ITAT Ahmedabad Condoned 543-Day Delay but Upheld Section 263 Revision Over Demonetisation Cash Deposits

January 06, 2026 : The Ahmedabad Bench of the Income Tax Appellate Tribunal has condoned a delay of 543 days in filing an appeal against a revisionary order under Section 263 of the Income Tax Act, 1961, accepting the assessee’s explanation that the delay arose from incorrect professional advice. However, after admitting the appeal, the Tribunal dismissed it on merits and upheld the revision ordered by the Principal Commissioner of Income Tax.

The case related to Assessment Year 2017–18. The assessee’s original assessment was completed under Section 143(3) on 22 December 2019. Subsequently, the Principal Commissioner of Income Tax, Ahmedabad-1 exercised revisionary powers under Section 263 by an order dated 3 March 2022, holding that the assessment was erroneous and prejudicial to the interests of the Revenue.

The PCIT noted that during the demonetisation period the assessee had deposited cash amounting to ₹78.56 lakh in bank accounts. During assessment proceedings, the assessee claimed that these deposits were made from earlier cash withdrawals. The Assessing Officer accepted this explanation without verifying whether the withdrawn amounts were actually available as cash or had been utilised elsewhere. The PCIT observed that the withdrawals appeared to be from overdraft or loan facilities and that there was no enquiry into whether the funds were spent on business, personal use, or other purposes.

Challenging the Section 263 order, the assessee approached the Tribunal with a delay of 543 days. In seeking condonation, he stated that his earlier chartered accountant had not advised him to file an appeal due to lack of expertise in income tax litigation. It was only after a consequential assessment order dated 23 September 2023 was passed, making an addition of ₹5.80 crore under Section 69, that the assessee consulted a litigation specialist who advised filing the appeal. Both the assessee and his former consultant filed sworn affidavits admitting that the delay was caused by wrong or inadequate professional advice.

The Tribunal observed that the explanation for delay remained uncontroverted by the Revenue. Relying on judicial precedents where delays were condoned due to bona fide mistakes or wrong legal advice, the Bench held that the assessee had shown “sufficient cause”. It reiterated that courts have consistently taken a liberal approach in such cases, particularly where there is no mala fide intent or negligence attributable to the taxpayer. Accordingly, the delay was condoned and the appeal was admitted.

On merits, however, the Tribunal agreed with the PCIT. It noted that during the original assessment the Assessing Officer had accepted the explanation for demonetisation cash deposits merely on the basis of bank statements, without examining a cash book or verifying whether the earlier withdrawals had remained unutilised. Such acceptance, without proper verification, amounted to lack of enquiry.

The Tribunal also rejected the assessee’s argument that the PCIT had travelled beyond the show-cause notice by directing examination of possible “on-money” payments in property transactions. It held that these directions were intrinsically linked to verifying the utilisation of withdrawn cash and did not introduce a new or independent issue. Further, it clarified that an appeal against a consequential assessment order and an appeal against a Section 263 order operate in different spheres and can be pursued independently.

In the result, while the Tribunal condoned the inordinate delay of 543 days, it dismissed the appeal on merits and upheld the PCIT’s revisionary order under Section 263.

Cause Title: Vineetsingh Gulabsingh Rore v. PCIT
Case No.: I.T.A. No. 868/Ahd/2023
Coram: Suchitra Kamble (Judicial Member) and Annapurna Gupta (Accountant Member)