HAMID ALI,GORAKHPUR vs. INCOME TAX OFFICER - (1), GORAKHPUR

IN THE INCOME TAX APPELLATE TRIBUNAL VARANASI BENCH, VARANASI BEFORE SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA Nos.21 & 40/VNS/2024 A.Y.-2015-16 Hamid Ali, vs. Income Tax Officer, Luchui, Ward No. 4, Sahjanwa, 1(1), Gorakhpur Gorakhpur-273209 PAN: ATKPA3349M (Appellant) (Respondent) Assessee by: Sh. Arvind Shukla, Advocate Revenue by: Smt. Amandeep Kaur, Sr. DR Date of hearing: 17.02.2026 Date of pronouncement: 30.03.2026 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 wherein the ld. CIT(A) has dismissed the appeal of the assessee filed against the assessment order of the ld. Assessing Officer dated 25.03.2022 under section 147 r.w.s. 144 of the Income Tax Act, and the order dated 7.02.2024 wherein the ld. CIT(A) has confirmed the penalty levied under section 271(1)(b) by the Assessing Officer on 6.09.2022. The grounds of appeal are as under:- ITA No. 21/VNS/2024 “1. Because the learned CIT(A) has erred in law as well as on facts in dismissing the appeal without appreciating the facts and evidences on record under the incorrect impression that no response was filed by the assessee/appellant. 2. Because the learned CIT(A) has erred in law as well as on facts in dismissing the appeal without appreciating that exhaustive submissions and evidences in support of the assessee's case were duly uploaded on the portal but the same have escaped the consideration of the learned CIT(A).” 1

ITA Nos.21 & 40/VNS/2024 Hamid Ali A.Y. 2015-16 ITA No. 40/VNS/2024 “1. Because the learned CIT(A) has erred in sustaining the penalty of Rs.30,000/- for alleged non-appearance against notices u/142(1) without appreciating that the illiterate non-computer educated assessee never came to know of any notice issued against him. 2. Because the learned CIT(A) has failed to appreciate the non-appearance by the assessee was not deliberate and only because he never came to know of the notices uploaded on the portal 3 Because the learned CITIA) has failed to appreciate that the assessee has no taxable income nor had he filed any return then how could he be expected to comply with the notions uploaded on the portal when he has no access to the portal.” 2. The facts of the case are that the Department received information that the assessee had made cash deposits amounting to Rs. 1,35,19,800/- in his accounts held with Central Bank of India during the F.Y. 2014-15. A notice under section 148 was issued requiring the assessee to make compliance and file a return for the A.Y. 2015-16 but the assessee did not make any compliance. Subsequently, the ld. AO issued notices under section 142(1) and a show cause notice under section 144 of the Income Tax Act, but records the fact that the assessee had not made any compliance to any of these notices. Since, no income was forthcoming, he decided to complete the assessment on a best judgment basis holding that the amount of Rs. 1,35,19,800/- was unexplained money within the meaning of section 69A of the Income Tax Act. As the notices issued under section 142(1) had not been complied with, the ld. AO also initiated penalty proceedings under section 271(1)(b) for this non-compliance. The ld. AO records that penalty notices were issued to the assessee on 26.03.2022 and 17.08.2022, but no compliance was made to these notices. Therefore, the ld. AO held that the assessee had nothing to state in this regard and he accordingly levied a penalty of Rs. 30,000/- for three defaults in the failure to comply with notices under section 142(1). 3. The matter travelled to the ld. CIT(A). Before the ld. CIT(A), it was submitted that all notices and letters regarding the assessment proceedings had been issued online and sent to the email goldenfeedagency@gmail.com, which was handled by an Accountant but not a single message and email had actually been 2

ITA Nos.21 & 40/VNS/2024 Hamid Ali A.Y. 2015-16 received on the said email. The assessee was uneducated. He did not have any knowledge of computer and system activities. Hence, he was not aware about any assessment proceedings taking place and also not aware that from 13.08.2020, there was a change in the method of assessment proceedings. Due to the lack of information about the e-filing, NEAC and NFAC, no compliance could be made during assessment proceedings. It was, therefore, prayed that the non-compliance was not intentional but due to the aforesaid circumstances. With regard to the cash deposited in his bank accounts, the assessee submitted that the amount of Rs. 1,35,19,800/- was cash received from cash sales to retailers from trading of Eggs and the amount recovered from his debtors during F.Y. 2014-15. It was submitted that this was against purchases of Rs. 1,31,82,991.60/- and the actual rate profit was only Rs. 1,46,549.66/- i.e. 1.09% of total sales. Some purchase bills were attached for the perusal of the ld. CIT(A). The ld. CIT(A) records that in response to the various notices issued by him, only a single page response was filed by the assessee. He also observed that the appeal was delayed by 14 days. The ld. CIT(A) held that in the present appeal proceedings, a notable absence of crucial financial documentation had come to light that raised concerns about the transparency and legitimacy of the assessee’s claims. As the assessee had failed to submit books of accounts, audit reports and evidence of any business activities despite claiming a turnover of more than Rs. 1 Crore and without any previous history of business, there was no evidence to support the claim of the assessee. Accordingly, he dismissed the appeal and he confirmed the addition.

ITA Nos.21 & 40/VNS/2024 Hamid Ali A.Y. 2015-16 taxable threshold limits, then no return was required to be filed. It was submitted that although the turnover for the year was Rs. 1,35,19,800/- but the G.P. was very small because the G.P. in this type of trade was very low. The assessee submitted that he had not been able to make compliance before the Assessing Officer due to lack of information and as he never came to know of any notices issued under section 148 or any other proceedings, or any other orders. He only came to know about the assessment order when his various bank accounts were frozen and a sum of Rs. 67,52,832/- and Rs. 89,230/- were recovered from him in March, 2023, whereupon he had immediately filed the appeal against the assessment proceedings in March, 2023. It was then that the assessee came to know that penalty of Rs. 30,000/- had also been levied upon him and he had filed the appeal with a request for condonation of delay. After considering the submissions of the assessee, the ld. CIT(A) decided to admit the appeal in the interest of justice. However, he held that the assessee had failed to provide any explanation or justification for the non-compliance to the various notices and this had compelled the AO to make an assessment under section 144. The AO had followed the process by issuing notices and providing opportunities for compliance. The notices sent by the AO had been sent to the same email ID i.e. goldenfeedagency@gmail.com on which the present appeal notices were being sent. If these could be complied with, then there was no reason why the earlier notices could not be complied with. He, therefore, held that the only reason that they were not complied with, is because the assessee did not think them important enough for compliance. The ld. CIT(A) therefore, confirmed the penalty of Rs. 30,000/- imposed upon the assessee under section 271B.

ITA Nos.21 & 40/VNS/2024 Hamid Ali A.Y. 2015-16 notices. He had submitted before the ld. CIT(A) on various occasions that he as a trader in Eggs and that he did not enjoy taxable income. He had further submitted that his accounts were audited but the return was not filed because the income was not taxable. It was submitted that when the assessee had owned up to the fact that he was not able to comply with the notices due to his incapacity to deal with the electronic medium, there was no reason to either assess him at such a large amount or to levy penalty upon him for default committed due to lack of knowledge. It was therefore, prayed that the penalty may be deleted and that the assessment may be restored back to the file of the AO so that the assessee could demonstrate that he did not have the income which the AO had assessed in his hands.

ITA Nos.21 & 40/VNS/2024 Hamid Ali A.Y. 2015-16 email ID, cannot be a ground for disbelieving that the assessee was not aware of the earlier proceedings before the AO. Having seen his bank account attached, due to electronic proceedings, the assessee cannot be faulted for being more vigilant during appeal proceedings. The assessee has submitted that he has audited books of accounts and that his income is below taxable limits as the margin in his trade is very low. We believe it is in the interest of justice, that the assessee should be allowed to demonstrate this before the AO. We, therefore, restore the quantum appeal to the file of the Assessing Officer. Regarding the penalty, we notice that the ld. CIT(A), after considering the submissions made by the assessee had decided to admit the delayed appeal of the assessee in the interest of justice. Given our observations above, we feel that the reasons cited by the assessee for a non- compliance for notices under section 142(1) cannot be dismissed out of hand. Accordingly, we hold that a levy of penalty is not justified and we delete the same.