2024 (6) TMI 732 - AT - Income Tax

Condonation of delay in filing appeals - inordinary delay of more than 400 days - Unexplained cash deposit in the bank account - protective addition made in the hands of the assessee when substantive addition was deleted - HELD THAT - The assessee has acted on the bonafide advice and believed that the protective addition made in the hands of the assessee would be deleted by tax authorities after substantive addition was deleted by tribunal and the income was directed to be assessed in the hands of the society. All these facts as explained by the assessee as a cause of delay in filing the appeal are not in dispute and therefore, there was a bonafide reason with the assessee to believe that the protective addition having no tax impact would be deleted by the AO in pursuant to the order of the tribunal deleting substantive addition in the hands of Shri Manish Kothari and directing the assessment of the said income in the hands of the society. The assessee also took steps in this respect by filing a rectification application u/s 154 before the AO but no avail. Thus, it is clear that by filing these appeals belatedly there was no malafide intention to take any undue advantage by assessee. The assessee has acted on the advice of the tax consultant for not filing the appeal within the period of limitation. Addition on protective basis made by the assessee on account of cash deposit transactions with Society Vardhman Sakh Sahkarita Maryadit Ujjain - AO made protective addition of the amounts found in the pocket diary during the survey proceedings in case of society and the substantive addition was made in the hands of President of the said society but tribunal said income on account of unexplained cash deposit is liable to be assessed in the hands of the society by taking peak credit and not in the hands of President of the society - HELD THAT - When the substantive addition in the hands of Shri Manish Kothari was deleted by Tribunal then the protective addition in the hands of these individuals would not survive. Accordingly the protective addition made in the hands of the assessee for all these years is deleted.

Summary

Issues Involved:
1. Condonation of delay in filing the appeals.
2. Validity of protective addition made in the hands of the assessee.
3. Substantive addition in the hands of Shri Manish Kothari.
4. Grounds raised by the assessee and their resolution.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeals:
The assessee filed appeals belatedly, with delays of 436 days for A.Y. 2009-10 & 2010-11 and 121 days for A.Y. 2012-13 to 2015-16. The delay was attributed to the assessee's bonafide belief that the protective addition would be deleted following the Tribunal's deletion of the substantive addition in the hands of Shri Manish Kothari. The assessee acted on the advice of tax consultants and filed a rectification application u/s 154 before the AO instead of filing an appeal. The Tribunal found the delay to be neither willful nor deliberate but due to a lack of understanding. The delay was condoned in the interest of justice.

2. Validity of Protective Addition Made in the Hands of the Assessee:
The assessee challenged the protective addition made by the AO on account of cash deposit transactions with Vardhman Sakh Sahkarita Maryadit Ujjain. The CIT(A) confirmed the protective addition on the grounds that the substantive addition was also confirmed in the hands of Shri Manish Kothari. However, the Tribunal had previously held that the income from unexplained cash deposits should be assessed in the hands of the society and not Shri Manish Kothari. Consequently, the Tribunal deleted the protective addition in the hands of the assessee, following the precedent set in the case of Smt. Sonal Chhablani vs. ITO.

3. Substantive Addition in the Hands of Shri Manish Kothari:
The Tribunal had earlier deleted the substantive addition in the hands of Shri Manish Kothari, President of Vardhman Sakh Sahkarita Maryadit Ujjain, holding that the income from unexplained cash deposits should be assessed in the hands of the society. This decision was based on the finding that the society, being a separate legal entity, should bear the tax liability for the cash deposits, not Shri Manish Kothari.

4. Grounds Raised by the Assessee and Their Resolution:
The assessee raised several grounds in the appeals. Ground no.2 (regarding the ex-parte order passed by CIT(A) during the pandemic) and ground no.6 (relating to 5% gross profit addition) were not pressed and were dismissed. The effective grounds pressed were ground no.3 to 5, all relating to the protective addition based on cash deposit transactions with Vardhman Sakh Sahkarita Maryadit Ujjain. The Tribunal, following its earlier decisions, deleted the protective addition in the hands of the assessee for all the years in question.

Conclusion:
The appeals were partly allowed, with the Tribunal condoning the delay in filing the appeals and deleting the protective addition in the hands of the assessee. The substantive addition in the hands of Shri Manish Kothari was earlier deleted, and the protective addition in the hands of the assessee was found unsustainable.