AJAI JAISWAL,LUCKNOW vs. DCIT, RANGE-3, LUCKNOW

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW ‘B’ BENCH, LUCKNOW BEFORE SH. KUL BHARAT, VICE PRESIDENT AND SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA No.698/LKW/2025 A.Y. 2012-13 Ajay Jaiswal, vs. Deputy Commissioner of 255/172, Kundri, Rakabganj, Income Tax, Range-3, Lucknow Lucknow PAN: AFGPJ5274G (Appellant) (Respondent) Assessee by: Sh. S.C. Dixit, Advocate Revenue by: Sh. R.R.N. Shukla, Addl CIT DR Date of hearing: 03.02.2026 Date of pronouncement: 29.04.2026 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 on 10.09.2025, wherein the ld. CIT(A) has dismissed the appeals of the assessee against the orders of the ld. Assessing Officer, passed under section 147 for the assessment year 2012-13 on 4.12.2020. The grounds of appeal are as under:- “1. On Limitation and Dismissal by CIT(A): That the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi ["L.4. CIT(A) erred in law and on facts in dismissing the appeal vide order dated 10.09.2025 on the alleged ground of delay, without appreciating that the assessment order dated 04.12.2019 was never served upon the appellant and that a certified copy of the order was obtained only on 04.11.2020. The appeal filed on 04.12.2020 was, therefore, well within the prescribed time limit under Section 249(2) of the Act, and dismissal of the appeal on limitation is wholly arbitrary and illegal. 2. Violation of Principles of Natural Justice by CIT(A): That the Ld. CIT(A) erred in law in dismissing the appeal arbitrarily after keeping it pending for over 19 months from the date of hearing on 15.01.2024, despite 1

ITA No.698/LKW/2025 A.Y. 2012-13 Ajay Jaiswal full compliance by the appellant, and further in ignoring the appellant's specific request for a re-virtual hearing dated 12.04.2025. The order suffers from gross violation of principles of natural justice and is liable to be quashed. 3. Validity of Notice under Section 148: That the Learned Assessing Officer ("Ld. AO") erred in law in initiating reassessment proceedings under Section 148 of the Act without recording valid reasons to believe that income had escaped assessment. Mere cash deposits in a bank account cannot, by themselves, constitute a valid reason to believe escapement of income. The initiation of reassessment proceedings is, therefore, bad in law and void ab initio. 4. Addition of ₹50,60,000/- (Cash Deposita); That the Ld. AO erred in law and on facts in making an addition of ₹50,60,000 by treating cash deposits in the savings bank account as unexplained, without appreciating that the deposits represented cash sales of liquor duly recorded in the audited books of account and included in the turnover for the year under consideration. 5. Ad hoe Disallowance of 230,04,281/-(Expenses); That the Ld. AO erred in law and on facts in making an arbitrary ad hoc disallowance of 20% of business expenses, amounting to 230,04,281/-, under the heads "travelling" and "other expenses", without pointing out any specific defect or discrepancy in the duly audited books of account. The disallowance is unjustified and unsustainable in law. 6. Levy of Interest under Sections 234B and 234C That the Ld. AO erred in law in charging interest under Sections 234B and 234C of the Act mechanically and without a proper basis 7. Denial of Opportunity by AO; That the Ld. AO erred in not affording a reasonable and sufficient opportunity to the appellant to explain and substantiate his claims, thereby vitiating the assessment proceedings. 8. General: That the appellant craves leave to add, alter, amend, or withdraw any ground at the time of hearing in the interest of justice.”

ITA No.698/LKW/2025 A.Y. 2012-13 Ajay Jaiswal and audit report and copy of some bank accounts etc,. The ld. AO, then issued a final show cause notice in which he noted that the assessee had submitted a copy of savings bank account at Pandey Ganj, Lucknow and stated that cash deposit in that account had been made through sale of liquor, but no proof of cash sale of liquor had been submitted. The assessee was therefore given an opportunity to produce the proof of cash sale by producing cash book ledger, bills, vouchers, stock register etc,. Several other pieces of information were also called for. The ld. AO records that the assessee did not make any compliance to the show cause notice and therefore, he added the amount of Rs. 50,60,000/- to the income of the assessee, holding it to be unexplained and unverifiable. He also asked the assessee to submit details and documentary evidences in respect of travelling expenses including foreign travel amounting to Rs. 64,20,928/- and other expenses amounting to Rs. 86,00,480/-, debited to P&L account. The assessee was asked to show cause that the in case compliance was not made, 20% of these expenses would be disallowed. As the assessee did not made compliance, an amount of Rs. 30,04,281/- was disallowed as unvouched and unverifiable and added back to the income of the assessee. 3. Aggrieved with the said assessment order, the assessee filed an appeal before the ld. CIT(A). Before the ld. CIT(A), statement of facts was filed in which it was submitted that the assessee was an individual engaged in Trasport business as well as dealing in Liquor. The total turnover of the assessee from Transport as well as Liquor business was Rs. 3,54,84,841/- and the assessee had filed a return of income on 28.09.2012 disclosing a total income of Rs. 17,83,060/-. The nature of the business of the assessee was such that all sales of liquor were made in retail in cash and the cash sales so received was deposited in the savings bank account for making payment to

ITA No.698/LKW/2025 A.Y. 2012-13 Ajay Jaiswal the supplier and meeting out other business-related expenses. The assessee did not have any current account and the said savings account stood disclosed in his books of accounts. On 22.09.2011, the assessee finally opened the current account with ICICI Bank. Till then, total cash of Rs. 50,60,000/- was deposited into the savings bank account and after that date, they were deposited in the current account. The cash deposits made into the savings bank account were duly accounted for in his business receipts, in the books of accounts maintained by the assessee and stood included in the turnover and offered to tax while filing the return of income for the year under consideration. The books of accounts of the assessee were audited under section 44AB of the Act. During the course of assessment proceedings, the assessee had submitted before the AO that the cash deposits had been made into the savings banks account out of the cash sale of liquor proceeds, but the AO did not appreciate the same and made the addition. Another adhoc addition was made by way of disallowing 20% of expenses under various heads, without pointing specific defect in the books maintained by the assessee. It was submitted that during the year under consideration, the total payment to the supplier of liquor was Rs. 1,13,81,802/- on which TCS of Rs. 1,13,820/- was collected by the supplier from the assessee. This was proof of the fact that the assessee was dealing in liquor sales. Further, as the AO had failed to point out how the assessee had hidden any facts, the notice under section 148, which had been issued without recording any valid reason or belief and after the period of four years, was not as per law. The ld. AO had also not provided the assessee a copy of the reasons recorded for initiating the proceeding and furthermore, the assessee had not received the copy of the assessment order until he applied for and obtained a certified copy on 4.11.2020. The ld. CIT(A) recorded that he issued seven notices to the assessee, of which three were replied to. After considering the 4

ITA No.698/LKW/2025 A.Y. 2012-13 Ajay Jaiswal submissions of the assessee in response to these notices, he noted there was a delay of more than eleven months in the filing of the appeal. The assessee had not filed any application for condonation of delay but only mentioned that he received the order late. However, no reasons had been given for the delay in receipt. Therefore, relying upon the judgment of the Hon’ble Supreme Court in the case of J.B. Advani & Co. (P.) Ltd. vs. CIT (1969) 72 ITR 395, the ld. CIT(A) held that the assessee had been negligent in not filing the appeal on time and since the assessee had not been able to give a reasonable cause for the delay, he dismissed the appeal as being not maintainable. Thereafter, he ld. CIT(A) also proceeded to examine the issue on merits and came to the conclusion that the assessee had been given three show cause notices but not filed the necessary details before the ld. AO. Further, since the nexus between the deposit and the recorded turnover had not been demonstrated, he confirmed the additions made by the Assessing Officer. On the issue of adhoc disallowances, he held that the onus was upon the assessee to justify its expenditure and for this reason, he upheld the additions made by the Assessing Officer. 4. The assessee is aggrieved by this order of the ld. CIT(A) and has accordingly come before us in appeal. Sh. Shyama Charan Dixit, Advocate (hereinafter referred to as the ld. AR) appearing on behalf of the assessee submitted an affidavit from the assessee in which it was submitted that the assessment order under section 147 r.w.s. 143(3) dated 4.12.2019 was never served upon him and that he only obtained a certified copy of the same on 4.11.2020. He had submitted all the document before the ld. CIT(A) alongwith explanations and the appeal had been finally heard on 15.01.2024. Despite this, the appeal was kept pending for 19 months and subsequently arbitrarily dismissed on 10.09.2025 on ground of delay. The ld. AR drew our

ITA No.698/LKW/2025 A.Y. 2012-13 Ajay Jaiswal attention to the fact that the assessee had specifically submitted a request for virtual hearing on 12.04.2025 but the same had been ignored and no further opportunity had been granted to the assessee before dismissing the appeal. Accordingly, he prayed that the said order of the ld. CIT(A) was arbitrary and unjust and deserved to be set aside. Drawing our attention to the order of the ld. Assessing Officer, the ld. AR submitted that the ld. CIT(A) had erred in law in not adjudicating upon the validity of the notice under section 148. He had also erred in not considering the submissions of the assessee with regard to the source of the deposits and in upholding the order of the AO to make adhoc disallowances, without pointing out any specific defects in the books of accounts. He, therefore, prayed that the order of the ld. CIT(A) and the Assessing Officer could not be sustained and therefore, they deserved to be set aside. The ld. AR filed a paper book containing a copy of the certificate from the District Authorities at Lucknow which demonstrated that he had been allotted a liquor shop during the financial year 2011-12, in support of his submissions. 5. On the other hand, Sh. R.R.N. Shukla, Addl CIT DR (hereinafter referred to as the ld. DR) submitted that the assessee had been non- compliant before the Assessing Officer and had also not submitted the necessary evidences before the ld. CIT(A) that could justify the delay in the filing of the appeal before him. Accordingly, he prayed that the orders of the lower authorities may be upheld. 6. We have duly considered the facts of the case and the arguments advanced by both parties. It appears that the AO had asked the assessee to submit certain details before him, which was not complied and therefore the ld. AO held the entire sales of the assessee to be unexplained. It also appears that the ld. CIT(A) has not examined the arguments raised by the assessee 6

ITA No.698/LKW/2025 A.Y. 2012-13 Ajay Jaiswal during appeal by effectively dismissing the appeal in limine. In the circumstances, we feel that since there were reasonable cause for the delay in the filing of the first appeal, the ld. CIT(A) ought to have considered the issues on merits. Be that as it may, since it is obvious that the complete details had not been furnished before the AO, we deem it fit to restore the matter back to the file of the ld. AO so that the assessee may submit the evidences to demonstrate that the deposits in his savings bank account are not unexplained and to justify the expenses claimed by him, on account of which disallowances had been made. The assessee may also raise objections to the validity of the proceeding before the AO; if deemed necessary. The ld. AO may offer the assessee to adequate opportunity to make such representation and thereafter pass a fresh order in accordance with law.