ZIAUL WARIS ANSARI,MUMBAI V. INCOME TAX OFFICER-20(3)(1), MUMBAI

ITA 6008/MUM/2024

AI Insights

The case involves Ziaul Warfis Ansari, who appealed against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2017-18. The primary contention was regarding the application of an 8% net profit ratio on a revised turnover figure, which the assessee argued was incorrect as the provisions of section 44AD were not applicable to him. The Assessing Officer had reopened the assessment due to substantial cash deposits in the assessee's bank account during the demonetization period, which were alleged to be unexplained. The CIT(A) had partially relieved the assessee by considering other income while calculating the turnover discrepancy but upheld the addition of Rs 1,46,43,460 as business income. The Tribunal found that the CIT(A) did not adequately consider the materials submitted by the assessee and remitted the case back for a thorough examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 778187 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2017-2018
• Appeal Filed On: 21-11-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNIL CHOUDHARY
• Keywords: Business income; Principle of natural justice
• Section: 148; 44AD

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “G” BENCH, MUMBAI BEFORE SAKTIJIT DEY, VICE PRESIDENT & MS PADMAVATHY S, AM I.T.A. No. 6008/Mum/2024 (Assessment Year: 2017-18) Ziaul Warfis Ansari, 217, Fidvi Manzil, Maulana Azad Road, Madanpura, Maharashtra-400080. PAN: AHUPA6295N Vs. ITO-20(3)(1), Income Tax Office, Piramal Chambers, Mumbai-400012. Appellant) : Respondent) Assessee / Appellant by : None Revenue / Respondent by : Shri Swapnil Choudhary, CIT-DR Date of Hearing : 11.09.2025 Date of Pronouncement : 06.10.2025 O R D E R Per Padmavathy S, AM: This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 22.09.2024 for Assessment Years (AY) 2017-18. The assessee raised the following grounds of appeal: “The Learned Commissioner of Income Tax (Appeals) (Ld. CIT(A)] erred in confirming the action of Assessing Officer and directing the Assessing Officer to apply 8% net profit ratio on the alleged revised shortfall turnover figure without rejecting the audited books of accounts and without understanding Printed from counselvise.com 2 ITA No. 6008/Mum/2024 Ziaul Warfis Ansari that the provisions of section 44AD are not applicable to your appellant and thereby erred in not directing the AO to re-assess income at Rs. 14,95,311/- as per returned income.” 2. The assessee is an individual and did not file the return of income for AY 2017-18. The Assessing officer (AO) reopened the assessment for the reason that the assessee is running a proprietary business in the name of and style Zia Stores and the cumulative cash deposit in the Current A/c is more than Rs. 1,00,00,000/- during the demonization period. The AO issued various notices to the assessee and the assessee filed response to the last show-cause notice issued on 01.05.2023 stating that the return in response to notice under section 148 has been filed on 28.03.2023. The assessee also raised objections to the proposed variations. The assessee also filed the financial statements along with Audit Report in response to the subsequent notice issued by the AO. The assessee also submitted that the source for the cash deposit is the cash sales and therefore the same cannot be treated as unexplained considering cash sales register. The AO after perusing the details furnished by the assessee held that the total receipt / turnover as reflected in the financial statement is less than the credits in the bank account during the year under consideration. Accordingly, the AO held that the assessee has understated the receipts /turnover to the tune of Rs. 18,30,43,248/- and proceeded to apply 8% on the same to be treated as the business income of the assessee amounting to Rs. 1,46,43,460/-. Aggrieved assessee filed further appeal before the CIT(A). Before the CIT(A) the assessee submitted that the AO failed to consider the other income to the tune of Rs. 6,75,96,416/- while arriving at the difference between the amount reflected in the bank statement and the turnover as per the financial statements. The assessee further submitted that the AO should not have applied net profit ratio at 8% without rejecting the books of accounts. The assessee made the alternate plea before the CIT(A) that the credit for other income should be Printed from counselvise.com 3 ITA No. 6008/Mum/2024 Ziaul Warfis Ansari considered while making the addition towards business income. The CIT(A) after considering the submissions of the assessee held that “7. On perusal of the submissions made by the appellant and the Assessment order of the AO it is observed that the AO has made an addition of Rs 1,46,43,460/- on account of shortfall of turnover of Rs. 18,30,43,248/- between the turnover shown in the Audit Report and the total credits available in the Bank account. During the appellate proceedings the appellant has contended that the AO has considered the total credits appearing in the Bank account as turnover of the business of the appellant whereas the credits in the Bank account could also be due to financing received by the appellant Moreover the appellant has also requested that the indirect income of Rs 6,75,96,416/-which has been separately shown by the appellant but appearing in the bank statement should be given credit to and reduced form the turnover considered by the AO and then a net profit % of 8% should be applied. In view of the submissions made by the appellant and no concrete finding given by the AO as to why the entire credits should be considered as total turnover especially when Rs 6,75,96,416/- forms part of the indirect income, the addition of Rs 1,46,43,460/- cannot be sustained Further the AO is directed to reduce Rs 6,75,96,416/- being indirect income separately shown by the appellant from the turnover of Rs 18,30.43.248/- which is considered as difference of turnover between bank credits and turnover appearing in the P&L account and then apply 8% net profit percentage on the same.” 3. The ld. DR made a detailed written submission in support of the orders of the lower authorities which is taken on record. The ld. DR submitted that the AO/CIT(A) have correctly made the addition considering the huge discrepancies between the assessee's declared turnover and the total credits in the bank account. The ld. DR argued that inspite of giving several opportunities the assessee has not provided any proper explanation for the difference and also did not reconcile the difference. The ld. DR further argued that the CIT(A) has given partial relief to the assessee by fairly considering the submission to take into account the other income declared by the assessee while arriving at the difference. The ld. DR also argued that since the assessee has not discharged the onus of providing proper explanation and documentary evidences for the huge difference, the lower authorities have Printed from counselvise.com 4 ITA No. 6008/Mum/2024 Ziaul Warfis Ansari correctly considered the same as undisclosed turnover to make an addition by applying the profit ratio. 4. None appeared on behalf of the assessee and we heard the DR. The assessee for the year under consideration did not file the return of income. The assessee's case was reopened for the reason that the there is huge cash deposit in assessee's account and that the assessee did not file the return of income. In response to the various notices issued by the AO from July 2022 to March 2023 the assessee did not file any response nor did the assessee file any return under section 148. The assessee in response to the final show-cause notice filed the response stating that the return has been filed. On perusal of the reply filed by the assessee before the AO, we notice that the assessee has primarily contended applying 8% on the differential turnover stating that the said percentage prescribed under section 44AB cannot be applied. We further notice that the assessee submitted the cash sales register as the source for the cash deposit in the Bank. We also notice that the assessee did not provide any explanation with regard to the difference between the total credits in the bank account and the total turnover as reflected in the P&L A/c which the AO proceeded to consider as income understated. Even before the CIT(A) the assessee did not file any further documentary evidences or reconciliations. The CIT(A) has considered the alternate plea of the assessee that the other income to the tune of Rs 6,75,96,416/- should be considered while arriving at the difference between the total credits and the total turnover as reflected in the P&L A/c. Considering the facts as elaborated hereinabove, we are of the considered view that the addition as sustained by the CIT(A) needs proper examination on merits for the reason that all the credits in bank account cannot be arising out of the turnover of the assessee and that in the interest of natural justice the assessee may be given one final opportunity to file the explanation / Printed from counselvise.com 5 ITA No. 6008/Mum/2024 Ziaul Warfis Ansari reconciliation for the difference. Further we notice from the orders of the lower authorities that no findings are recorded with regard to the materials already submitted such as the financial statements, audit report, cash sales register, etc. Therefore, we deem it fit to remit the appeal back to the CIT(A) to examine the impugned issue on merits based on materials already submitted and by calling for other relevant details as may be required to decide the case in accordance with law. The assessee is directed to file all the necessary details as may be called for without seeking unnecessary adjournments and co-operate with appellate proceedings. It is ordered accordingly. 5. In result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 06-10-2025. Sd/- Sd/- (SAKTIJIT DEY) (PADMAVATHY S) Vice President Accountant Member *SK, Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "