LAL JEE RAM,GHAZIPUR vs. INCOME TAX OFFICER - 1 (4), BHADOHI

IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT BENCH (SMC), VARANASI BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.126/VNS/2024 Assessment Year: 2017-18 Lal Jee Ram v. The Income Tax Officer 1 (4) Village Tileshara Bhadohi Ghazipur (U.P) TAN/PAN:AZZPR7287G (Applicant) (Respondent) Applicant by: Shri Yogesh Gupta, C.A. Respondent by: Shri Sabayasachi Chakraborty, D.R. O R D E R This appeal has been preferred by the Assessee against the order dated 16.05.2024, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2017-18.

2.0 The brief facts of the case are that the assessee was engaged in wholesale trading of Battery and Solar Inverter. The assessee had not filed the return of income for the year under consideration. The Income Tax Department was in possession of information that the assessee had made cash deposits to the tune of Rs.11,49,500/- during the demonetization period in his Bank Account No.1597004010000 maintained with Corporation Bank, Ghazipur. The Assessing Officer (AO) issued statutory notices to the assessee, requiring the assessee to explain the source of cash deposited by him in his bank account. However,

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there was no compliance from the side of the assessee. The AO, therefore, issued notice under section 133(6) of the Income Tax Act, 1961 (hereinafter called “the Act’) to the Corporation Bank, Ghazipur and obtained details of cash deposits made by the assessee, as per which, the assessee had made cash deposit of Rs.11,49,500/- in his Bank Account No.1597004010000 maintained with Corporation Bank, Ghazipur during the demonetization period. Since the assessee failed to establish the nature and source of cash deposits amounting to Rs.11,49,500/- in his bank account, the AO treated the same as unexplained income of the assessee and added the same to the income of the assessee under section 68 of the Act.

2.1 The AO further noted that as per information available with the Department, the assessee was filing his return of income regularly from assessment year 2015-16 to assessment year 2019-20 except for assessment year 2017-18, i.e., the year under consideration. From the bank account details of the assessee, the AO noticed that during the year under consideration altogether there was a credit of Rs.84,51,169/- in his bank accounts, which included the cash deposits of Rs.11,49,500/- made by the assessee during the demonetization period. Since there was no response from the side of the assessee in relation to

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the query raised by the AO pertaining to credit entries of Rs.84,51,169/-, the AO treated the credit entries of Rs.73,01,669/- (Rs.84,51,169 – Rs.11,49,500) as turnover of the assessee for the year under consideration and estimated the profit @ 10% which came to Rs.7,30,166/- and added the same also to the total income of the assessee.

2.2 The AO completed the assessment under section 144 of the Act, assessing the total income of the assessee at Rs.18,79,670/-.

2.3 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under sections 271AAC and 270A of the Act, separately.

2.4 Aggrieved, the Assessee preferred an appeal before the Ld. First Appellate Authority. Subsequently, the appeal was migrated to the NFAC, which dismissed the appeal of the assessee by passing an order ex-parte qua the assessee and confirming the order of the AO.

3.0 Now, the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:

A. The Appellant submitted that technically no opportunity was given to him to submit his reply before the CIT-A as the

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Income Tax Portal was not functioning properly, even a complain to DIT system was not resolved. Thus our Appeal was dismissed without hearing to us which is totally violation of Natural Justice. (Copy of the Grievance to DIT System is attached) B. The Appellant submitted that only one officer has the jurisdiction to issue the show cause notice under section 143 and to adjudicate the matter, Anybody other than the assessing officer appointed for assessment and collection of tax with respect to a particular assessee cannot have jurisdiction to issue notice and to pass the assessment order. It has been held by the Courts that "assessment" means the whole procedure laid down in the Act for imposing the liability on the tax payer. C. Appellant has raised question about the Jurisdiction of the Ld. Income Tax Officer (1) (4), Bhadohi at various time and also through a written representation dated 15.12.2019, But it was not considering by the ld. A.O. and passed the Assessment Order. D. The Assessment order passed by the Ld. Income Tax Officer (1) (4), Bhadohi is contradict in the observations & conclusions of the Ld. A.O. Which is, evident from the order itself that it is passed in a mechanical way and without applying of Mind with the motive to add the Income at a very high level without considering the facts shown in the order itself. An order passed without applying of Mind, bias could be quashed on this ground only. E. Sufficient opportunity of personal hearing was not offered to the Appellant by the Ld. Assessing officer, there was

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sufficient spare time to pass the order under the time limit prescribed under the Act. The reason for hurry was not explained in the order. Thus principal of natural Justice was not followed by the Ld. Assessing officer. F. Bank statement could not considered as books of account, The burden of proving that a receipt is taxable in the hand of assesse is always on the Revenue and the onus never shifts to the assessee. In the impugned order, the Income Tax Officer has wrongly added several amounts as Unexplained Cash Deposit u/s 68 and income from Business, even after a reply was submitted by the Appellant that the amount of Cash deposited was made out of Business Receipts and some amount are related to his Mother & Father. G. The Income Tax Officer has ignored the submission made by the Appellant at the time of Passing the Assessment Order, and the order is silent about the submission made by the Appellant, thus the order is Bad in law, and liable to quash on this ground only. An order passed by A.O. which is not a speaking order is not sustainable in the eye of law and must be quashed. H. The Income Tax Officer has also failed to appreciate that the appellant is a trader and engaged in trading Activity as proved from the Documents/ITR filled for various assessment years, through its Reply submitted. I. The appellant craves leave to add or amend any grounds of appeal before the appeal is heard or disposed of. 4.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the impugned order has been passed by the

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Ld. First Appellate Authority ex-parte qua the assessee. It was submitted that technically no opportunity was afforded to the assessee to submit reply before the Ld. First Appellate Authority, as the Income Tax portal was not functioning properly at that point of time and although a complaint was also raised with the DIT (Systems) but the same also was of no avail, as the problem could not be resolved and the appeal of the assessee came to be dismissed without the assessee being able to furnish a response before the Ld. First Appellate Authority. It was also argued that assumption of jurisdiction for the purpose of assessment proceedings was invalid inasmuch as the jurisdiction had been assumed in terms of the provisions of section 120 of the Act and not in pursuance to any order passed under section 127 of the Act. It was submitted that the assessee had raised objection before the AO as the initial notice under section 142(1) of the Act dated 09.03.2018 was issued by the Income Tax Officer, Ghazipur which was duly responded to by the assessee but subsequently the case was taken up by the Income Tax Officer, Bhadohi, Ward 1(4) without giving the assessee any opportunity of being heard on the issue of transfer of the case. It was submitted that the assessee had also raised this issue before the Income Tax Officer, Bhadohi but the Income Tax Officer, Bhadohi responded by saying that he had power to assess as per order

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issued by the Ld. Principal Commissioner of Income Tax and, therefore, the jurisdiction had been properly assumed.

4.1 On merits of the case, it was submitted that the cash deposits made were earned in the regular course of business and to evidence the same, VAT assessment orders were on record but since the AO was stationed about 120 K.Ms. from the place of business of the assessee, he did not have the proper opportunity to produce the relevant records before the AO. It was submitted that the assessee had not been afforded a proper opportunity by both the lower authorities.

5.0 Per contra, the Ld. Sr. D.R. submitted that the transfer of the case was within the same jurisdiction and, therefore, the assessee did not have any legal right to object the jurisdiction and in such cases, the order under section 127 of the Act need not be passed.

5.1 It was further submitted that on merits, the cash deposits had been made in Specified Bank Notes (SBNs) for which the assessee had offered no explanation at all and, therefore, at the most the assessee’s case can be sent back to the lower authorities to explain the source of cash deposits with cogent evidence. The Ld. Sr. D.R. also submitted that admittedly and undisputedly, for the year under consideration, the assessee

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had not filed any return of income and, therefore, the assessee had not come with clean hands in this regard notwithstanding the fact that the assessee had credit entries of Rs.84,51,169/- in the bank accounts which included the cash deposits of Rs.11,49,500/-.

6.0 I have heard the rival submissions and have also perused the material on record. From the record, it is evident that the order of the Ld. First Appellate Authority was passed ex- parte qua the assessee. The Ld. A.R. has pointed out technical glitches on the Income Tax portal, corroborated by complaints raised before the DIT (Systems) which prevented the assessee from submitting a proper reply, thereby violating the principles of natural justice. Further, on the merits of the case, the assessee contends that the cash deposits in question were derived from regular business operations, as supported by VAT assessment orders on record. However, due to lack of a proper opportunity during the assessment proceedings, as well as before the Ld. First Appellate Authority, these evidences could not be effectively evaluated. Even the Ld. Sr. D.R. fairly conceded that, at most, the matter may be remitted back to the lower authorities to enable the assessee to explain the source of the cash deposits with cogent evidence. Therefore, on these facts, I deem it fit and

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proper, in the interest of substantial justice, to set aside the impugned order of the Ld. First Appellate Authority and restore the matter to the file of the AO. The AO is directed to re-examine the issue of cash deposit and the credits in bank accounts afresh after affording a reasonable and proper opportunity of being heard to the assessee. The assessee is also directed to co-operate in the assessment proceedings and produce all relevant books of accounts and supporting documentary evidence to substantiate its claim. I also caution the assessee to fully comply with the directions of the AO in the set-aside proceedings when called upon to do so, failing which, the AO would be at complete liberty to pass the order in accordance with law, based on material available on record even if it is ex-parte qua the assessee.

6.1 As far as the issue of assumption of jurisdiction by Income tax Officer, Bhadohi is concerned, it is seen that the jurisdiction over the present assessee was assigned to Income Tax Officer, Bhadohi in terms of section 120 of the Act which does not require any opportunity to be given to the assessee prior to such assignment of jurisdiction. Therefore, notwithstanding the objection raised by the assessee, the assumption/assignment of jurisdiction in terms of section 120 of the Act cannot be faulted with. Accordingly, this argument of the Ld. A.R. is rejected.

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7.0 In the result, the appeal of the assessee stands partly allowed for statistical purposes.

Order pronounced in the open Court on 10/08/2026.

Sd/- [SUDHANSHU SRIVASTAVA] JUDICIAL MEMBER DATED:10/08/2026 JJ: Copy forwarded to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR By order

Assistant Registrar/DDO