RAJNESH KUMAR,SITAPUR V. THE INCOME TAX OFFICER, SITAPUR

ITA 304/LKW/2025

AI Insights

The case involves a series of appeals by the assessee, Rajnesh Kumar Khamhriya, against the orders of the Income Tax Officer, Sitapur, pertaining to the assessment year 2015-16. The appeals were related to quantum proceedings and penalties under sections 271(1)(b), 271(1)(c), and 271F of the Income Tax Act, 1961. The primary issues revolved around the rejection of the condonation of delay in filing appeals, the validity of additions made to the assessee's income, and the imposition of penalties for alleged concealment and inaccuracies in income reporting. The Tribunal found that the delay in filing was justified due to the medical condition of the assessee's advocate and that the penalties were improperly imposed without adequate consideration of the assessee's explanations and circumstances.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 826577 (ITAT-LUCKNOW)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 23-04-2025
• Other Referred Cases: Collector of Land Acquisition Vs. MST. Katiji & Ors 167 ITR 471 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.R.N. SHUKLA
• Assessee Lawyers: K. R. RASTOGI
• Keywords: Condonation of delay; Set aside; Reasonable cause; Period of limitation; Principle of natural justice
• Section: 148; 271(1)(c); 44AD; 139

Judgement Text

"आयकर अपीलीय अधिकरण ‘बी’ न्यायपीठ, लखनऊ। IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH “B”, LUCKNOW श्री क ुल भारत, उपाध्यक्ष एवं श्री ननखखल चौिरी, लेखा सदस्य क े समछ BEFORE SHRI KUL BHARAT, VICE PRESIDENT AND SHRI NIKHIL CHOUDHARY, ACCOUNTANT MEMBER ITA Nos. 301 to 304/LKW/2025 Assessment Year: 2015-16 Rajnesh Kumar Khamhriya Katesar, Sanda, Laharpur, Sitapur-261135 (U.P). v. The Income Tax Officer, Sitapur New/Assessment Unit Income Tax Department Eye Hospital Road, Sitapur, U.P.-208001. PAN:AVUPK5214H (Appellant) (Respondent) Appellant by: Shri K. R. Rastogi, CA Respondent by: Shri R. R. N. Shukla, Addl. CIT(DR) Date of hearing: 27 11 2025 Date of pronouncement: 09 01 2026 O R D E R PER BENCH.: These bunch of appeals by the assessee, related to quantum proceedings and the penalty u/s 271(1)(b), 271(1)(c) and 271F of the Income Tax Act, 1961 (“Act”, for short), pertaining to the assessment year 2015-16. 2. For the sake of convenience, these appeals were heard together and are being disposed of by way of consolidated order. First, we take up the ITA. No. 301/LKW/2025 (Quantum Appeal), pertaining to the A.Y. 2015-16. The assessee has raised the following grounds of appeal: - “1. The Ld. CIT(A), NFAC without appreciating that delay in filing of the appeal, there was a reasonable cause being “Medical Reasons of Advocate Ayaj Ahmad Ayyubi”, Sitapur and assessee is living in remote area and was not aware about e-profile system, hence, he is not aware about passing of assessment order. Thus, the rejection of condonation of Printed from counselvise.com ITA. Nos. 301 to 304/LKW/2025024 Page 2 of 10 delay petition and dismissing the appeal solely on this ground by Ld. CIT(A), NFAC is not justified. 2. That the return filed u/s 44AD of IT. Act, w.r.t sale of country liquor Rs.75,10,075/- on retail basis at an income of Rs.6,00,807/- and net taxable income at Rs.5,27,750/- and also accepted by Ld. AO. Thus, the addition of Rs.63,07,000/- being cash deposit in bank on different dates out of cash sale of country liquor is invalid. 3. The Ld. Authorities below failed to appreciate that no addition of Rs.63,07,000/- being cash deposit in bank account on different dates and utilized towards payment of purchases of country liquor paid to suppliers through banking channel. Suppliers also deducted due TCS on purchases which has also been examined by Ld. AO and also allowed the credit of TCS. 4. That the Ld. Authorities below fails to appreciate that in addition to the cash sale of liquor Rs.75,10,075/- the assessee has also net agriculture income Rs.4,67,862/- and Rs.63,07,000/- were deposited out of the said cash available in addition to sale collection. Thus, the addition u/s 69A of I.T. Act is invalid. 5. The addition upheld is highly excessive, contrary to the facts, law and principle of natural justice and without providing sufficient time and opportunity to have its say on the reasons relied upon by Ld. Lower authorities.” 3. It is noted that the appeal is barred by limitation for 235 days. The assessee has filed an application seeking condonation of delay along with supporting affidavit. Ld. Counsel for the assessee Shri K. R. Rastogi, CA reiterated the submissions as made in the application seeking condonation of delay. It is stated that the assessee is an illiterate person residing in a remote area of Sanda, Laharpur, District Sitapur, and there was no proper facility available at the relevant time. He contended that the e- profile ID belonged to the assessee’s advocate, Shri Ayaz Ahmad Ayyubi but unfortunately, the Ld. counsel for the assessee had been suffering from terminal cancer and was undergoing medical treatment during the relevant period. Due to such medical exigency, the appeal could not be filed in time by the Ld. counsel, nor could a petition seeking condonation of delay be submitted. Further, he took us through the medical reports of Shri Ayaz Ahmad Ayyubi, Advocate. Under the facts and circumstances of Printed from counselvise.com ITA. Nos. 301 to 304/LKW/2025024 Page 3 of 10 the present case, it was pleaded that a liberal view may be adopted and the impugned orders may please be set aside. 4. On the other hand, the learned Departmental Representative for the Revenue, Shri R. R. N. Shukla, opposed the submissions of the assessee and contended that the assessee ought to have been vigilant and should have filed the appeal within the prescribed period of limitation. He further contended that there was no representation on behalf of the assessee even before the lower authorities, which clearly demonstrates the negligence on the part of the assessee. Accordingly, he submitted that the appeal deserves to be dismissed on the ground of limitation alone. 5. Heard the rival contention and perused the materials available on records. It is seen from the record that Ayaz Ahmad Ayyubi Ld. Counsel for the assessee was suffering from a terminal disease during the relevant period. Therefore, we find merit in the contention of the assessee that the delay occurred due to medical exigencies. Further, considering fact that the assessee is not adequately literate. We, therefore, respectfully following the judgment of the Hon'ble Supreme Court in the case of Collector of Land Acquisition Vs. MST. Katiji & Ors 167 ITR 471 (SC) hereby condone the delay and admit the appeal for hearing on merits. 6. Apropos to the grounds of appeal, at the outset, the learned counsel for the assessee drew our attention to the impugned orders and submitted that the lower authorities have not adjudicated the matter on merits, as there was no representation on behalf of the assessee, and the orders were passed ex parte against the assessee. He, therefore, prayed that, in the interest of the principles of natural justice, the assessee Printed from counselvise.com ITA. Nos. 301 to 304/LKW/2025024 Page 4 of 10 may be afforded an opportunity to represent his case on merits. He further contended that the non-appearance was due to reasonable cause, as explained in the application seeking condonation of delay. Further, he contended that the learned counsel for the assessee, Shri Ayaz Ahmad Ayyubi, who was solely handling the assessee’s case, was suffering from a terminal disease during the relevant period. He further contended that since there was no taxable income, the assessee had not filed the return of income. However, in response to the notice issued u/s 148 of the Act, the assessee filed the return declaring profit of Rs.6,00,807/- being 8% of the total turnover of Rs.75,10,075/-. Despite this, without adverting to the submissions of the assessee, the Assessing Officer invoked the provisions of section 69A of the Act and made an addition of Rs.63,07,000/-, which he submitted that in highly excessive. He further submitted that under the facts and circumstances of the present case, the assessee could not represent his case effectively before the Ld. CIT(A), who rejected the appeal without considering the relevant facts and circumstances of the present case. 7. On the other hand, the Ld. Departmental Representative for the Revenue opposed the submissions and supported the orders of the lower authorities. He contended that it was incumbent upon the assessee to prove the nature and source of the amounts deposited in the bank account. He further contended that undisputedly a sum of Rs.63,07,000/- was deposited by the assessee in cash in the bank account maintained by him with Oriental Bank of Commerce. Therefore, he submitted that there is no illegality in the order of the Assessing Officer, as the same was passed after due consideration of the material as available on record. Printed from counselvise.com ITA. Nos. 301 to 304/LKW/2025024 Page 5 of 10 8. We have heard the Ld. Representatives of the parties and perused the materials available on records. It is seen that the assessee had disclosed a total turnover of Rs.75,10,075/- and declared profit by applying the provisions of Section 44AD of the Act @ 8% amounting to Rs.6,00,807/-. The Assessing Authority in para no. 4.5.2 of the assessment order, has stated that the payments made by the above entities on purchase of liquor and collected tax at source u/s 206CA of the Act does not appear to be made in the mode of cash. While there appears to be a business of liquor sales, in the absence of any explanation from the assessee, the payments as made by these entities are taken as made through non-cash mode. Which means, the cash deposits are not made out of the liquor sales. Thus, the finding of the AO is based on guess work. Nothing is brought on record that the stock was not verifiable. It is not the case of the Assessing Officer that there were no sales but on account of absence of proper explanation on the part of the assessee impugned addition was made drawing adverse inference. The Ld. CIT(A) has not given any finding and dismissed the appeal on the ground of limitation. Since there was reasonable cause for the absence of the assessee before the Ld. CIT(A). We hereby set aside the impugned order and restore the assessment to the file of the AO who would frame assessment fresh in accordance with law after duly considering the explanation offered by the assessee. The assessee is directed to cooperate in the assessment proceedings by furnishing all requisite details as may be called for by the Assessing Authority. The grounds raised in this appeal are allowed for statistical purposes. The appeal of the assessee in ITA. No.301/LKW/2025 is allowed for statistical purposes. Printed from counselvise.com ITA. Nos. 301 to 304/LKW/2025024 Page 6 of 10 9. Now, coming to the assesse’s appeal in ITA. No.303/LKW/2025 (Penalty appeal), pertaining to the A.Y. 2015- 16. The assessee has raised the following grounds of appeal: - 1. The Ld. CIT(A), NFAC without appreciating that delay in filing of the appeal, there was a reasonable cause being ‘MEDICAL REASONS OF ADVOCATE AYAZ AHMAD AYYUBI”, Sitapur and Assessee is living in Remote Area and was not aware about e-profile system, hence he is not aware about passing of Penalty Order u/s 271(1)(c) and Assessment Order. Thus the rejection of Condonation of delay Petition and dismissing the appeal solely on this ground by Ld. C.IT.(A), NFAC is not justified. 2. That penalty of Rs. 20,45,000/- imposed u/s 271(1)[c] of I. T. Act without appreciating that in the assessment order penalty is initiated for concealment of Income, however in the present Penalty Order, the penalty has been imposed “Furnished inaccurate Particulars of such Income” as per details given in the Penalty Order. Hence, Ld. A. O. has not imposed the Penalty on the basis of the Assessment Order. Accordingly, the. present Penalty of Rs. 20,45,000/- imposed u/s 271(1)(c) of I. T. Act is bad in the eyes of Law. 3. The Ld. Authorities below failed to appreciate that addition, of Rs. 63,07,000/- made in the Assessment Order being Cash Deposit in Bank Account on different dates in spite of the fact that the Source of Cash Deposit was Cash Sale of Country Liquor on day to day basis deposited in the Bank on different dates and such deposit in Bank are utilized for payment of Purchase Amount of Country Liquor to Supplier through Banking Channel on which due TCS has also been deducted for which credit of tax has also been allowed by Ld. A. O. hence no penalty should be imposed. 4. That the Return filed u/s 44AD of I. T. Act w. r. t. Sale of Country Liquor Rs. 75,10,075/- on Retail Basis, at an Income of Rs. 6,00,807/- and Net Taxable Income at Rs. 5,27,750/- and also accepted by Ld. A. O. Thus, the addition of Rs. 63,07,000/- being Cash Deposit in Bank on different dates out of cash sale of Country Liquor is invalid. Thus, the imposition of penalty is also invalid. 5. The Penalty imposed is highly excessive, contrary to the facts, law and principal of natural justice without providing sufficient time and opportunity to have its say on the reasons relied upon.” 10. It is noted that the present appeal is barred by limitation for 235 days. The assessee has filed an application along with supporting affidavit seeking condonation of delay. The parties have adopted the same arguments as were in ITA. No.301/LKW/2025. For the same reasoning, the delay is condoned and the appeal is admitted for adjudicating on merits. 11. Heard, the Ld. Representatives of the parties. In this case, the assessee has challenged the imposition of penalty u/s Printed from counselvise.com ITA. Nos. 301 to 304/LKW/2025024 Page 7 of 10 271(1)(c) of the Act. In the quantum proceedings, in ITA No. 301/LKW/2025 (Quantum Appeal) for A.Y. 2015-16, we have set aside the assessment order and restored the matter back to the file of the AO for framing the assessment afresh. The foundation of levy of penalty u/s 271(1)(c) of the Act was the impugned addition since the assessment has been set aside in quantum proceedings. Accordingly, we set aside the penalty order and restore the issue of levy of penalty to the file of the AO to be decided afresh in accordance with law. The grounds raised by the assessee are allowed for statistical purposes. 12. Now, coming to the assesse’s appeal in ITA. No.304/LKW/2025 (Penalty appeal), pertaining to the A.Y. 2015- 16. The assessee has raised the following grounds of appeal: - 1. The Ld. CIT(A), NFAC without appreciating that delay in filing of the appeal, there was a reasonable cause being ‘MEDICAL REASONS OF ADVOCATE Ayaz Ahmad Ayyubi”, Sitapur and assessee is living in Remote Area and was not aware about e-profile system, hence he is not aware about passing of Penalty Order u/s 271(1)(b) and Assessment Order. Thus, the rejection of Condonation of delay Petition and dismissing the appeal solely on this ground by Ld. C.IT.(A), NFAC is not justified. 2. That penalty of Rs. 20,000/- imposed u/s 271(1)(b) of I. T. Act without appreciating that due to unavoidable circumstances being MEDICAL REASONS OF ADVOCATE AYAZ AHMAD AYYUBI, Sitapur, who is handling Taxation Matter and keeping e-profile password, further assessee is living in Remote Area and was not aware about e-profile system, hence he is not aware about passing of penalty order u/s 271(1)(b) and assessment order. Thus, penalty of Rs. 20,000/- imposed u/s 271(1)(b) of I. T. Act is bad in the eyes of law. 3. The Penalty imposed is highly excessive, contrary to the facts, law and principal of natural justice without providing sufficient time and opportunity to have its say on the reasons relied upon.” 13. It is noted that the present appeal is barred by limitation for 235 days. The assessee has filed an application along with supporting affidavit seeking condonation of delay. The parties have adopted the same arguments as were in ITA. No.301/LKW/2025. For the same reasoning, the delay is Printed from counselvise.com ITA. Nos. 301 to 304/LKW/2025024 Page 8 of 10 condoned and the appeal is admitted for fresh adjudicating on merits. 14. Heard, the Ld. Representatives of the parties. In this case, the assessee has challenged the imposition of penalty u/s 271(1)(b) of the Act. In the quantum proceedings, in ITA No. 301/LKW/2025 (Quantum Appeal) for A.Y. 2015-16, we have set aside the assessment order and restored the matter back to the file of the AO for framing the assessment afresh. The foundation of levy of penalty u/s 271(1)(b) of the Act was non-compliance of notice issued during the assessment proceedings since the assessment has been set aside in quantum proceedings. Accordingly, we set aside the penalty order and restore the issue of levy of penalty to the file of the AO to be decided afresh in accordance with law. The grounds raised by the assessee are allowed for statistical purposes. 15. Now, coming to the assesse’s appeal in ITA. No.302/LKW/2025 (Penalty appeal), pertaining to the A.Y. 2015- 16. The assessee has raised the following grounds of appeal: - 1. The Ld. CIT(A), NFAC without appreciating that delay in filing of the appeal, there was a reasonable cause being ‘MEDICAL REASONS OF ADVOCATE Ayaz Ahmad Ayyubi”, Sitapur and Assessee is living in Remote Area and was not aware about e-profile system, hence he is not aware about passing of. Penalty Order u/s 271F and Assessment Order. Thus, the rejection of Condonation of delay Petition and dismissing the appeal solely on this ground by Ld. C.IT.(A), NFAC is not justified. 2. That penalty of Rs. 5,000/- imposed u/s 271F of I. T. Act without appreciating that Assessee is not properly educated and living in remote area of District Sitapur. He has been advised by the Local Advocate that his income is below from the Taxable Limit therefore, he is not required to file Return u/s 139 of I. T. Act. Thus, there was a reasonable cause for not filing of Return u/s 139(1) of I. T. Act. Thus, penalty of Rs. 5,000/imposed u/s 271F of I. T. Act is bad in the eyes of law. 3. The Penalty imposed is highly excessive, contrary to the facts, law and principal of natural justice without providing sufficient time and opportunity to have its say on the reasons relied upon.” Printed from counselvise.com ITA. Nos. 301 to 304/LKW/2025024 Page 9 of 10 16. It is noted that the present appeal is barred by limitation for 235 days. The assessee has filed an application along with supporting affidavit seeking condonation of delay. The parties have adopted the same arguments as were in ITA. No.301/LKW/2025. For the same reasoning, the delay is condoned and the appeal is admitted for fresh adjudicating on merits. 17. Heard, the Ld. Representatives of the parties. In this case, the assessee has challenged the imposition of penalty u/s 271F of the Act. In the quantum proceedings, in ITA No. 301/LKW/2025 (Quantum Appeal) for A.Y. 2015-16, we have set aside the assessment order and restored the matter back to the file of the AO for framing the assessment afresh. The foundation of levy of penalty u/s 271F of the Act was non-filing of the ITR, however in the re-opened the assessment the assessee had filed ITR. Considering the totality of facts as narrated by the assessee. The impugned order is hereby set aside and restore the issue to the file of AO for consideration afresh. The grounds raised by the assessee are allowed for statistical purposes. 18. In the result, these appeals of the assessee are allowed for statistical purposes. Order pronounced in the open Court on 09/01/2026. Sd/- [ननखखल चौिरी] Sd/- [क ुल भारत] [NIKHIL CHOUDHARY] [KUL BHARAT] लेखा सदस्य/ACCOUNTANT MEMBER उपाध्यक्ष/VICE PRESIDENT DATED: 09/01/2026 Vijay Pal Singh, (Sr. PS) Printed from counselvise.com ITA. Nos. 301 to 304/LKW/2025024 Page 10 of 10 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. DR 5. Guard File By order //True Copy// Sr. Private Secretary Printed from counselvise.com "