2024 (4) TMI 90 - AT - Income Tax

Condonation of delay - delay of 1607 days in filing the appeal by the assessee before ITAT - reasons specified therein for the delay was ill health and bankruptcy eventually running away from the society and police which has created lot of stress upon the assessee - Whether delay was inordinate or excessive? - HELD THAT - Certainly, the delay is significant. But length of the delay becomes insignificant if there was sufficient cause for such delay which prevented the assessee in filing the appeal. As such we need to consider the cause for the delay and not the length of the delay. Accordingly in our considered view when there was a reasonable cause, the period of delay may not be relevant factor. As in KSP. SHANMUGAVEL NADAR AND OTHERS 1984 (4) TMI 24 - MADRAS HIGH COURT Hon ble Madras High Court was pleased to condone the delay for 20 years approximately by holding that there was sufficient and reasonable cause on the part of the assessee for not filing the appeal within the period of limitation. Thus, the delay in the instant case is just of 1607 number of days which cannot be considered to be inordinate or excessive in comparison to the delay of 7330 days approximately. What is the sufficient cause of delay? - It is trite law that where a case has been presented in the Court beyond limitation, the petitioner has to explain the Court as to what was the sufficient cause which means an adequate and enough reason which prevented him to approach the Court within limitation. From the medical details filed by the assessee, we find that the assessee was having one or the other medical issues right from the financial years 2008-09 to 2019-20 which may not be of serious concern, but the ill-health of the assessee cannot be ruled out. Likewise, the assessee in the affidavit has also submitted that he was under a lot of financial stress and was declared as an insolvent. Furthermore, he was running away from the police and society. There was also a case against the assessee of cheque bouncing as evident from the details available on record. If we aggregate all these factors, the fact that the assessee was having a stressful life cannot be ruled out and assessee was not in sound mind to take correct decisions on legal proceedings. Besides the above, we note that all the credits in the form of cheque and cash deposits in the bank account of the assessee has been added to the total income of the assessee. The AO has done so in the absence of any cooperation from the side of the assessee despite the assessee being afforded several opportunities. However, what we find is this that there is no discussion in the assessment order as far as withdrawn from the banks is concerned. Thus, it is transpired that all the credits appearing in the bank has been treated as income of the assessee though the assessee during the assessment proceedings vide letter dated 22 January 2014 has submitted details with the request to tax the income under the provisions of section 44AF of the Act. As such, the reply submitted by the assessee vide letter dated 22 January 2014 was rejected by the AO stating that the detailed furnished was incomplete but how was it incomplete, the order of the AO is silent. It is the settled law that only the credit sides of the bank do not represent the income. Thus it is the fit case where the delay has to be condoned irrespective of the duration/period of the delay. In this case, the non-filing of an affidavit by the Revenue for opposing the condonation of delay itself is sufficient for condoning the delay of 1607 number of days. We also note that there is no allegation from the Revenue that the appeal was not filed by the assessee within the time deliberately. Therefore, we are inclined to prefer substantial justice rather than technicality in deciding the issue - Thus we condone the delay of 1607 days in filing the appeal and proceed to hear the appeal on merit for the adjudication. Addition u/s 69 - As order passed by the ld. CIT-A and the AO is ex-parte. Furthermore, there was also delay in filing the appeal before the ITAT which has been condoned in the preceding paragraph after giving detailed reasons. The same reasoning can also be applied for non-appearance of the assessee before the revenue authorities while restoring the issue to the file of the AO for fresh adjudication as per the provisions of law. It is also directed to the assessee to extend the full co-operation during the assessment proceedings. Hence, the ground of appeal filed by the assessee is allowed for the statistical purposes. Penalty u/s 271(1)(c) - We note that the quantum addition against which the penalty under section 271(1)(c) of the Act was imposed by the revenue authorities, such quantum addition has already been set aside to the file of the AO supra for fresh adjudication as per the provisions of law. Accordingly, the penalty levied in the case on hand is not sustainable and liable to be deleted. The AO is at the liberty to proceed with the penalty under section 271(1)(c) of the Act in pursuance to the outcome of the quantum matter.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Addition u/s 69 of the Act.
3. Penalty u/s 271(1)(c) of the Act.

Summary:

Condonation of Delay in Filing the Appeal:
The assessee filed the appeal with a delay of 1607 days, citing ill health, bankruptcy, and legal issues as reasons. The Tribunal noted that the delay was significant but emphasized that "length of the delay becomes insignificant if there was sufficient cause." The Tribunal referred to various judgments, including the Hon'ble Madras High Court in CIT v. K.S.P. Shanmugavel Nadai and Ors and the Hon'ble Supreme Court in Mst. Katiji (167 ITR 471), to conclude that substantial justice should be preferred over technicalities. The Tribunal found the assessee's reasons for the delay, including medical issues and financial stress, to be sufficient cause and condoned the delay.

Addition u/s 69 of the Act:
The assessee contested the addition of Rs. 54,23,290.00 u/s 69, arguing that the credits in the bank account were not properly evaluated. The Tribunal noted that the assessment order was ex-parte and that the AO did not consider the withdrawals from the bank. The Tribunal cited the Hon'ble Gujarat High Court in Principal Commissioner of Income-tax v. Shitalben Saurabh Vora, which held that deposits cannot be treated as income without considering withdrawals. The Tribunal set aside the addition and remanded the matter to the AO for fresh adjudication, directing the assessee to cooperate fully.

Penalty u/s 271(1)(c) of the Act:
The penalty of Rs. 24,57,460 u/s 271(1)(c) was contested by the assessee. The Tribunal noted that the quantum addition, which formed the basis for the penalty, had been set aside for fresh adjudication. Consequently, the penalty was deemed unsustainable and was deleted. The AO was given the liberty to reinitiate penalty proceedings based on the outcome of the fresh adjudication of the quantum addition.

Conclusion:
The appeal in ITA No. 192/AHD/2021 was allowed for statistical purposes, and the appeal in ITA No. 193/AHD/2021 was allowed. The order was pronounced on 28/03/2024 at Ahmedabad.