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Facts
The assessee failed to file a return of income, leading to a best judgment assessment under section 144. The Assessing Officer (AO) treated a portion of bank deposits as unexplained under section 69A and the rest as business income. The assessee's appeal before the CIT(A) was dismissed solely on the ground of a 935-day delay.
Held
The Tribunal condoned the delay in filing the appeal, considering the ex parte assessment order, the dismissal on technical grounds, and the impact of the Covid-19 pandemic. The matter was restored to the AO for fresh adjudication on merits, allowing the assessee an opportunity to present their case.
Key Issues
Whether the delay in filing the appeal before the CIT(A) should be condoned due to the ex parte assessment, and whether the appeal should be decided on merits rather than dismissed on limitation.
Sections Cited
144, 69A, 44AD, 264, 249
AI-generated summary — verify with the full judgment below
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The present appeal has been instituted by the assessee against the order of the Ld. CIT(A) passed u/s 250 of the Act dated 31.12.2024.
The effective issue raised by the assessee is that the learned CIT(A) erred in dismissing the appeal in limine on account of delay in filing the appeal by 935 days.
The facts in brief are that the assessee, an individual, is carrying travel agency and tour operator business in the name of K.G.N. Tour and Travels. The assessee for the year under consideration had not filed return of income. Based on information regarding deposit of cash during the demonetisation period, a notice under section 142(1) was issued requiring the assessee to file return of income but the assessee failed to file the return. In the absence of response from the assessee, the AO proceeded to complete best judgment assessment as per section 144 of the Act.
The AO from the bank statement of the assessee observed that during the year the bank account of the assessee was credited for the sum of Rs. 63,77,397/- which included cash deposits of Rs. 55,52,450/- only. Out of total cash deposits during the year, a sum of Rs. 27,26,200/- was made deposit during the demonetisation period. The AO further worked out average monthly cash deposit of the assessee except for November 2016 at Rs. 2,57,841.00. Applying the average monthly cash deposit, the AO worked annual cash deposit of Rs. 30,94,092 from business and remaining amount of cash deposit of Rs. 24,58,358/- was treated as unexplained money under section 69A of the Act.
4.1 As the bank account of the assessee for the year was credited for Rs. Rs. 63,77,397/- through cash and bank transfer and out of the same, an amount of Rs. 24,58,358 was treated as unexplained money, the remaining sum was treated as business receipt. As the assessee in the earlier year has offered income as per section 44AD of the Act, the AO computed income on business receipt of 39,19,039/- @ 8% which was arrived at Rs. 3,13,315/- only. Accordingly, the AO assessed total income of the assessee at Rs. 27,71,880/- vide order dated 30-12-2019. 4.2 Against the assessment order famed under section 144 of the Act, the assessee files revision petition under section 264 of the Act, before the ld. PCIT as on 18-02-2021 which came to be dismissed as on 24-02- .
2022. The learned PCIT declined to interfere into the mater leaving the proposal to assessee to file an appeal under section 249 of the Act.
4.3 Hence, the AO filed appeal under section 249 of the Act before the learned CIT(A)/NFAC as on 22-04-2022. The learned CIT(A) found that appeal was delayed by 935 days which is beyond the time limit specified under the provision of section 249 of the Act. The learned CIT(A) after referring to various case laws held that the delay in filing the appeal may be condone if there is sufficient and reasonable cause. However, the assessee in the present case did not adduce any reasonable cause which prevented the assessee in filing the appeal within the time. Hence the learned CIT(A) dismissed the assessee appeal in limine on account of limitation.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us submitted that though the assessment order was passed as on 30th October 2019 but the same was served on the assessee as on 4th March 2020 only. Hence the due date for filing appeal was 3rd April 2020. However, the relevant period was hit by the Covid-19 pandemic followed by strict lockdown. The Hon’ble Supreme Court in Cognizance for Extension of Limitation, In re reported in 134 taxmann.com 307 (SC) has held that period starting from 15th March 2020 to 28th February 2022 shall have to be excluded for the purpose of limitation. Accordingly, there was delay of 65 days which in the backdrop of covid-19 pandemic is condonable.
On the contrary, the learned DR supported the orders of the lower authorities. It was submitted that the assessee neither filed the return of income nor responded to the notices issued during the assessment proceedings, due to which the AO was constrained to complete the assessment u/s 144 of the Act. It was further submitted that the appeal before the Ld. CIT(A) was filed with a substantial delay of 935 days and the assessee failed to furnish any satisfactory explanation for such delay. Therefore, the Ld. CIT(A) was justified in dismissing the appeal on the ground of limitation and the same does not call for any interference.
We have heard the rival contentions of both the parties and perused the materials available on record. The facts emerging from the record show that the assessment in the present case was completed by the AO u/s 144 of the Act on 30.12.2019 in the absence of compliance from the assessee. The AO, on the basis of bank statement, noticed that the bank account of the assessee was credited with a sum of Rs. 63,77,397/- which included cash deposit of Rs. 55,52,450/- only. Out of the cash deposits, the AO treated a sum of Rs. 24,58,358 as unexplained money u/s 69A of the Act and the remaining amount was treated as business receipts on which income was estimated by applying the provisions of section 44AD of the Act. Accordingly, the total income of the assessee was assessed at Rs. 27,71,880/- only.
8.1 Against the said assessment order, the assessee preferred an appeal before the learned CIT(A) who dismissed the appeal in limine on the ground that the appeal was filed with a delay of 935 days and the assessee failed to furnish sufficient cause for condonation of delay.
8.2 Before us, the learned AR submitted that though the assessment order was passed earlier, the same was served on the assessee on 04.03.2020 and therefore the due date for filing appeal would fall on 03.04.2020. It was further submitted that the said period coincided with the outbreak of the Covid-19 pandemic and the nationwide lockdown. The Hon’ble Supreme Court had directed exclusion of the period from 15.03.2020 to 28.02.2022 for the purpose of computing limitation. Therefore, according to the assessee, the delay in filing the appeal is marginal and deserves to be condoned.
8.3 After considering the facts of the case, we notice that the assessment order itself has been passed ex parte u/s 144 of the Act and the assessee did not get adequate opportunity to place the relevant explanation and supporting materials before the AO. Further, the appeal before the learned CIT(A) has also been dismissed on technical ground of limitation without adjudicating the issues involved in the assessment on merits. Thus, the additions made by the AO have not been examined by the appellate authority on merits.
8.4 In our considered view, the object of the appellate proceedings is to render substantial justice and to examine the correctness of the assessment on the basis of facts and law. When the assessment itself is ex parte and the appeal has also been dismissed on technical ground, the matter has not been examined on merits at any stage. In such circumstances, it would be appropriate in the interest of justice to restore the matter to the file of the AO so that the assessee gets a reasonable opportunity to explain the nature and source of the deposits appearing in the bank account.
8.5 We also take note of the fact that the assessee cannot be said to have remained completely dormant or negligent in pursuing the matter. The record shows that the assessee had filed a revision petition before the Ld. PCIT against the assessment order, which came to be disposed of subsequently. This conduct clearly indicates that the assessee was vigilant and was making efforts to seek appropriate remedy against the assessment order. Therefore, it cannot be inferred that the assessee was inactive in prosecuting the matter. Furthermore, the aspect of Covid-19 further persuades us to adopt a liberal approach so that the issues involved in the assessment can be examined on merits. Accordingly, considering the overall facts and circumstances of the case and in the interest of substantial justice, we condone the delay occurred before the ld. CIT-A and set aside the orders of the lower authorities and restore the entire matter to the file of the AO for fresh adjudication in accordance with law after providing adequate opportunity of being heard to the assessee. The assessee is also directed to cooperate in the assessment proceedings and furnish the necessary details and evidence in support of his claim. Thus, the ground of appeal of the assessee is allowed for statistical purposes.