ZAHID ABDULLAH LAKHANI,MUMBAI vs. INCOME TAX OFFICER, MUMBAI

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ITA 5241/MUM/2025Status: DisposedITAT Mumbai17 June 2026AY 2017-1810 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal condoned the delay in filing the appeal and, noting that proper representation was not made by the assessee, set aside the addition. The issue was restored to the Assessing Officer for fresh adjudication, allowing the assessee an opportunity to explain the nature and source of the credits.

What were the facts?

The Assessing Officer initiated reassessment proceedings based on information about cash deposits in the assessee's bank account. During the proceedings, the Assessing Officer noted significant credits in the bank account that were disproportionate to the declared business turnover and were not explained by the assessee.

What were the issues?

Whether the reassessment proceedings were validly initiated and whether the addition of unexplained credits in the bank account was justified without providing the assessee adequate opportunity to explain.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B,Section 148A,Section 144,Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “G” BENCH, MUMBAI

[ Per Rahul Chaudhary, Judicial Member:

1.

The present appeal preferred by the Assessee is directed against the Order, dated 14/02/2025, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 16/05/2023, passed under Section 147 read with Section 144B of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’],for the Assessment Year 2017-2018. 2. The Assessee has raised following grounds of appeal:

“1. Validity of Reopening: The learned CIT(A) has erred in law and on facts in upholding the reopening of assessment under section 147 of the Act without appreciating that the mandatory procedure under section 148A was not followed and the reopening is bad in law.

2.

Violation of Principles of Natural Justice: The learned authorities have erred in completing the assessment ex parte under section 144 without granting adequate and reasonable opportunity to the appellant to present his case and furnish evidences.

3.

Erroneous Addition under Section 69A: The learned CIT(A) has erred in confirming the addition of ₹3,87,19,853/- as unexplained money under section 69A of the Act without appreciating that the said amounts represented business turnover and deposits arising from regular business transactions duly explained.

4.

Non-Consideration of Business Facts: The authorities below have failed to appreciate that the appellant was carrying on the business of trading in soaps, detergents, and consumer goods, and the cash deposits were sourced from business sales, which were subsequently utilized for supplier payments.

5.

Bank Account Not Disclosed: The learned authorities erred in holding against the appellant for not reporting the Jammu & Kashmir Bank account in the return of income without considering that the omission was inadvertent and not deliberate, and the transactions were linked to disclosed business activity.”

3.

When the appeal was taken up for hearing the Learned Authorized representative for the Assessee invited the attention towards application seeking condonation of delay filed along with the appeal. Taking us through the said application and the supporting affidavit, the Learned Authorized Representative for the Assessee submitted that the delay of about 117 days in filing present appeal be condoned. The Learned Authorized Representative for the Assessee explained that the Assessee did not receive correct legal advice and therefore, proper representation could not be made by the Assessee during the assessment as well as appellate proceedings. Therefore, the Learned authorized representative for the Assessee sought another opportunity to make out a case on merits before the Assessing Officer.

4.

Per contra the Learned Departmental Representative opposed the application submitting that there was inordinate delay in filing the present appeal. It was also submitted that the Assessee had been non-compliant during the assessment as well as appellate proceedings. Therefore, the order passed by the Learned CIT(A) be upheld.

5.

On perusal of record it emerges that the Assessee is a resident individual.

Information was received by the Assessing Officer to the effect that cash deposits have been made in the bank account of Maharashtra Soap Center, a propriety concern of the Assessee. On verification of Statement of Financial Transactions (SFT), it was found that cash of around INR.42,68,440/- was deposited in account maintained by the Assessee with Jammu and Kashmir Bank Limited, Mahim Branch, Mumbai. On perusal of return of income filed by the Assessee the Assessing Officer noted that for Assessment Year 2017-18 the Assessee had declared total income of INR.4,41,563/-. According to the Assessment Officer the source of cash deposit of INR.42,68,440/- made by the bank account of the Assessee during the demonetization period had remained undisclosed and there was escapement of income. Therefore, re-assessment proceedings initiated in the case of the Assessee. During the re-assessment proceedings the Assessee did not responded to the notices issued by the Assessing Officer and was, therefore, proceeded ex-parte. Based on material on record, the Assessing Officer completed assessment under Section 147 read with Section 144 of the Act making addition of INR.3,57,19,853/- in the hands of the Assessee under Section 69A of the Act. The conclusion drawn by the Assessing Officer reads as under:

“3.8 The Assessee has maintained bank account bearing No. 530020100000009 with Jammu & Kashmir Bank Ltd. Further, during the course of assessment proceedings in the case of the Assessee, bank account statement of bank account 530020100000009 maintained with Jammu and Kashmir Bank Ltd, called for. On perusal of the same, it is noticed that these are total credits of Rs. 3,87,19,853/- in said bank account for the year under consideration. Further, on perusal of return of income filed u/s 139 of the Act, it is noticed that the Assessee has shown total turnover of Rs. 24,03,048/- for the year under consideration. The Assessee has submitted that M/s Maharashtra Soap Centre is proprietor Mr. Zahid A. Lakhani. The Proprietor Firm shall be trading in all kinds of shop, Detergent cake, washing Powders, Liquid soaps and general consumer items. The shop unit is located at Shop No.50, Khoja Jamat Khana, Kapad Bazar, Mahim. During the year 2017-2018 the all cash deposited are only for the payment of supplier, the major supplier is Hindustan Lever, Dettol, P&G Ltd, Colgate and Palmolive etc. ...we give the cheque in advance against the purchase. Hence, the Assessee has contended that the source of deposits is from business sales. However, it is noteworthy to mention that the Assessee has shown total turnover of Rs. 24,03,048/- only in return of income for the year under consideration. Moreover, the Assessee has not shown the bank account under consideration in return of income. Further, the Assessee has also not reported cash deposit during the demonetization period in return of income. The Assessee has also failed to furnish any explanation/documents/submission in respect nature and source of such credits in his bank account. Despite of affording ample opportunities, the Assessee has neither furnished supporting documents of so claimed sales nor furnished any other document for substantiate his claim. In such circumstance, it is construed that total credits of Rs. 3,87,19,853/- including cash deposit during demonetization period in his bank account 530020100000009 maintained with Jammu and Kashmir Bank Ltd are unexplained income/money u/s 69A of the Act. In view of the above, an amount of Rs. 3,87,19,853/- is treated unexplained Income/money for the year under consideration and added to the total income. Penalty proceedings are also initiated u/s 271AAC of the Act for income determined under section 69A rws 115BBE of the Act.

6.

Being aggrieved by the above Assessment Order, dated 16/05/2023, passed by the Assessing Officer under Section 147 read with Section 144 of the Act, the Assessee preferred appeal before the Learned CIT(A). The aforesaid appeal was dismissed by the Learned CIT(A) vide Order, dated 14/02/2025, holding as under:

“1. Grounds of appeal objects to issuing notice u/s.148 without following the procedure specified in section 148A. The reasons for reopening the case was duly communicated by the AO and hence notice u/s148 does not become invalid. The Assessee did not file any return in response to notice u/s. 148 forcing the AO to complete the order exparte u/s. 144. The Assessee has maintained bank account bearing No. 530020100000009 with Jammu & Kashmir Bank Ltd. Further, during the course of assessment proceedings in the case of the Assessee, bank account 530020100000009 maintained with Jammu and Kashmir bank statement account of Bank Ltd, was called for. On perusal of the same, it is noticed that these are total credits of Rs. 3,87,19,853/- in said bank account for the year under consideration. Further, on perusal of return of income filed u/s 139 of the Act, it is noticed that the Assessee has shown total turnover of Rs. 24,03,048/- for the year under consideration. The Assessee has submitted that Mr. Zahid A. Lakhani, is the proprietor of M/s Maharashtra Soap Centre. The Proprietor concern shall be trading in all kinds of shop, Detergent cake, washing Powders, Liquid soaps and general consumer items. The shop unit is located at Shop No.50, Khoja Jamat Khana, Kapad Bazar, Mahim. During the year 2017- 2018 the all cash deposited are only for the payment of supplier, the major supplier is Hindustan Lever, Dettol, P&G Ltd, Colgate and Palmolive etc. while we give the cheque in advance against the purchase. Hence, the Assessee has contended that the source of deposits is from business sales. However, it is noteworthy to mention that the Assessee has shown total turnover of Rs. 24,03,048/-only in return of income for the year under consideration. Moreover, the Assessee has not shown the bank account under consideration in return of income. Further, the Assessee has also not reported cash deposit during Assessee has also failed the demonetization period in return of income. The to furnish any explanation/documents/submission in respect nature and source of such credits in his bank account. Despite of affording ample opportunities, the Assessee has neither furnished supporting documents of so claimed sales nor furnished any of this document for substantiate his claim. In such circumstance, it is construed that total credits of Rs. 3,87,19,853/- including cash deposit during demonetization period in his bank account 530020100000009 maintained with Jammu and Kashmir Bank Ltd are unexplained income/money u/s 69A of the Act. In view of the above, an amount of Rs. 3,87,19,853/- is treated unexplained income/money for the year under consideration and added to the total income. The addition of Rs.38719853/- is confirmed.”

7.

As a result, the Assessee has now preferred the present appeal before this Tribunal on the grounds reproduced in paragraph 2 above after a delay of 117 days.

8.

On perusal of application seeking condonation of delay and the supporting affidavit we find that the Assessee has explained as under:

“On 16/05/2023 appellant has been served an order of Income Tax officer Ward MUM-W-(197)(92) Mumbai, for assessment year 2017-18. The Assessee being illiterate person in the matters of Income Tax was carrying on the business of wholesalers and retailer in all kinds of shop, detergent cake, washing powders, liquid soaps and general consumer item in the name of M/S Maharashtra Soap Centre The assessee was in a wrong belief that his accountant-Tout who claimed to be a Tax consultant is making all compliances in the assessment proceedings which was not the truth. An appeal was filled before CIT(Appeals) against the order passed by the AO by a Chartered Accountant. He was requested to handle my case before the CIT(Appeals) as the applicant is not aware of the procedures and legal provisions regarding the Income tax Matter and he assured the appellant regarding the remedial measures and representing his case before the CIT(Appeals). But the CA appointed neither filled reply to the notices nor inform me about the orders passed by the CIT(A). Based on above submission, it is clear that there was not will full default from the assessee but was prevented by a reason out of his hands from taking further remedial measure available under law. A duly sworn affidavit detailing the aforesaid facts from appellant in this regard is also furnished The Honourable Members are requested that the delay in filing of appeal may please be condoned as the appellant was prevented by reasonable cause from filling the Appeal before the Honourable Bench” Thus, the stand taken by the Assessee is that for pursuing the income tax matters the Assessee was dependent upon his accountant who also claimed to be a tax consultant. The said accountant/tax consultant failed to provide proper legal advice to the Assessee and also failed make proper representation before the tax authorities.

9.

In the case of Collector of Land Acquisition Vs. Mst. Katiji & others : AIR 1987 1353 (SC) the Hon’ble Supreme Court has, while dealing with the issue of condonation of delay, emphasized that substantial justice should prevail over technical considerations. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold. As against this, when delay is condoned, the highest that can happen is that a cause would be decided on merits after hearing the parties. On perusal of the application seeking condonation of delay (which is supported by duly sworn affidavit of the director of the Assessee- Company) it has been explained that the Assessee-Company was unable to file the appeal within the stipulated timeframe on account of failure of the accountant/tax consultant to pursue the appeals properly. The Assessee was dependent upon the accountant/tax consultant who failed to communicate the factum of impugned order having been passed to the Assessee. This resulted in delay in filing the present appeal. In our view, no benefit would have accrued to the Appellant by delaying filing of appeal. The Assessee has provided sufficient explanation for delay in filing the appeal before the Tribunal and we have no reasons to doubt the bonafaides of the said explanation. We hold that in the facts and circumstances of the present case the Assessee was prevented by sufficient cause from filing the present appeal within the prescribed time. Accordingly, accepting the explanation offered by the Assessee as bonafide and reasonable, we condone the delay of around 117 days in filling of the present appeal and proceed to adjudicate the grounds raised by the Assessee in the present appeal.

10.

On perusal of the Assessment Order we find that initially Assessing Officer had received information that cash deposits of INR.42,68,440/-were made in the bank account during the demonetization period. However, during the assessment proceedings the Assessing Officer called for bank account statement of the Assessee from the Jammu and Kashmir Bank Limited. On perusal of same, the Assessing Officer noted that the credits in the aforesaid bank account aggregated to INR.3,87,19,853/-. The Assessing Officer noted that in the return income for the relevant assessment year, the Assessee had only shown total turnover of INR.24,03,048/-. We find that the Assessing Officer has recorded that no explanation, documents or submission were filed on behalf of the Assessee. Therefore, the Assessing Officer proceeded to make addition of the entire amount of INR.3,87,19,5853/- credited in the bank account as unexplained income/money taxable in the hands of the Assessee in terms of Section 69A of the Act. On perusal of order passed by the Learned CIT(A), we find that Learned CIT(A) rejected the stand taken by the Assessee that credits to the bank account of the Assessee were related to business sales during the relevant previous year observing that the Assessee had failed to furnish any explanation, document or submission to explain the nature and source of credits in his bank account despite having been granted sufficient opportunities. During the course of hearing, it was explained by the Learned Authorized Representative of the Assessee that the Assessee was engaged in trading of soaps, detergents, cake, washing powder, liquid soaps and general customer items. The Assessee had moved out of Mahim, Mumbai during the Covid Period and therefore, the Assessee was dependent upon accountant/tax consultant for perusing tax matters. It is the case of the Assessee that the accountant/tax consultant appointed by the Assessee failed to discharge the duties properly and did not make submissions/representations during the assessment/appellate proceedings. It has been contended that the Assessee being an illiterate person, could not keep track of the matter and that the accountant/tax consultant appointed by the Assessee did not inform about the fate of the appellate proceedings. The Assessee has now sought an opportunity to make proper representation before the authorities below. We note that the basis of addition is the bank account statement obtained by the Assessing Officer. While the reassessment proceedings were initiated in respect of cash deposited in the bank account the Assessing Officer during demonetization period, the Assessing Officer completed the assessment by making addition of entire credits to the bank account of the Assessee. From the perusal of the Assessment Order and the order passed by the Learned CIT(A) it is apparent that proper representation was not made on behalf of the Assessee. Taking note of the fact that addition of entire amount credited to the bank account has been made by the Assessing Officer, we it deem it appropriate and in the interest of justice to grant an opportunity to the Assessee to explain the nature and source of credits to the bank account of the Assessee. Accordingly, subject to deposit cost of INR.25,000/- in the Prime Ministers National Relief Fund within a period of 30 days from the date of the present order, the addition made by the Assessing Officer is set-aside and the issue is restored back to the file of the Assessing Officer for adjudication afresh as per law. The Assessee has directed to place before the Assessing Officer all documents/details to explain the nature and source of credit in the bank account of the Assessee. The Assessing Officer is directed to provide to the Assessee a copy of the bank statement on the basis of which additions were made by the Assessing Officer. It is clarified that in case the Assessee fails to furnish proper submission and supporting documents before the Assessing Officer and/or fails to enter appearance, the Assessing Officer would be at liberty to adjudicate the issue on merit on the basis of material forming part of the assessment record. The Assessee is directed to be vigilant and the track the assessment proceedings through Income Tax Business Application (ITBA) Portal. Further, the Assessee is directed to place on record the current postal address and the correct Email address for communication of notices/orders by the Assessing Officer. The Assessing Officer would be at liberty to carry out such inquiry/verification as the Assessing Officer may deem fit. The Assessee would be confronted with the material gathered by the Assessing Officer and shall be granted reasonable opportunity of being heard. Since we have restored the issue back to the file of the Assessing Officer, all the rights and contentions of the Assessee are left open. In terms of the aforesaid, Ground No. 3, 4 and 5 raised by the Assessee are allowed for statistical purposes, while Ground No. 1 & 2 are dismissed as having been rendered infructuous without returning any findings on merits of contentions raised therein.

11.

In result, the present appeal preferred by the Assessee is partly allowed.

Order pronounced on 17.06.2026. (Om Prakash Kant) Judicial Member मुंबई Mumbai; िदनांकDated : 17.06.2026 आदेशकी"ितिलिपअ"ेिषत/Copy of the Order forwarded to : 1. अपीलाथ"/ The Appellant

2.

""थ"/ The Respondent. 3. आयकरआयु"/ The CIT

4.

"धान आयकर आयु" / Pr.CIT 5. िवभागीय"ितिनिध ,आयकरअपीलीयअिधकरण ,मुंबई/ DR, ITAT, Mumbai 6. गाड"फाईल / Guard file.

आदेशानुसार/ BY ORDER, स"ािपत"ित //// उप/सहायकपंजीकार /(Dy./Asstt.

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