SANJAYKUMAR KANUBHAI PATEL,AHMEDABAD V. THE ITO, WARD-1, GANDHINAGAR

ITA 2229/AHD/2025

AI Insights

The case involves Sanjaykumar Kanubhai Patel, an individual engaged in milk distribution, who appealed against the orders of the Income Tax Officer and the CIT(Appeals) for the assessment years 2018-19 and 2019-20. The primary issues revolved around the addition of unexplained income and interest income, as well as procedural challenges related to the issuance of notice under section 148 of the Income Tax Act. The Assessing Officer had treated a difference in reported sales and bank deposits as unexplained income, which the CIT(Appeals) initially upheld but dismissed the appeal due to a significant delay in filing. The Tribunal found merit in reconsidering the case due to the substantial nature of the additions and the potential for the assessee to substantiate his claims if given another opportunity.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 848295 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Ahmedabad
• Assessment Year: 2019-2020
• Appeal Filed On: 24-11-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHAKAR VERMA
• Assessee Lawyers: HEMAL P DOSHI
• Keywords: Set aside; Business income; Opportunity of being heard; Reasonable cause; Principle of natural justice
• Section: 147; 148; 144; 142(1); 56; 273B

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER I.T.A. No.2226 to 2229/Ahd/2025 (Assessment Years: 2018-19 & 2019-20) Sanjaykumar Kanubhai Patel, C/o. Hemal P Doshi & Associates, Chartered Accountants, 912, West Wing, Venus Stratum, Nr. Jahnsi Ki Rani Bus Stop, Nehrunagar, Ahmedabad-380015 Vs. Income Tax Officer, Ward-1, Gandhinagar-382010 [PAN No.COMPP6349K] (Appellant) .. (Respondent) Appellant by : Shri Hemal P Doshi, AR Respondent by: Shri Sudhakar Verma, Sr. DR Date of Hearing 23.03.2026 Date of Pronouncement 25.03.2026 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: These are appeals filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide separate orders dated 25.08.2025 & 06.09.2025 passed for A.Y. 2018-19 & 2019-20. Since common facts and issues for consideration are involved for the years before us, the present appeals are being disposed of by way of a common order. ITA No. 2226/Ahd/2025(A.Y. 2018-19) 2. The assessee has taken the following grounds of appeal: Printed from counselvise.com ITA Nos. 2226 to 2229/Ahd/2025 Sanjaykumar Kanubhai Patel vs. ITO Asst. Years –2018-19 & 2019-20 - 2– “1. Whether, on facts and in circumstances of the case and in law, Ld. CIT(A) has erred in confirming the addition of unexplained income u/s 69A of the act amounting to Rs. 32,22,144/-? 2. Whether, on facts and in circumstances of the case and in law, Ld. CIT(A) has erred in confirming the addition of interest income u/s 56 of the act amounting to Rs. 50,285/-? 3. Whether, on facts and in circumstances of the case and in law, Ld. AO erred in issuing notice u/s. 148 of the act? Further, appellant craves leave to add, amend, alter or withdraw all or any ground of appeal.” 3. We hereby condone delay of 24 days in filing of present appeal in view of smallness of delay causing no perceptible prejudice to the order side. 4. The brief facts of the case are that the assessee is an individual engaged in the business of milk distribution as an agent of Gujarat Co-operative Milk Federation and earns commission income on such sales. The case of the assessee was reopened under section 148 of the Income-tax Act, 1961 (“the Act”) on the basis of information relating to substantial cash deposits and other financial transactions. During the course of assessment proceedings, notices under sections 143(2) and 142(1) of the Act were issued from time to time and the assessee filed certain replies along with bank statements and computation of income. The assessee submitted that he was only earning commission income and had deposited cash in bank out of sales proceeds. 5. However, on examination of the records, the Assessing Officer observed that there was a mismatch between the total sales declared by the assessee and the cash deposits reflected in the bank accounts. While the assessee had shown sales of Rs. 3,05,88,011/-, the total cash deposits in bank accounts were found to be Rs. 3,38,10,155/-, resulting in a difference of Rs. Printed from counselvise.com ITA Nos. 2226 to 2229/Ahd/2025 Sanjaykumar Kanubhai Patel vs. ITO Asst. Years –2018-19 & 2019-20 - 3– 32,22,144/-. The Assessing Officer issued show cause notices asking the assessee to explain the difference and also to furnish complete bank statements. Despite being given sufficient opportunities, the assessee failed to respond satisfactorily and did not furnish complete details. Accordingly, the Assessing Officer proceeded to complete the assessment on the basis of available material and treated the difference amount of Rs. 32,22,144/- as unexplained income under section 69A of the Act. Further, interest income amounting to Rs. 50,285/- which was not disclosed in the return of income was also added under the head “Income from other sources”. The total income of the assessee was thus assessed at Rs. 35,23,780/- as against the returned income of Rs. 2,51,350/-. Penalty proceedings were also initiated separately. 6. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(Appeals). However, the CIT(Appeals) noted that the appeal was filed with a delay of 581 days. The Ld. CIT(Appeals) examined the reasons furnished by the assessee for such delay but was not satisfied with the explanation offered. The CIT(Appeals) observed that the assessee failed to demonstrate any sufficient and reasonable cause which prevented him from filing the appeal within the prescribed time limit. Accordingly, the Ld. CIT(Appeals) refused to condone the delay of 581 days and dismissed the appeal of the assessee in limine without going into the merits of the case. 7. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. 8. Before us, the Counsel for the assessee submitted that the assessee was engaged in the business of milk distribution and was an agent of Gujarat Co- Printed from counselvise.com ITA Nos. 2226 to 2229/Ahd/2025 Sanjaykumar Kanubhai Patel vs. ITO Asst. Years –2018-19 & 2019-20 - 4– operative Milk Federation and earned commission income on such sales. The milk purchased was sold by the assessee to local villagers on which the assessee earned a commission income. Accordingly, the Assessing Officer erred in treating the entire differential amount of deposit as income of the assessee. Further, the Counsel for the assessee also submitted that the actual deposits in the bank account was 4.5 crores approximately and inadvertently the assessee omitted in disclosing the deposits in SBI account number “8641” inadvertently (which were to the tune of Rs. 1.5 crores approximately) while filing return of income. Accordingly, the Counsel for the assessee also sought permission to revise the audited books of accounts so as to account for the above receipts. The Counsel for the assessee further submitted that if given opportunity of hearing, the assessee is in a position to explain the source of the entire cash deposits and in interest of justice, looking into the quantum of additions, the assessee may be provided another opportunity of hearing to present case on merits. The Counsel for the assessee submitted that the assessee is selling in village area and therefore there was a bona-fide cause for not being able to file appeal before CIT(Appeals) in time. 9. We have heard the rival submissions and perused the material available on record. It is noted that the Ld. CIT(Appeals) has dismissed the appeal of the assessee in limine solely on the ground of delay of 581 days in filing the appeal and has not adjudicated the issues on merits. At the same time, it is also evident that the assessee has failed to file the appeal within the prescribed time limit and has not been able to properly substantiate the reasons for such inordinate delay before the Ld. CIT(Appeals). Printed from counselvise.com ITA Nos. 2226 to 2229/Ahd/2025 Sanjaykumar Kanubhai Patel vs. ITO Asst. Years –2018-19 & 2019-20 - 5– 10. However, considering the totality of facts and circumstances of the case, we find that the additions made by the Assessing Officer are substantial in nature and relate to treatment of cash deposits as unexplained income under section 69A of the Act. Before us, the assessee has raised contentions that he is merely a commission agent engaged in milk distribution and that the cash deposits represent business turnover, including certain bank accounts which were inadvertently not considered while filing the return of income. It has also been submitted that the assessee is in a position to explain the source of deposits and is willing to revise the books of accounts, if an opportunity is granted. 11. In our considered view, the principles of natural justice require that the assessee should be afforded a reasonable opportunity to present his case on merits, especially when the additions are of significant magnitude. At the same time, the conduct of the assessee in not filing the appeal within time and in not properly pursuing the matter before the Ld. CIT(Appeals) cannot be ignored. 12. Accordingly, in the interest of justice, we deem it appropriate to set aside the impugned order passed by the Ld. CIT(Appeals) and restore the matter to his file for de novo adjudication. The Ld. CIT(Appeals) may condone the delay and decide the appeal afresh on merits in accordance with law after providing adequate and reasonable opportunity of being heard to the assessee. The assessee is also directed to fully cooperate in the appellate proceedings and furnish all necessary details and evidences in support of his claim without seeking unnecessary adjournments. Printed from counselvise.com ITA Nos. 2226 to 2229/Ahd/2025 Sanjaykumar Kanubhai Patel vs. ITO Asst. Years –2018-19 & 2019-20 - 6– 13. At the same time, considering the negligence on the part of the assessee in not filing the appeal within the prescribed time and in not properly complying with the proceedings, we impose a cost of Rs. 20,000/- on the assessee, which shall be deposited in the Prime Minister’s Relief Fund within a period of 30 days from the date of receipt of this order. Proof of such payment shall be furnished before the Ld. CIT(Appeals) at the time of hearing. 14. In the result, the appeal of the assessee is allowed for statistical purposes for assessment year 2018-19. ITA No. 2229/Ahd/2025 (Assessment Year 2019-20) 15. The assessee has taken the following grounds of appeal: “1. Whether, on facts and in circumstances of the case and in law, Ld. CIT(A) has erred in confirming the addition of unexplained income u/s 69A of the act amounting to Rs. 1,89,19,965? 2. Whether, on facts and in circumstances of the case and in law, Ld. CIT(A) has erred in confirming the addition of interest income u/s 56 of the act amounting to Rs. 23,728/-? 3. Whether, on facts and in circumstances of the case and in law, Ld. AO erred in issuing notice u/s 148 of the act? Further, appellant craves leave to add, amend, alter or withdraw all or any ground of appeal.” 16. Since the facts and issues for consideration are identical for both assessment years 2018-19 and 2019-20, the appeal of the assessee for assessment year 2019-20 is also restored to the file of CIT(Appeals) for de- novo consideration subject to payment of cost of Rs. 20,000/- for assessment Printed from counselvise.com ITA Nos. 2226 to 2229/Ahd/2025 Sanjaykumar Kanubhai Patel vs. ITO Asst. Years –2018-19 & 2019-20 - 7– year 2019-20 as well, which shall be deposited in the Prime Minister’s Relief Fund within a period of 30 days from the date of receipt of this order. 17. In the result, the appeal of the assessee is allowed for statistical purposes for assessment year 2019-20. ITA No. 2228/Ahd/2025 (penalty u/s 271AAC(1) of the Act for assessment year 2018-19: 18. The assessee has taken the following grounds of appeal: “1. Whether, on facts and in circumstances of the case and in law, Ld. CIT(A) has erred in confirming the penalty amounting to Rs. 1,93,328/-? Further, appellant craves leave to add, amend, alter or withdraw all or any ground of appeal.” 19. Since the case of the assessee with respect to quantum additions has been restored to the file of CIT(Appeals) for de-novo consideration, the penalty matter is also restored to the file of CIT(Appeals). 20. In the result, the appeal of the assessee is allowed for statistical purposes in ITA No. 2228/Ahd/2025. ITA No. 2227/Ahd/2025 (Assessment Year: 2018-19) 21. The assessee has taken the following grounds of appeal: “1. Whether, on facts and in circumstances of the case and in law, Ld. CIT(A) has erred in confirming the penalty amounting to Rs. 1,50,000/-? Further, appellant craves leave to add, amend, alter or withdraw all or any ground of appeal.” Printed from counselvise.com ITA Nos. 2226 to 2229/Ahd/2025 Sanjaykumar Kanubhai Patel vs. ITO Asst. Years –2018-19 & 2019-20 - 8– 22. The brief facts of the case are that the assessee is an individual engaged in business activities and was subjected to assessment proceedings for the relevant assessment year. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee had reported substantial turnover exceeding the prescribed limit under section 44AB of the Act, however, the assessee failed to get his books of accounts audited within the prescribed due date as required under the said provisions. The assessment was completed under section 147 read with section 144 of the Act determining the total income at a higher figure. 23. Consequently, penalty proceedings under section 271B of the Act were initiated for failure to comply with the provisions of section 44AB of the Act. The Assessing Officer issued multiple show cause notices to the assessee during the course of penalty proceedings, providing several opportunities to explain the failure to get the accounts audited in time. However, the assessee remained largely non-compliant and did not furnish any satisfactory explanation. Though the assessee had produced an audit report dated 26.12.2020, the Assessing Officer observed that the same was not obtained within the prescribed due date under the Act. In absence of any reasonable cause being demonstrated by the assessee, the Assessing Officer concluded that the assessee had failed to comply with the statutory requirement of audit and accordingly levied penalty under section 271B of the Act. The penalty was computed at 0.5% of the turnover subject to the statutory limit and a sum of Rs. 1,50,000/- was imposed as penalty. 24. Aggrieved by the penalty order, the assessee preferred an appeal before the Ld. CIT(Appeals). However, the CIT(Appeals) noted that the appeal was Printed from counselvise.com ITA Nos. 2226 to 2229/Ahd/2025 Sanjaykumar Kanubhai Patel vs. ITO Asst. Years –2018-19 & 2019-20 - 9– filed with a delay of 451 days. The Ld. CIT(Appeals) examined the reasons furnished by the assessee for such delay but found that the assessee failed to establish any sufficient or reasonable cause which prevented him from filing the appeal within the prescribed time limit. Accordingly, the Ld. CIT(Appeals) refused to condone the delay of 451 days and dismissed the appeal of the assessee in limine without adjudicating the issue on merits. 25. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. 26. We have heard the rival submissions and perused the material available on record. It is observed that the assessee had turnover exceeding the prescribed limit under section 44AB of the Act and was therefore mandatorily required to get his books of accounts audited within the prescribed due date. However, the assessee has failed to do so. Even during the course of penalty proceedings, despite being provided with sufficient opportunities, the assessee did not furnish any satisfactory explanation for such failure. The audit report produced by the assessee is admittedly dated beyond the prescribed due date and therefore does not meet the statutory requirement. 27. Before us also, the assessee has not been able to demonstrate any reasonable cause for the delay in getting the audit report within the time allowed under the Act. The explanations, if any, are general in nature and do not establish any bona fide or unavoidable circumstances. In absence of any reasonable cause as contemplated under section 273B of the Act, the failure of the assessee clearly attracts penalty under section 271B of the Act. Printed from counselvise.com ITA Nos. 2226 to 2229/Ahd/2025 Sanjaykumar Kanubhai Patel vs. ITO Asst. Years –2018-19 & 2019-20 - 10– 28. We are of the considered view that that the Assessing Officer has rightly concluded that the assessee has violated the provisions of section 44AB and has correctly levied penalty as per law. The findings of the Assessing Officer are based on facts available on record and do not suffer from any infirmity. 29. Accordingly, we find no reason to interfere with the order of the lower authorities. The appeal filed by the assessee is therefore dismissed. 30. In the combined result, the appeals filed by the assessee in ITA No. 2226/Ahd/2025, 2229/Ahd/2025 & 2228/Ahd/2025 are allowed for statistical purposes and appeal filed by the assessee in ITA No. 2227/Ahd/2025 is dismissed. This Order is pronounced in the Open Court on 25/03/2026 Sd/- Sd/- (NARENDRA P. SINHA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 25/03/2026 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad Printed from counselvise.com "