INCOME TAX OFFICER,WARD-1,MODASA, INCOME TAX OFFICE MODASA V. BHAGABHAI KACHARABHAI PATEL, BHILODA, DIST ARVALLI,GUJARAT

ITA 1492/AHD/2025

AI Insights

The case involves an appeal by the Income Tax Officer against the decision of the Commissioner of Income Tax (Appeals), which had significantly reduced the additions made to the assessee's income for unexplained investments and expenditures. The Assessing Officer had initially treated substantial amounts as unexplained money and unexplained expenditure based on information from a search and seizure operation related to a cooperative society. The Commissioner (Appeals) found that the Assessing Officer had relied on third-party information without proper verification and reduced the additions. The Tribunal found that the Commissioner (Appeals) had not adequately addressed the findings of the Assessing Officer and had not conducted a thorough examination of the evidence, leading to the decision to restore the matter for a detailed re-examination.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 833815 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2026
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Appeal Filed On: 24-07-2025
• Other Referred Cases: Kaushik Pravinchandra Gohel vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside; Opportunity of being heard; Corroborative evidences; Unexplained expenditure; Search and seizure; Initiation of penalty proceedings
• Section: 148; 142(1); 132; 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH Before: DR. B.R.R Kumar, Vice President And Shri Siddhartha Nautiyal, Judicial Member Income Tax Officer, Ward-1, Modasa - 383315 (Appellant) Vs Bhagabhai Kacharabhai Patel, 11, Shamlaji Road Khodamba, Bhiloda, Modasa Gujarat - 383250 PAN:CBRPP708Q (Respondent) Assessee Represented: Shri Chirag Raval, CA Revenue Represented: Shri C Dharani nath, Sr. D.R. Date of hearing : 02-02-2026 Date of pronouncement : 04-02-2026 आदेश आदेश आदेश आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- The present appeal has been filed by the Assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (in short “NFAC”) Delhi vide order dated 29-04-2025 passed for A.Y. 2017-18. ITA No: 1492/Ahd/2025 Assessment Year: 2017-18 Printed from counselvise.com I.T.A No. 1492/Ahd/2025 , A.Y. 2017-18 Page No ITO Vs Bhagabhai Kacharabhai Patel 2 2. The Grounds of Appeal raised by the Assessee reads as under: 1. Whether the learned CIT(A), NFAC, has erred in deleting the addition of Rs 2,40,39,750/- out of addition of Rs, 2,41,00,000/- made by the AD under section 64 rws 115BBE of the Income Tax Act, 1961, towards unexplained money, as well as tie addition of Rs. 9,18,150/- towards unexplained expenditure u/s 69C of the Act, without properly appreciating that the assessee had grossly failed to explain the nature and source of such substantial transactions through credible and verifiable evidence during the course of assessment proceedings, and that the explanation furnished during the course of appellate proceedings was based solely on non-authenticated documents, and lacked any independent verification?\" 2. The appellant craves leave to amend or alter any ground or add a new ground may be necessary.\" 3. It is, therefore, prayed that the order of ld. CIT(A) may be set aside and that of the Assessing Officer be restored?” 3. The brief facts of the case are that the assessee had filed his original return of income for Assessment Year 2017-18 on 21.07.2017 declaring total income of Rs.4,59,750/- and agricultural income of Rs.4,73,857/-. On the basis of information received from the ACIT, Central Circle-4(4), Mumbai, the Assessing Officer noted that a search and seizure action under section 132 of the Act in the case of Shri Renuka Mata Multi State Urban Co- operative Society Ltd. had revealed that the society had permitted large cash deposits in the accounts of persons whose creditworthiness was doubtful or who were persons of very low means. As per this information, the Assessing Officer was of the view that the assessee had invested Rs.2.41 crore in the said society despite having returned only meagre income. Further, the Assessing Officer observed that the information from the Additional Director (Investigation and Criminal Investigation) also showed that the assessee had purchased a luxury car for about Rs.27.98 lakh and had paid Rs.13,84,950/- in cash. The Assessing Officer therefore formed a belief that Printed from counselvise.com I.T.A No. 1492/Ahd/2025 , A.Y. 2017-18 Page No ITO Vs Bhagabhai Kacharabhai Patel 3 investments and cash payments aggregating to Rs.2,54,84,950/- had escaped assessment due to failure on the part of the assessee to disclose material facts and initiated proceedings under section 148 of the Act. 4. In response, the assessee filed a return on 29.04.2021 declaring income of Rs.4,65,000/- and agricultural income of Rs.4,73,857/-. The Assessing Officer issued notices under sections 143(2) and 142(1) of the Act along with questionnaires and called for details regarding the investments and cash payments, but the assessee did not respond despite repeated opportunities. The Assessing Officer observed that there had been continuous non-compliance throughout the proceedings on the part of the assessee and the return of income filed by the assessee was not sufficient to explain such source of cash payments made by the assessee after meeting household expenses. The assessee also did not furnish any explanation at all regarding the investment of Rs.2.41 crore with the co-operative society. Applying the test of human probabilities and relying on judicial precedents, the Assessing Officer treated Rs.2.41 crore as unexplained money under section 69A of the Act and after allowing Rs.4,66,800/- as explained from declared income, the Assessing Officer treated the balance amount as income of the assessee. The Assessing Officer also initiated penalty proceedings initiated on the assessee. 5. Before the Commissioner (Appeals), the assessee submitted that he had not made any investment in the co-operative society and that his bank account had been misused, asserting that he was only a name lender and not the real beneficiary of the transactions. The assessee placed reliance on the Printed from counselvise.com I.T.A No. 1492/Ahd/2025 , A.Y. 2017-18 Page No ITO Vs Bhagabhai Kacharabhai Patel 4 decision of the Ahmedabad Bench of the Tribunal in the case of Kaushik Pravinchandra Gohel involving similar allegations against the same society. After considering these submissions, the Commissioner (Appeals) held that the Assessing Officer had relied only on third-party information and had not cross-verified the assessee’s denial either with the source agency or with the society itself. Observing that the facts were similar to the Tribunal decision relied upon by the assessee, the Commissioner (Appeals) restricted the addition of Rs.2.41 crore to 0.25% thereof, amounting to Rs.60,250/-, and deleted the balance of Rs.2,40,39,750/-. In respect of the addition of Rs.9,18,150/- for cash payment towards purchase of the car, the Commissioner (Appeals) accepted the assessee’s plea that he had taxable and agricultural income in earlier years which could have resulted in savings and therefore deleted the entire addition. The ground relating to initiation of penalty proceedings was dismissed as premature, while the delay in filing the appeal was condoned. 6. The Department is in appeal before us against the order passed by CIT(Appeals) allowing the appeal of the assessee. 7. We have heard the rival contentions and perused the material on record. After hearing the rival submissions and perusing the material placed on record, we find that the Commissioner (Appeals) erred in law and on facts in granting relief to the assessee by mechanically relying upon the decision in the case of Kaushik Pravinchandra Gohel, decided by the Ahmedabad Bench of the Tribunal in ITA Nos. 690 to 694/Ahd/2023 dated 17.04.2024, reported in (2024) 70 CCH 0352 (Ahd Trib) and (2024) 231 Printed from counselvise.com I.T.A No. 1492/Ahd/2025 , A.Y. 2017-18 Page No ITO Vs Bhagabhai Kacharabhai Patel 5 TTJ 1 (Ahd). In the said case, after detailed examination of the Investigation Wing reports and the modus operandi of the Renukamata Society, the Tribunal had come to a categorical factual finding that the assessee therein had no effective role in operating the bank accounts and was merely a name lender, and therefore only a small percentage of the deposits was directed to be taxed as commission income. However, in the present case, the Commissioner (Appeals) failed to appreciate that the Assessing Officer had specifically pointed out that apart from the alleged deposits with the co- operative society, the assessee had also purchased a luxury car costing about Rs.27.98 lakh and had made substantial cash payment of Rs.13,84,950/-, the source of which was not satisfactorily explained during the assessment proceedings. These surrounding facts, which go to the root of the matter while applying the test of human probabilities, were completely ignored by the Commissioner (Appeals). 8. We further find that the Commissioner (Appeals) accepted the assessee’s plea that his bank account had been misused and that he was merely a name lender, without calling for or examining the complete bank statements of the assessee, without verifying whether the assessee himself had signed cheques or authorised transactions. We are of the considered view that that CIT(Appeals) granted relief to the assessee merely on the basis of the submissions of the assessee and by drawing an analogy with the aforesaid Tribunal decision, without undertaking the necessary factual verification in the present case and without dealing with the findings made by the Assessing Officer. We are of the considered view that the deletion of the addition relating to cash payment for purchase of the car has been made Printed from counselvise.com I.T.A No. 1492/Ahd/2025 , A.Y. 2017-18 Page No ITO Vs Bhagabhai Kacharabhai Patel 6 by CIT(Appeals) by assuming availability of past savings, again without calling for cash-flow statements, bank statements or other supporting evidence. 9. In view of these deficiencies, and in the interests of justice, we are of the considered opinion that the impugned order of the Commissioner (Appeals) cannot be sustained. Accordingly, the order passed by the Commissioner (Appeals) is set aside and the entire matter is restored to his file for de-novo adjudication. The Commissioner (Appeals) is directed to examine afresh all aspects highlighted by the Assessing Officer, including the alleged investment in the co-operative society and the cash payment made towards purchase of the vehicle, and shall specifically call for and scrutinise the complete bank statements and other relevant records to ascertain the precise role of the assessee in operating the bank account and in the impugned transactions. The Commissioner (Appeals) shall also make such further enquiries as may be necessary and thereafter pass a speaking order in accordance with law after providing due opportunity of being heard to the assessee. 10. The appeal of the Department is thus allowed for statistical purposes. Order pronounced in the open court on 04-02-2026 Sd/- Sd/- (DR. B.R.R KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated - 04/02/2026 Nk True Copy Printed from counselvise.com I.T.A No. 1492/Ahd/2025 , A.Y. 2017-18 Page No ITO Vs Bhagabhai Kacharabhai Patel 7 आदेश आदेश आदेश आदेश क\u0002 क\u0002 क\u0002 क\u0002 \u0003ितिलिप \u0003ितिलिप \u0003ितिलिप \u0003ितिलिप अ ेिषत अ ेिषत अ ेिषत अ ेिषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद Printed from counselvise.com "