PURAN K JAIN (HUF),MUMBAI V. INCOME TAX OFFICER, WARD 41 (2) (4 ), MUMBAI

ITA 3800/MUM/2024

AI Insights

The case involves Puran K Jain (HUF), who appealed against the order of the National Faceless Appeal Centre (NFAC), which was based on the earlier order of the Income-tax Officer (ITO) for the assessment year 2017-18. The assessee, a Hindu Undivided Family (HUF) engaged in the business of trading fans, deposited a significant amount of cash during the demonetization period, which raised questions during the assessment. The ITO added the entire cash deposit to the assessee's income, treating the business income and transactions as unsubstantiated. The Tribunal, however, found that the AO had not adequately investigated the business activities of the assessee and had not considered the documents and explanations provided during the appellate proceedings.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474422 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KIRAN UNAVEKAR
• Assessee Lawyers: ANANT PAI
• Keywords: Business income
• Section: 250; 44AD

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “K(SMC)”, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.3800/Mum/2024 (Assessment Year: 2017-18) Puran K Jain (HUF) 17/253, Tagore Nagar, Vikhroli (East), Mumbai-400 083 PAN: AAJHP2523E vs Income-tax Officer, Wad-41(2)(4) Mumbai, Kautilya Bhavan, BKC, Bandra (East), Mumbai-400051 APPELLANT RESPONDENT Assessee by : Shri Anant Pai Respondent by : Shri Kiran Unavekar SR DR Date of hearing : 20/01/2025 Date of pronouncement : 27/01/2025 O R D E R PER ANIKESH BANERJEE: Instant appeal of the assessee was filed against the order of the National Faceless Appeal Centre (NFAC), Delhi *for brevity, ‘Ld.CIT(A)’) passed under section 250 of the Income-tax Act, 1961 (for brevity, ‘the Act’), date of order 15/05/2024 for A.Y. 2017-18. The impugned order was emanated from the order of the Ld.Income-tax Officer, Ward 26(2)(7), Mumbai, passed under section 143(3) of the Act, date of order 23/12/2019. 2. The brief facts of the case are that the assessee is a HUF and the karta is running the business as trader of fans. During this impugned assessment year, 2 ITA No.3800/Mum/2024 Puran K JIN (HUF) the assessee-HUF deposited cash in bank account amount to Rs.10,92,000/-. The assessee submitted that during the demonetization period, the assessee deposited cash amount to Rs.2,83,000/-. The assessee confirmed that during this impugned financial year, the assessee was running the business of the same nature, as the karta was doing and the total sale during this year was Rs.11,00,897/- and the assessee purchased the goods amount to Rs.7,33,162/-. The assessee submitted a re-computation during the assessment proceedings and declared the business income amount to Rs.2,45,543/-. During assessment, the Ld.AO found that the assessee declared only the interest under the head ‘Income from other sources’. No business income was declared. During the assessment proceedings, the assessee submitted the month-wise list for sale and purchase of the goods and accordingly, the cash was deposited in related to the business transactions. The assessee explained the source of cash deposit in the bank account. The details of source of deposit of cash as placed by the Ld.AR which is reproduced as follows:- “Opening Cash Balance as on 01.04.2016 Rs. 42869 Add : Net Surplus Received during 01.04.2016 to 08.11.2016 1061881 Less : Deposited during 01.04.2016 to 08.11.2016 809000 BALANCE AS ON 08.11.2016 295750 IN Form of SBN Details not available IN OTHER DENOMINATIONS Details not available Add : Cash received during 09.11.2016 to 31.12.2016 NIL Less: Cash paid during 09.11.2016 to 31.12.2016 NIL Less: Cash Deposited in Bank during 09.11.2016 to 31.12.2016 283000 Closing Cash Balance as on 31.12.2016 12750 3 ITA No.3800/Mum/2024 Puran K JIN (HUF) Add : Net Surplus Cash received during 01.01.2017 to 31.03.2017 22302 Less: Cash Deposited in Bank during 01.01.2017 to 31.03.2017 NIL Closing Cash Balance as on 31.03.2017 35052” 3. The Ld.DR argued and relied on the order of the revenue authorities. 4. We have carefully considered the submissions made by both parties and reviewed the documents on record. It is evident that the appellate order was passed ex parte, as the assessee was unable to submit any documents before the Ld. CIT(A). However, it is observed that the assessee had furnished certain details before the Ld. AO, who subsequently rejected the assessee's business claims. The Ld. AO took the view that the assessee had not disclosed any business income in the return of income (ROI) filed, and hence, the business transactions claimed during the assessment proceedings were treated as an afterthought. Furthermore, the cash deposit in question was made during the demonetization period.We note that the Ld. AO did not conduct any investigation into the nature of the assessee's business. During the appellate proceedings before the ITAT, the assessee submitted supporting documents, including bills, ledgers, and bank account statements, which are compiled in the paper book (APB pages 48–83). The assessee also contended that the cash deposit during demonetization amounted to Rs.2,83,000/-, not Rs.10,82,000/- as alleged. It was further argued that the assessee is a small businessman who declared business profits exceeding the presumptive profit prescribed under Section 44AD of the Act. The Ld. AO, however, disregarded these submissions and added the entire cash deposit in the bank account to the assessee’s income. After considering the submissions of theLd. AR, we find that the Ld. AO failed to initiate any verification into the assessee's business activities. Although the assessee did not initially 4 ITA No.3800/Mum/2024 Puran K JIN (HUF) declare business income in the ROI, the income was recomputed and declared during the assessment proceedings. Considering the above, we find no justification for sustaining the addition against the assessee. Consequently, the addition of Rs.10,82,000/- is hereby quashed. 5. In the result, the appeal of the assessee bearing ITA No.3800/Mum/2024 is allowed. Order pronounced in the open court on _____ day of January, 2025. (PRABHASH SHANKAR) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,दिन ांक/Dated: /01/2025 Pavanan Copy of the Order forwarded to: 1. अपील र्थी/The Appellant , 2. प्रदिव िी/ The Respondent. 3. आयकरआयुक्त CIT 4. दवभ गीयप्रदिदनदि, आय.अपी.अदि., मुबांई/DR, ITAT, Mumbai 5. ग र्डफ इल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, Mumbai 5 ITA No.3800/Mum/2024 Puran K JIN (HUF) Details Date Initials Designation 1 Draft dictated on PC on 21.01.2025 Sr.PS/PS 2 Draft Placed before author 22.01.2025 Sr.PS/PS 3 Draft proposed & placed before the Second Member JM/AM 4 Draft discussed/approved by Second Member JM/AM 5. Approved Draft comes to the Sr.PS/PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS/PS 7. File sent to the Bench Clerk Sr.PS/PS 8 Date on which the file goes to the Head clerk 9 Date of Dispatch of order "