SWATI BHAVIN SHAH,MUMBAI vs. ITO WARD 41(4)(4), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “SMC” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER)

ITA 1870/MUM/2026 Assessment Year: (2012-13)

SWATI BHAVIN SHAH ITO WARD 41(4)(4) 501, GURUKRUPA JAWAHAR KAUTILYA BHAVAN, C41 TO C43 NAGAR ROAD, NO. 4, BANGUR AVENUE 3 NEAR VIDESH Vs. NAGAR GOREGAON WEST, BHAVAN, G BLOCK GILBAN AREA MUMBAI-400104, MAHARASHTRA KURLA COMPLEX BANDRA EAST MUMBAI-400051, MAHARASHTRA Appellant Respondent

PAN No. AAJPS8940C

Appellant represented by: Ms Dinkle Hariya Respondent represented by: Ms Kanupriya Damor- Sr. AR

Date of conclusion of hearing: 21.08.2026 Date of pronouncement: 31.08.2026

ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against order dated 07.01.2026 passed by the learned National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred as learned CIT(A)] for Assessment Year 2012-13 on the following grounds: “1. THE ORDER IS BAD IN LAW, ILLEGAL AND WITHOUT JURISDICTION 1.1 In the facts and the circumstances of the case, and in law, the appellate order u/s. 250 of the Income tax Act, 1961 ['the Act'] framed and passed on 07.01.2026 by the Commissioner of Income tax (Appeals), National Faceless Appeal Centre, Delhi ['Ld. CIT (A)'] is bad in law, illegal and without jurisdiction, as the same is framed in breach of the statutory provisions of the Act and the scheme and as otherwise also is not in accordance with the law.

1.2 Without prejudice to the generality of the above, the appellate order so passed is bad in law, illegal and void as the same is arbitrary and perverse.

2.2 Without prejudice to the generality of the above ground, in the facts and the circumstances of the case, the Ld. CIT (A) erred in –

(i) not granting proper, sufficient, reasonable and fair opportunity of being heard to the Appellant while passing the appellate order; and

(ii) not granting an opportunity of personal hearing.

3.1 The L.d. CIT (A) erred in confirming the action of the A.O. in initiating the reassessment proceeding and framing the assessment of the Appellant by invoking the provisions of section 147 r.w.s. 148 of the Act.

3.2 While doing so, the Ld. CIT (A) failed to appreciate that:

(i) The case of the Appellant did not fall within the parameters laid down by section 147 r.w.s. 148, 149 & 151 of the Act;

(ii) The necessary preconditions for initiating the reassessment proceeding and completion thereof were not satisfied.

3.3 It is submitted that in the facts and the circumstances of the case, and in law, the reassessment framed is bad in law, illegal and without jurisdiction.

WITHOUT PREJUDICE TO THE ABOVE:

4.1 The Ld. CIT(A) erred in confirming the action of the A.O. in making addition of the amount of Rs. 29,04,000/-, being notional profit computed on presumptive basis @ 8% on the amount of Rs. 3,63,00,000/-, u/s. 44AD of the Act, by treating the same as alleged unexplained business income.

4.2 While doing so, the Ld. CIT(A) erred in -

(i) Basing his action only on surmises, suspicion and conjecture,

(ii) Taking into account irrelevant and extraneous considerations, (iii) Ignoring relevant material and considerations as submitted by the Appellant, and (iv) Not appreciating that the receipts during the year represented loans taken from various parties during the year. 4.3 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for. 4.4 Without prejudice to the above, in the alternative, assuming but not admitting - that some addition was called for, the Ld. CIT (A) failed to appreciate that the computation of the addition made by the A.O. was arbitrary, excessive and not in accordance with the law. WITHOUT PREJUDICE TO THE ABOVE: 5. ADDITION OF CASH DEPOSITS OF RS. 10,75,000/- AS UNEXPLAINED INCOME FROM OTHER SOURCES 5.1 The Ld. CIT(A) erred in confirming the action of the A.O. in making addition of the amount of Rs. 10,75,000/-, being cash deposits made out of business receipts and cash withdrawals, as alleged unexplained income from other sources. 5.2 While doing so, the Ld. CIT(A) erred in - (i) Basing his action only on surmises, suspicion and conjecture; (ii) Taking into account irrelevant and extraneous considerations; and (iii) Ignoring relevant material and considerations as submitted by the Appellant, 5.3 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for. 5.4 Without prejudice to the above, in the alternative, assuming but not admitting that some addition was called for, the Ld. CIT (A) failed to appreciate that the computation of the addition made by the A.O. was arbitrary, excessive and not in accordance with the law.”

2.1 During the reassessment proceedings, the assessee did not comply with the notices issued under section 142(1) of the Act. Consequently, the Assessing Officer issued a show-cause notice dated 27.11.2019, requiring the assessee to explain the source of credits aggregating to Rs.3,63,00,000/- and cash deposits of Rs.10,75,000/-. In the absence of compliance, the assessment was completed under section 147 read with section 144 of the Act vide order dated 15.12.2019. Relying, inter alia, upon the assessment for Assessment Year 2011-12, wherein the assessee's income had been determined under section 44AD, the Assessing Officer treated the aforesaid credits of Rs.3.63 crore as business turnover and estimated profit thereon at 8%, resulting in an addition of Rs.29,04,000/-. The Assessing Officer separately treated the cash deposit of Rs.10,75,000/- as unexplained money and added the same to the income of the assessee.

3 LOAN FROM VINAYCHAND JAIN- 50,00,000

4 LOAN FROM TRIFA DIAMONDS - 11,00,000 AAAPV4954A

5 LOAN FROM KESHAVLAL KHEMCHAND & 62,60,000 SONS PVT LTD-AADCK9051H

6 LOAN FROM BHAVIN N. SHAH-CJZPS5865F 1,04,50,000 7 SWEEP TRF FROM KOTAK FD 61,20,000 8 SAVINGS BANK INTEREST 963 9 CONTRA ENTRIES (INSUFFICIENT BALANCE) 1,19,58,000

10 BUSINESS RECEIPTS 72,098

11 CASH DEPOSIT (OUT OF BUSINESS 10,75,000 RECEIPTS AND CASH WITHDRAWALS) TOTAL 5,43,36,061

5.2.2 With regard to the loan taken from Dev Diamonds, Bright Diamonds, Vinay Chand Jain, the appellant has submitted copy of loan confirmation only signed by her. As per appellant, these parties are not traceable. Further, with regard to loan taken from Trifa Diamond, Kehsavlal Khemchand & Sons Private Limited and Bhavin H Shah, the appellant has filed loan confirmation duly signed by the creditors.

5.3.1 The appellant's submission was carefully perused but not found tenable. The appellant has stated that loan of Rs. 20,00,000/- taken from Dev Diamonds was paid to M/s Prakarsh Gems and Jewels Private Limited. However, the appellant has not furnished corroborative evidence to show any relation between M/s Prakarsh Gems and Jewels Private Limited and M/s Dev Diamonds. Even, the appellant has not furnished any reason explaining that why such loan was paid to M/s Prakarsh Gems and Jewels Private Limited instead paying to the actual creditor i.e. M/s Dev Diamonds.

5.3.2 Similarly, with regard to the loan taken from Bright Diamond and Vinay Chand Jain, the appellant has stated that loan/interest was paid but the party is not traceable. The appellant has submitted loan confirmation only signed by herself. It is very surprising to know that the party who gave the appellant such huge unsecured loan is not traceable or address of the party is not known to her. Further, no concrete evidence has been provided by the appellant to prove the genuineness of the transaction, Identity and creditworthiness of the creditor. The submission given by the appellant nothing but a self-serving document which is prepared for the sake of explain the anomalies without any supporting proof. Everything which has been said by the appellant cannot be considered as Gospel Truth unless some corroborating evidences are furnished. Hence, the submission given by the appellant is not reliable and accordingly, the such credits are still remaining unexplained.

5.3.3 Further, with regard to the loan taken from Trifa Diamond, Keshavlal Khemchand & Sons Private Ltd and Bhavin Shah, the appellant has submitted copy of loan confirmation duly signed by the creditors. However, the appellant has not submitted any supporting documents such ITR, Bank statement of these creditors to prove the identity and creditworthiness of these creditors. The appellant has failed to discharge the onus cast upon her. Mere submission of confirmation letter does not mean that the transaction was genuine in nature. In view of the above, the addition of Rs. 29,04,000/- is hereby confirmed.

5.4.1 Further, the appellant's contention regarding the addition of Rs. 10,75,000/-rests on the claim that these deposits originated from legitimate business activities, specifically a combination of cash sales and prior cash withdrawals. The Appellant provided a breakdown of total business receipts amounting to Rs. 25,22,250/-, asserting a highly skewed ratio where Rs. 24,50,452/- (approx. 97%) was received in cash, while a mere Rs. 72,098/- (3%) was processed through banking channels.

5.4.2 Upon a critical review of these claims, it is noticed that for appellant particularly one dealing in high-value commodities like gold to conduct 97% of its transactions exclusively in cash, is highly improbable and statistically anomalous for a modern business entity. Such a pattern is inconsistent with standard commercial practices. Moreover, despite multiple opportunities, the appellant failed to produce a single piece of documentary evidence. There are no purchase invoices, sales vouchers, stock registers, or delivery challans to verify the actual movement of goods. The appellant has provided no proof regarding the nature of the trade, the identity of the vendors/customers, or the physical premises where such high- volume gold trading allegedly occurred.

5.4.3 In the absence of a verifiable "paper trail," the appellant's explanation remains a mere statement of intent rather than a statement of fact. These claims are an after-thought, constructed solely to provide a veneer of legitimacy to unexplained cash credits. Consequently, the appellant's arguments lack any legal or factual force.

5.4.4 The conduct of the appellant throughout the assessment and appellate proceedings has been characterized by non-compliance and a lack of transparency. The onus of proof lies squarely on the assessee to explain the source and nature of credits found in their bank account; in this case, that onus has remained entirely undischarged. The appellant has failed to demonstrate that the cash deposits are linked to a legitimate taxable source. Therefore, the intentions of the appellant are found to be evasive and accordingly, the addition of Rs. 10,75,000/- made by the AO is hereby sustained and confirmed. 5.5 In light of the above discussion, it is held that the appellant has failed to produce the necessary documentary evidence to overturn the best judgment assessment made by the AO u/s 144 of the Act. Accordingly, the addition made by the AO is hereby confirmed and appeal is dismissed.”

5.1 In our considered view, before determining the quantum of taxable income, the true nature of the credits themselves requires examination. If the assessee's claim that the credits represented loans is substantiated by reliable evidence, the question of treating the same as business turnover for the purpose of section 44AD would not arise. Conversely, the claim has to be tested with reference to the identity and creditworthiness of the alleged creditors, the genuineness of the transactions, the source of the funds and the corresponding entries in the assessee's bank account and books.

5.2 We further note that the assessee remained non-compliant before the Assessing Officer and has now sought an opportunity to place the requisite evidence on record. In the interest of substantial justice and for a proper determination of the real controversy, we consider it appropriate to restore the matter to the file of the Assessing Officer.

5.3 The issue relating to the cash deposit of Rs.10,75,000/- is also restored to the Assessing Officer for fresh examination. The assessee shall be permitted to substantiate its explanation that the deposit represented business receipts and/or redeposit of earlier cash withdrawals. The Assessing Officer shall examine the relevant bank entries, cash-flow statement, books of account and other supporting material and thereafter determine the taxable consequence in accordance with law.

5.4 Accordingly, the order of the learned CIT(A) is set aside and the entire assessment is restored to the Assessing Officer for de- novo afresh adjudication. The assessee shall be afforded a reasonable opportunity to furnish complete evidence in support of its claim regarding each of the credits aggregating to Rs.3,63,00,000/- and cash deposit of Rs.10,75,000/-. The Assessing Officer shall examine such material and determine, in accordance with law, whether the credits represent loans or business receipts and, consequently, whether any addition under section 68, section 44AD or any other applicable provision is warranted. Needless to say, the Assessing Officer shall pass a speaking order after affording adequate opportunity of being heard to the assessee. We express no opinion on the merits of either addition. Accordingly, the grounds challenging the additions are allowed for statistical purposes.

5.5 As regards the grounds challenging the validity of the reassessment proceedings, we find that such grounds were not raised before the learned CIT(A) and have been raised for the first time before the Tribunal. No application seeking admission of the same as additional grounds has been filed. We, therefore, refrain from adjudicating those grounds in the present proceedings. The assessee shall, however, be at liberty to pursue such remedy as may otherwise be available in law.

5.6 The ground relating to violation of principles of natural justice is substantially addressed by the restoration of the matter for fresh adjudication with adequate opportunity to the assessee. The grounds relating to consequential interest and initiation of penalty proceedings shall be dealt with in accordance with law, as and when they become ripe for consideration.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 31/08/2026 M. Ranganath Vittal , Sr. P.S. Copy of the Order forwarded to:

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai