SARVRAY ALAM,KUSHINAGAR vs. INCOME TAX OFFICER - 2 (4), KUSHINAGAR

PER SUDHANSHU SRIVASTAVA, J.M.: These appeals have been preferred by the Assessee against the separate orders, both dated 29.12.2023, passed by the National Faceless Appeal Centre, Delhi (NFAC) in quantum proceedings as well as penalty proceedings for Assessment Year 2015-16.

2.0 The brief facts of the case are that the assessee was a wholesale trader. The assessee had filed his return of income for the year under consideration on 30.09.2015, declaring a total income of Rs.2,66,200/-. The case of the assessee was selected for scrutiny under CASS. The Assessing Officer (AO) issued statutory notices to the assessee. The assessee sought adjournment on various occasions, but failed to appear before

ITA Nos.79 & 80/VNS/2024 Page 2 of 7

the AO despite being afforded multiple opportunities. The AO noticed that the assessee had made deposits of Rs.2,48,04,056/- in his Bank Accounts maintained with ICICI Bank and Punjab Gramin Bank. The assessee was asked to explain the difference of Rs.72,77,536/- in the total bank deposits and the actual sales reported in the profit and loss account. Since there was no response from the side of the assessee, the AO rejected the books of account of the assessee under section 145(3) of the Income Tax Act, 1961 (hereinafter called “the Act’) and added Rs.72,77,536/- to the income of the assessee under section 69C of the Act.

2.1 Since the books of accounts of the assessee were rejected by the AO, the gross profit of the assessee was also rejected and, accordingly, the AO calculated the gross profit of the assessee @ 6% as against 5.4499% disclosed by the assessee, which came to Rs.10,51,591/-. The difference of Rs.96,396/- was added to the income of the assessee as income from business and profession.

2.2 Further, the AO also disallowed the following expenses claimed by the assessee @ 5% owing to lack of verification and probability of personal use:

Expenses Claim Disallowance Travelling Rs.41,250/- Rs.2,063/-

ITA Nos.79 & 80/VNS/2024 Page 3 of 7

Mobile 14,250/- Rs.713/- Shop & Misc. Rs.64,125/- Rs.3,206/- Total Rs.5,982/-

2.3 The AO completed the assessment under section 143(3) of the Act, computing the income of the assessee as under:

Business income declared by the assessee : Rs.2,78,196/- Addition u/s 69C of the Act : Rs.72,77,536/- Addition of gross profit : Rs.96,396/- Disallowances : Rs.5,982/- Total income : Rs.76,58,110/-

2.4 The AO also initiated penalty proceedings under section 271(1)(c) of the Act for concealment of income amounting to Rs.73,79,914/-. Since the assessee had failed to comply with the notice issued under section 271(1)(c) of the Act, the AO held that the assessee has concealed the particulars of his income to the tune of Rs.73,79,914/- and, therefore, he imposed a penalty of Rs.22,14,000/- being the minimum penalty imposable @ 100%.

2.5 Aggrieved, the Assessee preferred appeals before the NFAC. The NFAC, in the quantum proceedings, partly allowed the appeal of the assessee by rejecting the grounds raised by the assessee against additions of Rs.72,77,536/- and Rs.96,396/- and allowing the ground raised by the assessee against

ITA Nos.79 & 80/VNS/2024 Page 4 of 7

disallowance of expenses to the tune of Rs.5,982/-, by passing an order ex-parte qua the assessee. However, in the penalty proceedings, the appeal filed by the assessee was dismissed by the NFAC, confirming the order of the AO imposing a penalty of Rs.22,14,000/- under section 271(1)(c) of the Act, by passing an order ex-parte qua the assessee.

3.0 Now the assessee has approached this Tribunal challenging the orders of the NFAC, by raising the following grounds of appeal:

GROUNDS IN ITA NO.79/VNS/2024:

ITA Nos.79 & 80/VNS/2024 Page 5 of 7

4.0 None was present on behalf of the assessee when the appeals were called out for hearing nor was any adjournment application moved in this regard. However, looking into the facts of the case, we proceed to adjudicate the appeals based on record before us.

5.0 The Ld. Sr. D.R. placed reliance on the orders of the NFAC and submitted that the assessee had not appeared before the lower authorities and now before the Tribunal too, the assessee had failed to appear. The Ld. Sr. D.R. prayed that the orders of the NFAC in the quantum as well as in the penalty may be upheld and the appeals of the assessee be dismissed.

6.0 We have heard the Ld. Sr. D.R. and have perused the material on record. It is evident that the orders passed by both

ITA Nos.79 & 80/VNS/2024 Page 6 of 7

the authorities are ex-parte qua the assessee. Looking into the facts of this case, we are of the considered view that the assessee deserves one more opportunity to present his case and, therefore, we set aside the order of the NFAC in quantum proceedings and restore this file to the Office of the Assessing Officer with the direction to provide one more opportunity to the assessee to present his case. We also caution the assessee to fully comply with the directions of the Assessing Officer in the set-aside proceedings when called upon to do so, failing which, the Assessing Officer would be at complete liberty to pass the order in accordance with law, based on material available on record even if it is ex-parte qua the assessee.

6.1 Since the quantum appeal has been restored to the AO, the penalty appeal is also being restored to the file of the AO for re-adjudication after giving proper opportunity to the assessee.

7.0 In the result, both the appeals of the assessee stand allowed for statistical purposes.

Order pronounced in the open Court on 16/04/2026.

Sd/- Sd/- [NIKHIL CHOUDHARY] [SUDHANSHU SRIVASTAVA] ACCOUNTANT MEMBER JUDICIAL MEMBER

DATED:16/04/2026 JJ:

ITA Nos.79 & 80/VNS/2024 Page 7 of 7