Manoj Kumar Singh Yadav Vs ITO (ITAT Lucknow)
Lucknow ITAT Deletes ₹1.31 Crore Addition on Cash Deposits by Bank Mitra; Holds Customer Deposits Cannot Be Taxed as Agent’s Income
The Lucknow ITAT held that cash deposits made by a Bank Mitra on behalf of bank customers cannot be treated as unexplained money under section 69A merely because the assessee failed to explain the transactions during assessment proceedings. The Tribunal observed that the assessee had produced documentary evidence, including the Business Correspondent Agreement, establishing that he acted as a Bank Mitra authorised to collect cash from customers and deposit the same into their respective bank accounts. Since the deposits represented customers’ funds and not the assessee’s own money, the addition of ₹1.31 crore under section 69A was deleted by following its earlier decision in ITO v. Shyam Sagar Yadav. The Tribunal also deleted the addition towards alleged rental income, noting that the Revenue failed to establish that such income had not already been offered to tax. Further, while upholding the levy of penalty under section 272A(1)(d) for non-compliance with notices under section 142(1), it held that only one penalty of ₹10,000 can be levied for failure to comply with a particular statutory requirement, irrespective of the number of notices issued, and accordingly deleted the second penalty of ₹10,000.
Cases Discussed
- Suvej Singh Vs Ram Naresh & Ors. (SC), CA 00/2025 arising out of SLP (C) 1681/2024 dt. 09-12/2025
- ITO Vs Shyam Sagar Yadav (ITAT), ITA No 445 & 446/LKW/2024
- Rekha Rani Vs DCIT, [2015] 60 com131
FULL TEXT OF THE ORDER OF ITAT LUCKNOW
Out of twin appeals filed by the assessee first appeal in ITA No. 549/LKW/2026 is directed against the order dt. 31/03/2026 passed in quantum proceedings, whereas appeal in ITA No. 550/LKW/2026 challenges the even dated order passed in penalty proceedings by the National Faceless Appeal Centre, Delhi [‘Ld. NFAC’] for assessment year 2020-21. [‘AY’]
2. Briefly stated facts are that; the assessee is an individual and engaged in business activities as ‘Bank Mitra for facilitating personal banking to various bank customers. For the year under consideration assessee filed his return of income, declaring total income of ₹1,70,000/-. Vide notice dt. 23/03/2024 issued u/s 148 of the Act, the National Faceless e-Asstt Centre [‘Ld. A.O’] reopened the case of the assessee to examine cash amounting to ₹1,31,66,770/- deposited into ‘Bank of India’ [‘BOI’] and reassess income (if any) u/s 147 of the Act. When notices issued u/s 148 and u/s 142(1) of the Act went attended by the assessee, the Ld. AO invoked the section 144 of the Act and assessed the income to the best of his judgement by brining to tax entire of cash deposit as ‘unexplained money’ u/s 69A of the Act for assessee’s failure to establish nature & source of such cash deposits, along-with rental income of ₹14,065/- remained to be offered to tax by the assessee and framed the assessment accordingly u/s 147 r.w.s. 144 r.w.s. 144B of the Act.
3. Consequent to former assessment, the Ld. AO initiated penalty proceedings u/s 272A(1)(d) of the Act for and vide notice 27/11/2024 the assessee was put to a show cause notice [‘SCN’] to explain as to why penalty in terms of section 272A(1)(d) should not be levied for his failure to comply with the various notices issued to him u/s 142(1) of the Act in the course of assessment proceedings. In the event of failure on the part of assessee to respond SCN, the Ld. AO issued multiple notices which were also remained unattended. In the facts & circumstance, the Ld. AO advanced the proceeding ex-parte and imposed a penalty of ₹20,000/- by an order dated. 27/05/2025 framed u/s 272A(1)(d) of the Act.
4. Aggrieved assessee challenged both, the former order of assessment and penalty order separately u/s 246A of the Act before the Ld. NFAC. Being unsuccessful the assessee came in present twin second appeals separately on the following grounds of appeal;
ITA No. 549/LKW/2026 (Quantum Appeal);
1. The Learned Commissioner of Income Tax (Appeals), NFAC (hereinafter referred to as the Ld. “CIT-A”] has erred on facts and in law in dismissing the appeal of the appellant by observing that the appellant failed to justify the delay occurred in filing the appeal and also failed to make any submissions on the grounds taken in the appeal memo.
2. The Ld. CIT-A has erred on facts and in law in not appreciating the law that notice dated 23.03.2024 issued u/s 148 of the I.T.Act, 1961 by the office of the ITO-3(1), Lucknow was bad in law and illegal as the ITO-3(1), Lucknow was not having the pecuniary jurisdiction over the assessee.
3. The Ld. CIT-A has erred on facts and in law in not appreciating the law that the notice u/s 148 of the Act was issued by the ITO 3(1), Lucknow without assuming proper jurisdiction over the assessee as after bringing the faceless assessment scheme into the statute book, jurisdictional Assessing Officer (JAO) is not having any such jurisdiction to issue any notice u/s 148 of the Act.
4. The Ld. CIT-A has erred on facts and in law in confirming the action of the Ld. A.O. in framing the impugned assessment order in consequence of notice issued u/s 148 of the Act, which in itself is bad in law and illegal on the ground that no any copy of specific approval granted u/s 151 of the Act was provided to the assessee.
5. The Ld. CIT-A has erred on facts and in law in confirming the action of the Ld. A.O. in passing the impugned assessment order in consequence of the notice issued u/s 148 of the Act as the reasons recorded for the issuance of such notice was made on borrowed satisfaction, without application of own and independent mind on the part of the Assessing Officer and no any sort of material was provided to the assessee to have his say.
6. The Ld. CIT-A has erred on facts and in law in confirming the action of the Ld. A.O. in making addition of ₹1,31,66,770/-on account of cash deposits made into the bank accounts of the assessee by treating it as unexplained without appreciating the fact that the entire amounts of cash deposits so made were made out of the cash collections made from the customers as a Bank Mitra which was ultimately deposited into the customers respective accounts.
7. The Ld. CIT-A has erred on facts and in law in confirming the action of the Ld. A.O. in making addition of ₹ 14,065/-in the hands of the assessee on account of alleged rent received from Bank against hiring of plant.
8. The Ld. A.O. erred on facts and in law in not providing the appellant any such opportunity to have her say and to make compliance of the reasons being relied upon by him while creating tax demand against the assessee.
9. The appellant reserve’s her right to advance such other grounds before or at the time of hearing which she may consider fit and appropriate, for which she craves leaves to amend, alter or otherwise modify the grounds appearing hereinabove with kind permission of the office of the Hon’ble Bench.
ITA No. 550/LKW/2026 (Appeal against Penalty);
1. The Learned Commissioner of Income Tax (Appeals), NFAC (hereinafter referred to as the Ld. “CIT-A”] has erred on facts and in law in dismissing the appeal of the appellant with levy of penalty of Rs 20,000/- u/s 272A((1)(d) of the I.T. Act 1961 without appreciating the merit of the case that no notice was served by the assessee.
5. In the course of hearing, the Ld. AR submitted that, the assessee is operating as ‘Bank Mitra’ with the Bank of India and all the relevant evidential documents were laid before the tax authorities below. Owning to peculiar nature of business operations carried out by the assessee, facts & circumstances were not appropriately appreciated by the rival parties in the proceedings below, hence the impugned additions were made in the assessment and same was confirmed in first appeal. The cash deposit made by the assessee is of & against small deposits made by the customers with ‘Assessee-Bank Mitra’ for crediting their respective accounts maintained with their respective banks. Therefore, the addition made is fully devoid of facts & merits. The Ld. AR relied on Ld. Co-Ordinate bench decision in ‘ITO Vs Shyam Sagar Yadav’ [ITA No 445 & 446/LKW/2024] and submitted that, in similar facts & circumstance, like addition u/s 69A made by the Ld. AO was first deleted by Ld. NFAC and such deletion was upheld by the Tribunal as devoid of facts & merits.
6. Per contra, the Ld. DR Shukla at the outset stated that, the claim of the assessee’ with full documentary evidences were neither explained in assessment proceedings nor in the proceedings before the Ld. NFAC. Adverting to page 1 to 160 of the assessee’s paper book, the Ld. Shukla however candidly submitted that, the documentary evidences placed in the present proceedings solidifies the claim in relation to addition u/s 69A of the Act only. Therefore balance addition made towards rental income Ld. DR sought to remand for re-verification as to whether same was offered to tax. In rebuttal, the assessee objected the remand pointing out that; the said income was duly considered while filing the return of income.
7. We have heard the rival parties on the former limited issue and subject to rule 18 of ITAT-Rules, 1963 perused the material placed on record and considered the fact of the case in the light of settled position of law which was forewarned to the respective parties for their rebuttal.
ITA No. 549/LKW/2026 (Quantum Appeal);
8. From Pg 1 & 2 of paper-book, we note that, the assessee is registered ‘Bank Mitra’ with Bank of India at Kumhrawan Branch (UP) registered vide BC Code 11800707 w.e.f. 20/11/2014. The business correspondent sub-agency agreement laid on page 4 to 15 of paper book supports the claim of the assessee that, he was engaged as ‘Bank Mitra’ through Integra Micro System Pvt Ltd. as a commission agency for rendering almost 39-type of bank services to bank customers which inter-alia were in the nature of; opening of bank account, cash deposits, cash withdrawal from bank, fund transfer, remittance of cash, inter-bank remittance, opening of term or fixed deposits, aadhar seeding etc. The perusal of bank account statement (Pg 16 to 160) leaves no shred of doubt that, the financial transactions reported/detailed therein are in-line with the business correspondent sub-agency agreement entered and were for facilitating the bank customers on remuneration of prescribed commission.
9. It is not oblivious from the record that, that, the appellant assessee failed to effectively present and explain his case & claims made in the present appeal with wholesome documentary evidences before the tax authorities below. On such account though the case may require to be set-aside for re-verification to the file of Ld. AO, we however in view of the Hon’ble Apex Court decision in ‘Suvej Singh Vs Ram Naresh & Ors’ [CA 00/2025 arising out of SLP (C) 1681/2024 dt. 09-12/2025] inclined to avoid multiplicity of litigation and thus advance the adjudication as the impugned addition made u/s 69A of the Act in similar facts and circumstance in the hands of ‘Bank Mitra’ assessee decided by the Ld. Co-ordinate Divisional Bench in ‘ITO Vs Shyam Sagar Yadav’ (supra). Wherein the bench headed by the Hon’ble Vice President & Co-author of the this order vide para 7 thereof adjudicated the merits of the issue in favour of the assessee and against the Revenue 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.”
10. It is apt to also mention here that, although there are other similar decisions which are cited on behalf of the appellant assessee, but we do not intend to burden this adjudication as the principles of adjudication/law as discussed in the former judgment (supra) is well settled now for Bank-Mitra. On the contrary, the Revenue could hardly bring out to our notice any converse decisions to depart from taking similar to view in the present case.
11. Maintaining the parity with the former adjudication laid in ITO Vs Shyam Sagar Yadav (supra) and view taken therein, we see no merit this present case where impugned addition u/s 69A of the Act was made towards cash deposits made by the assessee, which with the sufficient documentary evidences established on record that such deposits represents money/funds of the banking customers for whom the appellant assessee was rendering intermediary services as ‘Bank-Mitra’. In view thereof, adopting the equal reasoning laid in foretasted decision (supra) we deem it fit to set-aside the impugned order and delete the impugned addition as devoid of facts & merit. Order Accordingly. The ground no 6 thus stands allowed.
12. Now coming to addition of rental income generated from renting of plant & machinery is concerned, we note that the Revenue could hardly disprove the claim of the appellant that, such rental income was accounted and included while computing total taxable income.
13. On the other hand, the Revenue could hardly support addition with any documentary evidence that same was not offered to tax by the appellant in his return filed for the year under consideration. In this clinching facts & circumstance, there remains much less reason in not vacating the ad-hoc addition made in the assessment. Therefore impugned addition since made & sustained without evidence & merit, deserves to be deleted. Ordered accordingly. The ground no 7 thus stands allowed.
14. All other grounds raised in quantum appeal memo are dismissed as not pressed.
ITA No. 550/LKW/2026
15. Now coming to levy of penalty for failure to comply with notices issued u/s 142(1) of the Act. It is ostensible from the record that during the course of assessment proceedings, after invoking the provisions of re-assessment, the Ld. AO issued two notices dt. 22/07/2024 and 27/08/2024 u/s 142(1) of the Act. Admittedly these two notices went unattained. In view of the aforestated non-compliance, a penalty proceedings were initiated and the appellant assessee was put to final show cause notice u/s 274 r.w.s. 272A(1)(d) of the Act, and thereby granted an opportunity to explain the reasoning beyond its non-compliance. Upon effective failure of the appellant to show cause good, sufficient & reasonable cause beyond such non-compliance, the Ld. AO imposed a consolidate penalty of ₹20,000/- for the year under consideration computed @₹10,000/- per default for two such occasions. Aforestated levy of penalty was unsuccessfully assailed before first appellate authority in an appeal; consequently the assessee came before the Tribunal in present appeal on a solitary ground as reproduced hereinbefore.
16. During the course of physical hearing, the Ld. AR candidly solidified the facts of non-compliance and could hardly establish any reasonable cause there behind. However it is vehemently pleaded that, since appellant’s non-compliance is attributable to a single instance, therefore imposition of penalty against each of such multiple notices is illegal. Per contra the Ld. DR submitted that, the tax authorities below have rightly imposed and sustained the penalty for not complying with two notices issued, hence warranting no interference therewith.
17. After hearing to rival contention of both the parties; perused material placed on record and duly considered the facts of the case in the light of legal position, we note that, for the reasons of non-compliance to the notices issued u/s 142(1) of the Act neither party is in dispute over the legality of initiation and imposition of penalty u/s 272A(1)(d) of the Act. The sole legal dispute is over the validity of multiple levy of penalty based on multiple notices issued u/s 142(1) of the Act which remained unattended by the appellant assessee.
18. The plain reading of applicable provision of clause (d) of s/s (1) of section 272A of the Act reveals us that, the assessee’s failure to comply with a notice issued under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, empowers the assessing officers to levy a sum of ten thousand rupees for each such failure. Now the words ‘for each such failure’ appearing in the former provision in our considered view is referred in context of three exclusive covenant viz; (i) notice u/s 142(1) requiring assessee either to furnish return or to produce accounts/documents or such information in connection therewith (iv) notice u/s 143(2) to produce evidence in support of return filed and (v) direction to get books audited u/s 142(2A) of the Act, etc. Since compliance of requirement as directed by the Revenue could only be defaulted once, therefore consequential penalty u/s 272A(1)(d) could only be levied once, where such requirement is defaulted.
19. It must be noted here that, during the course of assessment proceedings, for each of aforestated requirement, it may necessitate the assessing officer to issue either single or multiple notices whereby compliance is called for. This however by no means empowers the assessing officer to impose a penalty u/s 272A(1)(d) for each and every notice issued which remained un-responded. The penalty u/s 272A(1)(d) is qua default prescribed as failure to comply (i) notice u/s 142(1) (ii) notice u/s 143(2) and notice u/s 142(2A) and not qua notices issued for each of former compliances. Further since this provision is of deterrent nature and not for revenue earning, therefore such penalty in our considered view can be imposed only once for each of the default enumerated u/c (b) of section 272A(1)(d) of the Act, irrespective of number of notices issued remained unattended.
20. We find our this view fortified by the Co-ordinate bench in‘Smt. Rekha Rani Vs DCIT’ [2015] 60 com131 wherein the was held that, the penalty u/s 271(1)(b) of the Act can only be imposed once and cannot be imposed for each and every notice issued which remained not complied with on the part of the assessee.
21. Following the principle of parity (supra), in the present case, the imposition of single penalty ₹10,000/- u/s 272A(1)(d) of the Act for failure to comply with the requirement sought by notice u/s 142(1) of the Act is sustained only and balance penalty of ₹10,000/- is directed to be deleted. The solitary ground is thus stands partly allowed.
22. In the result, the appeal ITA No. 549/LKW/2026 is allowed, and the appeal in ITA No. 550/LKW/2026 is partly allowed.
U/r 34 of ITAT Rules, order pronounced in the open court on the date mentioned herein above.
