MOHAMMAD OSAMA,ALENBAD FARM vs. INCOME TAX OFFICER WARD I(5) , INCOME TAX DEPARTMENT

PER ANADEE NATH MISSHRA:A.M.

(A) This appeal has been filed by the assessee against the impugned appellate order of ld. CIT(A)/National Faceless Appeal Centre (NFAC), Delhi dated 14.08.2024 for Assessment Year (AY) 2017-18. The assessee has raised the following grounds of appeal:

“1. BECAUSE the appellate order dated 14.08.2024 passed by the learned CIT (A) NFAC U/s 250 of I.T. Act 1961 for the A.Y. 2017-2018 is erroneous and bad on the facts and in law. 2. BECAUSE the learned CIT(A) NFAC has failed to appreciate that section 250(6) of I.T. Act 1961 makes it obligatory for him to adjudicate each and every ground of appeal and then dispose of the same in writing with the reason for his decision.

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(B) The issue in dispute in this appeal is regarding the addition of Rs. 4,80,000/- made by the Assessing Officer in the assessment order, out of which an amount of Rs. 1,44,000/- was deleted by the learned CIT(A) in the impugned appellate order dated 14.08.2024 and the remaining amount of Rs. 3,36,000/- was confirmed by the learned CIT(A). The aforesaid addition of Rs. 4,80,000/- was made by the Assessing Officer on account of rental income calculated @ 40,000/- per month on immovable property (alleged House Property). The learned CIT(A) took the view that the assessee was entitled to claim of deduction of 30% as per section 24 of the Act on the aforesaid amount of Rs. 4,80,000/-. Accordingly he deleted the aforesaid amount of Rs. 1,44,000/- and confirmed the remaining amount of Rs. 3,36,000/-. However, in the grounds of appeal, the assessee has contended that the immovable property was an agricultural land and not a house property. It has been further contended that the rental income of Rs. 40,000/- per month being taken rental income, as decided by the Assessing Officer without making any enquiry. Further, the assessee has also contended that the amount of Rs. 27,54,000/- deposited in cash in the assessee’s bank account was part of assessee’s

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business turnover, therefore, the assessee has disputed the addition of this amount as assessee’s income.

(C) At the time of hearing, there was no representation from the assessee side. The learned Departmental Representative relied on the impugned order of the learned CIT(A), the relevant portion of which is reproduced below:

“4. Decision: I have considered the assessment order, statements of facts, grounds of appeal, written submissions made and cited case laws by the appellant during the course of appellate proceedings. The appellant has raised various grounds in this appeal. The ground wise decisions are made in following para of this order: 4.1 Ground No. 1 is general in nature and therefore does not require any decision. 4.2 Ground No. 2 pertains to addition of Rs.24,54,000/- being cash deposited during the demonetization period. In the instant case, the appellant didn't filed his return of income for AY 2017-18. During the demonetization, the appellant had deposited cash of Rs.27,54,000/- in his two bank accounts bearing account no. 05490100016292 and 35463961945 maintained with UCO Bank and State Bank of India respectively. The AO made addition of the cash deposit amount as the appellant could not substantiate his reply and therefore remained unexplained. During the appellate proceedings, the appellant has submitted that he has derived income from petty contract work including repairing and renovation of civil nature. The appellant has accepted that he has deposited cash of Rs.25,00,000/- and Rs.2,48,000/- in his two bank accounts maintained with SBI and UCO Bank respectively. The appellant has submitted that this cash deposit amounts are gross business receipt. 4.2.1 The matter has been examined and it is observed that the appellant is trying to explain the cash deposits during the demonetization period as business receipt. During the assessment proceedings, the appellant had submitted that ITR for A.Y. 2017-18 was not filed by him due to his income been much below taxable limit. At the same time, the appellant had submitted that he was engaged in civil construction work and he had received advances for renovation, construction and maintenance work of before the declaration of demonetization and the same was deposited in bank account. In this regard, it is considered that the business receipt of

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Rs.24,54,000/- is the amount which has exceeded the maximum amount not chargeable to tax. Therefore, the appellant has failed to file his return of income either u/s 139(1) of the Act or u/s 142(1) issued by the AO during the assessment proceedings. Further, with regard to the claim of the appellant of receipt of advance against civil work undertaken by him, it is observed that the appellant has not submitted any documentary evidence e.g. nature of work with its address, name and address of the persons from the advance was received and the reason for receiving such huge advances in cash. Further, the appellant didn't furnish any evidence that he had done the civil work on a/c of receipts of advances for such work. The appellant has also not substantiated his claim of civil work during the year and also during preceding years that he was engaged in civil work and it was his regular work, the income of which was offered to tax on regular basis. There is no comparative figure submitted by the appellant in this regard to substantiate that in earlier year also, he had received such huge cash for civil work and therefore the appellant has failed to substantiate his claim raised in his submission during the appellate proceedings. 4.2.2 Considering the above facts and circumstances of the case, I am of the considered view that the amount of Rs.24,54,000/- deposited by the appellant in cash in his bank accounts are unexplained in nature. Therefore, the addition made by the AO is hereby confirmed. The ground no. 2 of the appeal is dismissed. 4.3 Ground No. 3 pertains to addition of Rs.6,84,440/- by applying rate of 10 percent on the declared business turnover. On perusal of the appellant's bank accounts, the AO noted that there were total credit entries of Rs.68,54,400/- apart from the cash deposits during the year under consideration and this receipt would have been taxable u/s 44AD of the Act if the same was offered to tax. However, the appellant has not filed his ITR. Therefore, the AO treated the receipt as income from business or profession of the appellant for the year under consideration and made addition of Rs.6,84,440/- as income under the head business or profession by applying rate of 10% of total credits in the bank account other than cash deposits. During the appellate proceedings, the appellant has submitted that the entire cash deposit of Rs.27,54,000/- as well as credits amount of Rs.68,54,400/- totaling to Rs.96,08,400/- are the gross business receipt for AY 2017-18. The appellant has challenged the separate addition of cash deposit amount and the credits in the bank account at the rate of 10%. The appellant has submitted that he is agreed to declare the whole cash and

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credit amounting to Rs.96,08,400/- as gross turnover of civil construction business and voluntarily adopts the net profit @8% u/s 44AD of the Act. 4.3.1 The matter has been examined and it is observed that the appellant is trying to declare the whole cash and credit entries of his bank accounts by adopting the net profit @8% as per the provisions sec 44AD of the Act. In this regard, it is observed that the appellant has not filed his return of income either u/s 139(1) of the Act or u/s 142(1) issued by the AO during the assessment proceedings. The contention of the appellant is that he had no taxable income to file the ITR for AY 2017-18. In this regard, it is seen that the appellant's gross receipt is more than the threshold limit of income not chargeable to tax. Therefore, the contention of the appellant for not filing the ITR is incorrect. Further, the appellant is trying to offer the whole amount i.e. cash deposit and credits in his bank account as business receipt. The claim of business activity in which the appellant is engaged is devoid of any documentary evidence. Therefore, the treatment of cash deposits and the credits entries has to be on different footing to bring under the tax net. The issue of cash deposit has already been dealt with in preceding para of this appeal order. As per as credits of Rs.68,54,400/- is concerned, which is not the cash deposit, the appellant wants to declare it under sec 44AD of the Act. The AO has also considered the same but has taken the rate of 10% as net profit of the appellant. Considering the contention made by the appellant, it would be wise to determine the net profit as 8% u/s 44AD of the Act. 4.3.2 Considering the above facts and circumstances of the case, I am of the considered view that the net profit should be lowered to at the rate of 8% against the determination made by the AO at 10%. Therefore, the AO is directed to consider the net profit at 8% on the amount Rs.68,54,400/-. Thus, the ground no. 3 is partly allowed. 4.4 Ground No. 4 pertains to addition of Rs.4,80,000/- on account of estimated rental income. During the assessment proceedings, the AO has noted that the TDS of Rs.1,23,645/- has been deducted u/s 1941A of the Act on sale of immovable property of Rs.1,23,64,500/- located in Mumbai during F.Y. 2018-19. In this regard, the AO has further noted that the property sold during F.Y. 2018-19 would have been in the possession of assessee during A.Y. 2017-18 and the appellant would have employed the property to earn rental income during the year under consideration. The AO estimated that appellant would have earned income under the head house property at Rs.40,000/- per month. Accordingly, the AO computed rental income at Rs.4,80,000/- during the year under consideration. Hence, an

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addition of Rs.4,80,000/- was made. During the appellate proceedings, the appellant has submitted that the said property was ancestral agricultural property which was not let out to anybody. The appellant has challenged the addition on estimation basis. 4.4.1 The matter has been examined and it is observed that the issue involved in this ground is receipt of rental income. The appellant has contended that the said property is agricultural property and no rental income was received on it. However, it is seen that the appellant has not furnished any documentary evidence in support of his claim. Further, it is seen that the said property was sold to M/s ITC Builders & Developers and the TDS u/s 1941A of the Act was also made on the sale transaction and section 1941A of the Act applies only on immovable property other than agricultural land. Hence, it is clear that the said property is not an agricultural property as claimed by the appellant. This fact shows that the appellant was in possession of the said property which was non- agricultural. Since the said property was in nature of accruing rental income, the appellant has failed to offer the income under the head house property to tax. Further, the ground of appeal raised by the appellant reveals that the appellant is accepting the facts of the rental income and therefore he has mentioned about chargeability of tax without giving statutory deductions. 4.4.2 Considering the facts and circumstances of the case, I am of the considered view that the appellant was in possession of the property during FY 2016-17 which was in nature of generating rental income and the appellant has failed to offer to tax. However, the appellant is also entitled to claim the deduction of 30% u/s 24 of the Act. Therefore, the AO is directed to allow the deduction of Rs.1,44,000/- (30% of Rs.4,80,000) and addition of amount Rs.3,36,000/- (Rs.4,80,000 1,44,000) is hereby confirmed. Thus, this ground is partly allowed.” (D) As far as the cash deposits made by the assessee in bank account is concerned, it is found that the assessee had deposited a total amount of Rs. 96,08,400/- in the Bank out of which cash deposit was Rs. 27,54,000/-. The learned CIT(A) has accepted the aforesaid amount of Rs. 68,54,400/- as the assessee’s business turnover and determined the net profit on this amount @ 8% as per section 44AD of the Act. However, the learned CIT(A) has not

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accepted the aforesaid amount of Rs. 27,54,000/- as part of the assessee’s business turnover. Perusal of the assessment order and the impugned appellate order of the learned CIT(A) shows that the assessee did not get reasonable opportunity either during the assessment proceedings or during the appellate proceedings before the learned CIT(A) to establish that the aforesaid amount of Rs. 27,54,000/- was also part of the assessee’s business turnover. Therefore, issues in dispute regarding the aforesaid adition of Rs. 27,54,000/- are restored back to the file of the Assessing Officer with the direction to provide reasonable opportunity to the assessee to explain the aforesaid amount of Rs. 27,54,000/- and to decide the issues afresh in accordance with law.

(E) As far as the aforesaid addition of Rs. 4,80,000/- is concerned, out of which an amount of Rs. 3,36,000/- was confirmed by the learned CIT(A), It is found that no verification was carried out by the Assessing Officer or the learned CIT(A) and also reasonable opportunity was not provided to the assessee in this regard. Therefore, this issue is also restored back to the file of the Assessing Officer for fresh order on this issue in accordance with law after providing reasonable opportunity to the assessee.

(G) In the result, the appeal of assessee is partly allowed.

(Order was pronounced in the open court on 08/07/2026.)

Sd/- (ANADEE NATH MISSHRA) Accountant Member Date: 08/07/2026 SK, Sr.PS

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Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. Concerned CIT 4. D.R., I.T.A.T., 5. CIT(A) Senior Private Secretary Income Tax Appellate Tribunal Lucknow