DCIT, CENTRAL CIRCLE - 7(1), MUMBAI , MUMBAI V. RAKESH NATWARLAL PATEL, THANE

ITA 3059/MUM/2024

AI Insights

The case involves multiple appeals related to the assessment year 2017-18, concerning Rakesh Natwarlal Patel, a trader in gold bullion and jewellery. The primary issues revolved around the addition of unexplained cash deposits, disallowance of bad debts, rejection of books of accounts, and estimation of profits. The Income Tax Officer and Deputy Commissioner of Income Tax had made various additions to the assessee's income based on alleged bogus transactions and unexplained cash deposits. The Commissioner of Income Tax (Appeals) upheld most of these additions, leading to the current appeals before the Tribunal. The Tribunal's decision addressed the validity of these additions and the appropriateness of the profit estimation method used by the tax authorities.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 46920 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Other Referred Cases: TRF Ltd. [323] ITR 397(SC), S.M.I.L.E Microfinance Ltd. Vs. ACIT in WP(MD)2078 and 1742 of 2020, Naranbhai Samatbhai Bharwad Vs. ITO in ITA No.272/Ahd/2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Difference of opinion; Change of opinion; Bad and doubtful debts; Rejection of books of accounts; Bogus purchase; Reopening of assessment; Principle of natural justice; Borrowed satisfaction; Bogus
• Section: 147; 143(3); 201; 22; 69C; 13; 69A; 145; 20

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH MUMBAI BEFORE SHRI. SAKTIJIT DEY, HON’BLE VICE PRESIDENT AND SHRI. GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 2813/MUM/2024 Assessment Year: 2017-18 Rakesh Natwarlal Patel, A-204, Kanak Palace, Virat Nagar, PP Marg, Virar, Thane – 401303, Maharashtra (PAN : AKUPP5064H) Vs. Income-tax Officer, Ward-23(3)(5), Mumbai (Appellant) (Respondent) ITA No. 2814/MUM/2024 Assessment Year: 2017-18 Rakesh Natwarlal Patel, A-204, Kanak Palace, Virat Nagar, PP Marg, Virar, Thane – 401303, Maharashtra (PAN : AKUPP5064H) Vs. Assistant Commissioner of Income Tax, Central Circle - 7(1), Mumbai (Appellant) (Respondent) ITA No. 3059/MUM/2024 Assessment Year: 2017-18 Deputy Commissioner of Income Tax, Central Circle - 7(1), Mumbai Vs. Rakesh Natwarlal Patel, A-204, Kanak Palace, Virat Nagar, PP Marg, Virar, Thane – 401303, Maharashtra (PAN : AKUPP5064H) (Appellant) (Respondent) 2 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 Present for: Assessee : Shri Anadi Varma and Ms. Komal Trivedi Revenue : Smt. Sanyogita Nagpal, CIT DR Date of Hearing : 08.01.2025 Date of Pronouncement : 07.04.2025 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: Appeals in ITA No.2813/Mum/2024 filed by assessee and cross appeals filed by assessee and Revenue in ITA No. 2814/Mum/2024 and 3059/Mum/2024, respectively are against the orders of Ld. CIT(A)-49, Mumbai, vide order nos. ITBA/APL/S/250/2023-24/1063008295(1), dated 20.03.2024 and ITBA/APL/S/250/2023-24/1063487844(1), dated 27.03.2024 passed against the assessment orders by Income-Tax Officer, Ward-23(3)(5), Mumbai, dated 30.12.2019, u/s.143(3) of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), and Deputy Commissioner of Income-Tax, Central Circle-7(1), Mumbai, dated 29.03.2022, u/s.144 read with Section 147 of Act, respectively, for Assessment Year 2017-18. 2. Grounds taken by the assessee in ITA No. 2813/MUM/2024 are reproduced as under: 1. Under the facts and in law, the learned CIT(A) erred in confirming the addition made by the Assessing officer (herein after referred to as \"learned A.O.\") of Rs.52,45,78,500/-, being the cash deposit made out of sale proceeds of bullion, gold and silver ornaments, and other precious metals in the bank account, under section 69A of the Income Tax Act, 1961 (the Act) as unexplained money. 1.1 Under the facts and in circumstances, the learned CIT(A) failed to appreciate the fact that the cash deposited in bank account was part of appellant's turnover 3 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 for the year i.e., Rs.243.37 crores which has been duly offered to tax in the return of income filed. 1.2 Under the facts and in law, the learned CIT(A) erred in concluding that the appellant was not carrying out any business as well as alleging the parties from whom purchases have been made are bogus since there was survey carried out at their premises. 1.3 Under the facts and in law, the learned CIT(A) erred in concluding that the appellant had manipulated its closing stock to explain cash sales. 1.4 Under the facts and in law, the learned CIT(A) erred in alleging that the appellant has manipulated the closing stock without considering the fact that the purchases and sales of earlier years as well as for year under consideration has already disclosed in MVAT returns filed before MVAT authorities, which has been accepted by the said authorities. 1.5 Under the facts and in law, the learned CIT(A) erred in confirming the addition made merely on the basis of presumption, surmises and conjecture of the learned А.О without any corroborative evidence against the appellant. 2. Under the facts and in law, the learned CIT(A) erred in confirming the disallowance made by the learned A.O. of bad debts of Rs.13,93,46,773/- alleging that the 'Abhishek Enterprise' the party of whose balance was written off as bogus party only on assumption and surmises. 2.1 Under the facts and in law, the learned CIT(A) failed to appreciate the fact that the sales made to Abhishek Enterprise in FY 2014-15 was accepted by the department. 3. Under the facts and in law, the learned CIT(A) erred in rejecting books of accounts of the appellant inferring that the sales and purchases of the appellant are manipulated and bogus as well as all the business transaction of the appellant are fictious and only exists on paper. 3.1 Under the facts and in law, the learned CIT(A) erred in estimating the profit of the appellant at 0.1% without citing any comparable case having similar profit. 3.2 Under the facts and in law, the learned CIT(A) erred in computing estimated profit of the appellant considering the sales declared in the books of account after rejecting the books of accounts. 4. Under the facts and in law, learned CIT(A) erred in alleging that the appellant is engaged in carrying out bogus purchase and sale transaction and would be getting 1% commission on such transactions. 5. Without prejudice to above grounds which overlap each other, the same leads to some income being taxed more than one time. 6. Under the facts and in law, the learned CIT(A) erred in confirming the applicability of provisions of Section 115BBE of the Income Tax Act, 1961. 4 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 7. All the aforesaid grounds are without prejudice to each other, independent and in the alternative. 2.1. Grounds taken by the assessee in ITA No. 2814/MUM/2024 are reproduced as under: “1. Under the facts and in law, the learned Commissioner of Income Tax (Appeal) - 49 (hereinafter referred to as \"CIT(A)\") erred in confirming the reopening of assessment under section 147 of the Income Tax Act, 1961 (hereinafter referred to as \"the Act\"). 1.1 Under the facts and in law, the learned CIT(A) erred in confirming the reopening based on the reasons recorded by the learned A.O. which are vague and does not indicate any escapement of income. The reasons recorded are nothing but change of opinion, on the basis of facts which were already on record. 1.2 Under the facts and in law, the learned CIT(A) failed to appreciate the fact that the cash deposit has been specifically scrutinized during the assessment proceedings completed under section 143(3) of the Act and hence there was no new material alluding to reopening of appellant's case. 1.3 Under the facts and in law, the learned CIT(A) failed to appreciate the fact that the learned A.O. has reopened appellant's case only on the basis of learned A.O.'s suspicion or doubt. 1.4 Under the facts and in law, learned CIT(A) failed to appreciate the fact that learned A.O. has reopened appellant's case based on borrowed satisfaction and without having done any further enquiry. 1.5 Under the facts and in law, learned CIT(A) erred in not providing opportunity to cross examine the statements relied on for reopening appellant's case. The principle of natural justice is violated. 1.6 Under the facts and in circumstances, the learned CIT(A) erred in confirming the addition which is made in violation of principle laid down in various Supreme Court Judgements that any material used against the appellant and which is obtained by private enquiry, should have been communicated to the appellant so as to know full particulars of the case and the failure to do so vitiates the case of the Revenue. 2. Under the facts and in law, the learned CIT(A) erred in rejecting books of accounts of the appellant inferring that the sales and purchases of the appellant are manipulated and bogus as well as all the business transaction of the appellant are fictious and only exists on paper while deciding the appeal against assessment order. 2.1 Under the facts and in law, the learned CIT(A) erred in estimating the profit of the appellant at 0.1% without citing any comparable case having similar profit while deciding the appeal against assessment order. 5 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 2.2 Under the facts and in law, the learned CIT(A) erred in computing estimated profit of the appellant considering the sales declared in the books of account after rejecting the books of accounts while deciding the appeal against assessment order. 2.3 Under the facts and in law, learned CIT(A) erred in alleging that the appellant is engaged in carrying out bogus purchase and sale transaction and would be getting 1% commission on such transactions while deciding the appeal against assessment order. 3. Without prejudice to above, under the facts and in circumstances, the learned CIT(A) erred in alleging the purchases made and debited to profit and loss account of Rs.1,71,26,13,205/- as bogus and unexplained though there is no corroborative evidence against the appellant. 4. Under the facts and in law, the addition is made merely on the basis of presumption, surmises and conjecture of the learned A.O. 5. Under the facts and in law, the order passed by learned CIT(A) is against the principle of natural justice and equity. 6. All the aforesaid grounds are without prejudice to each other, independent and in the alternative. 2.2. Grounds taken by Revenue in its cross appeal in ITA No. 3059/MUM/2024 are reproduced as under: “1. On the facts and in the circumstances CIT(A) erred in allowing of the case and in law, the Ld. that assessee could the appeal of the assessee despite the fact not prove the nature and source of credits in his Bank Account. 2. On the facts and in the circumstances CIT(A) erred in of the case and in law, the Ld. appreciating allowing the appeal of the assessee without source of purchases the fact that assessee could not prove the nature and of Rs.171,26,13,205/-. 3. On the facts and in the circumstances CIT(A) failed to appreciate of the case and in law, the Ld. that credit of Rs. 57,58,527/- over and 4. received above the from addition made on account of the same and information the investigation unit of the same, was rightly added in the assessment order.” 3. It is noted that all the three appeals relate to Assessment Year 2017-18. Appeal in ITA No. 2813/Mum/2024 by the assessee is against the assessment order passed u/s. 143(3) dated 30.12.2019. Subsequently, matter was taken up for re-assessment by initiating re- assessment proceedings u/s.148 r.w.s. 147 and re-assessment order was passed u/s. 143(3) r.w.s. 147, dated 29.03.2022. Against this 6 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 order, both assessee and Revenue are in cross appeals vide ITA No. 2814/Mum/2024 by the assessee and ITA No.3059/Mum/2024 by the Revenue. We will first take up the matter in appeal by the assessee vide ITA No.2813/Mum/2024. From the perusal of the grounds of appeal, raised by the assessee, broadly following issues emerges: 1. Double addition made u/s 69A on account of cash deposit to the tune of Rs.52,45,78,500/- during demonetisation period on receipts already offered to tax as business proceeds: (GOA 1) 2. Disallowance of bad debts written off to the tune of Rs.13,93,46,773/-(GOA 2) 3. Wrongful rejection of books and estimating profit on turnover @ 0.1% thereby sustaining addition to the tune of Rs.19,09,140/- (GOA 3) 4. Surmising notional commission on alleged bogus purchases and sales and estimating the same @1% thereby enhancing income by Rs.4,22,69,707/-(GOA 4) 4. Brief facts of the case as culled out from records are that assessee is engaged in trading of gold bullion and jewellery ornaments under the name and style of “Pihu Gold”. Assessee filed his return of income on 29.03.2018, reporting total loss at Rs.1,10,030/-. In the course of assessment, from the perusal of profit and loss account, ld. Assessing Officer observed that during the year under consideration, assessee had shown total purchase of Rs.169,23,05,543/-, details of which are discussed in para-9 of the impugned assessment order. In respect of these purchases, assessee was asked to submit purchase register with details of purchase parties along with their PAN, address, quantity purchased, amount paid to them, date of transaction and purchase bills. Ld. Assessing Officer noted in this respect that assessee did not 7 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 furnish PAN and address of the parties from whom purchases were made. Only a list of parties from whom purchases were made was furnished without their ledger accounts and purchase receipts which according to the ld. Assessing Officer was insufficient to prove the genuineness of the transaction, since verification could not be done. In this respect, ld. Assessing Officer also, after perusing the bank statement, noted that assessee did not make payments in respect of purchases made from the following parties, during the year- i) Jorss Bullion Pvt. Ltd. ii) Rialto Exim Pvt. Ltd. iii) Rushabh Jewellers iv) Trikesh Tradelink Pvt. Ltd. v) Regalia Gold Pvt. Ltd. vi) Rajmal Lakhichand (Jalgaon) vii) Rajmal Lakhirchand Jewellers 4.1. Ld. Assessing Officer thoroughly analysed the transaction with the parties from whom purchases were made and noted that against the purchases debited in the profit and loss account, sundry creditors reported in the balance sheet are at Rs.63,50,55,508/-. From this factual position, ld. Assessing Officer observed that out of total purchases of Rs.169,23,05,543/-, sundry creditors reported at Rs.63,50,55,508/- shows that the difference of Rs.105,72,50,035/- ought to have been paid during the year and should reflect in the bank statement of the assessee. However, on verification of bank statements of various bank accounts, as submitted by the assessee, no such payments were reflected therein. 5. On the sales side, Ld. Assessing Officer observed that assessee had shown total cash sales of Rs.18,75,78,331/- in the month of 8 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 October and of Rs.33,68,80,200/- in the month of November of the year under consideration. A peculiar fact was noted by the ld. Assessing Officer about total cash sales shown during the year which are of Rs.52,94,54,028/-, and out of this cash sales reported in the month of October and November totals to Rs.52,54,58,531/-, more importantly, shown to have been made from 14.10.2016 to 08.11.2016, i.e., within a span of 25 days, immediately before the announcement of demonetisation by the Government of India. Ld. Assessing Officer called for various details in respect of sales made by the assessee during the year as well as of the immediately preceding year for the purpose of comparison. Assessee submitted the details which are reproduced in the impugned order. The details of comparative cash sales in Assessment Year 2016-17 and Assessment Year 2017-18 is tabulated as under: F.Y. NET SALES VAT TOTAL F.Y.2015-16 4,12,07,354 4,13,678 4,16,21,032 F.Y.2016-17 52,94,54,028 63,83,725 53,58,37,753 5.1. Comparative cash sales for the period 01.04.2015 to 08.11.2015 (relating to Assessment Year 2016-17) and similar corresponding period in Assessment Year 2017-18 is tabulated below: PERIOD NET SALES VAT TOTAL 01.04.2015 to 08.11.2015 4,12,07,354 4,13,678 4,16,21,032 01.04.2016 to 08.11.2016 52,94,54,028 63,83,724 53,58,37,753 9 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 5.2. Comparative month-wise cash sales for Assessment Year 2016-17 and Assessment Year 2017-18 is also tabulated below: Pihu Gold Month-wise cash sales & cash deposits from 01.04.2015 to 08.11.2015 Month-wise cash sales & cash deposits from 01.04.2016 to 08.11.2016 Month Cash Sales Month Cash Sales April 10,40,522 April - 5.3. Ld. Assessing Officer also analysed the cash book submitted by the assessee to understand the frequency of deposit of cash by the assessee in its bank account and also holding of cash in hand. Details of the same is tabulated below: In the month of April 2016 Four times In the month of May 2016 Seven times In the month of June 2016 Three times In the month of July 2016 NIL as no cash sales In the month of August 201 6 NIL as no cash sales In the month of Sept. 2016 Once only as no cash sales 5.4. From the above tabulated details and its analysis, ld. Assessing Officer observed that assessee has shown all the cash sales during the year under consideration, between the period from 01.04.2016 to 10 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 08.11.2016. No cash sales are reported during the demonetisation period as well as post demonetisation period. Entire cash sales are made within a short span of 25 days creating a serious doubt on the conduct of business by the assessee, more particularly, when meagre expenses are debited in the profit and loss account for running the business activity of such high volume. In this respect, it is noted that total salary expense debited amounts to Rs.1,45,000/- only which shows that not many persons are working with the assessee. Ld. Assessing Officer posed a serious doubt on carrying out of such huge cash sales of more than Rs.50 crores of jewellery ornaments within a span of 25 days without a team to handle such voluminous transaction as it would require sufficient number of persons for weighing, generating cash bills, handling of cash, maintaining of stock, handling of customers, etc. 5.5. From the sample sales invoices furnished by the assessee, ld. Assessing Officer noted that these bills do not contain complete details of the items sold by the assessee. These invoices only mention “22 CT Gold Ornaments”. There is no brief description of the items sold except for total quantity and rate per gram to arrive at the total invoice value after charging VAT. All these invoice values range below Rs.2 lakhs and these sample invoices are placed in the paper book at page 266 to 287, which have been perused and corroborates observations made by ld. Assessing Officer as stated above. One of such invoices is reproduced below for ready reference: 11 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 12 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 6. Ld. Assessing Officer also analysed the day-wise stock register in respect of purchases made by the assessee, details of which are tabulated below. From these details, ld. Assessing Officer observed that these purchases are made during the seven days of April month and for which no payments are reflected in the bank statement of various bank accounts furnished by the assessee. Date of purchase Item Purchase value 07.04.2016 22 ct Gold 5,95,27,610 05.04.2016 Silver Gram Bar 2,85,51,250 05.04.2016 Bullion 14,02,00,000 01.04.2016 Bullion 12,82,50,000 03.04.2016 Silver gram Bar 2,85,51.250 purchase value Total 47,15,14,630 6.1. From the analysis of balance sheet, ld. Assessing Officer observed that opening stock reported is at Rs.62,55,24,980/- which is essentially funded by way of sundry creditors balance of Rs.82,51,49,114/- since assessee has negative capital balance as on 31.03.2016. Further, ld. Assessing Officer observed from the tax audit report for the year under consideration as well as the preceding year that quantitative details of principle items of goods traded are not furnished therein. 7. Inspector of Income-tax was sent to visit the business premises of the assessee for which a report was furnished. In the said report, it was stated that the premise was locked and belonged to some other person. Inspector was also sent to another address which was found in the 13 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 books of assessee for which also a negative report was furnished on verification of this address. In this respect, assessee had contended that he shifted to another premise w.e.f. 01.08.2017 for which the leave and licence agreement was placed on record. 7.1. From the analysis of bank account statement, ld. Assessing Officer also observed that deposit of cash in the bank account during the demonetisation period from 09.11.2016 to 30.12.2016 was Rs.52,45,00,500/- whereas it was only Rs.3,000/- during the same period in the immediately preceding year. Based on all these analysis and observations from the submissions made by the assessee, ld. Assessing Officer concluded that assessee failed to substantiate cash deposit made in his bank accounts with documentary evidences. According to the ld. Assessing Officer, assessee could not substantiate exceptionally high cash sale during the year as well as could not establish the genuineness of the purchases recorded in the book of accounts which only reflects inflated stock to create cash balance in the books as on 08.11.2016 by recording fictitious cash sales and making fictitious sales bills. Based on these observations and findings, he held that books of accounts of the assessee are not reliable and are cooked up to channelise unaccounted cash. He thus, rejected the books of accounts u/s. 145 of the Act and held that cash deposit of Rs.52,45,78,500/- in various bank accounts of the assessee during the demonetisation remained unexplained. By applying provisions of section 69A r.w.s. 115BBE, addition was made in the hands of the assessee. 8. Ld. Assessing Officer also noted from the profit and loss account that an amount of Rs.13,93,46,773/- was debited on account of bad 14 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 debts written off during the year. Since no details were furnished, the same was disallowed and added as business income for the year. 9. In completing the assessment, ld. Assessing Officer noted that assessee has reported total sales of Rs.243,37,18,479/- during the year with gross profit percentage of 4.76%. From these reported sales, the amount of deposit of cash during the demonetisation period was reduced to arrive at a figure of Rs.190,91,39,979/- on which the reported GP percentage of 4.76% was applied to arrive at business income of the assessee amounting to Rs.9,08,75,063/-. From this a deduction was allowed towards expenses amounting to Rs.4,49,383/-. In respect of deposit of cash in the bank accounts of the assessee during the demonetisation period, the amount of Rs.52,45,78,500/- was added under the heard “income from other sources”. Addition was also made towards disallowance of bad debts written off during the year. Thus, total income was assessed at Rs.75,43,52,780/-. Against this, assessee went in appeal before the ld. CIT(A), who also took note of the elaborate observations and findings of the ld. Assessing Officer and also considered detailed submissions made by the assessee on various counts. 10. For the purpose of deciding the genuineness of cash sales, ld. CIT(A) analysed the facts in respect of adequacy of stock available for making such sales, genuineness of corresponding purchases of the said sales and whether such sales have actually been carried out or otherwise. After detailed analysis of the submissions made by the ld. CIT(A) as contented in para-10.5 to 10.7.5, he summarised the factual position on all these aspects in para 10.8 which is reproduced below: “10.8 From the above discussion, it is evident that answers of all the three questions posed above are in negative. The facts are summarized as under: 15 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 i.The return for A.Y2016-2017 was not filed and subsequently filed only after the demonetization on 21/01/2017 ii. Purchases w.r.t. to the opening stock for A.Y. 2017-18 were shown from the dubious parties iii.No payments were made against these purchases and only entries of sales made against these purchases. iv. Thus, the stock shown for cash sales is fabricated. v. Cash sales are mainly on account of 22 ct gold ornaments, whereas the main business of the appellant is bullion trading. vi. It is beyond any human probabilities to carry out the huge alleged cash sales.” 10.1. Based on the above, he concluded that cash sales are found to be fictious and bogus and the source of deposit of cash in the bank accounts remained unexplained, thereby dismissing the ground raised by the assessee. On the issue relating to disallowance of claim of bad debts written off, assessee claimed that the debtor, Abhishek Enterprises, to whom sales were made in the Financial Year 2014-15 relevant to Assessment Year 2015-16 was untraceable and therefore the amount became irrecoverable which was already offered in the sales turnover for the said Assessment Year. In this respect, copy of ledger account of the said party was furnished from which ld. CIT(A) noted that total sales are in the month of February, 2015 but since no confirmation from the said party was placed on record, ld. CIT(A) arrived at a conclusion that sales shown to this party are non-genuine and thus sustained the disallowance made by the ld. Assessing Officer, dismissing the ground raised by the assessee. 10.2. On the rejection of books of accounts and adopting a GP percentage of 4.76%, ld. CIT(A) noted that profit margin in bullion trading ranges from 0.05% to 0.1% and thus restricted the profit estimation made by the ld. Assessing Officer from 4.76% to 0.1% which 16 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 resulted in net profit estimation of Rs.19,090,140/-, granting substantial relief to the assessee in this respect. However, ld. CIT(A) went ahead to observe that assessee is indulged in carrying out bogus purchase and sales transactions. According to him, on such transactions, entry operators on an average gets commission of 1%. Based on this, he estimated the commission both on purchase as well as sale to arrive at an amount of Rs.4,22,69,707/- in the hands of the assessee. According to him, since total cash sales shown of Rs.52.54 crores has been held as bogus, no separate addition in respect of commission estimation was made on these cash sales. Further, he noted that since the total income determined by ld. Assessing Officer is more than the total income confirmed, no separate notice for enhancement was issued. Appeal of the assessee was thus dismissed. Aggrieved, assessee is in appeal before the Tribunal. 11. Before us, ld. Counsel for the assessee elaborately reiterated the facts of the case along with reference to documentary evidences placed in paper book which were perused. A written submission dated 19.09.2024 is also placed on record which also has been taken into consideration. Facts and analysis thereupon are already discussed in detail in the above paragraphs and therefore not repeated for the sake of brevity. In the written submission made by the assessee, observation and analytical conclusions drawn by the ld. Assessing Officer are addressed. These are exhaustively dealt by both ld. Assessing Officer and ld. CIT(A) in their orders, relevant facts in respect of which are already reproduced above. 11.1. We have given our thoughtful consideration to overall factual matrix, conduct of business by the assessee in peculiar circumstances, reflecting upon pre-ponderance of human probabilities by keeping in 17 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 juxtaposition, the logistic and operational activities relating to transactions undertaken by the assessee within a short span of 25 days immediately preceding the announcement of demonetisation to justify the deposit of cash in various bank accounts of the assessee in the period of demonetisation. The thoughtful analysis done at both the levels of ld. Assessing Officer and ld. CIT(A), based on corroborative documentary evidences and financial data furnished by the assessee from its own books of accounts, evidently demonstrates the façade created by the assessee and has been pierced to bring out the true intent and purpose of explaining unaccounted money of the assessee. 11.2. Having perused orders of the authorities below, coupled with corroborative documentary evidences placed on record in the paper book, we do not find any reason to interfere with the conclusion drawn by the ld. CIT(A) in respect of deposit of cash in the various bank accounts of the assessee. Accordingly, the addition made u/s.69A of Rs.52,45,78,500/- is sustained. Grounds raised by the assessee in this respect are dismissed. 11.3. In respect of claim of bad debts written off during the year, claim of the assessee is that sales on this account has been duly reported forming part of his total sales turnover for Assessment Year 2015-16. In this respect, he had produced copy of ledger account which was analysed by ld. CIT(A), while arriving at his findings. There is no factual dispute on the contents of the ledge accounts as well as reporting of sales in Assessment Year 2015-16. In this respect, we find that claim of any bad debts is to be allowed in terms of section 36(1)(vii) in the year in which such bad debts have actually been written off as irrecoverable in the accounts of the assessee. In this respect, we find support from the decision of Hon'ble Supreme Court in the case of TRF Ltd. [323] ITR 18 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 397(SC). Considering the facts of the case and provisions of law, as well as decision of Hon'ble Supreme Court, we delete the addition so made by ld. Assessing Officer in this respect. Accordingly, grounds raised by the assessee in this respect are allowed. 11.4. In respect of rejection of book of accounts by ld. Assessing Officer u/s. 145 and sustained by ld. CIT(A) by taking into account our observations and findings while dealing with issue relating to cash deposits in various bank accounts for which the addition has been sustained, as well as keeping in view the elaborate analysis made by the authorities below, we do not find any reason to interfere with their observations and findings to draw the conclusion for rejection of books of accounts. Further, in this respect, ld. Assessing Officer applied the GP percentage of 4.76% which was taken from the reported GP percentage of the assessee and was reduced by ld. CIT(A) to 0.1%, granting substantia relief. It is important to note here that Revenue is not in appeal against this substantial relief granted by ld. CIT(A). Considering overall factual matrix of the case and the nature of business reported by the assessee, we do not find any reason to interfere with the conclusion drawn by ld. CIT(A) in this respect and therefore uphold the profit estimation by applying percentage of 0.1% as done by ld. CIT(A) on the sales turnover excluding the sales relating to deposit of cash in various bank accounts during the demonetisation period. 11.5. On the issue relating to notional commission computed by ld. CIT(A) on both purchases as well as sales by observing that assessee has indulged in carrying out bogus purchase and sales transaction enhancing the income by Rs.4,22,69,707/-. We find that it is not a case of taking accommodation entry from the accommodation entry operators by the assessee. Furthermore, both ld. Assessing Officer and 19 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 ld. CIT(A) have taken into consideration, the net profit estimation by rejecting the book of accounts of the assessee which has been upheld by us also, affirming the application of 0.1% of sales turnover as already stated above. Once the books have been rejected and net profit estimation have been applied, we do not find any justification for the enhancement made by ld. CIT(A) by presuming commission without any corroborative material on record. The enhancement so made by ld. CIT(A) is solely on presumption and assumption, more importantly when net profit estimation has already been sustained in the hands of the assessee. Accordingly, notional commission added in the hands of the assessee is deleted. Grounds taken by the assessee in this respect are allowed. 11.6. On the ground raised by the assessee on applicability of provisions of section 115BBE, it is to be noted that in the present case the alleged transaction of deposit of cash in the bank account of the assessee is during the period from 09.11.2016 to 30.12.2016. This issue of imposition of increased rate of tax from 30% to 60% by way of applying provisions of section 115BBE is addressed by Hon'ble High Court of Madras in the case of S.M.I.L.E Microfinance Ltd. Vs. ACIT in WP(MD)2078 and 1742 of 2020, dated 19.11.2024 whereby it is held that Revenue is empowered to impose 60% rate of tax on transactions from 01.04.2017 onwards and not prior to the said date and for prior transaction, Revenue is empowered to impose only 30% tax, as noted in para 17. Accordingly, respectfully following the decision of Hon'ble High Court of Madras, ground of appeal raised by the assessee on the issue of section 115BBE is allowed. It is worthwhile noting that this decision of Hon'ble High Court of Madras has been followed by the Coordinate Bench of ITAT, Ahmedabad in the case of Naranbhai Samatbhai 20 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 Bharwad Vs. ITO in ITA No.272/Ahd/2024 for Assessment Year 2017- 18, dated 03.01.2025. 12. In the result, appeal of the assessee is partly allowed. 13. Now, we take up cross appeals in ITA No.2814/Mum/2024 and 3059/Mum2024, which are for the Assessment Year, i.e., 2017-18 but pursuant to reopening proceedings and re-assessment order passed thereafter u/s.147. In this re-assessment order, it is important to note that the reopening proceedings were initiated based on information from DDIT (Inv), Unit-7(4), Mumbai. According to the said information, survey action u/s.133A was conducted on 21.06.2017 on Trikesh Tradelink Pvt. Ltd. and Pihu Gold, i.e., the assessee, resulting into consequential survey actions in the other entities also. Based on this information and survey action, it was noted that assessee had deposited cash in their respective bank accounts in the demonetisation period. Further, it was noted that at the premise where survey was undertaken, no business activity was going on. Considering the information received by the ld. Assessing Officer from the Investigation Wing, it was observed that assessee has made bogus purchases and sales out of which cash sales are also made during the same period. This re-assessment proceedings culminated into re-assessment, whereby total assessed income as per assessment order passed u/s.143(3) was taken, to which addition was made on account of bogus purchases by applying provisions of section 69C and also towards deposit of cash in the bank accounts. 13.1. From the perusal of assessment order, we note that all these issues were already considered in the original assessment made u/s.143(3) for which we have adjudicated upon in ITA 21 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 No.2813/Mum/2024 in the above paragraphs. In the original assessment made u/s.143(3), books of accounts had been rejected after analysing both the sales and purchase transactions made by the assessee during the year under consideration and net profit estimation was done which has been up held by taking into consideration the finding of ld. CIT(A). In the impugned re-assessment order passed u/s.147, addition is made towards purchase transaction which were already analysed and verified during the course of assessment, resulting into the aforesaid addition in the hands of the assessee. Taking up exercise of re-assessment for again making an addition by disallowing the purchases which have already been examined, amounts to change of opinion which is not permissible within the provisions contained in the section 147 of the Act. 13.2. Similar is the case, in respect of addition of Rs.57,58,527/- made towards deposit of cash in the re-assessment proceedings. We find that the issues dealt in the re-assessment proceedings for which additions have been made in the hands of the assessee have already been dealt in with in the original assessment u/s. 143(3). 13.3. Ld. CIT(A) has also deleted the said additions by taking into account the original assessment order passed u/s.143(3). There being no dispute on the facts that the issues taken up in the re-assessment proceedings have already been dealt in the original assessment as also held by ld. CIT(A), we dismiss the grounds raised by the Revenue in this appeal, both on the additions made in respect of purchases as well as deposit of cash in the bank accounts of the assessee. Appeal filed by the assessee in this respect is a cross appeal which is also rendered infructuous and accordingly dismissed as infructuous. 22 ITA No.2813/Mum/2024 and ors. Rakesh Natwarlal Patel, AY 2017-18 14. In the result, ITA No. 2813/Mum/2024 filed by the assessee is partly allowed, ITA No.2814/Mum/2024 filed by the assessee is dismissed as infructuous and ITA No. 3059/Mum/2024 filed by the Revenue is dismissed. Order is pronounced in the open court on 07 April, 2025 Sd/- Sd/- (Saktijit Dey) (Girish Agrawal) Vice President Accountant Member Dated: 07 April, 2025 MP, Sr.P.S. Copy to : 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 5 Guard File CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai "