THAKKAR MUKESHBHAI KESHAVLAL, HUF,AHMEDABAD V. THE INCOME TAX OFFICE, WARD-3(3)(5), AHMEDABAD

ITA 1498/AHD/2024

AI Insights

The case involves Thakkar Mukeshbhai Keshavlal HUF, who appealed against the order of the CIT(A) confirming the addition of Rs.59,70,000 as unexplained cash deposits under section 69A of the Income-tax Act, 1961, for the Assessment Year 2017-18. The Assessing Officer had initially treated these deposits as unexplained, attributing them to unaccounted money introduced under the guise of cash sales during the demonetization period. The CIT(A) upheld this decision, leading to the appeal before the Tribunal. The Tribunal found merit in the assessee's arguments and additional evidence, leading to the setting aside of the CIT(A)'s order and a remand to the Assessing Officer for further verification of the new evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 313978 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TRUPTI PATEL
• Assessee Lawyers: RUPESH R. SHAH; EMAIL
• Keywords: Condonation of delay; Set aside; Additional evidence; Corroborative evidences; Rejection of books of accounts; Bonafide belief
• Section: 143(3)

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘D’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD ] ] BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER ITA No.1498/Ahd/2024 Asstt.Year : 2017-18 Thakkar Mukeshbhai Keshavlal HUF 456, 45th Floor, Titanium City Centre Nr.Sachin Tower Satellite Ahmedabad 380 015. PAN : AAAHT 1750 N Vs. ITO, Ward-3(3)(5) Vejalpur, Ahmedabad. (Applicant) (Responent) Assessee by : Shri Rupesh R. Shah, AR Revenue by : Smt.Trupti Patel, Sr.DR सुनवाई क तारीख/Date of Hearing : 06/05/2025 घोषणा क तारीख /Date of Pronouncement: 07/05/2025 आदेश आदेश आदेश आदेश/O R D E R PER MAKARAND V.MAHADEOKAR, AM: This appeal is filed by the assessee against the order dated 09.10.2023 passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] under section 250 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”] for the Assessment Year 2017–18, arising out of the assessment order dated 05.12.2019 passed by the Assessing Officer under section 143(3) of the Act. ITA No.1498/Ahd/2024 2 Facts of the Case 2. The assessee, a Hindu Undivided Family (HUF), filed its return of income for A.Y. 2017–18 on 20.07.2017 declaring total income of Rs.5,63,300/-, which was processed under section 143(1) of the Act. The case was selected for complete scrutiny under Computer Assisted Scrutiny Selection (CASS) with the reason flagged as “abnormal increase in cash deposits during the demonetization period as compared to pre- demonetization period.” In response to statutory notices under sections 143(2) and 142(1), the assessee eventually furnished a written submission, including a stock summary statement, quarterly VAT returns, and a copy of a single purchase bill dated 23.11.2016. The assessment was completed under section 143(3) of the Act. 3. In the course of assessment proceedings, the Assessing Officer noted that the assessee had deposited total cash of Rs.59,70,000/- in its bank account during the year, of which Rs. 57,80,000/- was deposited during the demonetization window into the Bank of India account no. 2076201100274 held in the name of “M/s. Ambika Jewellers, Prop: Mukesh Keshav Thakkar (HUF).” The assessee contended that the said cash was generated from cash sales made during the financial year 2016–17 and declared in the turnover of Rs.88,21,636/-, which included cash sales aggregating to Rs.57,57,257/-. In support of its explanation, the assessee submitted the following: i. A purchase bill dated 23.11.2016 from M/s. Chowksi Balmukund Jamnadas & Bros for Rs.3,04,000/-, ii. Confirmation of earlier purchase payments made to the same party of Rs.15,20,000/- on 19.11.2016 and Rs.12,16,000/- on ITA No.1498/Ahd/2024 3 21.11.2016, both immediately following cash deposits made in the bank account, iii. A stock statement showing opening stock of Rs. 53,12,529/- as on 01.04.2016, iv. Quarterly VAT returns for the period under consideration, v. A claim that the surge in cash sales between October and November 2016 was due to increased gold demand during the demonetization period when high-value currency was invalidated. 4. However, the Assessing Officer noted that these submissions lacked critical supporting evidence such as sales bills, names, addresses or PAN details of customers. No retail invoices or register of cash sales exceeding Rs.50,000/- per transaction were furnished. The AO also observed that the assessee had not furnished the sales register, cash book, or any bank reconciliation to explain the nexus between sales and deposits. From the available data, it was further noted that the assessee reported no sales in F.Y. 2015–16, reported only Rs.1,70,000/- in F.Y. 2014–15, and reported Rs.88,21,636/- in F.Y. 2016–17, out of which a large component of Rs.57,57,257/- was shown as cash sales, predominantly during the narrow window from October to 08.11.2016. 5. The AO concluded that such a sudden and steep increase in cash sales, uncorroborated by documentary evidence or third-party confirmation, lacked commercial credibility. The explanation regarding demand surge during demonetization was treated as an afterthought and a colourable device to introduce unaccounted money into the books under the guise of cash sales. The AO also noted that frequent RTGS receipts from Ashutosh Suiting Pvt. Ltd. and Vishnu Laxmi Textiles pointed to the assessee’s core business activity being textile trading and not jewellery. Consequently, the Assessing Officer held the cash deposits as unexplained money under section 69A and made an addition of Rs.59,70,000/-, which was brought to tax under section 115BBE. ITA No.1498/Ahd/2024 4 Penalty proceedings under section 271AAC were initiated separately. The total assessed income was determined at Rs.65,33,300/- as against the returned income of Rs.5,63,300/-. 6. The assessee preferred an appeal before the Ld. CIT(A) against the order of AO. In the grounds of appeal, the assessee contended that the cash deposits were fully explained and duly supported by books of account, VAT returns, stock register, and bank statements, and that the assessment was made under section 143(3) without invoking section 145(3); therefore, the AO could not disregard the books and make any separate addition under section 69A. The assessee also contended that the cash sales had been accepted in the ITR and no objection was raised by the AO on the declared turnover under section 44AD. However, despite multiple notices issued during appellate proceedings between 2020 and 2023, the assessee did not file any substantive submissions. The Ld. CIT(A), relying on the assessment order and the absence of any material rebutting the findings of the AO, dismissed the appeal and confirmed the addition of Rs.59,70,000/- under section 69A r.w.s. 115BBE of the Act. 7. Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds: 1. Both the lower authorities erred in confirming the addition made of Rs.59,70,000/-towards cash deposited in bank account under S.69A and taxed under S.115BBE without appreciating that the appellant had duly discharged the onus by proving the source of cash deposit in the bank accounts by filing complete books of accounts and Bank Statements as well as Stock Register VAT Returns may be deleted in the interest of justice as appellant says that while framing the assessment order under S.143(3) AO has not rejected the books of accounts u/s 145(3), so he cannot make any separate addition for cash deposit and hence, the addition confirmed of Rs.59,70,000/- is without any justification and liable to be deleted. 2. This 2nd Appeal is not filed late as CIT(A) passed under S.250 dated 09-10-2023but the said PDF available on portal when download not ITA No.1498/Ahd/2024 5 able openable being corrupt PDF therefore appellant has filed grievance and in response to grievance Ld. ITO Ward 3(3)(5) Ahmedabad through mail dated 01-08-2024 therefore this appeal is not filed late therefore the same may be admitted in the interest of justice. 3. That your appellant reserve right to amend/ alter/ modify any ground or grounds during the pendency of the appeal. Condonation of Delay 8. At the outset, it was noted by the Registry that there was a delay of 252 days in filing the present appeal before us. In response, the assessee filed an application for condonation of delay supported by a duly sworn affidavit dated 20.01.2025 explaining the reasons for such delay. It is submitted that the order passed by the learned CIT(A), National Faceless Appeal Centre (NFAC), Delhi under section 250 of the Act dated 09.10.2023 was not available in a readable format. Though the order was uploaded on the e-Proceedings tab of the income tax portal, the file was found to be corrupt and unopenable. The assessee, therefore, remained unaware of the contents and legal consequences of the said order. 9. The affidavit states that the first appeal was preferred through the assessee’s brother and advocate, Late Shri Arvindbhai Thakkar. However, due to his demise, no effective representation could be made in the appellate proceedings. The assessee first became aware of an outstanding demand for A.Y. 2017–18 on 15.06.2024 when he engaged a new tax consultant for filing return of income for A.Y. 2024–25. Upon inquiry, the assessee learned of the defective upload of the appellate order and immediately took action. A formal representation was made to the Jurisdictional Assessing Officer, ITO Ward 3(3)(5), Ahmedabad, on 17.06.2024 requesting a readable copy of the order. In response, the NFAC order dated 09.10.2023 was furnished to the assessee by email only on 01.08.2024. The present appeal was then filed on 16.08.2024 without any further delay. The affidavit further confirms that the delay ITA No.1498/Ahd/2024 6 was neither deliberate nor due to negligence but occurred due to circumstances beyond the control of the assessee, including the technical defect in the portal and the unfortunate demise of the assessee’s brother who was previously handling the proceedings. The affidavit is supported by contemporaneous records including grievance correspondence, email from the jurisdictional officer dated 01.08.2024, and a screenshot evidencing the inaccessible file upload on the portal. 10. Considering the sequence of events and the bona fide explanation offered, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed time. In view of the settled legal position that substantial justice should not be denied on account of technicalities, and therefore the delay of 252 days in filing the appeal is condoned. The Departmental Representative (DR) raised no objection in condoning the delay. Application for Admission of Additional Evidence 11. During the course of hearing before us, the assessee moved an application under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, seeking admission of additional evidence in the form of various documents which, according to the assessee, could not be submitted either during the assessment proceedings or before the Ld. CIT(A). The application is supported by a detailed affidavit sworn by Shri Mukeshbhai Keshavlal Thakkar, Karta of the assessee-HUF, explaining the reasons for such non-submission. It is stated therein that the assessment proceedings were attended to by the assessee’s late brother and tax consultant, Shri Arvindbhai Thakkar, who, due to a bonafide belief that only the assessee's individual case was under scrutiny and due to his medical condition and limited familiarity with the technological changes under the faceless assessment regime, could not ITA No.1498/Ahd/2024 7 properly upload or submit the relevant documents in the HUF case. The assessee has explained that complete books of accounts, cash sale bills containing details of customers including PAN/Aadhaar, VAT returns, stock register, purchase bills, and bank statements were physically produced before the Assessing Officer but were not uploaded electronically. It is further explained that the Ld. CIT(A) also disposed of the appeal ex-parte due to non-compliance arising from the same reasons. 12. The assessee has now filed a comprehensive Paper Book comprising the following: i. Cash sales bills with identity of buyers including PAN/Aadhaar ii. Stock statement showing opening gold stock of Rs. 53,12,529/- iii. Purchase bills including the RTGS transaction with M/s Chowksi Balmukund Jamnadas & Bros iv. Monthly stock statements v. VAT returns and Profit & Loss Account vi. Bank statements of both saving and current accounts with Bank of India vii. Paper books for F.Y. 2013–14 to 2015–16 substantiating past business operations. 13. The assessee contends that the aforesaid evidences are directly relevant to substantiate the explanation regarding source of cash deposits and genuineness of cash sales, and failure to produce the same earlier was due to circumstances beyond his control. It is submitted that non-consideration of these materials would cause serious prejudice to the assessee and defeat the cause of justice. 14. In view of the above, and considering the substantial nature of the documentary evidence now placed on record which goes to the root of the matter, we are satisfied that the requirements of Rule 29 are met. Accordingly, in the interest of justice and fair adjudication, the application for admission of additional evidence is allowed. The Revenue ITA No.1498/Ahd/2024 8 has not brought any material on record to rebut the factual assertions made in the supporting affidavit, nor has any serious objection been raised at the time of hearing. 15. During the course of hearing, the Authorised Representative (AR) of the assessee appeared and elaborated upon the factual matrix of the case, particularly with reference to the issue of opening stock as questioned by the Assessing Officer. The AR drew our attention to the Profit and Loss Account for the financial year 2016–17, wherein the opening stock has been disclosed at Rs.53,12,529.20, a figure duly reflected at page 149 of the paper book. It was submitted that the said figure represents the closing stock carried forward from the preceding financial year, and in support thereof, reliance was placed on a purchase invoice dated 31.03.2015 amounting to Rs.53,00,707/- raised by M/s. Shree Krishna Gold & Gems Pvt. Ltd., which forms part of the assessee’s records. Further, it was submitted that during the financial year 2015– 16, the assessee had not undertaken any sales transactions, and the entire closing stock of Rs.53,12,529/- was duly reported in the return of income filed for A.Y. 2016–17, a copy of which has been placed at page 443 of the paper book. Upon a specific query from the Bench as to whether any payment was made against the said invoice dated 31.03.2015, the AR clarified that no separate payment was made to the party during the year, as the ledger account of M/s. Shree Krishna Gold & Gems Pvt. Ltd. showed a continuing debit balance of Rs.56,55,207/- as on 31.03.2015, as evident from the ledger account extract placed at page 371 of the paper book. 16. We have carefully considered the rival contentions and perused the material available on record including the voluminous additional evidence filed by the assessee in support of the explanation for cash deposits treated as unexplained under section 69A of the Act. The ITA No.1498/Ahd/2024 9 additional documents include books of accounts, cash sales bills containing identity details of purchasers, VAT returns, purchase bills, stock registers, profit and loss accounts, bank statements, and supporting financial records for preceding years. The assessee has explained that these records could not be properly submitted earlier due to circumstances beyond his control, which explanation has already been accepted by us while admitting the additional evidence under Rule 29 of the Appellate Tribunal Rules, 1963. Upon examining the nature and extent of such additional material placed before us, we are of the considered view that verification of the same is essential for proper adjudication of the issue at hand. The evidentiary contents involve complex factual aspects including reconciliation of purchases, stock position, movement of inventory, and sale transactions during the period relevant to the cash deposits under question. These are matters which fall within the domain of fact-finding and require examination and verification at the level of the Assessing Officer. We also note that during the course of hearing, the learned Departmental Representative did not raise any objection to the matter being restored to the file of the Assessing Officer for the purpose of verification of additional evidence. Accordingly, in the interest of justice and fair play, we deem it appropriate to set aside the impugned order of the CIT(A) and restore the matter to the file of the Assessing Officer with a direction to verify the additional evidences now placed on record and to pass a fresh order in accordance with law, after granting reasonable opportunity of hearing to the assessee. 17. In view of the foregoing discussion and in the interest of substantial justice, the impugned order passed by the Ld. CIT(A) is hereby set aside. The matter is restored to the file of the Assessing Officer for denovo adjudication after carrying out necessary verification of the ITA No.1498/Ahd/2024 10 additional evidence now placed on record by the assessee. The Assessing Officer shall grant adequate opportunity to the assessee to present his case and furnish any further explanation or supporting material as may be required. The assessee is also directed to extend full cooperation in the remand proceedings. In case the assessee fails to comply or does not cooperate in the remand proceedings, the Assessing Officer shall be at liberty to decide the matter on the basis of material already available on record in accordance with law. 18. In the result, the appeal of the assessee is treated as allowed for statistical purposes. Order pronounced in the Court on 7th May, 2025 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 07/05/2025 "