Bengaluru ITAT Orders Fresh Assessment Where Bank Turnover Discrepancy May Reflect Sister-in-Law's Business Receipts

Case Overview

Case Name: Hebbale Javarappa Santhosh Kumar Vs The Income Tax Officer (ITAT Bangalore)
Appeal Number: ITA No. 2071/Bang/2025
Date of Order: 19/02/2026
Assessment Year: 2017-18
Forum: Income Tax Appellate Tribunal, Bangalore Bench

Background and Facts of the Case

This matter arose from a scrutiny assessment conducted for Assessment Year 2017-18 in the case of an assessee engaged in the business of running a liquor shop. The assessee filed his return of income on 05/01/2018, following which the case was selected for scrutiny under CASS. Notices under Section 143(2) and Section 142(1) of the Income Tax Act, 1961 were duly issued. Two additional notices were also issued requiring the assessee to furnish details sought in an earlier notice dated 06/08/2019.

The assessee did not respond to any of these notices. Working solely on the available material, the Assessing Officer identified a discrepancy between the turnover declared by the assessee and the turnover reflected in the audit report. This difference was treated as unreported turnover. The Assessing Officer then estimated the net profit at 5.04% of such under-reported turnover and added the resulting amount to the assessee's total returned income.

Against the assessment order dated 12/12/2019, the assessee preferred an appeal before the CIT(A) after a considerable delay. The CIT(A) dismissed the appeal solely on the ground of limitation, without examining the underlying turnover dispute on its merits. Aggrieved, the assessee approached the ITAT Bangalore.

The Delay Condonation Issue

Assessee's Explanation for the Delay

Before the Tribunal, the assessee's authorized representative put forth several reasons to explain why the first appeal was filed belatedly. The primary grounds were:

  • The assessee had no personal familiarity with faceless proceedings under the Income Tax Act, 1961 and had relied entirely on an accountant for return filing and compliance matters.
  • The accountant, according to the assessee, failed to communicate the existence of scrutiny notices or the assessment order to the assessee.
  • The assessee became aware of the assessment and consequent demand only after his bank account was attached by the department.
  • Upon learning of the attachment, the assessee engaged another accountant who accessed the e-filing portal and downloaded the assessment order.

COVID-19 Period and Supreme Court's Limitation Extension

The assessee also drew the Tribunal's attention to the timing of the assessment order, which was passed on 12/12/2019, just before the nationwide lockdown was declared in March 2020. Reliance was placed on the Supreme Court's suo motu order in In Re: Cognizance For Extension of Limitation, by which the period of limitation for filing proceedings was extended up to 31/05/2022, covering the COVID-19 lockdown period.

The Tribunal considered this submission carefully. Taking into account the exclusion of the COVID-19 period as directed by the Supreme Court, the Tribunal found that the effective delay, after such exclusion, stood at approximately 1,771 days. The Tribunal noted that a person unfamiliar with digital proceedings and affected by nearly two years of pandemic disruption could reasonably have missed filing deadlines.