ITAT Directs CIT(A) to Condone Delay and Hear Appeal on Merits; Sets Aside Quantum and Penalty Orders

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) allowed three appeals filed by Kanubhai Laxmanbhai Rabari for statistical purposes and directed the Commissioner of Income Tax (Appeals) [CIT(A)] to condone the delay in filing the appeals and decide them afresh on merits. The Tribunal observed that the assessee, an illiterate person residing in a remote area, had explained the delay and that substantial issues raised in the appeal deserved adjudication on merits rather than rejection on technical grounds.

The assessee had not filed a return of income for Assessment Year 2018-19. Based on information regarding cash deposits, bank credits, and property transactions, the Assessing Officer reopened the assessment and made additions exceeding Rs.6.11 crore. The AO treated cash deposits and bank credits as unexplained income, considered the entire sale consideration of immovable property as short-term capital gains, added the purchase value of property as unexplained investment, and disallowed deduction claimed under Section 80C. Separate penalties under Sections 270A and 271AAC(1) were also imposed. The CIT(A) dismissed the quantum as well as penalty appeals solely on the ground of delay without examining the merits.

Before the Tribunal, the assessee contended that he was not digitally literate, was unaware of the assessment order, and came to know about it only when recovery proceedings were initiated. It was also argued that the additions were highly excessive and had been made without proper examination of the nature of bank transactions and property dealings.

The Tribunal noted that the Assessing Officer had incorrectly treated the entire cash deposits and bank credits as income without considering corresponding debit entries or examining the nature of the transactions. It further observed that the entire sale consideration of immovable property could not be assessed as short-term capital gains without allowing deduction for cost of acquisition. The Tribunal also found fault with simultaneous additions relating to both purchase and sale transactions of the same property.

Relying on the judgment of the Vareli Textiles Limited v. Union of India, the Tribunal held that meritorious matters should not be dismissed merely on the ground of limitation. Accordingly, it directed the CIT(A) to condone the delay and re-adjudicate all grounds raised in the quantum appeal on merits after granting proper opportunity to the assessee.

Since the quantum appeal was restored, the Tribunal also set aside the orders relating to penalties under Sections 270A and 271AAC(1) and directed the CIT(A) to decide those appeals afresh after first adjudicating the quantum proceedings.

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