2025 (5) TMI 441 - AT - Income Tax

Unexplained investment in land purchase appeal allowed for statistical purposes after 40-day delay condoned

Ajay Bhauso Kadam At Durandewadi Versus ITO, Ward 2, Satara

Ajay Bhauso Kadam At Durandewadi Versus ITO, Ward 2, Satara - TMI The core legal questions considered by the Tribunal in this appeal include:1. Whether the delay of 461 days in filing the appeal before the Tribunal can be condoned given the circumstances of non-receipt of notices at the correct e-mail ID.2. Whether the appellate order of the CIT(A)/NFAC dismissing the appeal for non-compliance and delay in filing the appeal before it was justified.3. Whether the Assessing Officer was justified in making additions under section 69 of the Income Tax Act, 1961 on account of unexplained investment in immovable property, despite the assessee's claim of acting as a General Power of Attorney (GPA) holder for the company.4. Whether the matter should be remitted back to the Assessing Officer for fresh adjudication in light of additional evidence and explanations submitted by the assessee.Issue-wise Detailed Analysis1. Condonation of Delay in Filing Appeal Before the TribunalLegal Framework and Precedents: The Tribunal relied on settled principles articulated by the Hon'ble Supreme Court in Collector, Land Acquisition vs. Mst. Katiji & Ors. and Inder Singh vs. The State of Madhya Pradesh. These decisions emphasize that substantial justice must prevail over technicalities, and delay in filing appeals should be condoned if there is a reasonable cause. The Supreme Court held that refusal to condone delay can result in injustice and dismissal of meritorious matters at the threshold.Court's Reasoning: The Tribunal noted that the delay of 461 days was primarily due to the notices being sent to an incorrect e-mail ID ([email protected]) instead of the correct one ([email protected]) as provided by the assessee. Consequently, the assessee was unaware of the order of the CIT(A)/NFAC. The delay was not willful or intentional but arose from circumstances beyond the assessee's control.Application of Law to Facts: The Tribunal found merit in the assessee's explanation and, following the Supreme Court's guidance, condoned the delay in filing the appeal before the Tribunal. This enabled the appeal to be admitted for adjudication on merits rather than being dismissed on procedural grounds.Treatment of Competing Arguments: The Department opposed condonation, but the Tribunal gave precedence to substantial justice over procedural delay.Conclusion: Delay of 461 days was condoned, and the appeal was admitted.2. Dismissal of Appeal by CIT(A)/NFAC for Delay and Non-ComplianceLegal Framework: The CIT(A)/NFAC dismissed the appeal due to delay exceeding 40 days in filing the appeal and non-compliance with two notices issued for explanation of delay and submission of documents. The CIT(A)/NFAC relied on procedural requirements under the Income Tax Act and the ITBA portal system for communication.Court's Reasoning: The Tribunal observed that the CIT(A)/NFAC did not condone the delay and dismissed the appeal ex parte. However, the Tribunal found that the assessee had reasonable cause for delay and that the CIT(A)/NFAC should have adopted a pragmatic approach by condoning the delay as per the Supreme Court's decisions. The Tribunal also noted that the assessee was not given adequate opportunity to present the merits due to dismissal on procedural grounds.Application of Law to Facts: The Tribunal held that the CIT(A)/NFAC's refusal to condone delay and dismissal of appeal was contrary to the principle of substantial justice. The assessee's failure to respond to notices was contextualized with the initial non-receipt of earlier communications.Conclusion: The Tribunal set aside the dismissal by the CIT(A)/NFAC and allowed the appeal for statistical purposes.3. Addition of Rs. 1,89,07,000/- Under Section 69 for Unexplained InvestmentLegal Framework: Section 69 of the Income Tax Act permits the Assessing Officer to add unexplained investments to the income of the assessee if the source is not satisfactorily explained. The burden lies on the assessee to prove the genuineness of transactions and source of funds.Court's Reasoning: The Assessing Officer reopened the assessment on the basis of information that the assessee, as GPA holder of Kadam family, was involved in transactions involving sale and purchase of immovable property with consideration far below market value and unexplained sources of investment. The AO issued notices to the company (Shri Maruti Wind Park Developers) to clarify the transactions, but the company did not respond. The assessee also failed to submit adequate details during assessment proceedings, leading to addition under section 69.The assessee contended that he was merely a salaried employee and GPA holder acting on behalf of the company, and the payments were made by the company. Additional evidence was filed before the Tribunal to substantiate this claim, including confirmation from the company and property sale documents.Application of Law to Facts: The Tribunal found that the Assessing Officer's addition was based on the absence of explanation and non-cooperation from the company and the assessee. However, the Tribunal noted that the assessee's claim of acting as GPA holder and employee was supported by additional evidence admitted during the appeal. The Tribunal emphasized that the Assessing Officer should verify these facts afresh and afford the assessee an opportunity to substantiate the claim.Treatment of Competing Arguments: The Department argued that the assessee had shown scant regard for tax laws by non-filing of details and delay in appeals. The assessee's counsel argued for a fair opportunity to prove the transactions were on behalf of the company. The Tribunal sided with the principle of natural justice and substantial justice.Conclusion: The Tribunal directed the issue to be remitted to the Assessing Officer for fresh adjudication after proper verification and hearing.4. Remand for Fresh AdjudicationCourt's Reasoning: The Tribunal considered the admitted additional evidence and the fact that the assessee was acting as a GPA holder and employee of the company. It held that the Assessing Officer must examine the facts and law afresh, providing the assessee full opportunity to be heard and to submit requisite documents.Application of Law to Facts: The Tribunal emphasized that refusal to condone delay and dismissal of appeal without examining merits would defeat justice. The remand was necessary to ensure that the assessee's contentions are fairly considered.Directions: The assessee was directed to cooperate fully and not seek adjournments, failing which the AO may pass appropriate orders. The grounds raised by the assessee were allowed for statistical purposes.Significant Holdings'When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties.''There can be no quarrel on the settled principle of law that delay cannot be condoned without sufficient cause, but a major aspect which has to be kept in mind is that, if in a particular case, the merits have to be examined, it should not be scuttled merely on the basis of limitation.'The Tribunal established the principle that procedural delays, especially those caused by communication failures, should not bar adjudication on merits. It reaffirmed the requirement that Assessing Officers must provide natural justice and consider explanations and evidence before making additions under section 69.Final determinations:The delay of 461 days in filing the appeal before the Tribunal was condoned.The dismissal of the appeal by the CIT(A)/NFAC for delay and non-compliance was set aside.The addition of Rs. 1,89,07,000/- under section 69 was not upheld outright; the issue was remitted to the Assessing Officer for fresh consideration after due opportunity to the assessee.The appeal was allowed for statistical purposes, with directions for fresh adjudication.