ANKIT UMESHKUMAR SHAH,AHMEDABAD V. THE INCOME TAX OFFICER, WARD-1(2)(1), AHMEDABAD

ITA 1815/AHD/2024

AI Insights

The case involves Ankit Umeshkumar Shah, an individual engaged in the business of manufacturing and trading gold and silver ornaments, who appealed against the order of the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre, Delhi. The appeal was related to the assessment year 2017-18, where the assessee's income was significantly increased by the AO based on unexplained cash deposits during the demonetization period and other discrepancies noted in the business's financial activities. The Tribunal found that the CIT(A) had not adequately considered the assessee's submissions and the relevant facts, leading to the decision to remand the case back to the AO for a fresh assessment.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 653157 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRASAD RAO WAGHE ANNASAHEB
• Assessee Lawyers: CHHAJED
• Keywords: Corroborative evidences; Rejection of books of accounts; Principle of natural justice
• Section: 44AD

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 1815/Ahd/2024 (िनधा[रण वष[ / Assessment Year : 2017-18) Ankit Umeshkumar Shah 309/27, M R Chambers, Nagori Pole, Hathikhana, Ratanpole, Ahmedabad, Gujarat - 380001 बनाम/ Vs. Income Tax Officer Ward 1(2)(1), Ahmedabad Öथायी लेखा सं./जीआइआर सं./PAN/GIR No. : BEVPS1693P (Appellant) .. (Respondent) अपीलाथȸ ओर से /Appellant by : Shri M S Chhajed, A.R. Ĥ×यथȸ कȧ ओर से/Respondent by : Shri Prasad Rao Waghe Annasaheb, Sr. DR Date of Hearing 01/05/2025 Date of Pronouncement 20/06/2025 (आदेश)/ORDER PER SMT. ANNAPURNA GUPTA, AM: The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), (hereinafter referred to as “CIT(A)”), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi dated 25.09.2024 passed under Section 250 of the Income Tax Act, 1961 ITA No.1815/Ahd/2024 [Ankit Umeshkumar Shah vs. ITO] A.Y. 2017-18 - 2 – (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2017-18. 2. The facts of the case are that the assessee is an individual, running business activity in proprietorship concern of manufacturing and trading of Gold, Silver and ornaments made thereof. The assessee filed return of income for the impugned year declaring income of Rs.4,72,880/-. During the year under consideration, the assessee was noted to have deposited cash during demonetization period, from 8th November, 2016 to 30th December, 2016, of Rs.42,00,000/- (in Specified Banned Notes) in his account maintained with State Bank of India, Nr. Dharnidhar Derasar, Ahmedabad. Marking this to be a suspicious activity based on risk paramateres applied by computer software used by CBDT for selection of case for scrutiny under CASS, the case of assesse was selected for complete scrutiny. Various notices were issued to the assessee asking the assessee to explain the source of cash deposited in his bank account and also to substantiate the same with evidences. The assessee explained the source of cash to be from its activity of sales of goods and job work carried out by him but in response to notice issued to him asking him to substantiate the said explanation no response was received from the assessee. The AO, accordingly, analyzed the cash deposited by the assessee as also his turnover and the cash in hand with the assessee in the impugned year as compared to the preceding year ITA No.1815/Ahd/2024 [Ankit Umeshkumar Shah vs. ITO] A.Y. 2017-18 - 3 – and noted that there was huge anomaly in the same. He noted a sharp increase in cash sales in the pre-demonetization period as compared to the previous year in the same period, as also excess cash in hand in the pre-demonetization period is compared to the preceding years. He also noted regular and unreliable pattern of cash deposited in the pre-demonetization period and also noticed steep increase in the sale turnover in the impugned year, specially pre-demonetization period as compared to the previous year and steep fall in the subsequent year. On the basis of this analysis carried out by him, he rejected the assessee’s explanation of source of the cash deposited as being from his business activity and accordingly added from his business activity. He rejected the books of accounts maintained by the assessee. The increase in cash sale in the pre-demonetization period as compared to the previous year was treated as income from other undisclosed sources since it was this increased turnover which was attributed by the assesseeas the source of cash deposited in the bank. The pre-demonetization cash sales for the impugned year was noted to be Rs.44,60,540/- while that of the immediately preceding year for the same period was noted to be only Rs.2,05,006/-. The difference accordingly of the two amounting to Rs.42,55,534/- was added to the income of the assessee as income from other undisclosed sources. 3. The AO further noted the assessee to have taken undisclosed loans to the tune of Rs.35,00,590/- and in the absence of ITA No.1815/Ahd/2024 [Ankit Umeshkumar Shah vs. ITO] A.Y. 2017-18 - 4 – substantiation of the genuineness of the same by the assessee, the entire amount was added to the income of the assessee u/s.68 of the Act. Addition was also made on account of conveyance expenses having remained unsubstantiated, to the extent of 50% of the expenses claimed by the assessee being Rs.20,020/- resulting in a disallowance of Rs.10,010/- u/s.37 of the Act. Similarly, disallowance of 25% of the total purchases made by the assessee amounting to Rs.10,04,732/- was also made on account of failure of the assessee to file supporting evidences. Thus, as against income returned of Rs.4,72,880/-, the AO assessed the same at Rs.92,43,746/- making addition of Rs.87,70,866/- to the income of the assessee on account of various issues as noted above by us. 4. The matter was carried in appeal before the Ld. CIT(A) who confirmed all the additions made by the AO and dismissed the assessee’s appeal. Aggrieved by which, the assessee has come up in appeal before us by raising following grounds: “1. The order passed by the Ld. CIT(A) is against the law, equity and principle of natural justice. 2. The Ld. CIT(A) has erred in law and on facts in upholding rejections of books of accounts made by the L.d. A.O. without any defects 3. The Ld. CIT(A) has erred in law on facts in upholding addition made by the Ld. A.O. of Rs.42,55,534/- U/S 68 of the Act. 4. The Ld. CIT(A) has erred in law and on facts in upholding addition made by the Ld. A.O. of Rs.35,00,590/- U/S 68 of the Act. ITA No.1815/Ahd/2024 [Ankit Umeshkumar Shah vs. ITO] A.Y. 2017-18 - 5 – 5. The Ld. CIT(A) has erred in law and on facts in upholding disallowance made by the Ld. A.O. of Rs. 10,010/- being 50% of Rs.20020/- u/s 37 of the IT Act, 1961. 6. The Ld. CIT(A) has erred in law and on facts in upholding disallowance made by the Ld. A.O. of Rs. 10,04,732/- being 25% of Rs.40.18.929/- u/s 37 of the IT Act, 1961. 7. The appellant craves liberty to add, amend, alter or modify all or any grounds of appeal before final appeal.” 5. The assessee has also raised additional ground before us vide letter dated 20.12.2024 as under: “1. The assessment order passed by the Ld. A.O. is void and illegal as additions are made for the issues other than CASS.” 6. During the course of hearing before us, at the outset itself Ld. Counsel for the assessee stated that he did not wish to press the additional ground raised before us. Accordingly, the additional ground raised is not being considered for adjudication at all. 7. With respect to the main grounds raised by the assessee against the merits of the addition/disallowance made in its case, the contention of the Ld. Counsel for the assessee before us was that the assessee had returned income from its business on presumptive basis @8% of its total turnover in accordance with the provisions of Section 44AD of the Act. The total turnover of the assessee amounted to Rs.49,89,283/- and the cash deposited in ITA No.1815/Ahd/2024 [Ankit Umeshkumar Shah vs. ITO] A.Y. 2017-18 - 6 – the bank account of the assessee amounted to Rs.44,60,540/-. That the entire cash deposited was attributable to its sales turnover. The assessee was not required to maintain any books of accounts in terms of Section 44AD of the Act and there was no question, therefore, of rejecting the books of the assessee and making any addition to its income either on account of disallowance of expenses or on account of cash deposited in his bank account remaining unexplained. With respect to the unsecured loans noted to have remained unexplained, it was contended that majority of the loans were brought forward from the preceding years and there was no question of making any addition of the same u/s.68 of the Act for the same having remained unexplained. The contention of the Ld.Counsel for the assessee was that all these facts were pointed out to the Ld. CIT(A) in the submissions made in writing before him, a copy of which was placed at paper book page nos. 72 to 98. He contended that the submissions were substantiated with the return of income filed by the assessee showing income returned from business activity u/s.44AD of the Act. Copy of the computation of income was filed before us a paper book page no.1 to 3. He contended that despite the assessee pointing out the above facts none of these facts were considered by the Ld. CIT(A) while adjudicating the grounds raised by the assessee before him. ITA No.1815/Ahd/2024 [Ankit Umeshkumar Shah vs. ITO] A.Y. 2017-18 - 7 – 8. Ld. DR was unable to controvert the contention of the Ld. Counsel for the assessee as above, however, he relied on the order of the Ld. CIT(A). 9. We have heard the contentions of both the parties. As noted above in the facts of the present case the books of accounts of the assessee had been rejected and addition made on account of cash found deposited in his bank account during demonetization period u/s.68 of the Act as also disallowance of various expenses incurred by it and addition made u/s.68 of the Act on unsecured loans noted to be taken by the assessee during the year. As pointed out by the Ld. Counsel for the assessee, all these additions made by the AO and confirmed by the Ld. CIT(A) are in complete disregard of the facts on record before the AO and the pleadings made by the assessee to the CIT(A) that the assessee was not required to maintain any books of account having returned income on presumptive basis u/s.44AD of the Act and, therefore, no question of making any addition of either cash found deposited in its bank account or disallowance of expenses incurred by it. Even on the aspect of unsecured loans added to its income u/s.68 of the Act, it has been pointed out that it was demonstrated to the authorities below that majority of the loan was taken in the preceding year. Clearly the order passed by the Ld. CIT(A) is not sustainable since there is no application of mind to the facts on record and the pleadings made by the Ld. Counsel for the assessee ITA No.1815/Ahd/2024 [Ankit Umeshkumar Shah vs. ITO] A.Y. 2017-18 - 8 – before him. We, therefore, consider it fit to restore the issue back to the AO to frame assessment de novo after considering all the facts on record and the pleadings of the assessee before him. The AO is directed to pass order thereafter in accordance with law. 10. In the result, appeal filed by the assessee is allowed for statistical purposes. This Order pronounced on 20/06/2025 Sd/- Sd/- (SANJAY GARG) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 20/06/2025 S. K. SINHA True Copy आदेश कȧ Ĥितिलǒप अĒेǒषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंिधत आयकर आयुƠ / Concerned CIT 4. आयकर आयुƠ(अपील) / The CIT(A)- 5. ǒवभागीय Ĥितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad "