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1. ISSUES PRESENTED AND CONSIDERED
1.1 Whether the delay of 67 days in filing the appeal before the first appellate authority constituted "sufficient cause" warranting condonation.
1.2 Whether the first appellate authority was justified in dismissing the appeal in limine without condoning the delay and without affording adequate opportunity to explain the delay.
1.3 Whether the addition of Rs. 2,02,500/- as unexplained money under section 69A on account of cash (SBN) deposited during the demonetisation period was sustainable when (i) the deposit amount was below the monetary threshold in Board Instruction No. 3/2017, and (ii) the amount formed part of the disclosed business turnover already accepted in assessment.
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1 & 2 - Condonation of delay in appeal and propriety of dismissal by the first appellate authority
Legal framework (as discussed):
2.1 The Court proceeded on the principle that delay in filing an appeal may be condoned on showing reasonable and sufficient cause, and that the first appellate authority should examine the factual explanation for delay before declining condonation.
Interpretation and reasoning:
2.2 The assessment order was passed on 23.03.2022 and the normal due date for filing appeal before the first appellate authority was 21.04.2022.
2.3 The assessee was stated to be facing legal proceedings and was in judicial custody during the relevant period, and was released on bail by an order of the criminal court dated 30.05.2022.
2.4 The appeal before the first appellate authority was filed on 28.06.2022, resulting in a delay of 67 days.
2.5 The assessee's explanation for the delay, supported by the order of the Additional District and Sessions Judge, was that custody and related legal proceedings prevented timely filing.
2.6 The Tribunal observed that the first appellate authority had dismissed the appeal by refusing to condone the delay without properly considering these factual aspects and without providing an opportunity to the assessee to explain the delay during appellate proceedings.
2.7 Considering the short length of delay and the circumstances of judicial custody, the Tribunal held that the cause shown was sufficient and satisfactorily explained.
Conclusions:
2.8 The delay of 67 days in filing the appeal before the first appellate authority was held to be duly explained and liable to be condoned.
2.9 The refusal by the first appellate authority to condone the delay and the dismissal of the appeal in limine, without adequately considering the factual explanation, was found to be unjustified.
Issue 3 - Justification of addition under section 69A for cash deposit of Rs. 2,02,500/- during demonetisation
Legal framework (as discussed):
3.1 Reassessment proceedings were initiated under section 147 based on information that cash deposits of Rs. 52.27 lakhs in demonetised notes were made during the demonetisation period.
3.2 The assessment ultimately made an addition of Rs. 2,02,500/- under section 69A, being the aggregate cash (SBN) deposits identified from bank information during the demonetisation period.
3.3 The Court referred to Board Instruction No. 3/2017, which, as noted, provided that cases where cash deposits during demonetisation are less than Rs. 2.5 lakhs are not to be taken up for specific action under the instruction.
Interpretation and reasoning:
3.4 On verification of bank information obtained under section 133(6), the Assessing Officer found that the total cash (SBN) deposit during the demonetisation period across all three bank accounts was only Rs. 2,02,500/-, and not Rs. 52.27 lakhs as originally presumed.
3.5 The total credits in all bank accounts were Rs. 53.14 lakhs, and the assessee had disclosed gross turnover of Rs. 57.82 lakhs in the return of income filed on 26.03.2018, which had been accepted by the Assessing Officer.
3.6 The net profit at 8% on the disclosed turnover, resulting in total income of Rs. 4,62,624/-, had also been accepted as business income.
3.7 The Tribunal recorded that the reassessment proceedings had been initiated on the basis of "misinformation" that SBN cash deposits were Rs. 52.27 lakhs, whereas in fact they were only Rs. 2,02,500/-, an amount below the Rs. 2.5 lakh threshold in Board Instruction No. 3/2017.
3.8 It further found that the cash deposit of Rs. 2,02,500/- formed part of the disclosed gross turnover of Rs. 57.82 lakhs that had been accepted in assessment as business turnover.
3.9 The Tribunal reasoned that, since the turnover including such cash deposits had already been brought to tax by applying an 8% net profit rate and accepted by the Assessing Officer, there was no justification for a separate addition of the same cash deposits as unexplained money under section 69A.
3.10 The Tribunal also observed that, being covered by the Board Instruction (amount less than Rs. 2.5 lakhs), there was no basis to treat the cash deposit independently for adverse inference.
Conclusions:
3.11 The cash deposit of Rs. 2,02,500/- during the demonetisation period was held to be a part of the assessee's accepted business turnover and fully covered by the Board Instruction No. 3/2017.
3.12 The separate addition of Rs. 2,02,500/- under section 69A, on account of SBN deposits during demonetisation, was held to be unwarranted and was deleted.
3.13 With the delay condoned and the addition deleted, the appeal was allowed.
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