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Facts
The assessee, engaged in running a Fitness Studio, declared Nil income. The AO added Rs.13,54,100/- to the assessee's income as unexplained cash credits from the demonetization period under Section 68, read with Section 115BBE. The assessee's appeal before the NFAC was dismissed for non-compliance.
Held
The Tribunal condoned the delay in filing the appeal due to the director's medical reasons. Observing that the NFAC order was ex-parte, the Tribunal restored the appeal to the NFAC for adjudication on merits, granting one more opportunity to the assessee.
Key Issues
Whether the NFAC was justified in dismissing the appeal for non-compliance without considering medical reasons, and whether the addition for unexplained cash credits during demonetization was correct.
Sections Cited
68, 115BBE, 143(3), 271AAC, 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
Assessment Year: 2017-18 M/s Athletic Studio v. The DCIT/ACIT-1 Private Limited Lucknow 11-CP/2, Ring Road Vikas Nagar, Lucknow TAN/PAN:AALCA7841H (Appellant) (Respondent) Appellant by: Shri Shubham Rastogi, C.A. Respondent by: Shri Sunil Kumar Rajwanshi, D.R. Date of hearing: 04 03 2025 Date of pronouncement: 11 03 2025 O R D E R
This appeal has been preferred by the assessee against the order dated 22.02.2024, passed by the National Faceless Appeal Centre (NFAC), Delhi for Assessment Year 2017-18.
The brief facts of the case are that the assessee was engaged in the business of running a Fitness Studio for Gym and Sports. The assessee filed its return of income for the year under consideration on 30.10.2017, declaring total income at Nil. The case of the assessee was selected for scrutiny under CASS. In response to the statutory notices issued by the Assessing Officer (AO), the assessee furnished details of Sales/Gross Receipts, month-wise sales and purchases, cash deposits, daily cash summary, etc. on verification of the details so furnished by the assessee, it was noticed by the AO that the assessee had made total cash deposits of Rs.54,40,000/- during the demonetization period. On being required to explain the nature and source of cash deposits, the assessee could not satisfactorily explain before the AO the source of Rs.13,54,100/-. The AO, therefore, treated the same as unexplained cash credits and added the same to the income of the assessee under section 68 of the Income Tax Act, 1961 (hereinafter called “the Act’). The AO completed the assessment under section 143(3) of the Act, assessing the total income of the assessee at Rs.13,54,100/-.
2.1 The Assessing Officer also invoked the provisions of section 115BBE of the Act and also initiated penalty proceedings under section 271AAC of the Act.
Aggrieved, the Assessee preferred an appeal before the NFAC. However, the appeal before the NFAC came to be dismissed for the reason of non-compliance by the Assessee.
Now, the Assessee has approached this Tribunal challenging the action of the NFAC by raising the following grounds of appeal:
1. That CIT (A), NFAC failed to appreciate that there was a reasonable cause being medical reason for non-compliance of the Notices issued during Appellate Proceeding through e- filing portal, hence the addition upheld being Rs.13,54,100/- Cash Deposit during demonetization period under section 68 read with Rule 115BBE of I. T. Act is incorrect.
2. That the Ld. CIT (A), NFAC failed to appreciate that the Ld. A. O. made the addition of Rs. 13,54,100/-being Cash deposit during demonetization period solely on the wrong facts by holding that "No Compliance of notice u/s 142(1) of I.T. Act dated 08.12.2019 has been made" without appreciating that due compliance of said notice was made on 09.12.2019 by submitting submission along with documentary evidence being Copy of Agreement to Sale, Details of Employees from whom Imprest money given was received back and detail of advances recovered from staff vide acknowledgement no. 09121912589583 which is verifiable in e-filing portal.
3. That the Land Advance, Other Imprest Advance and Staff Advances given before the date of demonetization as per Regular business work were duly recorded in books. The same were returned by these persons due to demonetization duly recorded in the Cash book and deposited in Bank Account, hence no addition of Rs.13,54,100/- should not be made under section 68 read with section 115BBE of I. T. Act.
4. The books of accounts of the Assessee produced during the assessment Proceeding has been accepted hence no addition should be made merely relying on the human conduct and preponderance of probability. Further, the Case Laws relied on are distinguishable from the facts of the case.
5. The addition 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.
The Ld. Authorized Representative for the assessee submitted that there is a delay of 330 days in filing the appeal before the Tribunal. He further submitted that the assessee had filed an application dated 24.01.2025 for condonation of delay, duly supported by an Affidavit and Medical Certificate, stating therein that the Director of the assessee-company, Shri Nagendra Kumar Agarwal was confined to bed and was under treatment of Prof. Shrish Bhatnagar of Era’s Lucknow Medical College & Hospital, Lucknow due various old aged related diseases, such as Urinary Tract Infection, Arthritics, Kidney and Bladder related problems and depression, etc. It was further stated that the assessee-company came to know about passing of the order by the NFAC after receiving telephonic call from the jurisdictional Officer for payment of outstanding demand for assessment year 2017-18 and immediately thereafter, the appeal was filed with a delay of 330 days. He prayed that the delay be kindly condoned.
The Ld. D.R. had no objection to the delay being condoned.
In view of the prayer made by the Assessee, duly supported by an Affidavit, Medical Certificate and no objection by the Ld. D.R., I condone the delay in filing of the appeal and admit the appeal for hearing.
The ld. AR submitted that due to ill-health of the Director of the assessee-company, no compliance could be made before the ld. CIT(A). He prayed that the assessee’s appeal may be restored to the file of the NFAC for the purpose of adjudication on merits.
Since the order passed by NFAC was an ex-parte order, the Ld. D.R. had no objection to the restoration of appeal to the NFAC.
I have heard both the parties and have also perused the material on record. It is evident that there was complete non- compliance on the part of the assessee during the course of first appellate proceedings. However, looking into the facts of this case, I am of the considered view that the assessee deserves one more opportunity to present its case and, therefore, in the interest of substantial justice, I restore this file to the Office of the NFAC with the direction to hear the appeal on merits. I also caution the assessee to fully comply with the notices and directions of the NFAC in the set-aside proceedings when called upon to do so, failing which, the NFAC would be at complete liberty to pass the order in accordance with law, based on material available on record even if it is ex-parte qua the assessee.
In the result, the appeal of the assessee stands allowed for statistical purposes.
Order pronounced in the open Court on 11/03/2025.