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NILESH JAIN,INDORE vs INCOME TAX OFFICER 1(1), INDORE, INDORE | BharatTax

NILESH JAIN,INDORE vs. INCOME TAX OFFICER 1(1), INDORE, INDORE

ITA 631/IND/2025Status: DisposedITAT Indore17 April 2026AY 2011-1217 pages

AI SummaryPartly Allowed

Facts

The Assessing Officer (AO) reopened the assessment of the assessee, a small trader, for AY 2011-12 due to cash deposits of Rs. 31,75,000/-. The AO accepted part of the explanation for the deposits but added Rs. 6,57,923/-, representing alleged recovery from debtors, to the assessee's income under section 68, which was upheld by the CIT(A).

Held

The Tribunal noted that the assessee, being a small trader exempted from maintaining books of account and opting for presumptive taxation, had provided supporting documents for the debtor recoveries. While the AO's addition was not fully sustainable, to bring the litigation to an end, the Tribunal accepted the assessee's proposal to tax 8% of the disputed amount as business income.

Key Issues

Whether the addition of Rs. 6,57,923/- made under Section 68 for alleged unexplained cash credit (recovery from debtors) is sustainable when the assessee is opting for presumptive taxation and not maintaining regular books of account.

Sections Cited

143(3), 147, 148, 44AD, 68, 253(5)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, INDORE BENCH, INDORE

Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI

For Appellant: Shri Pankaj Mogra, AR

For Respondent: Shri Ashish Porwal, Sr. DR

Hearing: 13.04.2026Pronounced: 17.04.2026

आदेश/ O R D E R

Per B.M. Biyani, A.M.:

Feeling aggrieved by order of first appeal dated 26.09.2024 passed by learned Commissioner of Income-Tax (Appeals)-Addl/JCIT(A)-12, Mumbai [“CIT(A)”], which in turn arises out of assessment-order dated 10.12.2018 passed by learned ITO-1(1), Indore [“AO”] u/s 143(3)/147 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2011-12, the assessee has filed this appeal.

2.

The registry has informed that the present appeal is delayed by 231 days and therefore time-barred. The assessee has filed an application/

Page 1 of 17

Nilesh Jain ITA No. 631/Ind/2025 – AY 2011-12 affidavit for condonation of delay; the same is scanned and re-produced for

an immediate reference:

Page 2 of 17

Nilesh Jain ITA No. 631/Ind/2025 – AY 2011-12 3. The averments made by assessee in above affidavit, which are self-

explanatory and which do not require repetition, were discussed and the Ld.

DR for revenue does not have any objection if the bench condones delay and

accordingly left it to the wisdom of bench. We have considered the

explanation advanced by assessee and in absence of any contrary fact or

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Nilesh Jain ITA No. 631/Ind/2025 – AY 2011-12 deposited in his bank account on account of recovery from the debtors and has added the said amount of Rs. 6,57,923/- to the Total Income of the Assessee u/s 68 of the act while passing the Re-assessment Order passed U/s 143(3)/147 of the Income Tax Act dated 10/12/2018. A.6]. That against the said order the appellant had filed an appeal before the Ld. CIT(Appeals), however the Ld. CIT(Appeals) has maintained the said addition of Rs. 6,57,923/- made by the Ld. AO. Vide his order dt. 26.09.2024 A.7] The present appeal before the Hon'ble Bench has been preferred by the Appellant against the order as passed by the Ld. AO u/s 143(3)/147 of the Income Tax Act dated 10/12/2018 for the Assessment Year 2011-12 and confirmed by the Ld. CIT(A) vide order passed on 26.09.2024. SUBMISSIONS IN THE APPEAL ON MERITS OF THE CASE: 1.1] That in the present appeal the appellant has challenged the addition made by the Ld. A.O. of Rs. 6,57,923/- to his total income as his Income from undisclosed sources u/s 68 of the Act even when the amount was deposited by him in the Saving Bank Account on account of recovery from the Debtors. 1.2) That the appellant is an individual and a small trader who was carrying on the business of trading of Cotton Seed Oil Cake (Khali) at very small village Chandrawatiganj near Indore. He has filed the return of Total income in response to the notice u/s 148 for the year under consideration declaring the Business Income u/s 44AD of the Act showing business income of Rs. 1,76,000/-. Copy of the same is available on pages 2 to 3 of the paper book 1.3] That during the course of Assessment Proceedings the Ld. A.O. has asked from the appellant to furnish the details about the source of cash deposit of Rs. 31,75,000/- in his saving bank accounts. 1.4) That appellant had duly submitted the details in respect of cash deposited by him the bank account. That he has substantiated the Total amount of Cash deposited in bank account of Rs. 31,75,000/- by explaining that an amount of Rs. 22,00,000 in cash was deposited by him in Bank out of the current year's sales, Rs. 2,94,000 was deposited by him in Bank out of the cash withdrawn from bank, and Rs. 6,57,923 was deposited out of realization from debtors and the balance amount of Rs. 23077/- was deposited by him out of the available cash balance. Copy of Bank Account of the assessee for the year under consideration duly showing the said transactions was also filed before the Ld. A.O. Copy of the same is available on pages 4 to 6 of the paper book 1.5] It was explained by the appellant to the Ld. AO that he is a small trader and was doing trading business during the year under consideration at a very small scale. He was not maintaining day-to-day books of accounts. The appellant had filed a Copy of Capital Account and Statement of affairs for the year ended 31.03.2010

Nilesh Jain ITA No. 631/Ind/2025 – AY 2011-12 with Submission filed before A.O. wherein the amount of sum receivable from the Debtors of Rs. 6,57,923/ was also duly reflected in the Balance Sheet. 1.6] That to substantiate the details of Debtors the appellant has also duly filed a statement giving partywise details of Debtors along with copies of confirmation letters of all the said parties duly signed by them mentioning their postal address with copy of their aadhar card confirming the amount paid by them to the assessee. Copy of the same are available on pages 8 to 31 of the paper book. 1.7] Thus it was duly demonstrated by the appellant before the Ld. AO that amount of Cash of Rs. 6,57,923/- was received by him out of the recovery made from the Debtors and the said amount was deposited by him in the Bank Account. 1.8) It is submitted that appellant has filed the return of income by declaring Income from the Business u/s 44AD of the Act thus he was not required to maintain the regular books of account however the source of Cash deposited in the bank account was properly explained by him by way of all the documents filed before the A.O. and moreover these facts are clearly verifiable. Thus the appellant had fully explained the source of Cash deposited in his bank account of Rs. 6,7,923/- from recovery from Debtors and justified the genuineness of Cash Deposited by him. 1.9] However, while passing the assessment order it is respectfully submitted that the Ld. AO has not properly appreciated the facts of the case and the submission filed before him and has made an addition of amount of Rs. 6,57,923/- to the Total income purely on Conjectures and surmises. 1.10] The Ld. A.O. has not made any efforts to justify the addition made by him. He has neither issued any notice u/s 133(6) or nor has he issued any summons to the Debtors parties to justify his action for addition made by him u/s 68 of the Act in the Assessment Order. He has merely disbelieved the papers filed by the appellant and has ignored the details and explanation given by the Assessee and has added the entire amount of Rs. 657923/- received from the debtors which was deposited in the bank account to the total income of the assessee by treating the same as his Income from Undisclosed Sources u/s 68 of the Act. 1.11] The assessee has furnished the details of all the Debtors and they have confirmed that they have given the amount to the assessee towards outstanding amount. Thus the amount as deposited in the bank account through recovery made from Debtors cannot be regarded as Unexplained Income of the assessee u/s 68 of the Act. The Addition so made by the Ld. A.O. of Rs. 6,57,923/- was therefore factually as well as and legally not correct. You are therefore very kindly requested to delete the same in full. 02) Cash deposited in the Bank Account cannot be taxed under section 68 of the Act where the assessee was not maintaining books of account and has opted the presumptive taxation.

Nilesh Jain ITA No. 631/Ind/2025 – AY 2011-12 2.1] It may further be noted that during the year under consideration the assessee was doing trading business and has filed his return of income u/s 44AD of the Income Tax Act. 2.2] That appellant was not maintaining day-to-day books of accounts and has opted for tax in presumptive tax scheme u/s 44AD. It may be noted that the scheme of presumptive taxation had been provided under the law in order to avoid long drawn process of assessment in case of small traders or in case of businesses where incomes were almost of static quantum of all businesses. 2.3] It is submitted that since the assessee was maintaining books of account and has opted the presumptive taxation, the amount of cash as deposited by the assessee could not be taxed under section 68 of the Act. For this preposition reliance is placed on the following decisions mentioned below. >CIT v. Surinder Pal Anand [2010] 192 Taxman 264 (Punj. Har.), >Nand Lal Popli v. Dy. CIT [2016] 71 taxmann.com 246/160 ITD 413 (Chd. Trib.) 2.4] In view of the above it is submitted that the addition as made by the Ld. A.O. to the Total income u/s 68 of the Act of Rs. 6,57,923/- is wrong and uncalled for. The same requires to be deleted in full. 03] Addition u/s 68 of the Act cannot be be made on account of cash deposited in bank account if an assessee is not liable to maintain the regular books of accounts. 3.11. That the appellant is a small trader and was doing trading business of Cotton Seed Oil Cake during the year under consideration. The appellant had not maintained day-to-day books of accounts and has filed his return of income u/s 44AD of the Income Tax Act. 3.2] That while passing the Re-assessment Order passed U/s 143(3)/147 of the Income Tax Act, the Ld. A.O. had added an amount of Rs. 6,57,923/ to the total income of the appellant u/s 68 of the act on account of cash deposited in the bank account by not accepting the explanation of the appellant that the said amount was deposited by him on account of recovery from the debtors. 3.3] It is submitted that Ses. 68 of the Act deals with unexplained cash credits. It provides that if any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, then the sum so credited may be charged to income- tax as the income of the assessee of that previous year. 3.4.1) Thus to invoke the provisions of Sec. 68, one of the prerequisite condition is that any sum must be found credited in the books of account of the assessee maintained for any previous year.

Nilesh Jain ITA No. 631/Ind/2025 – AY 2011-12 3.4.2] The appellant was a small trader and was not maintaining the regular books of accounts. He has also filed the Return of Income u/s 44AD of the Act. 3.4.3] That while passing the Assessment Order, the Ld. A.O. has made addition in respect of Amount of cash deposited in the Bank account and Bank Statements are not considered as the books of accounts hence it is submitted that on the peculiar facts of the case of the appellant, the provisions of Sec. 68 cannot be invoked. For this preposition reliance is placed on the decisions mentioned below. > Hon'ble Bombay High Court in the case of CIT v. Bhaichand N. Gandhi [1982] 11 Taxman 59/141 ITR 67 (Bom.) > Hon'ble ITAT Mumbai Bench in the case of Mehul V. Vyas v. ITO [2017] 80 taxmann.com 311/164 ITD 296 (Mum. - Trib.) > Hon'ble Ahmedabad Bench of ITAT In the case of Smt. Ramilaben B. Patel v. ITO [2018] 100 taxmann.com 325 (Ahd. - Trib.) > Hon'ble Delhi Bench of ITAT in the case Amitabh Bansal v. ITO [2019] 102 taxmann.com 229 (Delhi Trib.) 3.5]. In following decisions it has been held that bank pass book or bank statement cannot be regarded as the books of accounts of the assessee for the purposes of section 68 of the Act: >Rameshbhai Somabhai Patel vs ITO (ITA No- 1864/AHD/2014) dated 19.04.2018 >Smt. Nirmala Devi vs ITO (2017) 88 taxmann.com 870 (Jodhpur-Trib.) >Smt. Bhagwati Devi v. ITO [1993] 47 ITD 58 (Cal.) >ITO v. Kamal Kumar Mishra [2013] 33 taxmann.com 610 (Lubknow-Trib.) >Smt. Ramilaben B Patel vs ITO [2018] 100 taxmann.com 325 (Ahmedabad Trib.) >ITO vs. Om Prakash Sharma (ITA 2556/Del/2009) >Babbal Bhatia vs. ITO (2018) 65 ITR (Trib.) 500 (Delhi) >Satish Kumar v ITO (2019) 198 TTJ (Asr) 114 3.6) In view of the above it is submitted that the addition as made by the Ld. A.O. to the Total income of the assessee u/s 68 of the Act by considering the bank passbook/bank statement as books of accounts is wrong. The addition so made of Rs. 6,57,923/- u/s 68 of the Act therefore requires to be deleted in full.