AJAY KUMAR GUPTA, BARABANKI vs. ITO-5(4), BARABANKI

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW ‘B’ BENCH, LUCKNOW BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.175/LKW/2026 A.Y. 2016-17 Ajay Kumar Gupta, vs. Income Tax Officer-5(4), Ram Sanehi Ghat, Barabanki, Barabanki Uttar Pradesh PAN: ALKPK4049A (Appellant) (Respondent) Assessee by: Sh. G.C. Dobariyal, C.A. Revenue by: Smt. Pratibha Singh, Addl CIT DR Date of hearing: 01.07.2026 Date of pronouncement: 30.07.2026 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the ld. CIT(A), NFAC dated 24.11.2025, wherein the ld. CIT(A) has dismissed the appeals of the assessee against the orders passed by the Assessing Officer under section 147 r.w.s. 144 r.w.s. 144B of the Income Tax Act, 1961 for the A.Y. 2016- 17 on 21.03.2024. The grounds of appeal are as under:- “1. That the ld. AO erred on facts and in law in assessing certain credit entries of Bank account which was fully part of turnover of the business and id. CIT(A) is also erred on facts and wrongly confirmed the same, which is against the law, natural justice and circumstances of the case. 2. That the assessment is much beyond the reasons as recorded in notice u/s 148A(b) and order u/s 148A(d) and notice u/s 148 of the Act, hence the notice u/s 148A(b) and notice u/s 148 are against the law and circumstances of the case. 3. That the assessee is assessed before Sales Tax Deptt under VAT Act so it cannot be said that bank transactions are not relevant. 4. That the notice u/s 148 is issued by Jurisdictional assessing office which is against the norms of faceless assessment proceedings and against the notification of CBDT. Hence the notice u/s 148 is liable to be quashed.

ITA No.175/LKW/2026 Ajay Kumar Gupta A.Y. 2016-17 5. That the order u/s 148A(d) dated 20-03-2023 and notice u/s 148 dated 20-03- 2023 are not issued as per NFAC NORMS and notification of CBDT dated 28-03- 2022 and 29-03-2022 hence the entire proceedings of the case are invalid and liable to be quashed. 6. That the notice u/s 148 is issued beyond survival time which is against the law and circumstances of the case. 7. That the appellant craves leave to add one or more ground of appeal or to alter/modify the existing ground before or at the time of hearing of appeal. The aforesaid grounds of appeal are without prejudice to each other.”

ITA No.175/LKW/2026 Ajay Kumar Gupta A.Y. 2016-17 86,34,906/- created as a result of this addition was unjustified because he was a small trader and could not earn so much income that he had to pay that much of tax demand. It was submitted that on account of the mistake on the part of the assessee’s consultant, the ITR was missed to be filed for the assessment year 2016-17. It was submitted that the assessee was 53 years old at the time, residing in a rural area and not very literate so as to able to understand compliances required. Accordingly, he was wholly dependent upon his counsel and the consultant had not done his job with due diligence resulting in the failure to file the return and the non-compliance. It was submitted that the no notices had been received by the assessee physically and therefore, he was not aware of the assessment proceedings. He was not educated and not well versed with computer operations and furthermore, the number and email ID on the Income Tax Portal did not belong to the assessee. Subsequently the assessee had updated his email ID and mobile number on Income Tax Portal to that which were managed by his son. Subsequently, the assessee’s current consultants have logged on to the Income Tax Portal and then the assessee came to know about the case. Accordingly, it was prayed that no penalty should be levied upon the assessee and all requisite documents to verify assessment year 2016-17 such as bank statement, balance-sheet and profit & loss account M/s Ajay Iron Store for the F.Y. 2015-16, ITR Form, computation of income, LIC premium receipts, purchase invoices amounting to taxable value of Rs. 85,38,397/- had been filed and it was prayed that the ld. CIT(A) may delete the erroneous addition made to the extent of Rs. 98,78,465/-. It was further submitted that the order was against the principles of natural justice, because the entire cash deposited in the bank account could not be treated as the income of the assessee. If at all, it was only the peak cash which could have been disallowed. It was submitted that the provisions of Income Tax Act of presumptive taxation under section 44AD had been framed such that profit was calculated at 8% of the turnover, but in the 3

ITA No.175/LKW/2026 Ajay Kumar Gupta A.Y. 2016-17 case of the assessee, even though his actual income was only Rs. 2,18,130/-, the assessment had been made at a sum of Rs. 98,74,465/-. The ld. CIT(A) considered the submissions of the assessee and held that the assessee’s submissions did not hold much water on account of the fact that he had done huge transactions and therefore should have been able to file the return. The onus of filing of return and complying to statutory notices were the responsibility of the assessee which the assessee had failed to comply with. Merely furnishing the bank account was not acceptable, the assessee was required to furnish the source of the deposits made in the bank account. Regarding the tax invoices of purchase done with the parties, he submitted that the confirmation of the same had not been submitted by the assessee that could prove their genuineness. Accordingly, the ld. CIT(A) agreed with the orders of the Assessing Officer and confirmed the addition of Rs. 98,74,465/- as unexplained under section 69A of the Act. 5. Aggrieved with the said order, the assessee has come before us. It was pointed out that the assessee Sh. G.C. Dobariyal, C.A. (hereinafter referred to the as the ld. AR) appearing before us held that the assessee was a regular filer and in previous years had been filing his business income under the name and style of M/s Ajay Iron Store. Due to a mistake, the returns for this year could not be filed but all documents had been filed before the ld. CIT(A). This would show that the assessee was doing the business of Iron Merchant and the profit of the assessee from such business was of a very nominal amount owning to which he had declared an income of only Rs. 2,18,130/-. The ld. CIT(A) had established in his order, the fact of the assessee making purchases to the extent of Rs. 85,38,397/- but still chose to hold the entire amount of cash deposited in the bank account as unexplained. It was submitted that once it was established that the assessee was running a business, then only the profit element of the business could be brought to tax. Accordingly, he prayed that the orders passed 4

ITA No.175/LKW/2026 Ajay Kumar Gupta A.Y. 2016-17 by lower authorities may be quashed and the assessee may be assessed as per the returned income filed by him. 6. On the other hand, Smt. Pratibha Singh, Sr. DR (hereinafter referred to as the ld. DR) pointed out that the onus was primarily upon the assessee to reveal the sources of the deposit and the assessee had so far not been able to furnish the evidence to satisfy the lower authorities that the deposits in the bank account were from a regular business rather than being unexplained. She therefore, prayed that in the absence of proper evidence, the contentions of the assessee could not be accepted. However, if at all the Tribunal decided to send the matter back, she prayed that necessary directions should be issued to the assessee to make proper compliances failing which the non-compliance itself could be view as an admission of inability to explain. 7. We have duly considered the facts and circumstances of the case and the arguments advanced by both parties. It is a fact that the assessee has not made compliance before the AO, which is what has resulted in the substantial additions made in his hands. However, we note that the assessee did file the necessary documents before the ld. CIT(A) and the ld. CIT(A) was obliged to consider those documents before holding the deposits made by the assessee in the bank account to be unexplained. If required, a report could have been obtained from the AO. Therefore, keeping in mind the interest of justice, we think it is appropriate that the matter be referred back to the AO so that the assessee can submit the necessary documentation before the AO to establish that the cash deposits and other deposits in his bank account are explained and out of his regular sources of income and thereafter the AO may consider the matter and pass a fresh order in accordance with law. The assessee is also cautioned that failure to make compliance before the AO could result in a presumption of inability to explain the said deposits. Accordingly, the matter

ITA No.175/LKW/2026 Ajay Kumar Gupta A.Y. 2016-17 stands restored to the AO for a fresh assessment in accordance with the aforesaid directions. 8. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 30.07.2026 in the Open Court.

Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30/07/2026 Sh Copy forwarded to: 1. Appellant– 2. Respondent– 3. CIT DR, ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S.