RAJARAM BHIKU PATIL,KOLHAPUR V. ASSISTANT COMMISSIONER OF INCOME TAX, KOTTAYAM

ITA 203/COCH/2025

AI Insights

The case involves Rajan Bhiku Patil, an individual engaged in bullion trading and gold jewellery business, who appealed against the order of the Commissioner of Income Tax (Appeals), Kochi-3. The appeal was related to the assessment year 2018-19, where the AO had added Rs. 47 lakhs as unexplained money seized from his employee and Rs. 21 lakhs as unexplained gifts received from relatives. The CIT(A) upheld these additions, leading to the current appeal. The Tribunal found merit in taxing only the profit element of the Rs. 47 lakhs and upheld the addition of Rs. 21 lakhs as unexplained gifts.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711824 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURESH SIVANANDAN
• Keywords: Business income; Income from undisclosed sources; Gift
• Section: 143(3); 153A; 131

Judgement Text

"1 ITA No.203/Coch/2025 Rajan Bhiku Patil vs.ACIT IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH BEFORE SHRI INTURI RAMA RAO, AM AND SONJOY SARMA, JM ITA No.203/Coch2025 Assessment Year:2018-19 Rajaram Bhiku Patil .......... Appellant 13/602, Ritz Shopping Centre, Engineering College Junction, Chengannur, Alleppey-689121. PAN: AHIPB3276E vs. Asst. Commissioner of Income Tax .......... Respondent Kottayam. Appellant by: None Respondent by: Shri Suresh Sivanandan, CIT-DR Date of Hearing: 04.06.2025 Date of Pronouncement: 22.07.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), Kochi-3 (in short “CIT(A)”), dated 24/02/2025 for Assessment Year (AY) 2018-19. Printed from counselvise.com 2 ITA No.203/Coch/2025 Rajan Bhiku Patil vs.ACIT 2. Briefly the facts of the case are that the appellant is an individual carrying on the business in the name and style of “Ganesh Gold Works”. It is the engaged in the business of Bullion Trading and Gold Jewellery. The return of income for the AY 2018-19 was filed on 22/10/2018 disclosing the income of Rs. 16,70,620/-. Against the said return of income, the assessment was completed by the ACIT, Central Circle, Kottayam (hereinafter referred to as “AO”) vide order dated 29/09/2022 passed U/s. 143(3) r.w.s 153A of the Income Tax Act, 1961 (in short “the Act”) at a total income of Rs. 84,70,620/- . While doing so, the AO brought to tax a sum of Rs. 47,00,000/- being the money seized from one Mr. Nithin Datatray Pawar, who is the employee of the appellant, as unexplained money of the assessee. The AO also made an addition of Rs. 21,00,000/- claimed to be the gifts received from his Father, Brothers, Brother-in-Law and other relatives, disbelieving the explanation offered by the appellant. 3. The brief background leading to the addition of Rs. 47 lakhs is as under. The Excise Inspector recovered the cash from Shri Nithin Dattatrey Pawar from Kottayam bound KSRTC bus on 11/02/2018 with cashof Rs.47 lakhs. Since there was no evidence for the cash with Sri Nitin Daattatrey Pawar, he was taken into custody by police. On receiving the information from police, a summons U/s. 131 dated 12/02/2018 was issued by ADIT (Inv.), Palakkad to Shri Nitin Dattatrey Pawar to attend his office 19/02/2018. However, the appellant Shri Biku patil appeared before the ADIT (Inv). Palakkad on 02/03/2018 and claimed the money ie., after 20 days of seizure Printed from counselvise.com 3 ITA No.203/Coch/2025 Rajan Bhiku Patil vs.ACIT took place. However, he confessed in his statement U/s.131 of the Act given before ADIT (Inv.), Palakkad that amont of Rs. 47 lakhs seized from Sri Nitin Dattatrey Pawr was his unaccounted business income and was ready to offer for the FY 2017-18 (AY 2018-19) and pay the requisite tax. While answering source of cash seized the appellant had stated that this is the unaccounted money of his gold refining business. This Rs. 47 lakhs was the sale proceeds of scrap which is generated while refining the Gold. He further stated that he was ready to offer this amount for the FY 2017-18 and to pay the due tax for this amount. He further stated that he would inform the Hon'ble judicial First Class Court that he had no objection to hand over the questioned about the source of the cash seized vide Qn.No. 6 of the sworn statement recorded from him on02/03/2018 and the appellant had stated that this amount of Rs. 47 lakhs was his business income. He further stated that this was the sale proceeds of the scrap which is getting while refining the Gold. He had handed over this money to his employee Shri Nitin and entrusted him to purchase the Gold from Palakkad. However, the purchase was not materialised and hence as per his instruction, while he was returning from Palakkad with money, the Kuzhalmannam Police seized the money from hi. He categorically stated that the above amount was the unaccounted income of his business. He admitted during the statement that he was ready to include this amount for the FY 2016-17 and pay the tax. However, the assessee had not disclosed and offered the same to tax. Therefore, the AO brought to tax the same. Printed from counselvise.com 4 ITA No.203/Coch/2025 Rajan Bhiku Patil vs.ACIT 4. With regard to the addition of Rs. 21 lakhs, the appellant had claimed that he received gifts aggregating to Rs. 21 lakhs from Father (Rs. 5 lakhs); Brother (Rs. 3 lakhs); Brothr-in-law (Rs 3 lakhs) and from relatives (Rs. 10 lakhs). However, the appellant had failed to substantiate the same by adducing necessary evidences. In these circumstances, the AO made addition of Rs. 21 lakhs. 5. Being aggrieved by the above assessment order, an appeal was filed before the CIT(A), who dismissed the appeal of the assessee vide the impugned order for the failure on the part of the assessee to discharge the onus of proving the identity, genuineness and creditworthiness of the gifts of Rs. 21 lakhs and confirmed the addition of Rs. 47 lakhs placing reliance on the sworn statement recorded U/s. 131 of the Act that the appellant himself has submitted before the ADIT (Inv.), Palakkad that the amount seized was from his unaccounted income out of the sale proceeds of scrap generated while refining the Gold. 6. Being aggrieved by the above order of the CIT(A), the appellant is in appeal before us in the present appeal. 7. When the appeal was called on, none appeared on behalf of the assessee despite issue of service of notice. The appellant sought for adjournment of hearing of the appeal on the ground that the Authorized Representative could not appear due to unavoidable circumstances without specifying such unavoidable circumstances. Therefore, we proceed to dispose of this appeal on merits after hearing the Ld. Sr. DR. Printed from counselvise.com 5 ITA No.203/Coch/2025 Rajan Bhiku Patil vs.ACIT 8. Ld. Sr. DR submits that the orders passed by the lower authorities are very reasoned one as the addition of Rs. 47 lakhs was confirmed based on the statement of the appellant himself recorded U/s. 131 of the Act. She further submits that since the appellant had failed to substantiate that the gifts received from the relatives, CIT(A) is justified in confirming the addition of Rs. 21 lakhs. 9. We heard the rival submissions and perused the material available on record. The Grounds of Appeal No. 1, 2 and 3 challenge the addition of Rs. 47 lakhs as unaccounted money of the appellant. The said money was seized from one Mr. Dattatrey Pawar by the Excise Inspector during the routine check-up on 11/02/2018. Thereafter, the said cash was handed over to the Income Tax Department and subsequently, the statement was recorded by the ADIT(Inv.), Palakkad on 12/02/2018. During the course of such statement, the appellant had categorically stated that the said cash is undisclosed money of the appellant generated out of the scrap while refining the Gold. No doubt, the lower authorities were justified in treating this income as undisclosed gross receipts but, what has to be taxed is the real income and not the gross receipts. Therefore, in our considered opinion, the only profit element embedded in the gross receipts alone can be taxed and not the entire receipts. In these circumstances, we are of the considered view that the matter requires remand to the file of the AO with a direction to tax the gross income of Rs. 47 lakhs by applying the average GP rate of preceding three years. Accordingly, these Grounds of appeal stand partly allowed. Printed from counselvise.com 6 ITA No.203/Coch/2025 Rajan Bhiku Patil vs.ACIT 10. As regards the Grounds of Appeal No. 3, the appellant challenged the addition of Rs. 21 lakhs being the amount received towards gifts from his Father, Brother, Brother-in-law and other relatives. During the course of the proceedings before the AO as well as the CIT(A)/NFAC, the appellant had not discharged the onus of proving the identity, genuineness and creditworthiness of the gifts received and the appellant had not adduced any evidence to substantiate his claim. Therefore, the lower authorities were justified in treating the gifts of Rs. 21 lakhs as unexplained money of the appellant. 11. In the result, appeal filed by the assessee stands partly allowed. Order pronounced in the open court on 22nd July, 2025. Sd/- Sd/- (SONJOY SARMA) JUDICIAL MEMBER (INTURI RAMA RAO) ACCOUNTANT MEMBER Cochin, Dated: 22nd July, 2025 okk sps Copy to: 1. The Appellant 2. The Respondent 3. The Pr. CIT concerned 4. The Sr. DR, ITAT, Cochin 5. Guard File Assistant Registrar ITAT, Cochin Printed from counselvise.com "