2025 (5) TMI 2036 - AT - Income Tax

Taxpayer's Appeal Dismissed: Medical Grounds Insufficient to Challenge Income Tax Assessment Under Section 139(8A)

HIMANSHU BHARDWAJ Versus DCIT, CIRCLE-11 (2), New Delhi

Tribunal upheld the AO's addition of Rs. 13,67,850/- on unexplained business income based on GST returns. The 100-day delay in filing appeal was condoned ... Unexplained business income - addition @10% on total sales turnover (as per GST return) in the absence of any information and noncompliance from the assessee. HELD THAT:- As admitted fact that before the lower authorities assessee was unable to produce any voucher/ invoice and other evidence to explain gross profit or business income. Hence, in the absence of sufficient evidences, the addition made by the AO was rightly confirmed by the CIT(A), which does not need any interference on my part, hence, affirm the action of the CIT(A) on this account and reject the grounds raised by the assessee. 1. ISSUES PRESENTED and CONSIDERED- Whether the delay of 100 days in filing the appeal before the Tribunal can be condoned on grounds of reasonable cause, including incorrect legal advice and family medical exigencies.- Whether the addition of Rs. 13,67,850/- made by the Assessing Officer (AO) on account of unexplained business income, based on a 10% markup on total sales turnover as per GST returns, was justified.- Whether the updated return filed under section 139(8A) after completion of assessment proceedings is valid and can be considered for rectifying the originally filed return.- Whether the failure of the assessee to produce vouchers, invoices, or other evidentiary material to substantiate the claimed business income justifies confirmation of the addition made by the AO.2. ISSUE-WISE DETAILED ANALYSISCondonation of Delay in Filing AppealRelevant legal framework and precedents: The Tribunal has discretionary power to condone delay in filing appeals if sufficient cause or reasonable explanation is provided. The principles guiding such condonation include consideration of bona fide reasons, absence of negligence, and circumstances beyond the appellant's control.Court's interpretation and reasoning: The assessee attributed the delay to incorrect advice by his Chartered Accountant that no appeal lay against the impugned order, thus causing inadvertent delay. Additionally, the medical condition of the assessee's father, who underwent nephrectomy surgery, was cited as a significant factor affecting the family's ability to pursue timely legal recourse. The Tribunal noted that medical documents were placed on record corroborating this claim.Key evidence and findings: Affidavit filed by the assessee, medical reports of the father's nephrolithiasis and nephrectomy, and absence of any contrary contention from the Revenue.Application of law to facts: Given the bona fide nature of the reasons and supporting evidence, the Tribunal exercised its discretion to condone the delay, emphasizing that the delay was not due to willful negligence but reasonable cause.Treatment of competing arguments: The Revenue did not dispute the reasons for delay; hence, no adverse inference was drawn.Conclusion: Delay of 100 days in filing the appeal was condoned.Validity of Updated Return Filed under Section 139(8A)Relevant legal framework and precedents: Section 139(8A) permits a taxpayer to file an updated return to rectify errors or omissions, but this is not permissible if any assessment or reassessment proceedings are pending or completed for the relevant assessment year.Court's interpretation and reasoning: The Tribunal noted that the updated return was filed on 12.01.2023, after the assessment was completed on 27.12.2022. The appellate authority observed that section 139(8A) does not allow such updated returns post completion of assessment proceedings. Consequently, the updated return was deemed invalid.Key evidence and findings: Dates of original return filing, assessment completion, and updated return filing; reliance on statutory provisions.Application of law to facts: Since the updated return was filed after the assessment order, it was not legally permissible and could not be considered for rectification of the originally declared income.Treatment of competing arguments: The assessee contended that the original return was wrongly filed as ITR-1 and sought to rectify via updated return, but the Tribunal upheld the strict statutory bar.Conclusion: The updated return under section 139(8A) was invalid and could not be relied upon.Justification of Addition Made by AO on Unexplained Business IncomeRelevant legal framework and precedents: Under the Income Tax Act, if an assessee fails to explain the nature and source of income or fails to produce supporting evidence for claimed business income, the AO is empowered to make additions based on best judgment. The use of a percentage of turnover as deemed profit is a recognized method where no evidence is furnished.Court's interpretation and reasoning: The AO made an addition of 10% of total sales turnover (as per GST returns) amounting to Rs. 13,67,850/- due to non-disclosure of income from business transactions and failure to produce vouchers or invoices. The CIT(A) confirmed this addition, noting the absence of any supporting evidence and the invalidity of the updated return.Key evidence and findings: GST returns showing sales turnover; absence of vouchers/invoices or other documentary proof; balance sheet and P&L account filed only after assessment completion.Application of law to facts: The Tribunal found that the assessee's inability to substantiate the claimed business income justified the AO's addition. The late filing of financial statements post-assessment did not assist the assessee's case.Treatment of competing arguments: The assessee argued that the updated return and financial statements should be considered, but the Tribunal rejected these on grounds of procedural and substantive invalidity.Conclusion: The addition made by the AO was rightly confirmed by the CIT(A) and upheld by the Tribunal.3. SIGNIFICANT HOLDINGS'The provision of section 139(8A) of the Act does not allow any appellant to update any return of income u/s 139(8A) where any proceeding for assessment or reassessment or re-computation or revision of income under this Act is pending or has been completed for the relevant assessment year.''In the absence of sufficient evidences, the addition made by the Assessing Officer is hereby confirmed.''Reasonable reason has been attributed to the assessee for filing the belated appeal, hence, I condone the delay in dispute in filing the appeal before the Tribunal.'Core principles established include the strict interpretation of section 139(8A) barring updated returns post-assessment, the permissibility of additions based on best judgment in absence of evidence, and the discretionary power of the Tribunal to condone delay on bona fide grounds supported by evidence.Final determinations:- Delay in filing appeal was condoned.- Updated return filed post-assessment was invalid.- Addition of Rs. 13,67,850/- on unexplained business income was justified and confirmed.- Assessee's appeal was dismissed.