M. RANGASWAMY vs. ITO,

PER SHRI JASON P BOAZ, ACCOUNTANT MEMBER :

3. The assessee, an individual engaged in the business of running a petrol bunk in the name and style of M/s Swami Service Station, filed his return of income for the asst. year 2006-07 on 27/10/2006 declaring total income of Rs.1,85,219/-. The return was processed u/s 143(1) of the Income-tax Act, 1961 (hereinafter referred to as the Act) and the case was subsequently taken up for scrutiny. In the course of assessment proceedings, the Assessing Officer on examination of the assessee’s cash book observed that the assessee had introduced cash amounting to Rs.31,00,000/- in his capital account on 5/4/2005 and required the assessee to explain the source thereof. Since no explanation was forthcoming, the Assessing Officer treated the same as unexplained cash credits u/s 68 of the Act and brought the same to tax in the assessee’s hands. The assessment was concluded u/s 143(3) of the Act vide order dated 28/11/2008, wherein the income of the assessee was determined at Rs.32,85,219/- as against the returned income of Rs.1,85,219/-, in view of the addition of Rs.31,00,000/- on account of unexplained cash credits u/s 68 of the Act.

2.2 Aggrieved by the order of the assessment for asst. year 2006-07 dated 28/11/2008, the assessee preferred an appeal before the CIT(A)- III, Bangalore, accompanied by a condonation petition since this appeal was filed belatedly by 146 days. The learned CIT(A) in the impugned order has recorded that the assessee was afforded hearings on the 18 different dates, (the dates are listed out on page 1 of the order) to which there were eight requests for adjournments and no less than ten occasions when the assessee did not attend the hearings. In these circumstances the learned CIT(A) dismissed the appeal vide order dated 31/5/2013; both for inordinate delay in filing the appeal and also on merits; recording that the assessee had failed to discharge his onus of defending his case with evidences and proof, holding as under at para 2 and 3 thereof:-

“2. I have to note that the delay in filing the appeal is of 146 days. The case was fixed for hearing on various dates where the representatives sought adjournments from time to time. The record shown that there had been eight requests for adjournments claiming that the details are being prepared apart from no less than ten non compliances. The fixations are going from 13-9-2010. The latest non- compliances of a consecutive nature are towards hearings fixed on 20-2-2013, 19-3-2013, 3-4-2013 and 30-5-2013.

Yet, I also note that the details of the addition made as well as the proof of justification for delay were called for as early as 10-1-2012.

3. Aggrieved by the order of the learned CIT(A)-III, Bangalore dated 31/5/2013 for that year 2006-07, the assessee is in appeal raising the following grounds:

“i. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case. ii. The learned CIT(A) is not justified in refusing to condone the delay in filling the appeal on the ground that the appellant has not substantiated his case on merits under the facts and in the circumstances of the appellant’s case. iii. Without prejudice to the above, the learned CIT(A) is not justified in sustaining the addition of Rs.31,00,000/- as unexplained cash credit u/s 68 of the Act under the facts and in the circumstances of the appellant’s case. iv. Without prejudice to the right to seek waiver with the Hon’ble CCIT/DG the appellant denies himself liable to be charged to interest u/s 234A and 234B of the Act, which under the facts and in the circumstances of the appellant’s case deserves to be cancelled. v. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”

6.1 Ground at SNo.2 and 3 are therefore, the only effective grounds in this appeal wherein the assessee has challenged the confirmation of the addition of Rs.31,00,000/- made by the Assessing Officer in respect of unexplained cash credit u/s 68 of the Act. According to the learned AR for the assessee, the assessee has brought in capital into the business of running the petrol bank from out of his past savings and the funds of the assessee’s HUF on various dates during the year and that the same was also entirely withdrawn by the assessee during the year. However, before the Assessing Officer, it was shown that the entire funds was brought in on a single day ie. 5/4/2005. It is submitted that it was in these circumstances the addition was made by the Assessing Officer u/s 68 of the Act on account of failure on the part of the assessee to furnish evidence/details to establish the genuineness of the cash credit. The learned AR filed an Affidavit dated 14/7/2014 along with additional evidences in the form of ledger accounts in the books of assessee and the assessee’s HUF in support of the source for additional capital and prayed that the assessee be given another opportunity before the Assessing Officer to explain the sources for the amount of Rs.31,00,000/- sought to be introduced as capital.

6.2 Per contra, the learned DR for Revenue supported the impugned order of the learned CIT(A), submitting that the assessee was afforded adequate opportunity to present its case on the issue in appeal both before the Assessing Officer and the learned CIT(A). The learned DR contended that the plea for a fresh opportunity to the assessee to represent its case at this stage was not justified. The learned DR also placed reliance on the decision of the coordinate bench of the ITAT, Bangalore in the case of Anupam Kothari in dated 5/9/2014 and submitted that the assessee’s plea for admission of additional evidence should not be entertained since the requirement of Rule 29 of the ITAT Rules are not satisfied.

6.3.1 We have heard the rival contentions and perused and carefully considered the material on record. From a perusal of the impugned order we find that the learned CIT(A) has dismissed the appeal both on merits of the grounds raised; that the assessee has not discharged the onus of proving the credits with evidence and that the reasons for seeking condonation of delay were not acceptable. On an appreciation of the material on record we feel that the learned CIT(A) ought not to have rejected the appeal of the assessee on the question of delay of 146 days in filing the appeal. The assessee has submitted that the delay of 146 days was due to the advice of its counsel to accept the assessment to escape penal consequences. However, when penalty came to be levied, the assessee on the advice of its present counsel, was advised to file an appeal immediately. As per the explanation furnished, we are of the view that the assessee has shown sufficient cause for condonation of the delay of 146 days in filling of the appeal before the learned CIT(A). Having referred to the judgment of the Hon’ble Apex Court in the case of MST Katiji and Others reported in 167 ITR 471, we are inclined to hold that the order of the learned CIT(A) on the issue of condonation of delay requires to be vacated and hold accordingly.

6.3.2 On the merits of the case, we decline to express any opinion on the additional evidence put forth by the assessee at this stage as we are confining ourselves to the prayer of the assessee for another opportunity to plead his case before the Assessing Officer. We are inclined to allow the assessee another opportunity only because the addition has been made by the Assessing Officer and upheld by the learned CIT(A) due to the lack of evidence put forth by the assessee.

The purpose of assessment is to determine the correct income of the assessee and we are of the view that the assessee has realized his errors and has attempted to file additional evidence before us in an attempt to show that he had sufficient sources to explain the capital introduced in the year under consideration. In this view of the matter, we are of the opinion that the assessee must be afforded an opportunity to establish the same and not reject the said recourse on the ground that the assessee did not appear before the learned CIT(A) earlier. We, therefore, in the interest of equity and justice set aside the orders of the authorities below and restore the matter to the file of the Assessing Officer to consider afresh the matter relating to the addition of Rs.31,00,000/- u/s 68 of the Act, after affording the assessee adequate opportunity of being heard. We are not passing any order on the admission of additional evidence put forth by the assessee in terms of Rule 29. However, liberty is given to the assessee to produce before the Assessing Officer material/details/evidence in support of the claim of genuineness of the cash credit. The Assessing Officer shall also be at liberty to examine the matter afresh, gather such evidence, cause any enquiry to be made, etc. in order to verify the veracity of the assessee’s claim and to thereafter decide the matter in accordance with law.

Order pronounced in the open court on 24th Sept, 2015.