PANKAJ KUMAR MITTAL,DHOLPUR vs. INCOME TAX OFFICER WARD 4 BHARATPUR, BHARATPUR

PER DR. S. SEETHALAKSHMI, J.M. The assessee has filed this appeal challenging the impugned order dated 21.01.2025, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [ld. CIT(A)], for the assessment year 2018-19.

2. The assessee has raised following grounds:–

2. The Ld. Assessing authority grossly erred in law and facts in making Sh. Pankaj Kumar Mittal, Dholpur addition of Rs.3,34,526/- in spite of return filed u/s 44AD of the Income Tax Act.

3. The order of the AO is based on assumptions and presumptions and against real facts of the case.

5. The Ld.CIT(A) and the AO have grossly erred in law as well as on facts of the case in initiating proceedings u/s 271AAC and 272A(1)(d) of the Act.

7. That appellant craves leave to add, amend, or alter all or any grounds of appeal before or at the time of hearing.” During the appellate proceedings, he filed an application for raising an additional ground which reads as under :-

“That the Ld. Assessing officer has allowed only 6 days of time for filing reply u/s 144A(b), which is less than the mandatory time of 7 days as specified under the Income Tax Act, thus all the proceedings are null and void.”

3. Succinctly, the facts as culled out from the records are that the assessee had filed his original tax return (ITR 4 – Presumptive tax Income from B&P) for the relevant year on 29.08.2018, declaring total income of Rs.2,93,770/-. Thereafter, on the basis of specific information flagged as per Risk Management Strategy, that the assessee has made non- genuine/bogus purchases amounting to Rs.26,76,210/- the AO issued notice u/s 148. The assessee, in response thereto again filed return (ITR 4 – Presumptive tax Income from B&P) declaring the same income, i.e. Rs.2,93,770/- Assessment was completed u/s 144/147 of the I.T. Act Sh. Pankaj Kumar Mittal, Dholpur assessing income of Rs.6,28,296/- Penalty proceedings under section(s) 271AAC and 272A(1)(d) of the I.T. Act were initiated along with the assessment order dated 02.03.2023.

4. Aggrieved from the order of Assessing Officer, the assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised the ld. CIT(A) dismissed the appeal stating that the onus is on the appellant to prove the fact that he has not availed the said accommodation entries. The CIT(A) also observed that no new evidence has been adduced at the appellate stage and the AO having already considered the given evidence, has made the additions, which does not call for any interference.

Sh. Pankaj Kumar Mittal, Dholpur That the Learned AO has stated the reason for opening of assessment proceeding U/s 148 that Assessee has make bogus entries of purchase non-genuine/ bogus purchases of amounting to Rs. 26,76,210/-from the two entities Madan Lal Madho Prasad and M/sKalki Trading Company amounting to Rs. 15,51,210/- and Rs. 11,25,000/- respectively. The Humble appellant has filed his original return U/s 44AD showing his income as per provisionsofIncomeTaxAct1961onDt29/08/2018andin responseofNotice U/s 148 Return again filed U/s 44AD on Dt 29/04/2022 The Learned AO has not considered facts that The Humble appellant has filed ITR and transaction made by The Humble appellant not verified from GST Deptt and with bank accounts. The Humble appellant has no transactions with the parties stated in assessment order. Merely information available with third party is not valid reason to assess the income in hand of The Humble appellant. Further without looking to the ITR Filed, wherein the humble Appellant has filled U/s 44AD of the Act, thus no Question of rejection of Books & Additions cannot be made on Account of Purchases in the humble Appellant case. Income Tax Officer has made addition in hand of humble Appellant without considering facts and Addition made in assessment order which is bad in law, illegal and against facts.

That Humble appellant was in business, and has filed Income tax Return in response of sec 148 on dated 29/04/2022.The Humble appellant has filed ITR 4in response of Sec 148and shown turnover of Rs 18,63,503/- and profit shown Rs 2,93,770/- in profit and loss account of Form 4 filed , which has not been considered by the Learned AO. The Learned AO has made computation of total income by considering Income Tax return filed in responses of U/s 148 and Estimated profit Rs 3,34,526/- on Purchase (12.5% of 26,76,210/-) which has been assumedbytheLearnedAOofpredeterminedmind.LearnedAOhasmade addition in hand of humble Appellant without considering facts and Addition made in assessment order which is bad in law, illegal and against facts. The learned AO grossly eared in making addition unilaterally for amount deposited against facts of the case & Law. That the Learned AO grossly made addition of Purchase on estimated basis of Rs 3,34,526/- (12.5% of 26,76,210/-)the same is treated as income of the Humble Appellant and added to the total income of the Humble Appellant.

That the Learned Assessing Officer grossly eared in initiating the Penalty proceedings u/s 271(1)(c) of the Act. That the Learned Assessing Officer passed the Assessment Order U/s 147 r.w.s 144without verifying the Facts completed the Assessment with predetermined Mind made the additions & created the Sh. Pankaj Kumar Mittal, Dholpur Demand. Relief claimed in appeal. The Appeal of the Appellant may please be accepted. Assessment Order Dated 02-03-2023 and Order of Commissioner of Income Tax (Appeals), Faceless Appeal Centre, Delhi Dated 21-01-2025 confirming the order of Assessing Authority to the extent additions have been made in returned Income may please be set aside and the income declared by the Appellant Assessee may please be accepted. Any other order or relief which your honour deem fit and proper may please be granted. Revised Ground of Appeal is as under:-

1. That the learned Assessing Officer (ITO Ward-1, Bharatpur) has allowed only 6 days filling of Reply U/s 148A (b), which is less than mandatory time of 7 days as specified under the Income Tax Act, thus all the proceedings are null &Void.

2. ThatlearnedAssessingAuthoritygrosslyerredinlawandfactsinmakingadd itions of Rs. 3,34,526/- inspite of Return filled U/s 44AD of the Income Tax Act.

3. That order of Learned Assessing Authority is bad in law, illegal and against facts and circumstances of the case.

4. That order of learned Assessing Authority is based on assumptions and presumptions and against real facts of the case.

5. That the Learned CIT(A) grossly eared in rejecting the Appeal inspite of adjournment filled & not considered the same.

6. That the learned Assessing Authority, grossly erred in law and facts in initiating proceedings under section 271AAC and 272A(1)(d) of the act.

7. That further submissions in support of appeals hall be made at the time of hearing.

8. That appellant craves leave to add, amend or alter all or any grounds of appeal before or at the time of hearing.

Sh. Pankaj Kumar Mittal, Dholpur Written Submission:- 1. That the learned Assessing Officer (ITO Ward-1, Bharatpur) has allowed only 6 days filling of Reply U/s 148A (b), which is less than mandatory time of 7 days as specified under the Income Tax Act, thus all the proceedings are null &Void. That as per Section 148A. The Assessing Officer shall, before issuing any notice under section 148,— (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (b) provide an opportunity of being heard to the assessee, 23[***] 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); (c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisions of this section shall not apply in a case where,— (a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or (b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or Sh. Pankaj Kumar Mittal, Dholpur (c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, 24[relate to, the assessee; or (d) the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.] Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151.] That the Learned Assessing Officer issued Notice under clause (b) of section 148A of the Income-tax Act,1961 on Dt 14-03-2022 for due date to furnish Reply on or before 21-03-2022, thus the time allowed is of only 6 days since the 14th& 21st has to be excluded for calculation of clear minimum 7 days. (Refer Page No 11-12 of Paper Book) Similar view has been taken by Hon’ble HIGH COURT OF RAJASTHAN incase of Bijendra Singh v. Principal Chief Commissioner of Income-tax [2024] 162 taxmann.com 66 (Rajasthan) held that “Where Assessing Officer issued on assessee a notice under section 148A(b) dated 16-3-2022 calling upon him to file response on or before 23-3-2022, since impugned notice was posted on 17-3-2022 and date fixed for response was 23 3-2022 and excluding two days, i.e., date of sending notice as well as last date indicated notice fell short of seven days, impugned notice deserved to be set aside” (Refer Page No. 37-40 of Paper Book) In view of the above, since the Notice itself is defective we therefore request your honour to kindly quash the proceedings pursuant thereof & oblige.

Sh. Pankaj Kumar Mittal, Dholpur That the Assessee being small Trader during the year & maintained two firms during the year as per below:-  MITTAL DRUG AGENCY having registered Address at Main Bazar, Main Bazar, Dholpur, Dholpur, Rajasthan, 328001 holding GSTN- 08APXPM0304B1Z4 dealing in Medicines

 KRISHNA TRADERS holding GSTN- 08APXPM0304B2Z3 having registered address at Khasra No. 739, BagcholiKhar, Maniyan, Dholpur, Rajasthan, 328024dealing in granuals ie wheat, rice etc. That the Humble Appellant declared the turnover of Rs. 18,63,503 & Income declared approx 13.16% ie Rs 2,45,290/- U/s 44AD of the Income Tax Act. That the income is accepted by the Learned Assessing Officer as per below:- that the Screenshot of ITR V is as per below:-

 The provisions of section 44AD are quite unambiguous to the effect that in case of an eligible business based on the gross receipts/total turnover, the income under the head 'profits & gains of business' shall be deemed to be at the rate of 8 per cent or any higher amount. The first important term here is 'deemed to be', which proves that in such cases there is no income to the extent of such percentage, however, to that extent, income is deemed. It is undisputed that 'deemed' means presuming the existence of some thing which actually is not. Therefore, it it quite clear that though for the purpose of levy of tax at rate of 8 percent or more may be considered as income, but actually this is not the actual income of the assessee. This is also the purport of all provisions relating to presumptive taxation.  If 8 per cent of gross receipts are 'deemed' income of the assessee, the remaining 92 per cent are also 'deemed' expenditure of the assessee. Meaning thereby that actual expenditure may not be 92 per cent of gross receipts, only for the purposes of taxation, it is considered to be so. To take it further, it can be said that the expenditure may be less than 92 per cent or it may also be more than 92 per cent of gross receipts.

 The crucial words in section 69C for the purposes of present appeal are 'any financial year an assessee has incurred any expenditure'. But can one say on the facts and circumstances of the present case that the assessee has 'incurred' any expenses. From an analysis of section 44AD it has already been held that the assessee had not incurred the expenses to the extent of 92 per cent of the gross receipts. Therefore, in the present case, the provisions of section 69C cannot be applied.

 That in present case Humble Appellant Declared 13% of Gross Receipts ie above than 8% & learned Assessing Officer have accepted the return Income thus excessive additions made on account of Purchases is against the Law & provisions of the Act.

Sh. Pankaj Kumar Mittal, Dholpur In support of our contension we are submitting herewith following judgement for your kind perusal THE Hon’ble ITAT CHANDIGARH BENCH in case of Nand Lal Popli v.Deputy Commissioner of Income-tax, Central Circle-II, Chandigarh* [2016] 71 taxmann.com 246 (Chandigarh - Trib.) held that “Where profit declared by assessee under presumptive taxation as provided under section 44AD was accepted, Assessing Officer could not make separate addition by invoking provisions of section 69C”. In view of the above, since the Return U/s 44AD is accepted we therefore request your honour to kindly delete the additions of Rs. 3,45,526.00& oblige.

a. That the Learned AO has stated the reason for opening of assessment proceeding U/s 148 that Assessee has make bogus entries of purchase non-genuine/ bogus purchases of amounting to Rs. 26,76,210/-from the two entities Madan Lal Madho Prasadand M/s Kalki Trading Company amounting to Rs. 15,51,210/- and Rs. 11,25,000/- respectively That the Humble Appellant Paid through NEFT to MadanLalMadhoPrasad (AABPG 0387 R) Rs. 3,00,000/- on Dt 28- 11-2017 &Rs. 5,00,000/- on Dt 31-01-2018, thus total Payment Made only of Rs. 8,00,000/-(Refer Page No. 13 of Paper Book) but the Learned Assessing Officer made the additions of Rs. 26,76,210/-from the two entities Madan Lal Madho Prasad and M/s Kalki Trading Company amounting to Rs. 15,51,210/- and Rs. 11,25,000/- respectively. b. That the Learned Assessing Officer issued Notice under clause (b) of section 148A of the Income-tax Act,1961 on Dt 14-03-2022 for due date to furnish Reply on or before 21-03-2022, thus the time allowed is of only 6 days since the 14th& 21st has to be excluded for calculation of clear minimum 7 days. (Refer Page No 11-12 of Paper Book) c. That in present case Humble Appellant Declared 13% of Gross Receipts ie above than 8% & learned Assessing Officer have accepted the return Income thus excessive additions made on account of Purchases is against the Law & provisions of the Act.

Sh. Pankaj Kumar Mittal, Dholpur In view of the above, since the Return U/s 44AD is accepted, Accepted paid is recorded in Books & the Additions which are not reflected in Bank Statement and reopening itself not lawfull, we therefore request your honour to kindly delete the additions of Rs. 3,45,526.00& oblige.” 5.1 To support the various grounds so raised by the ld. AR of the assessee and has relied upon the following evidences in support of the contentions so raised:-

S No Particulars Page No.

6. Per contra, Ld. DR relied upon the orders of Ld. CIT(A) and also filed the report of the Ld. AO which reads as under:- “In this regard, it is kindly submitted that In the present case, the assessee was given sufficient time of seven days for filing his reply and his reply has also been considered before the passing of order by the assessing officer which has been mentioned in the report called for. For kind reference relevant part of the report received from the AO is reproduced here under- "On perusal of facts of the case and on verification of available record it is crystal clear that the assessee has given sufficient/mandatory 07 days time for filing his reply. In this case the notice u/s 148A (b) of the IT Act, 1961 was issued to the assessee on 14.03.2022 and was requested to submit their reply on or before 21.03.2022, assessee has filed reply on 21.03.2022 and same has also Sh. Pankaj Kumar Mittal, Dholpur been considered while passing order w/x 148A(d) & issuing notice w/x 148 dated 29.03.2022. It is also mentioned here that the on this issue assessee has not arisen any objection neither during the proceedings of section 1484 of the LT. Act nor during the proceedings of appeal in the CIT(A), NFAC. It is also mentioned here that during the assessment proceedings the assessee remain non-compliant and he has not raised this ground. Therefore, it is very clear that this is the afterthought of the assessee. Therefore, the raised additional ground of the assessee in the Hon'ble ITAT has not been sustainable because notice u/ss 148 has been issued as per SOP in this regard." Furthermore, relevant part of the case law which has been relied by the assessee representative is also reproduced here under:-

"That the Learned Assessing Officer issued Notice under clause (b) of section 148t of the Income-tax Act, 1961 on Dt. 14-03-2022 for due date to furnish Reply on or before 21-03-2022, thus the time allowed is of only 6 days since the 14th & 21st has to be excluded for calculation of clear minimum 7 days. (Refer Page No 11-12 of Paper Book). Similar view has been taken by Hon'ble HIGH COURT OF RAJASTHAN in case of Bijendra Singh v. Principal Chief Commissioner of Income-tax [2024] 162 taxmann.com 66 (Rajasthan) held that "Where Assessing Officer issued on assessee a notice under section 1484(b) dated 16-3-2022 calling upon him to file response on or before 23-3-2022, since impugned notice was posted on 17- 3-2022 and date fixed for response was 23 3-2022 and excluding two days, Le., date of sending notice as well as last date indicated notice fell short of seven days, impugned notice deserved to be set aside" (Refer Page No. 37-40 of Paper Book" On perusal of report sent by the AO and case laws filed by the representative of the assessee, it is observed that both cases not having the same circumstances as the notice was sent one day later in case of Bijendra Singh Vs Principal Chief Commissioner of Income-tax[2024] 162 taxmann.com 66 (Rajasthan) and in present case, the notice was sent on same date Therefore, in these cases the assessee couldn't reply in the given sufficient time. In the view of above facts, the revenue has prayed to the Hon'ble Bench to dismiss the assessee's claim that no sufficient opportunity was given at the time of assessment proceedings.” Ld. DR relying on the above contention of the ld. AO submitted that 7 days time was given to the assessee.

"The words "not being less than one month do imply that clear one month's notice was necessary to be given, that is, both the first day and the last day of the month had to be excluded. To put it in the language used by Maxwell on Interpretation of Statutes, 10th Edition, p. 351 :-

. . . . . . . . . when. . . . . . . . . . 'not less than' so many days are to intervene, both the terminal days are excluded from the computation."

Sh. Pankaj Kumar Mittal, Dholpur 13. It has been laid down by the Hon'ble Supreme Court that both the terminal days have to be excluded for the purpose of complying with the requirement of words 'not less than …… days ". Admittedly, in the present case, the notice dated was issued on 14.03.2022 and the date fixed for response was 21.03.2022. Thus, i.e. the date of sending of the notice as well the last date indicated, the same falls short of seven days' period, as envisaged by provisions of Section 148A(b) of the Act; and as such, for violation of mandatory provisions of Section 148A(b) of the Act, the notice issued to the petitioner cannot be sustained.

The appeal of the assessee in the result, stands allowed.

Order pronounced in the open Court on 24/09/2025.