ITO Vs Shyam Sagar Yadav (ITAT Lucknow)
The Income Tax Appellate Tribunal (ITAT), Lucknow, decided the Revenue’s appeal against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi dated 19.04.2024 for Assessment Year 2017-18. The appeal challenged the deletion of a penalty of ₹60,29,841 levied under Section 271AAC(1) of the Income-tax Act, 1961, which had been imposed on the basis of an addition of ₹10,04,97,350 treated as unexplained money under Section 69A and taxed under Section 115BBE.
The Revenue’s appeal was filed with a delay of 34 days. The Tribunal considered the application for condonation of delay and found that the delay had occurred for bona fide reasons and was not attributable to negligence or inaction on the part of the Revenue. Accordingly, the delay was condoned and the appeal was admitted for hearing on merits.
At the outset, counsel for the assessee submitted that the Tribunal, in the quantum appeal, had already deleted the addition on which the penalty was based. It was pointed out that the ITAT, Lucknow Bench, by order dated 16.10.2025 in ITA No. 445/LKW/2024 for Assessment Year 2017-18, had deleted the addition made by the Assessing Officer. A copy of the Tribunal’s order in the quantum appeal was placed on record. The assessee therefore contended that, once the underlying addition no longer survived, the penalty levied under Section 271AAC(1) also could not survive.
The Departmental Representative supported the penalty order passed by the Assessing Officer and relied upon the orders of the lower authorities.
After hearing both sides and examining the material available on record, the Tribunal noted that in the quantum proceedings it had already considered the issue relating to the addition under Section 69A. The Tribunal reproduced the relevant findings recorded in its order dated 16.10.2025, wherein it had observed that the Revenue had not disputed the existence of the agreement between the assessee and the State Bank of India under which the assessee functioned as the bank’s Correspondent/Bank Mitra. Under the agreement, the assessee was authorised to collect cash and make payments to customers of the bank.
The Tribunal also referred to the confirmation furnished by the Branch Manager of the State Bank of India stating that the assessee had worked as a Banking Correspondent during the period 01.04.2016 to 31.03.2017 and was authorised under the agreement to collect cash and make payments. Although the bank stated that it was not in a position to verify individual deposits because of the large volume of transactions, it also confirmed that no complaints had been received against the assessee during the relevant period regarding non-deposit of amounts into the concerned account holders’ accounts.
In the quantum appeal, the Tribunal had held that the Assessing Officer had not appreciated the assessee’s explanation in the proper perspective and had drawn an adverse inference by treating the deposits as the assessee’s income under Section 69A without making any further inquiry from the assessee’s account statement or calling for records from the bank. Considering the totality of the facts and the material available on record, the Tribunal had upheld the Commissioner (Appeals)’s order deleting the addition.
While deciding the present penalty appeal, the Tribunal observed that it was undisputed that the addition forming the basis of the penalty had already been deleted in the quantum proceedings. The Tribunal further noted that, in the quantum appeal, it had sustained the finding of the Commissioner (Appeals) that the assessee had merely acted as an agent of the bank and that the money deposited in the bank account pertained to the bank. The assessee’s status as an agent had also been accepted by the Branch Manager.
On these facts, the Tribunal held that when the addition itself had been deleted, the penalty imposed on the basis of that addition could not survive. Accordingly, the Tribunal rejected the grounds raised by the Revenue.
The appeal filed by the Revenue was therefore dismissed, and the deletion of the penalty under Section 271AAC(1) was upheld.
The order was pronounced in the open court on 15.01.2026.
Cases Discussed
- ITO, Lucknow vs. Shyam Sagar Yadav (ITAT Lucknow), ITA No. 445/LKW/2024 for A.Y. 2017-18, order dated 16.10.2025
FULL TEXT OF THE ORDER OF ITAT LUCKNOW
This appeal, by the Revenue, is directed against the order of the Learned Commissioner of Income tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi dated 19.04.2024, pertaining to the assessment year 2017-18. The Revenue has raised the following grounds of appeal: –
“1. Because on the facts and circumstances of the case, the Ld. CIT(A) has erred in law and in facts while deleting the penalty u/s 271AAC(1) of the Act, amounting to Rs.60,29,841/- levied on account of unexplained money u/s 69A of Rs,10,04,97,350/- ignoring that cash deposit of Rs.10,04,97,350/- was added to the income of assessee and income tax was charged as per provisions of section 115BBE of the Income Tax Act.”
2. The appeal is time barred by 34 days. The Revenue has filed an application seeking condonation of delay in filing of appeal. After perusal of application, we have satisfied that delay in filing of appeal was for bonafide reasons and not on account of negligence or inaction on the part of Revenue. The delay in filing of appeal is condoned and appeal is admitted for hearing on merits.
3. At the outset, the Ld. Counsel for the assessee submitted that in the quantum appeal, the Tribunal (ITAT ‘A’ Bench Lucknow) vide its order dated 16.10.2025 has deleted the addition. Consequently, the penalty does not survive. He has also placed on record a copy of the said order of the Tribunal passed in the quantum appeal in ITA No. 445/LKW/2024 for A.Y. 201718.
4. On the other hand, the Ld. Departmental Representative for the Revenue supported the order of the Assessing Officer and relied on the penalty order.
5. We have heard the rival submission, perused the materials available on record and gone through the orders of the authorities below. We note that this Tribunal, in the quantum appeal in ITO, Lucknow vs. Shyam Sagar Yadav, ITA No. 445/LKW/2024 for A.Y. 2017-18, vide order dated 16.10.2025, has deleted the addition made by the Assessing Officer and confirmed by the Ld. CIT(A) has been deleted by holding as under: –
“7. Heard the Ld. Representatives of the parties and perused the material available on records. The Revenue has not disputed the fact that the assessee had entered into an agreement with the SBI to act as its Correspondent/Bank Mitra. As per the terms of the agreement, the assessee was authorized to collect the cash and make payment to the customers of the SBI. The assessee throughout has been stating that the cash in question pertained to the concerned branch of SBI and such Act of the assessee was duly supported by the relevant terms of the agreement. During the course of assessment proceedings, the assessee had asked the bank manager about the specific details related to the cash. The response of the bank manager in this regard “we submit that Sh. ShyamSagaryadav was working as banking corresponding during the period in question i.e. 01.04.2016 to 31.03.2017 and as per the agreement with the bank he was authorized to collect cash and make payments under terms of agreement. The branch is presently not in the position to confirm/verify that the amount deposited by the assessee in the said account was consequently deposited in the concerned account holder’s account since the volume of the transactions is quite large. However, we would like to submit that we have received no complaints against the assessee for the period in question for non-deposit of amount in concerned account holder’s account which may answer your query”. However, the Assessing Officer did not appreciate the explanation offered by the assessee in the right perspective and drew an adverse inference by treating the amount as the income of the assessee in terms of Section 69A of the Act. Such an action by the Assessing Authority, without making any further inquiry from the assessee’s account statement or calling for records from the bank, in our considered view, would not be justified. Considering the totality of the facts and materials available on record, we do not see any infirmity in the finding of the Ld. CIT(A) for deleting the impugned addition. The grounds raised by the Revenue are thus, dismissed.”
6. It is undisputed that the Tribunal, in the quantum appeal, has sustained the finding of the Ld. CIT(A) deleting the addition on the ground that the assessee was merely acted as an agent of the bank and that the money deposited in the bank account pertained to the bank. The factum of assessee being the agent has also been duly accepted by the branch manager of the bank. Under these facts, when the impugned addition has been deleted the penalty imposed on the basis of such addition would not survive. Therefore, grounds raised by the Revenue are rejected.
7. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open Court on 15/01/2026.
