RAJRANI KISHANLAL PAHWA,SURAT V. ITO, WARD 1(2)(1), SURAT

ITA 994/SRT/2025

AI Insights

The case involves Rajrani Kishanlal Pahwa, who appealed against the orders of the Commissioner of Income-tax (Appeals), which confirmed additions made by the Assessing Officer under Sections 143(3) and 147 of the Income-tax Act, 1961. The additions pertained to unexplained bank deposits and undisclosed FDRs and interest for the Assessment Years 2009-10, 2011-12, and 2013-14. The Tribunal found that the FDRs were funded by the assessee's son, whose income had been declared and taxed under the Income Declaration Scheme, thus not subjecting the same amount to tax again in the hands of the assessee. For the unexplained bank deposits, the Tribunal directed that only the embedded profit should be taxed.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 831410 (ITAT-SURAT)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: misc
• Appeal Filed On: 24-09-2025
• Other Referred Cases: CIT v. Babulal K. Daga, 358 ITR 177 (Guj.)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AJAY UKE
• Assessee Lawyers: SURESH K. KABRA
• Keywords: Business income; Opportunity of being heard; Revised return; Reassessment proceedings; Unexplained investment; Source of fund
• Section: 147; 148; 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. Nos. 994 to 996/SRT/2024 (Assessment Year: 2009-10, 2011-12 & 2013-14) Rajrani Kishanlal Pahwa, 801, Siddhi Vinayak Apartment, Sarela Wadi, GHOD DOD ROADM, Surat - 395007 [PAN : AGEPP 2659 J] Vs. Income Tax Officer, Ward-1(2)(1), Surat (Appellant) .. (Respondent) Appellant by : Shri Suresh K. Kabra, CA Respondent by: Shri Ajay Uke, Sr DR Date of Hearing 19.01.2026 Date of Pronouncement 22.01.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- These three appeals have been filed by the assessee against the separate orders of the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (‘Ld. CIT (A)’ in short), all dated 25.07.2025, passed under Section 250 of the Income-tax Act, 1961 (‘the Act’ in short) for Assessment Years 2009-10, 2011-12 and 2013-14. 2. Since the issues involved in all the appeals are identical, they were heard together and are being disposed of by this common order for the sake of convenience. For adjudication, we take ITA No. 994/SRT/2024 for Assessment Year 2009-10 as the lead case. ITA No.994/Ahd/2025 : AY 2009-10 3. The assessee has raised following grounds of appeal: “1. The Ld. CIT(A) – NFAC has erred and was no just and proper on the facts of the case and in law in confirming the addition of Rs.4,59,682/- being the total amount of cash/cheque deposited in bank a/c instead of the embedded profit. Printed from counselvise.com ITA Nos. 994 to 996/SRT/2025 Rajrani Kishanlal Pahwa Vs. ITO Asst. Year : 2009-10 , 2011-12, 2013-14 - 2– 2. The Ld. CIT(A)-NFAC has erred and was not just and proper on the facts of the case and in law in confirming the addition of Rs.46,70,484/- and rejecting the explanation of source from IDS of the two sons of the appellant.” 4. The brief facts of the case are that the assessee is an individual, aged about 70 years, widow, engaged in business of textiles under the name and style of “K Sons”. She filed her original return of income for the Assessment Year 2009-10 on 24.09.2009 declaring a total income of Rs.3,16,660/-. Subsequently, based on information that the assessee was maintaining an undisclosed savings bank account with Sutex Co-operative Bank Ltd., the assessment was reopened u/s 147 of the Act and notice under section 148 was issued on 25.03.2015. In response, the assessee filed a revised return of income on 22.04.2015 declaring total income of Rs.3,58,951/-. During reassessment proceedings, the Assessing Officer noticed cash and cheque deposits aggregating to Rs.4,59,682/- in the undisclosed bank account, and Fixed Deposit Receipts (FDRs) amounting to Rs.43,40,000/- along with interest of Rs.3,30,484/-, aggregating to Rs.46,70,484/-, which were not disclosed in the return of income. The Assessing Officer also observed that a part of the FDRs had already been taxed in Assessment Year 2008-09 and accordingly no separate addition was made in respect thereof, except interest of Rs.13,794/-. The balance amount was treated as unexplained investment. The assessment was completed under section 143(3) read with section 147 of the Act on 21.03.2016, determining total income at Rs. 54,46,830/- after making the following additions: a) Unexplained bank deposits - Rs. 4,59,682/- b) Undisclosed FDRs and interest - Rs.46,70,484/- 5. On appeal, the Ld. CIT(A) restricted the addition relating to FDRs and interest to Rs.42,00,000/-, while confirming the addition of Rs.4,59,682/- on account of unexplained bank deposits. Printed from counselvise.com ITA Nos. 994 to 996/SRT/2025 Rajrani Kishanlal Pahwa Vs. ITO Asst. Year : 2009-10 , 2011-12, 2013-14 - 3– 6. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal. 7. With regard to undisclosed FDRs amounting to Rs.42,00,000/-, the Ld. AR submitted that the assessee is an elderly lady and the funds invested in FDRs did not belong to her but to her son, Shri Rajesh Kumar K. Pahwa. It was contended that the investments were made in the name of the assessee in order to avail a higher rate of interest offered to senior citizens. It was further submitted that Shri Rajesh Pahwa had disclosed an amount of Rs.98,50,506/- under the Income Declaration Scheme (IDS), 2016, and the amounts advanced to the assessee were out of such disclosed income. Therefore, once the income has already been subjected to tax in the hands of the son, no further addition can be made in the hands of the assessee. 8. The Ld. DR, on the other hand, relied upon the orders of the authorities below and submitted that no evidence was furnished during assessment proceedings to establish the nexus between the IDS declaration and the investments made in the assessee’s name. 9. We have carefully considered the rival submissions and perused the material available on record. The issue before us relates to the addition of Rs.42,00,000/-, being the amount sustained by the Ld. CIT(A) on account of undisclosed FDRs and interest. The assessee has consistently contended that the source of investment in the said FDRs was loans received from her son, Shri Rajesh Kumar K. Pahwa. It is an undisputed fact that Shri Rajesh Kumar K. Pahwa has disclosed an amount of Rs.98,50,506/- under the Income Declaration Scheme, 2016 and the said income has been duly subjected to tax under the Scheme. The explanation of the assessee that the funds so disclosed were advanced to her as loans and were utilised for making the impugned FDRs has not been controverted by the Revenue with any cogent material. The identity of the lender and the source of funds having been established, the initial onus cast upon the assessee stands Printed from counselvise.com ITA Nos. 994 to 996/SRT/2025 Rajrani Kishanlal Pahwa Vs. ITO Asst. Year : 2009-10 , 2011-12, 2013-14 - 4– duly discharged. Once the source of investment is established as income already offered to tax in the hands of the son under a statutory disclosure scheme, the same amount cannot be brought to tax again in the hands of the assessee. In view of the above facts and circumstances, we hold that the addition of Rs.42,00,000/- on account of FDRs and interest thereon is not sustainable in law. Accordingly, the said addition is directed to be deleted and the ground raised by the assessee in this regard is allowed. We clarify that no addition is required to be made on account of FDRs stand in the name of the assessee as the son of the assessee Shri Rajesh Kumar K. Pahwa has already declared the said amounts in IDS. For the sake of ready reference, the declaration made by her son is reproduced below:- Printed from counselvise.com ITA Nos. 994 to 996/SRT/2025 Rajrani Kishanlal Pahwa Vs. ITO Asst. Year : 2009-10 , 2011-12, 2013-14 - 5– 10. With regard to the addition of Rs.4,59,682/- on account of unexplained bank deposits, it is the submission of the assessee that she is engaged in the business of trading in textiles and the deposits in the bank account represent business receipts. It was contended that the cheques received, which were not deposited in the regular bank account, were deposited in the said account and there was no source of deposits other than trading activity. Reliance was placed on the decision of the Hon’ble Gujarat High Court in CIT v. Babulal K. Daga, 358 ITR 177 (Guj.), wherein it has been held that where the assessee has no other source of income and the deposits represent business turnover, only the embedded profit can be brought to tax. Printed from counselvise.com ITA Nos. 994 to 996/SRT/2025 Rajrani Kishanlal Pahwa Vs. ITO Asst. Year : 2009-10 , 2011-12, 2013-14 - 6– 11. In the present case, the assessee, in response to notice under section 148, filed a return declaring income of Rs.38,929/- on a turnover of Rs.4,56,319/-, resulting in a profit rate of 8.53%. The turnover declared corresponds to the amount deposited in the bank account. As per the regular books of account, the assessee had disclosed a net profit rate of 1.65%. 12. Considering the totality of the facts and circumstances, we are of the view that only the embedded profit in the bank deposits can be brought to tax and not the entire amount of deposits. Accordingly, the Assessing Officer is directed to restrict the addition by applying the same net profit rate as disclosed by the assessee in her regular books of account. This ground of appeal is, therefore, partly allowed. In the result, the appeal of the assessee for AY 2009-10 is partly allowed. ITA No. 995/SRT/2025: AY 2011-12 ITA No. 996/SRT/2025: AY 2013-14 13. The facts and issues involved in these appeals are identical to those in AY 2009-10. Accordingly, the decision rendered hereinabove shall apply mutatis mutandis to AY 2011-12. 14. However, with regard to AY 2013–14, it was submitted that the investments in FDRs represented reinvestment of FDRs made in earlier assessment years. Since this factual aspect has not been verified by the lower authorities, we deem it appropriate to restore this issue to the file of the Assessing Officer for limited verification. The Assessing Officer shall verify whether the FDRs were made out of amounts already disclosed and taxed in earlier years and Printed from counselvise.com ITA Nos. 994 to 996/SRT/2025 Rajrani Kishanlal Pahwa Vs. ITO Asst. Year : 2009-10 , 2011-12, 2013-14 - 7– thereafter allow appropriate relief in accordance with law, after affording due opportunity of being heard to the assessee. 15. In the combined result, the appeals of the assessee for AYs 2009-10 and 2011-12 are partly allowed, while the appeal for AY 2013-14 is partly allowed for statistical purposes. Order is pronounced in the open Court on 22.01.2026 Sd/- Sd/- (SUCHITRA KAMBLE) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Surat; Dated 22/01/2026 btk 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 , अिधकरण अपीलीय आयकर , /DR,ITAT, Surat, 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, TRUE COPY सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण ITAT, Surat 1. Date of dictation …dictated in the open court on..…19.01.2026….….. 2. Date on which the typed draft is placed before the Dictating Member … …19.01.2026………… 3. Other Member……20.01.2026…………… 4. Date on which the approved draft comes to the Sr.P.S./P.S …. 20.01.2026…………. 5. Date on which the fair order is placed before the Dictating Member for pronouncement ....... 22.01.2026........ 6. Date on which the fair order comes back to the Sr.P.S./P.S ……22.01.2026…..…………. 7. Date on which the file goes to the Bench Clerk ……22.01.2026.….…. 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…………………………………… Printed from counselvise.com "