M. K. ENTERPRISES,JALANDHAR vs. INCOME TAX OFFICER WARD-3(5), JALANDHAR

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, ‘DB’: AMRITSAR

BEFORE UDAYAN DAS GUPTA, JUDICIAL MEMBER AND SHRI BRAJESH KUMAR SINGH, ACCOUNTANT MEMBER

ITA No.351/ASR/2023 [Assessment Year: 2017-18]

M/s MK Enterprises, Income Tax Officer, 128, Cheema Chowk, Ward-3(5),C.R. Building, Mithapur Road, Jalandhar, Vs Model Town Road, New Wing, Punjab-144003 Jalandhar, Punjab-144001 PAN-ABBFM9654J Appellant Respondent

Appellant by Shri Jatinder Sharma, CA Revenue by Shri Charan Dass, Sr. DR

Date of Hearing 27.05.2025 Date of Pronouncement 19.08.2025

ORDER PER BRAJESH KUMAR SINGH, AM,

This appeal by the assessee is directed against the order of

National Faceless Appeal Centre (NFAC)/learned Commissioner of

Income Tax (Appeals), Delhi (hereinafter referred to ‘ld. CIT(A)’) dated

28.09.2023 pertaining to Assessment Year 2017-18 arising out of the

assessment order u/s 144 of the Income Tax Act, 1961(hereinafter

referred as ‘the Act’) dated 22.12.2019.

“1. The ld. CIT(A) erred in upholding the order passed by Ld. Assessing Officer u/s 144 of the Income Tax Act, 1961, ignoring the facts and circumstances of the case.”

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under CASS for the reason of “Large cash deposited during demonetization

period and abnormal increase in sales with decrease in profitability

compared to preceding previous year”. The Assessing Officer noted that

during the demonetization period i.e. from 09.11.2016 to 31.12.2016, the

assessee had made cash deposit of Rs.47,54,000/- in bank account

number XXXXXX018729 with HDFC Bank Ltd. and Rs.2,35,000/- in

account number XXXX7055 with Central Bank of India. Out of the above,

it was noticed that cash deposits of Rs.8,55,000/- in HDFC Bank and

Rs.2,35,500/- in Central Bank of India totalling Rs.10,91,000/- was

deposited in old currency notes (SBNs), which were no longer legal tender

after announcement of demonetization from 09.11.2016 as per guidelines

of Reserve Bank of India. During the course of assessment proceedings,

the Assessing Officer had issued various notices as per the details in para

no.3 of the order and also issued a show-cause notice dated 18.12.2019

asking the assessee to show-cause why assessment should not be

completed u/s 144 of the Act and the amount of Rs.10,91,000/- should not

be added back as unexplained money u/s 69A of the Act. Further, the

assessee was also issued to show-cause as to why he 50% of total expenses

amounting to Rs.3,31,860/- should not be disallowed in absence of any

supporting documents filed. According to the Assessing Officer, the

assessee failed to file any reply and therefore, the Assessing Officer added

an amount of Rs.10,91,000/- as unexplained cash credit u/s 68 r.w.s.

115BBE of the Act. Further, the Assessing Officer also disallowed 50% of

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the total expenses amounting to Rs.3,31,860/- on the ground that no

details were furnished during the assessment proceedings.

before the ld. CIT(A). The ld. CIT(A) also gave several opportunities vide

notice dated 11.03.2021, 28.08.2023, 14.09.2023 and 21.09.2023 which

according to the ld. CIT(A) were served to the assessee by the ld. CIT(A)

through ITBA/email but there was no response by the assessee. The said

fact has noted by the Ld. CIT(A) in para-4 of his order. Accordingly, the ld.

CIT(A) held that this appeal deserves to be dismissed on the ground that

the assessee was deliberately avoiding the pursuit of this appeal and was

not serious in pursuing this appeal. However, the ld. CIT(A) further

observed that in adherence to principles of natural justice, he also

discussed the matter on merits and found no reason to interfere with the

finding of the Assessing Officer in absence of any explanation filed by the

assessee. Thereafter, the ld. CIT(A) dismissed the appeal of the assessee.

submission as well as a paper book containing pages 1 to 62. The ld. AR

also filed additional grounds of appeal being ground nos.3 to 6 in addition

to the ground no.1 and 2 filed with the original appeal. The ld. AR

explained the reasons for his non-appearance of the assessee during the

course of assessment proceedings as well as appellate proceedings and the

relevant extract of the said submission in para no.1.1 to 1.5 is reproduced

as under:-

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1.1. The appellant firm's partner Sh. Monish Kumar went to Australia in the month of November-2018 and he was receiving all the correspondence from Income Tax Department on his email munish.shilpa@gmail.com registered in the profile of appellant firm. Sh. Monish Kumar used to send the emails received from department to the previous counsel CA. Raghav Arora from Jalandhar on his official email id admin@vmaroraca.com. Sh. Munish Kumar has also forwarded some of the above mails to Sh. Raghav Arora at r.arora@vmaroraca.com and to his office subordinate Mr Anmol and Gaurav Sabharwal at gaurav20sabharwal@gmail.com . Other than emails, Sh. Munish Kumar repeatedly called the previous counsel and his staff members from Australia. Sh. Munish Kumar also sent notices and messages through whatsapp to the previous counsel. The emails record is attached at page no.18 to 34 of the paper book. 1.2 During the course of assessment proceedings and the first appellate proceedings the appellant was under bonafide belief that the previous counsel is taking care of proceedings. On receipt of ex-parte order passed u/s 250 of the Act by the Ld. CIT-A, the appellant has sent the following email to CA Raghav Arora on 07.10.2023: I have received this notice from income tax department. As per notice they send various notice but no one response. I have attached all the screenshots of my WhatsApp conversation with you. I have sent all the notice to Mr. Raghav and Mr Anmol which I received from department. I have called many time to Mr. Anmol but he Raghav Sir and Mr Anmol told me he already handover all the documents to Mr. Raghav which have added in screen shot on every s called and message many time to Mr. Raghav. But Mr Raghav has no time to taking any of my calls he is not replying any of my messages. This is my humble request please look into this matter and resolve this matter ASAP." (Page 20 to 30 of Paper Book) 1.3 After the order u/s 250 of the Act and further discussion, CA. Raghav Arora, has filed the appeal before Hon'ble ITAT Amritsar. The Worthy Registrar has identified the defects in the appeal and sent defect memo and notices to CA. Raghav Arora for rectification but he has not submitted any reply to defect memo and notices.

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1.4. Thereafter, the appellant has changed the counsel and engaged me as counsel to appear and plead on behalf of appellant. 1.5. It is very humbly submitted that the appellant is very attentive and responsible in facing the assessment as well as appellate proceedings. Appellant was under bonafide belief that the previous counsel has taken care of the proceedings on basis of departmental emails that were resent by him from Australia. It is purely a mistake on part of previous counsel that he has not attended the proceedings at various levels.” 6.1. On merits, the ld. AR submission in para 2.1 to 2.6 on the issue of

cash deposits during demonetization period and in para no.3.1 about the

disallowances of expenses are reproduced as under:-

“2.1. With respect to the above said ground, it is submitted that the appellant firm was dealing in the business of mobile recharge as "Distributor" of Vodafone Mobile Services Limited wherein the firm was dealing with prepaid mobile e-recharges with "Retailers" who were appointed after authentication from Vodafone Mobile Services Limited. (Copy agreement at page 43 to 59 of PB) 2.2. The modus operandi of business was to collect the cash from Retailers which was deposited into the current accounts of the Firm maintained with HDFC Bank Ltd, PNB and Central Bank of India and such amounts were further transferred to Vodafone Mobile Services Limited through bank. Against such transfers, the Vodafone used to recharge the e-vault of Firm and such e- recharges were further transferred to Retailers against the cash collected from them. 2.3. The firm has deposited the cash in SBN of Rs. 10,91,000/- in the bank accounts out of the cash in hand as on close of business at 08.11.2016. It is further pertinent to mention here that the total cash deposited in bank accounts during financial year 2016-17 was Rs. 3,69,85,500/-out of which the cash of Rs. 49,89,500/- was deposited in bank accounts in the period of demonetisation. The Ld. A.O has made addition of Rs. 10,91,000/- only being amount deposited in SBN during demonetisation which implies that the rest of business cash deposited by appellant during the F.Y 2016-17 is accepted by the Ld. A.O along with the prudent business practice.”

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“3.1 The Ld. A.O has made disallowance of expenses of 50% of total expenses debited to Profit & Loss a/c to the tune of Rs. 3,31,860/-which is purely hypothetical and arbitrary disallowance and without any basis. The books of accounts of appellant were audited u/s 44AB of the Act and the financial statements for the year under consideration were duly submitted along with audit report by the auditor. There is no finding of Ld. A.O as to why 50% expenses are disallowed. To run a business and to earn income, the expenses are to incurred. The copy of audited financial statements are attached.” 7. The ld. Sr. DR supported the orders of the authorities below.

on record. The assessee has filed written submission and paper book on

the merits of its submission, which requires factual verification. Further,

the assessee has requested to set-aside the proceedings back to the

Assessing Officer as the case was decided ex-parte at every stage and

neither any submissions were made on merits of the case nor the same

were examined at any stage. We, therefore, in the interest of justice, set-

aside the order of the Ld. CIT(A) and remand the matter back to the file of

the ld. AO for de-novo assessment on the subject matter of the dispute in

the present appal, after taking into consideration all documentary

evidences and the books of account to be produced by the assessee for

proper explanation of his case.

8.1. Before concluding we find that in the instant case, the ld. CIT(A)

issued the notice in ITBA portal and also in the e-mail ID provided in form

35, as confirmed by the ld. DR, and the present counsel also admitted to

the same. As such, we observe that there were some latches on the part of

the assessee in not appearing before the Ld. CIT(A) and as such, we impose

a token cost of Rs.5,000/- (Rs. Five thousand) on the assessee to be

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deposited to the credit of the Prime Minister National Relief Fund, within 30 days, (thirty) from the receipt of this order, evidence to be produced before the jurisdictional AO.

8.2 With the above observation, we remand this case back to the file of the Assessing Officer for de novo assessment as directed above and we also direct the assessee to file all necessary papers and documents in support of his case before the AO, and to fully cooperate in fresh assessment proceedings.

Order pronounced in the open court on 19th August, 2025

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