SHANKARBHAI VIRABHAI PATEL,DAHOD V. ITO WARD-1, DAHOD

ITA 2219/AHD/2024

AI Insights

The case involves appeals by Shankarbhai Virabhai Patel against the orders of the Commissioner of Income Tax (Appeals) and the Income Tax Officer, which pertained to the assessment year 2018-19. The primary issues revolved around the non-consideration of the assessee's submissions due to procedural delays and the alleged double addition of the same amounts in the assessee's income. The Tribunal noted that the assessee, being a first-time businessman, was unaware of the Income Tax proceedings and that the assessments were made ex-parte. The Tribunal found merit in re-evaluating the additions made to the assessee's income and the subsequent penalties imposed.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717393 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2018-2019
• Appeal Filed On: 31-12-2024
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: PARAG JAIN
• Keywords: Set aside; Business income; Opportunity of being heard; Corroborative evidences; TDS; Recovery proceedings; FORM 26AS
• Section: 147; 44AD; 194C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. Nos.2218&2219/Ahd/2024 (Assessment Year: 2018-19) Shankarbhai Virabhai Patel, 57/B, Shayal Society, Chakalya Road, Dahod, Gujarat-389151 Vs. Income Tax Officer, Ward-1, Dahod [PAN No.AOGPP3652R] (Appellant) .. (Respondent) Appellant by : Shri Parag Jain, A.R Respondent by: Shri Rignesh Das, CIT-D.R. Date of Hearing 22.07.2025 Date of Pronouncement 11.08.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: These appeals have been filed by the Assessee against the orders passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide orders dated 15.10.2024 passed for A.Y. 2018-19. First we shall deal with Assessee’s Appeal in ITA No. 2218/Ahd/2024 (A.Y. 2018-19) 2. The Assessee has taken the following grounds of appeal:- “1. Assessee had provided sub - contractor service against which computation of! income was prepared but since reply window was closed computation was sent via email to the Commissioner of Income Tax (Appeals) i.e. CIT(Appeals). The Appellate Authority rejected the appeal without considering our genuine considerations. Considering the first year of business assessee has indeed incurred a loss but opted for section 44AD for filing of return showing 6% of the total gross receipts since all receipts had been received through RTGS. 2. As mentioned in the order the Total Deposits amounting to Rs. 1,59,00,000/- in FDR's is Auto-generated sweep FDR's. The Source is business receipts. These are hybrid model of Savings and a Fixed Deposit account wherein if any spare amount is left idle in the bank Printed from counselvise.com ITA Nos. 2218&2219/Ahd/2024 Shankarbhai Virabhai Patel vs. ITO Asst. Year –2018-19 - 2– account same shall be transferred to an Auto Sweep FD account. Same amount has been rotated multiple times and has been added to income whereas no such additional income exists. 3. Interest Income earned from PNB of Rs.3,266/- and Rs.1,682/- are deductible under section 80TTA and shall not be made an addition. 4. The Assessee being harassed from this situation and having no knowledge of the fact at that time regarding the proceedings initiated by the Income Tax Department had failed to file appeal on time to the CIT(Appeals) which was filed by him as soon as the fact came to his knowledge. Assessee had just started the business during A.Y. 2018-19 and had no idea regarding the liabilities that arose and had filed all the Income Tax Returns post A.Y. 2018-19 disclosing all the incomes and liabilities. 5. Considering the same it can be observed that the income earned by the Assessee is from genuine sources and no funds are obtained from illegal sources. Thus Sections 115BBE and 69A regarding undisclosed income shall not be imposed on the Assessee. 6. The Assessee has not received a proper opportunity of being heard from the First Appellate Authority. The Documents including Statement of Facts and grounds of appeal were filed with the CIT (Appeals) but the appeal was rejected. We plead you to accept our appeal and please decide the case on merits considering our submissions.” 3. The brief facts of the case are that the assessment was reopened under section 147 of the Income Tax Act (Act) in the case of the assessee on the basis of information received during the assessment of Shri Harishkumar Ramjibhai Patel, who submitted that he had made payments amounting to ₹1,33,65,195/- to the assessee for contract work, with corresponding TDS having been deducted under section 194C of the Act. Despite these payments, the assessee had not filed a return of income for the relevant year. The Assessing Officer issued various notices of hearing, but the assessee filed no response to the same. The Assessing Officer noted that the assessee continued to remain non-compliant and failed to respond to the notices issued or participate in the proceedings. Accordingly, based on the documents submitted by Shri Harishkumar Patel, which included various bills, bank statements, and a letter of confirmation, the Assessing Officer observed that while payments were made to the assessee on which TDS had also been deducted, the assessee failed to provide any supporting documentation such Printed from counselvise.com ITA Nos. 2218&2219/Ahd/2024 Shankarbhai Virabhai Patel vs. ITO Asst. Year –2018-19 - 3– as work details, expenditure incurred, or material purchases to substantiate the contract income received by him. Further, the Assessing Officer noted that the assessee had invested a sum of ₹1.42 crore in two fixed deposits and received ₹17 lakh as maturity proceeds, yet the assessee provided no explanation or source of these funds. Accordingly, since the assessee failed to furnish any response, this amount, along with the ₹1.33 crore which was received from Shri Harishkumar Patel, amounting to ₹2,92,65,195/-, was treated as unexplained money under section 69A of the Act. Further, interest income of ₹4,948/- reflected in Form 26AS was also taxed as “income from other sources” in the hands of the assessee. The assessment was completed ex-parte due to non-compliance on part of the assessee. 4. In appeal, CIT(Appeals) noted that the appeal was filed belatedly on 06.08.2024, whereas the assessment order was served on the appellant on 26.03.2023. As per section 249(2) of the Act, the appellant was required to file the appeal within 30 days from the date of service of the order. In Form 35, the appellant acknowledged the delay and sought condonation on the grounds that he was unaware of the proceedings at the time and only came to know about the assessment after the initiation of tax recovery proceedings. The assessee contended that the delay was unintentional and due to a lack of knowledge, particularly since the business had just commenced during the relevant assessment year 2018–19, and that returns were duly filed in subsequent years. The CIT(Appeals), however, found no merit in this explanation and held that the appellant failed to demonstrate sufficient cause for the inordinate delay in filing the appeal. Since the appeal was not filed within the time limit prescribed under section 249(2) of the Act, and the Printed from counselvise.com ITA Nos. 2218&2219/Ahd/2024 Shankarbhai Virabhai Patel vs. ITO Asst. Year –2018-19 - 4– conditions for condonation under section 249(3) of the Act were not met, the delay was not condoned. Accordingly, the appeal was not admitted by CIT(Appeals) and was dismissed for statistical purposes without going into the merits of the case. 5. The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee. Before us, the ld. counsel for the assessee submitted that the assessee is a civil contractor and this was the first year of the assessee’s business. The assessee received certain amounts on account of its business activities, which were deposited by the assessee in his bank account and the same were converted into fixed deposits due to auto sweep facility in the bank account. Further, the ld. counsel for the assessee submitted that that the Assessing Officer made the entire addition of total deposits in the bank account of the assessee without appreciating / giving credit of withdrawals made by the assessee from the same bank account. Accordingly, the ld. counsel for the assessee submitted that that the same amount was added twice in the hands of the assessee while farming the assessment order. 6. We have heard the rival contentions and perused the material on record. Before us, the learned counsel for the assessee has reiterated that the assessee, being a first-time businessman and a civil contractor, was unaware of Income Tax proceedings. It has been submitted that the amounts received were part of business receipts and deposited in the assessee’s bank account, which were subsequently converted into fixed deposits through an auto- sweep facility. The learned counsel also drew our attention to the fact that the Assessing Officer has not considered the withdrawals made from the bank Printed from counselvise.com ITA Nos. 2218&2219/Ahd/2024 Shankarbhai Virabhai Patel vs. ITO Asst. Year –2018-19 - 5– account while computing the additions, thereby resulting in a possible double addition of the same amounts, which, according to the Counsel for the assessee, has caused serious prejudice to the assessee. Considering the totality of the facts and circumstances of the case and in the interest of justice, we are of the view that the matter deserves a fresh look at the level of the Assessing Officer. The assessment was completed ex-parte and the addition appears to have been made without proper reconciliation of deposits and withdrawals. Further, the assessee was denied relief by CIT(Appeals) solely on technical grounds without examination of the facts of the assessee’s case. Therefore, we consider it appropriate to set aside the matter to the file of the Assessing Officer for de novo consideration, after affording due opportunity to the assessee to present his case along with supporting evidence. The Assessing Officer shall consider all relevant facts, including the nature of business receipts, flow of funds in the bank account, and any other submissions made by the assessee, before passing a fresh assessment order in accordance with law. 7. In the result, appeal of the assessee is allowed for statistical purposes. Now we come to ITA No. 2219/Ahd/2024 (A.Y. 2018-19) 8. The assessee’s appeal in ITA No. 2219/Ahd/2024 relates to appeal against levy of penalty under section 271AAC(1) of the Act. In this case, the Assessing Officer held that in view of the additions made under Section 69A r.w.s. 115BBE of the Act, amounting to Rs. 2,92,65,195/-, the assessee is liable to pay penalty computed @ 10% of the tax so levied on the assessee. Printed from counselvise.com ITA Nos. 2218&2219/Ahd/2024 Shankarbhai Virabhai Patel vs. ITO Asst. Year –2018-19 - 6– Accordingly, the assessee was directed to pay a sum of Rs. 71,25,912/- under Section 115BBE(1) of the Act. 9. In appeal against levy of penalty, Ld. CIT(A) dimissed the appeal of the assessee on account of delay in filing of appeal under Section 249(3) of the Act, refusing to condone the delay in filing the appeal by the assessee. 10. The assessee is in appeal before us against the aforesaid order passed by the Ld. CIT(A), who dismissed the appeal of the assessee. 11. We note that since appeal against quantum addition have been restored to the file of Assessing Officer for de-novo consideration, accordingly, the matter relating to levy of penalty is also restored to the file of Assessing Officer for de-novo consideration. 12. In the result, both the appeals of the assessee are allowed for statistical purposes. This Order is pronounced in the Open Court on 11/08/2025 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 11/08/2025 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 "