HIREKUMAR MADHUBHAI GONDALIYA ,SURAT vs. INCOME TAX OFFICER WARD-2(3)(2), SURAT

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ITA 71/SRT/2026Status: DisposedITAT Surat10 July 2026AY 2012-136 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that section 68 can only be invoked if the assessee maintains books of accounts, which is not mandatory under section 44AD. Following the Bombay High Court's decision, the Tribunal deleted the additions made by the AO.

What were the facts?

The assessee, engaged in the sand and concrete business, did not file a return for AY 2012-13. After a notice under section 148, the assessee filed a return declaring income under section 44AD. The Assessing Officer (AO) made additions under section 68 for cash deposits in bank accounts, which were confirmed by the CIT(A).

What were the issues?

Whether additions under section 68 for unexplained cash credits in bank accounts are valid when the assessee has opted for presumptive taxation under section 44AD and has not maintained books of accounts.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 148,Section 44AD,Section 68,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: Shri T.R. Sentil Kumar & Shri Ratnesh Nandan Sahay

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT (PHYSICAL HEARING) Before: Shri T.R. Sentil Kumar, Judicial Member And Shri Ratnesh Nandan Sahay, Accountant Member

ITA No: 71/SRT/2026 Assessment Year: 2012-13

Hirenkumar Madhubhai Income Tax Officer Gondaliya Ward-2(3)(2), 202, Gajanand Society-3, Vs Surat Yogi Chowk, Punagam, Surat-395006 PAN: APTPG6307G (Respondent) (Appellant) Assessee Represented: Shri P.M. Jagasheth, C.A. Revenue Represented: Shri Ajay Uke, Sr. D.R. Date of hearing : 30-04-2026 Date of pronouncement : -07-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

This appeal is filed by the Assessee as against the appellate order dated 28.11.2025 passed by the Additional/Joint Commissioner of Income Tax (Appeals)-2, Chennai arising out of the assessment order passed under section 147 r.w.s. 143(3) of the Income Tax Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2012-13.

I.T.A No. 71//SRT/2026 A.Y. 2012-13 Page No 2 Hirenkumar Madhubhai Gondaliya vs. ITO

2.

Brief facts of the case are, the assessee is an individual, engaged in the business of sand, mixture of sand and concrete. The assessee has not filed the return of income for the A.Y 2012-13. Therefore, a notice u/s 148 of the Act was issued on 30.03.2019. In response the assessee filed a return of income declaring total income of Rs. 1,67,330/- u/s 44AD of the Act. The AO noticed, the assessee maintained two bank accounts of ICICI Bank and Bank of Baroda and deposited cash of Rs. 12,47,000/- and Rs. 2,88,300/- respectively. The assessee was asked furnish the source of cash deposits with supporting evidences. The assessee partly complied with the above notice which are resulted in making addition u/s 68 of the Act of Rs. 15,66,640/- and demanded tax thereon.

3.

Aggrieved, re-assessment order, the assessee filed appeal before ld. CIT(A), who had given three opportunities of hearing and considered the submissions of the assessee and held that the business turn over in sand, mixture of sand and concrete business is not acceptable in the absence of any supporting evidence, thereby confirmed the additions made by the Assessing Officer.

4.

Aggrieved against the appellate order, the assessee is in appeal before us, raising the following grounds of appeal as under:-

1.

On the facts and in the circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in reopening the assessment u/s.147 of the act and issuing notice u/s.148 of the Income Tax Act, 1961. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in invoking provisions of section 68 for making addition. 3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the

I.T.A No. 71//SRT/2026 A.Y. 2012-13 Page No 3 Hirenkumar Madhubhai Gondaliya vs. ITO

action of the Assessing Officer in making addition of Rs. 15,35,300/- on account of alleged cash deposit in the bank account. 4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.31,340/-on account of alleged unexplained credits in the account. 5. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has not offered adequate opportunities to hear the case and hence, the case may please be set aside and restored back to the CIT(A) or AO. 6. On the facts and in the circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in initiating penalty proceedings u/s. 271(1)(c) of the Income Tax Act, 1961. 7. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 8. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.

5.

Ld. Counsel, Mr. P. M. Jagasheth, appearing on behalf of the assessee submitted before us, a paper book which contains the reply filed by the assessee u/s 133(6) of the Act, return of income filed for the earlier A.Y 2011-12, wherein similar re-assessment order passed by the Assessing Officer dated 14.12.2018 wherein the business transactions of the assessee and the turnover of sand business declared u/s 44AD of the Act was accepted by the Assessing Officer. Ld. Counsel also given the bank statement of Bank of Baroda and ICICI Bank and also relied upon various the tribunal decisions and Bombay High Court judgment on the ground that bank pass book does not constitute books of accounts as envisaged u/s 68 of the Act and the assessee is engaged in eligible business and has total turnover or gross receipts in the previous year not exceeding Rs.60,00,000/-, the assessee is eligible to file the return of income on the basis of presumptive income @ 8% of total turnover or gross receipts. In the

I.T.A No. 71//SRT/2026 A.Y. 2012-13 Page No 4 Hirenkumar Madhubhai Gondaliya vs. ITO

present case, the assessee has not maintained any books of accounts however declared a profit @ 10.53% and offered to tax Rs. 1,64,409/-. Further, for the earlier A.Y 2011-12, the assessee offered 8% u/s 44AD of the Act of Rs. 3,12,870/- which was accepted in the re-assessment proceedings by the Assessing Officer. Therefore, two different views cannot be taken by the revenue for the very same business carried out by the assessee and therefore, requested to delete the additions made by the lower authorities.

6.

Per contra, ld. Sr. DR, Mr. Ajay Uke, appearing for the Revenue supported the orders passed by the lower authorities and requested to confirm additions.

7.

We have given our thoughtful consideration and perused the materials available on record, including the Paper Book filed by the assessee and case laws relied thereon. At page No. 4 of the paper book, we find the re-assessment order passed for the Assessment Year 2011-12 dated 14.12.2018 wherein the Assessing Officer held as follows:-

“2. In response to the aforesaid notice, Shri Mukesh Kumar Jhanwar, C.A. & A.R. of the assessee attended the office and submitted the copy of return declaring total Income of Rs.2,64,360/- filed on 10.12.2018 (u/s. 44AD) along with computation of income in response to the notice u/s 148 of the I.T. Act. On request of the assessee. the reason recorded for reopening the case has been provided to the assessee. Thereafter, a notice u/s. 143(2) of the I.T. Act dated 11.12.2018 was issued to the assessee requesting him to produce documents, accounts and any other evidence in support of the return filed by the assessee and also to establish the source of the cash deposits in her bank account in question. In response to the same, the assessee submitted the copy of cash book, bank book and other details showing the business transactions relevant to F.Y 2010-11 establishing the source of the cash deposits in question.

I.T.A No. 71//SRT/2026 A.Y. 2012-13 Page No 5 Hirenkumar Madhubhai Gondaliya vs. ITO

3.

During the year under assessment, the assessee was involved in the business of purchasing & selling of 'Sand'. The assessee has shown his profits u/s 44AD of the LT. Act in his return for assessment year in question. All the details/evidences produced by the assessee in support of his submissions have been verified and seems to be satisfactory.” 8. There is no change in facts and nature of business of the assessee with that of present A.Y 2012-13. It is not mandatory for the assessee to maintain with books of accounts, if the return of income is filed u/s 44AD of the Act. Further, as per section 68 of the Act can be invoked only if any credit entries found in the books of accounts maintained by the assessee for any previous year and the assessee fails to offer valid explanation for the credit of such sum in the books or explanation offered by the assessee is rejected by the Assessing Officer. In other words, maintaining of books of accounts by the assessee sine qua non by making addition u/s 68 of the Act. Since section 44AD of the Act does not obligate the assessee to maintain books of accounts and therefore, the provisions of section 68 of the Act cannot be invoked, when the assessee has filed the return of income under the provisions of section 44AD of the Act. The Hon’ble Bombay High Court in the case of CIT vs. Bhaichand N. Gandi 141 ITR 67 (Bom.) held as under:- “........the pass book supplied by the bank to its constituent is only a copy of the constituent's account in the books maintained by the bank. It is not as if the pass book is maintained by the bank as the agent of the constituent, nor can it-be said that the pass book is maintained by the bank under the instructions of the constituent. In view of this, the Tribunal was, with respect, justified in holding that the pass book supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, that is, a book maintained by the assessee or under his instructions. In our view, the Tribunal was justified in the conclusions at which it arrived."

I.T.A No. 71//SRT/2026 A.Y. 2012-13 Page No 6 Hirenkumar Madhubhai Gondaliya vs. ITO

9.

Respectively following the above judicial precedent, we have no hesitation in deleting the additions made by the Assessing Officer. Thus, the grounds of appeal raised by the assessee are allowed.

10.

In the result, the appeal filed by the assessee is allowed.

Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 10-07-2026

Sd/- Sd/- (RATNESH NANDAN SAHAY) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER

*Ganesh Kr., Sr. PS Dated 10/07/2026 आदेश क� �ितिलिप अ�ेिषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Surat 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, सूरत

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