MOHD. SALEEM,VARANASI vs. NATIONAL FACELESS ASSESSMENT CENTRE, DELHI

PER SUDHANSHU SRIVASTAVA, J.M.: This appeal has been preferred by the Assessee against the order dated 29.09.3034, 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 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.1,22,02,400/- and cash withdrawal to the tune of Rs.68,600/- during the year under consideration. The case of the assessee was reopened under section 147 of the Income Tax Act, 1961 (hereinafter called 'the Act’) after issuing notice under section 148 of the Act to the assessee. However, in response to

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notice under section 148 of the Act, there was no response from the side of the assessee. Thereafter, the AO issued notices under section 142(1) of the Act, requiring the assessee to explain the source of cash deposits with supporting evidence. The assessee filed part reply. The AO again issued a notice dated 08.03.2022 under section 142(1) of the Act fixing the date for hearing on 14.03.2022. However, there was no response from the side of the assessee. The AO, subsequently, issued a show cause notice to the assessee for completion of assessment under section 144 of the Act, vide which assessee was required to furnish the details of source of cash deposits. Since again there was no response from the side of the assessee, the AO treated the cash deposits of Rs.1,22,02,400/- and withdrawal of Rs.68,600/-, totaling to Rs.1,22,71,000/- as unexplained money of the assessee and added the same to the total income of the assessee under section 69A of the Act. The AO completed the assessment under section 144 read with sections 147/144B of the Act, assessing the income of the assessee at Rs.1,22,71,000/-.

2.1 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under sections 271F, 272A(1)(d) and 271AAC of the Act, separately.

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2.2 Aggrieved, the Assessee preferred an appeal before the NFAC, which partly allowed the appeal of the assessee by sustaining the addition of Rs.1,22,02,400/- (cash deposits made by the assessee) and deleting the addition of Rs.68,600/- (withdrawal made by the assessee).

2.3 Now the assessee has approached this Tribunal challenging the order of the NFAC in confirming the addition of Rs.1,22,02,400/-, by raising the following grounds of appeal:

“BECAUSE; (1) the CIT(A) has erred in law and on facts, in passing the ex-parte order, partly allowing the appeal of assessee and sustaining inter alia, the addition of Rs.1,22,02,400/- (being out cash deposited in Bank account as had been made under section 69A of the Act); (2) while upholding the validity of initiation of proceedings under section 147 for the Assessment Year 2017-18, the ld. CIT(A) had omitted to consider that: (i) initiation of proceedings under section 147 (by issue of notice under section 148) was not based on 'tangible material', as mere cash deposit in bank account of the appellant, did not amount to 'income escaping the assessment as per the view taken by Hon'ble Supreme Court in the case of Parimietti Seethsramamma Vs. CIT, AP reported in (1965) 57 ITR 532, which had since been followed by Hon'ble ITAT, in various cases, to enumerate a few such case as cited herein below, along with gist thereof:-

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(a) Bir Bahadur Sijwali VS ITO, Ward 1, Haldwani - ITAT Delhi bench "A" [Appeal No. 3814(Delhi) of 2011] - The reopening is bad only on the basis of cash deposited with bank, not seen bank account not seen debit entries. It is purely guess work of the AO that income has escaped. The AO proceeded on the fallacious assumption that bank deposits in cash constituted undisclosed income and overlooked facts that the cash deposits need not necessarily be the income of the assessee. It can be the gross receipts but entire cash deposits cannot be the income of the assessee. (b) Gurpal Singh v. ΙΤΟ (2016) 159 ITD 797 (ITAT Amritsar) - In the given case, the tribunal allowed the appeal of assessee and held that mere deposits in the banks cannot be presumed, as undisclosed income hence reassessment was held to be bad in law. The Assessing Officer's fallacious assumption that bank deposits constituted undisclosed income, over-looking the fact that source of deposits need not necessarily be income of assessee and, therefore, action of Assessing Officer was not justified. (c) Mahavir Prasad Vs. ITO [ITAT Delhi] ITA No. 924/DEL/2015. It was held that Section 69A is a deeming provision and it cannot be initiated based on suspicion. Merely deposits cannot be treated as income from undisclosed sources within the meaning of section 69A of the Act. The Ld. AO has erred on facts and in law in making addition of Rs.2571700/- as the requirement of application of mind is missing in the present case as it is cardinal principal of taxation that all receipts are not

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income and all incomes are not taxable incomes. This applies squarely to the present facts as held in the case. (d) Narain Dutt Sharma vs. ITO (ITAT Jaipur 2018 (4) TMI 427. In the instant case, pursuant to receipt of AIR information from an external agency that cash has been found deposited in assessee's savings bank account, there has been no further examination by the AO. In the instant case, the AO has thus failed to examine the AIR information so received which would have provided the nexus or the vital link to form a prima facie opinion that income of the assessee had escaped assessment for the impugned assessment year. In absence of necessary nexus between the tangible material and formation of belief, the reassessment proceedings cannot be sustained in the instant case. (3) such an initiation under section 147 was just based on information of 'cash deposits' in bank account of the appellant, but the same were out of sale proceeds and realizations from debtors, (as had been submitted before the Id. Assessing Officer himself, during the course of regular assessment proceedings, vide replies dated 08.02.2022 and 03.03.2022 (as had been submitted by the appellant); (4) copies of "reasons recorded" and 'approval thereof by the 'specified Authority', if any, had never been provided to the appellant, as were required to be so provided, as per the decisions of (i) Hon'ble Allahabad High Court in case of Prem Prakash Tripathi Vs. Commissioner of Income Tax reported in 208 ITR 461; and

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(ii) Hon'ble Delhi High Court in case of SABH Infrastructure Ltd Vs. Assistant Commissioner of Income tax reported in 398 ITR 198 and other legal pronouncements. (5) owing to the reasons as narrated above, and other narration of facts the ld.CIT(A) has erred in law and facts in upholding the view of the ld. Assessing Officer, even though assessment proceedings had been earlier made against the principles of natural justice (without providing due and effective opportunity of being heard to the appellant); (6) cash deposits in question in the regular Bank account of the appellant represented sale proceeds realized and other realizations in cash at his end, looking to the nature of business carried on by the appellant; (7) the authorities below had failed to appreciate that 'cash deposits' in the regular bank account of the appellant, represented sale proceeds of the perishable commodities, in which the appellant had been dealing with, ever since inception, and in treating the same as unexplained investment, within the meaning of deeming provision, as contained in section 69A of the Act; (8) ld. CIT(A) has erred in law and on facts, in upholding the addition made by Id. Assessing Officer merely on the basis of gross 'cash deposits' in the bank account of the appellant, without allowing set off debits and other withdrawals (without telescoping as per the decision of Amritsar Bench of Hon'ble ITAT, in case of Smt. Sanjeet Kanwar Vs. reported in 143 taxmann.com 266 and various other legal pronouncements);

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(9) on the facts and circumstances of the instant case, the deeming provisions of section 69A of the Act, were not applicable, and no addition was justified, either on facts or in law. (10) the order appealed against, is contrary to the facts, law and principles of natural justice; 3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that there is a delay of 574 days in filing the appeal before the Tribunal. He further submitted that the assessee had filed an application dated 25.06.2025 for condonation of delay, supported by an Affidavit, stating therein that the assessee was an illiterate person dealing in dates/dry fruits and other allied products and was not aware of his obligation to file the return for such trade and, therefore, he did not file the return of income. It was further submitted that the notices issued by the lower authorities and the orders passed by them never came to the knowledge of the assessee as they were not physically received by the assessee. It was also submitted that in the month of May, 2025, the new Counsel engaged by him informed him about the income tax proceedings in his case and only then the assessee had come to know about the passing of the order by the Ld. First Appellate Authority. It was further stated that when the assessee had come to know about the passing of order by the Ld. First Appellate Authority, he engaged

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a Counsel and filed the appeal before the Tribunal. The prayer of the Ld. A.R. was that the delay of 574 days caused in filing the appeal was not deliberate, which may please be condoned and the appeal be heard on merits.

3.1 The Ld. Sr. D.R. objected to the delay being condoned.

3.2 In view of the prayer made by the Ld. A.R., we condone the delay in filing of the appeal and admit the appeal for hearing.

2.0 The Ld. A.R. submitted that the assessee was dealing in dates and other allied products and the transactions with consumers and small retailers were conducted in cash. It was further submitted that the payments towards purchase of fruits were routed exclusively through electronic bank transfers (RTGS). The Ld. A.R. submitted that the total cash deposits during the year under consideration were Rs.1.22 crores as against the purchase of Rs.1.23 crores. It was also submitted that the cash deposited in the bank account is nothing but the realization of sale proceeds and realizations from debtors. It was further submitted that the AO had not afforded sufficient opportunity to the assessee to furnish the relevant documents before him and, therefore, the relevant documents could not be furnished before the AO to prove the source of the cash deposits made by the assessee in his Bank Account. The Ld. A.R.

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submitted that the Ld. First Appellate Authority had also erred in simply confirming the addition made by the AO under section 69A of the Act. The Ld. A.R., therefore, prayed that, in the interest of justice, the matter may be restored to the file of the AO for deciding the same afresh after providing reasonable opportunity of being heard to the assessee. He submitted that the assessee undertakes to produce all the relevant documents in support of his claim before the AO.

4.0 Per contra, the Ld. Sr. D.R. placed reliance on the order of the Ld. First Appellate Authority and submitted that the Ld. First Appellate Authority had given substantial relief to the assessee and, therefore, no interference was called for in the order of the Ld. First Appellate Authority.

5.0 We have heard the rival submissions and have also perused the material on record. It was noticed that the assessee was dealing in perishable items, like dates and other allied products and the transactions with consumers and small retailers were mainly conducted in cash. It was the submission of the Ld. A.R. that the payments towards purchase were routed exclusively through electronic bank transfers and that the total cash deposits during the year under consideration were to the tune of Rs.1.22 crores and purchases were to the tune of Rs.1.23

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crores. It is an undisputed fact that the assessee had not filed the return of income for the year under consideration. However, the assessee has placed before us the copies of returns filed by the assessee for assessment years 2016-17, 2018-19 to 2020-21 to prove that the assessee was regularly assessed to tax. The assessee has also placed before us a chart showing the trading summary for assessment years 2016-17 to 2018-19, which is as under:

A.Y. Turnover Gross GP Net NP Remarks Profit % Profit % 2016-17 27,63,958 2,01,492 7.29% 1,18,574 4.29% Return filed on 16.08.216 2017-18 1,23,00,000 9,10,318 7.40% 5,60,000 4.55% Under consideration (no return filed) 2018-19 76,27,541 7,37,032 9.66% 4,58,271 6.1% Return filed on 30.10.2018

3.0 It is an undisputed fact that for the assessment year under consideration (A.Y. 2017–18), the Assessee did not file the Return of Income nor furnish the statutory Audit Report before the Assessing Officer. However, a perusal of the record indicates that the Assessee has been regularly filing his Returns of Income and submitting Audit Reports in other assessment years, declaring profit from its business operations. It is a settled principle of tax jurisprudence that the primary goal of assessment proceedings is to determine the correct tax liability of an assessee based on actual profit/income, rather than

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penalizing procedural or technical lapses. Since the Assessee has a consistent track record of compliance in preceding and succeeding years, we find force in the argument that the failure in the year under consideration was not willful. In view of the above circumstances and in the interest of substantial justice, we deem it fit and proper to set aside the impugned order of the Ld. First Appellate Authority and restore the matter back to the file of the AO with the direction to provide one more opportunity to the assessee to present his case. We 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.

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

Order pronounced in the open Court on 27/07/2026.

Sd/- Sd/- [NIKHIL CHOUDHARY] [SUDHANSHU SRIVASTAVA] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED:27/07/2026 JJ:

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