The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) while condoning the delay of 818 days interfered With NFAC order upholding ₹9.59 Crore addition based on entire bank credits.
The bench of Manu Kumar Giri (Judicial Member) and Inturi Rama Rao (Accountant Member) has observed that the Commissioner of Income Tax (Appeals) [CIT(A)] was not justified in dismissing an assessee’s appeal solely on the ground of an 818-day delay without properly examining the explanation furnished for the delay. The Tribunal directed the appellate authority to condone the delay and adjudicate the appeal on merits, observing that an uncontroverted affidavit explaining the delay could not be brushed aside.
The dispute relates to Assessment Year (AY) 2017-18. The assessee had not filed a regular return of income under Section 139 of the Income Tax Act, 1961. Based on information regarding cash deposits of ₹16.79 lakh in the assessee’s bank account, the Assessing Officer (AO) issued a notice under Section 142(1) calling upon the assessee to file the return of income.
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According to the Tribunal’s order, the assessee failed to comply with the statutory notices. Consequently, the Assessing Officer completed a best judgment assessment under Section 144 on September 21, 2019.
During the assessment proceedings, the AO treated the entire bank credits amounting to ₹9,59,55,177 in the assessee’s South Indian Bank account as unexplained money and brought the amount to tax after the assessee failed to explain the source of the credits.
The assessee subsequently filed an appeal before the CIT(A). However, the appeal was filed with a delay of 818 days.
The assessee filed a petition seeking condonation of delay, explaining that the delay occurred due to multiple personal and professional issues coupled with deteriorating health. Despite the explanation, the CIT(A) refused to condone the delay and dismissed the appeal for non-prosecution without entering into the merits of the assessment.
Before the Tribunal, the assessee argued that the appellate authority ought to have condoned the delay considering the reasons furnished in the condonation petition.
It was further contended that the appeal was dismissed ex parte; sufficient opportunity was not provided; the appellate order violated the principles of natural justice; and the CIT(A) failed to comply with the requirements of Section 250(6) of the Income Tax Act while rejecting the appeal.
The Tribunal examined the reasons furnished for the delay and noted that the assessee had specifically stated that personal difficulties, professional issues and deteriorating health prevented the filing of the appeal within the prescribed period.
Importantly, the Bench observed that these averments made in the affidavit were never controverted by the Revenue.
The Tribunal found that while refusing condonation, the CIT(A) merely stated that sufficient cause had not been shown but failed to explain why the reasons advanced by the assessee did not constitute a reasonable cause.
The Bench held that such an approach was legally unsustainable.
The ITAT relied upon the Supreme Court’s decision in M. Kalappa Sethi v. M.V. Laxmi Narain Rao (AIR 1973 SC 627), wherein it was held that an uncontroverted affidavit should ordinarily be accepted as evidence of the facts stated therein.
Applying this principle, the Tribunal observed that in the absence of any material contradicting the affidavit, the explanation offered by the assessee could not simply be ignored.
Allowing the appeal partly for statistical purposes, the Chennai Bench held that the CIT(A) ought to have condoned the delay and admitted the appeal for adjudication on merits.
Accordingly, the Tribunal directed the CIT(A) to admit the appeal and decide the issues raised by the assessee in accordance with law after examining the merits of the case.
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