ITAT Delhi rules out Section 69 addition on cash deposits in joint home loan account

Background of the dispute

The case of Sanjeev Kumar Vs ITO (ITAT Delhi) concerns an appeal against the order passed by the CIT(A)-NFAC for AY 2011-12. The controversy arose from an addition of Rs. 18,75,000 made under Section 69 of the Income Tax Act 1961, treating cash deposits in a joint home loan account as unexplained investment.

The core issues before the Tribunal were:

  • Whether cash deposited in a joint home loan account, representing repayment of an existing housing loan, can be taxed as unexplained investment under Section 69; and
  • Whether an addition made under an incorrect charging provision can survive in law when the underlying facts do not fit within the scope of that provision.

Additionally, the assessee had to seek condonation of a delay of 295 days in filing the appeal before the ITAT.

Condonation of delay: ITAT’s liberal approach

Explanation for delay

The assessee argued that:

  • The first appeal before the CIT(A)-NFAC was handled by his earlier authorised representative, Shri Gaurav Goel, whose e-mail address was specifically mentioned in Form 35 for all communications.
  • No order or communication from the CIT(A) was ever received on that e-mail.
  • The assessee only became aware of the dismissal of the quantum appeal when he received a penalty notice dated 22.02.2023.
  • On approaching the previous representative, the assessee was informed that he would not continue with the matter. A new authorised representative was then engaged to handle the penalty proceedings.
  • While preparing the penalty appeal, the new AR checked the assessee’s ITBA portal and discovered that the quantum appeal had already been dismissed on 23.03.2022.
  • Immediately thereafter, the assessee filed an appeal before the ITAT on 13.03.2023, leading to a delay of 295 days, which was claimed to be unintentional and beyond the assessee’s control.

The assessee supported his application with an affidavit.

Revenue’s opposition

The Ld. Sr. DR opposed condonation, contending:

  • There was no conclusive material to show non-receipt of the first appellate order.
  • The assessee was expected to be vigilant and track his proceedings.
  • The affidavit was executed on 18.04.2023, and there was no contemporaneous evidence proving lack of communication of the CIT(A) order.

However, the Department did not dispute that the communication e-mail in Form 35 was that of the earlier authorised representative, i.e., charteredaccountantgauravgoelbcr@gmail.com.

Tribunal’s finding on delay

The Tribunal held:

  • The explanation furnished by the assessee was reasonable and bona fide.
  • A litigant gains no advantage by delaying an appeal; on the contrary, delay only prolongs litigation and uncertainty.
  • The reasons for delay had not been effectively rebutted by the Department.

Result: Delay of 295 days was condoned, and the appeal was admitted for adjudication on merits.

Facts relating to the addition under Section 69

Nature of cash deposits

The Assessing Officer (AO):

  • Noticed cash deposits totalling Rs. 24,96,274 in a joint home loan account held by the assessee and his wife during the demonetisation period.
  • Mistakenly rounded this to Rs. 25,00,000 in the assessment order.
  • Treated 75% of this amount, i.e., Rs. 18,75,000, as unexplained investment under Section 69 in the hands of the assessee.

The assessee’s stand was:

  1. The account in question was a loan account with a bank, operated jointly with his wife, for repayment of a housing loan availed for a flat owned equally by both.
  2. Out of the total deposits of Rs. 24,96,274:
    • The assessee had deposited Rs. 12,91,883; and
    • His wife, Smt. Shalini, had deposited Rs. 12,08,116.
  3. All deposits were towards repayment of the home loan, not for acquiring any new asset. Hence, no “investment” was made during the relevant period.

Evidence produced by the assessee

The assessee, during assessment and appellate proceedings, placed on record: