MUMTAZ ALI MOHD,HYDERABAD vs. INCOME TAX OFFICER, WARD-8(1), HYDERABAD

Succinctly stated, the AO based on information that the assessee during the subject year had made cash deposits of Rs.2.93 crores (approx.), but had not filed his return of income, initiated proceedings under section 147 of the Act. Notice under section 148 of the Act, dated 30/07/2022 was issued by the AO. In compliance, the assessee had filed his return of income for AY 2014-15 on 14/08/2022, declaring an income of Rs.4,42,610/-.

During the course of the assessment proceedings, the AO observed that the assessee in his Profit & Loss account that was filed along with his return of income had disclosed gross receipts of Rs.3,59,18,339/-. The AO to verify the business transactions of the assessee, called upon him to furnish the details of the registers maintained regarding sales/purchases, stock register, cash book, ledger accounts, VAT/Sales Tax/GST return, bank statements, bills and vouchers of the expenses claimed in Profit & Loss account, details of sundry creditors, etc. However, the assessee failed to comply with the aforesaid direction of the AO and did not furnish the requisite details as were called for by the AO. Accordingly, the AO observed that the assessee had failed to come forth with an explanation regarding the source of the cash credits/deposits of Rs. 2,93,42,300/- made during the subject year in his bank account with Jammu & Kashmir Bank. However, the assessee at the fag end of the assessment proceedings though filed before the AO copies of ledger account of expenses, sales and purchases, vouchers etc., but failed to furnish the Sales Tax/VAT/GST return, stock register, cash book and the details of the sundry creditors. The AO held a conviction that as the assessee had failed to produce copies of the Sales Tax return, GST return, therefore, the gross sales/turnover disclosed by him in his return of income was nothing but bogus. Accordingly, the AO vide his show cause notice (SCN), dated 25/04/2023 called upon the assessee to explain as to why the cash deposits of Rs.2.93 crores (approx.) made in his bank account with Jammu & Kashmir Bank may not be treated as his escaped income. In reply, the assessee, inter alia, submitted before the AO that he was engaged in textile business since his childhood and had failed to file his return of income due to certain family problems.

The AO taking cognizance of the fact that the assessee had failed to substantiate his claim of having carried out business activity, observed that the tax audit report, dated 31/03/2022 (after due date) was filed by the assessee only with the purpose of minimizing his profit component and to divert huge cash deposits to business activities. The AO based on his deliberations, rejected the assessee’s claim of having made sales turnover of Rs.3.59 crores (approx.) as disclosed in the return of income and made an addition of the entire amount of cash deposits of Rs.2.93 crores (supra) by treating the same as unexplained cash credits under section 68 of the Act. Accordingly, the AO vide his order under section 147 r.w.s 144B of the Act, dated 12/05/2023 determined the income of the assessee at Rs.2,97,84,910/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A). As the assessee despite having been given 5 opportunities, had failed to participate in the proceedings before the CIT(A), therefore, the latter holding a conviction that the assessee was not interested in prosecuting the appeal on merits, dismissed the appeal.

The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us.

We have heard the Learned Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions.

Shri S. Rama Rao, Advocate, Learned Authorized Representative (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal submitted that the present appeal involved a delay of 247 days. The Ld. AR had drawn our attention to the petition filed by the assessee seeking condonation of the delay involved in filing the present appeal along with a supporting affidavit, dated 29/11/2025 of the assessee. Elaborating on the reasons leading to the delay in filing of the appeal, the Ld. AR submitted that the same had crept in for the reason that the notices of hearing intimating the fixation of the appeal were dropped in the email Id of the assessee’s counsel and the assessee had remained totally unaware about the same. The Ld. AR fairly submitted that as the assessee’s counsel at the relevant point of time was busy in filing of the returns of income/audits, therefore, the notices intimating the fixation of the appeal had escaped his attention. The Ld. AR submitted that the assessee being an illiterate person had remained unaware of the online proceedings and procedures involved in appeal proceedings and was totally dependent on his tax consultant regarding his income-tax matters. Apart from that, the Ld. AR submitted that the assessee at the relevant point of time was going through a difficult phase as his family had suffered the death of his son-in-law at an age of 45 years leaving behind his daughter and two children who thereafter were dependent upon him. The Ld. AR submitted that the assessee’s counsel had gathered about the order of the CIT(A) only when he had opened the income-tax portal of the assessee for filing his return of income for AY 2024-25 on 25/11/2024. The Ld. AR submitted that the assessee on learning about the disposal of his appeal had without any further loss of time entrusted the matter to a senior tax consultant who had thereafter prepared the appeal and filed the same with the Tribunal on 03/12/2024, which by the time involved a delay of 247 days. The Ld. AR submitted that as the delay in filing of the present appeal was not prompted by any mala fide reason or lackadaisical approach of the assessee, but due to certain reasons beyond his control, therefore, considering the totality of the facts involved, the delay in filing the same in all fairness and in the interest of justice be condoned.

Per contra, Shri V. Vinoth Kannan, Learned Senior Departmental Representative (for short, “Ld. Sr.DR”) objected to the seeking of condonation of delay in filing of the present appeal.

We have given thoughtful consideration to the facts leading to the delay in filing the present appeal before us. In our view, considering the totality of the facts which had led to the delay in filing the present appeal, there is a substance in the assessee’s claim that the same had occasioned for bona fide reasons and not due to any lackadaisical approach on his part. We thus, are of a firm conviction that in the totality of the facts involved in the present case, the delay therein involved merits to be condoned. Our aforesaid view that a liberal approach should be taken while considering an application seeking condonation of delay is supported by the judgment of the Hon’ble Supreme Court in the case of Vidya Shankar Jaiswal vs. The Income Tax Officer, Ward-2, Ambikapur in Special Leave Petition (Civil) Nos. 26310-26311/2024, dated 31st January, 2025. The Hon'ble Apex Court while setting aside the order of the Hon'ble High Court of Chhattisgarh, which had approved the declining of the condonation of delay of 166 days by the Income-Tax Appellate Tribunal, Raipur Bench, had observed, that a justice-oriented and liberal approach should be adopted while considering the application filed by an appellant seeking condonation of the delay involved in filing the appeal. We thus, in terms of our aforesaid observations, condone the delay involved in the filing of the present appeal.

Coming to the merits of the case, we find that the CIT(A) had dismissed the appeal for standalone reason that the assessee despite having been afforded 5 opportunities, i.e., vide notices dated 04/10/2023, 20/10/2023, 08/11/2023, 24/11/2023 and 18/12/2023 had failed to participate in the proceedings before him, which, thus revealed that he was not interested to prosecute the appeal on merits. Although, we concur with the CIT(A) that on a failure on the part of the assessee appellant to participate in the appellate proceedings, the same cannot be stalled and have to be proceeded with, but at the same time are unable to persuade ourselves to concur with the manner in which the present appeal has been disposed of by the CIT(A). We say so, for the reason that the CIT(A) without addressing the specific grounds of appeal based on which the validity of the jurisdiction assumed by the AO for initiating the impugned proceedings under section 148 of the Act as well as the merits of the case, had simplicitor dismissed the appeal for the reason that the assessee had failed to participate and prosecute the same. In our view, the CIT(A) ought to have addressed the specific grounds based on which the impugned order of assessment was assailed by the assessee and ought not to have summarily dismissed the appeal for want of prosecution. Our 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). The Hon’ble High Court in the aforementioned case had observed as under:

We thus, in terms of our above observations, set aside the matter to the file of the CIT(A) with a direction to readjudicate the appeal after affording a reasonable opportunity of being heard to the assessee. Also, we may herein observe that the CIT(A) shall in the course of the set aside proceedings adjudicate the additional grounds of appeal that have been raised by the assessee and admitted by us herein above.

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 09th January, 2026.