Appeal allows deletion of cash deposit addition u/s 69A r.w.s.115BBE for failure to verify sources under s.250(4),(6)

ITAT Raipur allowed the assessee's appeal and deleted the addition made u/s 69A r.w.s. 115BBE on alleged unexplained cash deposits and property purchase. The Tribunal held that CIT(A)/NFAC failed to discharge the statutory duty under s. 250(4) and (6) by summarily dismissing the appeal without factual verification of the assessee's explanations, capital accounts, or sources of funds from family and employment. As the Revenue brought no material indicating undisclosed sources beyond accepted salary and commission income, the addition was held arbitrary, misplaced, and bad in law.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether delay of 42 days in filing the appeal before the Tribunal deserved to be condoned in the circumstances explained by the assessee regarding non-service of the first appellate order by email.

1.2 Whether the addition made as unexplained money under Section 69A read with Section 115BBE of the Act, on account of cash deposits in the assessee's bank account, was sustainable in view of the assessee's explanation of source and the manner in which the authorities below dealt with the evidence and their statutory duties under Section 250(4) and (6) of the Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1 - Condonation of delay in filing appeal

Legal framework (as discussed):

2.1 The Tribunal considered the explanation tendered by the assessee for delay in filing the appeal, particularly with reference to the option exercised in Form 35 regarding service of departmental notices/communications by email. Judicial guidance was taken from decisions recognizing sufficient cause and the effect of non-service or ineffective service of orders on limitation.

Interpretation and reasoning:

2.2 The assessee had opted "No" in Form 35 for service of notices/communications by email. The impugned order of the first appellate authority, however, was sent by email and, therefore, according to the assessee, went unnoticed and resulted in delay of 42 days.

2.3 The Tribunal held that once the department itself has provided an option in Form 35 and the assessee has expressly opted not to receive communications by email, the assessee cannot be faulted for delay arising from an order sent only through email. In such circumstances, the resultant delay constituted a bona fide and reasonable cause.

2.4 Relying on the cited judicial pronouncements, the Tribunal treated the cause shown as sufficient and treated the delay as condonable.

Conclusions:

2.5 The delay of 42 days in filing the appeal was condoned and the appeal was admitted for decision on merits.

Issue 2 - Validity of addition under Section 69A read with Section 115BBE on account of cash deposits

Legal framework (as discussed):

2.6 The addition was made under Section 69A of the Act, read with Section 115BBE, treating the cash deposits of Rs. 18,18,000/- (part of total deposits noted by the authorities) as unexplained money. The Tribunal examined the manner in which the first appellate authority discharged its obligations under Section 250(4) and (6) of the Act.

2.7 The Tribunal referred to precedents of the Coordinate Bench and a High Court decision, emphasizing that incorrect or mechanical application of provisions and non-application of mind by quasi-judicial authorities vitiate the additions. Although those cases involved wrong charging sections (Sections 68, 69, 69A), the underlying principle of "non-application of mind" and the necessity for proper enquiry and reasoning was applied.

Interpretation and reasoning:

2.8 The assessee, an employee earning salary and commission income, had deposited cash in his bank account and thereafter used banking channels to pay for an immovable property. The limited dispute was the source of the cash deposits of Rs. 18,18,000/- in the bank account.

2.9 The assessee explained that Rs. 11,75,000/- (out of the cash available) came from his mother in earlier years, being amounts received by her from the employer of her deceased husband and compensation received through a court order, which she kept and later handed over to the assessee for purchase of land. Capital accounts of the assessee and his mother for the period 2006-2016 were furnished.

2.10 The assessment order recorded that, besides capital accounts, no further documentary evidence for the source of cash deposits was placed, and hence the amount was treated as unexplained money under Section 69A and taxed under Section 115BBE.

2.11 The first appellate authority confirmed the addition primarily on the basis that the assessee failed to file "supporting documentary evidences" both at assessment and appellate stages, and summarily rejected the claim regarding the funds from the mother as unsubstantiated.

2.12 The Tribunal found that the first appellate authority failed to (i) conduct any enquiry as contemplated by Section 250(4), (ii) verify or investigate the capital accounts submitted for the assessee and his mother, and (iii) record reasoned findings on the factual explanation placed on record, as required by Section 250(6). The appeal had been disposed of summarily without proper factual verification or reasoned adjudication.

2.13 The Tribunal observed that the department had not brought on record any material to suggest that the assessee had any other source of income beyond the declared salary and commission income, which the department itself accepted. In such a situation, where a plausible explanation supported by capital accounts was given and was not investigated, it was not open to uphold the addition solely for want of further documents, without enquiry.

2.14 Referring to the earlier decisions (Sanjeev Kumar, the High Court decision in Sarika Jain, and the Tribunal decision in Raghvendra Singh Thakur), the Tribunal applied the principle that non-application of mind by the assessing or appellate authority, including failure to use the correct legal approach and to discharge their statutory duties of enquiry and reasoned decision-making, renders the additions arbitrary and unsustainable in law.

2.15 On these facts, the Tribunal held that the addition under Section 69A was "misplaced and uncalled for, arbitrary and bad in law", being a result of non-application of mind and absence of proper factual verification.

Conclusions:

2.16 The addition made under Section 69A read with Section 115BBE, towards unexplained cash deposits, was held to be unsustainable and directed to be deleted.

2.17 All grounds of appeal on merits were allowed and the appeal was allowed in full.

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