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Facts
The assessee failed to file returns and respond to notices from the AO, leading to an ex-parte assessment. The AO added cash deposits made during demonetization and business income as unexplained. The CIT(A) dismissed the appeal for non-prosecution and on merits due to the assessee's non-compliance.
Held
The Tribunal condoned the 577-day delay in filing the appeal, noting the disruption caused by the COVID-19 pandemic and transition to the faceless regime. The Tribunal set aside the orders of the lower authorities, restoring the matter to the AO for fresh adjudication.
Key Issues
Whether the delay in filing the appeal can be condoned due to COVID-19 disruptions and whether the ex-parte assessment and appellate orders should be set aside.
Sections Cited
144, 142(1), 133(6), 69A, 250
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Income Tax Appellate Tribunal, ‘SMC’ BENCH, BANGALORE
Before: SHRI WASEEM AHMED & SHRI KESHAV DUBEY
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The present appeal, at the instance of the assessee, is directed against the order passed under section 250 of the Income Tax Act, 1961, (hereafter the Act) by the National Faceless Appeal Centre-NFAC CIT(A)) dated 28th (hereafter- Ld. August 2023 having DIN ITBA/NFAC/S/250/2023-24/1055479820(1).
At the outset, we note that the present appeal filed by the assessee has been delayed by 577 days. The assessee in the affidavit for delay condonation explained that he filed appeal before the ld. CIT(A)
against the ex-parte assessment order passed under section 144 of the Act. The assessee entrusted the matter to an authorized representative. Hearing notices were issued by the appellate authority on different dates which could not be attended due to urgent professional work of the authorized representative and thereafter the country was affected by Covid-19 pandemic, resulting in prolonged lockdowns, closure of offices and disruption of normal functioning. During this period, the appeals were also shifted to the faceless regime and certain notices were allegedly not accessed due to incorrect e-mail linkage and portal glitches. The assessee stated that the order of the NFAC dismissing the appeal was not within his knowledge and came to light only later when a new auditor noticed it while filing return of income for the assessment year 2023-24. On obtaining fresh legal advice, the assessee eventually approached the Tribunal, resulting in a delay of 577 days in filing the appeal.
In the affidavit, the assessee submitted that the delay was neither willful nor deliberate but occurred due to bona-fide circumstances such as Covid-19 restrictions, inability to access e-mails and the new income- tax portal, incorrect communication of notices, and lack of familiarity with electronic compliance. It was pleaded that he had a good case on merits and that denial of condonation would cause irreparable prejudice. Accordingly, he prayed that the delay of 577 days be condoned in the interest of justice and equity.
On the other hand, the ld. DR opposed the condonation of delay and submitted that the delay of 577 days was excessive. He contended that the assessee had not shown sufficient cause for such a long delay .
and that the reasons stated were general in nature. It was argued that the assessee was careless in pursuing the appeal and therefore the delay should not be condoned.
We have considered the affidavit and the sequence of events narrated therein, particularly the disruption caused by the Covid-19 pandemic, transition to the faceless appellate system, alleged communication difficulties, and the assessee’s explanation that the delay occurred on account of bona-fide and uncontrollable reasons. Taking note that the assessee had expressed willingness to pursue the appeal on merits and that there was no material to suggest deliberate inaction, we hold that sufficient cause had been shown for the delay. In the interest of substantial justice and to afford the assessee an opportunity of being heard, we condone the delay of 577 days and admitted the appeal for adjudication on merits.
The issue raised by the assessee is that the ld. CIT-A erred in dismissing the appeal ex-parte without considering the merit of the case and confirming the order of the AO.
The facts in brief are that the assessee, an individual, has not filed return of income for the year. The AO received information that the assessee has deposited substantial cash during the demonetization period. Hence, a notice under section 142(1) of the Act was issued requiring the assessee to file return of income, but there was no response from the assessee. Thereafter, the AO obtained the bank statements of the assessee from Syndicate Bank for FY 2016-17 in pursuance to a notice issued under section 133(6) of the Act. It was .
found that cash of ₹26,61,500/- was deposited between 9-11-2016 and 31-12-2016, and further cash of ₹80,63,000 was deposited during the remaining part of the year, aggregating to total credits of ₹1,07,24,500/- only. A show-cause notice was issued asking the assessee to explain the sources of the deposit made during the year. Since there were no responses and the assessee also failed to file the return even after notice, the AO completed the assessment ex-parte under section 144 of the Act and held that the source of cash deposits remained unexplained. Accordingly, the AO added ₹26,61,500/- as unexplained money under section 69A of the Act being deposits made during the demonetization and further added ₹6,45,040/- as business income being 8% of the other cash deposit during the year.
The aggrieved assessee preferred an appeal before the Ld. CIT(A)/NAFC. The Ld. CIT(A) during the proceedings observed that the assessee neither appeared nor filed any written submissions despite several opportunities granted through notices issued on different dates and therefore held that the assessee was not interested in prosecuting the appeal. Relying on judicial precedents, the Ld. CIT(A) held that merely filing an appeal is not sufficient and the assessee must actively pursue it, and hence the appeal was liable to be dismissed for non- prosecution.
8.1 On merits also, the Ld. CIT(A) recorded that the assessee had failed to furnish any satisfactory explanation or supporting evidence either before the AO or during appellate proceedings regarding the source of cash deposits made in the bank account. It was noted that no proof was produced to explain the demonetization-period deposits of .
₹26,61,500/- or the remaining cash deposits on which income was estimated by the AO. In view of these facts and the continued non- compliance, the Ld. CIT(A) held that the additions were rightly made by the AO and accordingly upheld the addition of cash deposits and business income, dismissing the appeal both for non-prosecution and on merits.
Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.
The learned AR before us submitted that the assessment as well as the appellate proceedings were completed ex-parte without giving the assessee an effective opportunity of being heard. He explained that due to Covid-19 disruptions and lack of knowledge of electronic proceedings, the assessee could not respond to notices in time. The learned AR submitted that the assessee has a genuine explanation for the cash deposits and requested that the matter be restored to the file of the AO for fresh consideration.
On the other hand, the learned DR supported the orders of the AO and the Ld. CIT(A). He submitted that despite several notices, the assessee did not comply and failed to explain the source of cash deposits. It was argued that the authorities below rightly made the additions and no further opportunity should be given to the assessee.
We have heard the rival contentions of both the parties and perused the materials available on record. We note that the assessment was completed by the AO under section 144 of the Act in an ex-parte .
manner due to non-compliance by the assessee. The additions on account of cash deposits during the demonetization period as well as estimation of business income were made without the benefit of any explanation or supporting evidence from the assessee. We further observe that before the Ld. CIT(A) also, the assessee did not effectively participate in the appellate proceedings, as a result of which the appeal came to be dismissed for non-prosecution and on merits. However, from the affidavit filed before us, the assessee has explained the circumstances for non-appearance, including disruption caused by the Covid-19 pandemic, transition to the faceless regime, alleged difficulties in accessing electronic notices, and delay in receiving proper legal advice. Though these reasons cannot fully absolve the assessee’s negligence and lack of diligence in pursuing his remedies. They do indicate that the matter has not been examined on merits after considering the assessee’s explanation and documentary evidence.
12.1 In the interest of justice and fair play, and keeping in view that both the assessment order as well as the appellate order are essentially ex-parte in nature, we are of the considered view that one more opportunity should be granted to the assessee to place his case on record and substantiate the source of cash deposits with supporting material. Accordingly, we set aside the orders of the lower authorities on this issue and restore the matter to the file of the AO for fresh adjudication in accordance with law, after providing due and reasonable opportunity of being heard to the assessee and after examining the evidence that may be produced.
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12.2 At the same time, we cannot ignore the fact that the assessee was not vigilant in pursuing the proceedings at earlier stages and that his conduct contributed to the prolonged litigation. Therefore, as a condition for granting this opportunity, we direct the assessee to pay a sum of ₹10,000 to the Prime Minister’s Relief Fund and to furnish proof of such payment before the AO during the remand proceedings. Subject to the above, the issue is restored to the file of the AO for fresh consideration. Hence, the ground of appeal of the assessee is allowed for statistical purposes.
In the result appeal of the assessee allowed for statistical purposes.
Order pronounced in court on 4th day of February, 2026
Sd/- Sd/- (KESHAV DUBEY) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, 4th February, 2026 / vms / Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore .
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