INCOME TAX OFFICER, WARD-1, NANDED V. RAKESH HUKUMCHAND AGARWAL, NANDED

ITA 1655/PUN/2024

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A)/NFAC, which pertained to the assessment year 2013-14. The assessee, Rakesh Hukumchand Agarwal, was engaged in the business of grain merchant and had made substantial cash deposits in his account. The Revenue contended that the assessee failed to explain the sources of these deposits and did not file his income tax return under section 139 of the IT Act. The Assessing Officer had reopened the case under section 147 and added the deposits as unexplained cash credit under section 68. However, the CIT(A) found that the assessee was running a regular business and modified the assessment to include a net profit estimate on the deposits rather than treating them as unexplained.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716717 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 05-08-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILESH SRIVASTVA
• Assessee Lawyers: ABHAY A. AVCHAT
• Keywords: Set aside; Business income; Unexplained cash credit; Peak credit
• Section: 147; 148; 68; 139

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “B”, PUNE BEFORE SHRI MANISH BORAD, ACCOUNTANT MEMBER AND SHRI VINAY BHAMORE, JUDICIAL MEMBER आयकर अपील सं. / ITA No.1655/PUN/2024 िनधाᭅरण वषᭅ / Assessment Year : 2013-14 ITO, Ward-1, Nanded. Vs. Rakesh Hukumchand Agarwal, House No.3-4-104, Narayansingh Building, Sachkhand, Nanded- 431601. PAN : AOSPK6840A Appellant Respondent आदेश / ORDER PER VINAY BHAMORE, JM: This appeal filed by the Revenue is directed against the order dated 13.06.2024 passed by Ld. CIT(A)/NFAC for the assessment year 2013-14. 2. The Revenue has raised the following grounds of appeal :- “1. On the facts and in the circumstances of the case, the Ld. CIT(A) failed to appreciate the facts that the assessee has made huge cash deposit amounting to Rs.2,61,10,199/- and the assessee filed his ROI after issue of notice u/s 148 of the Act and the assessee failed to explain his sources of cash deposits amounting to Rs.2,61,10,199/- with documentary evidences. Therefore, the Revenue by : Shri Akhilesh Srivastva Assessee by : Shri Abhay A. Avchat Date of hearing : 29.07.2025 Date of pronouncement : 22.08.2025 Printed from counselvise.com ITA No.1655/PUN/2024 2 order of the CIT(A) deserve to be set aside and to be remitted the file to AO for fresh assessment after giving proper opportunity. 2. The Ld. CIT(A) failed to appreciate the facts that the assessee had shown his total receipts of Rs.2,31,83,247/- in his RO1 which is less than his total cash deposits of Rs.2,61,10,199/-. Therefore, the said excess amount of Rs.29,26,952/- not considered and shown in his ROI for the year under consideration. 3. The Ld. CIT(A) erred in appreciating the facts of the case as the assessee's case needs to be audited as his total receipts are above one crore for the year under consideration. The assessee has violated the provision of under section 44AB of the 1.T.Act, 1961. Hence, the order of the CIT(A) deserve to be set-aside and to be remitted the file to AO for fresh assessment. 4. The appellant craves leave to add, amend or alter all or any of the Grounds of Appeal.” 3. Facts of the case, in brief, are that the assessee is an individual and was engaged in the business of grain merchant and trading during the year under consideration. The assessee did not file his income tax return u/s 139 of the IT Act. On the basis of information that the assessee has deposited huge cash in his account maintained with M/s Shri Renuka Mata Multi State Urban Cooperative Society and no return has been filed, his case was reopened u/s 147 of the IT Act and notice u/s 148 was issued to the assessee. The assessee filed his return of income on 26.04.2021 in response to notice issued u/s 148 and declared business income of Rs.1,98,820/. After considering the reply of the assessee, the Assessing Officer completed the assessment u/s 147 r.w.s. 144B of the IT Act Printed from counselvise.com ITA No.1655/PUN/2024 3 determining total income at Rs.2,63,09,022/- as against the income returned by the assessee at Rs.1,98,820/-. The above assessed income includes addition on account of unexplained cash credit u/s 68 of Rs.2,61,10,199/- which is the total of credit side of account maintained with M/s Shri Renuka Mata Multi State Urban Cooperative Society. 4. After considering the reply of the assessee, Ld. CIT(A)/NFAC partly allowed the appeal of the assessee by observing as under :- “4.3 The appellant had requested since the AO had already accepted the business activities done in the name & style of SRMSC, the addition u/s 68 is not to be made. Whereas, alternatively submitted that he may kindly be granted peak credit or income may be taken at 1 or 2% as per the previous year’s net profit since the average gross margin in the line of business operates at 4% of sales. With regard to the above discussion, the above claims of the appellant’s business with SRMSC are found to true. The appellant is running the grain merchant business and the same is also accepted by the AO in the assessment order. Having come to the conclusion that the appellant is running regular business and adding entire cash deposit u/s 68 of the Act is not correct. More reasonable way to estimate the income out the sales is estimating the Net Profit of the business. Even though the appellant submitted that the gross margin is 4%, the appellant did not file the ROI and offer correct income. Since, the appellant claims that he is carrying out the grain merchant business throughout the year, the fluctuations in the grain prices will not make NP not less than 8% where normal NP in this trade is more than 8%. In this regard, the AO is directed to assess the income at 8% of Rs.2,61,10,199/- i.e. total cash deposits made with SRMSC. Therefore, the grounds of the appellant are hereby partly allowed. 4.4 In the result, the appeal is partly allowed.” 5. It is the above order against which the Revenue is in appeal before this Tribunal. Printed from counselvise.com ITA No.1655/PUN/2024 4 6. Ld. DR appearing from side of the Revenue submitted before us that the assessee has only considered an amount of Rs.2,31,83,247/- in his return of income furnished in response to notice u/s 148 of the IT Act which is less than the total cash deposit of Rs.2,61,10,199/-. Accordingly, it was the contention of Ld. DR that the remaining amount of Rs.29,26,952/- should be added u/s 68 as unexplained cash credit to the income of the assessee. 7. Apart from above, Ld. DR also submitted that the total receipts of the assessee are more than Rs.1 crore and therefore the assessee was required to get his accounts audited and the assessee has violated the provisions of section 44AB of the IT Act. 8. Ld. AR appearing from side of the assessee requested to dismiss the appeal filed by the Revenue. 9. We have heard Ld. Counsels from both the sides and perused the material available on record including the paper book furnished by the assessee. In this regard, we find that Ld. CIT(A)/NFAC has partly allowed the appeal of the assessee wherein he has accepted the contention of the assessee that he is involved in business of grain merchant and the whole of the deposits made in the impugned account maintained with M/s Shri Renuka Mata Multi State Urban Printed from counselvise.com ITA No.1655/PUN/2024 5 Cooperative Society pertains to his grain business and accordingly Ld. CIT(A)/NFAC deleted the addition of Rs.2,61,10,199/- made by the Assessing Officer u/s 68 of the IT Act and further directed to estimate @ 8% net profit on Rs.2,61,10,199/- i.e. the amount deposited by the assessee in the account maintained with M/s Shri Renuka Mata Multi State Urban Cooperative Society. Considering the totality of the facts of the case, we do not find any error in the order passed by Ld. CIT(A)/NFAC and accordingly, the grounds of appeal raised by the Revenue are dismissed. 10. In the result, the appeal filed by the Revenue is dismissed. Order pronounced on this 22nd day of August, 2025. Sd/- Sd/- (MANISH BORAD) (VINAY BHAMORE) ACCOUNTANT MEMBER JUDICIAL MEMBER पुणे / Pune; ᳰदनांक / Dated : 22nd August, 2025. Sujeet आदेश कᳱ ᮧितिलिप अᮕेिषत / Copy of the Order forwarded to : 1. अपीलाथᱮ / The Appellant. 2. ᮧ᭜यथᱮ / The Respondent. 3. The Pr.CIT concerned. 4. िवभागीय ᮧितिनिध, आयकर अपीलीय अिधकरण, “B” बᱶच, पुणे / DR, ITAT, “B” Bench, Pune. 5. गाडᭅ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune. Printed from counselvise.com "