MR. MOHAMMAD ARIF MOHAMMAD IDRIS ANSARI,AHMEDABAD V. .THE ITO, WARD-5(3)(4), AHMEDABAD

ITA 1400/AHD/2024

AI Insights

The case revolves around the appeal by Mr. Mohammad Arif Mohammad Idris Ansari against the order of the Commissioner of Income Tax (Appeals) which confirmed the additions made by the AO regarding unexplained cash deposits and credit entries in the assessee's bank account. The AO had added a sum of Rs. 26,35,500 as unexplained cash deposit and Rs. 2,00,000 as unexplained credit entries to the assessee's income for the Assessment Year 2014-15. The assessee contended that these transactions were related to his employer's trading activities and were conducted without his knowledge. The Tribunal, considering the precedents set in earlier assessment years where no additions were made under similar circumstances, ruled in favor of the assessee.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 25813 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V.K. MANGLA
• Assessee Lawyers: PRADEEP TULSIAN
• Keywords: Unexplained cash credit; Rule of consistency; Reason to believe
• Section: 148; 143(3); 250; 271(1)(c); 153; 69A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.1400/Ahd/2024 (Assessment Year: 2014-15) Mr. Mohammad Arif Mohammad Idris Ansari, 167, Dosham Khan Chal Miltanagar, Bhairavnath Isanpur Road, Gujarat-380028 Vs. Income Tax Officer, Ward-5(3)(4), Ahmedabad [PAN No.AKWPA7354F] (Appellant) .. (Respondent) Appellant by : Shri Pradeep Tulsian, A.R. Respondent by: Shri V. K. Mangla, Sr. D.R. Date of Hearing 17.12.2024 Date of Pronouncement 19.12.2024 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre, (in short “NFAC”), Delhi vide order dated 17.05.2024 passed for A.Y. 2014-15. 2. The Assessee has taken the following grounds of appeal:- “Without following the procedure u/s 148 (1) The AO has not followed the procedure prescribed under section 148 to 153 and others as given in the Income Tax Act and hence the whole proceeding is bad in law. (2) The reason to believe based on which the case was reopened is Cash Deposit in account as per the reasons for reopening of the case. According to the various judgments, cash deposit cannot be a reason to believe for escape of taxable income. Therefore, AO and PCIT both have failed to carry out any independent enquiry before ITA No. 1400/Ahd/2024 Mr. Mohammad Arif Mohammad Idris Ansari vs. ITO Asst.Year –2014-15 - 2– giving notice u/s 148. Therefore, the notice issued itself is bad in law and should be set-aside. Cash Deposit by the employer: (3) Assessee was working in VLB Management Consultants Private Limited (CIN -U74140GJ2010PTC059855), Ahmedabad director, Shri Parmod Omprakash Bhootra during the said assessment year which was having business of trading in shares and commodities. Employer of assessee, Mr. Pramod Omprakash Bhutra, has used the bank account of the assessee. He deposited cash in the bank account of assessee and undertook various transaction of trading of shares and commodities in his name without the knowledge of the assessee. The bank account of assessee has been misused for the transactions of the employer. The assessee has informed the said facts to the AO vide its letter dated 05.03.2019. Assessee has provided the PAN No of the director Shri Parmod Bhootra to AO. But AO fails to inquire about the facts from him. Therefore, the Assessee has properly disclosed the source of the cash deposited in his account, which cannot be treated as his income. Alternate: Cash Deposit which was received from Clients: (4) Even if the above argument is not at all acceptable, then it is very much clear from bank account and account statements of brokers given during the hearing that the amount was used for the shares/derivatives/commodities trading activity, therefore, which cash deposited in the bank account might have been received from various clients (customers) by the employer against the loss suffered by the assessee in the shares trading. The details of the loss incurred from various share/commodity/derivative trading were already submitted to the AO. Therefore, the AO has made a mistake which is apparent on record, by not allowing the set off of the loss incurred by the assessee. (5) Therefore, even cash was received from various persons by employer, the cash was deposited in bank account of assessee without the knowledge of assessee and transactions of trading in shares and commodities were done on behalf of other persons. Applicability of Section 44AD: (6) Even if these transactions are considered as the transactions of assessee himself, the set off of the business loss should be allowed to the assessee as per the provisions of the Income Tax Act and should be taxed at most 8% of the gross receipt (i.e. 2635500 at 8% = 210840/-) as per the provisions of the Income Tax Act (Section 44AD). Credit Entry of Rs. 200000/-: (7) The credit entry of Rs. 200000/- is not known to the assessee, moreover on going through the bank statement it is observed that the said amount was earlier paid to someone in parts was refunded, which is not remember by the assessee. Therefore, ITA No. 1400/Ahd/2024 Mr. Mohammad Arif Mohammad Idris Ansari vs. ITO Asst.Year –2014-15 - 3– since it is just a refund of his own amount (refund of earlier amount paid) the same cannot be treated as income as unexplained. Fraud by Employer (8) The same issue has been arisen in AY 2011-12. The details were asked for from assessee and assessee has stated that all share transactions were undertaken by Mr. Pramod Boothra and the same has happened with other person and FIR in this regard has already been filed. It was found in AY 2011-12 that assessee has nothing to do with these transactions and assessee was considered as innocent. (9) The whole assessment proceeding is with bad intention and based on the wrong presumptions and assumptions. (10) That on the facts and in the circumstances of the case the learned Assessing Officer has grossly erred in making addition of Rs. 28,35,500/-. (11) Being the fraud by the employer and transaction undertaken by employer in name of assessee without his knowledge, assessee has not concealed any income, it is the learned AO who has treated the Cash deposit as income, no penalty can be levied u/s 271(1)(c) and penalty proceedings initiated by AO should be dropped. (12) Aggrieved with the Assessment Order, the assessee has filed an appeal before CIT(A) vide appeal No. CIT(A), Ahmedabad - 5/10398/2019-20 which has been dismissed by the CIT(A) and order u/s 250 has been passed by confirming the additions. The learned CIT(A) dismissed the appeal stated that the assessee did not submit the copy of FIR filed against Mr. Pramod Omprakash Bhutra, who used the bank account of the assessee and undertook various transactions related of trading of shares. (13) Honorable CIT(A) has not decided the matter on all the grounds and has dismissed the appeal only on the ground that the assessee has not submitted the copy of the FIR. (14) The Honorable CIT(A) has failed to consider that the department while passing the Assessment Order for the AY 2011-12 (The copy of which was submitted before CIT(A) with the written submission) and AY 2013-14, the department has not made any addition considering the FIR and other facts of the case. The copy of the both Assessment Order along with the internal note and FIR are attached herewith for ready reference. Therefore, when in the past no additions were made where the facts are same, the addition made during the year should have been deleted. (15) The appellant craves leave to add alter modify or amend any ground on or before the date of hearing.” ITA No. 1400/Ahd/2024 Mr. Mohammad Arif Mohammad Idris Ansari vs. ITO Asst.Year –2014-15 - 4– 3. The brief facts of the case are that the assessee had failed to file an Income Tax Return for the Assessment Year (AY) 2014-15 within the due date. In response to a notice under Section 148 of the Income Tax Act, 1961, the assessee filed the return on 08.04.2019, declaring a total income of Rs. 1,93,880/-. The Assessing Officer (AO) completed the assessment by adding an unexplained cash deposit of Rs. 26,35,500/- under Section 69A and credit entries amounting to Rs. 2,00,000/- as unexplained credit entries to the assessee’s total income. The AO's actions were based on the detection of a cash deposit of Rs. 26,35,500/- in the assessee’s ICICI savings bank account during the year in question. During the course of assessment proceedings, the assessee submitted various supporting documents along with a declaration statement on 12.09.2019. Despite these submissions, the AO proceeded to add the cash deposit of Rs. 26,35,500/- as unexplained under Section 69A of the Act and included Rs. 2,00,000/- as unexplained credit entries in the assessee’s income. 4. The assessee contested these additions before Ld. CIT(Appeals), stating that the AO had not provided an appropriate opportunity to explain the matter and that the submissions made during the hearing were not considered properly. The assessee also submitted that as an individual employed with VLB Management Consultants Private Limited, an entity involved in trading shares and commodities, he had no knowledge of the deposits made into his bank account. The assessee claimed that his employer, Mr. Pramod Omprakash Bhutra, had used the assessee’s bank account for cash deposits related to trading activities. The assessee further submitted before Ld. CIT(Appeals) that these cash deposits might have come from ITA No. 1400/Ahd/2024 Mr. Mohammad Arif Mohammad Idris Ansari vs. ITO Asst.Year –2014-15 - 5– various clients of the employer and were made without the assessee’s knowledge. Additionally, the assessee stated that the credit entry of Rs. 2,00,000/- was unknown to him. The Commissioner (Appeals) found the submissions of the assessee to be untenable. As per Ld. CIT(Appeals), the assessee’s claim that his employer, Mr. Pramod Omprakash Bhutra, used his bank account for these transactions was not substantiated by adequate evidence. Although the assessee mentioned that an FIR had been filed regarding this matter, the assessee failed to provide a copy of the FIR to support his claim. Furthermore, the assessee did not provide any documentary evidence to substantiate his claim that the cash deposits and credit entries were legitimate. As a result of the lack of sufficient evidence and proper explanation regarding the unexplained cash deposits and credit entries, the Commissioner (Appeals) confirmed the addition made by the AO under Section 69A of the Income Tax Act. 5. The assessee is in appeal before us against the order passed by Ld. CIT(Appeals). 6. Before us, the Counsel for the assessee submitted that the assessee had submitted all supporting documents along with declaration statement on 12.09.2019 giving details about the fraud which happened with him to the Assessing Officer. Further, earlier, the assessee had also submitted letter dated 09.04.2019 with the Assessing Officer giving details of the fraud committed with the assessee. The Counsel for the assessee submitted that the entire assessment proceedings under Section 143(3) r.w.s. 147 of the Act was based on surmises and conjectures and against the principles of natural justice. The Counsel for the assessee submitted that Ld. CIT(A) dismissed ITA No. 1400/Ahd/2024 Mr. Mohammad Arif Mohammad Idris Ansari vs. ITO Asst.Year –2014-15 - 6– the appeal of the assessee only on the ground that the assessee had not submitted copy of FIR, even though the assessee had submitted before Ld. CIT(A) that the issue of cash deposit was first raised in A.Y. 2011-12 and again in A.Y. 2013-14, wherein the details regarding cash deposit and other transactions were asked for by the Assessing Officer, from the assessee. In replies to the Assessing Officer, the assessee had submitted that the all transactions in the aforesaid bank account undertaken by Mr. Pramod Omprakash Bhutra, the employer of the assessee and not only the assessee, but other employees working with Mr. Bhutra were also subject to similar fraudulent activities in their bank accounts. During the assessment for A.Y. 2011-12 and A.Y. 2013-14, on the basis of details submitted by the assessee, the Assessing Officer found that the assessee had nothing to do with these transactions and the hence, no additions were made in the hands of the assessee. Accordingly, the Counsel for the assessee submitted that even on the principle of consistency, no additions were called for, during the impugned assessment year as well. 7. In response, Ld. D.R. placed reliance on the observations made by the Assessing Officer and CIT(A) in their respective orders. 8. We have heard the rival contentions and perused the material on record. 9. On going through the case records, we observe that the assessee has furnished copy of FIR filed by the assessee against his employer. Further, we observe that the Ld. CIT(A) has dismissed the appeal of the assessee, primarily on the ground that the assessee has not furnished copy of FIR ITA No. 1400/Ahd/2024 Mr. Mohammad Arif Mohammad Idris Ansari vs. ITO Asst.Year –2014-15 - 7– claimed to have been filed by him. Further, on perusal of the office note for A.Y. 2011-12, wherein, similar queries were raised, no additions on similar set of facts were made in the hands of the assessee. Accordingly, in light of the above facts we are of the considered view that it is a fit case that no additions are liable to be sustained in the hands of the assessee, since with respect to similar set of facts, in the assessment proceedings initiated for earlier assessment years, no additions were made by the Assessing Officer, keeping into consideration, assessee’s set of facts. 10. In the result, the appeal of the assessee is allowed. This Order is pronounced in the Open Court on 19/12/2024 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 19/12/2024 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 18.12.2024(Half part dictated on dragon software and half dictated to p.s.) 2. Date on which the typed draft is placed before the Dictating Member 18.12.2024 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 18.12.2024 5. Date on which the fair order is placed before the Dictating Member for pronouncement 19.12.2024 6. Date on which the fair order comes back to the Sr.P.S./P.S 19.12.2024 7. Date on which the file goes to the Bench Clerk 19.12.2024 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order…………………………………… "