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Facts
The assessee, engaged in footwear business, did not file an income tax return for AY 2018-19. Following a notice under Section 148 for unexplained bank deposits, the assessee filed a return declaring income under Section 44AD. The AO, however, made an addition under Section 69A for unexplained money, which was upheld by the CIT(A) due to the assessee's failure to provide documentary evidence of business activities.
Held
The tribunal noted the assessee's negligence in responding to notices and pursuing the case before lower authorities. It directed the assessee to pay a cost of Rs. 5,000 to the Prime Minister Relief Fund and remanded the case back to the AO for fresh adjudication, providing the assessee another opportunity to present their case.
Key Issues
The key issues were the validity of the assessment under Section 144 despite the assessee filing a return under Section 44AD, the application of Section 69A for unexplained bank deposits, and the assessee's failure to substantiate business activities with documentary evidence.
Sections Cited
Section 147, Section 148, Section 144, Section 144B, Section 44AD, Section 69A, Section 145(3), Section 115BBE, Section 271AAC(1), Section 148A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & DR. DINESH MOHAN SINHA
Assessment Year: (2018-19) Dilip Rajubhai Dariyani Vs. The ITO, wd – 2(10), Prop. Aumshanti Footwear Income Tax Office, Shiv Smruti, B/h. Juma Masjid, Bardhan Chowk, Jamnagar – 361008 Jamnagar – 361001 �ायीलेखासं./जीआइआरसं./PAN/GIR No.: AJEPD4859M (Appellant) (Respondent) : Smt. Astha Maniyar , Ld. AR Appellant by Respondent by : Shri Gopi Nath Chaubey, Ld. Sr. DR Date of Hearing : 16/01/2026 : 30/01/2026 Date of Pronouncement आदेश / ORDER Per, Dr. Dinesh Mohan Sinha, JM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2018-19, is directed against the order passed by the Learned Commissioner of Income Tax(Appeals), National Faceless Appeal Centre, Delhi [in short “the Ld. CIT(A)/NFAC”], dated 11.09.2025, which in turn arises out of an assessment order passed by Assessing Officer (in short ‘the AO”) u/s 147 r.w.s. 144 and 144B of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), vide order dated 15.03.2023.
Grounds of appeal
raised by the assesse, are as follows: “
1. The Id.AO in the facts and circumstances of the case erred in not assessing the return u/s 44AD when assessee has specifically filed return in reply to notice u/s 148 of the Act..
2. The AO erred-in-not following its norms when in para 3.2 of the assessment order mentioned that the assessee has filed rep- lies/documents and examined them, there Dff Dilip R. Dariyani either he has to reject books of account u/s 145(3) of the Act and then invoke the provisions of section 144 r.w.s.144B o the Act.
3. The AO erred in not accepting the contents of return of in- come filed by assessee in response to notice u/s 148 declaring turnover of Rs. 61,80,500/- and declared profit at the rate of 8% u/s 44AD of the Income-tax Act, 196.
4. The AO erred in invoking the provisions of section 69A when the assessee filed return u/s 44AD of the Act declaring total turnover of Rs.61,80,500/-.
5. The AO erred in considering the money as unexplained money u/s 69A of the Act when all the deposits have been made in the banks and details have been supplied to the AO while replying notice u/s 148 on 25.1.2023 and profit declared at the rate of 8% and paid tax.
6. The AO erred in observing in assessment order that the assessee has not filed books of accounts for claiming the benefit u/s 44AD of the Act. The books of accounts are necessary to submit when the return is filed u/s 44AD and declared profit below as has been mentioned in para 40, CIRCULAR NO.- 3/2017 F. No. 370142/20/2016-TPL Government of India Ministry of Finance Department of Revenue (Central Board of Direct Taxes), Dated, the 20th of January, 2017, EXPLANATORY NOTES TO THE PROVISIONS OF THE FINANCE ACT, 2016, Annexure-A-5 to the Statement.
7. The AO erred in not observing his finding as mentioned in para 3.4 of the assessment order that the assessee has filed documents and on the contrary he has not rejected u/s 145(3) of the Act but made assessment u/s 144, this assessment itself is bad in law On the contrary did not accept return u/s 44AD when the assessee has very specifically replied on 25.1.2023 that he has filed return u/s 44AD of the Act and declared all the deposits and earning and paid taxes d thereon at the rate of 8%; 8. The assessment and imposing of penalty, u/s 115BBE and penalty u/s 271AAC(1) of the Income-tax Act, 1961 is bad in law when the assessment made u/s 144 and 144B itself is bad in law and in violation of principles set down by the Finance Ministry by EXPLANATORY NOTES dated 20th of January, 2017.
9. The AO erred in not verifying the facts from earlier ITR filed and nature of business as has been mentioned in the returns of earlier years and questioning the assessee to show the nature of business.
10. The AO erred in not following the ratio laid down in the cases of (1) Dinesh kumar verma V/S ITO in (2). Mehul V Vyas V/S ITO(2017-18)80- TAXMANN.COM 311 (Mum ITAT) (3), Eapen V/s ITO (2020) 113 TAXMANN.COM 268 (Cochin ITAT) (4) Madhu Raitani V/s ACIT (2011) 10 TAXMANN.COM 206 (Gauhati TM).
11. The AO erred in not following the terms and conditions as laid down by the Hon'ble Supreme Court in the case of the Appeal (civil) 7731 of 2002 in GKN DRIVESHAFTS (INDIA) LTD. DATED 25/11/2002. Therefore, also the order u/s 144 is bad in law and consequently, addition made by the AO in assessment or- der needs to be deleted.
12. The AO erred in not passing reasoned order by considering the provisions of Act, norms set up by the Finance Ministry and principals set by Hon'ble Supreme Court, High Court, Income Tax Appellate Tribunal, including the AO of different range. Page 2 of Dff Dilip R. Dariyani 13. The Assessee is at liberty to file new ground, add, alter or delete any ground if needs so arises.
Brief facts of the case are that the assessee is an individual and carried on the business of FOOT WEAR. The assessee was not file return of income for the Assessment year 2018-19. Thereafter, order under clause (d) of section 148A of the Income-tax Act, 1961 has been passed on 30.03.2022. Subsequently, notice under section 148 of the Income-tax Act, 1961 has been issued on 31.03.2022. In response to notice issued under section 148 of the Income-tax Act, 1961, the assessee filed return of income on 25.01.2023 declaring total income at Rs. 4,99,770/-. The reasons of reopening of case is as "As per the specific information received from the department that the assessee; i. Dena Bank amounting to Rs. 9,01,000/-; ii. AU Small Finance Bank Ltd. of Rs. 36,26,668/-; iii. Rajkot Nagarik Sahakari Bank Limited of Rs. 15,40,000/-; iv. Received Interest of Rs.37,930/- Total Rs 61,05,598/- The assessee has not filed return of income. There was an escapement of income and accordingly notice under section 148 of the Act has been issued." During the assessment proceedings the opportunities of being heard have been afforded. In response to these notices the assessee furnished the reply. The replies/documents filed by the assessee were examined carefully and after noticing certain discrepancies, show-cause notice dated 24.02.2023 has been issued. No reply was filed and the assessee has not opted hearing through video conferencing. After considering the submission made by the assessee, the total income of the assessee is computed as under:
Income as per Return of Income filed Rs. 4,99,770/- Variation in respect of issue of <as per provisions of section 69A> Rs. 62,50,168/- Total income/loss determined as per the above proposal Rs. 67,49,938/- Page 3 of Dff Dilip R. Dariyani 4. That the assessee filed an appeal against the order of the AO. That the Ld.CIT(A) dismissed the appeal of the assessee by following remarks: “6.3 Decision: I have carefully examined the assessment order and the written submissions filed by the appellant. The AO has clearly mentioned in the Assessment Order that the assesse failed to furnish copy of cash book, stock register and sales & purchase bills, sale & Purchase register to prove that he did any business activities. During the appellate proceedings also, the appellant has not provided any documentary evidence to prove that he did any business activities during the year under consideration. In view of the above, the addition amounting to Rs.62,50,168/- made by the A.O. is being upheld. Hence, ground no. 1 to 7, 9 & 12 of appeal are dismissed.”
That the assessee filed an appeal against the impugned order of the Ld.CIT(A), before this Tribunal.
During the course of hearing, the Ld.AR of the assesse prayed for one more opportunity to be given to the assessee to represent the case before the lower authority.
On the other hand, the Ld.DR for the revenue submitted that the assessee is negligent in pursuing the case, therefore a cost must be imposed on the assessee, and the Ld. DR further relied on the order of the Ld.CIT(A).
We have heard both the parties and perused the material available on record. We note that the assessee has not gave due care and attention to the notice issued by the lower authorities and remain negligent in pursuing the case before the Ld.CIT(A) as well as AO, for this non-cooperative attitude in pursuing the case. We direct the assessee to deposit a cost of Rs.5000/-, and the same is to be deposited with Prime Minster Relief fund (Government of India), within 10 days from today, and the receipt is to be submitted with the Registrar of this Tribunal. Keeping in view, and in the interest of justice, we grant an opportunity to the assessee to present the case before the AO. We set aside the order of lower authority and remit the matter back to the file of the AO for fresh adjudication on Page 4 of Dff Dilip R. Dariyani merit after giving due opportunity to the assessee of being heard., in accordance with law.
In the result, appeal of the assessee, is allowed for statistical purpose.
Order is pronounced in the open court on 30/01/2026.