GOURAGARI PRAVEEN REDDY,MAHABUBNAGAR vs. ITO, WARD -1, MAHABUBNAGAR

Succinctly stated, the AO based on information that the assessee during the demonetization period, i.e., 09/11/2016 to 30/12/2016 had Gouragari Praveen Reddy vs. ITO deposited an amount of Rs.64,90,770/- in his bank account no. 62437760996 held with State Bank of India, Shadnagar Branch, Mahabubnagar District, but had not filed his return of income within the stipulated due date under section 139(1) of the Act, issued notice under section 142(1) of the Act, dated 24/11/2017, calling upon him to file his return of income. As is discernible from the record, the assessee filed his return of income on 31/03/2018, but the AO, observing that it was filed belatedly, held it to be an invalid return and, as a consequence, non-est in all respects.

During the course of the assessment proceedings, the AO obtained copies of the bank account statements No.351405000048 and 02621110000645 held by the assessee with ICICI Bank Ltd., Jadcharla Branch, Mahabubnagar District and Andhra Bank, Jadcherla Branch, Mahabubnagar District. On perusal of the bank statements, he observed that the assessee, during the subject year, had deposited an amount of Rs.1,20,05,265/- in his aforementioned bank accounts, out of which Rs.13,21,000/- was deposited in cash during the demonetization period.

The AO observed that the assessee had filed his return of income for the immediately preceding year declaring an income of Rs.12,04,110/- after claiming a deduction under Chapter-VIA of Rs.38,640/-. Apart from that, it was noticed that the bank account of the assessee was in the name of M/s. Maharaja Wines.

The assessee, on being queried about the cash deposits made during the subject year, submitted that the same was sourced out of the following, viz., (i) sale proceeds on liquor; (ii) cash balance available with him; and (iii) money received from his brother through his mother’s account for business purposes. Also, it was stated that the assessee’s HUF owned agricultural land which was under cultivation by his family members.

The AO, on a perusal of the record, observed that the assessee was a proprietor of M/s. Maharaja Wines, i.e., a concern engaged in the retail sale of IMFL and having a turnover of Rs. 7,53,40,881/- during the year under consideration. The AO on verifying the books of account along with supporting documents, viz., invoices/bills and vouchers in respect of IMFL purchases made by the assessee and the expenses claimed under different heads, observed that the books of accounts were not properly maintained by the assessee, and thus the true profit could not be deduced therefrom. Also, it was observed that the assessee’s claim for deduction of expenditure was not supported by documentary evidence. Accordingly, the AO, in the absence of proper books of account, rejected the book results and estimated the assessee's income at 3% of the cost of goods sold of Rs. 6,66,43,341/-, determining it at Rs. 19,99,300/- from the said stream of income.

The AO further observed that the assessee had declared an amount of Rs.82,990/- as interest income on fixed deposits and income Gouragari Praveen Reddy vs. ITO from other gross receipts of Rs.6,79,000/-, which was included by him in the net profit of business of M/s. Maharaja Wines. The AO observed that the assessee had failed to produce satisfactory documentary evidence in respect of gross receipts of Rs. 14,40,990/-, which was stated to have been included in the turnover from the liquor business. The AO, observing that the assessee had failed to place on record any documentary evidence in support thereof, brought to tax 50% of the said receipts under the head “income from other sources” and added the same to the assessee's income. Also, the AO added interest income accrued to the assessee from fixed deposits of Rs. 82,990/-. Accordingly, the AO, vide his order dated 06/12/2019, passed under section 144 of the Act, determined the assessee's income at Rs. 27,52,200/-.

Thereafter, the AO vide his order passed under section 270A of the Act, dated 01/09/2021, levied a penalty of Rs.3,36,491/- on the assessee for under-reporting of income.

Aggrieved, the assessee assailed the order passed by the AO under section 270A of the Act before the CIT(A) but without success.

The assessee, aggrieved with the order of the CIT(A), has carried the matter in appeal before us. (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the same involves a delay of 106 days. Elaborating on the reasons leading to the delay, it was submitted by him that though the assessee had in “Form-35” provided his email Id, viz., “gouragari.praveen@gmail.com” for issuance of notices/communications from the CIT(A) office, but neither of the notices were forwarded/dropped in the said email account, and as gathered by him from his income tax portal account the same were forwarded to an email account, i.e., “kpassociate00@gmail.com". The Ld. AR, to buttress his contention, had taken us through a screenshot of the assessee's income tax portal account. Elaborating further on his contention, the Ld. AR submitted that it was only when the officials of the Income Tax Department, pursuant to the disposal of the assessee’s case by the CIT(A), contacted the assessee for recovery of the outstanding demand that he learned about the dismissal of the appeal. The Ld. AR submitted that as the delay in filing of the present appeal was not attributable to the assessee but because of the failure on the part of the CIT(A) office to validly serve the order disposing of the appeal at the e-mail address Representative, (for short, “Ld. Sr-DR”) though objected to the seeking of condonation of delay as was sought for by the assessee but could not rebut the fact that the notices/order disposing of the appeal was not forwarded by the CIT(A) at the email address that was provided by the assessee appellant in “Form-35”.

Considering the aforesaid facts, we are of firm conviction that as the delay in filing of the appeal cannot be attributable to the assessee, the same merits being condoned.

On merits of the case, Shri S K Gupta, Advocate, Learned Authorised Representative (for short, “Ld. AR”) for the assessee, at the threshold submitted that the assessee appellant had suffered dismissal of the appeal by the CIT(A) without being afforded any opportunity to participate in the proceedings before him and put forth his case. Elaborating on his contention, the Ld. AR reiterated that although the assessee in his memorandum of appeal in “Form No. 35” had specifically provided his email address, viz., “gouragari.praveen @gmail.com” for receiving the notices/communications from the CIT(A) office, but neither of the notices, which as per the appellate order were stated to have been issued on four occasions was ever dropped in the Gouragari Praveen Reddy vs. ITO said email account. The Ld. AR, to buttress his contention, had taken us through the screenshot of the income tax portal account of the assessee, which revealed that all the notices intimating the fixation of the appeal by the CIT(A) were forwarded/dropped in the email account “kpassociate00@gmail.com". Elaborating on his contention, the Ld. AR submitted that as the assessee, for no fault of his, was deprived of the opportunity to put forth his case before the CIT(A); therefore, the summary disposal of the appeal by the First Appellate Authority cannot be sustained and is liable to be set aside.

Per contra, Shri Laxmi Kanth, Learned Senior Departmental Representative (for short, “Ld. Sr. DR”), relied upon the orders of the authorities below.

We have given thoughtful consideration to the contentions advanced by the Learned Authorised Representatives of both parties in the backdrop of the orders of the authorities below.

Admittedly, it is a matter of fact discernible from the record that the assessee had in “Form-35” provided his email address, i.e., “gouragari.praveen@gmail.com”, for receipt of notices/communications from the CIT(A) office. However, a perusal of the screenshots of the income tax portal account produced by the Ld. AR before us reveals that on all the four occasions the notices intimating the fixation of appeal, i.e., dated 15/11/2022, 29/05/2024, 11/07/2024 and 23/09/2024 were Gouragari Praveen Reddy vs. ITO forwarded not at the aforementioned email address provided by the assessee but were dropped in some other email account, i.e., kpassociate00@gmail.com. In our view, as the assessee, for no fault of his, had been divested of the opportunity to participate in the proceedings before the CIT(A), the ex parte order passed by him cannot be sustained and is liable to be set aside.

We thus, in terms of our aforesaid deliberations, set aside the order passed by the CIT(A) and restore the matter to his file with a direction to re-decide the appeal after affording a reasonable opportunity of being heard to the assessee.

In the result, the appeal filed by the assessee is allowed for statistical purposes in terms of our aforesaid observations.

We shall now take up the appeal filed by the assessee against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, New Delhi, (for short, “CIT-(A)”), dated 29/08/2025, which in turn arises from the order passed by the AO under section 271B of the Act, dated 16/08/2021 for the assessment year (AY) 2017–18

The assessee has assailed the impugned order of the CIT(A) on the following grounds of appeal:

Succinctly stated, the assessee, who had not voluntarily filed his return of income under section 139(1) of the Act, had, however, filed the same on 31/03/2019, which was treated by the AO as non-est.

Thereafter, the case of the assessee was selected for scrutiny, and the assessment order was passed by the AO under section 144 of the Act, dated 06/09/2019, determining his income at Rs. 27,52,200/-.

During the course of the assessment proceedings, the AO, taking cognisance of the fact that the assessee had failed to furnish the audit report within the due date contemplated under section 44AB of the Act, initiated penalty proceedings under section 271B of the Act.

Thereafter, the AO vide his order under section 271B of the Act, dated 16/08/2021, imposed a penalty of Rs.1,50,000/-.

Aggrieved, the assessee carried the matter in appeal before the CIT(A) but without success.

The assessee, aggrieved with the order of the CIT(A), has carried the matter in appeal before us. (for short, “Ld. AR”) for the assessee, at the threshold of hearing of the appeal, submitted that the same involves a delay of 106 days. Elaborating on the reasons leading to the delay, it was submitted by him that though the assessee had in ‘Form-35” provided his email Id, viz., “gouragari.praveen@gmail.com” for issuance of notices/communications from the CIT(A) office, but neither of the notices were forwarded/dropped in the said email account and as gathered by him from his income tax portal the same were forwarded to an email account, i.e., “kpassociate00@gmail.com". The Ld. AR, to buttress his contention, had taken us through a screenshot of the assessee's income tax portal account. Elaborating further, the Ld. AR submitted that it was only when the officials of the Income Tax Department contacted the assessee for recovery of the outstanding demand, pursuant to the disposal of the assessee’s case by the CIT(A), that he learned of the dismissal of the appeal. The Ld. AR submitted that as the delay in filing of the present appeal was not attributable to the assessee but because of failure on the part of the CIT(A) office to validly serve the order disposing of the appeal, the same, in all fairness and in the interest of justice, merits to be condoned.

Per contra, Shri Laxmi Kantha, Learned Senior Departmental Representative, (for short, “Ld. Sr-DR”) though objected to the seeking of condonation of delay sought for by the assessee but could not rebut Gouragari Praveen Reddy vs. ITO the fact that the notices/order disposing of the appeal was not forwarded by the CIT(A) at the email Id that was provided by the assessee appellant in “Form-35”.

Considering the aforesaid facts, we are of firm conviction that, as the delay in filing the appeal cannot be attributed to the assessee, the same merits being condoned.

On the merits of the case, we have heard the Learned Authorised Representatives of both the parties, perused the orders of the authorities below, and the material available on record.

Ostensibly, the AO, taking cognisance of the fact that the assessee had failed to get his accounts audited under section 44AB of the Act, initiated penalty proceedings under section 271B of the Act in the body of the assessment order. Thereafter, the AO issued a show- cause notice (SCN) under section 274 r.w.s. 271B of the Act, dated 06/12/2019, calling upon the assessee to explain as to why a penalty under section 271B of the Act may not be imposed on him. In reply, it was submitted by the assessee that the failure to get his accounts audited was for the reason that, during the relevant period, he was looking after his mother, who was suffering from ill health, and, thus, he could not properly attend to his day-to-day business affairs, including the maintenance of accounts and filing of the income tax return. Also, he stated that his Accountant was unwell during the relevant period, and Gouragari Praveen Reddy vs. ITO he remained under a bona fide belief that he had filed the return of income along with the audit report within the prescribed period. Elaborating on his contention, he submitted that, because of the said misconception, the return of income, along with the audit report, could be filed only on 31/03/2019. The assessee, based on his aforesaid contention, had claimed that as the delay in filing of the audit report was not intentional or mala fide, the impugned penalty imposed under section 271B of the Act be vacated.

However, the AO did not find favour with the assessee's explanation and imposed a penalty of Rs.1,50,000/-, being 0.5% of the turnover of Rs. 7,66,98,100/-, which thereafter was upheld by the CIT(A).

We have given our thoughtful consideration and find no infirmity in the view taken by the authorities below, who had rightly imposed/upheld the penalty under section 271B of the Act. It has been the claim of the assessee that his mother was seriously ill from 17/10/2017 to 20/12/2017 with “Viral Hepatitis” and “Pulmonary Infection”. We find that the due date for filing the audit report for the subject year, i.e., AY 2017-18, which was initially 31/10/2017, was extended to 07/11/2017. In our view, there is substance in the CIT(A)’s observation that as the assessee had sufficient time to get his accounts audited before the illness of his mother, therefore, the aforesaid

Ex-consequenti, the appeal filed by the assessee in ITA No.438/Hyd/2026 is allowed for statistical purposes, and the appeal filed by the assessee in ITA No.439/Hyd/2026 is dismissed in terms of our aforesaid observations.

"वभागीय""त"न"ध, आयकरअपील"यअ"धकरण /DR,ITAT, Hyderabad.

The Commissioner of Income Tax 6. गाड"फ़ाईल / Guard file