ABHAY HARGOVINDBHAI PATEL,JAMNAGAR V. THE INCOME TAX OFFICER, JAMNAGAR

ITA 17/RJT/2024

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The case involves Abhay Hargovindbhai Patel, who appealed against the order of the Commissioner of Income Tax (Appeals) confirming the addition of Rs. 40,16,900 as unexplained money under section 69A of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer following the demonetization period in India, during which substantial cash deposits were made in Patel's bank account. The Tribunal noted that while the assessee failed to provide satisfactory explanations during the assessment proceedings, some documents submitted during the appellate proceedings suggested that part of the deposits could be explained by gifts and provident fund withdrawals by his parents. The Tribunal decided to tax only 30% of the total deposits, treating the rest as unexplained, and directed the assessing officer to apply the normal tax rate instead of the higher rate under section 115BBE.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708820 (ITAT-RAJKOT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: CIT Vs. Simon Carves Ltd. (1976) 105 ITR 212 (SC), President industries, 258 ITR 654
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K. L. SOLANKI; LD.
• Assessee Lawyers: VIMAL DESAI; LD
• Keywords: Additional evidence; Onus to prove; Gift; Principle of natural justice
• Section: 144; 142(1); 133(6); 139

Judgement Text

"Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, AM. & DINESH MOHAN SINHA, JM आयकरअपीलसं./ITA No. 17/RJT/2024 Ǔनधा[रणवष[ / Assessment Year: (2017-18) (Hybrid Hearing) Abhay Hargovindbhai Patel 305, Dwarkeshdham,B/h. Samudra Sales, Rajnagar, Aerodram Road, Jamnagar 361006 AUBPP7196D Vs. The Income Tax Officer, Ward 1(3), Jamnagar 1st Floor, Taranjali Building, PN Marg, Jamnagar 361008 (Assessee) (Respondent) Assessee by : Shri Vimal Desai, Ld. AR Respondent by : Shri K. L. Solanki, Ld. Sr. (DR) Date of Hearing : 27/04/2025 Date of Pronouncement : 16/ 07/2025 आदेश / O R D E R Per, Dr. Arjun Lal Saini, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year 2017-18, is directed against the order passed by Commissioner of Income Tax (Appeals), vide order dated 08/11/2023, which in turn arises out of an order passed by the Assessing Officer, dated 26/11/2019, u/s 144 of the Income Tax Act, 1961. Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 2 2.Grounds of appeal, raised by the assessee, are as follows: 1. The assessment order passed u/s. 144 is bad in law. 2. The learned Assessing Officer has erred on facts and in law in not considering the submissions of the assessee while passing an ex-parte assessment order under section 144. 3. The learned Assessing Officer has erred on facts and in law in making addition of Rs. 40,16,900/- by considering the cash deposited in bank account as alleged unexplained money u/s. 69A and the learned CIT(A) has erred in confirming the same. 3. Succinctly, the factual panorama of the case is that assessee before us is an Individual.In assessee`s case, on verification of data relating to \"cash deposits during the demonetization period\" available with this office on AIMS Module of ITBA, demonetization of Rs.500/- & Rs. 1000/- currency note, steps taken by the Government of India on 8th November, 2016, ceasing the usage of Rs.500/- & Rs. 1000/- currency notes form of a legal tender in India from 9th November, 2016, it is to state for clarity that the persons who deposited such currencies in their bank accounts were in possession of the said cash and was the owner of such money. On verification, the assessing officer noticed that during the demonetization period (9th November, 2016 to 30th December, 2016), the assessee has deposited huge cash in his bank account No. 18940100010833 maintained with Bank of Baroda, Khodiyar Colony, Jamnagar and from the quantum of cash deposit made by the assessee, it was noted by the assessing officer that the assessee was liable to file return of income offering correct picture of income. Accordingly, before the end of the F.Y. 2017-18, a notice u/s 142(1) of the Act, dated 26/12/2017, was issued and duly served upon the assessee electronically through ITBA, as well as physically too requiring him to file return of income for A.Y. 2017-18, however the assessee has failed to file return of income for A.Y. 2017-18, within time, as prescribed in section 139 of the I.T. Act. Non-compliance of such notice has compelled the income tax department, Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 3 to assess the income of the assessee on the basis of details available on record u/s. 144 of the Act. 4. However, following the principle of natural justice, an opportunity was provided to the assessee in form of detailed questionnaire issued vide e-notice u/s.142(1) of the Act dated 24/04/2019 which was duly served on the assessee electronically through ITBA and RPAD as well. However again, the assessee has neither filed the written submission with regard to the proceeding nor furnished any documentary evidences or proof. Thereafter, the case was received on transfer from the ITO, Wd-1(5), Jamnagar on 08/05/2019 as per order u/s. 120(5) of the Jt.CIT, Range-1, Jamnagar dated 07/05/2019. Information u/s. 133(6) of the Act was called for from the Bank of Baroda vide letter dated 13/05/2019, 28/05/2019, 14/06/2019 & 23/10/2019. Information was received from the Bank of Baroda on 17/05/2019, 03/06/2019, 24/06/2019, 23/10/2019 & 25/10/2019. Further, a notice u/s.142(1) cum show cause was issued on 25/06/2019 asking the assessee to furnish the details / clarification, which was duly served on the assessee, electronically through ITBA and RPAD. Further, following the principle of natural justice, the sufficient and ample opportunities were given to the assessee, as discussed above and narrated above, however, a final show cause notice u/s. 142(1) of the I.T. Act, 1961, was issued by the assessing officer to the assessee on 17/09/2019, which was duly served upon the assessee electronically through ITBA and RPAD as well. In response to final show cause notice dated 17/09/2019, the father of the assessee has filed written submission dated 11/10/2019. 5. During the assessment proceedings, the assessing officer observed that sufficient and ample opportunities were given to the assessee, however, the assessee did not file/submit/furnish any details. The assessee has not responded to any notices issued u/s 142(1) of the I.T. Act, hence there was no option left Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 4 with the assessing officer to finalize the assessment to the best of the judgment of the Assessing Officer, on the basis of material available on record. It may also be mentioned that considering the non- cooperative attitude of the assessee, penalty u/s 272A(1)(d) r.w.s. 274 of the I.T. Act 1961 was also initiated for non- compliance of notices issued u/s 142(1) of the I.T. Act. During the assessment proceedings, the information u/s 133(6) from bank/banks were called for regarding bank accounts held by the assessee. On perusal of information received from bank, it was observed by the assessing officer that the assessee was maintaining bank account No. 18940100010833 with Bank of Baroda, Khodiyar Colony, Jamnagar where in the assessee has deposited (credit) aggregate cash of Rs.22,93,500/- in Specified Bank Notes, during the demonetization period and Rs.17,23,400/- during other period. In this regard, the assessee was requested to explain the source of cash deposit. In response to above notices, the father of the assessee has furnished a written submission dated 01/07/2019 and mentioned that his son is not in his control and he has published an advertisement in newspaper (Nobat) on 30/12/2017 and in Newspaper (Bhumi) on 01/01/2017 stating that he has no any transaction or relation with his son and his son has already left the home and he and his wife both are senior citizen and requested not to harass them. Further, the father of the assessee has filed written submission dated 11/10/2019 in response to show cause notice dated 17/09/2019. Due consideration has been given to the submission filed by assessee's father but he could not explain source of cash deposits. In absence of any details, the source of such aggregate deposited (credit) of Rs.40,16,900/-during demonetization period as well as during the year under consideration in his bank account remains unexplained. The onus to prove the source of aggregate cash deposited (credit) of Rs.40,16,900/- during demonetization period as well as during the year under consideration in his bank account lies upon the assessee and he has failed to discharge primary onus and therefore, it is without any doubt clear that the assessee is not in a position to Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 5 explain the source of the said cash deposited (credit). Hence, assessing officer left with no option but to treat the cash of Rs.40,16,900/- deposited(credit) in Specified Bank Notes during the demonetization period as well as during the year under consideration in his bank account No. 18940100010833 maintained with Bank of Baroda, Khodiyar Colony, Jamnagar as unexplained money within the meaning of section 69A read with section 115BBE of the Income Tax Act, 1961 for the year under consideration. Accordingly, addition of Rs.40,16,900/- was made u/s 69A of the Act. 6. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the ld. CIT(A), who has confirmed the action of the assessing officer. 7. Shri Vimal Desai, learned Counsel for the assessee, submitted that during the appellate proceedings, the assessee has explained the source of cash deposit and learned CIT(A) obtained the remand report from the assessing officer in respect of additional evidences submitted by the assessee. The ld. Counsel submitted that loan was taken from Manappuram Finance Limited, which was withdrawn in cash and subsequently deposited in the bank. The assessee also submitted gift deed of his father and proof of provident fund withdrawal by the mother. Therefore, father and mother both gave the gift to the assessee and out of so gifted amount, the assessee deposited the amount in the bank account, therefore assessee has explained the source of the cash deposit and hence the addition made by the assessing officer may be deleted. 8. On the other hand, learned DR for the revenue, submitted that it is not possible that both father and mother gave the gift to the assessee, during the demonetization period and the assessee has deposited the amount in his bank account, these are merely self- servicing documents, and a cooked story, Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 6 therefore, these documents should not be relied on, and the addition made by the assessing officer may be upheld. 9. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that assessment order was framed by the assessing officer under section 144 of the Act. No return of income (ROI) was filed by the assessee, even after issuance of various statutory notices. The questionnaire was issued online by the assessing officer, however, no response was given by the assessee and the Bank statement was procured under 133(6) of the Act, by the assessing officer to examine the sources of cash deposit. However, some details were filed by the relatives of assessee, trying to explain the source of cash deposit. It was held by the assessing officer that assessee had not been able to explain such sources and therefore cash deposits were bought to tax in hands of assessee to the tune of Rs.40,16,900/-.We note that assessing officer has given umpteen opportunities to the assessee, as detailed in the assessment order. It was the duty of the assessee in assessment proceeding to lead the evidence. During the appellate proceedings, the assessing officer called the remand report, and we note that findings of the assessing officer in the remand report is entirely against the assessee. The comments of the assessing officer in the remand report and rejoinder submitted by the assessee, during the appellate proceedings are reproduced below: Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 7 Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 8 Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 9 Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 10 Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 11 10. We note that during the assessment proceedings, father of the assessee appeared before the assessing officer and did not file any details and documents relating to the issue under consideration, except general submissions. However, on appeal, before the Ld. CIT(A), the written submission, were furnished by the assessee, which were sent by the Ld. CIT(A) to the Assessing officer for calling the remand report. The assessing officer having examined the documents and written submissions filed by the assessee, has submitted the remand report to the Ld. CIT(A). We find that in the remand proceedings also, the assessee has failed to prove his claim and also failed to prove the source of the cash deposit in the bank account. The remand report submitted by the assessing officer during the appellate proceedings is completely against the assessee. Therefore, Ld. CIT(A) confirmed the action of the assessing officer. 11. However, we find a little merit in the documents and evidences submitted by the assessee, during the appellate proceedings. The assessee submitted that out of natural love and affection, during the demonetization period, father, and mother of the assessee gave the gift to the assessee. The assessee stated that he received some amount withdrawn by her mother from provident fund, which the assessee has received by way of gift from his mother. The copies of agricultural bills were submitted along with affidavit. We find that these documents are self servicing documents only. Therefore, submission of the assessee during the appellate proceedings is nothing but an afterthought which is not credible and not supported with any cogent evidences. 12. However, at this juncture, we would like to quote golden words of Hon'ble justice H. R. Khanna from the decision of CIT Vs. Simon Carves Ltd. (1976) 105 ITR 212 (SC) where applying the legal maxim of ex majorie cautela (out of abundant precaution) he said that: Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 12 \"the taxing authorities exercise quasi-judicial powers and in doing so they must act in a fair and not in a partisan manner. Although, it is a part of the duty to ensure that no tax which is legitimately due from an assessee should remain unrecovered, they must also at the same time act in a manner that might indicate scales are weighed against the assessee. We are wholly unable to subscribe to the view that unless those authorities exercise the power in a manner most beneficial to the revenue and subsequently most adverse to the assessee they should be deemed not have exercised it in a proper and judicial manner.” 13. Considering these facts, we note that legitimate taxes, should be recovered from the assessee. Therefore, we note that entire cash deposit in the bank account should not be treated as a profit of the assessee or net income of the assessee. Therefore, we are of the view that only profit element may be taxed. The Hon`ble jurisdictional High Court of Gujarat in the case of President industries, 258 ITR 654 held that 30% tax rate is appropriate in case of “on money”. Therefore, we are of the view that treating the cash deposit of the assessee, as an “on-money”, of the assessee, we confirm the addition of 30% of the total cash deposited in the bank account. Therefore, we direct the assessing officer to disallow the 30% of the total cash deposit in the bank account which comes to Rs. 12,05,070/- (30% of Rs. 40,16,900/-). Therefore, assessing officer is directed to make the addition in the hands of the assessee, to the tune of Rs. 12,05,070/-. 14. Before parting, we would like to state that assessee has submitted some documents and evidences showing the sources of the unaccounted money (on- money), so deposited in the bank account, therefore, said amount should not be taxed u/s 115BBE of the Act, hence, we direct the assessing officer to tax Rs. 12,05,070/-, by applying the normal rate of Income Tax. We have adjudicated the assessee’s appeal considering the peculiar facts and circumstances, therefore, it is also made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year. Ita no. 17/rjt/2024 Abhay Hargovindbhai Patel Page | 13 15. In the result, the appeal filed by the assessee is partly allowed, in above terms. Order pronounced in the open court on 16/ 07 /2025. Sd/- Sd/- (DINESH MOHAN SINHA) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER Rajkot Ǒदनांक/ Date: 16/ 07 /2025 Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr. CIT 5. DR/AR, ITAT, Rajkot 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Rajkot "