Vipulbhai Keharbhai Kukadiya Vs ITO (ITAT Ahmedabad)
Summary: The ITAT Ahmedabad considered connected quantum and penalty appeals for Assessment Year 2020-21 concerning cash deposits of ₹1,12,32,361 in the assessee’s Bank of India account. The assessee had returned income of ₹3,75,260. Following information available on the Insight Portal under the E-Verification Scheme, 2021, the Assessing Officer reopened the assessment and, following non-compliance with notices, completed an ex-parte assessment, treating the deposits as unexplained money under Section 69A read with Section 115BBE. The CIT(A) dismissed the quantum appeal in limine after refusing to condone approximately 319 days’ delay, finding the explanation general and unsupported. The assessee submitted that he worked as a Business Correspondent/Banking Mitra, handled deposits and withdrawals for the bank and its customers, and earned only nominal commission. He attributed the delay to limited education and knowledge of income-tax procedures, financial constraints and lack of timely professional guidance. The Revenue relied on the orders of the authorities below.
The Tribunal noted that the assessment had been completed ex-parte and that the assessee’s explanation regarding customer banking transactions had not been examined against supporting evidence. In the interest of substantial justice, it set aside the orders of the authorities below and restored the quantum matter to the Assessing Officer for fresh adjudication. The assessee must produce bank statements, appointment documents, transaction details, commission statements and other supporting evidence. The Assessing Officer must verify the nature and source of the deposits, determine whether the transactions were undertaken for the bank and its customers, and determine taxable income after granting a reasonable hearing. The assessee was directed to cooperate without seeking unnecessary adjournments. The quantum appeal was allowed for statistical purposes. Since the underlying addition did not survive at that stage, the Tribunal deleted the consequential penalty under Section 271AAC(1), while expressly permitting fresh penalty proceedings in accordance with law if warranted during the fresh assessment. The penalty appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Both appeals filed by the same assessees are directed against the separate orders dated 14.05.2026 and 19.05.2026 passed by the Ld. Commissioner of Income Tax (Appeals) (hereinafter referred to as the “Ld. CIT(A)”), National Faceless Appeal Centre, Delhi [in short “NFAC”], Delhi for the Assessment Year 2020-21 arising out of the assessment order dated 13.01.2025 completed under section 147 r.w.s 144 read with section 144B of the Income Tax Act, 1961 and penalty order dated 10.07.2025 completed under section 271AAC(1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). Since both the appeals are involved identical/connected issues, the same were heard together and are, therefore, being disposed of by way of common order.
First we take up ITA No. 2464/Ahd/2026 (A.Y.2020-21)
2. The assessee has raised the following grounds of appeal:
“1.1 The Ld. Commissioner of Income Tax (Appeals) [“CIT(A)”] has erred in law and on facts in dismissing the appeal of the Appellant solely on the ground of delay of 319 days in filing the appeal without properly appreciating the facts, circumstances and evidences explaining the delay.
1.2 The Ld. CIT(A) has erred in not condoning the delay despite the fact that the Appellant had demonstrated sufficient and reasonable cause preventing timely filing of the appeal and, therefore, the impugned order deserves to be quashed.
1.3 The Ld. CIT(A) has failed to appreciate that substantial justice should prevail over technical considerations and that the appeal ought to have been admitted and decided on merits in accordance with law.
1.4 The Ld. CIT(A) has erred in dismissing the appeal in limine without adjudicating the grounds raised before him, thereby denying the Appellant an effective opportunity of appellate remedy guaranteed under the Act.
1.5 The Ld. AO has erred in making an addition of ₹1,12,32,361/- under Section 69A of the Act treating the same as unexplained money without appreciating the facts and evidences available on record. The findings recorded by the Ld. AO are contrary to the facts, evidence and settled legal principles and therefore cannot be sustained.
1.6 The Ld. AO has failed to establish the essential conditions required for invoking Section 69A and has wrongly presumed that the amount represented unexplained money belonging to the Appellant.
1.7 The addition has been made merely on assumptions, presumptions, conjectures and surmises without any direct evidence establishing ownership and unexplained nature of the alleged money.
1.8 The Ld. AO has erred in completing the assessment without proper application of mind and without bringing any cogent material on record to justify the additions made.
1.9 The Ld. AO has erred in applying the provisions of Section 115BBE to the alleged addition made under Section 69A.
1.10 Without prejudice, the Ld. AO has failed to appreciate that the facts and circumstances of the case do not justify invocation of the provisions of Section 115BBE.
1.11 The levy of tax under Section 115BBE is illegal, arbitrary and contrary to the facts of the case.
1.12 The impugned assessment order as well as the order of the Ld. CIT(A) are illegal, unjustified and liable to be quashed and/or the addition of Rs.1,12,32,361/- made under Section 69A read with Section 115BBE deserves to be deleted in full.
1.13 The Appellant craves leave to add, alter, amend, withdraw or substitute any of the above grounds of appeal at or before the time of hearing.”
3. The brief facts of the case are that the assessee filed his return of income on 10.01.2021 declaring total income of Rs.3,75,260/-. Subsequently, based on information available on the Insight Portal under the E-Verification Scheme, 2021, the Assessing Officer (hereinafter referred to as “AO”) noticed cash deposits aggregating to Rs.1,12,32,361/- in the assessee’s account with Bank of India. The case was reopened under section 147 of the Act, and notice under section 148 of the Act was issued on 22.03.2024. Despite issuing notices under section 142(1) and various show-cause notices, the assessee did not furnish any explanation regarding the source of the deposits. Accordingly, the AO completed the assessment ex-parte under sections 147 read with section 144 and 144B of the Act, treating the amount of Rs.1,12,32,361/- as unexplained money under section 69A read with section 115BBE of the Act. The total income was assessed at Rs.1,16,07,620/- as against the returned income of Rs.3,75,260/-. The AO also initiated penalty proceedings under sections 271AAC and 272A(1)(d) of the Act for the unexplained money and non-compliance with statutory notices, respectively.
4. Aggrieved by the assessment order, the assessee filed an appeal before the Ld. CIT(A) on 28.12.2025, resulting in a delay of approximately 319 days. Before the CIT(A), the assessee explained that he was working as a Business Correspondent (BC)/Banking Mitra and earned only nominal commission income. It was submitted that the cash deposits and withdrawals were handled on behalf of the bank and its customers and did not represent the assessee’s own income. The assessee attributed the delay to limited knowledge of income tax procedures, limited education, financial constraints and the absence of timely professional guidance. However, the Ld. CIT(A) held that the explanation was general in nature and unsupported by documentary evidence or a specific account of the circumstances preventing the assessee from filing the appeal within the prescribed period. The Ld. CIT(A) rejected the application for condonation of delay and dismissed the appeal in limine without examining the merits of the addition.
5. Being aggrieved against the appellate order, the assessee is in appeal before this Tribunal.
6. The principal grievance of the assessee is that the Ld. CIT(A) erred in refusing to condone the delay and dismissing the appeal without considering the explanation furnished. On merits, the assessee has challenged the addition of Rs.1,12,32,361/- under section 69A of the Act and the consequential application of section 115BBE, contending that the transactions represented banking activities undertaken as a BC/Banking Mitra on behalf of the bank and its customers, and that only the commission earned by the assessee could be considered as his income.
7. In response, the Ld. Sr. DR placed reliance on the observations made by the AO and the Ld. CIT(A) in their respective orders.
8. We have heard the rival submissions and perused the material available on record. The issue to be adjudicated at this stage is whether the Ld. CIT(A) was justified in rejecting the assessee’s application for condonation of delay of approximately 319 days. We note that the Ld. CIT(A) rejected the application primarily on the ground that the explanation furnished by the assessee was general in nature and was not supported by documentary evidence explaining the entire period of delay. At the same time, the assessee has stated that he was engaged as a BC/Banking Mitra, earned nominal commission and could not take timely steps owing to limited knowledge of income tax procedures and financial constraints. The assessee has also raised a substantial grievance against the addition of Rs.1,12,32,361/-, contending that the deposits related to banking transactions were undertaken on behalf of customers.
9. We note that the Assessing Officer made an addition of Rs.1,12,32,361/- under section 69A read with section 115BBE of the Act on account of cash deposits in the assessee’s bank account, in the absence of any explanation or supporting evidence. The assessment was completed ex-parte. The assessee has contended that he was working as a Business Correspondent (BC)/Banking Mitra and that the deposits and withdrawals represented banking transactions undertaken on behalf of the bank and its customers, whereas his actual income was limited to commission. However, this contention has not been examined with reference to supporting evidence.
10. Considering the facts and circumstances of the case, in the interest of substantial justice, we deem it appropriate to set aside the impugned orders of the authorities below and restore the matter to the file of the Assessing Officer for fresh adjudication. The assessee is directed to furnish the relevant bank statements, BC/Banking Mitra appointment documents, transaction details, commission statements and any other evidence necessary to substantiate his claim. The Assessing Officer shall examine the nature and source of the cash deposits, verify whether the transactions were carried out on behalf of the bank and its customers, and determine the taxable income in accordance with law after providing the assessee a reasonable opportunity of being heard. The assessee is also directed to cooperate with the assessment proceedings and furnish the requisite details without seeking unnecessary adjournments.
11. In the result, the appeal of the assessee is allowed for statistical purposes.
ITA No. 2465/Ahd/2026 (A.Y. 2020-21)
12. So far as the appeal against levy of penalty under section 271AAC(1) of the Act in ITA No. 2465/Ahd/2026 is concerned, since we have set aside the matter relating to quantum additions for de-novo assessment and hence, the impugned addition on the basis of which, the impugned penalty was levied does not survive at this stage and therefore, the impugned penalty has no legs to stand and the same is accordingly ordered to be deleted. However, it is made clear that if the AO will be of the view during the set aside assessment proceedings that it is a fit case for levy of penalty under section 271AAC(1) of the Act, he may initiate the penalty proceedings afresh in accordance with law. With the above observation, penalty appeal of the assessee stands allowed.
10. In the combined result, the appeal of the assessee in ITA No. 2464/Ahd/2026 is allowed for statistical purposes whereas, penalty appeal in ITA No. 2465/Ahd/2026 is allowed.
This Order is pronounced in the Open Court on 16/10/2026
