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Facts
The assessee's appeal before the CIT(A) was dismissed due to a 22-month delay. The assessee, with limited education and computer literacy, attributed the delay to incorrect advice from a previous legal advisor. The original assessment was completed ex-parte under section 144 after the assessee failed to comply with notices in reassessment proceedings initiated following a search on a cooperative society where the assessee had made substantial unexplained cash deposits.
Held
The Tribunal condoned the delay in filing the appeal, taking a liberal view due to the assessee's circumstances and the landmark decision in Collector, Land Acquisition v Mst. Katiji. However, acknowledging the assessee's non-compliant attitude and lack of diligence, the Tribunal remanded the matter to the CIT(A) for de novo adjudication on merits and imposed a cost of Rs. 25,000/- on the assessee.
Key Issues
Whether the delay in filing the appeal before the CIT(A) should be condoned, and whether the reassessment proceedings, including approvals, notices, and additions made under various sections, are valid.
Sections Cited
143(3), 148A, 148, 151, 147, 144B, 153C, 144, 68, 115BBE, 156, 271 AAC (1), 272(1)(d)
AI-generated summary — verify with the full judgment below
Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR
PER PRABHASH SHANKAR [A.M.] :- The present appeal arising from the appellate order dated 05.08.2024 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)"] pertaining to assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 27.01.2021 for the Assessment Year [A.Y.] 2018-19. Page 2 Α.Υ. 2017-18 Amit Prabhunath Jaiswal
The grounds of appeal are as under:-
The requisite approval/sanction u/s 151 (ii) of the Act has not taken for issuance of order u/s 148A(d) and for issuance of notice u/s 148 of IT Act, 1961. The learned Assessing Officer has not taken the requisite approval/sanction u/s 151 (ii) of the Act from Pr. CCIT for issuance of order u/s. 148A(d) and notice u/s 148 of the IT Act, 1961. Thus, the Assessment proceedings so initiated be kindly annulled on such invalid approval and proper justice and relief in this respect may kindly granted by quashing the order u/s. 148A(d) and notice u/s. 148 of the I.T. Act, 1961. 2. The Assessment order passed under Sec 147 rws 144B of the Income Tax Act, 1961 is without juri iction, void and bad in law. A search under Sec 132 was conducted in the case of M/s. Renuka Mata Multi State Ur. Co-operative Credit Society Ltd on 26/05/2017. The information in respect of my credits in my bank account provided on insight portal. The proceedings have been commenced on the basis of search and material seized in search or post search inquiry in respect of third party, the provisions of sec. 153C of the Act are applicable for assessment in the case of third party, this excludes the application of sections 147 and 148 of the Act and hence the notice issued under sec. 148 and proceedings under sec. 147 of Income Tax Act, 1961 are illegal and void ab initio. Thus, the order passed by the learned AO u/s. 147 rws 144 is not valid liable to be quashed.
Validity of order u/s 148A(d) and notice u/s.148 of the I. T. Act, 1961. The learned JAO has passed order u/s. 148A(d) dated 29/07/2022 with the approval of Pr. CIT 27 Mumbai, which is after three years have elapsed from the end of the relevant assessment year, which is invalid in view of provisions of Sec 151 of the Act. The approval of Pr. CIT 27 Mumbai is also without digital signature ignoring the Instruction No. 01/20418 dated 12thFeb. 2018 and generating DIN. The learned JAO has issued notice u/s. 148 dated 29/07/2022 without DIN, which is not according to the CBDT Circular No. 19/2019 dated 14/08/2019, is violation of Circular issued by CBDT. The CBDT Circular No. 19/2019 dated 14/08/2019 mandates that communication shall be issued by any income tax authority relating to assessment, appeals, orders, statutory or otherwise, approval etc to the assessee or any other person unless DIN has been allotted and is duly quoted in the body of such communication. Page 3 Α.Υ. 2017-18 Amit Prabhunath Jaiswal The CBDT Circular No. 19/2019 also mandate if communication which is not in conformity of para 2 & 3 of said Circular shall be treated invalid and shall be deemed to have never been issued. Thus, the approval u/s 151, and the notice issued 148 without DIN are invalid and the order passed u/s u/s 148A(d) on such invalid approval liable to be quashed and consequential all further proceedings may kindly be set aside.
Whether the reasons recorded without verifying my bank statement in detail in respect of credits and subsequent debits is a valid reason for Sec 147 of the Act.
Addition u/s. 68 of the Act at Rs. 6098188/-. The learned AO has erred or not justified in making addition u/s. 68 of the Act at Rs. 6098188/- ignoring the fact there is regular withdrawals of cash from account after cash deposit/redeposit or credits, there is no Lumpsum cash deposit or credits in my account, which can be treated undisclosed income u/s 68 of the Act, there is also recycle. The provisions of Sec. 68 are not applicable for cash deposit in bank. Thus, addition made treating entire cash deposit/credits in my account is unexplained income may kindly be deleted.
Validity of reassessment when AO proceeded on fallacious assumption that bank deposits constitute undisclosed income. The learned AO has proceeded on fallacious assumption that bank deposits constitute undisclosed income overlooking the fact that source of deposits need not necessarily be the income so, reasons recorded to initiate proceedings u/s 147 is not valid. Thus, the assessment order passed by the learned AO is violation of principle of natural justice is not valid, which may kindly be quashed.
Whether the learned Assessing Officer has justified in invoking provisions of Sec 115BBE of the Act for business receipts i.e. sale and thereby levied tax @ 60% at Rs. 3658913/- surcharge at Rs. 914728/- and education cess at Rs. 137712/- for the year under appeal. The provisions of Sec 68 are not at all applicable to cash deposited in bank/society account. Thus, provisions of Sec 115BBE of the Act are not applicable in my case, the tax levied invoking the sec 115BBE may kindly be deleted.
Validity of reassessment when JAO proceeded on doubts, wrong facts and fallacious assumption that bank deposits constitute undisclosed income without application of own mind and reasons to believe is invalid and liable to be quashed. The learned AO has proceeded on doubts. wrong facts and fallacious assumption that bank deposits constitute undisclosed income overlooking the fact that source of deposits need not necessarily be the income so, reasons have been recorded without reason to believe, without own Page 4 Α.Υ. 2017-18 Amit Prabhunath Jaiswal application of mind, without verifying and conducting proper inquiry in respect of my business transactions but simply proceeded to initiate proceedings on the basis of information received which is nothing but a classic case of borrowed satisfaction recorded to initiate proceedings u/s 147 is not valid. Thus, such action fallacious assumption, without reason to believe, without own application of mind on the part of the JAO while recording the reason and JAO has initiated proceedings on the basis of information received which is nothing but a classic case of borrowed satisfaction is liable to be quashed.
The learned AO has erred in issuing the Demand Notice u/s 156 of the Act before passing the assessment order which is not according to the procedure laid down under I. T. Act, 1961. The learned AO has passed the assessment order on 12/04/2023 at 09.06.00 IST and the Demand Notice u/s 156 has been issued 09.05.59 IST which is before passing the assessment order. Thus, the Demand Notice issued u/s 156 of the Act, is invalid.
Penalty proceedings u/s. 271 AAC (1) and 272(1)(d) of the I.T. Act, 1961. When the approval u/s 151 itself is invalid, all further assessment proceedings and void ab initio. The penalty proceeding initiated u/s. 271 AAC (1) and 272(1)(d) on the strength of invalid approval is liable to be quashed, the penalty proceedings initiated is not valid, which may kindly be dropped
Briefly stated facts of the case are that the assessee filed return declaring total income at Rs. 3,85,150/-. As per information with the AO, Search & Seizure action u/s 132 of the Act was carried out in case of Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd (SRMSCS) on 26.05 2017. During the search, it was found that the society was used as a conduit for laundering of unaccounted money of some unscrupulous tax payers. As per the enquiries conducted by the Investigation Wing, the modus operandi was such that various accounts were opened in the cooperative society in the names of persons who Page 5 Α.Υ. 2017-18 Amit Prabhunath Jaiswal were mostly men of no means/low means. Huge cash deposits were made. Credits into the account-holders of SRMUCS were made by different modes. Further, on physical verification of some of the members/account holders, it was seen that many of the entities/account holders were not found on their address and/or are persons of meagre or no means. In many cases, the accounts were operated under the knowledge of the account holders on payment of commission. In the instant case, it has been observed that the assessee had made cash deposits/credits in bank account maintained with “SRMUCS amounting to Rs. 60,98,188/- and source and nature of the same were not explained by the assessee. Accordingly, notice u/s 148 of the Act was issued through electronic mode on his e-filing portal. In response, the assessee filed return. Notices u/s 143(2) and notice u/s 142(1) along with specific questionnaire were issued to the assessee. However, he neither replied nor field desired information/documents. Ultimately the assessment was completed ex parte u/s 144 of the Act.
Aggrieved, the assessee filed appeal before the ld.CIT(A) which was found to be delayed by 22 months. Before him, a request was made for condoning the delay stating that he was educated up to 12th std and could not operate computers also not aware of Information technology. He was more dependent on legal adviser Sri Pravin Jaiswal, who did not Page 6 Α.Υ. 2017-18 Amit Prabhunath Jaiswal give correct advise at the right time. On second opinion from the other CA, he was told to file appeal which was done. There was no intentional delay and no malafide reasons attributed to the delay. The delay in filing
the appeal was caused due to wrong opinion of earlier counsel which is a fact and reasonable and bonafide cause. The appeal was filed on legal issue which goes to the root of the matter violation of CBDT instructions or Circulars also without valid approval u/s 151 of the Act. In view of above facts and cited decisions, it was requested to condone the delay in filing appeal and to decide the case on merits.
1 The ld.CIT(A) however, found the reasons being general, unsatisfactory and unsubstantiated without any documentary evidence and concluded that the assessee had utterly failed in discharging such onus. Accordingly, the delay was not condoned and appeal was dismissed without going in to merits of the appeal.
The assessee has filed an affidavit stating the same reasons before the Bench as well with a requested to condone the delay to be decided on merits. On careful consideration of the submissions of the assessee, we are of the opinion that the delay in filing of the present appeal was not intentional but due to unavoidable and sufficient cause. Considering the fact that the assessee is moderately educated and not Page 7 Α.Υ. 2017-18 Amit Prabhunath Jaiswal computer literate and conversant with the e-communication and Faceless assessment and appeal proceedings, such lapse could not be considered to be deliberate though he needed to be keep track of the proceedings. Therefore, a liberal view was required to be taken by the ld.CIT(A).In this connection, reliance could be placed on the landmark decision of hon'ble Supreme Court which inter alia held in Collector, Land Acquisition v Mst. Katiji And Others- 167 ITR 471 (SC) that “ordinarily, a litigant does not stand to benefit by lodging an appeal late........Refusing tocondone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated....Any appeal or any application, other than an application under any of the provisions of Order XXI of the Code of Civil Procedure, 1908, may be admitted after the prescribed period if the appellant or the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period.... A litigant does not stand to benefit by resorting to delay. In fact, he runs serious risk.” We therefore, condone the delay.
Before us, the ld.AR has requested for remanding the issue to the lower authorities for proper and just adjudication of the appeal with an assurance of necessary compliance in the proceedings. The ld.DR Page 8 Α.Υ. 2017-18 Amit Prabhunath Jaiswal however, objected to the said proposal claiming that the assessee is habitual defaulter in this regard.
We have heard the rival parties and perused the material available on records. It is observed that the ld.CIT(A) dismissed the appeal on the ground of delayed filing of appeal without adjudicating the case on merits. It is the fundamental duty of the assessee to diligently pursue the appeal and comply with the notices and proceedings initiated by the Revenue authorities. The time lines laid down in the Act are required to be duly followed by the taxpayers. In this case,even the assessment order has been passed u/s 144 of the Act as the assessee did not make proper compliance before the AO as well.Such attitude of the assessee reflects gross negligence and indifference which is unacceptable. In light of the non-compliant attitude of the assessee, levy of cost needs to be evaluated in this case as cost serves as a necessary deterrent to ensure that taxpayers act with due diligence in pursuing their appeals and respecting the timelines and processes laid down under the law. It also emphasizes the principle that while justice must be ensured, the system cannot cater to indolence or negligence on the part of the assessee.
1 As the ld. AR has requested before us that the assessee may be given one more opportunity, we are also of the opinion that the scales of Page 9 Α.Υ. 2017-18 Amit Prabhunath Jaiswal justice demands that the matter should be verified and revisited at the level of ld. CIT(A) and accordingly, the entire matter is remanded back to the file of ld. CIT(A) for de novo adjudication by him while applying the principles of natural justice after affording sufficient opportunity of being heard to the assessee. In case of non compliance, the ld.CIT(A) would be at liberty to decide the appeal as deemed fit.
Further, considering assessee's non-compliant and non-co- operative attitude and lack of diligence in pursuing the appeal, we impose a cost of Rs. 25,000/- on him. The cost shall be deposited in the Prime Minister's Relief Fund within 15 days of the receipt of this order and proof of payment shall be submitted before the ld.CIT(A).
In the result, the appeal is allowed with cost for statistical purposes. Order pronounced in the open court on 12/02/2026. SANDEEP GOSAIN (न्यायिक सदस्य /JUDICIAL MEMBER) PRABHASH SHANKAR लेखाकार सदस्य/ACCOUNTANT MEMBEF Place: मुंबई/Mumbai दिनांक / Date 12.02.2026 Α.Υ. 2017-18 Amit Prabhunath Jaiswal Lubhna Shaikh / Steno आदेश की प्रतिलिपि अग्रेषित/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रतिनिधि, आयकर अपीलीय अधिकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यापित प्रति //// आदेशानुसार / BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.