BALBIR GURNANI,MUMBAI vs. I.T.O., WARD-2(5), KALYAN

PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated
18.03.2024 passed by the Ld. Commissioner of Income-tax
(Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld.
CIT(A)’] for assessment year 2016-17, raising sole ground as under:
a) On the facts and circumstances of the case and in law, the learned CIT(A) was not justified in confirming addition of 4271955/- as unexplained cash credit u/s 68 considering the fact that the amount deposited in bank was from opening cash balance Rs.
during the pe amount Rs. 2
to be taxed u amount depo
2. Briefly stated, individual, is engage garments under the Collection. The busin
Gauri Market, near
Thane. For the year return of income o
₹2,65,880/-, compri
₹1,50,881/- as inter accounts, and post declared his busines
44AD of the Income
Act”).
2.1 The return was 143(2) of the Act wa assessee. In the cou
Officer noticed su
₹43,37,200/- in vario
The particulars of s
Officer, are as follows
ITA

1456355/- and cash withdrawn Rs. 3
eriod (before depositing the cash) and the 2462439/- to be treated as business rec u/s 44AD by adapting certain percentage osited facts of the case are that th ed in the business of trading e proprietary concern styled ness is carried on from Shop No r Jai Gajanand Market, Ulhas r under consideration, the ass on 09.03.2017 declaring a t sing of ₹1,25,000/- as busine rest income from fixed deposits office deposits. The assessee c ss income on presumptive basi
-tax Act, 1961 (hereinafter refe selected for scrutiny, and notic s issued on 18.09.2017, duly s urse of assessment proceedings ubstantial cash deposits a ous bank accounts maintained b such deposits, as recorded by s:
Balbir Gurnani
2
A No. 3124/MUM/2025
353161/- e balance ceipt and e of total he assessee, an g in readymade as M/s Pappu s. 9 and 10, Jai snagar, District sessee filed his otal income of ess income and s, savings bank claimed to have s under section erred to as “the ce under section served upon the s, the Assessing aggregating to by the assessee.
y the Assessing

S.No.
Name of t
1
Bank of In 2
State Ban
3
Dena Ban

Total
2.2 When called u reconciliation statem sources:
Particu
Out of opening cash
Out of cash withdraw
Advances received a Unsecured loan recei
Tota
2.3 The Assessing explanation. In resp
₹14,56,355/-, he ob
2015-16, the asses
₹6,50,000/- with a n
The Assessing Office opening cash balan
ITA the bank Account no.
Cash dep ndia
007310100008990
20,75,600
nk of India 34928450433
3,03,600/
nk
045910027757
19,58,000
43,37,200
upon to explain, the assesse ment attributing the deposits t ulars
Amount (In Rs balance
14,56,355/- wal from bank
16,34,600/- against property
8,21,000/- ipt
3,60,000/- al
42,71,955/-
Officer, however, was not sat pect of the claimed opening c bserved that in the return of i ssee had declared gross re net profit of ₹1,30,700/- under r therefore concluded that the ce was wholly inconsistent w
Balbir Gurnani
3
A No. 3124/MUM/2025
posited (In Rs.)
0/-
/-
0/-
0/- ee furnished a to the following s.) tisfied with the cash balance of income for A.Y.
eceipts of only r section 44AD.
claim of a large with the meagre turnover. It was also 2016-17 had both b view, manipulation o
2.4 Regarding the e from the bank, he re under:
Date
2
2.5 The Assessing effected in February made in earlier mont
He thus held that the source of deposits of 2.6 As regards the received as advance that the entire con property transaction
Accordingly, the claim was disbelieved for w
ITA o noted that the returns for A.Y een filed on the same date, su f figures of cash in hand.
explanation of the assessee of c eproduced the details filed by e of withdrawals
Amount withdrawn
17.08.2015
54,000/-
20.11.2015
12,000/-
03.02.2016
7,00,000/-
03.02.2016
5,00,000/-
04.02.2016
4,07,000/-
Total
16,73,000/-
Officer observed that most wi
2016, whereas significant dep ths, particularly November and D e withdrawals could not reason
Rs. 16,34,600/-.
e sum of ₹8,21,000/- claimed against property, the Assessin nsideration of ₹25,00,000/- fo n was received through ban m of having received part consid want of supporting evidence.
Balbir Gurnani
4
A No. 3124/MUM/2025
Ys. 2015-16 and uggesting, in his cash withdrawal the assessee as ithdrawals were posits had been December 2015. ably explain the d to have been ng Officer noted or the relevant nking channels.
deration in cash

The difficulty with th had already declared and offered profit admission, would th stream of business ac
6.4 It is well-settled of purchases already the profit element m explained. However, undisclosed business investment in such p has been furnished generate these undis the deposits represen the investment in un be accounted for.
6.5 In the present c required to be deter context of the assess cycle ordinarily span such cycles would ha in October/Novembe
₹28,15,600/- as pro and applying the pro
ITA his argument lies in the fact th d his disclosed turnover unde thereon. The present receipts herefore represent a parallel a ctivity.
d that where undisclosed sales y recorded in the books, an add may suffice, since the source o where the entire transaction s, the assessee must demonstra purchases. In the present case, as to the source of goods purp sclosed receipts. If, as the ass nt turnover of such clandestine ndisclosed purchases would nec case, the quantum of unexplain rmined by a reverse working see’s garment trading business ns three to four months, it is ap ave been completed by the time er 2015. Treating the total ca ceeds of undisclosed sales up ofit margin of 8%, the net sales
Balbir Gurnani
9
A No. 3124/MUM/2025
hat the assessee er section 44AD s, by his own and undisclosed are effected out dition limited to of purchases is n represents an ate the source of no explanation portedly sold to sessee suggests, e business, then cessarily have to ned purchases is method. In the s, where a trade pparent that two of cash deposits ash deposits of to that period, proceeds at the commencement of ₹23,90,035/-, repres the first cycle. On a preceding cycle, the u at ₹23,70,912/- at th computation demons during the year, the ₹23,70,912/- toward notional profit margi source of such inves these circumstances embedded in the cas as the substantial un wholly unaccounted f
6.7 In the decision assessee, namely
Taxmann.com 348 (M purchases correspon appear from the reco were supported by limited to the net pr undisclosed sales ar the books of account of the source of such ITA the second trade cycle wo enting the undisclosed turnove further application of 8% profi unexplained purchase compone he commencement of the first t strates that, even assuming two assessee was required to deploy ds unaccounted purchases, e in. The assessee has failed to s stment or provide any cogent
, the contention that only the sh deposits ought to be taxed is nexplained capital outlay on pur for.
n relied upon by the Ld. C
Shri
Jayesh
Jagat
Parekh
Mumbai-Tribunal), the question nding to sales was not examin ord whether, in that case, the un explained sources of purchas rofit is warranted only in circum re derived from purchases alrea t, obviating the need for a separ h purchases. In the present cas
Balbir Gurnani
10
A No. 3124/MUM/2025
ould reduce to r at the close of it margin in the ent is quantified trade cycle. This business cycles y approximately xclusive of the substantiate the explanation. In e profit element s unsustainable, rchases remains
Counsel for the v.
ITO,
164
n of unexplained ned. It does not ndisclosed sales se. An addition mstances where ady recorded in rate explanation se, however, the assessee admittedly arises from an indep the onus lies squarel purchases deployed i
6.8 The Hon’ble Guj of Income-tax v
Court)258 ITR 654 ( rejected and unaccou purchases are not p should be restricted undisclosed sales, a treated as undisclose as under:
A No. 3124/MUM/2025
isclosed receipt
. Consequently, for the source of sed sales.
Commissioner
(Gujarat
High s of account are e corresponding ks, the addition mbedded in the sales cannot be g is reproduced
AO, the order made at the Tribunal was (1). It cannot be a s by itself cannot disclosed the sales.
e seller of the goods d the cost. It is the y forms part of the ore, unless there is of incurring cost in een made by the he absence of such finding of fact proceeds can answers by its finding nor any investment in a undisclosed sa
6.9 In the circums failure of the assess deposits as arising fr and secondly, the in investment in the considered view that be taxed as undisclos
6.10 In view of the addition partly to t addition of Rs.
Commissioner of Inco
7. In the result, th
Order pron (RAJ KUMAR C
JUDICIAL M
Mumbai;
Dated: 30/09/2025
Rahul Sharma, Sr. P.S.
ITA the question whether entire sum of be treated income of the relevant self in negative. The record goes to sh y material has been referred about acquiring the goods which have bee ales.
stances, for two distinct reaso see to substantiate his original rom withdrawals, property adva ability of the assessee to explai alleged parallel business—w the entire amount of ₹28,15,6
sed income.
reasons recorded hereinabove the extent of Rs. ₹14,56,355/
₹28,15,600/- sustained by ome-tax (Appeals) is upheld.
he appeal of the assessee is partl nounced in the open Court on /-
CHAUHAN)
(OM PRAK
MEMBER
ACCOUNTA
Balbir Gurnani
12
A No. 3124/MUM/2025
of undisclosed sale assessment year ow that there is no the suppression of en found subject of ons—firstly, the l explanation of ances and loans, in the source of we are of the 00/- is liable to e, we delete the /- and balance the learned ly allowed.
30/09/2025. KASH KANT)
ANT MEMBER

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

ITA ded to :

BY ORDER

(Assistant Re

ITAT, Mu

Balbir Gurnani
13
A No. 3124/MUM/2025
R, gistrar) umbai