan Singh, Ward - Sangrur Advocate, Vs. #527, Sector 10D,Chandigarh �थायी लेखा सं./ PAN NO: BDWPS5185E अपीलाथ�/Appellant ��यथ�/Respondent ( PHYSICAL HEARING ) �नधा�रती क� ओर से/Assessee by : Sh. Tej Mohan Singh, Advocate राज�व क� ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT, Sr. DR सुनवाई क� तार�ख/Date of Hearing : 05.06.2025 उदघोषणा क� तार�ख/Date of Pronouncement : 03 07.2025 आदेश/Order Per Krinwant Sahay, AM : Appeal in this case has been filed by the assessee against the order dated 29.10.2024 passed by the Ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the Assessment Year 2019-20.
2. Grounds of appeal are as under:
1130-Chd-2024 Hakam Singh, Sangrur 2
That the Ld. Commissioner of Income Tax (Appeals) has erred in law in dismissing the appeal only on the ground that the appellant has failed to provide any sufficient cause for the delay in filing of appeal by 212 days which is arbitrary and unjustified.
2. That the Ld. Commissioner of Income Tax (Appeals) has failed to appreciate that while filing the appeal in Form Number 35, it was specifically mentioned that the grounds of condonation of delay are attached and a prayer was made to condone the delay which has not been considered and as such the order passed arbitrary and unjustified.
3. That the Ld. Commissioner of Income Tax (Appeals) has failed to appreciate the reason for delay in filing the appeal being army personnel posted in Srinagar having connectivity issues in the area as well as non-service of notice at the correct address and as such the order passed arbitrary and unjustified. 4. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) has erred in not deciding the appeal on merits leading to upholding of the addition of Rs.63,97,895/- which is arbitrary and unjustified. 5. That the Ld. Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the initiation of proceedings under section 147 of the Act and framing the assessment under section 147 r.w.s 144 read with Section 144B of the Act without satisfying the statutory pre-conditions required for initiation of proceedings and completion of assessment and as such, the same are without 1130-Chd-2024 Hakam Singh, Sangrur 3 jurisdiction and hence deserve to be quashed as such.
6. That the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the assessment framed by the Assessing Officer in as much as there has been no reason to believe that there was an escapement of income in as much as the reasons recorded are based only on borrowed information, incorrect facts and conjectures as such the order passed is illegal, arbitrary and unjustified.
7. That initiation of proceedings was mechanical and without any application of mind much less independent application of mind, therefore the notice issued u/s 148 of the Act was an invalid notice and assumption u/s 147 of the Act was without jurisdiction.
8. That in absence of any valid approval obtained mechanically under section 151 of the Act, initiation of proceedings u/s 147 of the Act and assessment framed u/s 147/144B of the Act are invalid and deserve to be quashed as such.
9. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) has erred in in upholding of the addition of Rs. 14,00,000/- for alleged unexplained investment in purchase of alleged units of Mutual Fund of ‘Computer Age Management Service Limited' when no such investment was made by the assessee duly explained during the course of appellate proceedings and as such upholding of the addition is arbitrary and unjustified.
10. That the Ld. Commissioner of Income Tax (Appeals) has further erred in upholding of the addition of Rs.50,37,895/-under the head 1130-Chd-2024 Hakam Singh, Sangrur 4 'salary' when no such salary was ever received; bank entries duly explained during the course of appellate proceedings which was made the basis of addition by Assessing Officer and as such upholding of the addition is arbitrary and unjustified.
11. That the Ld. Commissioner of Income Tax (Appeals) has further erred in upholding of the disallowance of standard deduction of Rs.40,000/- which is statutorily allowable and as such upholding of the addition is arbitrary and unjustified.
At the very outset, the ld. Counsel for the Assessee during the proceedings before us summitted before the Bench that the order passed by the Assessing Officer is ex-parte order u/s 144 of the Income Tax Act, 1961 (in short 'the Act'). It was submitted that it was due to the reason that the Assessee is employed by the Indian Army and at the given point of time he was posted in Srinagar and he did not get notice issued by the Assessing Officer. Since there was no compliance by the Assessee during assessment proceedings, the Assessing Officer took the entire retirement proceedings / benefits of the Assessee (the Assessee retired in the same year) as unexplained income of the Assessee and made addition thereof. The 1130-Chd-2024 Hakam Singh, Sangrur 5 Assessing Officer got a letter u/s 133(6) from the Defence Accounts Office, clearly stating that the entire amount which was added by the Assessing Officer was received by the Assessee as his retirement benefits because of his services rendered in the Indian Army. The Assessing Officer also made entire addition of Rs. 14 lacs from alleged unexplained investment in purchase of alleged units of mutual funds of Computer Age Management Service Limited (‘CAMS’) while the Assessee has denied having made any such investment.
Aggrieved with the order of the Assessing Officer, the Assessee filed an appeal before the ld. CIT(A) NFAC, Delhi. In filing of the appeal before Ld. CIT(A), there was a delay of 212 days for which the Assessee filed a condonation of delay letter requesting the Ld. CIT(A) to condone the delay. The Assessee also filed written submissions on merit before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the Assessee on the simple ground that it was a delayed appeal. He has not taken into consideration any written submissions on merit.
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Aggrieved, with the order of the Ld. CIT(A), the Assessee has filed this appeal before the Tribunal.
During proceedings before us, the ld. Counsel for the Assessee has filed a detailed written submissions on both the additions made by the Assessing Officer, which is reproduced as under:-
Grounds of appeal 1-4 are against the dismissal of appeal on the ground of delay. Present appeal has been filed by the assessee the dismissal on the ground of delay of 212 days considering it to be barred by limitation. During the course of appellate proceedings, an application for condonation of delay who submitted which has been incorporated in the order of the Commissioner of Income Tax (Appeals) at page 1 1 of his order. Contents of the application are reiterated. The assessee is an officer of the Indian army who retired on 31.10.2018. After his retirement, he joined Defence Security Corps in Srinagar on 30.12.2019. During the course of his services to the nation, he was posted at Srinagar when his case was being scrutinised and further appeal was to be filed after passing of an ex-parte order by the assessing officer. Due to the frequent connectivity issues, it was difficult to communicate and as such this led to the filing of the appeal belatedly. As such, there was a reasonable cause for filing of the late appeal which be condoned in the facts of the case. Grounds of Appeal 5-8 are not pressed Ground No.9 is against the addition of Rs.14,00,000/- for alleged unexplained investment in purchase of alleged units of Mutual fund of "Computer Age Management Service Limited" when no such investment was made. The assessing officer observed in the assessment order at page 5 that the assessee's purchase of units of mutual funds of Rs. 14,00,000/- of 'Computer Age Management Service Ltd' is unexplained as the assessee has failed to furnish any documentary evidences on this issue. During the course of appellate proceedings, it was explained as under:
1130-Chd-2024 Hakam Singh, Sangrur 7 1 - Meaning of RTA :- Registrar and Transfer Agents (RTAs) are companies that act as a bridge between mutual fund companies and investors. They are registered with the Securities and Exchange Board of India (SEBI) and offer a variety of services to mutual funds, including:
Record keeping:- RTAs maintain records of investor transactions and mutual fund companies.
Information access:-RTAs provide investors with a single point of access to information about their mutual fund investments, including new offers, fund NA Vs, and income distribution details.
Customer Service:- RTAs process customer service requests, both financial and non-financial, and provide investors with consolidated statements periodically.
Service requests:- Investors can also use RTAs to place service requests, such as canceling or stopping an SIP, STP, or SWP, changing their bank mandate, or consolidating their folios.
Income added in related to unit purchase of Computer Age Management Service Ltd(CAMS) of INK 14,00,000/- :- CAMS has served the mutual fund industry for over two decades with a proprietary technology platform that supports a full range of investor and intermediary services, transaction processing, record keeping, and regulatory compliance. In India, there are two major RTAs (Registrar and Transfer Agents), namely Kfintech and CAMS. Mutual funds managed under CAMS include ICICI Prudential Mutual Fund, SBI Mutual Fund, Shriram Mutual Fund, Kotak Mutual Fund, HDFC Mutual Fund, Union Mutual Fund, IDFC Mutual Fund, Adilya Birla Sun Life Mutual Fund, DSP Mutual Fund, and many others.
Based on the explanation above, it is clear that Computer Age Management Services Ltd. (CAMS) does not issue mutual fund units; rather, it provides services to the mutual fund industry, including entities like SBI Mutual Fund. When the income tax department requests information regarding an assessee, CAMS provides information related to the mutual funds mapped under it.
1130-Chd-2024 Hakam Singh, Sangrur 8 Therefore, the addition of'INR 14,00,000/- b y the AO under Section 69, related to the purchase o f CAMS units, is incorrect and should not be included in the assessee's income. The assessee did not purchase any units o f CAMS, nor does CAMS issue units to any individual, as it is an RTA (Registrar and Transfer Agent) and not a mutual fund company. The assessee only purchased units o f SBI Mutual Fund, and the source o f this purchase has been duly accepted b y the AO, as evidenced by the bank statement.
As such, it is prayed that the addition made be deleted as no such investment was made. It is just based on some incorrect/ incomplete information. It is only the purchase of SBI Mutual Fund accepted by the AO himself of the same amount of Rs. 14,00,000/- as mentioned at page 5 of the assessment order. Ground No.10 is against the addition of Rs.50,37,895/- made on account of salary received by the assessee. As per some information received from the departmental resources, the assessing officer inferred that the assessee received salary of Rs.50,71,229/-. The assessee retired during the year on 31.10.2018 and had received salary, pension and retirement benefits during the year. The assessee was maintaining two bank accounts and details of deposits alongwith narration was placed on record before the Commissioner of Income Tax(Appeals) which is as under: Income added in respect to receipt of salary/pension of INR 20,89,202/-in A/c No: 20047467381:- While assessing the income of the assessee, the AO has added the following bank entries as part of the assessee's income:- DATE PARTICULAR Amount Remarks 03-Apr- BULK POSTING-CDA 66,783.00 Taxable-Salary 18 PATNA000000- 35,661.00 Taxable-Salary 03-Apr- BULK POSTING-CDA 18 PATNA000000- 29-May- 42,883.00 Taxable-Salary BULK POSTING-CDA 18 PATNA000000- 47,959.00 Taxable-Salary 30-Jun-18 BULK POSTING-CDA PATNA000000- 1130-Chd-2024 Hakam Singh, Sangrur 9 37,526.00 Taxable-Salary 31-Jul-18 BULK POSTING-CDA PATNA000000- 36,970.00 Taxable-Salary 31-Aug- BULK POSTING-CDA 18 PATNA000000- 52,428.00 Taxable-Salary 29-Sep- BULK POSTING-CDA 18 PATNA000000- 31-Oct- BULK POSTING-CDA 439,601.00 Out of Total INR 18 PATNA000000- 4,39,601/-, INR 2,93,087/- pertained to Leave encashment-Fully tax-exempt for State and Central Government employees. 669,391.00 Provident Fund-Fully 01-Nov- BULK tax-exempt for State 18 POSTING-CDA PATNA000000- and Central Government employees. 460,000.00 Reversed entry same date 09-Nov- CHEQUE DEP0S1T- 18 64132 in bank Statement. 14-Jan- 200,000.00 Transfer from Another CHEQUE DEPOSIT-- 19 ale 37477914882 64132 Total 20,89,202.00 Based on the above remarks, it is evident that out of the first 8 entries, totaling INR 4,66,724/- (comprising 66,783 + 35,661 + 42,883 + 47,959 + 37,526 + 36,970 + 52,428 + 4,39,601 - 2,93,087), this amount should be considered as taxable income. The remaining four entries, totaling INR 16,22,478/- are not taxable. Specifically, the entry of INR 2,93,087/-(included in the INR 4,39,601/-) and INR 6,69,391/- pertain to leave encashment and Provident Fund, respectively, which are fully exempt for government employees. The entry of INR 4,60,000/- is a reversed transaction, initially debited from the assessee's savings account and then credited back due to an error (Duly marked as Red on Page No. 10 Sell in Account Statement- 20047467381) . The entry of INR 2,00,000/-represents a transfer from the same assessee's savings account number 37477914882 on the same date, 14.01.2019 Income added in respect to receipt of salary/pension of INR 20,30,376/-in A/c No:37477914882:- While assessing the income of the assessee, the AO has added the following bank entries as part of the assessee's income:-
1130-Chd-2024 Hakam Singh, Sangrur 10 DATE PARTICULAR Amount Remarks 1,285,208.00 Commuted Pension- 20-Dec- CEMTEX DEP BY PEN 18 DEC, 18 (TDS000000) COM Fully tax-exempt for 04469 02333 1912180 State and Central Government employees. 669,963.00 20-Dec- CEMTEX DEP BY PEN Gratuity-Fully tax- exempt for State and 18 NOV, 18 (TDS000000) GTY 04469 02333 1912180 Central Government employees- 25,888.00 Taxable Pension 20-Dec- CEMTEX DEP BY PEN DEC, 18 (TDS000000) PEN 18 04469 02333 2712180 21,291.00 Taxable Pension 28-Dec- CEMTEX DEP BY PEN 18 DEC, 18 (TDS000000) PEN 04469 02333 2712180 14,013.00 Taxable Pension 28-Jan- CEMTEX DEPBY PEN JAN, 19 (TDSOOOOOO) PEN 19 04469 02333 2501190 14,013.00 Taxable Pension 25-Feb- CEMTEX DEP BY PEN FEB, 19 19 (TDSOOOOOO) PEN 04469 02333 2202190 Total 20,30,376.00 Based on the above remarks, it is evident that the first two entries, amounting to INR 12,85,208/- and INR 6,69,963/-, are non-taxable income as they pertain to Commuted Pension and Gratuity, respectively, both of which are fully exempt for government employees. The remaining four entries, totaling INR 75,205/-, represent the taxable income of the assessee.
Income added of INR 5,15,319/-(Salary from Form-16) + INR 4,02,998/-(taxable emoluments)] as found in the bank accounts with 'State bank of India' and Form-16 sent by the assessee's employer:- When issuing the assessment order and calculating the assessee's income, the Assessing Officer (AO) added an amount of INR 5,15,319/- as salary income based on Form 16, along with an additional INR 4,02,998/- as taxable emoluments found in Form 16. However, the latter amount was already included in the salary income from Form 16.
In light of the points mentioned above, it is clear that the assessee's only taxable income is INR 3,96,320/- (As per Form 16), on which tax has already been deducted and if we calculated the income as per Bank Statement (as explained 1130-Chd-2024 Hakam Singh, Sangrur 11 in Point no. 3 & 4) then I will comes only 4,20,529/-. Income tax calculation is given below:- Particular Amount(As per Form Amount(As per 16) Bank Statement) Gross Salary 5,17,719/- 5,41,929/- (4,66,724+75,205) -2,400/- -2,400/- Less:- Allowance Exempt u/s 10 Gross Total Salary 5,15,319/- 5,39,529/- Less :- Deduction u/s 80C -1,19,000/- -1,19,000/- Net Taxable Salary 3,96,320/- 4,20,529/- Tax on Total Income 7,609/- 8,868/-- Less:- Tax Deducted 8,425/- 8,425/- (26AS) Tax Payable NIL 443/- The submissions placed before the Commissioner of Income Tax(Appeals) are at Pages 914 of the Paper Book alongwith annexures which are placed in the Paper Book at Pages 16-65.”
The ld. DR relied on the orders of the authorities below.
We have considered the findings given by the Assessing Officer in his assessment order and summarily dismissal of the appeal by the Ld. CIT(A) merely on technical basis. We find that Ld. CIT(A) has not taken into consideration the details of written submissions filed before him by the Assessee. The Assessee has filed his explanation on this issue as under: - “During the financial year 2018-19 (assessment year 2014-20), I was stationed 1130-Chd-2024 Hakam Singh, Sangrur 12 in the Indian Army at Ferozepur Cantt, Punjab, and retired on 31.10.2018. Afterward, on 30.12.2019, I joined the Defence Security Corps in Srinagar. Due to the remote and conflict-prone nature of Srinagar, there were frequent connectivity issues, making it difficult to access necessary documents or communicate effectively. My commitment to national service made it impractical, if not impossible, to file the appeal within the prescribed timeframe….”
It is important to note that the Assessee is a Solider in Indian Army and at the relevant point of time he was still serving the Indian Army. Later, in the same the year, the assessee retired and got the retirement benefits. The Assessing Officer got this information from the Controller of Defence Accounts u/s 133(6) of the Act still then he made the addition of the entire amount as income of the Assessee. Further, the Assessee has categorically stated that he never made any investment in ‘CAMS’ because it is a gateway of investment to different mutual funds. The Assessee has made an investment of Rs. 14 lacs in the SBI Mutual Funds which the Assessing Officer accepted but the gateway that was used by the Assessee through which 1130-Chd-2024 Hakam Singh, Sangrur 13 investment was made in mutual funds of SBI i.e. considering the investment in Computer Age Management Service Limited (‘CAMS’), the Assessing Officer made addition of Rs. 14 lacs on it also. It was clarified during proceedings that no investment can be made in ‘CAMS’. Accordingly, it is wrong on the part of the Assessing Officer to make any addition on this issue. Both the additions were not considered by the Ld. CIT(A) and he dismissed the appeal simply because it was a delayed filing of appeal and despite of the fact that Assessee had filed a letter of condonation of delay and, instead of condoning the delay, the CIT(A) choose to dismiss the appeal.
We have gone through the order of the Assessing Officer and the order of the Ld. CIT(A). We have also considered the written submissions filed by the Counsel of the Assessee during proceedings before us as well as the arguments made by the ld. DR. We find that it is very unusual that the entire retirement benefits (certified by the Controller of Defence Accounts) was added as 1130-Chd-2024 Hakam Singh, Sangrur 14 unexplained income of the Assessee. We also find that second addition of Rs. 14 lacs in ‘CAMS’ was illogical as the ‘CAMS’ is just a gate way and not an instrument where any investment can be made. Therefore, in our considered view, both the addition made by the Assessing Officer are unwarranted and accordingly cannot be sustained. Therefore, we are deleting the additions made by the authorities below.
In the result, Assessee’s appeal on both the issues are allowed.
Order pronounced on 03. 07.2025.