2024 (12) TMI 1346 - HC - Income Tax

Appeal dismissed; deposits after 8 Nov 2016 demonetization treated as unexplained income under s.69A; s.143(6) reply insufficient

Pankaj Gupta Versus Principal Chief Commissioner of Income Tax, Odisha Region, Bhubaneswar and others.

Pankaj Gupta Versus Principal Chief Commissioner of Income Tax, Odisha Region, Bhubaneswar and others. - [2025] 477 ITR 387 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the delay of 373 days in filing the appeal should be condoned based on the appellant's application for rectification of the impugned order. Whether a deposit made after the demonetization notification on 8th November 2016 can be considered unexplained money under Section 69-A of the Income Tax Act, 1961. Whether the Tribunal erred in referring to the deposit as an unexplained investment rather than unexplained money.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Delay in Filing the AppealRelevant Legal Framework and Precedents: Section 260-A of the Income Tax Act, 1961, which allows for the condonation of delay in filing appeals under certain circumstances. Court's Interpretation and Reasoning: The court accepted the cause shown for the delay, considering the appellant's application for rectification of the impugned order as a valid reason for the delay. Key Evidence and Findings: The appellant argued that the time taken between 16th August 2023 and 26th July 2024 should be excluded from the delay period. Application of Law to Facts: The court exercised its power under Section 260-A(2) to condone the delay, allowing the appeal to proceed. Treatment of Competing Arguments: The respondent opposed the application, but the court found the appellant's explanation sufficient. Conclusions: The delay was condoned, and the application was disposed of.Issue 2: Treatment of the Deposit as Unexplained MoneyRelevant Legal Framework and Precedents: Section 69-A of the Income Tax Act, 1961, which deals with unexplained money. Court's Interpretation and Reasoning: The court found no substantial question of law arising from the Tribunal's order, as the facts established by the Assessing Officer (AO) and confirmed by the First Appellate Authority and the Tribunal supported the addition of the deposit as unexplained money. Key Evidence and Findings: The AO's assessment revealed that the appellant had a cash balance of Rs. 252.40 on 8th November 2016, but deposited Rs. 28,00,000/- on 12th November 2016 using old currency denominations. Application of Law to Facts: The appellant's explanation of the deposit being from cash sales and debtor realizations was deemed insufficient, as the nature or source of the money remained unexplained. Treatment of Competing Arguments: The appellant argued that the deposit was legitimate under the demonetization notification, while the respondent maintained it was unexplained money. Conclusions: The court concluded that the appeal did not merit admission, as the appellant failed to provide a satisfactory explanation for the deposit.Issue 3: Reference to the Deposit as Unexplained InvestmentRelevant Legal Framework and Precedents: The distinction between unexplained money and unexplained investment under tax law. Court's Interpretation and Reasoning: The court determined that the Tribunal's reference to the deposit as an unexplained investment was a minor error that did not affect the overall finding of unexplained money. Key Evidence and Findings: The AO's assessment and subsequent confirmations by appellate authorities focused on the unexplained nature of the deposit. Application of Law to Facts: The court found that the mistaken reference did not alter the legal conclusion of unexplained money. Treatment of Competing Arguments: The appellant claimed the reference was erroneous, but the court found it inconsequential. Conclusions: The appeal was dismissed as the reference error did not constitute a substantial question of law.3. SIGNIFICANT HOLDINGSPreserve Verbatim Quotes of Crucial Legal Reasoning: 'In the facts found by the AO, confirmed by the First Appellate Authority and thereafter the Tribunal, there does not arise any substantial question of law for admission of the appeal.' Core Principles Established: The court reaffirmed the necessity of providing a clear and satisfactory explanation for deposits made during the demonetization period to avoid classification as unexplained money under Section 69-A. Final Determinations on Each Issue: The delay in filing the appeal was condoned, but the appeal itself was dismissed due to lack of substantial questions of law.