KAMLESHBHAI DWARKADAS PATEL,SURAT V. ITO, WARD 3(2)(1), SURAT

ITA 1208/SRT/2024

AI Insights

The case involves Kamleshbhai Dwarkadas Patel, who did not file his income tax return for the Assessment Year 2011-12 despite having significant transactions with the Multiple Commodity Exchange (MCX). The AO, after multiple non-responses from the assessee, estimated the income at 1% of the total transactions amounting to Rs.20,85,97,290 and initiated penalty proceedings. The CIT(A) upheld this addition after the assessee failed to provide satisfactory explanations or evidence to substantiate his claims of minimal earnings from these transactions. The Tribunal, while agreeing with the lower authorities on the non-cooperation and the unexplained nature of the income, reduced the addition percentage from 1% to 0.75% of the total transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 102937 (ITAT-SURAT)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MUKESH JAIN
• Assessee Lawyers: SURESH K. KABRA
• Keywords: Set aside; Transactions in derivatives
• Section: 147; 148; 144; 142(1); 250; 271(1)(c)

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.1208/SRT/2024 Assessment Year: (2011-12) (Physical court hearing) Kamleshbhai Dwarkadas Patel, 57-58, Prabhunagar Soc - 2, Ved Darwaja, Katargam, Surat - 395 004 Vs. The ITO, Ward - 3(2)(1), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: APBPP0034K (Appellant) (Respondent) Appellant by Shri Suresh K. Kabra, CA Respondent by Shri Mukesh Jain, Sr. DR Date of Hearing 18/02/2025 Date of Pronouncement 17/04/2025 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 19.09.2024 by the National Faceless Appeal Centre, Delhi /Commissioner of Income-tax (Appeals) [in short ‘CIT(A)’] for the Assessment Year (AY) 2011-12. 2. Grounds of appeal raised by the assessee are as under: “1. The Ld. CIT(A), NFAC has erred and was not just and proper on the facts of the case and in law in confirming the addition of Rs.20,85,972/- as unexplained being 1% total MCX transaction of Rs.20,85,97,290/-. 3. Prayer 3.1 The additions made by Ld. Assessing Officer and confirmed by the Ld. CIT(A) may kindly deleted. 3.2 Personal hearing may be granted. 3.3 Any other relief that your honours may deem fit may be granted. 2 ITA No.1208/SRT/2024/AY.11-12 Kamleshbhai D Patel 4. The assessee craves leave to add, amend, modify alter or delete any of the grounds at the time of hearing.” 3. Facts of the case in brief are that the assessee had not filed his return of income for the year under consideration. As per AIR information in the ITD system, the assessee had made transactions of Rs.20,85,97,290/- with Multiple Commodity Exchange (MCX) for the subject AY.2011-12. The Assessing Officer (in short, ‘AO’) issued letters seeking information of the above transactions for the year. The assessee did not respond to the said letter. Therefore, the case was re-opened u/s 147 of the Act and notice u/s 148 was issued on 27.03.2018. Since the assessee did not file return in response to notice u/s 148, the notice u/s 142(1) was issued to furnish return of income and various details. This was also not responded to by the assessee. Thereafter, AO has issued various notices and show cause notice, which were not replied to by the assessee. The AO issued letter asking assessee as to why assessment proceeding should not be completed ex-parte u/s 144 of the Act on the basis of materials available on record. The assessee again failed to appear before AO. Hence, AO treated 1% of the total transaction of Rs.20,85,97,290/- as income of the assessee and determined total income at Rs.20,85,970/- u/s 144 r.w.s. 147 of the Act. He also initiated penalty proceedings u/s 271(1)(c) of the Act. 4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The CIT(A) stated that the only issue involved the addition of Rs.20,85,972/-, being percentage of derivative transaction turnover considered as unexplained income. The submission of the assessee that it had earned Rs.15,865/- only from commodity derivatives and forward contract in the recognized stock exchange was forwarded 3 ITA No.1208/SRT/2024/AY.11-12 Kamleshbhai D Patel to AO for remand report. The CIT(A) extracted the remand report of AO on 22.07.2024, which are at pages 4 to 7 of the appellate order. In response to the remand report, the appellant had filed rejoinder dated 29.07.2024, which is at pages 7 to 8 of the appellate order. The CIT(A) observed that the appellant had claimed to have earned only Rs.15,865/- from the transactions in derivatives, commodity derivates and forward contract in recognized stock exchange. The AO estimated the profit @ 1% of the total transaction whereas the appellant argued that he had earned only Rs.15,865/- from commodity derivatives and forward contract. Further, the CIT(A) noticed that there is total credit of Rs.8,65,901/- in the bank account including cash deposit of Rs.3,07,850/-. The appellant failed to prove the genuineness of the cash credits and other credits in the bank account with supporting documents. The CIT(A) observed that the onus was on appellant to rebut with cogent evidence the facts and findings in the assessment order. The appellant failed to prove the genuineness of the cash credit and other credits in the bank account with supporting documents. Hence, the CIT(A) upheld the addition made by AO and dismissed the appeal. 5. Aggrieved by the order of the CIT(A), the assessee filed appeal before the CIT(A). The learned Authorized Representative (ld. AR) of the assessee submitted that the assessee made transaction in derivatives, commodity derivatives and forward contract in recognized stock exchange and incurred loss. He submitted that the assessee earned profit of Rs.15,865/- only and therefore, he did not find any return of income. Besides the above submission, no explanations or details were 4 ITA No.1208/SRT/2024/AY.11-12 Kamleshbhai D Patel furnished by the appellant before us. The ld. AR requested to set aside the order of CIT(A) and restore the matter to AO for fresh adjudication. 6. The learned Senior Departmental Representative (ld. SR. DR) for the revenue supported the order of lower authorities. He submitted that the AO has given four notices and show cause notice which is clear from page 2 of the assessment order, which have not been properly replied to. Hence, the assessee has been negligent and non-cooperative due to which the addition made by the AO was rightly confirmed by CIT(A). The CIT(A) has clearly observed that the assessee failed to prove or rebut with cogent evidence, the findings of the AO. He, therefore, requested that the order of the CIT(A) may be upheld. 7. We have heard both the parties and perused the material available on record. It is an undisputed fact that the assessee has been totally non-cooperative to the statutory notices and the show cause notice issued to him by the AO. The AO has passed the order u/s 144 of the Act after observing that assessee chose not to file any reply till passing of the order. The CIT(A) has forwarded the submission of the assessee to the AO, who submitted a remand report. The CIT(A) has called for the rejoinder from the assessee in respect of remand report. He has considered remand report of AO and found that the assessee has no objection with the turnover of Rs.20,85,97,290/-. He observed that AO has estimated profit of the assessee at 1% of the total transactions whereas assessee argued that he had earned profit of Rs.15,865/- only. The CIT(A) also found that there was cash deposit of Rs.3,07,850/- and total credit of Rs.8,65,901/-. The appellant has not explained the nature and 5 ITA No.1208/SRT/2024/AY.11-12 Kamleshbhai D Patel source of the credits / cash deposits in the bank account. Therefore, he observed that appellant was having unexplained income, which was not offered to tax. He further stated that the appellant has not filed any evidence to rebut the findings of the AO. Hence, he confirmed addition of AO being 1% of the total transactions, i.e., Rs.20,85,972/-. The ld. AR has not filed any explanation or supporting details to controvert the concurrent finding of facts by the AO and CIT(A). However, in the interest of justice, we restrict the addition to 0.75% of the total transaction instead of 1%, estimated by the AO. Accordingly, ground of appeal is partly allowed. 8. In the result, appeal of the assessee is partly allowed. Order is pronounced on 17/04/2025 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 17/04/2025 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat "