ITAT Ahmedabad condones prolonged delay and sends ₹5,15,41,070 Section 69A addition back to Assessing Officer

1. Background of the dispute

This decision of the Ahmedabad Bench of the Income Tax Appellate Tribunal in the case of Niravkumar Ramjibhai Patel Vs ITO (ITAT Ahmedabad) concerns a significant cash deposit of ₹5,15,41,070 and a delay of about 600 days in filing a first appeal.

The assessee, an individual resident, had not filed a return of income for Assessment Year 2019-2020. Information received from State Bank of India through Form 61A showed that cash deposits amounting to ₹5,15,31,070 had been made during Financial Year 2018-19, relevant to this assessment year. In addition, a further cash deposit of ₹10,000 on 16/05/2018 in bank account No. 31334332970 took the total cash deposits under consideration to ₹5,15,41,070.

Relying on this information, the Assessing Officer initiated reassessment proceedings under Section 147. As the assessee did not participate in the proceedings or respond to statutory notices, the assessment was framed ex parte under Section 147 read with Section 144. The entire quantum of cash deposits of ₹5,15,41,070 was treated as unexplained money under Section 69A and taxed under Section 115BBE.

An appeal was then filed before the National Faceless Appeal Centre (NFAC), acting as the Section 250 appellate authority (CIT(A)), but with a delay of roughly 600 days. The NFAC declined to condone the delay under Section 249(3), resulting in dismissal of the appeal in limine. The assessee carried the matter in further appeal to the ITAT Ahmedabad.

2. Key grounds raised before the Tribunal

The assessee’s appeal before the Tribunal challenged:

  • The refusal of the NFAC to condone the delay in filing the appeal and the consequent dismissal on limitation.
  • The non-adjudication of the matter on merits.
  • The ex parte addition of ₹5,15,41,070 under Section 69A and taxation at the special rate under Section 115BBE without granting adequate opportunity and without considering that the deposits allegedly belonged to a partnership firm, M/s Sai Petroleum, in which the assessee was a partner.

The assessee’s central contention was that the cash deposits were not his unaccounted funds, but represented routine business receipts and sales of the partnership firm. According to him, his Permanent Account Number (PAN) had inadvertently been used instead of the firm’s PAN for the relevant bank account, and the firm itself had already faced assessment proceedings separately.

3. Assessment proceedings and addition under Section 69A

(i) Initiation of reassessment

On receipt of Form 61A information from State Bank of India reflecting substantial cash deposits during Financial Year 2018-19, the Assessing Officer initiated proceedings under Section 147 on the basis that income chargeable to tax had escaped assessment. The AO had details of total cash deposits of:

  • ₹5,15,31,070 from Form 61A, and
  • an additional ₹10,000 on 16/05/2018 in the same bank account,

aggregating to ₹5,15,41,070 treated as cash deposits made by the assessee.

(ii) Ex parte completion of assessment

Notices were issued from time to time during the reassessment proceedings. As per the assessment order, the assessee did not respond or appear. Consequently:

  • The assessment was completed under Section 147 read with Section 144.
  • The AO treated the full quantum of ₹5,15,41,070 as unexplained money under Section 69A.
  • The AO applied Section 115BBE to tax this amount at the applicable special rate.

No adjustment or relief was given, as there was no representation or explanation from the assessee at that stage.

4. Appeal before CIT(A) and refusal to condone delay

(i) Explanation for delay and merits put before CIT(A)

The assessee filed an appeal before the NFAC (CIT(A)) with an admitted delay of approximately 600 days. The explanation submitted for the delay and non-compliance during assessment included:

  • Notices in the reassessment proceedings were allegedly not effectively received because of non-availability of an operative email address and limited familiarity with electronic assessment processes.
  • The cash deposits actually pertained to a partnership firm, M/s Sai Petroleum, in which the assessee was a partner.
  • Due to an inadvertent error, the assessee’s PAN was fed or quoted in place of the firm’s PAN for the relevant bank account.
  • A separate assessment had already been framed in the name of M/s Sai Petroleum, and the cash deposits formed part of that firm’s regular business transactions and sales.