LAKHANSINGH SOLANKI,JHABUA vs. ITO, JHABUA, JHABUA

Per Paresh M Joshi, J.M.:

This is an Appeal filed by the Assessee under section 253 of

the income tax Act 1961,[ herein after referred to as the Act

for the sake of brevity] before this tribunal as & by way of a

second Appeal. The Assessee is aggrieved by the order

bearingNumber:-ITBA/NFAC/S/250/2023-24/1059839855(1)

dated 18.01.2024 passed by the Ld. CIT(A) u/s 250 of the

Act, which is herein after referred to as the “Impugned

order”. The Relevant Assessment year is 2012-13 and the corresponding previous year period is from 01.04.2011 to

31.03.2012.

2.1 That as and by way of an assessment order made u/s

144 rws 147 of the act, the total income of the assessee

was computed and assessed at Rs. 27,18,775/-. The total

income as per the return of income was at Rs. 11,71,790/-.

An addition of Rs. 15,46,985/- was made. That the

aforesaid assessment order is dated 25.11.2019 which is

“Impugned assessment herein after referred to as the

order”.

2.2 That on the basis of information received from the

DCIT-(Central-I), Bhopal it was found that a search &

seizure operation was conducted in the case of M/s SR ferro

alloys, Megh nagar as on 20.06.2012. It was found that the

SR ferro alloys has systematically inflated its expenses by

showing certain payments to certain parties to whom the

payment towards service/contract were made by the cheques and that subsequently the amounts used to get

refunded back to the SR ferro alloys.

2.3 The assessee is the sole proprietor of M/s solanki

construction which was one such parties as aforesaid in

para 2.2. The various documents, evidences etc which were

seized also included the documents, evidences relating to the

assessee i.e. M/s Solanki construction proprietor Lakhan

Solanki.

2.4 That the assessee is an individual engaged in the

business of “Blasting and Hire” in the name of M/s

Solanki corporation, as a proprietor the assessee had filed

a return of income on 30.09.2012 declaring the total income

of Rs. 11,71,790/-.

2.5 Subsequently a notice u/s 148 dated 29.03.2019 was

issued to the assessee through speed post were in the

reasons were recorded. No return of income was filed in

response to the notice u/s 148 of the act by the assessee.

2.6 It is recorded in the “Impugned assessment order” at

para 4 that the assessee was non-compliant to the various

notice(s) u/s 142(1) of the act. It was also recorded that a show cause notice u/s 142(1) dated 06.11.2019 was issued

to the assessee calling upon him to explain as to why 8% net

profit of the contract receipts should not be considered &

added to the total income of the assessee.

2.7 In para 5 of the “Impugned assessment order” it is also

recorded as under:-

“5. In compliance of above notices, the assessee has filed partly written submission E-portal on 12/11/2019 alongwith Copy of computation of income and details of various bank account for the relevant period, copy of 26AS etc, which are placed on record. Again Vide show cause notice with notice u/s 142(1) dated 19.11.2019, the assessee was asked to explain as to why 8% net profit of contract receipt should not be considered and added to the total Income. The assessee required to furnish reply on 22/11/2019. No compliance was made by the assessee.”

2.8 That in the “Impugned assessment order” at para 6 it

is also recorded by the Ld. AO as follows.

“6. On verification of 26AS It was found that the assessee has received contract receipt of Rs. 24,82,828/-, Rs. 1,35,000/-, Rs. 1,51,515/-, Rs. 2,62,40,326/-, Rs. 2,27,898/- and Rs. 2,72,790 total amounting to Rs. 2,95,10,357/- from Ambrish Kumar Tripathi, Rachna Infrastructure Ltd. Rajendra Singh Chandrawat, S.R. Ferro Alloys IVRCL Ltd. and Palldium Infrastructure & Project Ltd respectively and interest of Rs 12,183/- from Narmada Jhabua Gramin Bank and Tax deducted at source on contract receipt and interest. The assessee filed return of income on 30-09- 2012 declaring total income of Rs 11,71,790/- including interest of Rs 12,183/- income.”

2.9 The crucial observations & findings of the Ld. AO in

the “Impugned assessment order” are as follows:-

(i) The assessee has shown the receipts/sales from the

contractor’s business as at Rs. 2,98,58,842/- as per the P &

L A/C part “A” [P & L annexure to return].

(ii) Out of these the receipts of Rs. 2,62,40,326/- pertains to

SR Ferrro alloy Ltd.

(iii) The total turnover of the assessee with M/s SR Ferro

alloys ltd is Rs. 3,16,16,123/- which shows that the assessee

has under reported turnover of Rs. 53,75,797/- with SR

Ferro alloys Ltd which added to his total turnover. [Rs.

3,16,16,123/- - Rs.2,62,40,326/-= Rs.53,75,797/-]

(iv) Gross turnover determined at Rs. 3,52,34,639/-.

(v) The assessee has not furnished books of account despites

notice(s) is too recorded during course of the assessment

proceedings, various details which were called were too not

furnished completely. No details of the expenditure

incurred & vouchers etc were furnished. Consequently books

of accounts were rejected u/s 145(3) of the Act.

(vi) The assessee’s contract receipts were determined at Rs.

3,52,34,639/-. [Rs. ,2,98,58,842+53,75,797](supra)

(vii) The Ld. AO accordingly assessed assessee’s profit & gain

from contract business at 8% of Rs. 3,52,34,639/- which

came to Rs. 28,18,771/-.

(viii) Assessee’s declared profit was Rs. 12,71,786/- only

therefore differential amount of Rs. 15,46,985/- [Rs.

28,18,771 - Rs. 12,71,786.] added to the total income of the

assessee.

2.10 That the assessee being aggrieved by the aforesaid

“Impugned assessment order” prefers the first appeal u/s

246 A of the act before the Ld. CIT(A) who by the

“Impugned order” has dismissed the first appeal of the

assessee on the grounds & reasons stated therein. The core

grounds & reasons for the dismissal of the first appeal was

as under:-

“5.2 I have perused all the material on record including the impugned order. The Facts of the case as per the Assessment Order are as under: a) On the basis of information received from the DCIT (Central)-1, Bhopal, it was found that a search and seizure operation was conducted in the case of M/s S.R. Ferro Alloys, Meghnagar as on 20.06.2012. During the course of search and various books of accounts, documents evidences etc were seized. During course of the search and post-search proceedings, investigation of seized materials, it was found that the SR Ferro Alloys had systematically inflated its expenses by showing certain payments to certain parties to whom payments toward service/contract made by cheques and subsequently amount gets refunded to the SR Ferro Alloys.

b) The assessee M/s Solanki Construction prop. Lakhan Solanki was one of such parties. The various documents, evidences, etc seized included the documents, evidences relating to the assessee M/s Solanki Construction prop. Lakhan Solanki. c) The assessee is an individual engaged in the business of Blasting & Hire in the name of M/s Solanki Construction as a proprietor. The assessee filed return of Income for the AY under consideration, declaring total income of Rs 11,71,790/- d) Subsequently case was reopened u/s 147 of the Act by issuing notice u/s 148 on 29.03.2019 after recording of the reasons, the assessee did not file the Income Tax return in response to the notice u/s 148 of the IT Act. e) Thereafter, vide notice u/s 142(1) dated 12/06/2019, the assessee was asked to furnish the details of contract receipt & other necessary information in response to which, the assessee filed application for adjournment. f) Again, notices u/s 142(1) dated 09/08/2019 and 31/08/2019 the assessee was asked to furnish the details of contract receipt & other necessary information but no compliance was made by the assessee. g) Accordingly, Vide show cause notice with notice u/s 142(1) dated 06.11.2019,the assessee was asked to explain as to why 8% net profit of contract receipt should not be considered and added to the total Income. In compliance of above notice, the assessee filed partly written submission through E-portal on 12/11/2019 alongwith Copy of computation of Income and details of various bank account for the relevant period, copy of 26AS etc, which were placed on record.

h) Again, vide show cause notice with notice u/s 142(1) dated 19.11.2019 the assessee was asked to explain as to why 8% net profit of contract receipt should not be considered and added to the total Income, but no compliance was made by theassessee.

i) On verification of 26AS it was found that the assessee had received contract receipt of Rs. 24,82,828/-, Rs. 1,35,000/- Rs. 1,51,515/-, Rs. 2,62,40,326/- Rs.2,27,898/- and Rs. 2,72,790 total amounting to Rs. 2,95,10,357/- from Ambrish Kumar Tripathi, Rachna Infrastructure Ltd. Rajendra Singh Chandrawat, S.R. Ferro Alloys, IVRCL Ltd. and Palldium Infrastructure & Project Ltd respectively and interest of Rs 12,183/- from Narmada Jhabua Gramin Bank and Tax deducted at source on contract receipt and interest. The assessee filed return of income on 30-09-2012 declaring total income of Rs 11,71,790/-including interest of Rs 12,183/-income.

J) The assessee had shown receipts/sales from contractors' business of Rs.2,98,58,842/- as per P&L account part A-P&L annexure to return. Out of these receipts of Rs. 2,62,40,326/- pertained to SR ferro Alloy Ltd. As per report received from Investigation Wing Indore total turnover with M/s S R FERROW ALLOYS was of Rs 3, 16,16,123/- which shows that the assessee has under reported turnover of Rs 53,75,797/- with S R. Ferro Alloys which added to his total turnover. Accordingly, Gross turnover of the assessee was determined at Rs 3,52,34,639/-, The assessee had not furnished the books of account in spite of various notices issued u/s 142(1) of the IT Act. Also, the various details called for from time to time during the course of assessment proceedings, had not been completely furnished. No details of expenditure incurred and vouchers etc were furnished.

k) Accordingly, the AO not being satisfied about correctness and completeness of books of accounts rejected the same u/s 145(3) of the IT Act, and the assessee's contract receipts were determined at Rs. 3,52,34,639/-

L)In view of the above discussion, due to continued non- compliance at the end of the assessee, the AO tended to complete the best judgement assessment u/s 144 of the Act and estimated assessee's profit and gains from the contract business at 8% of Rs. 3,52,34,639/- which came to Rs. 28,18,771/-. The assessee had declared profit of Rs. 12,71,786/- only. Therefore, the differential amount of Rs.15,46,985/- (28,18,771-1271786) was added in the total Income of the assessee. 5.3 a) During appellate proceedings, the appellant has produced only copy of 26 AS and unsigned copy of Ledger Account of M/s S.R.Ferro Alloys (Old) A/c, which had already been considered by the AO during assessment proceedings.

b) Further, no audited books of Accounts have been produced by the appellant even during the appellate proceedings, on which the appellant emphasized time and again.

c) In its reply dated 06.01.2024, the appellant has submitted that the gross contract receipt of Rs.53,75,797/- as added by the AO, was not the receipt of the year under consideration rather it is opening balance as on 01.04.2011. In this regard, since, there was information with the department out of search and seizure proceedings on the SR Ferro Alloys, based on evidences gathered during the course of the search &post-search proceedings and investigation of seized materials, it was found that the SR Ferro Alloys had systematically inflated its expenses by showing certain payments to certain parties to whom payments toward service/contract made by cheques and subsequently amount gets refunded to the SR Ferro Alloys, and the appellant has been found one of such parties, who has provided accommodation of bogus expenses by way of providing bogus bill on which no actual expenses have been made by the appellant, and such amount of income (by way of raising bogus bills) would have been totally added back to the income of the appellant. However, taking cognizance of the circumstances, the AO has very reasonably added only 8% of such bogus bills to the total income of the appellant.

d) Moreover, during the appellate proceedings, the Appellant didn't came up with new facts other than which already been dealt by the Assessing officer.

e) In view of the above, it is clear that the appellant has nothing to say in support of grounds raised. In these facts and circumstances, I am constrained to be in agreement with the finding of the Assessing Officer and hold that the appellant is unable to substantiate its claims and is not able to controvert the assessment order. The addition made by the Assessing Officer is therefore confirmed. 5.4 The appellant has not been able to defend the grounds raised. Hence, grounds raised are rejected 6. In the result, the appeal is Dismissed.

2.11 The assessee being aggrieved by the “Impugned order”

has preferred the instant second appeal before this Tribunal

and has raised the following grounds of appeal in the Form

no. 36 against the “Impugned order” which are as under:- “1.The ld CIT(A) was not justified in confirming the addition of Rs.15,46,985/- without considering the facts and circumstances of the case. 2.The appellant carves leave to add, amend OR modify any of the grounds of appeal.”

2.12 As & by way of an application dated 26.02.2026 the

assessee has additionally requested that following be

admitted as additional grounds:-

“3. That, proceeding u/s 148 are invalid and void-ab-inito, as the reopening is based merely on investigation report. 4. That, material found during search proceedings, does not confer valid jurisdiction under section 148 and the assumption of jurisdiction is barred by limitation and contrary to the provisions of the Act. 5. That, the proceedings u/s 148, without proper approval u/s 151 are invalid.”

3.1 The hearing in the matter took place before this

Tribunal on 13.04.2026 when the Ld. AR for & on behalf of

the Assessee appeared before us & interalia contended that

the “Impugned Order” is bad in law, illegal & not Proper. It

therefore deserves to be set aside. It was next contended that

the registry of this Tribunal has pointed out the delay of 429

days in filling the instant appeal. It was submitted that the

“Impugned order” is dated 18.01.2024. The instant appeal is required to be filed within 60 days. However the instant

appeal was filed on 03.06.2025. A condonation of delay

application dated 08.02.2025 along with an affidavit in

08.12.2025 support dated is placed on record of this

Tribunal. It is stated therein that order of Ld. CIT(A) is dated

18.01.2024 & the appeal could have filed up to 31.03.2024

however the instant appeal was filed on 03.06.2025 resulting

in delay of 429 days. The assessee is an individual & not well

versed with income tax portal & is not technology friendly.

Impugned order was sent on portal. The assessee is illiterate

too. Delay is unintentional. There are no malafide intention

in filling the appeal belatedly. Hence in the interest of justice

delay be condoned. The Ld. AR has repeated & reiterated the

contents, of the condonation of delay application. Per contra

the Ld. DR appearing for the revenue has opposed the

application for condonation of delay. It was stated that the

assessee is not educated is a wrong statement. On the

issue of delay the Ld. DR stated that let this Tribunal take

an appropriate call basis law. We after hearing both the parties condone the delay in the interest of ends of justice.

Appeal is admitted & taken up for hearing.

3.2 The Ld. AR for & on behalf of the assessee has placed on

record of this Tribunal a synopsis consisting of 7 pages & a

paper book containing pages from 1 to 108. The Ld. AR read

out para 6 & 7 of the “Impugned assessment order” &

stated that how under reported turnover of Rs.

53,75,797/- is arrived at by the Ld. AO in the “Impugned

assessment order”. Our attention was invited to page 29 of

the paper book which extract of balance sheet as at

31.03.2011 where on investment side for SR Ferro alloys

(old) the figure & the amount of Rs. 53,75,797.00 is

reflected/shown [assets]. The balance sheet is dated

27.09.2011, where as the “Impugned assessment order” of

Ld. AO is dated 25.11.2019. Our attention was invited to the

PB page 30 which was a legder A/c of SR Ferro alloys (old)

A/c in the Solanki construction Jhabua for the period

01.04.2011 to 31.03.2012 were in on 01.04.2011 opening

balance is Rs. 53,75,797/-. Our attention was then invited

to PB page 33 which was SR Ferro alloys ledger A/C for Solanki construction for the period 01.04.2011 to

31.03.2012 where on 01.04.2011 the figure & amount of Rs.

53,75,797/- is shown & reflected. Our attention was then

invited to page 35 of the PB which is Form 26AS serial no. 5

[FY 2011-12-AY 2012-13] of the assessee were in total

amount of Rs. 2,62,40,326/- is shown as amount paid with

name of deductor as SR Ferro alloys. Basis above it was

contended by the Ld. AR that Ld. AO in the “Impugned

assessment order” has taken opening balance of Rs.

53,75,797/- as under reported turnover. The Ld. AR then

contended that basis of “Impugned assessment order” is

investigation report of the department which report was not

given to the assessee. The Ld. AR then submitted that the

income of the assessee in the earlier year shown in balance

sheet dated 27.09.2011 should not considered for the year

under consideration as each year is distinct & separate.

Our attention was invited to PB page 50 which id ledger A/C

of Solanki construction [assessee] for 01.04.2010 to

31.03.2011 were in the opening balance was Rs. 50,36,000/- as on 01.04.2010 & on 01.04.2021 a journal entry of Rs.

3,39,797/- is made taking the figure to Rs. 53,75,797/-.

3.3 Per contra the Ld. DR for the revenue contended that the

assessee during the course of the assessment proceedings

was non-compliant which fact is recorded in the “Impugned

assessment order” & part compliance is only done. Full &

complete compliance is not done so, despite opportunities in

this regard. The books of account is rightly rejected by the

Ld. AO basis reasons given in the “Impugned assessment

order”. The rejection of books of accounts being rejected

lawfully is not seriously contested as the assessee was non-

compliant. The reasoning of Ld. AO is logical & No

infirmities can be found in it. The Ld. DR has read out

para 5.2 & 5.3of the impugned order & has submitted

that no infirmities can be found in it. The Ld. AR has not

assailed the said observations & findings on any cogent

grounds. The 26AS, unsigned copy of ledger A/C of SR Ferro

alloys (old) non submission of audited books of accounts

both at the original stage & at the first appellate stage are proof enough for assessee’s failure. The views of lower

authorities are reasonable & just orders have been passed.

4.1 We have to decide the legality, validity and proprietary of the

“impugned order” basis records of the case & the rival

submission canvassed before us.

4.2 We have carefully perused the records of the case and have

heard the submissions.

4.3 We basis records of the case & after hearing & upon

examining the rival contentions of the Ld. AR & Ld. DR

canvassed before us, are of the considered opinion that the

“Impugned assessment order” is under section 144/147 of

the act. The matter could not be adjudged & adjudicated by

Ld. AO basis merits due to non-compliance by the

assessee. This Tribunal desires that it is incumbent upon

the assessee to furnish to the Ld. AO whatever relevant is

desired by the Ld. AO in the notice(s) etc. There should be

full & complete compliance on all the scores including on the

books of accounts etc. This unfortunately has not happened.

Even before the first appellate authority as submitted by Ld.

DR basis para 5.2 & 5.3 of the impugned order and the plea

that the situation at the original assessment level did not

improve much than what was desirable i.e. full & complete

disclosure. However before us now basis paper book new

arguments & contentions are made which were not made

before the lower authorities. A new case is made out

before us, basis PB (supra).Under these facts &

circumstances we deem it fit to set aside the “Impugned

order” as & by way of remand back to the file of Ld. AO on

denovo basis.

4.4 It is the expectation of this Tribunal that the assessee

would now give his full & complete disclosure of all available

information, documents, evidence to the Ld. AO as is sought

in the notices (142(1)) as detailed in the “Impugned

assessment order” which had remained non-compliant at

the stage of the assessment proceedings. The Ld. AO is

simultaneously directed to give all adversial material in his

possession to the assessee so that same is rebutted by the

assessee.

4.5 In the premises drawn up by us we set aside the

“Impugned order” & remand the case back to the file of Ld.

AO on denovo basis who shall now pass a speaking & a well-

reasoned order. The assessee to file before Ld. AO all

documents, papers, Material duly signed & authenticated

so that Ld. AO can verify the same accordingly, before

passing a fresh order on denovo basis.

5 Order

5.1 In the result-Impugned order is set aside as and by way of

remand back to the file of the Ld. AO with directions as aforesaid.

5.2. Appeal of assessee is allowed for statistical purpose.

pronounced in open court on 24.04.2026.

Sd/- Sd/-

(BHAGIRATH MAL BIYANI) (PARESH M JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Indore Dated : 24/04/2026 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Senior Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore