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Facts
During an election checking, cash of Rs. 12,00,000/- was seized from two individuals. The assessee claimed ownership of the cash, stating it was from outstanding collections from his potato trading business. The Assessing Officer (AO) added this amount as undisclosed income. Additionally, the AO estimated commission income at 1% of total turnover, leading to an addition of Rs. 27,66,386/-.
Held
The Tribunal condoned the delay in filing the appeal due to a mix-up of papers at the counsel's office. Since the CIT(A) had passed an ex-parte order, the Tribunal restored the appeal to the CIT(A) for a decision on merits, allowing the assessee one last opportunity to present their case. The assessee was cautioned to comply with future notices.
Key Issues
Whether the seized cash and estimated commission income could be treated as undisclosed income when the assessee claimed to have explained their nature and source. Whether the ex-parte order of the CIT(A) should be set aside and the appeal restored for a decision on merits.
Sections Cited
132A, 143(3), 115BBE, 271AAB, 270A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
Assessment Year: 2021-22 Shafi Ahamed v. The ACIT 133/194 ‘O’ Block Central Circle 1 Sabzi Mandi Kanpur Kidwai Nagar, Kanpur TAN/PAN:ALHPA0988P (Appellant) (Respondent) Appellant by: None Respondent by: Shri Amit Kumar, D.R. O R D E R
This appeal has been preferred by the assessee against order dated 03.10.2023, passed by the Ld. Commissioner of Income Tax (Appeals), Kanpur – 4 (ld. CIT(A)) for Assessment Year 2021-22.
2.0 The brief facts of the case are that the assessee is an individual, carrying on the business of Vegetables on commission basis. The assessee e-filed his return of income on 14.03.2022 declaring a total income of Rs.5,32,960/-.
2.1 During the course of checking by the Flying Squad team during elections in Ghatampur Constituency on 09.10.2020, they intercepted a Car bearing Registration No. UP78-BP-9328, in which two persons, namely Mr. Fuzail Zameer and Mr. Rehan Khan, were travelling and found and seized from them cash of Rs.12,00,000/-. Subsequently, the Investigation Wing of the Income Tax Department at Kanpur recorded statement of Mr. Fuzail Zameer, who stated on oath that the owner of the said cash of Rs.12,00,000/- was Shri Shafi Ahmed, the assessee under appeal, and that the amount was out of outstandings collected from different persons from Sabzi Mandi, where the assessee was a trader of Potatoes. Thereafter, the assessee also stated on oath that the aforesaid cash belonged to him. Subsequently, the aforesaid cash was requisitioned by the Investigation Wing under section 132A of the Income Tax Act, 1961 (hereinafter called “the Act’). Since the assessee failed to explain the nature and source of the seized cash of Rs.12,00,000/- with complete documentary evidences, the Assessing Officer (AO) treated the same as undisclosed income and added the same to the income of the assessee.
2.2 The AO also noticed that the assessee had a credit balance of Rs.39,37,64,024/- in his bank accounts as on 31.03.2021 as against the total receipts of Rs.11,71,254/-. During the course of assessment proceedings, the assessee submitted that he was doing business of vegetables like Potatoes, Onions, etc. on commission basis and that the rate of commission on the total turnover came to 0.29%. However, the AO estimated the commission @ 1% of the total turnover and worked out the amount of commission for the year under consideration at Rs.39,37,640/-. The AO, after reducing the total receipts of Rs.11,71,254/- from the estimated commission of Rs.39,37,64/-, which came to Rs.27,66,386/-, added the same to the income of the assessee.
2.3 The AO completed the assessment under section 143(3) of the Act, computing the income of the assessee as under:
Income declared by the assessee : Rs.5,32,960/- Addition of cash seized : Rs.12,00,000/- Addition on account of commission : Rs.27,66,386/- Total income (rounded off) : Rs.44,99,350/- 2.4 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under sections 271AAB(1A)(b), 271AAB(C) and 270A of the Act, separately.
2.5 Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who dismissed the appeal of the assessee by passing an order ex-parte qua the assessee for the reason of non-compliance by the Assessee.
2.6 Now, the assessee has approached this Tribunal challenging the dismissal of his appeal by the ld. CIT(A), Kanpur by raising the following grounds of appeal:
1. THAT the AO added the amount of Rs.12,00,000/- as undisclosed income, the CIT(A) has upheld the same, the action of CIT(A) is erroneous in as much as the provisions of undisclosed income is not apply in the present. The amount collected from debtors as well as farmers is fully verifiable and explained, there is no undisclosed income and as such the addition make the AO and upheld by the CIT(A) is contrary to facts, bad in law be quashed.
2. THAT the addition of Rs.12,00,000/- made by the AO and upheld by the CIT(A) is neither unexplained, nor undisclosed, the amount of Rs.12,00,000/- is fully explained, the provisions of undisclosed income are not applicable, the addition made be deleted.
3. THAT the AO as well as CIT(A) have failed, applying a commission rate of 1% on total turnover made in the bank treating it to be business income without appreciating the facts, the turnover as total credited amount of bank account is not genuine and estimated the amount of Rs.27,66,386/- made the AO as well as upheld by the CIT(A), action of the both are contrary to facts, bad in law, and liable to be deleted.
4. BECAUSE, addition of Rs.27,66,386/ has been made purely on presumptions and surmises basis without any evidence brought on records, the CITA) has also upheld the same is bad in law be deleted.
3.0 None was present on behalf of the assessee when the appeal was called out for hearing nor was any adjournment application moved in this regard. However, looking into the facts of the case, I proceed to adjudicate the appeal ex-parte qua the assessee.
4.0 During the course of hearing, it was brought to my notice that there is a delay of 445 days in filing the appeal before the Tribunal. The assessee has filed an application dated Nil for condonation of delay duly supported by an Affidavit, which was received by the Registry of this Office on 07.04.2025, stating therein that the impugned order of the ld. CIT(A) was handed over to the local counsel’s office for filing the appeal before the Tribunal. However, the Office Assistant kept the said order in a folder and the said folder got mixed up with other folders/files mistakenly and was misplaced. It was further stated that when the Income Tax Inspector visited his place/house for recovery of Income Tax dues, he immediately contacted the local counsel, who after search of his Office records, recovered the folder containing the impugned order and thereafter filed the appeal before the Tribunal with a delay of 445 days. It has been prayed that the delay be kindly condoned.
4.1 The Ld. Sr. D.R. had no objection to the delay being condoned.
4.2 In view of the prayer made by the Assessee and no objection by the Ld. Sr. D.R., I condone the delay in filing of the appeal and admit the appeal for hearing.
5.0 Since the order passed by ld. CIT(A), Kanpur was an ex- parte order, the ld. Senior D.R. had no objection to the restoration of appeal to the ld. CIT(A).
6.0 I have heard the Ld. Sr. D.R. and have also perused the material on record. It is evident that there was complete non- compliance on the part of the Assessee during the course of first appellate proceedings. However, looking into the facts of this case, I am of the considered view that the Assessee deserves one last opportunity to present his case and, therefore, in the interest of substantial justice, I restore this file to the Office of the ld. CIT(A) with the direction to hear the appeal on merits. I also caution the Assessee to fully comply with the notices and directions of the ld. CIT(A) in the set-aside proceedings when called upon to do so, failing which, the ld. CIT(A) shall 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.
7.0 In the result, the appeal of the Assessee stands allowed for statistical purposes.
Order pronounced in the open Court on 03/07/2025.