NADUR SIDDAGANAGAIAH CHANDRAKANTH,BANGALORE V. INCOME TAX OFFICER, WARD-5(2)(3), BANGALORE

ITA 558/BANG/2025

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The case involves Nadur Siddagangaiah Chandrakanth, the appellant, contesting an assessment order for the year 2017-18 passed under section 144 of the Income-tax Act, 1961, by the Income Tax Officer, Ward 5(2)(3), Bangalore. The appellant's appeal was initially dismissed by the Commissioner of Income Tax (Appeals) on grounds of non-payment of taxes, as required under section 249(4) of the Act. The appellant argued that he had not filed a return of income nor admitted any income, thus no tax was due. The Tribunal found that the CIT(A) erred in dismissing the appeal solely on the basis of non-payment of tax, especially when the appellant contested the entire assessment as unsustainable. The Tribunal noted that the AO had made additions to the appellant's income based on unexplained cash deposits during the demonetisation period and other periods, treating them as unexplained income and business income respectively.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 774850 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 18-03-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R. CHANDRASHEKAR
• Keywords: Business income; Income from undisclosed sources
• Section: 144; 142(1); 133(6); 139

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH : BANGALORE BEFORE SHRI PRASHANT MAHARISHI, VICE PRESIDENT AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No.558/Bang/2025 Assessment year : 2017-18 Nadur Siddagangaiah Chandrakanth, No.298, 2nd Cross, 1st Phase, Girinagar, Bangalore – 560 085. PAN: ACKPC 9844J Vs. The Income Tax Officer, Ward 5(2)(3), Bangalore. APPELLANT RESPONDENT Appellant by : Shri R. Chandrashekar, Advocate Respondent by : Shri Thamba Mahendra, Jt.CIT(DR)(ITAT), Bengaluru. Date of hearing : 24.07.2025 Date of Pronouncement : 03.09.2025 O R D E R Per Prashant Maharishi, Vice President 1. This appeal is filed by Nadur Siddagangaiah Chandrakanth (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 4.3.2025 wherein the appeal filed by the assessee against the assessment order passed u/s. 144 of the Income-tax Printed from counselvise.com ITA No.558/Bang/2025 Page 2 of 8 Act, 1961 [the Act] dated 16.4.2019 by the ITO, Ward 5(2)(3), Bangalore [ld. AO] was dismissed. 2. Therefore, the assessee is aggrieved with the same and is in appeal before us raising the following grounds of appeal :- “1. The Learned Commissioner of Income Tax (Appeals) has erred in rejecting the appellant's appeal filed against the order of Ex-party for the assessment year 2017-18. 2. The Learned Commissioner of Income Tax (Appeals) has erred in holding that the appeal is not maintainable on account of payment of taxes, when the appellant has contested the entire assessment as not sustainable. 3. The Learned Commissioner of Income Tax (Appeals) has erred in holding the appeal did not support that the appellant has not carried any business activity, when the appellant has filed returns filed under Karnataka Value Added Tax Act, 2003, in support that the appellant is running a petrol bunk. 4. The Learned Commissioner of Income Tax (Appeals) erred in holding the appellant did not show interest in prosecuting the appeal meaningfully, when the appellant participated in appeal proceedings by filing written submissions and other supporting documents. 5. The Learned Commissioner of Income Tax (Appeals) did not appreciate the submissions/explanation of the appellant in a prospective manner. 6. The order of the Learned Commissioner of Income (Appeals) is unjustified and not sustainable in law. 7. The appellant prays that this Hon'ble Tribunal be pleased to permit the appellant to add, delete or modify any ground or grounds at the time of hearing.” Printed from counselvise.com ITA No.558/Bang/2025 Page 3 of 8 3. The first ground of appeal is that the ld. CIT(A) erred in deciding the appeal of the assessee ex parte and holding that assessee’s appeal is not maintainable on account of payment of taxes when the assessee has contested the entire assessment as not sustainable. 4. The facts of the case show that assessee did not file any return of income, information was received in respect of cash deposits during the demonetisation period wherein assessee deposited Rs.17,23,000 in his Current A/c with SBI and sum of Rs.1,32,33,150 in his Current A/c with Bank of India totalling to Rs.6,91,56,738. Accordingly notice u/s. 142(1) was issued on 28.11.2017 but there was no compliance. Subsequently u/s. 133(6) information was obtained from the bankers. Accordingly information was collated and it was found that assessee has deposited Rs.2,41,000 and Rs.40,71,650 in the above bank accounts respectively during the demonetisation period A further sum of Rs.1,06,43,500 was deposited in the same accounting year but beyond the demonetization period. The assessee was issued 3 notices and no reply was received. The ld. AO considered the addition of Rs.43,12,650 being the amount of cash deposit during the demonetisation period in the above 2 bank account as unexplained income u/s. 69A of the Act and charged the same to tax u/s. 115BBE of the Act. With respect to further cash deposit of Rs.1,06,43,500 the ld. AO considered 10% of such credits as income of assessee and considered Rs.10,64,350 as business income of the assessee. Accordingly total income of Rs.53,77,000 was assessed u/s. 144 of the Act by assessment order dated 16.12.2019. Printed from counselvise.com ITA No.558/Bang/2025 Page 4 of 8 5. The assessee approached the ld. CIT(A). The ld. CIT(A) considered the written submissions of the assessee in para 3 of the order and in para 4 he has reproduced the assessment order. In para 4.4 he held that AO has completed assessment u/s. 144 of the Act at a total income of Rs.53,77,000 against which appeal has been filed. As appellant has not filed any return of income voluntarily u/s. 139 of the Act and also did not get his books of account audited and moreover on perusal of Form 35 assessee had not paid any tax as well in terms of section 249(4) of the Act, therefore the appeal of the assessee is not maintainable. He also held that assessee is not interested in prosecuting the appeal and accordingly findings of the AO were confirmed. 6. Aggrieved with the appellate order the assessee is in appeal before us. It was submitted that the appeal of the assessee has not admitted by the ld. CIT(A) because of non-payment of tax applying the provisions of section 249(4) of the Act. It was submitted that when assessee does not have any admitted tax, there is no reason that assessee must pay any tax before filing of the appeal. He submits that assessee has neither filed return of income disclosing any income on which assessee is supposed to pay any advance tax and therefore the dismissal of the appeal stating that assessee has not paid admitted tax in terms of section 249(4) of the Act is not sustainable. 7. It was further stated that assessee is an individual, dealer in Indian Oil Corporation, the reply to the several notices before the AO could not be Printed from counselvise.com ITA No.558/Bang/2025 Page 5 of 8 provided on account of his mother’s health. Due to family circumstances the assessee could not get his accounts completed and therefore return could not be filed. Because of this reason, the assessment order was passed u/s. 144 of the Act. It was further stated that the amount of Rs.43,12,650 deposited during the demonetisation period was added to the total income of assessee u/s. 69A of the Act, whereas with respect to the balance sum deposited during the other period of financial year amounting to Rs.1,06,43,500 it was treated as turnover and only 10% addition was made. This itself shows that there is a dichotomy in the amount of cash deposited in the bank account in the demonetisation period as well as in other period. He even otherwise submitted that there cannot be 10% of profit in the case of business with Indian Oil Corporation. For this proposition he submitted the VAT returns filed by the assessee and submitted that for all the 4 quarters it was the claim of assessee that amount of cash deposited in the bank account is sale of petroleum products. He also submitted a copy of the account generated from Indian Oil Corporation. It was submitted that assessee has to obtain raw material from the Principal and the total turnover is reflected in the statement. He therefore submitted that there is no unaccounted income and even profit estimate @ 10% is not proper. 8. The ld. DR vehemently submitted that assessee has failed to submit any information before the lower authorities and as assessee is running an Oil depot it is unusual that his income would be below the taxable Printed from counselvise.com ITA No.558/Bang/2025 Page 6 of 8 limit. Therefore, there cannot be any reason to upset the order of ld. lower authorities. 9. We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. We find that before the AO naturally assessee did not provide the complete information and assessment order was passed u/s. 144 of the Act. The assessee’s reason for not providing any information before the ld. AO was sickness of his mother as well as his family circumstances. This resulted into ex parte assessment order. The ld. AO considered the cash deposit during the demonetisation period as unexplained income and made addition to the extent of 100%. With respect to the balance cash deposit in the remaining part of the year, only 10% of such deposit was considered as income of the assessee. 10. Before the CIT(A), the assessee filed an appeal, but it was dismissed for the reason that assessee has not paid due amount on the assessed income. We find that assessee did not file any return of income and therefore there is no admitted tax involved. According to the provisions of section 249(4) of the Act, assessee is required to pay tax on the returned income or amount equivalent to the advance tax as per returned income. As assessee has not filed any return of income nor admitted any income, his appeal should have been admitted. Even otherwise, assessee has made application before the ld. CIT(A) u/s. 249(4)(b) of the Act wherein it was stated that assessee is carrying on business of retail outlet of Indian Oil Corporation Ltd. dealing with Printed from counselvise.com ITA No.558/Bang/2025 Page 7 of 8 petrol & diesel at Village Nadur in Sira Taluk. He could not attend to notices of AO on account of death of his mother. He could not file his return of income due to ill-health of mother who later passed away. The assessment was completed u/s. 144 of the Act. The assessee has contested the whole addition and has stated that he does not have any taxable income and therefore assessee is not required to pay any admitted tax. It was prayed that the CIT(A) may admit the appeal and dispose it on the merits. The ld. CIT(A) did not consider this application at all and despite the power given to ld. CIT(A) to condone the payment of tax condition if good and sufficient reasons are shown to him, he dismissed the appeal of the assessee on this count. Further he held that assessee is not interested in prosecuting the appeal as no information is furnished. In view of the above facts, we restore the appeal of the assessee back to the file of ld. AO as no fruitful purpose would be served if the matter is restored back to the file of ld. CIT(A), because the order of the AO is also ex parte assessment order. Accordingly, we direct the assessee to submit all the necessary details supporting his income and also explain the course of cash deposit during the financial year. The ld. AO may examine the same and then decide the issue afresh in accordance with law after giving assessee opportunity of hearing. In view of the above facts, ground Nos.1 & 2 are allowed and merits of the addition are restored to the file of the ld.AO. Printed from counselvise.com ITA No.558/Bang/2025 Page 8 of 8 11. In the result, the appeal of the assessee is allowed for statistical purposes. Pronounced in the open court on this 03rd day of September, 2025. Sd/- Sd/- ( SOUNDARARAJAN K. ) ( PRASHANT MAHARISHI ) JUDICIAL MEMBER VICE PRESIDENT Bangalore, Dated, the 03rd September, 2025. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore. Printed from counselvise.com "