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Facts
The assessee, engaged in real estate and construction, deposited Rs. 50 lacs in its bank account during the demonetization period (AY 2017-18). It explained this as part of Rs. 250 lacs raised from share subscribers in AY 2014-15, which was subsequently withdrawn and held as cash-in-hand. The AO and CIT(A) treated this as unexplained money under Section 69A, doubting the assessee's explanation, and the appeal to the Tribunal was delayed by 69 days.
Held
The Tribunal condoned the 69-day delay, adopting a liberal approach due to the director's illness and Supreme Court precedents. On merits, the Tribunal set aside the Section 69A addition of Rs. 50 lacs, finding the assessee's explanation credible as the original source (share application money) and business activities were undisputed by the revenue. It held that a mere time gap or deposit during demonetization does not automatically render the money unexplained if its source is established, citing previous ITAT decisions.
Key Issues
Whether the delay in filing the appeal should be condoned; and whether cash deposits made during demonetization, explained as prior period cash-in-hand from share application money, can be treated as unexplained money under Section 69A.
Sections Cited
Section 69A of Income Tax Act, 1961, Section 5 of Limitation Act, 1963, Section 139(4) of Income Tax Act, 1961
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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM
The captioned appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 19.02.2025 for the assessment year 2017-18 as per the grounds of appeal on record.
At the very outset, the Ld. Counsel for the assessee submitted that the appeal is time barred by 69 days. In this regard, the assessee has filed condonation petition a/w. affidavit explaining the reasons leading to the said delay. That as evident from the contents of the said application, the assessee has stated through its director that since he was suffering from high fever and Jaundice, therefore, he was unaware of the ex-parte order of the Ld. CIT(Appeals). The Ld. Counsel in support of his aforesaid contention has placed on record medical certificates.
On careful perusal of the contents of the affidavit and condonation petition a/w. medical certificates, it is discernible that the assessee was prevented by reasons beyond its control to comply with the period of limitation regarding filing of appeal before the Tribunal. There is no deliberate or malafide conduct emanating from the record nor the department could place on record any such material to suggest any such deliberate or malafide conduct on the part of the assessee causing such delay. In so far the delay is concerned, it would be relevant to point out that the Hon’ble Supreme Court in the case of Vidya Shankar Jaiswal Vs. ITO, Ward-2, Ambikapur, Civil Appeal Nos……………../2025 [Special Leave Petition (Civil) Nos. 26310-26311/2024, dated 31.01.2025, had observed that a justice oriented and liberal approach ought to be adopted while considering the aspect of condoning the delay involved in filing of the appeal. Also, the Hon’ble High Court of Chhattisgarh in the case of Jagdish Prasad Singhania Vs. Additional Commissioner of Income Tax (TDS), Raipur (C.G.), TAX Case No.17/2025, dated 24.02.2025, after relying on the judgment of the Hon’ble Supreme Court in the case of Vidya Shankar Jaiswal Vs. ITO, Ward-2, Ambikapur (supra) had held that a justice oriented and liberal approach be adopted while considering the application filed by the assessee for condonation of delay.
That in the recent judgment of the Hon’ble Supreme Court in the 4. case of Inder Singh Vs. the State of Madhya Pradesh, Civil Appeal No…………/2025, Special Leave Petition (Civil) No.6145 of 2024, dated 21st March, 2025, the Hon’ble Apex Court while interpreting Section 5 of the Limitation Act, 1963 regarding the condonation of delay in respect of case of land acquisition has observed and held on the aspect of delay that although the delay cannot be condoned without sufficient cause, the merits of the case could not be discarded solely on the ground of delay. A liberal approach, therefore, should be taken in condoning the delay when limitation ground undermines the merits of the case and obstructs the substantial justice. In other words, the objective of the court should be to deliver substantial justice coupled with liberal and judicious approach while deciding the issue of limitation and whenever it is found that the case has merits which needs to be addressed substantially, in such case, the delay should be condoned. Considering the entire facts on record and ratio-deciendi in all the aforementioned judicial pronouncements, the delay of 69 days involved in the present appeal is condoned.
Coming to the merits of the case, the relevant facts are that the assesse is engaged in the business of real estate and construction activities. The A.O during the course of assessment proceedings observed from the bank statement of the assessee that during the demonetization period Rs.50 lacs have been deposited in the account maintained with Bank of Baroda, Pandri. The assessee was asked to explain the source of such cash deposits. It was stated by the assessee that the company has raised an amount of Rs.250 lacs during F.Y.2013-14 relevant to A.Y.2014- 15 for business which was received from share subscriber and the same was withdrawn from bank during the F.Y.2013-14. The same cash was deposited in the bank account during the F.Y.2016-17 relevant to A.Y.2017-18. The A.O had made addition on the premise that such amount of money, the assessee had kept with it and had deposited only during F.Y.2016-17 which was highly improbable and at the same time, the assessee was not regularly deposited money in the bank account. The said addition was confirmed by the Ld. CIT(Appeals)/NFAC.
6. I have heard the submissions of the parties herein and carefully considered the documents on record. This is a case where Rs.50 lacs has been deposited by the assessee i.e. M/s. Divyansh Infra Estate Private Limited. It was explained by the assessee that the source of such deposits is Rs.250 lacs which was raised through share application money from share subscriber during A.Y.2014-15 and subsequently deposited the same during the year under consideration i.e. A.Y.2017-18. In this regard, the revenue has not disputed that the assessee is a registered company and listed in the Stock Exchange. It was not disputed by the department regarding money raised by the assessee through share application money. For a company keeping Rs.50 lacs for three years is not something unusual since it is engaged in the business of real estate and construction activities where such amount is considered a meagre amount so far as the corporate assessee is concerned. That for the regular functioning of the business also, the cash in hand is required which may look substantial if it is compared to any individual assessee. But the fact of the matter is that the source is well explained by the assessee stating that such amount was raised from share subscriber which is already on record and not disputed by the revenue.
That since such source of cash deposits is well explained and regular business activities are not disputed by the department, in such case, the addition made u/s.69A of the Act is misplaced in the hands of the assessee. At this stage, I find that ITAT, “SMC” Bench, Raipur in the case of Payel Verma Vs. Income Tax Officer-1(3), Bhilai, has dealt with the similar issue and delete the addition made by the A.O u/s. 69A of the Act observing as follows: “4. I have carefully considered the submission of the parties herein, analyzed the facts and circumstances in this case. The department had not disputed the nature of business of the assessee that the assessee is a wholesaler and selling goods to the retailers. The department had also not disputed that some of the retailers are also petty pan- walas/pan shop owners who do not have adequate documents either from the perspective of the income tax or from the perspective of the sales tax. Some of the petty pan- walas also conducts their business in some carts/trolley and they are not available every time at one single place. These realities have also not been disputed by the department. The Department has not questioned the turnover of the assessee and also has accepted the business module conducted by the assessee. Books of accounts of the assessee has also been accepted by the department. When all these parameters have been fulfilled by the assessee, there cannot be any addition u/s.69A of the Act treating the cash deposits in the bank account as unexplained money of the assessee. In view thereof, I set-aside the order of the Ld. CIT(Appeals)/NFAC and direct the A.O to delete the addition of Rs.17,61,000/- from the hands of the assessee.
5. As per the above terms, the grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.”
Also, I find that ITAT, “SMC” Bench, Raipur in the case of M/s. 8. Arihant Associates Vs. Income Tax Officer-2(1), Bilaspur, dated 20.09.2023 has deleted the addition made by the A.O u/s. 69A of the Act observing as follows:
“13. I have given thoughtful consideration to the issue in hand, i.e. sustainability of the explanation of the assessee firm as regards the source of the cash deposits of Rs. 33 lacs (supra) in its bank account. On perusal of the “balance sheet” of the assessee firm on 31.03.2016, it transpires that it had with it on the said date closing cash-in-hand of Rs. 52.47 lacs (supra). Ostensibly, the aforesaid C.I.H of Rs. 52.47 lacs (supra) was, in turn, stated to have been sourced out of the sale proceeds of the agricultural land situated at Village: Chhatona, Bilaspur that was sold by the assessee firm at the fag end of the immediately preceding year and was stated to have been received in tranches, i.e. over the period 25.02.2016 to 04.03.2016 – Page 2 of APB.
Considering the fact that the assessee firm had duly disclosed CIH of Rs. 52.47 lacs (supra) in its “balance sheet” for the immediately preceding year i.e. A.Y. 2016-17, therefore, the genuineness of the claim of availability of cash with it cannot be doubted. Apart from that, it is not even the case of the AO that the assessee firm did not have an opening CIH of Rs. 52.47 lacs on 01.04.2016. On a careful perusal of the assessment order, it transpires that the AO had declined the explanation of the assessee that the cash deposits of Rs. 33 lacs (supra) were sourced out of opening CIH of Rs. 52.47 lacs (supra) on 01.04.2016 for the reason that there was a substantial time gap between the date of availability of cash with the assessee i.e. 01.04.2016 and deposit of the same in its bank account in the month of November 2016. Also, the AO had observed that the fact that the assessee firm had made the cash deposits in four tranches i.e. on 13.11.2016, 15.11.2016, 16.11.2016, and 16.11.2016 did not inspire much confidence as regards the veracity of the aforesaid explanation of the assessee. Considering the fact that the cash deposits in the bank account were made by the assessee firm after a long interval and were made during the demonetization period, the AO had held the same as the assessee’s unexplained money u/s 69A of the Act.
I am unable to persuade myself to concur with the aforesaid observation of the AO. Admittedly, the AO had not doubted the availability of C.I.H of Rs. 52.47 lacs (supra) on 01.04.2016 with the assessee firm. Although I find that there is a time gap of 7 months in depositing the cash in the bank account of the assessee firm, i.e. in the month of November 2016, but at the same time, I cannot remain oblivion of the fact that it is not the case of the department that as cash-in- hand of Rs. 52.47 lacs (supra) was utilized/invested somewhere else by the assessee firm, therefore, availability of the same to the extent of Rs. 33 lacs (supra) with the assessee firm for making cash deposits in the assessee’s cannot be accepted. Apart from that, the claim of the assessee firm as regards availability with it on 31.03.2016 of C.I.H of Rs. 52.47 lacs (supra) cannot be dubbed as an afterthought or a concocted story that was hatched to explain the source of the cash deposits of Rs. 33 lacs (supra) in its bank account. My aforesaid conviction is supported by the fact that the return of income for the preceding year, i.e. A.Y 2016-17 wherein C.I.H of Rs. 52.47 lacs (supra) was shown available in the “balance sheet” of the assessee firm on 31.03.2016 was filed on 24.11.2016, i.e much prior to the issuance of the letter dated 11.12.2017 by the A.O, wherein the latter had for the first time queried as regards the source of cash deposits of Rs. 33 lacs (supra) in the assessee’s bank account during the year under consideration. Although the return of income of the assessee firm for the immediately preceding year, i.e A.Y 2016-17 was not filed within the stipulated time period but the same being a belated return of income that was validly filed under sub-section (4) of Section 139 of the Act cannot be brushed aside. As the department has neither drawn any adverse inference as regards the claim of the assessee firm that it had C.I.H of Rs. 52.47 lacs (supra) available with it on 31.03.2016 nor initiated any proceedings to scrutinize much the less dislodge the same, therefore, the only logical inference that can be drawn is that it had accepted the factual position as was canvassed and projected by the assessee firm in its return of income for the said preceding year. So far, the A.O.'s observation that the assessee firm's explanation, regarding the source of cash
deposits in its bank account did not inspire much confidence as they were made during the demonetization period; I am afraid that the same cannot be accepted. On the contrary, the conduct of the assessee firm in depositing whatever cash that was available as C.I.H in its books of account during the demonetization period could be the only prudent approach that the assessee firm could have adopted. Also, as the A.O had neither established that the C.I.H of Rs. 52.47 lac (supra) that was available with the assessee firm on 01.04.2016 was thereafter utilized by it for making any other investment or was exhausted towards incurring any expenditure, therefore, I find no justification on his part in summarily rejecting the assessee’s explanation that the cash deposits of Rs. 33 lacs (supra) made in its bank account during the year were sourced out of the same. Accordingly, I am of the view that the explanation of the assessee firm as regards the source of the cash deposits of Rs. 33 lacs (supra) in its bank account No. 16660200000753 maintained with Federal Bank, Bilaspur merits acceptance. Thus, in terms of the aforesaid observation, I set aside the order of the ld. CIT(A) and vacate the addition of Rs. 33 lacs (supra) made by the AO u/s 69A of the Act. The Ground of appeal no. 1 of the assessee firm is allowed in terms of my aforesaid observations.”
9. Respectfully following the aforesaid orders, I set-aside the order of the Ld. CIT(Appeals)/NFAC and direct the A.O to delete the addition of Rs. 50 lacs from the hands of the assessee. As per the above terms, grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in open court on 30th day of July, 2025.