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Facts
The deceased assessee made cash deposits of Rs. 27 lakhs during the demonetization period, which the legal heir explained as re-deposits of retirement benefits initially withdrawn for a property purchase that fell through. The A.O. rejected this explanation, adding the amount as unexplained money under Section 69A and applying Section 115BBE, resulting in a best judgment assessment under Section 144. The CIT(A) dismissed the appeal ex-parte due to the legal heir's non-participation in the proceedings.
Held
The Tribunal condoned the 121-day delay in filing the appeal, accepting the bonafide reasons provided by the legal heir, a housewife unfamiliar with tax intricacies. It ruled that the CIT(A) is statutorily obligated to dispose of appeals on merits and cannot summarily dismiss them for non-prosecution. Therefore, the Tribunal set aside the CIT(A)'s order and remanded the matter for fresh adjudication on merits, ensuring a reasonable opportunity of being heard for the assessee.
Key Issues
1. Whether the delay in filing the appeal by the legal heir of the deceased assessee should be condoned. 2. Whether the Commissioner of Income Tax (Appeals) can dismiss an appeal for non-prosecution without deciding on its merits.
Sections Cited
144, 69A, 115BBE, 142(1), 133(6), 251(1)(a), 251(1)(b), 251(2), 250, 250(6), 246A
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Income Tax Appellate Tribunal, Visakhapatnam Bench
O R D E R प्रतत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.
The present appeal filed by the assessee (since deceased) through his legal heir is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 27.03.2024, which in turn arises from the order passed by 2 the Assessing Officer (for short “A.O.”) u/s 144 of the Income Tax Act, 1961 (for short, “the Act”), dated 30.10.2019 for A.Y. 2017-18. The assessee has assailed the impugned order on the following grounds of appeal before us:
“1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) is not justified in dismissing the appeal exparte.
3. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.27,00,000 made by the assessing officer u/s 69A of the Act towards unexplained cash deposits in bank account and in subjecting the above addition to higher rate of tax by applying the provisions of S.115BBE of the Act.”
Succinctly stated, the A.O. based on information that the assessee during the demonetization period i.e 08.11.2016 to 30.12.2016 had though made cash deposits in his bank accounts but not filed his return of income for the subject year, called upon him to file his return of income u/s 142(1) of the Act. Although, there was initially no compliance to the notice u/s 142(1) of the Act, but thereafter, Smt. E. Narasamma, assessee’s wife, filed a reply wherein she brought to the notice of the A.O. that the assessee had expired on 10.07.2018.
Thereafter, the A.O. issued notice u/s 133(6) of the Act to the State Bank of India, Branch: Simhachalam, Visakhapatnam, pursuant whereto, a copy of the bank statement of the assessee for the subject year was furnished. Smt. E. Narasamma (supra) on being queried about 3 the cash deposits of Rs.27 lacs made in the bank account of the assessee (since deceased) with SBI, Branch : Simhachalam during the subject year, submitted that the same was sourced out of the cash withdrawal of the retirement benefits that were made by her husband from his said bank account for making payment of an advance for purchasing an immovable property. Elaborating further, it was stated by her that as the aforesaid purchase transaction did not materialize, therefore, the cash withdrawn by the assessee was re-deposited by him in his bank account during the demonetization period i.e. on 11.11.2016. 4. As the legal heir of the assessee (since deceased) failed to file the return of income in compliance to the notices issued u/s 142(1) of the Act, therefore, the A.O. was constrained to frame the assessment to the best of his judgment u/s 144 of the Act.
The A.O. did not find favour with the explanation of the legal heir of the assessee that the cash deposits of Rs.27 lacs (supra) made in the bank account during the subject year were sourced out of the cash withdrawal of the retirement benefits by the assessee. It was observed by him that as Smt. E. Narasamma (supra) despite specific directions had failed to place on record documentary evidence to substantiate her claim that the subject cash deposits in the assessee’s bank account 4 during the subject year were sourced out of the cash withdrawals made by him from his bank account to purchase an immovable property, therefore, her unsubstantiated explanation did not merit acceptance. The A.O., observing that the assessee had failed to come forth with any satisfactory explanation based on supporting material that the assessee had withdrawn cash amounting to Rs.27 lacs, viz. (i) on 16.07.2016: Rs.23 lacs; and (ii) on 22.08.2016: Rs.4,10,000/-; and after retaining the same with him for a period of 3 to 4 months had redeposited the same in his bank account on 11.11.2016, held the entire amount of the cash deposits made during the demonetization period aggregating to Rs.27 lacs (supra) as having been sourced out of his unexplained money u/s 69A of the Act.
Aggrieved with the assessment order, the assessee carried the matter in appeal before the CIT(A). As the assessee despite having been afforded sufficient opportunity, had failed to participate in the proceedings before the CIT(A), therefore, the latter dismissed the appeal on the said count itself. For the sake of clarity, the observations of the CIT(A) are culled out as under:
“4. OBSERVATION AND DECISION : It is observed from the records that the appellant was provided multiple opportunities of being heard by way of issue of hearing notices. But appellant has not responded to the said notices. From the non responding conduct of the appellant it may be concluded that he is not interested in completing the appeal proceedings. To reach the finality of this appeal the following judgments are refer to:
5 4.1 The law aids those who are vigilant, not those who sleep upon their rights. This principle is embodied in the well-known Latin dictum, VIGILANTIBUS ET NON DORMIENTIBUS JURA SUB VENIUNT. The conduct of the Appellant, as inferred from the aforesaid table, evidences that the Appellant fails on this principle of equity. Even the Hon'ble Courts, in various pronouncements, have frowned upon the Appellants who file appeals but thereafter do not take any further interest in prosecuting those appeals. 4.2 The Hon'ble Income Tax Appellate Tribunal Kolkata in the Pradeep Kumar Jhawar Kolkata vs. DCIT CCXXI (15 March, 2016) (ITA Nos. 450/Kol/2013 for Asst. Year: 2006-07) dismissed the appeal of the Appellant for non-prosecution. case of 4.3 The Hon'ble Madhya Pradesh High Court in the case of Estate of Late Tukojirao Holkar vs. CWT (223 ITR 480) held as under: "If the party, at whose instance the reference is made, fails to appear at the hearing, or fails in so as to enable hearing of the reference, the court is not bound to answer the reference." Similarly, the Hon'ble Punjab & Haryana High Court in the case of New Diwan Oil Mills vs. CIT ((2008) 296 ITR 495] returned the reference unanswered since the assessee remained absent and there was no assistance from the assessee. 4.4 Considering the above, it is clear that the Appellant is not aggrieved with the impugned order and not keen on pursuing this appeal. Hence I compel to proceed to decide the appeal based on the records available in my office and on merit of the case. Considering the records and merits of the case I have left with no option but to dismiss this appeal. 4.5 Accordingly, the appeal of the Appellant is dismissed.”
The assessee, being aggrieved with the order of CIT(A), has carried the matter in appeal before us.
Shri G.V.N.Hari, Advocate, the learned Authorized Representative (for short “Ld.AR”) of the legal heir of the assessee, at the threshold of hearing of the appeal, submitted that the same involves a delay of 121 days. Elaborating on the reasons leading to the delay, the Ld.AR had 6 taken us through the application filed by the assessee along with a supporting “affidavit”, dated 23.12.2024. The Ld.AR submitted that the delay in filing of the appeal had crept in because the assessee had expired on 10.07.2018 i.e. during the pendency of the assessment proceedings and the matter thereafter had been looked after by his legal heir Smt. E. Narasamma (widow of the assessee). The Ld. AR submitted that as Smt. E. Narasamma is a housewife and not conversant with the intricacies of tax matters, therefore, her tax consultant had registered the email account of her daughter Smt. E. Padma viz., epadma7991@gmail.com in the Memorandum of Appeal i.e. “Form No.35” that was filed with the CIT(A). Carrying his contention further, the Ld.AR submitted that though Smt. E. Padma (supra) had on the earlier occasion duly informed Smt. E. Narasamma (supra) about the fixation of the hearing of the appeal vide notice issued by the CIT(A) office on 09.01.2021, but thereafter, owing to her domestic responsibilities, as she had failed to keep track of the subsequent notices that on the last occasion was issued on 12.01.2024, therefore, the appeal was disposed off vide an ex parte order by the CIT(A) on 27.03.2024. The Ld.AR submitted that Smt. E. Narasamma (supra) gathered about the dismissal of the appeal by the CIT(A) only in the third week of September, 2024 when she had received a phone call from the A.O. regarding the outstanding demand. The Ld.AR submitted that 7 the assessee on learning about the dismissal of the appeal by the CIT(A) had thereafter, involving no further loss of time, filed the present appeal before the Tribunal involving a delay of 121 days. The Ld.AR submitted that as the delay in filing the present appeal had occasioned not due to any malafide conduct or lackadaisical approach of the legal heir of the assessee, but for bonafide reasons, therefore, the same in all fairness be condoned.
Per contra, Dr. Aparna Villuri, the learned senior Departmental Representative (for short “Ld. DR”) objected to the seeking of the condonation of the delay by the legal heir of the assessee (since deceased). The DR submitted that as the delay involved in the present appeal was inordinate, therefore, the same did not merit to be condoned.
We have heard the learned Authorized Representatives of both parties on the issue of delay involved in the present appeal and considered the material available on record. We are of the firm conviction that the delay involved in filing of the present appeal had occasioned for bonafide reasons and is not backed by any lackadaisical approach of the assessee’s legal heir, a housewife, who was not much conversant with the intricacies of the tax laws. Our conviction that the delay in preferring the present appeal is not for any lackadaisical 8 conduct of the legal heir of the assessee can safely be inferred from the fact that the impugned order of assessment passed by the A.O. u/s 144 of the Act, dated 30.10.2019 was assailed by her before the CIT(A) within the prescribed time limit. Considering the fact that the delay in filing the appeal had occasioned because the daughter of the assessee (since deceased) whose email ID was provided in “Form No.35”, had due to remaining engrossed in her domestic responsibilities failed to keep track of the notice that was issued after a substantial period by the CIT(A) Office i.e. on 12.01.2024, we are of the firm conviction that there is a bonafide reason leading to the delay in filing of the present appeal before us. We thus, in terms of our aforesaid observations, condone the delay involved in the filing of the present appeal.
On merits, we find that CIT(A) has dismissed the appeal for the standalone reason that the assessee had failed to participate in the proceedings before him. We are unable to persuade ourselves to accept the manner in which the appeal of the assessee had been disposed off by the CIT(Appeals). In our considered view, once an appeal is preferred before the CIT(Appeals), it becomes obligatory on his part to dispose off the same on merits and it is not open for him to summarily dismiss the appeal on account of non-prosecution of the same by the assessee. Rather, a perusal of Sec.251(1)(a) and (b), as well as the “Explanation” to Sec.251(2) of the Act reveals that the CIT(Appeals) remains under a 9 statutory obligation to apply his mind to all the issues which arise from the impugned order before him. As per the mandate of the law the CIT(Appeals) is not vested with any power to summarily dismiss the appeal for non-prosecution. The aforesaid view is fortified by the judgment of the Hon'ble High Court of Bombay in the case of CIT Vs. Premkumar Arjundas Luthra (HUF) (2017) 297 CTR 614 (Bom). In the aforementioned case the Hon’ble High Court observed as under:
8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the AO to make further inquiry and report the result of the same to him as found in Sec. 250 of the Act. Further, Sec. 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Sec. 251(1)(a) and (h) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-s. (2) of s. 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal under s. 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact w.e.f. 1st June, 2001 the power of the CIT(A) to set aside the order of the AO and restore it to the AO for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) are co-terminus with that of the AO i.e. he can do all that A.O could do. Therefore, just as it is not open to the AO to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non- prosecution of the appeal by the assessee. This is amply clear from the s. 251(1)(a) and (b) and Explanation to Sec. 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act.
10 12. We, thus, not being able to persuade ourselves to subscribe to the summary dismissal of the appeal by the CIT(A) for non-prosecution, therefore, set-aside his order with a direction to dispose off the same on merits. Needless to say, the CIT(A) shall in the course of the set-aside proceedings afford a reasonable opportunity of being heard to the assessee. As we have set aside the matter to the file of CIT(A) for fresh adjudication, therefore, we refrain from adverting to and adjudicating the grounds based on which the merits of the addition made by the A.O. have been assailed before us which, thus, are left open.
Resultantly, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.
Order pronounced in the Open Court on 26th June, 2025. (एस. बालकृष्णन) (रिीश सूद) (S. BALAKRISHNAN) (RAVISH SOOD) लेखध सदस्य/ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER Hyderabad, dated 26.06.2025. TYNM/sps