Facts of the Case

The assessee did not file a return of income for AY 2017-18. Based on AIMS information, the Department found substantial cash deposits aggregating ₹1,15,87,100 across multiple bank accounts. Reassessment proceedings were initiated under section 147, but the assessee did not respond to notices under sections 148 and 142(1).

Consequently, the Assessing Officer completed a best-judgment assessment under section 144 read with section 147, treating the deposits as unexplained money under section 69A and also adding bank interest income. Penalty proceedings under several provisions, including section 271AAC, were initiated.

Appeals filed before the NFAC against both the assessment order and penalty order were dismissed in limine due to delay and non-appearance.

Issues Involved

  1. Whether appeals can be dismissed solely on the ground of delay without examining reasonable cause.
  2. Whether ex-parte additions for bank deposits are sustainable without granting opportunity to explain sources.
  3. Whether penalty under section 271AAC can survive when the underlying addition is disputed.

Petitioner’s Arguments

The assessee contended that he was an illiterate person unfamiliar with electronic communication and unable to access his registered email account. He claimed that the assessment and penalty orders came to his knowledge only when he consulted a tax professional much later.

It was further submitted that the proceedings occurred during the COVID-19 period, which hindered communication and compliance. The assessee asserted that the bank deposits represented trading receipts and were fully explainable if an opportunity were provided.

Respondent’s Arguments

The Revenue relied on the orders of the lower authorities but did not object to remanding the matter for fresh consideration if the Tribunal deemed it appropriate.

Court Order / Findings (ITAT Allahabad)

The Tribunal observed that the assessee’s explanation—illiteracy, lack of awareness of email procedures, and pandemic-related difficulties—constituted a reasonable cause for delay. Dismissal of appeals without providing an opportunity to explain the delay was held to be unjustified.

On Addition u/s 69A

The Tribunal noted that the assessment had been completed entirely ex-parte without examining the nature or source of deposits. Since the assessee claimed that the deposits arose from business activities, the matter required verification rather than summary confirmation.

Direction for Fresh Proceedings

In the interest of substantial justice, the Tribunal restored the matter to the Assessing Officer with directions to provide one more opportunity to the assessee to furnish evidence explaining the bank deposits.

It further held that penalty proceedings would depend on the outcome of the reassessment. The assessee was cautioned to fully cooperate, failing which the Assessing Officer could decide the matter based on available material.

Important Clarification

The Tribunal emphasized that procedural lapses and non-compliance, particularly during extraordinary circumstances such as the COVID-19 pandemic, should not result in irreversible tax liability without substantive examination of facts. Natural justice requires that taxpayers be given a fair opportunity to present evidence before sustaining major additions.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1771065797_JITENDRAKUMARBANDAVS.ITOWARD224BANDA.pdf

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