FAIYAZ AHMED GULAM GAUS AND CO,VARANASI vs. INCOME TAX OFFICER , VARAANASI

PER SUDHANSHU SRIVASTAVA, J.M.: This appeal has been preferred by the Assessee against the order dated 15.07.2025, passed by the National Faceless Appeal Centre, Delhi (NFAC) for Assessment Year 2016-17.

2.0 The brief facts of the case are that the assessee had not filed the return of income for the year under consideration. On the basis of information received by the Income Tax Department that the assessee had made cash deposits to the tune of Rs.1,95,00,000/- in its Bank Account No.39630400000013 maintained with Bank of Baroda, Varanasi, the case of the assessee was reopened under section 147 of the Income Tax Act,

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1961 (hereinafter called 'the Act’) after issuing notice under section 148 of the Act to the assessee. However, the assessee had not filed the return of income in response to notice under section 148 of the Act. Subsequently, the AO issued statutory notices to the assessee, requiring the assessee to furnish the details of source of cash deposits. The assessee vide reply dated 31.10.2023 furnished its reply before the AO which was reproduced by the AO at page 3 of his order, which is being reproduced hereunder:

“Respected Sir Response to Notice No ITBA/AST/S/85/2023-24/1057363605(1) I am Submitting that 1.During AY 2016-17 ITR has been Submitted on PAN AEIPG9003M on behalf of PAN no AABFF1129N 2.Total Turn Over Rs.2900000+16600000 Which is Turn over in Bank of Baroda has been taken on PAN No.AEIPG9003M. 3.All Turn Over appearing in Bank of Baroda has already been Shown in Balance Sheet on PAN No.AEIPG9003M From Left to Right. 4.PAN No.AABFF1129N Has already been closed by me All Turn Over related to This PAN No.is being Shown on PAN AEIPG9003M and Return is also being submitted on behalf of PAN AABFF1129N on PAN No.AEIPG9003M 5.Copy of Audit Report For AY 2016-17 done on PAN AEIPG9003M is being uploaded.

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6.Return submitted on behalf of PAN AABFF1129N on PAN AEIPG9003M is being attached on Portal along with ITR, Computation, Balance Sheet, Trading and P/L Account. 7.Closed Deed of PAN No.AABFF1129N is also being uploaded. 8.All Turn over which is appearing on PAN AABFF1129N Is Business Turn Over Which is already submitted on PAN AEIPG9003M Bank Statement of This Turn Over is also being uploaded. 9.I have submitted to Bank for updation of PAN AEIPG9003M IN PLACE OF PAN AABFF1129N But due to Mistake by Bank This not been Corrected in Bank Account.” 2.1 After rejecting the reply furnished by the assessee, as not found acceptable, the AO held that the assessee failed to prove the genuineness of the cash deposits of Rs.1,95,00,000/- and, accordingly, the same was added to the total income of the assessee under section 69A of the Act. The AO completed the assessment under section 144 read with sections 147/144B of the Act, assessing the total income of the assessee at Rs.1,95,00,000/-.

2.2 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under sections 271(1)(c) and 271(1)(b) of the Act, separately.

2.3 Aggrieved, the Assessee preferred an appeal before the NFAC, which partly allowed the appeal of the assessee by

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restricting the addition to Rs.9,75,000/- being 5% of the total cash deposits of Rs.1,95,00,000/- made by the assessee during the year under consideration as against the addition of Rs.1,95,00,000/- made by the AO and directed the AO to arrive at the tax liability accordingly. The relevant portion of the order of the NFAC reads as under:

“6(c). The assessee already declared sales of Rs.5,94,55,517/- & commission on sales of Rs.17,83,665/- in the Return of Income filed for proprietorship concern for the AY.2016-17, therefore, all the cash deposits were already shown as turnover. Thus, substantial cash deposits were part of business transactions and the same were reflected in the Returns of proprietorship concern. Therefore, the AO's assumption of treating the same as unexplained money u/s.69A of the Income Tax Act, 1961 was not backed by any justification. Thus, all cash deposits were mainly emanated from business transactions which were already recorded in the books of accounts and Returns filed. However, it is not possible to correlate one to one cash deposits with the existing sales at this juncture. Therefore, to safeguard the interests of the revenue, 5% of total cash deposits are hereby treated as income of the assessee which comes to Rs.9,75,000/-. The AO is hereby directed to arrive at tax liability accordingly. Thus, the grounds of the assessee are hereby partly allowed.”

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2.4 Being further aggrieved, the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:

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proper perspective and the Ld. First Appellate Authority proceeded on wrong appreciation of facts by applying a net profit rate of 5% on alleged undisclosed turnover thereby resulting in miscarriage of justice. He prayed that the order of the AO deserves to be quashed as the entire proceedings were without any sound basis.

4.0 Per contra, the Ld. Sr. D.R. submitted that the assessee should have surrendered the PAN if the Firm had ceased to exist and should have also ensured that the Bank updated the PAN details. He also argued that on an overall view of the facts, the Ld. First Appellate Authority had already provided adequate relief. He prayed that the appeal of the assessee be dismissed.

5.0 We have heard the rival submissions and have also perused the material before us. The Ld. A.R. has argued that the Firm having PAN AABFF1129N has ceased to exist since 2009 and due to mistake on the part of Bank of Baroda, the deposits against PAN AEIPG9003M come to be reported against PAN AABFF1129N. It has also been argued that the turnover from these deposits in Bank have already been included in the Audited Accounts for assessment year 2016-17 filed against PAN AEIPG9003M. However, as the record before us shows, this claim of the assessee was never examined/verified by the AO and

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he simply brushed aside the explanation and proceeded to make addition of the bank deposits under section 69A of the Act and completed the assessment under section 144 of the Act. Further, the Ld. First Appellate Authority also estimated the addition by making an estimate of 5% just to protect the interest of the Revenue although holding that it was not a fit case for addition under section 69A of the Act. Thus, it is a case where the assessee’s contention never came to be examined by either of the lower tax authorities. Be as it may, the fact remains that no verification was ever made with respect to the claim of the assessee that the turnover was already disclosed against the PAN. The assessee was also not diligent enough to ensure that the PAN was surrendered and bank records had to be updated. In such a situation, we have no other option but to set aside the order of the Ld. First Appellate Authority and restore the matter to the file of the AO with a direction to verify the claim of the assessee that the turnover pertaining to the impugned bank deposits have already been included in the audited final accounts against PAN AEIPG9003M after providing proper opportunity to the assessee to furnish all relevant documents and explanations. The assessee is also cautioned 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

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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.

6.0 In the final result, the appeal of the assessee stands allowed for statistical purposes.

Order pronounced in the open Court on 03/11/2026.

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

DATED:03/11/2026 JJ: