HARSHIL DINESHBHAI RABARI,ANAND V. THE ITO,. WARD-1, ANAND

ITA 1097/AHD/2025

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The case involves Harshil Dineshbhai Rabari, who was a partner in the partnership firm Aatmiya Indane, facing scrutiny from the Income Tax Department for unexplained cash deposits and other transactions in his bank account during the demonetisation period in India. The Assessing Officer made additions to the assessee's income based on these transactions, which were contested in the Tribunal. The primary contention was that the bank account in question was used for the business operations of Aatmiya Indane and not solely by the assessee personally. The Tribunal's decision to remand the case back to the Assessing Officer for further investigation indicates that the matter requires a more detailed examination of the financial activities related to the partnership firm.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779634 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 16-05-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJIT
• Assessee Lawyers: SANKET BAKSHI
• Keywords: Set aside
• Section: 147; 144

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER ITA No.1097/Ahd/2025 Assessment Year: 2017-18 Harshil Dineshbhai Rabari, Brahmanvada, At & Post: Borsad, Anand – 388 540. (Gujarat) [PAN – AYVPR 2875 D] Vs. Income Tax Officer, “Ward - 1, Anand Income Tax Office, SP Complex, Beside C.K. Hall, Mayfair Road, Anand – 388 001. (Gujarat) (Appellant) (Respondent) Assessee by Shri Sanket Bakshi, AR Revenue by Shri Abhijit, Sr. DR Date of Hearing 24.09.2025 Date of Pronouncement 16.10.2025 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi (in short “the CIT(A)”), dated 13.03.2025, for the Assessment Year (A.Y.) 2017-18 in the proceedings under Section 144 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The brief facts of the case are that no return of income was filed by the assessee for the A.Y. 2017-18. The Assessing Officer had received an information that the assessee had made cash deposits of Rs.42,44,275/- in his bank account during the demonetisation period from 09.11.2016 to 30.12.2016. On the basis of this information, the case of Printed from counselvise.com ITA No.1097/Ahd/2025 (Assessment Year: 2017-18) Harshil Dineshbhai Rabari vs. ITO Page 2 of 6 the assessee was reopened under Section 147 of the Act, after recoding the reason. In the course of assessment, no compliance was made by the assessee and the source of cash deposits was not explained. The Assessing Officer had made enquiry from the Bank and from the bank statement it transpired that apart from cash deposits of Rs.42,44,275/-, there were other trading entries in the form of RTGS/transfers to the extent of Rs.1,66,58,784/-. In the absence of any explanation regarding the source of cash deposits in the bank account, the Assessing Officer had made addition of Rs.42,44,275/- on account of unexplained cash deposit. Further, 10% of the deposits by way of RTGS/transfer was also considered as income of the assessee and accordingly addition of Rs.16,65,878/- was made by the Assessing Officer. The assessment was completed under Section 144 of the Act on 26.08.2019 at total income of Rs.59,10,150/-. 3. Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed. 4. Now the assessee is in second appeal before us. The following grounds have been taken in this appeal: - “All the grounds of appeal in this appeal are mutually exclusive and without prejudice to each other. 1. The National Faceless Appeal Central (\"the NFAC\") and the learned Income Tax Officer, Ward 1, Anand (\"the AO\") erred in fact and in law in making addition to the total income of the Appellant based on a bank account of which the Appellant is not the owner. Addition of Rs.42.44.275/- as undisclosed/unexplained receipts Printed from counselvise.com ITA No.1097/Ahd/2025 (Assessment Year: 2017-18) Harshil Dineshbhai Rabari vs. ITO Page 3 of 6 2. The learned NFAC and the learned AO erred in fact and in law in considering an amount of Rs.42,44,275/- was unexplained / undisclosed and adding the same to the total income of the Appellant. 3. The learned NFAC and the AO erred in fact and in law in making the addition to the total income of the Appellant without considering the fact that the bank account in consideration never belonged to the Appellant. 4. The learned NFAC and the learned AO erred in fact and in law in making addition of Rs.42,44,275/- to the income of the Appellant relying upon the Bank Statement of Aatmiya Indane (PAN No.ABGFA7495L) which is erroneous and bad in law. 5. The learned NFAC and the learned AO erred in fact and in law in confirming the addition without considering the facts of the case in proper perspective. 6. Without prejudice to the above, the learned NFAC and the learned AO erred in fact and in law in considering the gross amount cash deposited as the income of the Appellant instead of making addition of the net income. Addition of Rs.16,65,878/- as unexplained entries to the bank account 7. The learned NFAC and the learned AO erred in fact and in law in considering an amount of Rs.16,65,878/- to the total income of the Appellant without considering the fact that the Appellant was never the owner of the said bank account. 8. The learned NFAC and the learned AO erred in fact and in law in making the addition to the total income of the Appellant without considering that the bank account in consideration belonged to a partnership firm wherein the Appellant was a partner. 9. Without prejudice to the above, the learned NFAC and the learned AO erred in fact and in law in making an addition of 10% of the total credits to the bank account which was based on assumptions and presumptions and without merits. Other Grounds 10. The learned NFAC and the learned AO erred in fact and in law in charging interest u/s.234A of the Act. 11. The learned NFAC and the learned AO erred in fact and in law in charging interest u/s.234B of the Act. Printed from counselvise.com ITA No.1097/Ahd/2025 (Assessment Year: 2017-18) Harshil Dineshbhai Rabari vs. ITO Page 4 of 6 12. The learned NFAC and the learned AO erred in fact and in law in initiating penalty proceedings u/s. 271AAC of the Act. 13. The Appellant reserves the right to add, alter, amend, modify, delete all or any of the grounds of appeal either partially or completely.” 5. Shri Sanket Bakshi, Ld. AR of the assessee, explained that the assessee was partner of M/s. Aatmiya Indane and individual bank account was utilised for the transactions of the partnership firm. He explained that all the transactions appearing in the bank account of the assessee were pertaining to Aatmiya Indane which was an Indane Distributor. In view of this fact, the addition made by the Assessing Officer was not correct as the transactions pertained to the firm. 6. On the other hand, Shri Abahijit, Ld. Sr. DR, submitted that no compliance was made by the assessee before the Assessing Officer. He submitted that the bank account was in the name of the assessee and the PAN given to the Bank was that of the assessee as Individual and not of the partnership firm. Therefore, the Assessing Officer had rightly made the additions. 7. We have considered the rival submissions. The assessee has filed a copy of the letter dated 29.01.2016 from Indian Oil Corporation Limited (IOCL) addressed to Shri Harshil Dineshbhai Rabari (the assessee) and Mrs. Vishva Harshil Rabari, whereby they were appointed as “Indane Distributor” which was to be run in the name of “Aatmiya Indane”. The assessee has filed another letter of IOCL dated 27.03.2017, as per which the distributorship commissioned on 31.01.2016 in the name of Shri Harshil Dineshbhai Rabari and Mrs. Vishva Harshil Rabari, as partners, was cancelled for the reason that they were residing in Australia and the Printed from counselvise.com ITA No.1097/Ahd/2025 (Assessment Year: 2017-18) Harshil Dineshbhai Rabari vs. ITO Page 5 of 6 operation of the distributorship was being done by unauthorised persons. From the copy of the bank statement brought on record, it is found that the cash deposits made in the bank account were immediately transferred to IOCL. It is thus apparent that the bank account No.34127441563 with Central Bank of India in the name of the assessee was being utilised for the business operation of Aatmiya Indane, for distributorship of IOCL. Thus, the submission of the assessee that the cash deposits in the bank account represented business proceeds of Aatmiya Indane appears to be prima facie correct. However, the copy of bank statement for the entire year has not been brought on record. Therefore, it could not be ascertained as to whether the cash deposits and their immediate transfer to IOCL were made throughout the year. The Assessing Officer also not recorded any finding in this regard in the assessment order. Only the cash deposit of Rs.42,44,275/- during the period 09.11.2016 to 30.12.2016 is mentioned in the assessment order and the cash deposits, if any, during the earlier or subsequent period was not examined. If the assessee’s account was being utilised for business operation of Aatmiya Indane, then the cash deposits and the transfer of such deposits to IOCL should appear throughout the year and not only during the demonetisation period. The explanation of the assessee can be accepted only after considering the trend of cash deposits and transfer thereof for the entire year and not only for the demonetisation period. We, therefore, deem it proper to set aside the matter to the file of the Assessing Officer with a direction to examine as to whether the bank account of the assessee was utilised for cash deposits on behalf of Aatmiya Indane for the entire year or only during the demonetisation period. If the cash deposits are found only during the demonetisation period, then the veracity of the assessee’s explanation needs to be Printed from counselvise.com ITA No.1097/Ahd/2025 (Assessment Year: 2017-18) Harshil Dineshbhai Rabari vs. ITO Page 6 of 6 properly examined. Further, the cash deposits as well the credits by RTGS/Transfer in the bank account should also be co-related with the sales of Aatmiya Indane during the corresponding period. The assessee is also directed to make compliance before the Assessing Officer and explain the source of cash deposits as well as the credit entries as appearing in the bank account in accordance with the direction as given above. 8. In the result, the appeal of the assessee is allowed for statistical purpose. Order pronounced in the open Court on this 16th October, 2025. Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Ahmedabad, the 16th October, 2025 PBN/* Copies to: (1) The appellant (2) The respondent (3) The PCIT (4) The CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPYE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad Printed from counselvise.com "