The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has remanded a case involving a Rs. 78.39 lakh addition made to the income of a fruit seller, condoned a delay due to the severe impact of COVID-19 on the assessee and his family.
Mohd. Farooque, (assessee) a fruit seller operating on a commission basis filed his income tax return for AY 2018-19, declaring an income of Rs. 8,21,210. The case was selected for limited scrutiny by the Assessing Officer (AO). The assessee did not respond to the notices or participate in the assessment proceedings.
The AO observed that the assessee reported a commission income of Rs. 19,70,000 after deducting expenses of Rs. 11,48,790, resulting in a net profit of Rs. 8,21,210. However, based on Statement of Financial Transactions (SFT) data, the AO noted cash deposits aggregating to Rs. 9,79,93,295 in the assessee’s bank accounts.
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Due to the absence of books of account and lack of substantiation for the source of cash deposits, the AO treated the cash deposits as turnover and made an addition of Rs. 78,39,472, calculated at 8% of the total turnover. The AO also levied penalties to the assessee.
Aggrieved by the AO’s order, the assessee filed appeals before the Commissioner of Income Tax (Appeals) [CIT(A)] with a delay of about 13-14 months. The CIT(A) dismissed all three appeals refusing to condone the delay.
The assessee argued that the delay was due to health issues caused by COVID-19, which affected him and his family members, leading to a disturbed state of mind and inability to coordinate with his counsel or respond to notices.
Aggrieved by the CIT(A)’s order, the assessee filed an appeal before the ITAT. The assessee’s counsel argued that the non-participation in earlier proceedings was due to circumstances beyond the assessee’s control. The counsel requested an opportunity for the assessee to present his case on merits.
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The two-member bench comprising Dr. Manish Borad (Accountant Member) and Vinay Bhamore (Judicial Member), referred to the Supreme Court’s judgment in Collector Land Acquisition vs. MST Katiji which emphasized condoning delays to ensure substantial justice over technicalities.
The Tribunal set aside the CIT(A)’s orders and remanded all appeals to the CIT(A) for fresh adjudication on merits. The tribunal observed that the remand was in the interest of justice, allowing the assessee an opportunity to substantiate the source of cash deposits and contest the penalties. The appeals of the assessee were allowed for statistical purposes.
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