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Facts
During the demonetization period, the assessee deposited Rs. 25,92,500/- cash but failed to file its Income Tax Return for A.Y. 2017-18. The AO subsequently added this amount as unexplained income under Section 69A and taxed it at 60% under Section 115BBE. The assessee's appeal to the CIT(A) was filed with a delay of 161 days and was dismissed without condonation of delay or a hearing on merits.
Held
The ITAT found the delay in filing the appeal to be genuine and bona fide, attributing it to the assessee-director's mental distress, ongoing insolvency proceedings against an associate entity, and lack of professional assistance. Citing judicial precedents, the ITAT condoned the 161-day delay and restored the matter to the CIT(A) for a fresh hearing on the merits of the case.
Key Issues
Whether the delay in filing the appeal before the CIT(A) should be condoned; and whether the addition of unexplained cash deposits under Section 69A read with Section 115BBE is justified.
Sections Cited
139, 142(1), 144(1)(b), 69A, 115BBE, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI
Before: SHRI AMIT SHUKLA & SHRI GAGAN GOYAL
PER GAGAN GOYAL, A.M: This appeal by assessee is directed against the order of National Faceless Appeal Centre (for short “NFAC”) Delhi dated 01.02.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’) for A.Y. 2017-18. The assessee has raised the following grounds of appeal:-
The appellant prefers an appeal against an order passed by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi dated 01/02/2024, on following amongst other grounds each of which are without prejudice to any other :- 1.0 On facts and circumstances of the case and in Law, Ld. CIT(A) erred in not condoning the delay in filing the appeal of 161 days, though there exist bonafide reasons and compelling circumstances that had precluded the appellant to file the 1 appeal in time; 2.0 on facts and circumstances of the case and in Law, Ld. CIT (A) ought to have considered the reasonable cause that had precluded the appellant to participate in the assessment and appeal proceeding; 3.0 On facts and circumstances of the case and in Law, Ld. CIT(A) ought to have deleted the addition u/s.69A r.w.s 115BBE of cash deposits made during demonetization period in the bank account of Rs.25,92,500/-; 4.0 On facts and circumstances of the case and in Law, Ld. CIT(A) ought to have held that the provision of Sec. 115BBE charging the tax @ 60% shall not apply, since the amendment to Sec. 115BBE made under Taxation Laws (Second Amendment), Act, 2016 was granted the ascent of the President of India w.e.f 15/12/2016; 5.0 A humble prayer is made before Hon'ble ITAT to decide the issues on merits and delete the addition made u/s.69A r.w.s 115BBE of cash deposits made in the bank account during demonetization period of Rs.25,92,500/-. The appellant craves leave to add, amend, alter and/or withdraw any of the grounds of appeal at the time of hearing.
2. The brief facts of the case are that the Income Tax Department during the online verification phrase of ‘Operation Clean Money’ gathered a list of assessees that had deposited substantial cash in the bank accounts during the period of demonetization i.e. from 9.11.2016 to 30.12.2016 but had failed to file the Return of Income for the A.Y. 2017-18. This data revealed that the Assessee had deposited Rs. 25, 92,500/- of cash in its bank accounts during the period of demonetization, further the Assessee neither filed their Return of Income for the A.Y. 2017-18 under section 139 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) nor did they file their return in their response when a notice was served upon them under section 142(1) of the Act, therefore the source of cash remained unexplained. As per Section 144(1)(b) of the Act if the assessee fails to comply with the terms of notice under section 142(1) of the Act, the assessing officer after taking into account all the relevant information and will determine the sum payable by the assessee based on such assessment.
3. Thus, pursuant to Section 144(1) (b) of the Act the AO served eight notices under section 142(1) of the Act upon the assessee, but the assessee failed to comply with the same. The AO thus as per the provisions of Section 69A of the Act added the unexplained amount of Rs. 25,92,500/- to the Assessee’s income which was to be taxed at the rate of 60% as per section 115 BBE of the Act.
4. The Assessee being aggrieved by the Order of the AO preferred an appeal before the Ld. CIT (A). The Ld. CIT (A) observed that the Assessee had received the copy of the Assessment Order and Demand Notice on 28/11/2019 and hence the Assessee had to file their appeal within 30 days, however the Assessee filed their Appeal on 09.06.2020 after a delay of nearly 161 days and also submitted no application for condonation of said delay. The Assessee also failed to comply with the notices issued by the Ld. CIT (A) under section 250 of the Act. The Ld. CIT (A) thus held that the Assessee was not serious about the ongoing statutory proceedings and therefore, the appeal filed by the appellant company was dismissed and the delay was not condoned.
5. The Assessee being aggrieved with this order preferred the present appeal before us. We have gone through the order passed by the AO, order of the Ld. CIT (A) under section 250 of the Act and submissions of the Assessee alongwith the grounds taken before us. It is observed that there was a delay of 161 days in filing the appeal on part of the Assessee. The only issue before us is whether the said delay in filing the appeal before the Ld. CIT(A) ought to be condoned or not. The Assessee’s director has submitted that the reason for the delay in filing the appeal before the Ld. CIT (A) is that she was extremely disturbed and was suffering from mental depression due to the insolvency proceeding going on against her husband. The director of the Assessee has attached a copy of the order of the Hon’ble High Court of Bombay dated 17.04.2018 passed against the Assessee company’s associate entity named M/s. KKB Properties and the husband of the director of the Assessee wherein they were declared as ‘Insolvent’ and an official assignee was appointed to liquidate the assets of such parties. The Assessee due to the above-mentioned ongoing litigation the Assessee’s director inadvertently failed to comply with the Income Tax Proceedings. The Assessee’s director also stated that due to the continuous threats and coercive methods to recover money applied by creditors the Assessee’s director had to shift residences from Mumbai to Pune which also led to the non-compliance and delay in proceedings. Lastly, the Assessee’s director submitted that she had no Chartered Accountant or other staff to advise her as her business was completely shut down and hence a delay in filing the appeal occurred. The Hon’ble Delhi High Court in G. V. Infosutions Pvt. Ltd. v. Deputy CIT, 2019 SCC Online Del 6861 held as follows: -
“8. …. The net result of the impugned order is in effect that the petitioner's claim of inadvertent mistake is sought to be characterised as not bona fide. The court is of the opinion that an assessee has to take leave of its senses if it deliberately wishes to forego a substantial amount as the assessee is ascribed to have in the circumstances of this case. "Bona fide" is to be understood in the context of the circumstance of any case. Beyond a plea of the sort the petitioner raises (concededly belatedly), there cannot necessarily be independent proof or material to establish that the auditor in fact acted without diligence. The petitioner did not urge any other grounds such as illness of someone etc., which could reasonably have been substantiated by independent material. In the circumstances of the case, the petitioner, in our opinion, was able to show bona fide reasons why the refund claim could not be made in time. 9. the statute for period of limitation prescribed in provisions of law meant to attach finality, and in that sense are statutes of repose; however, wherever the Legislature intends relief against hardship in cases where such statutes lead to hardships, the concerned authorities, including the Revenue authorities have to construe them in a reasonable manner. That was the effect and purport of this court's decision in Indglonal Investment and Finance Ltd. (supra). This court is of the opinion that a similar approach is to be adopted in the circumstances of the case.”
Having considered the matter and In light of the above decisions, we are satisfied that the delay was not intentional or deliberate, the delay made by the Assessee appears to be genuine and bona fide therefore the delay should be condoned to avoid causing genuine hardship to the Assessee.
In these circumstances and facts on record we restore the matter back to the file of Ld. CIT (A) with the direction that the delay in filing the appeal be condoned and a fresh hearing be given to the Assessee in view of the ratio laid down by the Hon’ble Delhi High Court in the case of G. V. Infosutions Pvt. Ltd. v. Deputy CIT, 2019 SCC Online Del 6861.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 21st day of August, 2024.
Sd/- Sd/- (AMIT SHUKLA) (GAGAN GOYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, दिन ांक/Dated: 21/08/2024 Dhananjay, Sr. PS