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Income Tax Appellate Tribunal, JABALPUR BENCH, JABALPUR
Before: SH. KUL BHARAT & SH. NIKHIL CHOUDHARY
O R D E R PER NIKHIL CHOUDHARY, A.M. This is an appeal filed by the assessee against the orders of the ld. CIT(A), NFAC on 5.03.2024, dismissing in limine the appeal of the assessee against the orders passed by the ld. AO under section 147 r.w.s. 144 on 25.03.2022. The grounds of appeal
1. are as under:- “1. The order passed u/s. 250 on 05.03.2024 for A.Y.2013-14 by CIT(A), Abad dismissing the appeal for late filing by 105 days and not taking into consideration the circumstances of death of the main partner of the firm, who manages all online work with email ID and Password and other partners were not aware of the online working also email id and password for delayed filing of appeal and upholding the addition of Rs.80,50,000/-towards unexplained credits u/s 68 of the Income Tax Act, 1961 instead of capital introduce by the partners in to the partnership firm is wholly illegal, unlawful and against the principles of natural law of justice.
2. The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the circumstances of death of the main partner of the firm, who manages all online activity and work with email ID and Password and other partners were not aware of the online working and also email id and password for delayed filing of appeal.
A.Y. 2013-14 Jainam Group Chhindwara 3. The Ld. CIT(A) has grievously erred in law and on facts in confirming the addition made by the AO towards unexplained credits u/s 68 of the Income Tax Act, 1961 instead of capital introduce by the partners in to the partnership firm as this would render the additions made totally unjustified and contrary when going into the prima facie evidences and scrutinizing the documents / details i.e. Death Certificate of the main partner, Capital Account of the all partners, Bank Statement of the all partners and Firm and Income Tax return of the all partners which were all made available to the CIT(A).
That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) ought not to have upheld the addition towards unexplained credits u/s 68 of the Income Tax Act, 1961 instead of capital introduce by the partners in to the partnership firm without going into the merits and facts of the case and evidences produced before good honour.
5. The Ld. CIT(A) had dismissed the appeal on the ground of non-appearance of the appellant and further also erred on not considering the circumstances of death of the main partner of the firm, who manages all online work with email ID and Password and other partners were not aware of the online working also email id and password, which was beyond the control of the appellant and upheld the order of the AO.
The Hon'ble CIT(A) dismissed the appeal because this appeal was filed deled by 105 days. The CIT(A) had coated various judgments of various Hon'ble courts. He relied on judgment of ITAT Delhi in which court stated that 1163 days delay is an extra ordinary delay. While in this case the delay in filing appeal is only of 105 days. It cannot be said as extra ordinary delay in accordance to the above quoted hon'ble court decision. The "sufficient cause" varies with case to case and depends on facts and circumstances of the case. But it is not considered and no opportunity was provided to explain personally the facts and circumstances of the case before assessing the case.
One of the partners of firm, Mr. Virendra Jain was expired on 13 March 2017. The email id and mobile no. which are registered at the department portal were belongs to him. All other partners were ignorant of such email id and password. All notices related to this assessment are duly served through such mail id so the present partners do not have knowledge of this assessment proceeding. Hence, they had not submitted any response to the assessment proceeding and have not submitted an appeal within time. The merits of the fact of the case were not considered and accepted by the Hon'ble CIT(A).
Without prejudice to above and in alternative, the impugned addition of Rs.80,50,000/- is highly excessive and contrary when going into the prima facie evidences and scrutinizing the documents/details i.e. Death Certificate of the main partner, Capital Account of the all partners, Bank Statement of the all partners and Firm and Income Tax return of the all partners.
Without prejudice to above and in alternative, it would against the natural justice and principal of law as to recovery of taxes on the additions made not sustainable in law emphasizing Assumption capital introduce by the partner as unexplained credits u/s 68 of the Income Tax Act, 1961 as decided by by the AO whereas the fact is that the Partners of the firms introduce capital contribution 2 A.Y. 2013-14 Jainam Group Chhindwara in the firm from their own sources in to the bank account of the firm which is further substantiated by the Capital Account of the all partners, Bank Statement of the all partners and Firm and Income Tax return of the all partners.
Without prejudice to above and in alternative, the impugned addition of Rs.80,50,000/- is highly excessive and contrary when going into the prima facie evidences and circumstances. No opportunity to produce personally, facts and to clarify the circumstances was provided before making the assessment. Which is against the natural law of justice.
Without prejudice to above and in alternative, the appellant begs your honor to set aside the matter for fresh adjudication and/or for statistical purpose. The appellant has a good case on merit and is likely to succeed in case the appellant should be given an opportunity to contest the appeal on merits. The petitioner can alter, add or delete the ground of appeal during the course of hearing.”
The facts of the case are that the Department came into the possession of information, that the assessee had deposited huge amounts in its bank account held with Vijaya Bank, Sanichara Bazar, Chhindwara during the F.Y. 2012-13. The total deposits during the year were Rs.80,50,000/- out of which Rs. 15,00,000/- had been deposited in cash. Perusal of the assessee’s return, showed that the assessee had nil turnover, but the balance-sheet showed that partner’s capital stood at Rs.95,98,350/-. However, there were no mention of extent of introduction of capital by each partner and therefore, the ld. AO concluded that the credits in the bank account amounting to Rs. 80,50,000/-, were unexplained. He, therefore, initiated proceedings under section 147. During the course of assessment, he issued several notices to the assessee but records that the assessee failed to respond to any of these notices. He, therefore, decided to complete the assessment in a best judgment manner under the provisions of section 144. He noted that the above cash deposits amounting to Rs. 80,50,000/- were not reflected in the assessee’s return. The assessee had not offered any income on this account for taxation and the assessee had not furnished any explanation with regard to the same. Therefore, he added back the amount of Rs. 80,50,000/- to the income of the assessee under section 68 of the Income Tax Act and initiated penalty proceedings under section 271(1)(c) and 271(1)(b) of the Act. 3 A.Y. 2013-14 Jainam Group Chhindwara 3. Aggrieved with the said additions, the assessee went in appeal before the ld. CIT(A), NFAC. The ld. CIT(A), NFAC observed that the appeal, which was to be filed by 25.03.2022, had only been filed on 8.08.2022 i.e. it was not on time. He further noted that the assessee was bound to explain the delay of 105 days in the filing of the appeal. He observed that in Form No.35, against the question, “whether there is a delay in filing of appeal”, the assessee had filled in, “Yes”. The cause for the delay was that the email ID which was registered at the Departmental portal was managed by one of the old partners Mr. Virendra Jain, who expired on 13.03.2017. Hence, the other partners were not aware of the appeal. The Ld. CIT(A) held that the reasoning given by the assessee could not be accepted as a valid reason, for the fact that the partner had died on 13.03.2017 and subsequently the assessee had carried on the business, filed income tax returns, filed sales tax returns, made communications with various Departments on various matters. Furthermore, he noted that the assessee firm had not updated the email ID on the e-filing portal of the Income Tax Department. He noted that the notice under section 148 had been issued on 30.03.2021, which was almost four years from the end of the financial year in which the death took place. Therefore, the death could not be considered as a valid reason for delay in filing the appeal. He held that the remaining partners were jointly and severally responsible for all acts of the firm during its existence and therefore, the assessee had not been able to display satisfactorily that it had sufficient cause for the delay. Thereafter, relying upon various case laws he held that the assessee was guilty of gross negligence and inaction and therefore, he dismissed the appeal of the assessee in limine.
4. Aggrieved with the in limine disposal of its appeal, the assessee has come in appeal before us. Sh. Rahul Bardia, C.A. (hereinafter referred to as the ld. AR) submitted that one of the partners of the firm Sh. Virendra Jain, had expired on 13th March, 2017. The email ID and the mobile number which were registered on the Departmental Portal belong to him. All other partners were 4 A.Y. 2013-14 Jainam Group Chhindwara ignorant of such email ID and passwords. All the notices relating to the present assessment were duly served to such email ID, therefore the present partners did not have any knowledge of this assessment proceedings. It was for this reason that they had not submitted any response to the assessment proceedings and had not submitted an appeal within time. Without prejudice to the above, the addition of Rs. 80,50,000/- was highly excessive and contrary when seen in the context of the capital account of all the partners, because the same were easily explainable on account of such capital introduction. The assessee could substantiate these facts by the capital account of all the partners, bank statement of all the partners and firm and income tax returns of all the partners. It was, therefore, prayed that since the additions the capital introduction into the firm was not an income of the firm, but only a source of capital, section 68 could not be applied to it. It was further submitted that a copy of the firm’s bank account and income tax return, copies of the partner’s capital accounts, copies of the partner’s bank statements and copies of the ITR filed by the partners had all been submitted to the ld. CIT(A) who had declined to consider them. Therefore, grave injustice had been caused to the assessee and additions that were unwarranted, had been sustained in its hands. It was, therefore, prayed that the assessee should be given an opportunity to substantiate its arguments and the evidences submitted by it should be considered on their merits.
On the other hand, Sh. Alok Bhura, Sr. DR (hereinafter referred to as the ld. DR) submitted that the assessee had been negligent and non-complaint both during the assessment proceedings and in the filing of the appeal. Therefore, the ld. CIT(A) was justified in dismissing the appeal in limine. However, if the Hon’ble Tribunal in its wisdom was inclined to restore the matter, then it was prayed that directions may be issued to the assessee to make due compliance before the lower authorities.
A.Y. 2013-14 Jainam Group Chhindwara 6. We have duly considered the facts and circumstances of the case. While the failure to change the email ID on the portal is suggestive of negligence, it is possible that owing to the death of the former partner, notices that were sent to that email ID may have escaped the attention of the other partners. We observe that the assessee has made certain submissions to the ld. CIT(A), which have not been considered by rejecting the application for condonation of delay. After considering the judgment of the Hon’ble Supreme Court in the case of Collector of Land Acquisition Vs. MST. Katiji & Ors 167 ITR 471 (SC), we are of the view that the fact that the appeal was delayed, is in itself an indicator to the fact that the remaining partners were not aware of the existence of the proceedings, because delay in filing the appeal does not help the assessee in any way but rather puts its own case in serious jeopardy. Furthermore, we observe that the additions against the assessee have been made essentially without examination of the issue on its merits and purely on account of the fact of non-compliance. Considering that the assessee seeks to explain the amounts added back as introduction of capital by the partners out of their duly explained income, in which case it would be non-taxable, we deem it fit in the interest of justice to restore this matter back to the file of the ld. AO so that the ld. AO may consider such evidences which are produced by the assessee on their merits and thereafter pass a fresh order determining the tax liability of the assessee, if any, in accordance with law.