INCOME TAX OFFICER, AHMEDABAD V. BELA KIRITKUMAR NAHTA, AHMEDABAD

ITA 882/AHD/2024

AI Insights

The case involves an appeal by the Income Tax Officer (ITO) against Bela Kiritkumar Nahta, concerning additions made to her income for the Assessment Year 2017-18. The additions were initially made by the Assessing Officer (AO) due to unexplained cash deposits during the demonetization period and disallowed costs of improvement on a sold property. The CIT(A) reversed these additions, leading to the ITO's appeal. The Tribunal found that the CIT(A) had correctly assessed the evidence and that the AO had not properly considered the submissions made by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29617 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RIGNESH DAS
• Assessee Lawyers: HARDIK VORA
• Keywords: Business income; Capital asset; Unexplained cash credit; Capital Gains; Principle of natural justice; Assessment record; Procedural lapse
• Section: 143(3); 142(1); 143(2); 143(1); 68; 44AB

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदा बा द \u0012ा यपीठ “सी“, अहमदा बा द । IN THE INCOME TAX APPELLATE TRIBUNAL “ C ” BENCH, AHMEDABAD सु\u0017ी सुिच\u0019ा का \u001aले, \u0012ा ियक सद एवं \u0017ी मकरंद वसंत महा देवकर, लेखा सद क े सम\"। ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.882/Ahd/2024 िनधा \u0010रण वष\u0010 /Assessment Year : 2017-18 The ITO B-502, 5th Floor Pratyaksh Kar Bhavan Ambawadi Ahmedabad – 380 015 बनाम/ v/s. Bela Kiritkumar Nahta 5, Gopinath Society Opp. Sunrise Park Vastrapur Ahmedabad – 380 015 \u0014थायी लेखा सं./PAN: ACAPN 1242 K अपीलाथ%/ (Appellant) &' यथ%/ (Respondent) Assessee by : Shri Hardik Vora, AR Revenue by : Shri Rignesh Das, Sr.DR सुनवाई की तारीख/Date of Hearing : 06/01/2025 घोषणा की तारीख /Date of Pronouncement: 09/01/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal by the Revenue arises from the order dated 20/02/2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi [hereinafter referred to as “CIT(A)”] for the Assessment Year (A.Y.) 2017-18, wherein the CIT(A) deleted the additions made by the Assessing Officer, Ward 3(3)(1), Ahmedabad [hereinafter referred to as “AO”] under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as “the Act”]. ITA No.882/Ahd/2024 ITO vs. Bela Kiritkumar Nahta Asst. Year : 2017-18 2 Facts of the case: 2. The assessee, Ms. Bela Kirtikumar Nahta, an individual engaged in the business of jewellery manufacturing and trading under the proprietorship concern M/s Belu Jewellers, filed her return of income for the Assessment Year 2017-18 on 06/11/2017, declaring a total income of Rs.10,83,000/-. The return was processed under Section 143(1) of the Act and subsequently selected for scrutiny under the Computer Aided Scrutiny Selection (CASS) due to significant cash deposits during the demonetization period (09/11/2016 to 31/12/2016). A notice under Section 143(2) of the Act was issued on 21/08/2018 and served electronically. Further notices under Section 142(1) of the Act, along with detailed questionnaires, were issued on 31/01/2019 and 26/09/2019, requesting details about cash deposits and supporting documents for improvement costs of the capital asset sold. The AO issued a show-cause notice on 16/11/2019 asking the assessee to explain the sources of the cash deposits and provide evidence regarding the improvement costs. The assessee was required to respond by 22/11/2019, but the AO recorded that no reply was received. 2.1. Based on Statement of Financial Transactions (SFT) data, the AO noted that the assessee had deposited cash totalling Rs.1,96,27,000/- during the demonetization period in her accounts at: - Nutan Nagrik Co-op Bank: Rs.84,39,000 and Rs.47,00,000/- (two entries allegedly). - Axis Bank: Rs.64,88,500/-. ITA No.882/Ahd/2024 ITO vs. Bela Kiritkumar Nahta Asst. Year : 2017-18 3 2.2. Since the assessee failed to provide satisfactory evidence for these deposits, the AO treated the entire amount as unexplained cash credit under Section 68 and added it to the total income. 2.3. The assessee sold an immovable property for Rs.1,45,00,000/- and claimed a cost of improvement of Rs.14,38,950/- while calculating short-term capital gains (STCG). The AO noted that no documentary evidence, such as bills or invoices, was provided to support the cost of improvement. Consequently, the AO disallowed the cost of improvement and added Rs.14,38,950/- to the total income. 2.4. The AO completed the assessment under Section 143(3) on 25/11/2019, determining the total assessed income as Rs.2,21,48,950/-. 3. Aggrieved by the additions, the assessee filed an appeal before the CIT(A). The CIT(A) accepted the submissions made by the assessee and found that the AO failed to acknowledge the documentary evidence submitted. The CIT(A) observed that several notices were not properly served, depriving the assessee of an opportunity to defend her case. It was further noted that the total cash deposits were Rs.1,11,88,500/-, not Rs.1,96,27,000/- and were duly reflected in the turnover disclosed in the P&L account. The CIT(A) deleted the addition under Section 68 and allowed the cost of improvement, holding that the assessment order was contrary to the principles of natural justice and facts on record. 4. Not satisfied with the order of the CIT(A), the revenue is in appeal before us with following grounds of appeal: ITA No.882/Ahd/2024 ITO vs. Bela Kiritkumar Nahta Asst. Year : 2017-18 4 (a) The Ld.CIT (A) has erred in law and on facts in deleting the addition of Rs.1,96,27,000/- made on account of unexplained cash deposit in bank accounts u/s 68 of the Act ? (b) The Ld.CIT (A) has erred in law and on facts in deleting the addition of Rs.14,38,950/- on account of disallowance of deduction of cost of improvement of the capital asset sold while computing the LTCG ? (c) The appellant craves leave to add, alter and /or to amend all or any the ground before the final hearing of the appeal. 5. During the course of hearing before us, the Departmental Representative (DR) relied on the order of AO and stated that the CIT(A) has not called for Remand Report from the AO and, therefore, the AO had no opportunity to defend his order. The DR further pointed out that the assessee failed in compliance with various notices issued by the AO and therefore the CIT(A) was required to call for the remand report from the AO. 6. The Authorized Representative (AR) on the other hand relied on the order of CIT(A) and stated that the all the details have been submitted before AO. The AR further stated that in response to notice 31-01-2019 u/s.142(1) of the Act, the assessee had furnished following documents to the AO on 15-02-2019 : i. Copies of the bank statements and bank book in respect of the bank accounts maintained by the appellant assessee. ii. Copy of the cash book for period from 01/04/2016 to 31/03/2017. iii. Copies of the VAT returns. iv. Details of the cash sales during the FY 2016-17. ITA No.882/Ahd/2024 ITO vs. Bela Kiritkumar Nahta Asst. Year : 2017-18 5 6.1. Therefore, as stated by the AR, the observation made by the AO to the effect that no reply/explanation has been furnished by the assessee is factually incorrect. 7. We have heard the submissions made by the DR for the Revenue and the AR for the assessee. We have also carefully perused the orders passed by the AO and the CIT(A) along with the documents placed on record. 7.1. We find merit in the submissions of the AR that all relevant details were furnished to the AO during the assessment proceedings. The CIT(A)’s order explicitly lists the documents submitted by the assessee, which include comprehensive records of cash sales, bank transactions, and VAT returns. It is settled law that the requirement for a remand report arises only when fresh evidence is produced before the appellate authority for the first time. In this case, the documents considered by the CIT(A) were already available on record and had been submitted to the AO during the assessment proceedings. Therefore, the CIT(A) was not obligated to call for a remand report when the evidence relied upon is already part of the assessment record. 7.2. The records show that the assessee responded to the notice under Section 142(1) dated 31/01/2019 by furnishing detailed explanations and supporting documents on 15/02/2019. These included: • Bank statements and cash book: The entries in the bank book corresponded to the deposits, showing that they were sourced from cash sales. • Cash book and VAT returns: The VAT returns corroborated the declared turnover of Rs.3,83,26,472/- and reflected cash sales forming a significant part of the business receipts. ITA No.882/Ahd/2024 ITO vs. Bela Kiritkumar Nahta Asst. Year : 2017-18 6 • Sales register and bills: The cash sales recorded in the sales register were supported by individual sales bills. 7.3. The AO, however, failed to consider these submissions and mechanically concluded that the deposits were unexplained. The observation that the assessee “did not provide any reply or explanation” is contrary to the facts on record. 7.4. The AO alleged cash deposits of Rs.1,96,27,000/- in the assessee’s bank accounts during the demonetization period. However, the CIT(A) found that the AO’s calculations were erroneous and included a fictitious deposit of Rs.84,39,000/- in Nutan Nagrik Co-op Bank, which was not reflected in the bank statements. The actual deposits during the relevant period amounted to Rs.1,11,88,500/-, as supported by the bank statements. The CIT(A) also observed that the opening cash balance of Rs.1,20,33,505/- on 09/11/2016 was more than sufficient to cover the cash deposits made during the demonetization period. The cash deposits were consistent with the day-to- day cash sales recorded in the cash book. 7.5. The assessee had claimed Rs.14,38,950/- as the cost of improvement for calculating STCG on the sale of an immovable property. The improvement costs pertained to civil work, flooring, and fixtures, and were supported by valid invoices and payment receipts. The CIT(A) examined the supporting documents and found them to be genuine. The AO disallowed the claim solely on the ground that “no evidence was submitted.” The CIT(A) rightly concluded that the disallowance was arbitrary, as the AO failed to substantiate his claim or refute the authenticity of the submitted documents. ITA No.882/Ahd/2024 ITO vs. Bela Kiritkumar Nahta Asst. Year : 2017-18 7 The CIT(A) noted that the assessment order was passed hastily on 25/11/2019, within nine days of issuing the show-cause notice dated 16/11/2019, despite the statutory time limit for passing the order extending until 31/12/2019. The failure to provide adequate time to respond deprived the assessee of a fair opportunity to defend her case, thereby violating the principles of natural justice. 7.6. After considering the submissions of both parties, the orders of the AO and the CIT(A), and the material on record, we find no infirmity in the well- reasoned order passed by the CIT(A). The CIT(A)’s findings are based on a detailed examination of the documentary evidence, including the books of accounts, tax audit report, and statutory submissions. The cash deposits during the demonetization period were fully explained as part of the assessee’s regular business turnover. The assessee’s books of accounts, including the cash book, bank book, and sales register, were maintained in compliance with accounting standards prescribed by ICAI and were subjected to statutory audit under Section 44AB of the Income Tax Act. The independent auditor’s tax audit report certified that the books of accounts were complete and properly maintained, and all cash transactions were duly recorded. The AR rightly contended that the AO overlooked this key evidence and made arbitrary additions without rejecting the books of accounts under Section 145(3). The CIT(A) correctly observed that the AO’s inclusion of a fictitious deposit of Rs.84,39,000/- reflected a lack of diligence in verifying the facts. The actual cash deposits during the relevant period, totalling to Rs.1,11,88,500/-, were corroborated by the bank statements and supported by the sales records. The cost of improvement of Rs.14,38,950/-, claimed by the assessee while computing short-term capital gains, was ITA No.882/Ahd/2024 ITO vs. Bela Kiritkumar Nahta Asst. Year : 2017-18 8 supported by valid invoices and payment receipts. The AO disallowed the claim without examining the submitted documents, making the disallowance arbitrary and baseless. The requirement for a remand report did not arise, as the CIT(A) adjudicated the appeal based on documents already on record during the assessment stage. The AO’s procedural lapse in passing the assessment order just nine days after issuing the show-cause notice, despite having more time, deprived the assessee of a fair opportunity to present her case, violating the principles of natural justice. 7.7. The Revenue has failed to bring forth any substantial grounds to contradict the detailed findings of the CIT(A) or demonstrate how the CIT(A)’s reliance on the statutory audit and evidence was incorrect. Accordingly, we find that the CIT(A) was justified in deleting the additions made by the AO. In light of the above, the grounds of appeal raised by the Revenue are rejected. 8. In the result, the appeal of the Revenue is dismissed. Order pronounced in the Open Court on 9th January,2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 09/01/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS ITA No.882/Ahd/2024 ITO vs. Bela Kiritkumar Nahta Asst. Year : 2017-18 9 आदेश की #ितिलिप अ$ेिषत/Copy of the Order forwarded to : 1. अपीलाथ% / The Appellant 2. #&थ% / The Respondent. 3. संबंिधत आयकर आयु' / Concerned CIT 4. आयकर आयु' ) अपील ( / The CIT(A)- 5. िवभागीय #ितिनिध , आयकर अपीलीय अिधकरण , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u0010 फाईल / Guard file. आदेशानुसार/ BY ORDER, स&ािपत #ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 7.1..2025 2. Date on which the typed draft is placed before the Dictating Member. : 8.1..2025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 9.1.25 7. Date on which the file goes to the Bench Clerk. : 9.1.24 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : "