ITAT condones 400-day delay in filing appeals due to bonafide belief about automatic deletion of protective additions

ITAT Indore condoned delay of over 400 days in filing appeals, finding bonafide belief that protective addition would be automatically deleted after tribunal deleted substantive addition from society president's hands. Assessee relied on tax consultant's advice and filed rectification application showing no malafide intent. Court held that when substantive addition against society president was deleted by tribunal and income directed to be assessed in society's hands, corresponding protective additions in individual assessees' hands cannot survive and were therefore deleted.

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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.

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