RAJMANI YADAV,JAUNPUR, UTTAR PRADESH vs. I.T.O., ITO, JAUNPUR-II, NEW

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 No.143/VNS/2025 A.Y. 2016-17 Rajmani Yadav, vs. Income Tax Officer, Vill-Balua, Post-Mirshadpur, Jaunpur 222125, Jaunpur PAN: ACPPY3832K (Appellant) (Respondent) Assessee by: Sh. Yaspal Gupta, Advocate Revenue by: Smt. Amandeep Kaur, Sr. DR Date of hearing: 18.02.2026 Date of pronouncement: 14.05.2026 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed by the assessee against the orders of the ld. CIT(A), NFAC passed under section 250 of the Income Tax Act, 1961 on 1.06.2025, wherein the ld. CIT(A) has partly allowed the appeals of the assessee against the orders of the ld. Assessing Officer passed under section 143(3) for the A.Y. 2016-17 on 26.12.2018. The grounds of appeal are as under:- “1. That the learned A.O. has on presumptions and arithmetical calculations arrived on an imaginary figure of Rs. 4703235.00 as undisclosed capital and has proceeded to make the addition. The learned C.LT(Appeal) Income Tax Department has wrongly confirmed the addition of 4703235.00 That the learned C.I.T. (Appeal) has overlooked the fact and order passed by A.O. on 28.08.2019 for the assessment year 2012-13, in which capital balance has been totally accepted, hence order passed by C.LT.(A) is liable to be quashed and addition of Rs. 4703235.00 to be deleted.

ITA No.143/VNS/2025 Rajmani Yadav A.Y. 2016-17 2. That the learned CIT.(A) has not justified to confirmed the addition of Rs. 1289692.00 relates to bank transfer entry and old arrear deposited by debtors, hence addition of Rs. 1289692.00 is liable to be quashed.” 2. The facts of the case are that the assessee filed a return of income on 30.01.2018 declaring total income of Rs. 4,26,070/- and agricultural income of Rs. 1,70,000/-. The case was initially selected for limited scrutiny but was specifically converted into a full scrutiny assessment with the approval of the ld. PCIT, Faizabad vide his letter dated 30.10.2018. The assessee was engaged in manufacturing and sale of bricks from the F.Y. 1993-94. However, he filed a return of income for the first time on 30.01.2018 (i.e., after demonetization) for the A.Ys. 2016-17 and 2017-18. In his balance-sheet for the F.Y. 2015-16, the assessee showed opening capital of Rs. 68,48,235/-. Since he had never filed income tax returns prior to assessment year 2016- 17, the ld. AO asked him to justify the accumulation of opening capital. In response, it was submitted that he had started his brick-Kiln business in July, 1993. As proof of this, he filed a copy of registration certificate issued by Assistant Commissioner, Commercial Taxes Registration Cell, Jaunpur dated 10.12.2010, wherein it was mentioned that the registration certificate was valid w.e.f. 6.07.1993. The assessee admitted that he had not filed return of income prior to assessment year 2016-17, due to ignorance but submitted a chart of capital accumulation w.e.f. F.Y. 2006-07 to 2016-17 which was reproduced by the Assessing Officer in his assessment order. The ld. AO observed that in all these years, as per the submissions made by the assessee, the assessee had earned business income of Rs. 1,20,000/- and therefore, as per the provisions of section 44AA of the Income Tax Act, 1961, he was liable to maintain books of accounts for his businesses for all these years. He, therefore, asked the assessee to produce the books for the last six years to substantiate his capital accumulation but the assessee could not produce them, stating that the have been destroyed by termites. The ld. AO therefore, 2

ITA No.143/VNS/2025 Rajmani Yadav A.Y. 2016-17 did not accept the capital accumulation disclosed by the assessee or the income claimed by the assessee and he held that since the assessee had not filed income tax returns, therefore, it must be held that the assessee had earned below taxable income in all the years prior to assessment year 2016- 17. Taking the said figure, the ld. AO computed the total possible capital accumulation from the assessee’s business to be only Rs. 21,45,000/- and he therefore, added back the sum of Rs. 43,03,235/- as unexplained. The AO had also asked the assessee to produce complete books of accounts, ledger and bills/vouchers in respect of expenses for verification and to produce the details for additions made in fixed assets, but the assessee did not produce the complete books of accounts. He only produced copies of salary paid for the months of April, 2015 and March, 2016, diesel expenses for the A.Y. 2016-17, Pathai expenses for April, 2015 to June, 2015, Bojhai expenses for April, 2015 and March, 2016 and details of sale for April, 2015 and March, 2016. The ld. AO was not convinced even with these details. He held them to have been prepared in haste, and as an afterthought, holding that the assessee did not maintain any books of accounts for his business. He pointed out certain contradictions in these accounts to record his belief of the above. The assessee was also asked to explain cash deposits and transfers to the extent of Rs. 13,38,692/-, but the AO was not satisfied with his reply. He therefore, made an addition of Rs. 12,89,692/- to the income of the assessee as unexplained receipts. The ld. AO also noticed that perusal of the reply to a notice under section 133(6) issued to the Assistant Commissioner, Commercial Taxes, Sector-2, Jaunpur revealed that the assessee had made excess payment of Rs. 2,05,775/- by way of VAT and entry tax as compared to the figures disclosed in the profit and loss account. Therefore, the ld. AO held the same to be out of unexplained sources and added it back.

ITA No.143/VNS/2025 Rajmani Yadav A.Y. 2016-17 Accordingly, the assessment of the assessee was completed at a figure of Rs. 66,24,770/-. 3. Aggrieved with the said assessment order, the assessee went before the ld. CIT(A). Before the ld. CIT(A), it was submitted that the opening capital balance of Rs. 68,48,235/- was mostly on account of old assets which have been carried forward from past years and were against opening capital. It was submitted that in the F.Y. 1998-99, as per the instructions issued by the U.P. State Government, a fixed chimney was built for approximately Rs. 8,00,000/- and thereafter repairs had been made to it every five or six years and the written down value came to around Rs. 3,08,580/- as on 1.04.2015. There were several other assets like a Tata Safari purchased in F.Y. 2007-08 for Rs. 9 Lacs, depreciated value of which was Rs.3,39,435/-, tractors and trolleys purchased in 2011-12 etc., etc. It was submitted that during the year, the total addition in assets was only that of one tractor for Rs. 6,50,000/- and one motorcycle for Rs. 63,000/-. The total liabilities and assets were Rs. 86,69,013/- on 31.03.2016, whereas in the previous year, they were Rs. 95,35,488/-. The assessee also submitted the details of sundry creditors of the previous year and what he had received from them during the course of the year. A list of such fixed assets was attached to the submissions before the ld. CIT(A) and it was argued that the AO had wrongly added Rs. 47,32,350/- out of old capital balance, whereas he had himself accepted the total balance-sheet capital amounting to Rs. 58,74,690/- shown and disclosed in F.Y. 2011-12. Hence, it was prayed that this amount may be deleted. Furthermore, amount deposited by old debtors was also pleaded to be deleted. The assessee submitted that the Brick Kiln business of the assessee was under the composition scheme and the assessee had been paying commercial taxes, which had been certified by the Commercial Taxes Officer. On these grounds, he prayed that the additions made by the AO may 4

ITA No.143/VNS/2025 Rajmani Yadav A.Y. 2016-17 be deleted. However, the ld. CIT(A) noted that the assessee had not produced any evidence to substantiate his contention in respect of source of initial capital of Rs. 10,00,000/- earned from agricultural income 25 years ago by his father. He further noted that the assessee was a non-filer and the AO had followed a very reasonable approach by holding that the assessee had not spent any amount out of assumed earnings, which he had assumed to be maximum amount not chargeable to tax, considering that the assessee was a non-filer and therefore, he found no reason to interfere with the order of the ld. AO. With regard to the claim of receipt of money from old debtors, the ld. CIT(A) held that claims of the assessee were not established by documentary evidences and with regard to the addition on account of unexplained expenditure on payment of VAT and entry tax, the ld. CIT(A) held that the addition was justified, but he restricted it to Rs. 49,350/- as Rs. 1,95,350/- had already been deposited. On these grounds, the ld. CIT(A) partly allowed the appeals of the assessee. 4. The assessee is aggrieved and has accordingly come before us in appeal. Sh. Yaspal Gupta, Advocate (hereinafter referred to as the ld. AR) appearing on behalf of the assessee submitted that the assessee had been doing the Brick Kiln business right from 1993. He admitted that the assessee had never filed returns prior to assessment year 2016-17 because of a lack of knowledge and he submitted that the return in 2016-17 had been filed due to notice issued by the Department. He submitted that the addition of opening balance was uncalled for, as opening capital could never be the income of the assessment year in question. Though the assessment of the assessee in sales tax had been done as per composite scheme, the ld. AR submitted that he could produce certificates from the Sales Tax Department to demonstrate what the turnover was of the assessee in all those years/composite orders and he could produce books of accounts prepared 5

ITA No.143/VNS/2025 Rajmani Yadav A.Y. 2016-17 on that basis to demonstrate that the amounts that was claimed to be opening capital was actually opening capital. The ld. AR submitted that the opening capital was represented by old assets and the details of those old assets would themselves demonstrate that the amounts were not liable to be added back in the course of this assessment year. He also agreed to produce confirmation from sundry debtors and pointed out that the amounts received from them were not cash deposits but bank transfers from other accounts. Accordingly, he prayed that an opportunity may kindly be provided to him so that the actual tax may be assessed in the hands of the assessee. 5. On the other hand, Smt. Amandeep Kaur, Sr. DR (hereinafter referred to as the ld. DR) pointed out that the assessee was a non-filer and lacking in documentary evidence to demonstrate that the amount claimed by him as opening capital was infact so. She therefore, prayed that in the absence of documentary evidences, the amounts had been added back by following a very reasonable approach and the order of the ld. AO should be confirmed. 6. We have duly considered the facts of the case. While it is self-evident that the assessee is a non-filer who has not previously been assessed to income tax, it is also evident that the assessee was regularly carrying out the business of Brick Kiln since long and had been filing returns with the Commercial Taxes Department of the Government of Uttar Pradesh. It also becomes apparent that some of the assets that have been reflected in its capital accounts have been purchased much earlier and therefore, demonstrate that they belong to earlier years. While the fact of assessee not having filed returns in previous years is a matter for enquiry of the Department after determining whether any income as escaped assessment or not, an addition cannot be made to the income of the assessee in this assessment year if the assessee is able to demonstrate that the opening 6

ITA No.143/VNS/2025 Rajmani Yadav A.Y. 2016-17 capital of the financial year in question was actually opening capital. The assessee claims to be in possession of evidence to demonstrate that the capital account submitted represents accumulation over the years and therefore, in the interest of justice, we deem it appropriate to restore the matter back to the file of the Assessing Officer so as to enable the assessee to produce this documentation before the ld. AO and thereafter we direct the AO to consider such evidences and grant relief to the assessee to the extent that he is able to establish, that assets represented in his opening capital stand explained by investments in previous years. Accordingly, as the matter stands restored to the file of the AO, the appeal of the assessee is held to be allowed for statistical purposes. 7. In the result, the appeal of the assessee is allowed for statistical purposes. Order pronounced on 14.05.2026 in the Open Court. Sd/- Sd/- [SUDHANSHU SRIVASTAVA] [NIKHIL CHOUDHARY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:14/05/2026 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR , ITAT, 4. CIT, 5. The CIT(A) By order Sr. P.S.