JAYESH BUDHALAL MEHTA,AHMEDABAD V. THE DY. CIT, CENTRAL CIRCLE-1(2), AHMEDABAD

ITSSA 23/AHD/2023

AI Insights

The case involves multiple appeals by Jayesh Budhalal Mehta against the orders of the Commissioner of Income-Tax (Appeals)-11, Ahmedabad, concerning various assessment years. The primary issues revolved around the disallowance of sundry creditors, speculative losses, and unexplained investments. The tribunal examined the validity of additions made by the Assessing Officer (AO) and upheld some while rejecting others based on the evidence and explanations provided by the assessee. The tribunal's decisions were influenced by the availability of supporting documents and the adherence to procedural requirements such as the filing of audited accounts within the stipulated deadlines.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41161 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 11-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V NANDA KUMAR
• Assessee Lawyers: DIPEN SHUKHADIA
• Keywords: Set aside; Speculation loss; Corroborative evidences; Unexplained cash credit; Unexplained investment; Third party statement
• Section: 153C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER & SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER आयकर अपील (एस.एस.) सं./I.T(SS).A. Nos. 21, 22, 23 & 24/Ahd/2023 (Ǔनधा[रण वष[ / Assessment Years : 2009-10, 2012-13, 2013-14 & 2014-15) Jayesh Budhalal Mehta C/o. S.A. Sukhadia, Advocate, L-3, Meghalaya Avenue, Near Sardar Patel Colony, Naranpura, Ahmedabad, Gujarat - 380014 बनाम/ Vs. Dy.CIT Central Circle - 1(2), Ahmedabad èथायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAXPM0780G (Appellant) .. (Respondent) अपीलाथȸ ओर से /Appellant by : Shri Dipen Shukhadia, A.R. Ĥ×यथȸ कȧ ओर से/Respondent by : Shri V Nandakumar, CIT. DR Date of Hearing 06/02/2025 Date of Pronouncement 11/02/2025 O R D E R PER SHRI NARENDRA PRASAD SINHA, AM: These four appeals are filed by the assessee against the orders of the Commissioner of Income-Tax (Appeals)-11, Ahmedabad (in short ‘the CIT(A)’), dated 30.12.2022 & 29.12.2022 for the Assessment Years 2009-10, 2012-13, 2013-14 & 2014-15. As the facts and some of the grounds involved in these appeals are common and interconnected, they were heard together and are being disposed of vide this common order for the sake of convenience. IT(SS)A Nos. 21 to 24/Ahd/2023 [Jayesh Budhalal Mehta vs. DCIT] - 2 – IT(SS)A No. 21/Ahd/2024 for A.Y. 2009-10 2. The assessee has taken following grounds in this appeal: “1. The Learned CIT (A) has erred in upholding the addition made by A.O. other then incriminating material found during the course of search at the place of searched person. In fact there is no material found at the place of searched person and no material provided or communicated by the A.O. which is incriminating material on basis of which he has made such addition. The addition should be deleted since the same is not covered in the ambit of provision of section 153C. 2. The Learned CIT (A) has erred in upholding the addition made by A.O. of Rs. 1035910/- on account of disallowance of sundry creditors on the ground that the geniuses of the claim is not proved. Since the said credit is of appellant another proprietorship firm and already disclosed in the return of income it cannot be held non genuine and addition required to be deleted. 3. The Learned CIT (A) has erred in upholding the A.O.S order for disallowance the speculative loss that of Rs. 680948/- since said loss is on account of commodity trading and routed through broker and banking channel. It is prayed that same should be allowed.” 3. In the course of hearing, Shri Dipen Sukhadia, Ld. AR of the assessee did not press Ground No.1. Hence, this ground is dismissed. 4. Ground No.2 pertains to disallowance of sundry creditor of Rs.10,35,910/-. The AO had noticed that the total gross receipt of the assessee as per P&L account was Rs.6 Lacs only. However, the sundry creditor had risen during the year from Rs.6,766/- to Rs.10,35,910/-. The AO had required the assessee to explain this increase in sundry creditor. The assessee had explained that loss of Rs.10,75,144/- was incurred in another proprietorship concern IT(SS)A Nos. 21 to 24/Ahd/2023 [Jayesh Budhalal Mehta vs. DCIT] - 3 – Jainam Enterprise, which was not debited to P&L account but was shown as current liabilities in the balance sheet. As a result, the sundry creditor had increased during the year. However, the AO was not satisfied with the explanation of the assesse and the entire sundry creditor of Rs.10,35,910/- was disallowed and added to the income. The addition as made by the AO was confirmed by the Ld. CIT(A). 5. Shri Dipen Shukhadia, the Ld. AR of the assessee explained that in the balance sheet of Jayesh B. Mehta as on 30.01.2009 sundry creditor of Rs.10,35,910.18 was shown. Further, a liability of Rs.23,17,285.55 in respect of Rajesh Mehta & Co. was also appearing in the balance sheet as current liabilities. He explained that a separate P&L account and balance sheet was prepared in respect of M/s. Rajesh Mehta & Co. Further, the assessee was also having another proprietorship concern M/s. Jainam Enterprises and P&L account and balance sheet of this concern was also separately prepared. A copy of all these documents have been brought on record in the paper book filed by the assessee. The Ld. AR explained that the P&L account and balance sheet of the two proprietorship concern M/s. Jainam Enterprises and M/s Rajesh Mehta & Co. was finally amalgamated and taken into account in the personal P&L account and balance sheet of Jayesh Budhalal Mehta. The current liability of Rs.10,35,910/- appearing in the balance sheet was in respect of M/s. Jainam Enterprises and that the AO was not correct in making addition in this regard. IT(SS)A Nos. 21 to 24/Ahd/2023 [Jayesh Budhalal Mehta vs. DCIT] - 4 – 6. Per contra, Shri V Nandakumar, Ld. CIT.DR supported the orders of the lower authorities. 7. We have considered the rival submissions. It is found that the AO did not accept the explanation of the assessee for the reason that only ledger account of M/s. Jainam Enterprises was filed and the copy of ITR or contra confirmation was not filed. A copy of the ITR filed by the assessee has been brought on record in the paper book from which it is found that the assessee had disclosed loss of Rs.21,54,167/-, which is as per personal P&L account. From the materials brought on record, it is found that this loss comprised of two components i.e. loss of Rs.10,79,023.17 in respect of M/s. Rajesh Mehta & Co. and loss of Rs.10,75,144.10 in respect of M/s. Jainam Enterprises. It is, thus, found that the business activity of M/s. Jainam Enterprises was already disclosed and the loss incurred in the said proprietorship concern was also disclosed in the ITR filed by the assessee. Under the circumstances, the disallowance of sundry credit balance of Rs.10,35,910/-, which was in respect of M/s. Jainam Enterprises is not found correct. The disallowance of sundry creditor of Rs.10,35,910/- as made by the AO is, therefore, deleted. The ground taken by the assessee is allowed. 8. Next ground pertains to disallowance of speculative loss of Rs.6,80,948/-. The AO had disallowed the loss for the reason that the broker notes and other supporting evidences were not furnished by the assessee. Though, the assessee had furnished a sample of the contract notes in the course of remand proceeding, the Ld. CIT(A) had confirmed the disallowance for the reason IT(SS)A Nos. 21 to 24/Ahd/2023 [Jayesh Budhalal Mehta vs. DCIT] - 5 – that all the broker notes, copy of demat account, copy of bank statement etc. was not furnished by the assessee. The Ld. AR submitted that only sample contract notes were furnished before the AO in the course of remand proceeding for the reason that the documents were quite voluminous. He requested that another opportunity may be allowed to the assessee to produce all the documents as required by the AO. Considering the request of the assessee, this issue is set aside to the file of the Jurisdictional AO with a direction to allow another opportunity to the assessee to produce the documents as required by the AO in support of the speculative loss incurred by the assessee. The ground is allowed for statistical purposes. 9. In the result, the appeal filed by the assessee for A.Y. 2009- 10 is allowed for statistical purposes. IT(SS)A No. 22/Ahd/2023 – A.Y. 2012-13 10. The grounds taken by the assessee in this appeal are as under: “1. The Learned CIT (A) has erred in upholding the addition made by A.O. on the basis of material, other then incriminating material found during the course of search at the place of searched person. The addition made by the A.O. on the basis of AIR Information. The AIR Information does not amount to incriminating material found during the course of search. The addition should be deleted since the same is not covered in the ambit of provision of section 153C. 2. The Learned CIT (A) has erred in upholding the addition made by A.O. of Rs. 700000/- as unexplained cash credit Since the said cash re-deposited in Bank account from the cash earlier withdrawal from Bank. The Learned CIT(A) has ignored the evidences filed before him regarding cash withdrawal and deposit.” IT(SS)A Nos. 21 to 24/Ahd/2023 [Jayesh Budhalal Mehta vs. DCIT] - 6 – 11. Shri Dipen Shukhaida, Ld. AR submitted that though the proceeding was initiated in this case under Section 153C of the Income Tax Act, 1961 (in short ‘the Act’), the addition made by the AO was not based on any incriminating material. He explained that the AO had made addition of Rs.14 Lacs in respect of cash deposits in the bank account on the basis of AIR information and not on the basis of any incriminating material. On merits, the Ld. AR submitted that out of total addition of Rs.14 Lacs made by the AO, the Ld. CIT(A) had allowed relief to the extent of Rs.7 Lacs for the reason that cash deposit of Rs.7 Lacs only was made in the bank account. He explained that the addition of Rs.7 Lacs as confirmed by the AO was also not correct considering the fact that assessee had opening cash balance of Rs.2,43,695/-, which was subsequently deposited in the bank account. Further that, the withdrawals made by the assessee was subsequently re-deposited in the bank account and there was no case of any unexplained cash deposit. 12. Per contra, Shri V Nandakumar, Ld. CIT.DR submitted that in the course of search at the residence of one Shri Falguniben R. Mehta balance sheet and P&L account of M/s. Rajesh Mehta & Co. (Prop. Shri Jayesh B. Metha) was found and seized. On the basis of this material, proceeding u/s.153C of the Act was initiated in the case of the assessee. He explained that the books of accounts of the assessee were also appearing in the two computers seized from Smt. Falguniben R. Mehta and that the cash deposits made in the bank account were also recorded in the seized books of accounts. The Ld. CIT.DR submitted that though the AO had referred to AIR information regarding cash deposits, IT(SS)A Nos. 21 to 24/Ahd/2023 [Jayesh Budhalal Mehta vs. DCIT] - 7 – the fact remained that the cash deposits were also appearing in the seized accounts as available with the department. As regarding merits of the addition, the Ld. CIT.DR supported the order of the Ld. CIT(A). 13. We have considered the rival submissions. We do not find any merit in the technical ground as taken by the assessee. Though, the AO had relied upon the cash deposits as per AIR information, the fact remains that the cash deposits were also appearing in the seized books of accounts and the bank statement. Therefore, the Ground No.1 as taken by the assessee is dismissed. 14. As regarding merit of the addition, the Ld. CIT(A) has held that the actual cash deposit in the bank account was to the extent of Rs.7 Lacs only. A copy of the cash book of the assessee has been brought on record, as per which there was opening cash balance of Rs.2,43,695/-. The contention of the assessee is that this opening balance was subsequently deposited in the bank account and, therefore, deposit to that extent was explained. It is further found that cash of Rs.5 Lacs was withdrawn on 16.02.2012 and cash of Rs.5 Lacs was deposited in the bank account on 27.02.2012. The contention of the assessee is that the same amount of Rs.5 Lacs withdrawn on 16.02.2012 was re- deposited after 10 days on 27.02.2012. This fact has not been controverted by the Revenue. We are of the considered opinion that considering the availability of opening cash balance of Rs.2.43 Lacs and proximity of re-deposit of Rs.5 Lacs withdrawn earlier by the assessee, there was no case for the Revenue to treat the cash deposit of Rs.7 Lacs as unexplained. Accordingly, the IT(SS)A Nos. 21 to 24/Ahd/2023 [Jayesh Budhalal Mehta vs. DCIT] - 8 – addition of Rs.7 Lacs in respect of cash deposits in the bank account is deleted. The ground as taken by the assessee is allowed. 15. In the result, the appeal of the assessee for A.Y. 2012-13 is partly allowed. IT(SS)A No. 23/Ahd/2023 – A.Y. 2013-14 16. The grounds taken in this appeal are identical to IT(SS)A No.22/Ahd/2023, except that the amount of cash deposit in this year was to the extent of Rs.35,50,000/-. The Ld. AR, while not pressing the Ground No.-1, explained that the assessee had opening cash balance of Rs.3,74,885/-, which was subsequently deposited in the bank account. Further, there were many instances of cash sales during the year, which was appearing in the cash book and were subsequently deposited in the bank account. The Ld. AR submitted that the AO was not correct in disregarding the cash sales as well as the cash withdrawals which was subsequently re-deposited in the bank account. 17. Per contra, Ld. CIT.DR supported the orders of the lower authorities. 18. We have considered the rival submissions. A copy of the cash book has been brought on record in the paper book, from which it is found that cash sales are appearing on various dates. Further, there were cash withdrawals from the bank account and possibility of their re-deposit in the account within a reasonable period of time cannot be ruled out. These aspects were not considered by the AO while examining the source of cash IT(SS)A Nos. 21 to 24/Ahd/2023 [Jayesh Budhalal Mehta vs. DCIT] - 9 – deposits as appearing in the bank account of the assessee. We, therefore, deem it proper to set aside the matter to the file of the Jurisdictional AO with a direction to allow credit to the assessee in respect of the opening cash balance and the cash sales as appearing in the cash book. Further, re-deposit of the cash withdrawn earlier within a reasonable period of time may also be considered by the AO. The AO is also directed to allow a proper opportunity to the assessee to explain the source of cash deposits. 19. In the result, the ground no-1 is dismissed and the ground no.-2 as taken by the assessee is allowed for statistical purposes. 20. In the result, the appeal filed by the assessee for A.Y. 2013- 14 is partly allowed for statistical purposes. IT(SS)A No. 24/Ahd/2023 – A.Y. 2014-15 21. The grounds taken in this appear are as under: “1. The Learned CIT (A) has erred in upholding the addition of Rs. 275000/- as unexplained investment u/s 69. 2. The Learned CIT (A) has erred in Not allowing the loss of Rs. 2612817/- to be carried forward.” 22. First ground pertains to addition of Rs.2,75,000/- in respect of unexplained investment. The assessee had shown purchase of gold bullion of Rs.2,75,000/- from Pruthvi Enterprise on 02.08.2013, the payment of which was made by cheque on 03.10.2013 i.e. after the date of search. The AO had treated this investment as unexplained only for the reason that the payment IT(SS)A Nos. 21 to 24/Ahd/2023 [Jayesh Budhalal Mehta vs. DCIT] - 10 – for purchase was made after the date of search, and the addition was upheld by the Ld. CIT(A). The Ld. AR explained that when the payment of purchase of gold bullion was made through cheque, there was no question of treating the same as unexplained investment. On the other hand, the Ld. CIT.DR supported the orders of the lower authorities. 23. We have considered the rival submissions. The Revenue has not disputed the fact that the payment for purchase of gold bullion of Rs.2,75,000/- was made by the assessee through cheque on 03.10.2013. Merely because the payment was made after the gap of two months, the investment cannot be treated as unexplained. In fact, no search proceeding was conducted in the case of the assessee and the present assessment was in pursuance of documents found at the premises of another person and the assessment was completed u/s.153C of the Act. Considering the fact that the investment in gold bullion was duly explained and the payment was made through cheque, there was no reason to treat the investment as unexplained. Accordingly, the addition of Rs.2,75,000/- made by the AO u/s.69 of the Act is deleted and the ground is allowed. 24. Next ground pertains to not allowing loss of Rs.26,12,817/- to be carried forward. The AO found that the assessee had filed only unaudited balance sheet and P&L account of Rajesh Mehta & Co. and Jayesh B. Metha in support of commodity trading loss of Rs.16,99,970/- and Rs.11,96,949/- respectively. It was further noticed that the gross receipt was below the limit prescribed u/s.44AB of the Act and the due date of filing of return was 01.07.2014. Since, the assessee did not file his return within the IT(SS)A Nos. 21 to 24/Ahd/2023 [Jayesh Budhalal Mehta vs. DCIT] - 11 – due date, the loss of Rs.26,12,817/- was not allowed to be carried forward. 25. Shri Dipen Shukhadia, Ld. AR submitted that the assessee had filed the return of income on 26.09.2014, which was within due date as the assessee was having other transactions and his accounts were liable for tax audit. According to the Ld. AR, the return was filed within the due date and, therefore, the loss was eligible for carry forward. On the other hand, the Ld. CIT.DR supported the orders of the lower authorities. 26. We have considered the rival submissions. A copy of the ITR for A.Y. 2014-15 has been brought on record, which was e- filed on 26.09.2014. It is found therefrom that the assessee had categorically stated in the said return that the assessee was liable for audit u/s.44AB of the Act. However, it was also mentioned in the ITR that the accounts were not audited by the Accountant till the date of filing of the ITR. The date of audit as appearing in the ITR was also left blank. It is, thus, found that the loss as claimed by the assessee in the ITR was not on the basis of audit report and that the audit report was neither prepared nor filed before the due date. Considering this fact, the AO had rightly held that the loss of Rs.26,12,817/- on the basis of unaudited account was not liable for carry forward. The assessee has also not stated as to what was the total turnover and how the accounts were liable for audit. The fact remains that the neither the books of accounts were audited nor the audit report was filed by the assessee. Since, the correctness and completeness of the accounts as well as the genuineness of the loss was under doubt, the AO had rightly disallowed the carry forward of loss, which was IT(SS)A Nos. 21 to 24/Ahd/2023 [Jayesh Budhalal Mehta vs. DCIT] - 12 – rightly upheld by the Ld. CIT(A). Accordingly, the Revenue had correctly denied the carry forward of the loss and the ground taken by the assessee is dismissed. 27. In the result, appeal filed by the assessee for A.Y. 2014-15 is partly allowed. 28. In the combined result, appeals filed by the assessee for A.Y. 2009-10 & 2013-14 are allowed for statistical purposes and appeals of the assessee for A.Y. 2012-13 & 2014-15 are partly allowed. This Order pronounced on 11/02/2025 Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 11/02/2025 S. K. SINHA True Copy आदेश कȧ ĤǓतͧलͪप अĒेͪषत/Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant 2. Ĥ×यथȸ / The Respondent. 3. संबंͬधत आयकर आयुÈत / Concerned CIT 4. आयकर आयुÈत(अपील) / The CIT(A)- 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड[ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलȣय अͬधकरण, अहमदाबाद / ITAT, Ahmedabad "