ITAT Condones 2,073-Day Delay and Deletes Addition for Cash Deposit Explained by Property Sale and Savings

The Income Tax Appellate Tribunal (ITAT) has condoned a significant 2,073-day delay in filing an appeal for an assessee who did not receive reassessment notices due to relocation. The Tribunal accepted the assessee's explanation for the delay, which included non-receipt of notices and age-related health issues. Furthermore, the ITAT deleted an addition of Rs 11 lakh, finding it unsustainable as the assessee provided evidence that the funds originated from a property sale and past savings.

In the case of Hira Ballabh Khulbe v. ITO, the assessment was reopened based on AIR information relating to a cash deposit of Rs. 11 lakh in a joint bank account held by the assessee and his wife. The notice issued under Section 148, along with subsequent notices under Sections 143(2) and 142(1), was sent to the assessee’s old address in Faridabad.

The assessee submitted that he had shifted from Faridabad in December 2010 and that no family member was residing at the old address. As a result, he did not receive the notices and remained unaware of the reassessment proceedings. The assessment was consequently completed ex parte under Sections 147 read with 144, and the entire cash deposit of Rs. 11 lakh was added to his income.

The assessee claimed that he became aware of the tax demand only during AY 2023-24 through his Chartered Accountant. He thereafter filed an appeal before the National Faceless Appeal Centre (NFAC) along with an application seeking condonation of a delay of 2,073 days. The delay was supported by an affidavit and explained on the grounds of non-receipt of notices, relocation and age-related health issues.

However, the CIT(A) dismissed the appeal at the threshold on the ground of limitation without examining the matter on merits.

The ITAT accepted the explanation provided by the assessee and held that sufficient cause existed for the delay. Accordingly, the delay of 2,073 days was condoned.

On the merits, the assessee explained that Rs. 8 lakh out of the total deposit represented proceeds from the sale of a residential property, while the remaining Rs. 3 lakh was from past savings. The explanation was supported by an affidavit and relevant documentary evidence.

After considering the facts and supporting material, the Tribunal held that the addition of Rs. 11 lakh was not sustainable and directed its deletion. The assessee’s appeal was allowed.

Key Takeaway: A substantial delay in filing an appeal may be condoned where the assessee establishes sufficient cause through a credible explanation supported by evidence. Further, a cash deposit cannot be treated as unexplained income when the assessee provides a reasonable and properly supported explanation regarding its source.

Disclaimer: This AI-generated summary is for informational purposes only. Please view the attached original judgment for the complete text and authoritative interpretation.