Loading judgment…
Facts
The assessee's appeal was dismissed by the CIT(A) for non-compliance with notices. The assessee claimed genuine difficulties due to the COVID-19 pandemic affecting their CA and director, leading to non-compliance in both assessment and appeal proceedings. The AO had initiated reassessment proceedings under Section 147, treating a cash credit deposit as unexplained money under Section 69A.
Held
The Tribunal admitted additional evidence and restored the matter to the AO. The AO is directed to determine if the assessee's accounts and credits were indeed not disclosed, based on the audit report and financial accounts. The assessee is also directed to file these evidences before the AO for proper compliance.
Key Issues
Whether the CIT(A) erred in dismissing the appeal without adjudicating grounds due to non-compliance, when the assessee had reasonable causes related to the pandemic and demise of the CA? Whether the additions made under Section 69A were justified when the sale proceeds were allegedly disclosed in the ITR and audited accounts?
Sections Cited
250, 147, 144, 139(1), 148, 69A, 271(1)(c), 44AB
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW ‘A’ BENCH, LUCKNOW
A.Y. 2016-17 M/s K.N.S. Exports Private Limited, vs. Additional/Joint/Deputy/ACIT/ M-18, Gole Market, Mahanagar, Income Tax Officer, National Lucknow-226006 (U.P.) Faceless Assessment Centre, Delhi PAN:AAACK8540L (Appellant) (Respondent) Assessee by: Sh. Shubham Rastogi, C.A. Revenue by: Sh. R.K. Agarwal, CIT DR Date of hearing: 30.04.2025 Date of pronouncement: 10.07.2025 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the ld. CIT(A), NFAC under section 250 of the Income Tax Act, 1961 on 16.10.2024 wherein, the ld. CIT(A) has dismissed the appeal of the assessee filed against the order of the ld. AO under section 147 r.w.s. 144 on 24.03.2022. The grounds of appeal are as under:- “(1) The Ld. C.I.T. (A), NFACerred on facts and law in dismissing the Appeal without adjudicating the Grounds of Appeal and without appreciating that there was a reasonable cause being medical reason for not making compliance in the proceedings. (2) That the Counsel of the Assessee Company CA Sandeep Tandon who is looking after Taxation Matter and keeping e-profile password was suffering from severe Neuro Problem. Due to this reason Assessee Company was not aware of issuance of Notice send on e-profile and also not aware of e-profile system, hence no compliance is made. (3) The Ld. Lower Authorities failed to appreciate that the Return filed u/s 139(1) of I. T. Act vide acknowledgement no. 503802161161016 on 16.10.2016 along with Audited Balance Sheet and Profit and Loss Account along with Audit
1. M/s K.N.S. Exports Pvt. Ltd. A.Y. 2016-17 Report in Form 3CA and 3CD is verifiable in e-filing portal where the said Cash Credit Bank Account withIndusind Bank Account No. 650014040543 has been duly shown with Opening Credit Balance Rs. 1,95,78,993/- and Closing Outstanding Balance Rs. 2,48,92,469/ and same is stated in the Notes 2.4Forming Part of the Balance Sheet, hence the reasons are invalid and subsequent assessment is also invalid. (4) The Lower Authorities failed to appreciate that Cash Credit Account with Indusind Bank Account No. 650014040543 is an Old Bank Account and has always been shown in the Audited Balance Sheet also in Earlier Years, hence, proceeding initiated u/s 148 of I. T. Act without examining the Assessment Record being ITR and Audited Balance Sheet are Invalid. Further, there is no column in the ITR to disclose the entire transactions of the Bank, hence the Reasons are itself Invalid. (5) That the reasons recorded there is no satisfaction of Ld. A. O. that it constitutes undisclosed Income of the Assessee Company, hence the Reasons do not meet the requirement of Law and are invalid and subsequent Assessment Proceedings are also invalid. (6) That the Lower Authorities failed to appreciate that there was a reasonable cause for non compliance of notice u/s 148 and subsequent assessment passed u/s 147 r. w. s. 144 of I. T. Act. Assessee Company was not aware of e-assessment proceedings and CA AkshyaKumar who is keeping password and handling Taxation matters also expired due to Covid Infection. That the Lower Authorities fails to appreciate that the Director of the Company, who was suffering from COVID infection and was confined to bed for long time and only on receiving telephonic call from the Office of ITO, he came to know the passing of the Order, therefore, there was a reasonable cause. (s) That the Lower Authorities erred on facts and in law in adding Rs. 5,60,64,577/- Total Credits in the Cash Credit Bank Account being Deposit of Sale Proceeds of Gold and Silver Jewellery and Ornaments during the year on different dates as unexplained money u/s 69A of I. T. Act without appreciating that these Sale Proceeds duly disclosed in the ITR at Rs. 11,03,94,034/- along with Tax Audit Report and Audited Balance Sheet and Profit and Loss Account, hence the present addition of Rs. 5,60,64,577/- is invalid. (9) That additions upheld is highly excessive, contrary to the facts, law and principle of natural justice and without providing sufficient time and opportunity to have its say on the reasons relied upon.”
At the very outset, it is noticed that the appeal of the assessee is delayed by 22 days. The assessee filed a condonation petition alongwith an affidavit in which it was submitted that the taxation matters of the company were handled by C.A. Sandeep Tandon, who was suffering from acute neuro problem and had also suffered severe injury multiple fractures in his right hand. Due to his aforesaid medical M/s K.N.S. Exports Pvt. Ltd. A.Y. 2016-17 problems, the assessee could not file the appeal on time. A copy of the medical certificate of the counsel was also enclosed. After considering the condonation petition, it is felt that the assessee was genuinely handicapped in filing the appeal on time and therefore, the delay in this regard is condoned.
The facts of the case are that the Company e-filed its return of income on 16.10.2016 declaring a total income at (-) Rs.2,18,896/-. Subsequently, the case was reopened by issue of notice under section 148 on the grounds that on the insight portal, there was information that the assessee had maintained a current account bearing no.650014040543 with Indusind Bank, Lucknow which had total credits of Rs.5,60,64,577/- during the F.Y. 2015-16 and that this account had not been disclosed by the assessee in its ITR. Accordingly, notices were issued to the assessee but no compliance was made to any of these notices. Therefore, the ld. AO made the assessment under the provisions of section 144. He treated the amount deposited in the said bank account as unexplained money under section 69A and he initiated penalty proceedings under section 271(1)(c).
The assessee went in appeal against this order to the ld. CIT(A). In the grounds of appeal, it was submitted that the ld. AO had failed to appreciate that the said account was a cash credit account with Indusind Bank. It was an old account and had always been shown in the audited balance-sheet in earlier years. Hence, solely on that basis, the proceedings under section 148 could not be validly initiated. Furthermore, there was no column in the ITR to disclose the entire transactions of the bank hence the reasons were invalid. It was further submitted that the ld. AO had failed to appreciate that the return filed under section 139(1) of the I.T. Act alongwith the audited balance-sheet and the profit and loss account was verifiable from the e- filing portal where the said cash credit bank account had duly been reflected in notes 2.4 forming part of the balance-sheet. Hence, the reasons were invalid. Since this appeal was also delayed, the assessee requested for condonation of such delay on M/s K.N.S. Exports Pvt. Ltd. A.Y. 2016-17 account of the fact that its C.A. Akshay Kumar, who was keeping the password and handling taxation matters was infected with Covid and subsequently expired due to complications arising out of the same. It was also submitted that the Director of the Company was also suffering from Covid and confined to bed for a long time and it was only after he received a telephone call from the office of the ITO that he came to know of the passing of the order. Therefore, the assessee was unaware about the order previously and sought condonation of delay on this account. Apparently, the ld. CIT(A) condoned the delay. But thereafter he notes that he issued three notices to the assessee on 23.09.2024, 1.10.2024 and 9.10.2024, all of which were met with non- compliance therefore, following the decision of the Hon’ble Supreme Court in the case of B.N. Bhattacharya and Others 118 ITR 461 (SC) and the ITAT order in the case of M/s Chhabra Land and Housing Limited (ITA No.1025-1027/CHD/2005), he dismissed the appeal of the assessee, for want of pursuit.
5. The assessee is aggrieved by these orders and has accordingly come in appeal before us. Sh. Shubham Rastogi, FCA (hereinafter referred to as the ld. AR) submitted that the assessee had been handicapped in presenting evidences in support of his case both during the assessment proceedings as well as during the appeal proceedings. In the case of the assessment proceedings, it was submitted that the assessee’s Chartered Accountant Sh. Akshay Kumar had contacted Covid and subsequently expired from its complications. Accordingly, since he had the password and the exclusively handled the taxation matters of the company, the company was not aware of the assessment proceedings and hence could not file any matter during the course of the assessment. It was also for this reason that the appeal before the ld. CIT(A) was delayed. Regarding the first appeal proceedings, it was submitted that the ld. CIT(A) had issued three notices in quick succession and effectively concluded the proceedings within span of three weeks. As already pointed out, the subsequent counsel of the assessee was suffering from neuro problems as a result of which he could not attend to and make compliance before the ld. CIT(A), therefore, the case had 4 M/s K.N.S. Exports Pvt. Ltd. A.Y. 2016-17 come to be dismissed without considering any of the facts upon which the assessee could demonstrate that the additions were unwarranted. He, therefore, made a prayer for admission of additional evidence under Rule 29 of the ITAT Rules, 1963 and sought to file these additional evidences which were the; i. Financial account being audited profit and loss account in balance-sheet for the A.Y. 2016-17 (uploaded alongwith audit report under section 44AB) ii. Copy of bank statement of Indusind Bank with A/c No.650014040543 of assessee company having C.C. limited for A.Y. 2016-17. He also requested permission to file copy of tax audit report in Form No.3CA and 3CD for the year ending 31.03.2016 and the proof of the demise of the former C.A. Sh. Akshay Kumar. He also requested that the matter may kindly be restored to the file of the ld. AO so that proper compliances could be made and the issue resolved.
On the other hand, Sh. R.K. Agarwal, ld. CIT DR argued that the assessee had been non-compliant in both assessment and appeal proceedings therefore, if the Tribunal, in its wisdom, decided to send the matter back to the AO then it should go with a direction to the assessee to make compliance failing which it ought to be assumed that the assessee had nothing to say in that regard.
We have duly considered the facts and circumstances of the case. After considering the facts narrated before us for failure to comply during assessment and appeal proceedings and the issues raised in the ground of appeal, we admit these additional evidences and we restore this matter back to the file of the ld. AO, to determine with reference to the audit report and the financial accounts as to whether his belief that the said accounts (and credits) were not disclosed by the assessee, had any basis. The assessee is also directed to file these evidences before the ld. AO and make due compliances so as to enable the AO to arrive at an informed conclusion. Since the matter has been restored to the file of the ld. AO, the appeal of the assessee is held to be allowed for statistical purposes.