SUBHASH CHANDRA YADAV,VARANASI vs. INCOME TAX OFFICER, NFAC, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL VARANASI BENCH, VARANASI BEFORE HON’BLE JUSTICE (RETD.) C.V. BHADANG, PRESIDENT AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA Nos.227 & 228/VNS/2024 A.Y.-2015-16 Subhash Chandra Yadav, vs. Income Tax Officer, Sirmalpur, Kajisarai, Varanasi NFAC, Delhi PAN: ALSPY7165P (Appellant) (Respondent) Assessee by: Sh. O.P. Shukla, Advocate Revenue by: Sh. Deepak Yadav, Sr. DR Date of hearing: 03.08.2026 Date of pronouncement: 31.08.2026 O R D E R PER NIKHIL CHOUDHARY, A.M.: These two appeals have been filed by the assessee against the separate orders of the ld. CIT(A), NFAC, passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) both dated 22.05.2024, wherein the ld. CIT(A) has dismissed the appeals of the assessee against the order under section 147 r.w.s. 144 passed by the Assessing Officer for the assessment year 2015-16 on 20.03.2023 and also confirmed the penalty of Rs. 30,000/- levied upon him under section 271(1)(b). As the penalty arises from the assessment proceedings and the cases were heard together, both appeals are taken up for disposal together for the sake of convenience. The grounds of both the appeals are as under:- ITA No. 227/VNS/2024 “1. Because the Ld. Commissioner of Income tax (A) NFAC was not justify to confirmed the addition of Rs 5800000.00 u/s 69A under the head undisclosed amount and deposited to the bank.

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 2. Because the Ld. Commissioner of Income tax (A) NFAC was not justify to pass order and confirmed the addition though the appellant has already disclosed the receipts incompliance of notice u/s 148. 3. Because the Ld. Commissioner of Income tax (A) NFAC was not justify to reliance on the assessee submission and cited the case by the appellant. Thought the case of the appellant is fully covered by the apex court. 4. Because the appellant craves for a right to raise any additional ground during the course of hearing of the case. 5. Because the order passed by the Ld. Assessing officer is erroneous, bad in law and on facts and is liable to be deleted.” ITA No. 228/VNS/2024 “1. Because the Ld. Commissioner of Income tax (A) NFAC was not justify to confirmed the penalty an amount of Rs. 10000/- under non-compliance of notice issued u/s 142(1) of the income tax Act. 2. Because the appellant craves for a right to raise any additional ground during the course of hearing of the case. 3. Because the order passed by the Ld. Assessing officer is erroneous, bad in law and on facts and is liable to be deleted.” 2. It is observed from the record that both the appeals are delayed by 142 days. A condonation petition has been filed by the assessee alongwith an affidavit, in which it has been submitted that that though the assessee had submitted his submissions before the ld. CIT(A), due to unawareness of functioning of the portal, he could not inform his counsel and it was only after the opening of the Portal for checking the status of appeal pending before the CIT(A), NFAC on 19.12.2024, that he came to know that the ld. CIT(A), NFAC had passed the order on 22.05.2024. It was submitted that the assessee was not well educated and since no physical notice had been served by the Department, the said lapse had taken place only because of lack of knowledge and awareness with regard to the portal. Accordingly, it was prayed that the delay in the filing of the appeals may kindly be condoned. 3. We have duly considered the said submission. We observed that the assessee had made a detailed submission before the ld. CIT(A) which is 2

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 indicative of the fact that he was desirous of challenging the addition made by the Assessing Officer. In the circumstances, we are inclined to accept his claim that he was not aware of the passing of the appeal order and after keeping in mind the judgment of the Hon’ble Supreme Court in the case of Collector, Land Acquisition vs. MST Katiji & Others 167 ITR 471, wherein the Hon’ble Supreme Court has held that when the cause of substantive justice and technical considerations are pitted against one another, the cause of substantive justice must always prevail and furthermore that an assessee does not ordinarily stand to gain from delay but runs a serious risk on this account, we condone the delay of 142 days in the filing of these two appeals and admit the same for consideration on their merits. 4. The facts of the case are that the Assessing Officer received information that the assessee had made deposits of cash in savings bank account in Bank of India amounting to Rs. 43,00,500/-; made deposits of cash aggregating Rs. 2,00,000/- or more with the Bank of India, amounting to Rs. 43,00,000/- and made a further deposit of Rs. 2,00,000/- or more on account of deposits in cash aggregating Rs. 20,00,000/-. As a result, the ld. Assessing Officer came to the conclusion that a sum of Rs. 1,06,00,500/- had escaped assessment within the meaning of clause (a) to Explanation 2 of section 147 of the Income Tax Act, since the assessee had not filed a return of income. After following the procedure under section 148A, the Assessing Officer issued a notice under section 148 to the assessee for filing of a return. He records that the assessee filed a return of income in compliance to the notice under section 148 on 20.06.2022, wherein he admitted income of Rs. 4,64,080/-. Notices were issued to the assessee to explain the deposits of Rs. 1,06,00,500/- in the bank accounts. In response, the assessee submitted a reply for the transactions made in the bank accounts. He also submitted a computation of income, ITR 3

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 acknowledgement, bank account statements, TDS forms etc,. On perusal and analysis of the details submitted by the assessee, the ld. Assessing Officer found that the assessee had deposited cash of Rs. 43,00,500/- in an account maintained with Bank of India and Rs.15,00,000/- in an account maintained with State Bank of India. The assessee was asked to explain the sources of cash deposit alongwith supporting documents. However, as per the Assessing Officer, the assessee failed to submit the details called for vide notice under section 142(1). Thereafter, the Assessing Officer issued a show cause notice to the assessee but records that the assessee failed to submit replies to the show cause notices. The Assessing Officer refused to consider the submissions made by the assessee as the assessee had been requested to submit the proof of doing business including certificate of registration, bills and vouchers etc., but the assessee had failed to submit the same and he further noted that the entire deposits had been made within a span of four days. The assessee had failed to explain this. He had sought to explain the same by stating that he had sold his business but was unable to submit the details of purchasers of the business including name, address, PAN, bank contact number or amount of sale. Accordingly, the ld. Assessing Officer decided to treat the entire deposit of Rs. 58,00,000/- as unexplained money under section 69A of the Income Tax Act and brought the same to tax under section 115BBE. 5. Aggrieved with the said assessment order, the assessee filed an appeal before the ld. CIT(A). Before the ld. CIT(A), it was submitted that deposits had been made between 25.06.2014 to 28.06.2014 out of the opening cash in hand available in the books of the assessee on the dates immediately preceding the deposit. A copy of the cash book was uploaded on the portal on 30.02.2023 which, according to the assessee, proved the source of the cash. It was submitted that the provisions of section 69A 4

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 could not be applicable in the assessee’s case as the assessee had submitted cash book, ledger, journal, bank book and cash which had been deposited in the bank had been duly reflected in the books. The Assessing Officer, without considering these facts had made the addition under section 69A. The assessee further submitted the cash entered in the books of accounts was again receipt of cash sales and such income could not be treated as undisclosed income because the sales had already been offered to tax. Reference was invited to the CBDT Instruction No. 03/2017 wherein the ld. Assessing Officer was required to take into consideration the records of the assessee such as stock register, bank statement, sales tax return, monthly sales summary, possibility of back dating of cash sale or fictitious sales, before arriving at a conclusion in this regard. Reliance was further placed on several judgments to the effect that where the complete books of accounts had been submitted to the Assessing Officer and no discrepancy had been pointed out, cash sales could not be treated as undisclosed income and no addition could again be made with regard to the same. 6. The ld. CIT(A) considered the additions made by the Assessing Officer and in the light of the submissions made by the assessee, but observed that the assessee had not given details of the specific amount of cash in hand as on 1.04.2014 and sale proceeds of Kirana business from 1.04.2014 to 25.06.2014. He further found that the assessee had filed his return in response to a notice under section 148 and no prior or subsequent returns had been filed by the assessee. No month-wise purchases / sales of his business had been submitted and it was only the cash deposits of Rs. 58,00,000/- from 25.06.2014 to 28.06.2014 which had been projected as the turnover on which income had been declared as per the provisions of section 44AB of the Act . No VAT or Sales Tax Returns had been filed by the assessee in support of the claim of business. Furthermore, 5

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 the ld. CIT(A) was not convinced that the turnover of the Kirana business in three months could be Rs. 58,00,000/- and therefore because the assessee could neither furnish evidence of the proof of running a business or of selling a business, he held that the Assessing Officer had rightly treated the cash deposited as unexplained money under section 69A of the Act. Hence, he dismissed the appeals of the assessee. 7. Subsequent to the passing of the assessment order, penalty proceedings under section 271(1)(b) were also initiated in for non- compliance of notices under section 142(1) during the course of assessment. The ld. Assessing Officer observed that the assessee had not complied with notices under section 142(1) of the Income Tax Act, 1961 dated 10.10.2022, 2.11.2022 and 20.01.2023. During the course of the penalty proceedings two show cause notices were issued to the assessee. In response, the assessee submitted a reply to the first show cause notice but did not furnish any reply to the second show cause notice. The Assessing Officer did not discuss the contents of the said reply in his penalty order but he stated that the reply had been perused and kept on record and the reply was not acceptable. He, therefore, levied penalty of Rs. 30,000/- upon the assessee for failure to make compliance with three notices under section 142(1). 8. Aggrieved with the said levy of penalty, the assessee filed an appeal with the ld. CIT(A). It was submitted that the assessee had made compliance of the said notices vide reply dated 23.02.2023 through Acknowledgement No. 965108571230223 and also made compliance of the notice dated 24.02.2023, therefore, the imposition of penalty of Rs. 30,000/- was unjustified. It was submitted that since full compliance had been made on that date, there was no basis to levy the penalty. 6

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 Furthermore, the assessee had also made compliance to the notice issued under section 271(1)(b) for imposition of penalty on 23.03.2023. Without considering the replies, the Assessing Officer had wrongly passed the assessment order under section 147 and therefore, no penalty was leviable upon the assessee. The ld. CIT(A) observed that from the reply of the assessee, it was clear that the assessee was non-compliant on three occasions and had not given any reasonable cause for said non-compliance. However, he held that the Assessing Officer was not correct in imposing penalty of Rs. 30,000/- for three defaults as the Hon’ble ITAT ‘F’ Bench Delhi in the case of Smt. Rekha Rani vs. DCIT (2015) 60 taxman.com 131 (Delhi-Trib), had held that the provisions of section 271(1)(b) were of deterrent nature and not for earning of Revenue and therefore, penalty under section 271(1)(b) could not be imposed for each and every notice issued under section 142(1) of the Act which remained not complied with on the part of the assessee, but it should be restricted to the first default only. Accordingly, he restricted the penalty to Rs. 10,000/- and partly allowed the appeals of the assessee. 9. The assessee is aggrieved at both these orders passed by the ld. CIT(A) and has accordingly come before us. Sh. O.P. Shukla, Advocate (hereinafter referred to as the ld. AR) appearing on behalf of the assessee submitted that the assessee had filed a return of income on 20.06.2022, in response to the notice under section 148, disclosing an income of Rs. 4,64,080/- on total receipts of Rs. 58,00,000/-. The assessee was engaged in the business of trading of General Merchant/Kirana and other small products like Soap, Utensils etc,. Notices under section 142(1) had been issued from time to time and the assessee had submitted a para wise reply to the said notices regarding deposit of cash in Bank of India amounting to Rs. 43,00,500/- and in State Bank of India of Rs. 15,00,000/-. The assessee 7

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 had submitted the details of source of deposit of cash alongwith cash book, ledger, journal and bank books vide his reply dated 24.02.2023 before the Assessing Officer. A copy of the same was enclosed on pages no. 1 to 5 of the paper book. The assessee had also explained the source of cash deposit in both bank accounts and produced the cash book for the dates where cash was available in the books of accounts and deposited into the bank account and from the same it was crystal clear that all the cash had duly been deposited, after withdrawing the cash from the cash book. It was further submitted that the said cash was the sale proceeds made by the assessee previously. The ld. AR questioned the findings of the ld. CIT(A), wherein he had been alleged not to have given the specific amount of cash in hand as on 1.04.2014 to 20.06.2014 by submitting that the assessee had already submitted a copy of the cash book from the date when the cash had duly been deposited, on pages no. 5 to 10 of the paper book. It was further submitted that the ld. CIT(A) was incorrect in suggesting that the assessee had not submitted the details of purchases and sales of the business of Kirana, because the assessee had submitted the purchase, sale ledger and other documents vide Acknowledgment No.965108571230223 dated 23.02.2023 and these documents were enclosed from page nos. 29 to 54 of his paper book. It was further pointed out that the assessee had also uploaded the complete balance-sheet, profit and loss account and trading account alongwith the computation of income, which were placed on page nos. 4 to 28 of the paper book. In response to the CIT(Appeal’s) observation that the assessee had not mentioned the details of business income, the assessee was submitting a sales ledger as proof that the CIT(A) had relied upon wrong facts, without examination of the documents submitted by the assessee. He refuted the finding of the ld. CIT(A) that the turnover in three months could not be Rs. 58,00,000/- by stating that many goods had been 8

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 sold on credit previously and these credit payments had been realized, which were displayed in the books and duly deposited into the bank account from the same. It was submitted that section 69A could have no application to the facts of the assessee’s case as the cash had been entered in the books of accounts against receipt of sale and already been considered in the income returned by the assessee. The books of the accounts of the assessee could not be rejected on account of cash deposit which had already been entered into the books and considered in the determination of profits. Section 69A was only applicable when there was no entry in the books of accounts and even the CBDT had acknowledged vide his Instruction No. 03/2017 dated 21.02.2017, that before coming to any such conclusion, the Assessing Officer had to consider things like the stock register, bank statement, sales tax return, monthly sale summary etc. The ld. AR placed reliance on a number of case laws in support of his arguments which are as follows:- “a. CIT v. Kailash Jewellery House (ITA No. 613/2010, Delhi HC) b. R.B. Jessaram Fatehchand (Sugar Dept) v. CIT (1969) 75 ITR 33 (Bom) c. CIT v. Jaora Flour and Foods Pvt. Ltd. (2012) 344 ITR 294 (MP) d. CIT v. Vishal Exports Overseas Ltd. (ITA No.2471/2009, Gujarat HC) e. M/s Single Exim Pvt. Ltd. v. ITO (ITA No. 6520/Del/2018, ITAT Delhi)” The ld. AR particularly invited our attention to pages 29 and 30 of his paper book which contained the e-proceedings response acknowledgment for the documents filed before the ld. Assessing Officer in the proceedings under section 147 to show that the same had not been taken into consideration while finalizing the assessment. 10. With regard to the levy of penalty under section 271(1)(b) and the partial confirmation thereof, the assessee submitted that he had already 9

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 made compliance of the three notices and the show cause notice vide his reply dated 22.02.2023 vide Acknowledgment No. 965108571230223. A copy of the reply submitted before the Assessing Officer was contained on pages 1 to 24 of the paper book submitted alongwith ITA No. 228/VNS/2024. It was submitted that there were several judgments from various Benches of the Tribunal and the Hon’ble High Court which stated that if an assessee initially failed to comply with the notices, but later on cooperated and filed reply, no penalty under section 271(1)(b) or under section 272A(1)(d) could be imposed. Our reference was invited to said case laws as under:- “1. Chudaji Thakar, Basajada v. Income Tax Officer(ITA No. 2049/AHD/2025) 2. Anshu Sharma, Jaipur v. ITO, Ward-1(3), Jaipur(ITA No. 73/JP/2023) 3. Geetu Kamara v. ITO, Ward-58(3), Delhi (ITA No. 5144/DEL/2024) Accordingly, it was prayed that in view of the aforesaid judgments and the compliance made by the assessee, the penalty of Rs. 10,000/-, that had been confirmed by the ld. CIT(A) may be quashed. 11. On the other hand, Sh. Deepak Yadav, Sr. DR (hereinafter referred to as the ld. DR) appearing on behalf of the Revenue, submitted that the Assessing Officer had elaborately discussed in the course of his assessment order as to why the explanations offered by the assessee were not acceptable. He drew our reference to para 3.5 of the order of the Assessing Officer in which the Assessing Officer had pointed out that the assessee had been requested to submit the proof of doing of business, but failed to do so. Furthermore, the bank accounts had been opened just before the deposit of cash, the entire cash had been deposited within a span of four days and the assessee had also failed to furnish any details of the persons to whom he had sold his business. Accordingly, these circumstances had led the ld. 10

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 Assessing Officer to conclude that the assessee did not have any business which could justify or explain the deposit of cash into the two bank accounts within a span of four days. He, therefore, prayed that the orders have correctly been upheld by the ld. CIT(A) and deserved to be upheld by the Tribunal also. On the issue of levy of penalty under section 271(1)(b), the ld. DR submitted that it was clear that the assessee had not made compliance to the various notices under section 142(1) that have been issued to him. The mere submission of a reply does not constitute compliance and since the Assessing Officer was not satisfied with the response, the assessee could not claim to have complied with the notices. He therefore, prayed that since the ld. CIT(A) had already granted relief to the assessee in this regard, further relief was not called for. 12. We have duly considered the facts and circumstances of the case and the arguments advanced by the rival parties. We noticed that while the assessee has claimed that the deposit of cash in the two bank accounts at Bank of India and State Bank of India, were on account of opening cash that was duly reflected in his books of accounts, which were maintained for the Kirana business, the Assessing Officer has held that the assessee had failed to establish the existence of a Kirana business and the subsequent sale thereof. However, we note that on 23.02.2023, the assessee has submitted a detailed reply on 23.02.2023 and alongwith the same uploaded a copy of his purchase register, sale register, cash book, bank ledgers, journal etc. Subsequently, another reply has also been filed on 24.02.2023 in which the assessee has attempted to explain the deposits out of the balance in the cash book, on the dates of deposit. The Assessing Officer does not appear to have examined these books of accounts and come to any finding that the said books are unreliable or that they are conjured up only to explain the cash deposits. In the circumstances, his decision to treat the money 11

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 deposited in the bank account as unexplained money under section 69A, without examination of and rejection of these books of accounts, cannot be sustained. Therefore, in order to meet the ends of justice, we deem it appropriate to restore this matter back to file of the Assessing Officer for examination of these documents furnished by the assessee on 23.02.2023 and conduct such other enquiries as he may deem fit and thereafter pass a fresh order with regard to the nature of the cash deposits, as he may deem appropriate. Accordingly, the matter is restored back to the file of the Assessing Officer and ITA No. 227/VNS/2024 is held to be allowed for statistical purposes. 13. As regards the levy of penalty under section 271(1)(b), we noticed that the order passed by the Assessing Officer has been passed under section 147 r.w.s. 143(3) r.w.s. 144B of the Income Tax Act. This would imply that the assessee ultimately made compliance to the notices issued by the Assessing Officer. We also notice from a perusal of the assessment order that the ld. Assessing Officer has referred to the replies of the assessee and made an addition thereafter. The levy of penalty under section 271(1)(b), is for the failure to comply with the notice under section 142(1) altogether. Once it is established that compliance has been made, section 271(1)(b), would not be attracted in such a case especially if there was material to show that the reply had not been considered in its entirety. It is observed that the ITAT Ahmedabad Bench in the case of Chudaji Thakar, Basajada v. Income Tax Officer (ITA No. 2049/AHD/2025) in considering a similar matter held that where the taxpayer failed to comply initially but was later on cooperative, held that it demonstrated reasonable cause such as lack of knowledge of electronic notice under section 273B and penalty in such cases was not justified. In the circumstances, considering that the assessee made subsequent compliance, which was not 12

ITA Nos.227 & 228/VNS/2024 Subhash Chandra Yadav A.Y. 2015-16 examined in detail by the Assessing Officer before concluding the assessment, levy of penalty under section 271(1)(b) would not be justified in the given facts and circumstances of the case. Accordingly, the penalty levied and confirmed to the extent of Rs. 10,000/- is deleted and the appeal of the assessee in this regard is held to be allowed. 14. In the result, ITA No. 227/VNS/2024 is held to be allowed for statistical purposes while ITA No. 228/VNS/2024 is held to be allowed. Order pronounced as per Rule 34(4) of Income Tax (Appellate Tribunal) Rules, 1963 on 31.08.2026.

Sd/- Sd/- [JUSTICE (RETD.) C.V. BHADANG] [NIKHIL CHOUDHARY] PRESIDENT ACCOUNTANT MEMBER DATED: 31/08/2026 Sh Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT DR, ITAT 4. CIT, 5. The CIT(A) By order Sr. P.S.