COMMISSIONER OF INCOME TAX VII V. PRADEEP SHANTILAL PATEL

TAX APPEAL NO. 899 of 2013

AI Insights

The case revolves around the appeal by the Commissioner of Income Tax against the decision of the ITAT, which had upheld the CIT (A)'s order. The dispute originated from the assessment year 2007-08, where the assessee, Pradeep Shantilal Patel, declared a total income of Rs.90,000. Upon scrutiny, it was found that substantial cash deposits were made in the assessee's bank account, which the Assessing Officer treated as undisclosed income. The CIT (A) later reclassified a portion of this income as business income from retail trade, which was further upheld by the ITAT. The High Court's decision dismissed the revenue's appeal, agreeing with the lower authorities' findings.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 361524 (HC-GUJARAT)
• Appeal Type: High Court cases
• Pronouncement Date: 19-11-2013
• Appeal Filed By: Department
• Assessment Year: 2007-2008
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: S UDHIR M EHTA
• Keywords: Assessment; Bank deposits; Income Tax; Retail trade; Undisclosed income
• Section: 142(1); 143(2); 143(1); 44AF

Judgement Text

"O/TAXAP/899/2013 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 899 of 2013 ============================================= COMMISSIONER OF INCOME TAX VII....Appellant(s) Versus PRADEEP SHANTILAL PATEL....Opponent(s) ============================================= Appearance: MR SUDHIR M MEHTA, ADVOCATE for the Appellant(s) No. 1 ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE R.P.DHOLARIA Date : 19/11/2013 ORAL ORDER (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Income Tax Appellate Tribunal (hereinafter referred to as the ‘ITAT’) dated 21.02.2013 passed in ITA No.1519/Ahd/2010 for the assessment year 2007-08, the revenue has preferred present appeal with the following proposed substantial questions of law: “2(A) Whether on the facts and circumstances of the case, the Hon’ble ITAT was right in considering in law, the deposits in the saving bank account of the assessee as “Trading Receipts” without any evidence of the existence of business on record? (B) Whether on the facts and circumstances of the case, the Hon’ble ITAT was right in restricting the addition from Rs.35,33,414/- to Rs.1.80 lacs by way of Page 1 of 7 Downloaded on : Tue Jun 03 15:37:01 IST 2025 Uploaded by LAVKUMAR J JANI(HC00210) on Wed Dec 18 2013 2013:GUJHC:28541-DB NEUTRAL CITATION O/TAXAP/899/2013 ORDER business income from retail trade u/s 44AF of the Act where the assessee failed to furnish name and addresses of the suppliers? (C) Whether on the facts and circumstances of the case, the Hon’ble ITAT’s order is perverse and bad in law being based on no evidence with respect to retail trade of the assessee?” 2. The facts leading to the present appeal in nutshell are as under: 2.1. The assessee filed his return of income for the assessment year 2007-08 declaring total income of Rs.90,000/-. The said return was processed under Section 143(1) of the I.T.Act. The case was selected for scrutiny under CASS and hence notice u/s. 143(2) was issued on 21.07.2008 which was served upon the assessee. Thereafter, notice u/s 142(1) alongwith a questionnaire was issued on 16.01.2009, which was served on the assessee. From the ITS data available, it was found that the assessee has made cash deposit of Rs.22,49,410/- in the S/B Account of Amarnath Co. Operative Bank Ltd. Therefore, the assessee was required to explain the source of same with supporting evidence. The assessee furnished a copy of detailed bank statement in respect of S/B account with Amarnath Co. Op. Bank Ltd. On verification of the same, it was noticed by the Assessing Officer that the actual cash deposits in the S/B Account No.2831 was of Rs.35,33,414/-. Therefore, another show cause notice was issued on 19.06.2009 requiring the assessee to explain the source of the said deposits with supporting evidence. The assessee tried to explain by submitting that the Page 2 of 7 Downloaded on : Tue Jun 03 15:37:01 IST 2025 Uploaded by LAVKUMAR J JANI(HC00210) on Wed Dec 18 2013 2013:GUJHC:28541-DB NEUTRAL CITATION O/TAXAP/899/2013 ORDER said bank account is HUF. The Assessing Officer was not satisfied with the explanation and therefore by passing the order of assessment he added the aforesaid amount of Rs.35,33,414/- as a total income of the assessee by treating the income from undisclosed source. 3. Feeling aggrieved and dissatisfied with the assessment order, the assessee preferred appeal before the learned CIT (A) and by order dated 04.02.2010, the learned CIT(A) partly allowed the said appeal by restricting the addition of Rs.35,33,414/- to Rs.1.80 lacs under Section 44AF of the I.T.Act. 4. Feeling aggrieved and dissatisfied with the order passed by the learned CIT(A), the revenue has preferred appeal being appeal No.ITA No.1519/Ahd/2010 before the learned ITAT and the assessee preferred cross objections in the said appeal. By impugned judgment and order, the learned ITAT has dismissed the appeal preferred by the revenue as well as the cross objections preferred by the assessee by confirming the order passed by the learned CIT(A) of restriction in the addition of Rs.35,33,414/- to Rs.1.80 lacs. 5. Feeling aggrieved and dissatisfied with the judgment and order passed by the learned ITAT, the revenue has preferred present appeal with the aforesaid proposed substantial questions of law. 6. Heard Shri Sudhir Mehta, learned counsel appearing for the appellant and perused and considered the impugned judgment and order passed by the learned ITAT as well as learned CIT (A) and we have also gone through the order Page 3 of 7 Downloaded on : Tue Jun 03 15:37:01 IST 2025 Uploaded by LAVKUMAR J JANI(HC00210) on Wed Dec 18 2013 2013:GUJHC:28541-DB NEUTRAL CITATION O/TAXAP/899/2013 ORDER passed by the learned Assessing Officer making addition of Rs.35,33,414/- in the total income of the assessee as undisclosed income. 7. At the outset, it is required to be noted that in the bank account of the assessee the actual cash deposit was of Rs.35,33,414/-. The learned CIT(A) also confirmed the finding of the Assessing Officer that the bank account in which the aforesaid amount was deposited was not the HUF account but it was the bank account of the assessee himself. However, by observing in para 4.2 and 4.3, the learned CIT(A) has restricted the addition to the extent of Rs.1.80 lacs by way of business income from retail trade of the assessee. Para 4.2 and 4.3 reads thus: 4.2. I have gone through the asst. order passed by AO and the written submission filed by the appellant. I have also considered the evidence produced by the appellant in his paper book. I find considerable force in the contentions raised by AO that the transactions recorded in the bank a/c no. 2831 with Amarnath Co- op Bank Ltd. do not pertain to his HUF. The contemporary evidence by way of filing the return of income in the status of HUF after the time allowed u/s. 139(4) of the Act and that too after issuance of first show cause notice by AO, making application for PAN on 28.07.2009, neither getting registered under Gujarat VAT Act nor filing any returns under it, failure to furnish name and address of the suppliers in respect of Iron scrap business claimed by the appellant – all these facts clearly establish that claim of the business of HUF was an afterthought and it Page 4 of 7 Downloaded on : Tue Jun 03 15:37:01 IST 2025 Uploaded by LAVKUMAR J JANI(HC00210) on Wed Dec 18 2013 2013:GUJHC:28541-DB NEUTRAL CITATION O/TAXAP/899/2013 ORDER was rightly rejected by AO. 4.3. Now, coming to the next contention of the appellant that the transactions in the said bank a/c were related to the Iron Scrap business, it was rejected by AO simply for the reason that sales cannot precede the purchases because sales (credit) comes first before the purchase (debit) in the bank a/c. However, from the perusal of the bank statement as produced in the paper book at page 3-7 that the modus operandi adopted by the appellant seems to be depositing cash either a day before or on the same day and the cheque for the payment getting cleared against such amount. It is also observed that the cash deposits are almost equal to the amounts to be paid/cheques to be cleared and the bank balance is a meager amount not exceeding Rs.1,000/- (except in couple of instances). The manner of carrying out both credit and debit transactions clearly indicate that payments have been made to the different parties out of cash deposited which is claimed by the appellant from the sale proceeds. In this view of the matter, sales (credit) will precede the purchases (debit) in the bank account. The contention of the appellant is that the cash deposits have been made out of sale proceeds of retail trade and purchasers have been paid out of it at a later date. It after all depends upon the terms and conditions of the sale between the two parties. The appellant has rightly contended that the payment for the purchase could be at later date but the goods cannot be delivered or sold without Page 5 of 7 Downloaded on : Tue Jun 03 15:37:01 IST 2025 Uploaded by LAVKUMAR J JANI(HC00210) on Wed Dec 18 2013 2013:GUJHC:28541-DB NEUTRAL CITATION O/TAXAP/899/2013 ORDER making its purchases unless it is a forward transaction. The payment for the purchases may precede the sale or subsequent to it depending upon the terms and conditions between the concerned parties. Therefore in the present case the contention of the appellant that the transactions in this bank a/c pertain to his business deserves to be accepted but still there would be a question of determining income in respect of these transactions. There is no evidence on record except the statement of the appellant with regard to the nature of business carried on by him and the details relating to the computation of income. The appellant has riled return of income on 13.08.2009 declaring income of Rs.1,76,660/- u/s 44AF in respect of the transactions appearing in this bank a/c. In view of such statement made by the appellant in his return of income under due verification and there being no other evidence to disbelieve it, I am inclined to accept as the transaction relating to retail trade. But the documents relating to this business such as sales purchase invoices, books etc. neither maintained nor produced by the appellant, the book result declared by the appellant cannot be accepted even the most of the credits (sales) are matching with the debits (purchases) which shows that the appellant has not deposited entire sale proceeds in this bank a/c. Therefore I have no alternative but to estimate income by estimating the sales. The total turnover of the appellant in this business is estimated at Rs.36 lacs and the net income u/s 44AF would work out to Page 6 of 7 Downloaded on : Tue Jun 03 15:37:01 IST 2025 Uploaded by LAVKUMAR J JANI(HC00210) on Wed Dec 18 2013 2013:GUJHC:28541-DB NEUTRAL CITATION O/TAXAP/899/2013 ORDER Rs.1.80 lacs. Accordingly the addition of Rs.35,33,414/- in respect of cash deposited in the bank a/c as undisclosed income is hereby restricted to Rs.1.80 lacs but by way of business income from retail trade of the appellant.” 8. The aforesaid finding has been confirmed by the learned ITAT by passing the impugned judgment and order and the order passed by the learned CIT(A) restricting the addition from Rs.35,33,414/- to Rs.1.80 lacs has been confirmed by the learned ITAT. 9. We are in complete agreement with the view taken by the learned CIT(A) as well as learned ITAT. The learned CIT(A) as well as learned ITAT have rightly held that the entire amount of Rs.35,33,414/- cannot be added in the income of the assessee as undisclosed income. 10. Considering the evidence on record and the total turnover of the assessee which came to be estimated at Rs.36 lacs, the CIT(A) has worked out the net income of the assessee under Section 44AF to Rs.1.80 lacs. We have no reason to interfere with the order passed by the learned CIT(A) as well as judgment and order passed by the learned ITAT. No questions of law much less any substantial questions of law arise in the present appeal. Hence, the present appeal deserves to be dismissed and is accordingly dismissed. (M.R.SHAH, J.) (R.P.DHOLARIA,J.) Jani Page 7 of 7 Downloaded on : Tue Jun 03 15:37:01 IST 2025 Uploaded by LAVKUMAR J JANI(HC00210) on Wed Dec 18 2013 2013:GUJHC:28541-DB NEUTRAL CITATION "