2022 (10) TMI 710 - AT - Income Tax

Unexplained cash deposits in bank account - argument that there were past savings which were pooled in and collected and deposited keeping the purpose for which the assessee was working to achieve the claim - Appellant is a low educated person doing petty labour jobs and not usual with the legal proceeding under the Income Tax Act and the non-compliance of the notices was not a deliberate act of the Appellant - HELD THAT - Circumstances consistently available on record that the benefit of past savings of the assessee's family consisting of assessee's wife; two educated daughters and educated son rejected by the AO and sustained by the CIT(A) cannot be upheld looking at the target which the assessee was aspiring for i.e. sending his daughter abroad for further studies. Looking at his background, it was a salute worthy ambition. The wife of the assessee as per pleadings before the AO also was working in other persons households; one Post Graduate daughter was giving tuitions and another Post Graduate daughter was in private employment and the educated son was also gainfully employed. Accordingly, the argument that there were past savings which were pooled in and collected and deposited keeping the purpose for which the assessee was working to achieve the claim has been discarded without any basis except the reasoning that t is very/highly improbable that such a huge amount can would be lying with him idle. Therefore, the assessee's contention is not acceptable . Keeping in view the purpose for which the assessee was working hard, the claim was justified on facts. Accordingly, the respective orders are set aside and Page addition is directed to be deleted. Said order was pronounced in the Open Court at the time of hearing itself. Appeal of the assessee is allowed.

Summary

Issues:
1. Correctness of the order dated 29.12.2021 of CIT(A) (NFAC) Delhi for the 2011-12 assessment year.
2. Non-compliance of notices by the appellant.
3. Disregarding the Principle of Natural Justice.
4. Impact of COVID-19 pandemic on the case.

Issue 1: Correctness of CIT(A) Order:
The appellant challenged the CIT(A) order, arguing that the appellant, a low-educated individual, was not familiar with legal proceedings under the Income Tax Act. The appellant explained the source of cash deposits for study visa requirements, stating it was pooled family savings. The Tribunal noted the AO made additions based on unsatisfactory replies and dismissed the appeal in limine. The Tribunal found the dismissal unjust, emphasizing the importance of providing a fair hearing, especially considering the appellant's background as a daily wage laborer. The Tribunal criticized the dismissal based on lack of notice and lack of consideration for the appellant's explanation, ultimately allowing the appeal.

Issue 2: Non-compliance of Notices:
The appellant's delay in responding to notices was explained due to COVID-related issues, which the Tribunal found valid. The appellant's plea for a remand back to the AO for proper consideration was supported by the Tribunal, highlighting the lack of documentary evidence and the dismissal based on limitation by the First Appellate Authority. The Tribunal emphasized the need for a fair hearing, especially for individuals like the appellant, and criticized the dismissal without proper consideration.

Issue 3: Disregarding Principle of Natural Justice:
The Tribunal observed that the CIT(A) dismissed the appeal without proper discussion or consideration of the appellant's explanation for the delay. The Tribunal found the dismissal based on lack of notice and the appellant's background as a daily wage laborer unfair, emphasizing the need for a fair hearing and condemning the biased reasoning in the case. The Tribunal highlighted the importance of not alienating marginalized individuals from the legal system and criticized the arbitrary dismissal of the appeal.

Issue 4: Impact of COVID-19 Pandemic:
The Tribunal acknowledged the impact of the COVID-19 pandemic on the case, considering the delay and the appellant's circumstances. The Tribunal re-fixed the hearing to allow the Revenue to defend the order, recognizing the peculiar facts of the case where the appellant's family income was below taxable limits. The Tribunal emphasized the need to avoid burdening the appellant and the tax administration unnecessarily, especially given the efforts of hardworking individuals to secure opportunities for their families.

In conclusion, the Tribunal allowed the appeal, setting aside the additions made by the AO and sustained by the CIT(A), emphasizing the appellant's justified ambition to send his daughter abroad for studies and the pooled family savings used for this purpose. The Tribunal highlighted the importance of considering the appellant's background and circumstances in tax proceedings to ensure fairness and justice.