SRI MYSOURE REVANNA MAHESHWARAN,BANGALORE vs. INCOME TAX OFFICER, WARD- 3(2)(3), BANGALORE

The assessee is an individual. For Assessment Year 2014-15, he filed return of income declaring an income of Rs.5,74,568/-. Based on the AIR information, the case was selected for scrutiny assessment. The AIR information received by the AO was that the assessee had deposited cash of Rs.81,80,500/- in State Bank of Mysore and Rs.15,19,000/- in ICICI Bank. In the assessment proceedings, the assessee explained that the cash deposits were made out of the sale proceeds of Rs.2.10 Crores on sale of property at Halagevaderahalli, Bengaluru and furnished the copy of the sale deeds. The explanation was accepted by the AO. The AO however noticed that the assessee earned interest income of Rs.10,61,295/- on Fixed Deposit made in the State Bank of Mysore which were not offered for taxation. The assessee agreed to the addition of interest income on Fixed Deposit and the assessment was completed under section 143(3) of the Act. In order dated 26.12.2016, the AO initiated penalty proceedings against the assessee for not disclosing interest earned on Fixed Deposit in the return of income.

The AO, by order dated 09.05.2017, imposed penalty on the assessee under section 271(1)(c) of the Income Tax Act, 1961 (‘the Act’). The appeal before the CIT(A) was filed belatedly (i.e., delay of 420 days). The assessee filed an affidavit explaining reasons for the delay which have been extracted in paragraph 4 of the CIT(A)’s order. In short, the assessee had mentioned in his affidavit that he is a senior citizen, aged 74 years and because of failing health, he had entrusted tax compliance matters to Shri. Santhanam, CA. It appears that Shri. Santhanam had died and during his life time, he did not inform the assessee about any penalty order having been passed against the assessee. It appears that the assessee came to know about the penalty order only when his bank account was attached. Thereafter, the assessee collected the papers from the Office of the CA Shri. Santhanam and after getting possession of the order, the assessee filed appeal before the CIT(A) and this is the reason for delay in filing the appeal before the CIT(A).

3. The CIT(A) did not agree with the reasons for delay in filing the appeals. The CIT(A) firstly came to the conclusion that the delay on the part of the assessee in filing the appeal was inordinate delay and the assessee had to show that he was not guilty of negligence. The CIT(A) also observed that the order imposing penalty was dispatched to the assessee’s address but was returned unserved. As per the assessment record, the order imposing penalty was never delivered to the address of the assessee. The CIT(A) was therefore of the view that the plea of the assessee that the assessee collected the order imposing penalty from his AR was not correct. According to the CIT(A), the assessee did not explain as to how he got possession of the copy of the penalty order. He also held that the assessee has not explained as to why he has not followed up the matter with his tax consultants. The CIT(A) also observed that the plea of the assessee that he came to know about the penalty order when his bank account was attached cannot be believed because tax demands are available on online portal of the Income Tax Department. For the above reasons, the CIT(A) came to the conclusion that the delay in filing the appeal could not be condoned. Accordingly, the appeal of the assessee was dismissed as not admitted.

Aggrieved by the aforesaid order of the CIT(A), the assessee is in appeal before the Tribunal. We have heard the rival submissions. We have perused the affidavit of the assessee filed before the CIT(A) and also findings of the CIT(A) as to why the delay in filing the appeal should not be condoned. In our view, the delay in filing the appeal should have been condoned by the CIT(A). The assessee is a senior citizen aged above 74 years and was guided by his CA in tax matters. During the pendency of the penalty proceedings, the CA died. The order of assessment mentions the fact that Shri. Santhanam appeared and furnished the details. Therefore, as on 21.06.2016, Shri. Santhanam, CA was handling the assessee’s matters related to tax and was alive. In the penalty proceedings, show cause notice was served on the assessee for the hearing on 27.01.2017 as well as the hearing on 28.04.2017. The assessee did not appear and the order imposing penalty was passed ex-parte. It is not disputed that Shri. Santhanam died and the order imposing penalty was not served on the assessee. In the circumstances, the plea of the assessee that he came to know about the order imposing penalty came only when his bank account was attached cannot be disbelieved. The fact that the demands are available on the online portal of the Department is no ground to reject the plea of the assessee regarding the knowledge of the order imposing penalty under section 271(1)(C) of the Act. We are of the view that this explanation offered by the assessee is acceptable. Law is well settled that in income- tax proceedings, the assessee does not gain by delaying the proceedings, nor is there any prejudice to the revenue by correct and proper determination of tax liability. In fact, the Hon'ble High Court of Karnataka in ISRO Satellite Centre, expressed the view that in income-tax matters, delay in filing the appeal on the part of the assessee should be condoned, irrespective of the length of delay. The Hon'ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji & Ors, 167 ITR 471 (SC) has also taken the view that there should be a liberal and practical approach in exercising discretionary powers in condonation of delay. Keeping in mind the judicial pronouncements referred to above and considering the facts and circumstances of the present case, we are of the view that the delay in filing the appeal has occasioned due to a reasonable and sufficient cause.”

In our view, the delay in filing the appeal before the CIT(A) should have been condoned. We hold that the delay in filing the appeal before the CIT(A) deserves to be condoned. We hold and direct accordingly. Since the CIT(A) has not decided the appeal of the assessee on merits, we direct CIT(A) to decide the appeal on merits, after affording assessee opportunity of being heard. Appeal of the assessee is accordingly treated as allowed for statistical purposes.

In the result, the appeal by the assessee is treated as allowed for statistical purposes.