THE ACIT, CIRCLE-1(1)(1), AHMEDABAD V. DHANESHBHAI PARSHOTTAMDAS SONI, AHMEDABAD

ITA 179/AHD/2023

AI Insights

The case involves an appeal by the Revenue against the decision of the Commissioner of Income Tax (Appeals), which had deleted additions made by the Assessing Officer under sections 68 and 143(3) of the Income Tax Act, 1961. The additions pertained to unexplained cash credits and disallowed interest on unsecured loans, which the Assessing Officer had deemed as unexplained income. The CIT(A) found that the sources of cash deposits were recorded in the books and thus not unexplained. The Revenue contended that the CIT(A) erred in deleting these additions without a Remand Report from the Assessing Officer. The Tribunal agreed with the Revenue, emphasizing the need for adherence to procedural norms and the principles of natural justice.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474788 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: Laxmichand Baijnath v. CIT; 35 ITR 416, G.K. Contractor (2009) 19 DTR 305 (Raj.), CIT Vs Dharamdev Finance (P.) Ltd. [2014] 43 taxmann.com 395
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside; Business income; Unexplained cash credit; Rejection of books of accounts; Principle of natural justice; Bogus
• Section: 143(3); 68; 43; 22

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “B” BENCH Before: Smt. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member The ACIT, Circle-1(1)(1), Ahmedabad (Appellant) Vs Dhaneshbhai Parshottamdas Soni 2294/1 Chanothi Masjid, Manek Chowk, Ahmedabad-380001 Gujarat PAN: ADIPS1555M (Respondent) Revenue Represented: Shri V Nandakumar, CIT-DR Assessee Represented: Shri S.N. Soparkar, Sr. Adv. & Shri Parin Shah, A.R. Date of hearing : 25-10-2024 Date of pronouncement : 23-01-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:- This appeal is filed by the Revenue as against the appellate order dated 24.02.2023 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2017-18. ITA No. 179/Ahd/2023 Assessment Year 2017-18 I.T.A No. 179/Ahd/2023 A.Y. 2017-18 Page No ACIT Vs. Dhaneshbhai Parshottamdas Soni 2 2. Brief facts of the case is that the assessee is an individual engaged in the business of trading and manufacturing of Gold, Silver and Diamond Ornaments. For the Asst. Year 2017-18, assessee filed its Return of Income on 03-11-2017 declaring total income of Rs.3,23,96,233/-. The return was taken up for scrutiny assessment. The assessee made cash deposit during demonetization period of Rs.6,31,00,000/- with the Specified Bank Notes, thus rejected the books of accounts and made addition of Rs.7,76,10,000/- and also made addition on the unsecured loans availed from 22 parties of Rs.45,90,80,505/- as unexplained income u/s. 68 of the Act and also disallowed interest paid of Rs.1,44,19,775/- on the above unsecured loans. Further the A.O. also made difference in the GP of Rs.39,49,382/- and assessed the total income at Rs.58,74,55,892/- and demanded tax thereon. 3. Aggrieved against the same, assessee filed an appeal before Ld. CIT(A). During the appellate proceedings, the Ld. CIT(A) called for a Remand Report on 13-01-2023 and a reminder was issued on 13- 02-2023. However Remand Report was not received from the A.O. till passing of the appellate order on 24-02-2023. Thus the Ld. CIT(A) deleted the additions by observing as follows: ”5.7 In para 8 of the assessment order the assessing officer commented that on verification of return of income, audit report and profit and loss account, it was observed that assessee has claimed that source of cash deposits is from sales of goods and payment received from debtors only. In other words, source of cash deposits is duly recorded and reflected in their books of account and as per their claim it has been disclosed in its return In this circumstance it can be held that the addition u/s 68 was not based on any specific finding by the assessing officer The AO could not point out any document or entry in books to show that the cash deposits made by the appellant is from bogus transactions. The AO stated that cash I.T.A No. 179/Ahd/2023 A.Y. 2017-18 Page No ACIT Vs. Dhaneshbhai Parshottamdas Soni 3 sales may be inflated but as held by supreme court in the case of Laxmichand Baijnath v. CIT; 35 ITR 416, that amount credited in business books can normally be presumed as business receipts. So it is clear all source of cash deposits are recorded in the books of the appellant. Once the sources are reflected in the books there is no question of unexplained cash credit as envisaged in section 68 of the Act. The Rajasthan High Court which is the jurisdictional court of the appellant has held in the case of G.K. Contractor (2009) 19 DTR 305 (Raj.) that the AO having estimated the higher profit rate on total contract receipts after rejection of the books of account Invoking the provisions of s. 145(3), no separate additions can be made on account of unexplained cash credit under s. 68 of the Act of 1961. As per discussions above it is held that the Assessing Officer has erred in making the addition of Rs 7,76,10,000/-on account of unexplained cash credit under section 68 of the Act. Hence grounds 3, 4 and 5 are allowed. I have verified the submissions along with individual bank statements and ledger of all 22 lenders as above and found that entire loan has been received through account payee cheques and there is no evidence on record which can prove that such loan taken by appellant is bogus. Hence the addition under section 68 on account of unsecured loan received during year under consideration of the Act is factually wrong and the corresponding disallowance of interest Rs 1.44.19 775 is also unfounded. As a result grounds 6 and 7 are allowed.” 4. Aggrieved against the same, Revenue is in appeal before us raising the following Grounds of Appeal: 1. \"Whether on facts and circumstances and in law, the Ld. CIT(A) has erred in deleting undisclosed income in the form of unaccounted cash amounting to Rs. 7,76,10,000/-\". 2. \"Whether on facts and circumstances and in law, the Ld. CIT(A) has erred in deleting the addition on account of unsecured loan of Rs.45,90,80,505/- even when the assessee has failed to discharge the onus of establishing the identity, creditworthiness and genuineness of the transactions.\" 3.\" Whether on facts and circumstances and in law, the Ld. CIT(A) has erred in deleting the corresponding addition on account of interest I.T.A No. 179/Ahd/2023 A.Y. 2017-18 Page No ACIT Vs. Dhaneshbhai Parshottamdas Soni 4 expenditure of Rs.1,44,19,775/- on unsecured loans which were not proved genuine\". 4. \"The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary\". 5. \"It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored\". 5. Ld. CIT-DR appearing for the Revenue submitted that the Ld. CIT(A) without receiving the Remand Report from the Assessing Officer deleted the additions made by the A.O. Therefore the matter be set aside back to the file of Ld. CIT(A) to decide the issue on merits after considering the Remand Report from the Assessing Officer. 6. Per contra, the assessee has filed a Paper Book and Case Laws Compilation, cash sales made during the demonetization period and also filed the Ledger confirmation, Bank Statement and Income Tax Returns of the 22 creditors and pleaded the above additions made by the A.O. was rightly deleted by the Ld. CIT(A). 6.1. The assessee further submitted that Rule 46A does not mandate Ld. CIT(A) to wait for the Remand Report. Sub clause (3) only provides a reasonable opportunity be given to the A.O. to respond. Since there is no additional documents filed by the assessee before Ld. CIT(A), the deletion made by the Ld. CIT(A) who has co-terminus power as that of the Assessing Officer. The deletion made by the Ld. CIT(A) does not require any interference and the appeal is liable to be dismissed and relied upon I.T.A No. 179/Ahd/2023 A.Y. 2017-18 Page No ACIT Vs. Dhaneshbhai Parshottamdas Soni 5 Jurisdictional High Court in the case of CIT Vs Dharamdev Finance (P.) Ltd. reported in [2014] 43 taxmann.com 395. 7. We have given our thoughtful consideration and perused the materials available on record including the Paper Book filed by the assessee. It is undisputed fact that the Ld. CIT(A) called for a Remand Report from the Assessing Officer on 13-01-2023 and issued a reminder on 13-02-2023. It is not clear what is the time limit given by Ld. CIT(A) to the Assessing Officer to respond to the above notices. However Ld. CIT(A) passed the appellate order on 24-02-2023. Though Rule 46A(3) prescribes reasonable opportunity be given to the A.O. to response to the Remand Report. Here, in this case, this reasonable opportunity is not given to the Assessing Officer. Without such response, the Ld. CIT(A) has deleted the additions which is in our considered view is not within the provisions of law. 8. The Jurisdictional High Court in the case of Dharamdev Finance (P.) Ltd. (cited supra) held that since remand report was obtained by Commissioner (Appeals) from Assessing Officer and fullest opportunity was provided to both sides, there was no violation of Rule 46A and justified the decision of Ld. CIT(A) in that case. Whereas in the present case, only two opportunities of hearing given to the A.O. to make response that too within a period of 30 days. Therefore, in our considered view, the Ld. CIT(A) is not correct in deleting the additions without hearing the Assessing Officer. Therefore in the interest of Principle of Natural Justice, we deem it fit to set aside the matter back to the file of Ld. CIT(A) to get I.T.A No. 179/Ahd/2023 A.Y. 2017-18 Page No ACIT Vs. Dhaneshbhai Parshottamdas Soni 6 Remand Report from the Assessing Officer by giving one more opportunity of hearing to the Assessing Officer and decide the appeal on merits of the case. 9. In the result, the appeal filed by the Revenue is allowed for statistical purpose. Order pronounced in the open court on 23-01-2025 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 23/01/2025 आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपीलȣय अͬधकरण, अहमदाबाद "