FASIHUDDIN KHAN,UCHRI GARHWA vs. ITO WARD W3(5) DALTONGANJ, DALTONGANJ

IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI RATNESH NANDAN SAHAY, ACCOUNTANT MEMBER AND SMT. RAJANI GUDURI, JUDICIAL MEMBER I.T.A. No. 345/RAN/2026 (Assessment Year: 2017-18) (Physical Hearing) Fasihuddin Khan, I.T.O., Uchri, Garhwa, Gharwa-822114 Ward 3(5), Vs. (Jharkhand) Daltonganj. PAN No. AXBPK 0468 N Appellant/ Assessee Respondent/ Revenue

Assessee represented by None Department represented by Shri Sandipan Khan, Sr.DR Date of hearing 05/10/2026 Date of pronouncement 14/10/2026 O R D E R PER: BENCH 1. This appeal by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC), Delhi, [in short, the ld. CIT(A)] dated 30/01/2026 for the Assessment Year (AY) 2017-18 wherein the assessee has raised following grounds of appeal: "1. For the facts and circumstances mentioned in statement of facts, the initiation of proceedings u/s 148 which has been upheld by CIT(A) is fit to be dismissed quashing initiation of proceedings u/s 148. 2. For the facts and circumstances mentioned in statement of facts, the estimation of profit @ 8% which has been upheld by CIT(A) should have been reduced to 2.5% of total turnover. 3. The assessee craves leave to add/alter any/all grounds of appeal before or at the time of hearing of appeal."

I.T.A. No. 345/RAN/2026 Fasuhuddin Khan Vs ITO "In assessee's case, the Ld. CIT (A) passed order u/s 250 of the Income Tax Act, 1961 on 30.01.2026 which the assessee came to know only on 14.02.2026 Accordingly the assessee should have preferred appeal before Hon'ble ITAT, Ranchi Bench, Ranchi on or before 15.04.2026 but the assessee could not be able to file appeal within due for the following facts-time (i) That the assessee resides at Uchari, District-Garhwa whereas his authorised representative resides at Ranchi at a distance of 200 Kilometres away from Uchri. (ii) That it took 10-15 time to contact him and to know the next course of action. (iii) That it was suggested by him to file appeal before Hon'ble ITAT if not satisfied with the order passed u/s 250 of the income Tax Act, 1961 by the ld CIT (A) NFAC, Delhi. (iv) That he further suggested to contact another authorised representative as he does not file appeal before ITAT, High Court etc. (v) That I contacted Sri Rajesh Garg Adv and Sri Yash Garg CA at Ranchi for filing appeal thereafter 10-15 days. (vi) That Sri Rajesh Garg suggested the documents needed for filing appeal before Ld. ITAT which was arranged and handed over to him again at Ranchi which took 10-15 days time again. (vii) That thereafter the authorised representative took time to prepare appeal, file appeal after payment of appeal fee, prepare statement of facts & Ground of appeal, condonation application etc. (viii) In all stated affairs took almost 140 days Approx time which constitute sufficient cause for not presenting appeal within the sufficient period. Thereafter the assessee requests your honour to admit appeal after the expiry of the limitation period by 140 Approx days and oblige."

I.T.A. No. 345/RAN/2026 Fasuhuddin Khan Vs ITO appeal before the Tribunal and the appeal of the assessee is admitted for hearing. 5. Facts of the case, in brief, are that the case of the assessee for the assessment year under consideration was flagged on the Insight portal of the Income Tax Department under 'High Risk Non-Filer' cases and therefore, in accordance with the Risk management Strategy formulated by the CBDT, the case was reopened under Section 147 of the Income Tax Act, 1961 (in short, the Act) and notice under Section 148 of the Act was issued on the ground that the assessee has entered into following transactions but has not filed his income tax return for the assessment year under consideration:- 1. Cash deposits in one or more accounts (other than a current account and time deposit) of a person a/c no.30896173571 of Rs. 21,000/-with State Bank of India. 2. (Cash withdrawals (including through bearers' cheque) in current account, a/c по.30896173571 of Rs. 4,58,24,401/-. 3. TDS Statement Interest other than interest on securities (Section 194A) of Rs. 14,780/- State Bank of India, Adb Garhwa (06037). Thus, after following the due procedure of law as provided under Section 148A(b) and 148A(d) of the Act, notice under Section 148 was issued on 30/03/2024. 6. In response to the above notice, the assessee filed his return of income on 22/04/2024 declaring a turnover of ₹ 6,30,25,455/- and after claiming various expenses, a net income of ₹ 5,32,120/- was declared. Further, in response to the notice under Section 142(1) of the Act issued on 07/08/2024, the assessee in his reply dated 05/09/2024 stated that he is

I.T.A. No. 345/RAN/2026 Fasuhuddin Khan Vs ITO engaged in sales and purchases of vegetables, goat and cattle from village farmers and sold to others on wholesale basis. The assessee further submitted details of 26AS, Profit and Loss account, proof of deduction claimed under Chapter VIA, etc. The assessee was then asked by the Assessing Officer to provide various other relevant details but the assessee didn’t provide the same except stating that the assessee is engaged in sales and purchases of vegetable, goat and cattle from village farmers and sold to others on wholesale basis and stated that this business does not require any license. No supporting documents establishing the actual trading was provided by the assessee. The assessee also claimed various expenses but no documentary evidence, proving that these expenses were done wholly and exclusively for the purpose of business, was produced. The Assessing Officer then issued show cause notice to the assessee that why the profit should not be estimated @10% of the total turnover of ₹ 6,30,25,455/- in the absence of any supporting documents. The assessee was also asked to explain that why 50% of the total expenses claimed at ₹ 47,56,852/- should not be disallowed for want of supporting evidence incurred on travel expenses of ₹ 1,45,877/-, Transport expenses of ₹ 45,12,520/- and Misc. expenses of ₹ 98,455/-). In response to which, the assessee submitted his reply dated 27/01/2025 as under: "1. No Trade License has been applied for as the assessee is completely unaware of any such provision. In Jharkhand, all meat shop runs without any trade License to the best of our knowledge & belief but it is a fact that meat shops runs at various places in town, sub-urban and village also.

I.T.A. No. 345/RAN/2026 Fasuhuddin Khan Vs ITO 2. The assessee's meagre profit reason has already been mentioned at serial No. 2 of submission dated 03/12/2024. 3. Uploading of supporting documents in respect of expenses incurred on Transport, Travelling and Miser is voluminous and handmade as truck driver had no voucher to supply. A few of vouchers is enclosed for ready reference as uploading the voluminous voucher is not possible. As the assessee has already explained the reason of low profit estimating profit @ 10% is not proper and is hereby objected. Similarly, the assessee objects to disallowance of 50% expenses under the head Travelling Expenses, Transport expense and miser expenses and has actually been incurred which is incident to business and allowable u/s 37 of the Income Tax Act, 1961." 7. The Assessing Officer, after giving due consideration of the above reply, applied a profit rate of 10% on the turnover of ₹ 6,30,25,455/- which comes to Rs.63,02,545/-. The Assessing Officer also added a sum of ₹ 23,78,426/- being 50% of the total expenses claimed at ₹ 47,56,852/- to the total income of the assessee on the ground that either no documentary evidence was produced before the AO to substantiate the expenses claimed or where some vouchers were produced were examined and it was found that in respect of 12 transport vehicles, in two cases addresses were not complete and in nine cases, there was no registration number given. Further, in one of the vouchers where Registration Number given as JH01AM-2754, was found to be a number of Maruti Wagon-R instead of a truck as claimed by the assessee. Similarly, another voucher consisting of registration number of the vehicle as JH01AM-6661, the type of vehicle was found to be of Maximo Plus and another vehicle having registration number JH01AG-2303 was found to be of tractor. The Assessing Officer, therefore,

I.T.A. No. 345/RAN/2026 Fasuhuddin Khan Vs ITO concluded that the transport expenses claimed by the assessee was found to be bogus as per the details of the vouchers submitted by the assessee before the Assessing Officer. Penalty proceedings under Section 270A of the Act was also initiated separately for underreporting/misreporting of income. Penalty proceedings were also initiated under Section 271A of the Act for not maintaining the books of account as required under Section 44AA of the Act and penalty under Section 271B of the Act for failing to get the books of account audited. 8. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the Ld. CIT(A) who vide the impugned order dated 30/01/2026 partly allowed the appeal of the assessee by reducing the net profit rate from 10% to 8% of the total sales. Further, the Ld. CIT(A) deleted the addition made by the AO on account of disallowance of 50% of the total expenses claimed. 9. Not satisfied with the findings of the Ld. CIT(A), the present appeal has been filed by the assessee before this Tribunal. Before us, none appeared on behalf of the appellant. The revenue was represented by the ld. Sr. DR. However, in the statement of facts submitted by the appellant in the memo of appeal, following submissions have been given: "The fact of the case is that no return of income was filed by assessee. The assessee's case is re opened u/s 148. But before issuing notice u/s 148, notice u/s 148A(b) was issued on 24.03.2024 requiring assessee's compliance on 29.03.2024 giving 5 days time only. The provision of section 148 states that before issuance of notice u/s 148, the Assessing Officer shall conduct enquiries, if required, with the prior approval of specified authority with respect to information which suggests

I.T.A. No. 345/RAN/2026 Fasuhuddin Khan Vs ITO that income chargeable to tax has escaped assessment as per section 148A(a): Before issuance of notice u/s 148, the Assessing officer shall provide an opportunity of being heard to the assessee on the basis of information which suggests that income chargeable to tax has escaped assessment. The time within which the assessee has to send his reply should be specified in the notice which cannot be less than seven days from the date on which notice is issued. Seven days time means clear seven days excluding the days of notice & holidays as held in several case viz. Giridhar Gopal Dalmia vs UIO (2072) 141 taxman.com (cal), R. N. Fashion vs UOI [2022] 139 taxman.com 539 (cal), in the case of Hosdurg Beedi Works Industrial Service Co-operative Society Ltd. vs ITO in WP(C) No. 13984 of 2023 order dated-23.08.2023. The Hon'ble Kerala High Court quashed the notice issued u/s 148 & related orders due to denial of the opportunity to file objection and the failure to meet mandatory requirements. Such other case is Pawan Kumar Sharma vs UOI & Ors, order passed by Hon'ble Calcutta High Court in WP(A) No. 23324 of 2023 quashing the notice u/s 148 of the Income Tax Act. In the assessee's case only 5 days time was allowed to the assessee. Hence notice u/s 148 is fit to be quashed. While deciding the issue, the CIT (A) NFAC Delhi has dismissed the ground of appeal for quashing the notice u/s 148 relying on the order of Hon'ble Supreme Court in the case of UDI vs Ashish Agarwala which is not squarely applicable in assessee's case. In Ashish Agarwala notice u/s 148 was directly issued without following the amended provision whereas in assessee's case notice u/s 148(A)(b) has been issued but did not give mandatory seven days time. The Hon'ble Supreme Court in the case of Ashish Agarwala held that the notice issued u/s 148 of erstwhile provision between 01.04.2021 to 30.06.2021 will be deemed to be a notice u/s 148A of new provision of the Act, and therefore based on this, a notice dated- 29.06.2021 issued to the assessee stood revived. This is not the case here. It pertains to notice issued between 01.04.2021 to 30.06.2021 whereas in assessee's case notice has been issued 24.03.2024 i.e. well after the amended provision was there. The assessee as objecting to the notice since long. Therefore the CIT (A) relying on

I.T.A. No. 345/RAN/2026 Fasuhuddin Khan Vs ITO wrong procedure dismiss appellant's ground should have be dismissed and notice issued u/s 148 should be quashed. The next issue relates to estimation of income @ 10% of total sales of Rs. 6,30,25,455/-which the assessee objects before CIT(A). The Ld. CIT (A) in his order dated-30.01.2026 reduced the net profit rate from 10% to 8% of total sales. The fact is that the assessee's business is sales of Agricultural produce etc. He used to purchased from local mandis/haats where no formal vouchers are being issued by agriculturist or local mandis broker etc. The CIT(A) is of view that in absence of proper purchase voucher for a substantial part of the purchasers does constitute a material defect specially in a business where cost of purchasers is the single largest component determining the ultimate profit. In such a situation, the A.O. is justified in doubting the correctness of the book result and in resorting to the estimate profit u/s 145(3). Section 145(3) is not a section of estimating of profit but it relates to rejection of book result which the A.O. did not do and estimated profit twelve times high than the declared profit @10% of turn over which the Ld. CIT(A) reduced to 8% which is still excessive in assessee's case. The assessee in his submission dated-29.12.2024. vide Para-2 of his submission submitted that the assessee used to purchase vegetables/goat etc. from villagers on sold it out to retailers on spot taking profit 0.5% to 1% of total purchase. Since it is done on wholesale basis taking low profit the perishables vegetables etc. are sold. The assessee further submitted that sale of meat of bovine animals result is a bit high profit between 2% to 3%. As some of the vegetables are perished, the resultant profit is 1% only which has been shown by the assessee. As such estimation of profit over and above 3% in any circumstance is not feasible & the A.O. has acted arbitrarily to estimate profit @10% which was subsequently been reduced to 8% by the CIT (A) NFAC Delhi. The Hon'ble ITAT Mumbai resects 8% estimation even for non-audit u/s 44AB and adopts 2.5% profit based on assessee's offer - Sarayu Synthetics Ltd. vs DCIT (ITAT Mumbai A/Y-2018-19) The Hon'ble ITAT Mumbai held that non-compliance with section 44AB does not justify estimation of

I.T.A. No. 345/RAN/2026 Fasuhuddin Khan Vs ITO income. The Act provides separate consequences (Penalty) not arbitrary income estimation. Books of accounts were not rejected u/s 145(3) and no defects were pointed out, section 44AD cannot be applied as turnover of Rs. 28.78 crore exceeded the prescribed limit. However considering that the assessee had voluntarily offered income of 2.5% of turnover during assessment. Accordingly ITAT directed the A.O. to estimate income @2.5% instead of 8% granting partial relief to the assessee. Applying same analogy in assessee's case income between 2% to 3%should have been estimated in assessee's case granting relief of Rs. 15,75,636/. The assessee has declared income of Rs. 5,17,340/- which when subtracted from above, the addition to be stand be Rs. 10,56,296/- is acceptable to the assessee." 10. On the other hand, the ld. Sr. DR supported the order of the ld. CIT(A) and submitted that the ld. CIT(A) held in the impugned order that "However, Union of India Vs Ashish Agarwal 333 ITR 1 (SC) emphasizes substantial compliance in faceless regime u/s 144B, where procedural defects are curable if no prejudice shown. Record shows that appellant responded substantively without alleging non-receipt or inability to reply. There is no evidence of section 148A(a) inquiry omission or approval lapse. Kerala High Court and Calcutta High Court have quashed in cases of total denial. But in the case at hand, proceedings advanced to full assessment with documents filed. Following Redington (India) Ltd. Vs ACIT (Mad), defect is technical sans prejudice. Ground dismisses; notice/order upheld." Thus, there is no error in the order of the ld. CIT(A) and the same should be upheld. 11. We have considered the legal ground raised by the assessee in ground No. 1 of the appeal. We have also considered the statement of facts given in the memo of appeal and also the submissions made by the ld. Sr. DR. However,

I.T.A. No. 345/RAN/2026 Fasuhuddin Khan Vs ITO the Coordinate Bench of this Tribunal has held in many cases where if clear seven days has not been provided to the assessee to make compliance of the notice issued under Section 148A(b) and 148A(d) of the Act, the notice under Section 148 of the Act was found to be void-ab-initio. We also find that the Coordinate Bench of this Tribunal in the case of Mantosh Kumar Vs ACIT in ITA No. 80/Ran/2024 dated 18/08/2025 had following the decision of the Hon'ble Jurisdictional High Court in the case of Satish Kumar Vs Pr.CIT in WP(T) No. 2640 of 2023 dated 28/08/2023 wherein it has been held as follows: "5. The entire periphery and ambit of the legal ground is confined to the interpretation of expression "being not less than 7 days..." That as demonstrated by the assessee the notice dated 12th March, 2022 u/s.148A of the Act states that the assessee shall submit the response with supporting documents on or before 18th March, 2022. Therefore, as per section 148A(b) of the Act, excluding these two das ie. Date of issuance of the notice and the date on when response is sought from the assessee, a clear 7 days time should have been provided to the assessee as has been held by the Hon'ble Jurisdictional High Court in the case of Satish Kumar vs Pr. CIT passed in W.P.(T) No.2640 of 2023 dated 28.8.2023. The relevant part of the judgment is extracted as follows: 7. To decide the lis involved in the instant application it is necessary to peruse the provisions of the Act which governs the issue in hand, which is quoted herein below:- Section 148A(b) of the I.T. Act. "148A (b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);" From bare perusal of Section 148A(b) it appears that minimum 7 days is required to be given to the Assessee for filing reply. This 7 day is to be calculated by ignoring the date of issue and the last date of submission. In

I.T.A. No. 345/RAN/2026 Fasuhuddin Khan Vs ITO other words, minimum 7 clear days has to be provided to the Assessee for filing reply. In this regard reference may be made to the case of Pioneer Motors (Private )Ltd. Vs Muncipal Council, Nagercoil reported in AIR 1967 sc 684, wherein at paragraph 8 & 9, the Hon'ble Apex Court has deliberated the issue with regard to counting of dates. "8. The words "not being less than one month" do imply that clear one months's notice was necessary to be given that is both the first day and the last day of the month had to be excluded. "When...... 'not less than' so many days are to intervene, both the terminal days are excluded from the computation". 9....................... In every case the words have to be construed in the context taking into consideration the language used and the object to be achieved. As we have said above, the use of the words "not being less than one month" implies the giving of a clear month excluding both the first and the last day of the month……………………………………………………………………………. Emphasis supplied. 6. Considering the aforestated judgment as per the notice issued to the assessee u/s.148A of the Act, the assessee gets only five clear days for response i.e. excluding the date of issuance of the notice and the date on which the response is sought for. This is, therefore, violative of the mandate as prescribed in the Act and also as per the principles laid down by the Hon'ble High Court (supra). Therefore, on this score alone, the notice u/s.148A(b) of the Act is hereby quashed and set aside and all the subsequent proceedings becomes a nullity and nonest in the eyes of law." 10. Since the issue of the notice under Section 148A(b) of the Act is now squarely covered by the decision of the Hon'ble Jurisdictional High Court in the case of Satish Kumar (supra) which was followed by the Coordinate Bench of this Tribunal in the case of Mantosh Kumar and in many other cases, we find that the judicial discipline and Rule of consistency requires us to follow the same. Thus, following the decision of the Hon’ble jurisdictional High Court in Satish Kumar vs. PCIT Ranchi (supra), we hold that the impugned notice issued under Section 148A(b) of the Act is void ab initio as no clear seven days have been given in this case, therefore, the assessment order passed under Section 147 read with section 144B of the Act cannot be

I.T.A. No. 345/RAN/2026 Fasuhuddin Khan Vs ITO sustained and therefore, quashed. Consequently, all subsequent proceedings are also quashed. 12. In the result, this appeal of the assessee stands allowed. Order pronounced in open court on 14/10/2026.

Sd/- Sd/- (RAJANI GUDURI) (RATNESH NANDAN SAHAY) JUDICIAL MEMBER ACCOUNTANT MEMBER Ranchi, Dated: 14/10/2026 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR By order 5. Guard File

Sr. Private Secretary, ITAT, Ranchi