INCOME TAX OFFICER, WARD-3(5), GHAZIPUR, INCOME TAX DEPARTMENT vs. ABDUL MANNAN, RAJDEPUR DEHATI

IN THE INCOME TAX APPELLATE TRIBUNAL VARANASI BENCH, VARANASI (Through Virtual Hearing) BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA Nos.136 & 137/VNS/2024 A.Ys. 2014-15 & 2015-16 Income Tax Officer, Ward- vs. Abdul Mannan, 3(5), Ghazipur, Income Rajdepur Dehat Sheikhpura Rauza, Tax Department Ghazipur City, Ghazipur PAN: AHYPM0977H (Appellant) (Respondent) Assessee by: Sh. O.P. Shukla, Advocate Revenue by: Sh. Sabayasachi Chakraborty, Sr. DR Date of hearing: 12.05.2026 Date of pronouncement: 28.07.2026 O R D E R PER NIKHIL CHOUDHARY, AM: These two appeals have been filed by the Revenue against the separate orders of the ld. CIT(A), NFAC dated 4.06.2024, wherein the ld. CIT(A) partly allowed the appeals of the assessee against the assessment orders passed under section 147/144 for the assessment years 2014-15 and 2015-16 by the Assessing Officer vide order dated 25.03.2022. The grounds of appeal are as under:- ITA No.136/VNS/2024 “1. The Ld. CIT(A) has failed to appreciate the facts that the assessee completely failed to substantiate the genuineness, creditworthiness and correctness of the entities made in the Bank account/cash book amounting to Rs 1,54,78,000/-. 2. The Ld. CIT(A) has failed to appreciate the facts that the assessee completely failed to explain the source of the deposits amounting to Rs. 1,43,00,000/-. 3. The Ld. CIT(A) has failed to appreciate the facts that the assessee completely failed to establish the completeness and correctness of the cash book and source of time deposits amounting to Rs1,75,00,000/-.

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan 4. Because the Ld. CIT(A) has accepted the audit report furnished by the assessee which was uploaded on 30.03.2022 without considering the fact that it was not supported with proper documentary evidences and without verifying genuineness and correctness of the audit report. 5. On the facts and circumstances of the case in law, order of the Ld. CIT(A) is erroneous in law and on facts and the same may be reversed and the order of AO may kindly be restored. 6. The department craves for leave to amend or alter any grounds of appeal and add other ground of appeal during the course of hearing of the case.” ITA No.137/VNS/2024 “1. The Ld. CIT(A) has failed to appreciate the facts that the assessee completely failed to substantiate the genuineness, creditworthiness and correctness of the entities made in the Bank account/cash book amounting to Rs1,91,68,500/-. 2. The Ld CIT(A) has failed to appreciate the facts that the assessee has failed to file return either section 139(1) or in response to notice U/s148 of the IT Act, 1961 and wrongly accepted the submission of the assesser to apply rate of 8% on total contract receipt of Rs.5,73,151/- 3. Because the Ld. CIT(A) has accepted the delayed audit report furnished by the assessee without considering the fact that it was not supported with proper documentary evidences and without verifying genuineness and correctness of the audit report. 4. On the facts and circumstances of the case in law, order of the Ld. CIT(A) is erroneous in law and on facts and the same may be reversed and the order of AO may kindly be restored. 5. The department craves for leave to amend or alter any grounds of appeal and add other ground of appeal during the course of hearing of the case.”

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan 3. The Assessing Officer, therefore, came to the conclusion that income had escaped assessment and, after obtaining the necessary approvals, he issued a notice under section 148 of the Income-tax Act on 24-03-2021. In response to the said notice, the assessee attached a copy of his bank statement with Punjab National Bank and submitted that the information was under preparation, for which more time was required. Thereafter, the Assessing Officer issued further notices to the assessee, but on each occasion, these were met with an adjournment request saying that the details were being complied. Therefore, the Assessing Officer proceeded to complete the assessment in a best judgment manner under the provisions of section 144 of the Income-tax Act. He observed that an amount of Rs. 1,54,78,000/- had been deposited in cash during the period 1.04.2013 to 31.03.2014. As no explanation was forthcoming regarding the source of these deposits, he held it to be unexplained money under section 69A of the Income-tax Act. He also found that the assessee had received interest of Rs. 68,750/- during the year. As the assessee had failed to file any return of income disclosing the said interest, he added the same back to the income of the assessee. Based upon the information received, the Assessing Officer also noticed that the assessee had made cash transactions of Rs. 1,43,30,000/- during the year and since the assessee had not filed a return of income or explained the same, he added the same back to the income of the assessee as unexplained money under section 69A of the Act. Accordingly, the income of the assessee was computed at Rs. 4,73,76,750/-. 4. In the A.Y. 2015-16, the ld. AO received information of the assessee having carried out the following transactions: - S. No. Nature of Amount Source of information transactions 1 Cash 1,91,68,500/- EXC-001 transactions 3

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan exceeding Rs. 10,00,000/- in a month 2 Deposited cash 1,88,23,100/- AIR-001 of Rs. 10,00,000/- or more in Saving Bank Account during the F.Y. 2014-15 relevant to A.Y. 2015-16. 3 Payment to 5,73,151/- TDS-194C Contractor (Section 194C) 4 Interest income 43,315/- TDS-Return/26AS (194A)

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan of the assessee was that he was engaged in the business of purchase and sale of property. In response to the notice under section 148, he could not file a return but he did file a copy of his audit report alongwith audited balance- sheet, trading and profit and loss account on 31.03.2022, which could be seen on the Departmental Portal. In the said audit report, the assessee had disclosed total receipts of Rs. 1,02,85,000/- and a profit of Rs. 2,12,635/- but no return was filed due to the fault of the counsel and due to network issues following the issue of notice under section 148. The assessee submitted that the cash deposit in the bank account of Rs. 1,54,78,000/- was on account of advances from customers against the sale of property and such cash advances were deposited in the bank account and also recorded in the cash book of the assessee, which was furnished before the ld. CIT(A). Subsequently, as against the said cash advances received from the customers, the property was also registered in the name of such customers as evident from registered sale deeds. It was further submitted that the assessee had made an agreement to sale with Syed Farhat Ullah S/o Late Syed Izzat Ullah of Ghazipur and against the said sale agreement, the assessee had made payment of Rs. 1 Crore to him and such amount had duly been debited in his bank account in Punjab National Bank. He furnished a copy of the power of attorney and the agreement to sale in support of the aforesaid claim. The assessee further submitted that out of the above cash advances from customers received during the year, the assessee had done registry of property of Rs. 1,02,85,000/- to them which was recorded in the books of accounts and in the audited balance-sheet that had been uploaded in the Departmental Portal. For the balance amount of Rs. 51,93,000/-, it was submitted that the same represented an advance for which the registry was done in the next year. It was further submitted that the total amount of registry done in the next year i.e. 2015-16 was of Rs. 2,42,60,000/- and this

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan included the opening balance of Rs. 51,93,000/- and the amounts received in assessment year 2015-16. Similarly, in the A.Y. 2015-16, the assessee again submitted that though he could not file the return of income under section 148 due to some technical issues, the audit report alongwith the audited balance-sheet, trading and profit & loss account had been uploaded on 31.03.2022. In the said audited accounts, the assessee had disclosed total receipts of Rs. 1,63,15,000/- and disclosed a profit of Rs. 2,26,635/-. Regarding the source of the aforesaid cash deposits of Rs. 1,91,68,500/-, once again it was submitted that the assessee had received advances from customers against the sale of property and such cash advances had been deposited into the bank account and also recorded in the cash book of the assessee which have been furnished before the ld. CIT(A). Subsequently, against the said cash advances, property had also been duly registered in the name of such customers as was evident from registered sale deeds. He reiterated his claim regarding the agreement to sale with Syed Farhat Ullah S/o Late Syed Izzat Ullah of Ghazipur and the payment of Rs. 1 Crore made to him on this account and furnished a copy of power of attorney and copy of agreement to sale in support of such claim. It was further submitted that the total amount of advances received from customers was Rs. 1,96,32,080/- and the outstanding in the books from the earlier year was Rs. 51,93,000/-. The assessee had made registry of property of Rs. 2,42,60,000/- to the customers, which was recorded in the books of accounts and in the audited balance-sheet. Out of the advances received, the advanced received from one customer Smt. Renu Singh of Rs. 5,65,087/- was adjusted by way of registry in the subsequent year. The assessee furnished a detail of ledgers and the registries made to the parties, / customers in the annexures to certain submissions and the ld. CIT(A) forwarded all these materials to the AO and called for a remand report in this regard. He also submitted extracts of the

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan cash book and ledger accounts of such persons where the cash received against advances against land had been reflected and the copy of the bank account reflecting the above transactions. 7. On going through the remand report furnished by the Assessing Officer, the ld. CIT(A) noted that the trading and profit & loss account for the F.Y. 2013-14 showed sales of Rs. 1,02,85,000/- and closing stock of Rs. 42,68,880/-. These facts had been confirmed by the AO in his remand report and in the opinion of the ld. CIT(A), these substantiated the claim that the cash deposit in the bank account were out of advances received from customers and duly reflected in his books of accounts. Since the AO could not point any defects or deficiency or inconsistency in the submissions made by the assessee or the documentary evidences submitted by him, the ld. CIT(A) was inclined to accept the submissions of the assessee. He did not pay much attention to the submission of the AO that the sundry creditors in the books had not been verified with reference to the PAN and address, since the same was not available, on the grounds that the lands had subsequently been registered in their name in the subsequent year and the aforesaid details were now a matter of public record. Accordingly, the ld. CIT(A) came to the conclusion that in the assessment year 2014-15, the sum of Rs. 1,54,78,000/- was reflected in the books of account of the assessee and the financials of the assessee which were uploaded on the Portal and therefore, the same could not be considered to be unexplained money under section 69A of the Act. He, therefore, directed the ld. AO to delete the same. He also came to the conclusion in the subsequent assessment year that the amount of Rs. 1,91,68,500/- could not be regarded as unexplained money under section 69A on account of the similar facts and he directed the ld. AO to delete this amount from the income of the assessee.

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan 8. Continuing with the additions made in the assessment year 2014-15, the ld. CIT(A) observed that out of the Rs. 68,750/- received by way of interest Rs. 29,485/- had been credited to the profit and loss account therefore, only the balance of Rs. 39,365/- was taxable. Accordingly, he confirmed the same. Similarly, in the assessment year 2015-16, he noted that out of the interest income of Rs. 43,315/-, Rs. 29,485/- had been credited to the P&L account and therefore, he confirmed the balance of Rs. 14,191/- in this regard. 9. Coming to the addition of Rs. 1,43,30,000/- under the head cash transactions through banks in the assessment year 2014-15, the ld. CIT(A), after considering the remand report furnished by the AO accepted these submissions of the assessee that these had already been included in the total deposit of cash in the bank account of Rs. 1,54,78,000/-. In the circumstances, he deleted the addition holding it to be a mere duplication which had now been accepted by the AO. Similarly, while noting the time deposits of Rs. 1,75,00,000/-, the ld. CIT(A) noted the explanation of the assessee wherein the assessee submitted that FDRs had been made from time to time out of cash deposits made and in the bank account from cash advances received from customers and perusal of the charge submitted by the assessee revealed, that the FDRs had been made eight times during the F.Y. 2013-14, which aggregated in total to Rs. 1,74,74,000/-. He noted the submissions of the assessee that all these FDRs had been made against deposits of cash in the bank account amounting to Rs. 1,58,78,000/- and the opening balance of Rs. 20,58,367/- and he forwarded the details to the AO for examination. Since the AO did not contradict these findings in the remand report, the ld. CIT(A) held that since the time deposits had been made from time to time out of the cash deposited in the bank, and since the cash deposited in the bank had already been found to be explained, no addition 8

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan could be made on this account in the hands of the assessee and therefore, he ordered that the addition made under section 69 of the Income Tax Act on this account in the A.Y. 2014-15 should be deleted. 10. On the issue of addition of Rs. 5,73,151/- and deduction of TDS of Rs. 7,229/-, the ld. CIT(A) noted the submissions of the assessee that these were on account of contract receipts from Executive Engineer, Nirman Nigam, Ghazipur, which have not been taken into account and his offer of conceding the income on such receipts at 8% amounting to Rs. 45,852/-. He forwarded the matter to the AO and since the AO essentially reiterated what has been stated by the assessee, he held that 8% of the undisclosed contract receipts of Rs. 5,73,151/- should be brought to tax and he allowed the assessee relief for the excess addition over and above the 8% of profits, which amounted to Rs. 45,842/-. Thus, both the appeals came to be partly allowed. 11. The Department is aggrieved at this relief offered by the ld. CIT(A) and has accordingly come before us in appeal. Sh. Sabayasachi Chakraborty, Sr. DR (hereinafter referred to as the ld. DR) pointed out that the ld. CIT(A) had completely failed to appreciate that the assessee had failed to establish the genuineness, correctness and creditworthiness of the entities from whom cash deposits were received, that were entered in the bank account/cash book amounting to Rs. 1,54,78,000/- in F.Y. 2013-14 and Rs. 1,91,68,500/- in F.Y. 2014-15. He had also failed to appreciate the facts that the Assessee had completely failed to explain the source of transactions amounting to Rs. 143,00,000/-. He had also failed to appreciate that the assessee had failed to demonstrate that the cash book was complete and thereby he had failed to explain the source of time deposits amounting to Rs. 1,75,00,000/-. The ld. CIT(A) had erred in accepting the audit report furnished by the assessee uploaded on 30.03.2022 without bothering to note that it was not supported with proper documentary evidences and without 9

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan verifying its genuineness and correctness. He also argued that the ld. CIT(A) had failed to appreciate the fact that the assessee had failed to file returns either under section 139(1) or in response to notice under section 148 and therefore, his submission that only 8% of the amount of unexplained contract receipts of Rs. 5,73,00,151/- was liable to be added back should not have been accepted. Finally, the ld. Sr. DR submitted that even if it was accepted that the audit report was authentic, the audit report represented an admission of income, which had not been disclosed before the Department by way of the filing of a return. Therefore, if nothing else, the ld. CIT(A) should have recorded in his order that the said income needed to be brought to tax. On account of these factors, the ld. DR questioned the order of the ld. CIT(A) and prayed that the file may be restored to the Assessing Officer for a detailed examination before allowing the relief. 12. On the other hand, Sh. O.P. Shukla, Advocate (hereinafter referred to as the ld. AR) filed a paper book with a detailed written submission in both assessment years in which essentially the arguments submitted before the ld. CIT(A) were reiterated. The ld. AR thereafter submitted that the assessee was unable to make compliance before the Assessing Officer on account of the failure of the counsel, but had subsequently furnished all the information before the ld. CIT(A). After considering this fact, the ld. CIT(A) had called for a remand report and reproduced this remand report in his appeal order. The ld. AR invited our attention to page 33 to 38 of the order passed by the ld. CIT(A) in the assessment year 2014-15 which contained a copy of such remand report and pages 30 to 34 of the appeal order for the assessment year 2015-16 in which the remand report was reproduced. The ld. AR pointed out that essentially the ld. AO had not made any adverse remarks with regard to the submissions offered by the assessee and therefore, the AO had effectively accepted the submissions made by the assessee. In the 10

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan circumstances, when the entire material had been given to the Assessing Officer and the Assessing Officer had not recorded any dissatisfaction with regard to the explanations offered by the assessee in the light of this material, there was no question of entertaining the appeal of the Department for setting aside the order of the ld. CIT(A) which was based upon consideration of such replies by the assessee. Accordingly, it was prayed that the order of the ld. CIT(A) may kindly be upheld. 13. We have duly considered the facts and circumstances of the case, the orders of the ld. CIT(A), the arguments advanced by both parties and the remand report submitted by the ld. AO during the course of proceedings before the ld. CIT(A). Effectively the only ground taken by the ld. Sr. DR is that the assessee could not produce the PAN or the details of the persons from whom he had taken advances and therefore, the ld. CIT(A) should not have accepted his contentions regarding the source of advances, without these details being furnished by the assessee. We note that the ld. CIT(A) has duly considered this issue and has pointed out that when the advances received from these customers have subsequently resulted into registered sale deeds in the course of the year and in the subsequent year, then there does not appear to be any reason to doubt the source of the advances. Nothing has been brought on record by the Department that would show that the assessee was claiming advances from persons other than those to whom the land had been sold. In the circumstances, we cannot accept the contention of the Department that the deposits in the bank account in both assessment years were unexplained. We concur with the view of the ld. CIT(A) that once the advance deposits were corroborated with subsequent sale deeds in which those deposits were reflected, then there is no scope left for questioning the genuineness of the deposits or the creditworthiness of the entities who/which have made such deposits. With regard to the cash 11

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan transactions of Rs. 1,43,00,000/-, the ld. CIT(A) based on the evidence produced before him, has concluded that these cash transactions are the same which relate to the cash deposit in the bank account and since the deposits have been held to be genuine, there is no scope of holding the cash transactions to be ingenuine. The department has not brought any material on record to demonstrate that the cash transactions pertained to matters not covered by the transactions that resulted in the cash deposits into the bank account. Therefore, we cannot file any fault in the findings of the ld. CIT(A) that there was no scope of making further addition on this account when the land transactions that resulted in the tax deposit stood explained. Regarding the opening of fixed deposits, it has been clearly explained by the ld. CIT(A) that the assessee had submitted that the money arising from the cash transactions was deposited in the bank account and resulted in the opening of the fixed deposits from time to time. The Department has not brought any evidence on record to dispute these facts. In the circumstances, there does not seem to be any scope for challenging the decision of the ld. CIT(A) to hold these deposits to be explained. With regard to the submission made by the Department that the ld. CIT(A) should not have blindly relied upon the report of the auditor that were uploaded on 30.03.2022, we observe that once the said report had been uploaded, it was the duty of the Department to point out the faults in such report before the CIT(A) could be faulted for accepting it. In view of the fact, the department has not pointed out any discrepancy in the said audit report, there is no basis to challenge the assumptions drawn by the ld. CIT(A) from study of the same. As regards, the addition of profits on contract receipts Rs. 5,73,151/- to the income of the assessee, instead of the entire receipts, we note that once it has been accepted that the said receipts represented contract receipts and unless there is a finding that the expenses against the contract receipts had already

ITA Nos. 136 & 137/VNS/2024 Abdul Mannan been claimed earlier, there could not be any reason to find fault with the decision of the ld. CIT(A) to only bring the profit element of the said contract to tax. We note that the Department has not brought any evidence to show that the expenditure relating to the said contract had already been claimed and therefore, we find no reason to interfere with the order of the ld. CIT(A). In conclusion, on the basis of the facts of the case, we do not see any reason to interfere with the orders of the ld. CIT(A) in either case. We therefore, confirm the orders of the ld. CIT(A) and dismiss the appeals of the Department. 14. In the result, both ITA Nos. 136/VNS/2024 & ITA No. 137/VNS/2024 of the Revenue are dismissed. Order pronounced on 28.07.2026 in the open Court. Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28/07/2026 sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR, ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S.