Reopening objections must be decided by speaking order, and unexplained bank deposits may justify only estimated profit addition.

Delay in filing the appeals was condoned on a liberal, justice-oriented approach, as the assessee showed reasonable cause linked to the Covid-19 period and medical circumstances. Reassessment for the earlier year was quashed because the Assessing Officer did not dispose of reopening objections by a speaking order and the recorded reasons showed mismatch and lack of application of mind. For the later year, additions based on bank deposits were reduced: cheque deposits were deleted as explained from known sources, while cash deposits were sustained only to the extent of an estimated 5% profit element.

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Issues: (i) whether the delay in filing the appeals deserved to be condoned; (ii) whether the reassessment for the earlier year was valid when objections to reopening were not disposed of by a speaking order and the recorded reasons were found to be arbitrary; and (iii) whether the additions arising from bank deposits for the later year should be sustained in full or restricted to an estimated profit element.

Issue (i): whether the delay in filing the appeals deserved to be condoned.

Analysis: The delay was considered in the backdrop of the Covid-19 period, the assessee's medical condition, and the surrounding circumstances pleaded for the late filing. The explanation was tested on the settled principle that applications for condonation require a liberal and justice-oriented approach where the delay is not shown to be deliberate or contumacious. The materials were found sufficient to show reasonable cause for the delay.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): whether the reassessment for the earlier year was valid when objections to reopening were not disposed of by a speaking order and the recorded reasons were found to be arbitrary.

Analysis: The assessee had objected to the reopening during assessment proceedings. The Assessing Officer was bound to dispose of those objections by a speaking order before completing reassessment. That was not done. The recorded reasons were also found to suffer from material mismatch and lack of application of mind. In these circumstances, the reassessment could not be sustained.

Conclusion: The reassessment was quashed in favour of the assessee.

Issue (iii): whether the additions arising from bank deposits for the later year should be sustained in full or restricted to an estimated profit element.

Analysis: The cheque deposits were treated as being from known sources and were deleted. As regards the cash deposits, the Tribunal applied an estimated profit approach and, on the facts, restricted the addition to 5% of the cash deposits. The remaining addition was sustained only to that limited extent.

Conclusion: The addition was partly deleted and partly sustained in favour of the assessee to a limited extent.

Final Conclusion: The delay challenge was accepted, the reassessment for one year was annulled, and the additions for the other year were substantially reduced by deleting the cheque-related amount and estimating only a limited profit element on cash deposits.

Ratio Decidendi: Objections to reopening under sections 147 and 148 of the Income-tax Act, 1961 must be disposed of by a speaking order before reassessment is completed, and where bank deposits are not fully explained, the addition may be confined to a reasonable estimated profit element rather than the entire gross deposits.

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