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Facts
The Assessing Officer issued a notice under Section 142(1) of the Income Tax Act on 12.03.2018 to the assessee who had not filed a return for AY 2017-18. The AO added Rs. 13 lakhs (cash deposits) and Rs. 37,934 (bank interest) to the assessee's income under Section 69A. The CIT(A) partly allowed the appeal, deleting Rs. 2.50 lakhs.
Held
The Tribunal held that the notice under Section 142(1) was issued beyond the prescribed date of 31.12.2017 as per CBDT instructions, rendering the assessment proceedings void ab initio. Therefore, the assessment was quashed on this legal ground.
Key Issues
Whether the notice under Section 142(1) was issued within the prescribed time limit as per the CBDT's SOP, and if not, whether the assessment proceedings are void ab initio.
Sections Cited
142(1), 69A, 144, 115BBE, 271AAC, 271F, 69
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
Assessment Year: 2017-18 Anis Ahmad v. The Income Tax Officer 95/91, Ameen Ganj Ward 1(3)(1) Parade, Kanpur (U.P) Kanpur TAN/PAN:AOZPA6913K (Appellant) (Respondent) Appellant by: Shri Rakesh Garg, Advocate Respondent by: Shri R.R.N. Shukla, D.R. O R D E R
This appeal has been preferred by the Assessee against the order dated 26.07.2023, passed by the National Faceless appeal Centre, Delhi (NFAC) for Assessment Year 2017-18.
2.0 The brief facts of the case are that the assessee had not filed the return of income for the year under consideration. The Assessing Officer (AO) issued notice under section 142(1) of the Income Tax Act, 1961 (hereinafter called “the Act’) on 12.03.2018, requiring the assessee to prepare a true and correct return of income for the year under consideration. However, the assessee had not filed any response to this notice. Thereafter, the AO, on the basis of information available with the Department, that the assessee had made cash deposits of Rs.12 lakhs in his bank account No.0032605009980 maintained with ICICI Bank during the demonetization period, issued statutory notices to the assessee, requiring the assessee to furnish the source of cash deposits. The submission of the assessee before the AO was that out of the deposits of Rs.12.00 lakhs, Rs.7,45,000/- was the amount of sale proceeds realized prior to demonetization, Rs.2,29,700/- was from his personal savings and Rs.2,25,000/- was from personal savings of his wife over the years. As per the AO, since the assessee had failed to establish the nature and source of deposits in his bank account amounting to Rs.13.00 lakhs (including deposit of Rs.1.00 lakh other than during the demonetization period), Rs.13.00 lakhs was to be treated as unexplained income of the assessee and was to be added to the assessee’s income under section 69A of the Act.
2.1 The AO also noted that the assessee had received bank interest, amounting to Rs.37,934/- during the year under consideration credited in his bank account No.628801543032 maintained with ICICI Bank, which was also to be added to the income of the assessee under the head ‘income from other sources’.
2.2 Accordingly, the AO completed the assessment under section 144 of the Act, assessing the total income of the assessee at Rs.13,37,934/-.
2.3 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under sections 271AAC and 271F of the Act, separately.
2.4 Aggrieved, the Assessee preferred an appeal before the NFAC, which partly allowed the appeal of the assessee by deleting an amount of Rs.2.50 lakhs and sustaining the balance addition of Rs.10.50 lakhs out of the addition of Rs.13.00 lakhs under section 69A of the Act.
2.5 Now, the assessee has approached this Tribunal challenging the order of the NFAC, by raising the following grounds of appeal:
1. Because the CIT(A) has erred on facts and in law in dismissing the appeal ex-parte upholding the addition of Rs.13,00,000/- being cash deposited in bank during demonetization period under section 69A of the Act, which addition is contrary to facts, bad in law be deleted.
2. Because the CIT(A) has failed to appreciate that the entire deposit made in bank is out of the sale proceeds of retail business (Pheriwala) of cloth, which is neither unexplained, nor undisclosed, the addition made to the extent of Rs.10,50,000/- is bad in law be deleted.
3. Because the explanation furnished by the assessee, that he carries on the retail business (Pheriwala) of cloth, having meager income, which explanation has not been found to be false or untrue, the addition made applying the provisions of section 69 be deleted.
3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that there is a delay of 640 days in filing the appeal before the Tribunal. He further submitted that the assessee had filed an application dated 24.06.2025 for condonation of delay, duly supported by an Affidavit of the assessee, stating therein that the assessee was not aware of the impugned order of the ld. CIT(A) having been uploaded on the portal on 26.07.2023 and it was only when the assessee had received show cause notice imposing penalty under section 271AAC(1) of the Act, it was then only that the assessee had come to know about the passing of the order by the NFAC and that immediately thereafter the assessee had filed the appeal before the Tribunal. It was submitted that the delay caused in filing the appeal was not deliberate and that it was beyond the control of the assessee, which may please be condoned and the appeal be heard on merits.
4.0 The Ld. Sr. D.R. had no objection to the delay being condoned.
5.0 In view of the prayer made by the Assessee, duly supported by an Affidavit and no objection by the Ld. Sr. D.R., I condone the delay in filing of the appeal and admit the appeal for hearing.
6.0 At the outset, the Ld. A.R. submitted that in this case, the notice under section 142(1) of the Act was issued on 12.03.2018, wherein the assessee was required to prepare the true and correct return of income for the captioned assessment year. The Ld. A.R. further submitted that, thereafter, the provisions of section 144 of the Act were invoked and the assessment of the assessee was completed after making an addition of Rs.13,37,934/- (Rs.13.00 lakhs under section 69A of the Act being total credit entries, including cash deposits, during the demonetization period and Rs.37,934/- being bank interest in the bank accounts of the assessee. The Ld. A.R. submitted that admittedly there was non-compliance on the part of the assessee but the action of the Department in issuing notice under section 142(1) of the Act on 12.03.2018 was in direct contravention of the Instruction issued by the Department regarding “SOP for issuance of notice under section 142(1) of the Act in cases related to substantial cash deposits in bank accounts during the demonetization period”, vide letter F No.225/363/2017-ITA.II dated 15.11.2017. It was submitted that as per this Instruction, the process of service of notice under section 142(1) of the Act was to be completed by 31.12.2017 in those cases where the cases pertained to non-filer of income tax return. The Ld. A.R. submitted that, therefore, the issuance of notice beyond the prescribed date was violative of the above said Instruction which made the entire exercise right from the issuance of notice under section 142(1) of the Act void. The Ld. A.R. also placed reliance on the order of the Lucknow Bench of the Tribunal dated 19.09.2025 in the case of Suraiya Begum vs. ITO in ITA No.92/LKW/2024. The Ld. A.R. submitted that the assessee’s appeal be allowed on this legal ground.
7.0 Per contra, the Ld. Sr. D.R. submitted that the issue of notice having been issued beyond the period of limitation was not ever raised before either of the authorities below and, therefore, raising this ground before the Tribunal should not be permitted. The Ld. Sr. D.R. prayed that the appeal of the assessee either be dismissed or should be set aside to the file of the AO.
8.0 I have heard the rival submissions and have also perused the material on record. The Ld. A.R. has drawn attention to letter F No.225/363/2017-ITA.II dated 15.11.2017 and it will be relevant, at this juncture, to reproduce the contents of the above said letter:
8.1 A perusal of the last paragraph, i.e., paragraph 4 in the above said letter, specifically lays down that the process of service of notice under section 142(1) of the Act should be completed by 31.12.2017. A perusal of the assessment order itself shows that the notice under section 142(1) of the Act in the case of the present assessee was issued on 12.03.2018 and, therefore, undisputedly, the statutory notice under section 142(1) of the Act has been issued beyond the date prescribed and, as such, the Instruction of the Department being binding on the Revenue Authorities, the issuance of notice beyond the prescribed date makes the proceedings itself void ab initio. Accordingly, I am of the considered view that in the present case the assessment proceedings deserve to be quashed. Accordingly, the assessment proceedings are hereby quashed, as notice under section 142(1) of the Act was issued beyond the prescribed limit.
8.2 Since the asseessee has already been granted relief on the legal ground, other grounds raised by the assessee on merits of the case become academic in nature and are being not adjudicated upon.