MUKESHKUMAR PATEL(INDIVIDUAL),AHMEDABAD V. THE INCOME TAX OFFICER,WARD-5(3)(1), AHMEDABAD

ITA 1462/AHD/2024

AI Insights

The case involves Mukeshkumar Patel, the assessee, who appealed against the orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which confirmed the additions made by the AO regarding unexplained cash deposits in the Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. The AO had re-opened the assessment under sections 147 and 148 of the Income Tax Act, based on information from a search operation at the credit society, which revealed unexplained deposits. The assessee contended that these deposits were from business transactions and had already been taxed at an 8% profit rate. The Tribunal found merit in the assessee's arguments, leading to the allowance of the appeals.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 833447 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 09-08-2024
• Other Referred Cases: Kaushil Pravinchandra Gohel in ITA Nos 690 to 694
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KETAKI DESAI
• Assessee Lawyers: PARIN SHAH
• Keywords: Unexplained cash credit; Search and seizure; Co-operative Credit Society
• Section: 148; 132; 44AD; 6

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0012ायपीठ “सी“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD \u0016ी संजय गग\u001a, \u0012ाियक सद\u001b एवं अ पूण\u001a गु!ा, लेखा सद\u001b क े सम%। ] ] Before Shri Sanjay Garg, Judicial Member And Annapurna Gupta, Accountant Member Sl. No(s) आयकर अपील सं/ ITA No(s) िनधा \u0010रण वष\u0010/ Assess- ment Year(s) Appeal(s) by : अपीलाथ' / ()थ' / Appellant बनाम/vs. Respondent 1. 1461/Ahd/2024 2015-16 Mukeshkumar Patel (individual) A/11, Mona Park Society Opp. Narayan Nagar Bapunagar Ahmedabad – 380 025 PAN: AAMPP 4168 J (Assessee) The ITO Ward-5(3)(1) Ahmedabad – 380 015 (Revenue) 2. 1462/Ahd/2024 2016-17 Assessee Revenue 3. 1463/Ahd/2024 2017-18 Assessee Revenue Assessee by : Shri Parin Shah, AR Revenue by : Ms. Ketaki Desai, Sr.DR सुनवाई की तारीख/Date of Hearing : 17 /12/2025 घोषणा की तारीख /Date of Pronouncement: 03/02/2026 आदेश/O R D E R Per Sanjay Garg, Judicial Member: The captioned appeals have been preferred by the assessee against the separate orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] of even date 12/07/2024 pertaining to different Assessment Years (AYs). Since Printed from counselvise.com ITA Nos.1461, 1462 & 1463/Ahd/2024 Mukeshkumar Patel (Individual) Asst. Years : 2015-16, 2016-17 & 2017-18 respectively 2 common facts and issues are involved in all these appeals, these were heard together and are being disposed of by this consolidated order. Assessee’s appeal in ITA No.1461/Ahd/2024 for AY 2015-16 is taken as a lead case for the purpose of narration of facts. ITA No.1461/Ahd/2024 for AY 2015-16 2. The assessee in this appeal is aggrieved by the action of the Ld. CIT(A) in confirming the addition of Rs.1,10,43,940/- made by the Assessing Officer (AO) on account of unexplained cash deposits by the assessee in Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. 3. The brief facts of the case as extracted from the assessment order are that the assessee filed his return of income for the year under consideration, i.e. AY 2015-16 on 07/11/2015 declaring total income of Rs.5,89,030/-. Thereafter, the AO got the information on the insight portal of the department that a search action under section 132 of the Act was carried out in the case of Shri Renuka Mata Multistate Urban Cooperative Credit Society Ltd. (SRMUCS) during which it was found that huge money was deposited in the bank accounts maintained with the society by the Account holders, the source of which was unexplained. Further, many of the account holders were not found on their address. The credits in the accounts of the account holders were unexplained . It was noted that in many cases, the depositors were mere name lenders . On verification, it was noticed that the assessee had deposited a cash of Rs.1,10,43,940/- during the year under consideration in the said Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd., which was unexplained cash credit. On the basis of such information, the AO formed the belief that the income of the assessee for the year under consideration to that extent had escaped assessment. He, therefore, re-opened the assessment Printed from counselvise.com ITA Nos.1461, 1462 & 1463/Ahd/2024 Mukeshkumar Patel (Individual) Asst. Years : 2015-16, 2016-17 & 2017-18 respectively 3 u/s.147 of the Act by issuing notice u/s.148 of the Act . The AO noted that in response to the said notice, the assessee had not filed any return of income u/s.147 of the Act. However, in reply to the subsequent notices issued by the AO, the assessee replied that the accountant of the firm, while filing the return of income of the assessee had failed to take into consideration the transactions carried out in the account of the assessee with Shri Renuka Mata Co-Op Society Ltd. That on receipt of notice u/s 148 of the Act, the Assessee filed his return of income assessee u/s 147/148 read with section 44AD of the Act on 22.03.2022. He further explained that the transactions/deposits in Shri Renuka Mata Cooperative Society Ltd. were considered as turnover and profit at the rate of 8% on the same was offered in the Return of Income so filed. It was submitted that only the profit element embedded in the transactions could be taxed and not the entire sale receipts. The AO, however, observed that since the return of income filed by the assessee was not e-verified by the system, hence the same was invalid. He ignored the return of income filed by the assessee and treated the entire deposits of the assessee into Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. as unexplained income of the assessee and made the impugned addition. The AO even did not give the credit of the tax deposited by the assessee on declaration of 8% profits on such deposits. 4. Aggrieved by the said addition made by the AO, the assessee preferred the appeal before the Ld. CIT(A). Before the Ld. CIT(A), it was submitted that though the assessee had complied with the notices of the AO, however, the AO failed to consider the submissions of the assessee, while passing the impugned assessment order u/s.144 of the Act. It was also contended that the re-opening of the assessment u/s.147 of the Act was bad in law as the AO had not supplied the reasons recorded for re-opening of the assessment. Printed from counselvise.com ITA Nos.1461, 1462 & 1463/Ahd/2024 Mukeshkumar Patel (Individual) Asst. Years : 2015-16, 2016-17 & 2017-18 respectively 4 Further, it was pleaded that the assessee was in the business of trading in plastic products and Submersible Pumps. It was submitted that that the said account with Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. was used to deposit the sale proceeds of the plastic products and submersible pump sets. That the agricultural submersible pumps were sold to agriculturists and the sale proceeds were deposited in the said account. It was requested that only profit element could be added in respect of the aforesaid deposits on account of business transactions. It was further submitted that the Co-ordinatr Ahmedabad Bench of the ITAT in the case of Kaushil Pravinchandra Gohel in ITA Nos 690 to 694 vide order dated 17.04.2024 held that the only 0.25% of deposits made in the account with Shri Renuka Mata Society be treated as income, however, the assessee has already offered profits @ 8% of such receipts/deposits. The Ld. CIT(A), however, did not agree with the contentions raised by the assessee and dismissed the appeal of the assessee. 5. Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us. 6. We have heard the rival contentions of the Ld. Representatives of the parties and gone through the record. The Ld. Counsel for the assessee has demonstrated that the deposits in the alleged account with Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. were multiple deposits on account of sale receipts. He has further demonstrated that it is not a case, where there was any lump sum deposit of any amount. He, in this respect, explained that submersible pumps were sold/supplied to various agriculturists at various remote places in the State, who in turn deposited the sale proceeds in account of the assessee in Shri Renuka Mata Multi State Printed from counselvise.com ITA Nos.1461, 1462 & 1463/Ahd/2024 Mukeshkumar Patel (Individual) Asst. Years : 2015-16, 2016-17 & 2017-18 respectively 5 Urban Co-operative Credit Society Ltd. He has further demonstrated that there were corresponding debit entries also. He, in this respect, had explained that the credit entries were against sales realization, whereas debit entries were regarding purchases of goods. He, therefore, has submitted that apparently it was a case of deposits out of business transactions, i.e. sales of submersible pumps and plastic products and that only the profit element had to be added. 7. The Ld. DR, on the other hand, has relied upon the findings of the lower authorities. 8. We have considered the rival contentions. The Ld. Counsel for the assessee has also taken legal pleas that this was not a case of simply information coming to the AO of the alleged deposits by the assessee in Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. He, in this respect, has stated that, in fact, a search action was carried out in the case of Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd, wherein, it was found that various persons had deposited amounts in their accounts running with Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. and that on the basis of said information, the re-opening of the assessment was done in the case of the assessee. He, in this respect, has submitted that as the provisions relating to assessment pursuant to search and seizure action is given u/s.153A to u/s.153C of the Act, which in itself a separate code in itself, and as per the aforesaid statutory provisions, the only course of action available to the AO was to proceed for assessment u/s.153C of the Act and not u/s.147/148 of the Act. He, in this respect, has relied upon various case-laws to contend that the reopening of the assessment in this case was bad in law as the only course available to the AO was to proceed Printed from counselvise.com ITA Nos.1461, 1462 & 1463/Ahd/2024 Mukeshkumar Patel (Individual) Asst. Years : 2015-16, 2016-17 & 2017-18 respectively 6 u/s.153C of the Act and not u/s.147 of the Act. Further, he has submitted that mere deposit in the bank account itself did not give any presumption to the AO that the income of the assessee for the year under consideration had escaped assessment. He, in this respect, has submitted that the AO did not have any information that the assessee had deposited his unaccounted money in the said account and, therefore, there were no valid reasons to the AO to re-open the assessment. He has further submitted, the AO, in the reasons recorded for reopening of the assessment has mentioned that certain account holders were not traceable and certain accounts were in the name of name lenders/benami only. However, this fact was missing in the case of the assessee. Therefore, the AO had no valid reasons to reopen the assessment. 8.1. In this case, the assessee has, from the accounts, that there were multiple deposits on different dates followed by multiple withdrawals. The assessee, has explained that the said account was used for deposit of sale proceeds of submersible pumps and plastic products as there were numerous deposits of small amounts on different dates and there were corresponding debits also. Under the circumstances, in our view, the entire deposits cannot be added as income of the assessee. In our view, the only profit element involved in respect of the aforesaid credit and debit entries is required to be taxed. The assessee has already offered profit @8% on such deposits, therefore no further addition is warranted in this case. Therefore, the impugned addition made by the AO is ordered to be deleted. However, the tax already deposited by the assessee on the 8% profits shown by the assessee will not be refunded and the said return be accepted as such. 9. With the above observations, the appeal of the assessee in ITA No.1461/Ahd/2024 for AY 2015-16 is hereby treated as allowed. Printed from counselvise.com ITA Nos.1461, 1462 & 1463/Ahd/2024 Mukeshkumar Patel (Individual) Asst. Years : 2015-16, 2016-17 & 2017-18 respectively 7 10. Now, we take up remaining Assessee’s appeals in ITA Nos.1462 and 1463/Ahd/2024 for AYs 2016-17 & 2017-18 respectively. 11. The facts and issues involved in all these appeals are identical except the amount of deposits with Shri Renuka Mata Multi State Urban Co- operative Credit Society Ltd. There was a deposit of an amount of Rs.84,70,800/- in the AY 2016-17 and of Rs.29,86,000/- in AY 2017-18. In view of our findings given above, the only profit element involved in respect of the aforesaid credit and debit entries is required to be taxed. The assessee has already offered profit @8% on such deposits, therefore no further additions are warranted in these cases. Therefore, the impugned additions made by the AO are ordered to be deleted. However, the tax already deposited by the assessee on the 8% profits shown by the assessee will not be refunded and the said return be accepted as such. 11.1. So far as the legal issues taken by the assessee are concerned, since we have decided the issue on merits and, hence, at this juncture, we are not inclined to decide the legal issues, and the same and are kept open to be decided at appropriate stage, if need be. With these observations, both the appeals of the assessee are hereby allowed. 12. In the result, all the three appeals of the assessee are hereby allowed. Order pronounced in the Open Court on 03 /02/2026. Sd/- Sd/- (Annapurna Gupta ) Accountant Member ( Sanjay Garg) Judicial Member अहमदाबाद/Ahmedabad, िदनांक/Dated 03/02/2026 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS Printed from counselvise.com ITA Nos.1461, 1462 & 1463/Ahd/2024 Mukeshkumar Patel (Individual) Asst. Years : 2015-16, 2016-17 & 2017-18 respectively 8 आदेश की !ितिलिप अ\"ेिषत/Copy of the Order forwarded to : 1. अपीलाथ$ / The Appellant 2. !%थ$ / The Respondent. 3. संबंिधत आयकर आयु& / Concerned CIT 4. आयकर आयु& ) अपील ( / The CIT(A)-(NFAC), Delhi 5. िवभागीय !ितिनिध , अिधकरण अपीलीय आयकर , अहमदाबाद/DR,ITAT, Ahmedabad. 6. गाड\u0010 फाईल / Guard file. आदेशानुसार/ BY ORDER, स%ािपत !ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by H-JM in his computer) : 02.02.2026 2. Date on which the typed draft is placed before the Dictating Member. : 02.02.2026 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 3.2.26 7. Date on which the file goes to the Bench Clerk. : 3.2.26 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 Despatch of the Order : Printed from counselvise.com "