BALUBHAI MOHANBHAI PATEL,DEHGAM, GANDHINAGAR vs. THE INCOME TAX OFFICER, WARD-1, GANDHINAGAR

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ITA 1456/AHD/2026Status: DisposedITAT Ahmedabad02 September 2026AY 2020-214 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the cash purchases were explained by the assessee's disclosed cash sales. Therefore, the addition made by the AO was incorrect.

What were the facts?

The assessee had declared total income for AY 2020-21. The AO reopened the case based on information about cash purchases made by the assessee from a specific LLP. The AO treated these cash purchases as unexplained money.

What were the issues?

Whether cash purchases can be treated as unexplained when the assessee has disclosed substantial cash sales. Whether the reopening of assessment was justified.

Which sections of the Income-tax Act were involved?

Section 69A,Section 147,Section 44AD

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD

Before: SHRI NARENDRA PRASAD SINHA & SHRI SANJAY KUMAR

For Appellant: Shri Jaymin Shah, AR
For Respondent: Shri R. V. Aroon Prasaad, CIT-DR
Hearing: 18.08.2026Pronounced: 02.09.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the Assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 10.02.2026 for the Assessment Years (A.Y.) 2020-21 in the proceeding u/s 147 of the Income Tax Act [hereinafter referred as “the Act”].

2.

The brief facts of the case are that the assessee had filed his return of income for A.Y. 2020-21 on 09.07.2020 declaring total income of Rs.4,27,420/-. The case of the assessee was reopened on the basis of information received by the AO to the effect that the assessee had made

ITA No.1456/Ahd/2026 Balubhai Mohanbhai Patel Vs ITO, AY- 2020-21 2 cash purchase of Rs.3,39,225/-. A search action was conducted on Ambica Fireworks Group on 16.11.2023 and the transactions carried out by the assessee in the said group was found recorded in the ROJMEL Account of M/s. Ambica Ashish Tradelink LLP. In the course of assessment, the AO had held that the assessee had failed to explain the nature and source of cash transactions made with M/s. Ambica Ashish Tradelink LLP. Therefore, the transaction of Rs. 3,39,225/- made by the assessee in the said concern was treated as unexplained money u/s. 69A of the Act. The assessment was completed u/s. 147 of the Act on 11.03.2025 at total income of Rs.7,66,645/-.

3.

Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed. Th

4.

Now, the assessee in second appeal before us. The following grounds have been taken in this appeal:

1.

That the Ld. CIT(A), NFAC has erred both in law and on facts while rejecting the appeal of the appellant without considering facts and documents on records and therefore the addition made by A.O of Rs 3.39,225/- and sustained by the CIT(A) being unexplained money u/s 69A required to be deleted 2. That the reasons recorded u/s 147 by the Income Tax officer, ward-1. Gandhinagar are vague and against the provision of law and therefore the whole assessment proceedings is bad in law and required to be quashed 3. That the notice issued u/s 148 of the Act by ITO, ward -1, Gandhinagar for AY 2020-21 dated 31/03/2024 is without jurisdiction and against the provision of law Therefore the re-assessment proceedings itself is bad in law and required to be quashed

ITA No.1456/Ahd/2026 Balubhai Mohanbhai Patel Vs ITO, AY- 2020-21 3 4. That the addition u/s 69A was made by Ld. A. O and sustained by the CIT(A) without any cogent material on record and without any material having live link with the addition made and therefore the addition of Rs 3,39,225/- required to be deleted. 5. That the assessee has furnished all the details and documents before the A O regarding payment towards purchases made from Ambica Ashish tradelink LLP. however without considering the same the addition made u/s 69A of the Income Tax Act, for Rs. 3,39,225/- is against the provision of law and required to be deleted 6. That the appellant has not violated section 69A of the Income Tax Act, 1961 of the Income Tax Act, 1961 and hence penalty proceedings initiated under section 271AAC and section 272(1)(d) of the Income tax Act, 1961 may please be dropped 7. That the appellant has paid all the taxes and therefore no Interest u/s 234A, 2348. 234C or 234D of the Income Tax Act, 1961 is required to be payable and therefore the demand may please deleted. 8. Your appellant craves leave to add, amend, deleted or alter any of the grounds till the appeal is finally heard and decided. 5. Shri Jaymin Shah, the Ld. AR of the assessee submitted that in the return of income filed by the assessee on 09.07.2020 the assessee had disclosed total turn-over of Rs.53,42,105/-. He submitted that the assessee was a small trader and was engaged in seasonal business of firecrackers. He explained that the entire sale was made by the assessee in cash and the assessee has disclosed presumptive income u/s. 44AD of the Act. The Ld. AR submitted that considering the cash sales of Rs. 53,42,105/- as disclosed by the assessee, the AO was not correct in treating the cash purchase of Rs. 3,39,225/- made from M/s. Ambica Ashish Tradelink LLP, as unexplained.

6.

Per contra, Shri R. V. Aroon Prasaad, the Ld. CIT-DR supported the order of the lower authorities.

7.

We have considered the rival submissions. The fact that the assessee has disclosed turn-over of Rs. 53,42,105/- in his return of

ITA No.1456/Ahd/2026 Balubhai Mohanbhai Patel Vs ITO, AY- 2020-21 4

income for A.Y. 2020-21 is not under dispute. It is also evident from the copy of ITR brought on record in the paper-book that the entire turn-over was in the mode other than through account pay cheque or account pay draft or electronic mode. Thus, the entire sales of the assessee was in cash. In view of this fact, the AO was not correct in treating the cash purchase of Rs. 3,39,225/- made by the assessee from M/s. Ambica Ashish Tradelink LLP as unexplained. The cash purchase was duly explained by the cash sales as disclosed by the assessee. Therefore, the addition of Rs. 3,39,225/- as made by the AO is deleted. The ground taken by the assessee on the merit of addition, is allowed.

8.

Since the assessee gets relief on the merit, the other grounds taken by the assessee regarding reopening of the case have become academic in nature and are not being adjudicated.

9.

In the result, the appeal of the assessee is allowed.

Order pronounced in the Court on 02/09/2026 at Ahmedabad.

Sd/- Sd/- (SANJAY KUMAR) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 02nd September, 2026 (True Copy) Neelesh, Sr. PS आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A) 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर आयकर अपीलीय आयकर आयकर अपीलीय अपीलीय अिधकरण अपीलीय अिधकरण अिधकरण, अहमदाबाद अिधकरण अहमदाबाद अहमदाबाद / ITAT, Ahmedabad अहमदाबाद

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