LATE SHRI MANOJKUMAR M. MISHRA ,BHAYANDER (EAST) THANE V. ITO, WARD 2(5), THANE, WAGLE INDUSTRIAL ESTATE, THANE (WEST)

ITA 412/MUM/2025

AI Insights

The case involves an appeal by the Late Shri Manojkumar M. Mishra against an order passed by the National Faceless Appeal Centre, Delhi / CIT(A) Mumbai, which had made additions under section 69A of the Income Tax Act, 1961, treating cash deposits during the demonetisation period as unexplained money. The assessee, engaged in the business of imitation jewellery, had filed his income under the presumptive scheme of taxation, declaring income under section 44AD. The Tribunal examined the submissions, including bank and cash statements, and found that the deposits were from declared turnover. The Tribunal's decision was influenced by several precedents where similar issues were adjudicated, leading to the conclusion that the additions made were uncalled for.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 33562 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-03-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Other Referred Cases: Land Acquisition Collector Vs. Mst. Katiji & Ors., Mr. Imran Ibrahim Badshah, CIT v/s Surinder Pal Anand, Virender Kumar v/s ITO, Shri Thomas Eapen v/s ITO, Kokkarne Prabhakara v/s ITO, Pradeep Jain v/s ITO, Kiran Vallabhai Ahir v/s ITO, ACIT v/s Aggarwal Construction Co.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KIRAN UNAVEKAR
• Assessee Lawyers: RAJ KUMAR SINGH
• Keywords: Condonation of delay; Set aside; Business income; Bogus
• Section: 250; 68; 44AD; 69A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN, (JUDICIAL MEMBER) I.T.A. No.412/Mum/2025 Assessment Year: 2017-18 Late Shri Manojkumar M. Mishra D-202, 1st Wing, Maa Vindhyavasini, Kasturi Park, Vavghar Road, Bhayander (E), Thane - 401105 PAN – AEYPM5134M Vs. ITO, Ward 2(5) Ashar IT Park, 6th Floor, Road, No. 16Z, Wagle Industrial Estate, Thane (W) – 400604. (Appellant) (Respondent) Appellant by Shri Rajkumar Singh Respondent by Shri Kiran Unavekar, Sr. DR Date of Hearing 11.03.2025 Date of Pronouncement 12.03.2025 ORDER Per: SHRI. SANDEEP GOSAIN, J.M.: The present appeal has been filed by the assessee challenging the impugned order 14.06.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi / CIT(A) Mumbai, for the A.Y 2017-18. 2. At the very outset, I noticed that there is delay in filing the present appeal. In this regard, assessee has filed an application seeking condonation of delay which is supported 2 ITA No. 412/Mum/2025 Late Shri Manojkumar M. Mishra, Mumbai. by a detailed affidavit which is at paper book page number 4 to 8 3. After having heard the counsels for both the parties and perusing the material placed on record. I found that in para No. 10 of the affidavit it has been stated that Shri Rajkumar Singh, Tax Advisor of the assessee had undergone ‘open heart bypass surgery’ and since he was recuperating and was not doing any professional work as per the advice of the doctors till the mid of January 2025. Therefore, on account of this fact, the delay occurred in filing the present appeal. The affidavit filed by the assessee went unrebutted and nothing contrary has been placed on record by the department. Therefore, considering factual position and also keeping in view the principles laid down by Hon’ble Supreme Court in the case of Land Acquisition Collector Vs. Mst. Katiji & Ors., [1987] AIR 1353 (SC) wherein it has been held that where substantial justice is pitted against technicalities of none deliberate delay, then in that eventuality substantial justice is to be preferred, therefore I condone the delay in filing the appeal and consequently, the appeal is admitted to be heard on merits 4. The only ground taken by the assessee is with regard to challenging the order of additions made by AO u/s 69A of the act of Rs. 19,99,500/- thereby treating the cash deposited in the bank accounts during the demonetisation period as unexplained money. 3 ITA No. 412/Mum/2025 Late Shri Manojkumar M. Mishra, Mumbai. 5. I have heard the counsels for both the parties, perused the material placed on record, judgement cited before me and also the orders passed by the revenue authorities. 6. From the records, I noticed that late assessee being an individual, during his lifetime was engaged and carrying out the trading business of imitation jewellery in the name of his proprietary firm, M/s Poonam Jewellers and was filing the return under the presumptive scheme of taxation, thereby declaring income u/s 44AD of the income tax act for all the assessment years i.e prior to and after the year under consideration and the said income was accepted by the department. 7. As per the submissions of the assessee, the substantial part of the turnover was in cash which was being regularly deposited in the bank accounts maintained by the assessee . In this regard the details and documents including the bank and cash statements of the year under consideration were filed during the course of assessment. 8. During the assessment proceedings, the assessee has categorically submitted that the cash amount deposited prior to demonetisation period, during the demonetisation period and post-demonetisation period was out of the turnover declared and profit thereon u/s 44AD of the act, however, the additions were made by the AO by holding that assessee could not explain the nature and source of the banned notes and therefore treated the same as unexplained money of the assessee. 4 ITA No. 412/Mum/2025 Late Shri Manojkumar M. Mishra, Mumbai. 9. The assessee has placed on record a detailed chart containing details of turnover and income declared u/s 44AD of the act and also statement containing the date wise details of cash deposited in bank accounts between 01.01.2017 to 31.03.2017, the said details substantiate the stand taken by the assessee that the amount deposited in the bank account was out of his turnover. The contents of the chart are reproduced herein below: Cash deposited in bank accounts after 31st December, 2016 (New currency notes) 1. In bank A/c No. ...66141 with Punjab National Bank 5 ITA No. 412/Mum/2025 Late Shri Manojkumar M. Mishra, Mumbai. 10. It would not be out of place to mention here that turnover declared by the assessee in the VAT returns filed by him for the year under consideration has also been accepted by VAT department, and even the turnover and income declared by the assessee u/s 44AD for the year under consideration has also not been disputed by the department. Since the cash amount deposited by the assessee in his bank account during demonetisation period was part and out of declared turnover on which profit of more than 8% has already been offered to tax in the return of income filed. Therefore, the entire additions made u/s 69A are uncalled for and hence directed to be deleted. For 6 ITA No. 412/Mum/2025 Late Shri Manojkumar M. Mishra, Mumbai. reaching to the above conclusion, reliance is being placed upon the following decisions: i) Mr. Imran Ibrahim Badshah (ITA No.1259/M/2024 order dated 09/12/2024 passed by Hon'ble \"SMC\" Bench [copy enclosed]): In this case assessee, Mr. Imran Ibrahim Badshah engaged in imitation jewelry usiness on very small scale had not filed the return of income for A.Y.2017-18. His case based on the cash deposited in his bank accounts at Rs. 16,84,100/-during demonetization period was reopened u/s.147/148. In the reassessment proceeding assessee submitted his computation of total income declaring turnover and income u/s.44AD at Rs. 1,08,38,664/- and Rs.8,67,094/-. However, there was total deposits in bank accounts of assessee was Rs. 1,25,20,466/ and for difference of Rs. 16,81,802/- between the total credits in bank accounts and declared turnover [1,25,20,466 1,08,38,664) assessee submitted that same was out of earlier year's income and family savings. However, the Id. AO treated the above stated difference amount of Rs. 16,81,802/- as unexplained money of assesse u/s.69A of the Act. The ld. CIT (A) confirmed the addition On further appeal the Hon'ble ITAT \"SMC\" Bench, Mumbai while setting aside the action of both the lower income tax Authorities directed the ld. AO to compute the addition @8% of Rs. 16,81,802/-. Here your honour will appreciate that in case of your appellant his contention is that cash amount deposited in his bank accounts at Rs. 19,99,500/- during demonetization period since itself is part and out of declared turnover on which profit of more than 8% already stands offered to tax in the return of income filed therefore, in his case entire addition made u/s.69A at Rs. 19,99,500/- has to be deleted. ii) CIT v/s Surinder Pal Anand, Surinder Pal Anand, [20111 242 CTR 0061 (P&H HC): In the above judgement it has been held by Hon'ble High Court that assessment being made under s. 44AD, the assessee was not under obligation to explain individual entry of cash deposit in the bank unless such entry had no nexus with the gross receipts and therefore no addition under s. 68 was called for. 7 ITA No. 412/Mum/2025 Late Shri Manojkumar M. Mishra, Mumbai. ii) Virender Kumar v/s ITO, ITA no.1100/Jp/2019, order dated 10.03.2021: In this judgement it has been held by hon'ble Tribunal that once under the special provision, exemption from maintaining of books of account has been provided and presumptive tax @8% of the gross receipt itself is the basis for determining the taxable income, the assessee was not under obligation to explain individual entry of cash deposit in the bank unless such entry had not nexus with the gross receipts. The stand of the assessee before Commissioner of Income Tax (Appeals) and the ITAT that the said mount of Rs. 14,95,300/- was on account of business receipts had been accepted. Learned counsel for the appellant with reference any material on record, could not show that the cash deposits amounting to Rs. 14,95,300/- were unexplained or undisclosed income of the assessee. tii) Shri Thomas Eapen v/s ITO, ITA no.451/Coch/2019, order dated 19.11.2019; The hon'ble Tribunal while pronouncing the judgement has held that the ld. CIT(A) has held that the provision of section 68 of the Act are not applicable to the case of the assessee. According to the CIT(A), the assessing officer gave a finding that the assessee was not maintaining books of account and therefore provisions of section 68 of the Act cannot be applied to tax the unexplained deposits in the Bank. However, the same can be taxed under section 69A of the Act. According to the CIT(A), quoting of wrong section is not fatal to the addition made and hence, it was held that the unexplained deposits in the bank account are assessable under section 69A of the Act Further, it is fact on record that the assessee had not maintained books of account that is why he opted for 8% income as per section 44AD of the Act. The section also does not put obligation on the assessee to maintain the books of account, more so in view of the fact that his income has been assessed as per section 44AD of the Act. 10) Kokkarne Prabhakara v/s ITO, ITA no.1239/Bang/2019, order dated 11.09.2020; The similar issue also came for consideration before hon'ble Cochin Bench of the tribunal in case of Thomo sEapen in ITA No 451/Coch/2019 wherein it has been held that since scheme of 8 ITA No. 412/Mum/2025 Late Shri Manojkumar M. Mishra, Mumbai. presumptive taxation has been found in order to avoid long drawn crosses of assessment in cases of small traders or in cases of those businesses where incomes are almost are static quantum of all businesses assessing officer could have made addition under section 69A once he had carved out case out of glitches of provisions of section 44AD-In view of above decision once assessment of assessee was completed under section 44AD, there cannot be any application of section 68/69A. Being so court direct the AO to delete the addition made by the AO and confirmed by the CIT(A)- Assessee's ground allowed. v) Pradeep Jain v/s ITO, ITA no.8001/Del./2018, order dated 04.06.2019; Since assessee is involved in small business activity and filed return of income under presumptive provisions under section 44AD of the I.T. Act, there was no justification to consider the sales of assessee to be bogus or to make addition of cash in hand as per details submitted by the assessee because A.O. did not bring any sufficient evidence on record to justify the, addition. I, therefore, do not find any justification to sustain the addition. I, accordingly, set aside the Orders of the authorities below and delete the entire addition. vi) Kiran Vallabhai Ahir v/s ITO, ITA no.65/Srt./2017, order dated 10.02.2020; The assessee has not maintained any books of accounts, hence in such situation only net profit as per provisions of section 44AD of the Act is required to be estimated as net profit. vii) ACIT v/s Aggarwal Construction Co., [2007] 106 ITD 129 (Chd. Trib.); Since the assessee has not maintained any books of account, hence, in such situation only net profit as per provisions of section 44AD of the Act is required to be estimated as net profit and not entire turnover or cash deposits reflected in the bank's account. Therefore, following the ratio laid down in case of CIT v/s Pradip Shantilal Patel (2014), 42 taxmann. com 002 (Guj.) wherein it was held that where the assessee admitted that the cash deposits pertains to his retail business but details and nature of business were not forthcoming from the record, considering the total turnover of the assessee, net income to be 9 ITA No. 412/Mum/2025 Late Shri Manojkumar M. Mishra, Mumbai. determined u/s 44AD of the Act, the AO is directed to estimate net profit @ 8% of the total turnover of Rs.53,32,345 being cash deposit in the bank account. Accordingly, ground 1, 2, 3 of the appeal are partly allowed. In the result, appeal of the assessee is partly allowed. iii) Om Prakash Karnani v/s ACIT, [2021] TaxPub (DT) 841 (Jp. Trib.): It cannot be argued that statute has provided a rate which is not reasonable. Further, having regard to provisions of s. 44AD, which is overriding, it is not possible for the Revenue to argue that profit computed as per the section is not profit computed \"in accordance with provisions of this Act\" or that the legislature was unaware of provision of ss. 68, 69, 269SS, 269T, 140(3) etc., in the enactment of s. 44AD. Thus, reading entire scheme of the Act one has to hold that profit computed as per s. 44AD of the Act by application of flat rate is one recognized method of computation of total income or part of total income. 10. Respectfully following the above judicial precedents of the various Hon’ble High Court & Coordinate Bench, I allow the grounds of appeal raised by the assessee. It is ordered accordingly. 11. In the net result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 12/03/2025 Sd/- (SANDEEP GOSAIN) Judicial Member Mumbai: Dated: 12/03/2025 KRK, Sr PS 10 ITA No. 412/Mum/2025 Late Shri Manojkumar M. Mishra, Mumbai. Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt. Registrar) ITAT, Mumbai "