2025 (4) TMI 350 - AT - Income Tax

Addition u/s 69A - cash book for the whole year was not produced and as such the withdrawals remain unverified - As argued AO accepted the cash withdrawal but did not accept the deposit made out of the withdrawal on account of demonetization. HELD THAT - Since the assessee is a contractor and had turnover of more than Rs. 3.5 Crore there was no justification for addition of Rs. 2 Lakh and accepting the rest of the deposits of Rs. 3, 97, 500/- which were deposited in old currency notes on 12.11.2016 when the assessee had also made withdrawal of Rs. 8 Lakh before the demonetization was announced and the unutilized cash was deposited in the bank account. The assessee also submits that the Ld. CIT(A) was not justified in dismissing the appeal ex parte only after issuing two notices after enabling communication window on e-portal on 04.11.2022. Therefore the Ld. AO was not justified in making the addition as well as the CIT(A) was not justified in upholding the same for an amount of Rs. 2 Lakh when the assessee had made withdrawals of Rs. 8 Lakh and had claimed deposit of Rs. 5, 97, 500/- out of the withdrawals without the Ld. AO specifying or bringing anything to the contrary to disbelieve that the deposit was out of the withdrawals made immediately before the demonetization. Appeal filed by the assessee is allowed.

ISSUES PRESENTED and CONSIDERED

The primary issues considered in this judgment are:

1. Whether the appeal filed by the assessee, which was delayed by 10 days, should be condoned and admitted for hearing on merits.

2. Whether the addition of Rs. 2,00,000/- under Section 69A of the Income Tax Act, 1961, made by the Assessing Officer (AO) and upheld by the Commissioner of Income Tax (Appeals) [CIT(A)], was justified.

3. Whether the CIT(A) was justified in dismissing the appeal ex-parte due to non-compliance with procedural notices.

ISSUE-WISE DETAILED ANALYSIS

1. Condonation of Delay

The Tribunal considered the application for condonation of delay filed by the assessee. The legal framework requires that an appeal must be filed within a statutory time limit unless there is a reasonable cause for delay. The Tribunal noted the reasons provided by the assessee, which included non-availability due to a family function, and found them to be reasonable and sufficient. Thus, the Tribunal condoned the delay and admitted the appeal for adjudication on merits.

2. Addition under Section 69A of the Income Tax Act

Relevant Legal Framework and Precedents: Section 69A of the Income Tax Act pertains to unexplained money, where the burden of proof lies on the assessee to explain the nature and source of the money found in their possession.

Court's Interpretation and Reasoning: The Tribunal evaluated the evidence presented, including the cash book and bank statements. The AO had added Rs. 2,00,000/- to the income of the assessee on the grounds that the withdrawal on 24.10.2016 was unverified. However, the Tribunal found that the assessee had made multiple withdrawals totaling Rs. 8,00,000/- before the demonetization period, which provided sufficient cash for the deposit.

Key Evidence and Findings: The Tribunal noted that the assessee had documented withdrawals of Rs. 8,00,000/- from 24.10.2016 to 08.11.2016, which were sufficient to cover the deposit of Rs. 5,97,500/-. The AO's reliance on the absence of a complete cash book for the entire financial year was found insufficient to justify the addition.

Application of Law to Facts: The Tribunal applied the principles of Section 69A and found that the AO had not provided any contrary evidence to dispute the assessee's claim that the deposit was made from prior withdrawals. Thus, the Tribunal concluded that the addition of Rs. 2,00,000/- was unwarranted.

Treatment of Competing Arguments: The Tribunal considered the AO's argument regarding the absence of a complete cash book and the assessee's explanation regarding the source of the deposit. The Tribunal found the assessee's explanation credible and supported by evidence.

Conclusions: The Tribunal allowed the appeal on this issue, ruling that the addition of Rs. 2,00,000/- was not justified.

3. Ex-parte Dismissal by CIT(A)

Relevant Legal Framework: Procedural fairness requires that parties be given a fair opportunity to present their case. The CIT(A) had dismissed the appeal ex-parte after issuing two notices via the e-portal.

Court's Interpretation and Reasoning: The Tribunal noted that the assessee was a senior citizen and not well-versed with the faceless appeal procedure. It was observed that the CIT(A) could have attempted physical service of notice or other means to ensure the assessee's participation.

Conclusions: The Tribunal found that the CIT(A)'s dismissal of the appeal without ensuring adequate notice was not justified.

SIGNIFICANT HOLDINGS

Core Principles Established: The judgment reinforces the principle that procedural fairness must be upheld, especially in faceless appeal procedures, and that reasonable causes for procedural delays should be considered sympathetically.

Final Determinations on Each Issue:

- The Tribunal condoned the delay in filing the appeal and admitted it for hearing on merits.

- The addition of Rs. 2,00,000/- under Section 69A was found to be unjustified and was deleted.

- The ex-parte dismissal by the CIT(A) was found to be procedurally unfair, and the appeal was allowed in favor of the assessee.

In conclusion, the Tribunal allowed the appeal filed by the assessee, setting aside the addition made under Section 69A and addressing procedural concerns regarding the appeal process.

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