SHRI PHOOLCAHND LALCHAND BAFNA,MUMBAI V. ITO WARD 3(2), THANE

ITA 2030/MUM/2025

AI Insights

The case involves Shri Phoolchand Lalchand Bafna, the appellant, who contested the additions made by the Assessing Officer under sections 69A and 115BBE of the Income Tax Act, related to cash deposits during the demonetization period and estimated business income. The Assessing Officer initially made a double addition of business receipts and separately added the cash deposits as unexplained income. The Tribunal found that the cash deposits were part of the business receipts and should be taxed accordingly, leading to a partial allowance of the appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 717050 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Appeal Filed On: 26-03-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SURENDRA MOHAN
• Assessee Lawyers: SHRIRAM BAJAJ
• Keywords: Business income
• Section: 144

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER& MS. PADMAVATHY S, ACCOUNTANT MEMBER ITA No. 2030/MUM/2025 (AY: 2017-18) (Physical hearing) Shri Phoolchand Lalchand Bafna 03/903, Rose, Regency Estate, Kalyan Shil Road, Davadi, Dombivli (East), Thane, Maharashtra-421203. [PAN: AAQPB9936Q] Vs ITO, Ward – 3(2), Thane Ashar IT Park, 6th Floor, Road No. 16Z, Wagale Industrial Estate, Thane-West, Maharashtra – 400604. Appellant / Assessee Respondent / Revenue Assessee by Shri Shriram Bajaj, CA Revenue by Shri Surendra Mohan, Sr. DR Date of Institution 26.03.2025 Date of hearing 08.07.2025 Date of pronouncement 18.08.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of Ld. CIT(A)/ADDL/JCIT(A)-3, Bengaluru dated 11.02.2025 for assessment year (AY) 2011-12. The assessee has raised following grounds of appeal: (i) On the facts and in circumstances of the case, and also in law, the Ld. C.I.T. (A), erred in confirming the action of Assessing Officer making addition of Rs. 12,64,000/- u/s 69A, being cash deposit in the bank account/s during the demonetisation period, ignoring the submission and explanations of your appellant that said deposits are made out of the cash balance held as on 08.11.2016. Your appellant, therefore, submits that addition made by the Assessing Officer is invalid, bad in law and prays for full deletion of the same. (ii) On the facts and in circumstances of the case, and also in law, the Ld. C.I.T. (A), erred in confirming the action of Assessing Officer arbitrarily estimating income of Rs.5,35,024/-, being 'profit and gains of business or profession' on as against the income of Rs.2,48,700/- offered by the appellant, ignoring the submission and explanations of your appellant. Your appellant, therefore, submits that addition made by the Assessing Officer is invalid, bad Printed from counselvise.com ITA No. 2030/Mum/2025 Shri Phookchand Lalchand Bafna 2 in law and prays for deletion of the addition made to the income offered under the above head. (iii) On the facts and in the circumstances of the case, and also in law, the Ld. C.I.T. (A) erred in confirming the action of the Assessing Officer levying interest under chapter XVII-F of the Act. Your appellant, therefore, prays that said levy of interest be deleted. 2. Rival submissions of both the parties have been heard and record perused. The learned Authorised Representative (ld. AR) of the assessee submits that assessing officer passed the assessment order under section 144, despite the fact that assessee furnished all required details in time. The assessing officer made a double addition of business receipts. Once, the assessing officer estimated the income of assessee at 8.00 % of certain credit in his bank account by treating it as business total turnover, therefore, no other addition on account of cash deposit during demonetisation is warranted. The ld. AR of the assessee submits that assessee is engaged in the business in the sub- dealership of multi-brand two-wheelers. The assessee was procuring order from prospective buyers on behalf of various dealers. The assessee used to collect advance from such customers and used to deposit/remit the same to various dealers after retaining his service charges and /or commission. The assessee was also arranging transport, arranging insurance of such two wheelers and registration of vehicles with local Regional Transport Office (RTO). The assessee was also storing such vehicles in his go-down till delivery is handed over to customers. The invoice of sale value of two- wheelers was issued directly by various dealers and role of assessee was of mediator. In response to notice under section 142(1), the assessee could not furnish return of income. Though, the assessee furnished complete Printed from counselvise.com ITA No. 2030/Mum/2025 Shri Phookchand Lalchand Bafna 3 information required for assessment, as initial notices could not be complied, which may have been considered by assessing officer to pass assessment order under section 144 against the assessee. The assessee vide his reply dated 11.09.2019 furnished note of business activities, computation of his total income and copy of income and expenditure account. The assessing officer has duly considered all such submissions. All such details were also furnished before ld. CIT(A). The assessee also furnished details of bank account of assessee. The assessee maintained current bank account in the name of “Mangalam Motors” though the assessing officer recorded it as Mangala Motors. The assessee also furnished complete details of deposit in bank during demonetization period, pre demonetization and subsequent demonetization period. The deposits in bank is not abnormal during the period from 09.11.2015 to 31.12.2015. During such period, the assessee made cash deposit of Rs. 12,64,000/-only in the form of Specified Bank Notes (SBN). The assessee also furnished copy of bank statement showing continues payment to various authorised dealers of two-wheelers. The assessing officer made two additions, first addition on account of cash deposit during demonetization period, such addition was made of 100% of cash deposit. The assessing officer estimated 8.00% of income on remaining cash and other credit in the bank account of assessee. The ld. AR of the assessee submits that once the income of assessee was estimated, therefore, entire amount including of cash deposit during demonization period which was out of business receipt was to be considered as a part of total turnover. The business activities of the assessee otherwise accepted by lower Printed from counselvise.com ITA No. 2030/Mum/2025 Shri Phookchand Lalchand Bafna 4 authorities. The ld. AR of the assessee prayed that reasonable and estimation of income @ 6.00% of total transaction in the bank including of cash deposit to avoid the long-drawn process of litigation with department. 3. On the other hand, learned Senior Departmental Representative(Sr DR) for the revenue supported the order of lower authorities. The ld. Sr. DR for the revenue submits that assessing officer has reasonably estimated the income of assessee on the deposit apart from cash deposits made in the form of SBN. The assessee failed to filed return of income and deposited cash in SBN, during demonatisation, therefore, said amount was separately added. The ld. Sr. DR for the revenue submits that assessing officer has reasonably estimated the business income of assessee @8.00%. The assessee is not filing return of income despite the huge transaction on account of alleged two-wheeler business. The assessee does not deserve any other or further relief. 4. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. On perusal of assessment order, we find that initially there was no response by assessee to various notices issued by assessing officer. Though, the assessee vide his reply dated 11.09.2019 filed his detailed explanation. In the explanation, the assessee accepted that no return of income was filed. The assessee claimed that he is working as a sub-broker of automobile business. The assessee furnished the bank statement, comparative details of cash deposit during demonetization period, prior period and subsequent to demonetization period.On receiving such detail, the assessing officer accepted that cash deposit during Printed from counselvise.com ITA No. 2030/Mum/2025 Shri Phookchand Lalchand Bafna 5 demonetization period is only of Rs. 12,64,000/-. The assessing officer further noted that there was other credit in various bank account of assessee aggregating of Rs. 66,87,806/-. Such other credit was considered as business receipt of assessee and the assessing officer estimated 8.00% income on such deposit thereby made addition of Rs. 5,35,024/- on account of business income. However, cash deposit in the form of SBN of Rs. 12,64,000/- was added separately under section 69A and was taxed at the enhanced rate under section 115BBE. We find that once the assessing officer has accepted the other credit in the bank account as part of business receipt by accepting the explanation of assessee of his business activities of two-wheeler, such cash deposit was also to be considered as part of business receipt. 5. While considering the submission of ld. AR of the assessee, we independently examined the fact of the case and the material available or record. On perusal of bank statement, we find that there is systematic cash deposit and transfer of such amount to the automobile dealers such as Roshan Automobiles, Dolphin Automobiles, Shree Durga Motors, Kanchan Auto Parts, Roshan Auto Parts and JM Automobiles. We are conscious of the fact that no such verification was carried out by assessing officer about such debit entry /clearance in the name of automobile dealers. However, such debit entry/clearance/transfer of fund indicates that assessee is engaged in some systematic activities of automobiles dealers. Moreover, the bank account in the AXIS and PMC Bank is in the name of Mangalam Motors which clearly indicates that assessee is in a systematic activities of automobile business. Such debit entries are not doubted by assessing officer. Thus, considering the Printed from counselvise.com ITA No. 2030/Mum/2025 Shri Phookchand Lalchand Bafna 6 fact that assessing officer himself accepted other credit of Rs. 66,87,806/- as part of business receipt and estimated business income @8.00%, therefore, the cash deposit in the form of SBN is to be taken as a part of total transaction / business receipt of assessee and no separate addition is warranted. Therefore, we direct the assessing officer to treat the cash deposit during demonetization period in the form of SBN of Rs. 12, 64,000/- and other credit of Rs. 66,87,806/- as a part of business receipt and tax the same @8.00%. In the result, grounds of appeal of assessee is partly allowed. 6. In the result, the appeal of the assessee is partly allowed. Order was pronounced in the open Court on 18/08/2025. Sd/- PADMAVATHY S ACCOUNTANT MEMBER Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 18/08/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "