NARESH SINGH CONTRACTORS,ETAWAH vs. ITO,WARD 2(2)(5), ETAWAH, ETAWAH,UP

At the outset, I find there is delay in filing of appeal by the assessee before this Tribunal by 2799 days. The reasons adduced in the delay condonation petition is reproduced below:- “Subject: Applications for condonation of delay in filing of appeal against the order passed by CIT(Appeals) Hon'ble Sir, The Applicant most respectfully beg, prays and humbly submits as under: Briefly stated, the fact of the case that the quantum order of appeal passed by CIT(A) Agra under section 250 of the Act dated 30.03.2018 was neither served to the Appellant and nor it was uploaded on the Income Tax Portal. Thereafter the Appellant has filed an application requesting the authorities to provide the copy of appellate order dated 30.03.2018 along with the challan of Rs. 100 dated 25.04.2019 having BSR Code: 6390340 and Challan Serial Number: 50713. Only Pursuant to this application the said order was uploaded on the Income Tax Portal in the month of November 2025. That the delay in filing appeal has been due to the non-availability of the Appellate Order which is beyond the control of Appellant Since there is genuine reason for delay in filling appeal, the same shall be condoned in the interest of natural justice. Prayer In view of above, having regards to the facts mentioned above, it is humbly prayed that based upon the totality of the circumstances mentioned above, since there was "sufficient cause" your honors may be pleased to consider the prayer of the Applicant for condonation of delay. The facts and circumstances as mentioned above involve the question of "substantial justice", delay deserves to be condoned in the overall interest of justice. On the other hand, if condonation of delay being denied it would seriously undermine the cause of justice, resulting miscarriage of justice for the Appellant.

The same facts are also supported in the affidavit of the partner of the assessee:- “Before the Hon'ble Members. Income Tax Appellate Tribunal Agra Affidavit of Naresh Singh, Partner of M/s Naresh Singh Contractors, resident of 42-A Friends Colony, Etawah having PAN: AWLPS3602D. The Deponent do hereby submit as under: 1. That the Deponent, Partner in M/s Naresh Singh Contractors, resident of 42- A Friends Colony, Etawah having PAN: AWLPS3602D is well verse with the facts of the case.

On perusal of the above, I am convinced that the assessee was not prevented from sufficient cause in not filing the appeal in time. Hence, I am not inclined to condone the delay and admit the appeal of the assessee is hereby dismissed in limine.

The only issue to be decided in this appeal is as to whether the ld CIT(A) was justified in confirming the levy of penalty u/s 271(1)(c) of the Act in the facts and circumstances of the instant case. The assessee is a partnership firm engaged in the business of contract work with Public Works Department. The business income was offered by the assessee in the return by applying the provisions of Section 44AD of the Act in the sum of Rs. 1,90,000/- and from which interest paid to partner of Rs. 9,00,395 was deducted resulting in business loss of Rs. 7,10,395/-. The assessee earned interest on fixed deposits of Rs. 6,30,895/- offered under income from other sources and total loss returned was Rs. 79,500/-.

The ld AO noted that there was a cash deposit made in the sum of Rs. 11,13,000/- in the bank account by the assessee. The total receipts reflected in Form 26AS was Rs. 28,93,261/-. The return of income filed by the assessee on 03.03.2015 declaring total income of Rs. Nil was treated as non est by the ld AO. Based on the AIR information that assessee had deposited cash of Rs.11,13,000/- in savings bank account, the same was added as unexplained cash credit u/s 68 of the Act. based on the gross receipts reflected in Form 26AS in the sum of Rs. 28,93,261/- in the assessment framed u/s 143(3) of the Act on 21.12.2016.

The ld CIT(A) noted that this is a case of non maintenance of books by the assessee and hence the assessee would be entitled to apply the provisions of Section 44AD of the Act and held that only 8% of business receipts of Rs. 28,93,261/- should be taxed as per Section 44AD of the Act and deleted the remaining sum of Rs. 26,61,800/-. The ld CIT(A) thereafter confirmed the addition made on account of cash deposit of Rs. 11,13,000/- u/s 68 of the Act in the quantum proceedings. Penalty proceedings u/s 271(1)(c) of the Act stood initiated and penalty order was passed on 26.03.2019 levying penalty only on the additions that stood sustained by the ld CIT(A) for no satisfactory explanation given by the assessee in response to the penalty show cause notice u/s 271(1)(c) of the Act dated 31.12.2016 and 28.06.2018. The ld CIT(A) confirmed the levy of penalty by the ld AO as the assessee had not complied with the penalty notices at all before the ld AO. 8. The ld AR before me stated that out of total gross receipts of Rs. 28,93,261/- mentioned in Form 26AS, a sum of Rs. 5,65,022/- represent interest from fixed deposit and hence the same cannot be treated as business receipts of the assessee from contract business. The assessee had indeed offered interest income on fixed deposits of Rs. 6,30,895/- separately under the head “income from other sources” in the return. Hence, this sum of Rs. 5,65,022/- had been otherwise offered to tax by the assessee in the return. With regard to cash deposit of Rs. 11,13,000/-, the ld AR pleaded that the same were sourced out of cash withdrawals made from the bank accounts during the year itself and only a paltry sum of Rs. 14,000/- stood deposited out of available cash with the assessee. The source of cash deposit explained by the assessee are tabulated as under:-

From the above, it could be seen that satisfactory explanation has indeed been given by the assessee explaining the source of cash deposits to have emanated out of withdrawals from the bank account during the year itself. It is not the case of the revenue that the withdrawals by the assessee have already been spent for personal or business purposes by the assessee and that the same is not available as a cash source for explaining the cash deposit. Hence, there cannot be any allegations of concealment of income or furnishing of inaccurate particulars of income qua the assessee warranting levy of penalty u/s 271(1)(c) for the addition of Rs. 11,13,000/-. 10. As stated earlier, the total gross receipts reflected in Form 26AS of Rs. 28,93,261/- includes a sum of Rs. 5,65,022/- on account of interest on fixed deposits which has been already offered to tax in the return itself as the said interest figure is included in the total interest income of Rs. 6,30,895/- offered in the return. Hence, there cannot be any levy of penalty u/s 271(1)(c) of the Act for the credit of Rs. 5,65,022/- representing interest income. With regard to remaining contract receipts of Rs. 23,28,239/- (2893261-565022). The assessee offered 8% profit as per Section 44AD of the Act which is only a estimated and accepted profit percentage as per the Act. The 8% of the contract receipts of Rs. 23,28,239/- works out to Rs. 1,86,259/- whereas assessee itself had disclosed Rs. 1,90,000/- as business income u/s 44AD before interest paid to partners in the return itself. Hence, there cannot be any allegation of concealment of income or furnishing of inaccurate particulars of income on the part of the assessee. 11. In view of the aforesaid observations, there cannot be any levy of penalty u/s 271(1)(c) of the Act in the facts and circumstances of the instant case and accordingly, I direct the ld AO to cancel the levy of penalty thereon. Grounds raised by the assessee are allowed. 12. In the result, the appeal of the assessee is allowed.

To sum up, the appeal in ITA No 117/AGR/2026 filed by the assessee is dismissed and ITA No. 85/AGR/2026 filed by the assessee is allowed. Order pronounced in the open court on 02/06/2026.