GAUTAM BABULAL JAIN,SURAT vs. INCOME TAX OFFICER, WARD CIRCLE 2(2), SURAT

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ITA 313/SRT/2024Status: DisposedITAT Surat07 July 2026AY 2017-1811 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found the Assessing Officer's calculation for unexplained cash credit to be non-justifiable. The assessee had provided details of debtors and VAT returns, and the AO had not doubted the credit sales.

What were the facts?

The assessee, a petrol pump owner, received a significant amount of cash from debtors in the week before demonetization. The Assessing Officer treated this as unexplained cash credit, while the assessee claimed it was from regular credit sales.

What were the issues?

Whether the cash received from debtors shortly before demonetization constituted unexplained cash credit, and if so, whether Section 115BBE was applicable.

Which sections of the Income-tax Act were involved?

Section 68,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT ‘DB’ BENCH, SURAT

Before: MS. SUCHITRA KAMBLE & SHRI BHAGIRATH MAL BIYANIShri Gautam Babulal Jain,

For Appellant: Shri Rasesh Shah, CA
For Respondent: Shri Ashish Kumar, Sr. DR
Hearing: 17.06.2026Pronounced: 07.07.2026

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT ‘DB’ BENCH, SURAT BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI BHAGIRATH MAL BIYANI, ACCOUNTANT MEMBER ITA No.313/SRT/2024 (Assessment Year: 2017-18) Shri Gautam Babulal Jain, Income Tax Officer, B 16, Ashok Nagar Society, Ward Circle 2(2), B/H M.S. Vidhyala, Room No.622, 6th Floor, Kanraj Road, Vs. Aayakar Bhawan, Olpad, Near Majura Gate, Gujarat Opp Civil Hospital, Surat, Gujarat PAN:ADOPJ0447P (Appellant) : (Respondent) Assessee by : Shri Rasesh Shah, CA Respondent by : Shri Ashish Kumar, Sr. DR Date of Hearing : 17.06.2026 Date of Pronouncement : 07.07.2026 O R D E R PER : SUCHITRA KAMBLE, JM: The appeal filed by the assessee is against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short “CIT(A)”] dated 30.01.2024 for the Assessment Year (in short “AY”) 2017-18.

2.

The assessee has raised the following grounds of appeal: “1. On the facts and circumstances of the case as well as the law on the subject, the learned CIT(A) has erred in confirming the actions of the assessing officer in making addition of Rs.36,67,012/- u/s 68 of the I.T. Act on account of alleged unexplained cash credit. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in taxing the addition by taking the rate @77.25% by attracting S. 115BBE instead of taxing as per normal tax slab. The addition if any that may be confirmed should be taxed as business income. 3. Even otherwise on the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in taxing the income u/s 115BBE @77.25% in a retroactive manner by applying the duly substituted S.115BBE inserted retrospectively instead of taxing it at 35.54% as per the old provisions of S.115BBE. 4. It is therefore prayed that the above addition made by the assessing officer and confirmed by the CIT(A) may please be deleted.”

3.

The assessee is engaged in the business of petrol pump of Indian Oil Corporation Ltd. under the name and style of Aastha Petroleum at Olpad. The assessee filed return of income on 30.10.2017 for the A.Y. 2017-18 thereby declaring total income at Rs.19,25,940/-. The case of the assessee was selected for scrutiny and notice u/s 143(2) of the Income Tax Act, 1961 (in short “the Act”) dated 21.09.2018 was issued and served upon the assessee. Notice u/s 142(1) of the Act was issued on 02.04.2019 and served upon the assessee, in response to the said notices the assessee submitted the details. After considering the said details, the Assessing Officer (in short “AO”) observed that the assessee had received cash for credit sales during the year under consideration which is increased before the demonetization period. The cash received for the credit sales was drastically increased from 01.11.2016 to 08.11.2016. The assessee received cash from debtors till October 2016 amounting to Rs.2,66,08,692/- and average of it comes to Rs.38,01,241/- per month. Thus, the assessee received average cash amounting to Rs.9,50,310/- in a week from these debtors. The assessee received cash from debtors Rs.56,06,796/- during the period of 01.11.2016 to 08.11.2016 i.e. before the demonetization period. The assessee has given the details in respect of debtors wherein complete address was not mentioned, therefore notice u/s 133(6) of the Act was issued to the debtors on test cheque basis. No reply was received from those debtors, therefore the assessee was given show cause notice, for which the assessee filed reply thereby objecting the AO’s contention. After taking cognizance of the details and the submissions made by the assessee, the AO has partially accepted the assessee’s contention and accordingly Rs.77,59,135/- which was the highest cash from debtors in the month of May, 2016 was considered for calculation. So highest weekly receipts from debtors possible was Rs.19,39,784/- but during 1st November to 8th November the unexplained cash receipts is Rs.56,06,796/- and therefore Rs.36,67,012/- was the unexplained cash credit in the books of accounts of the assessee. Thus, the addition of Rs.36,67,012/- was made u/s 68 of the Act as unexplained cash credit.

4.

Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.

5.

The Ld. Authorised Representative (in short “Ld. AR”) for the assessee submitted that the assessee is engaged in the dealership business of running a petrol pump under the dealership of Indian Oil Corporation in the name and style of "Astha Petroleum" since last many years. The same activities were undertaken by the firm during the year under consideration. Due to peculiar nature of its business activities, majority of its sales are done on purely cash basis only. The said cash receipts from the cash sales were duly deposited by the assessee into his bank accounts. The petrol pump of the assessee is located in Olpad area which is basically a rural area, the majority of customers of the assessee were agriculturist, transporters or a small scale business owners who generally are uneducated and not having any bank accounts. The majority of the customers were regular customers of the assessee and hence most of the sales transactions of the assessee happened through the relations/ references. The Ld. AR further submitted that the assessee had deposited cash amounting to Rs. 56,06,796/- during the period from 01.11.2016 to 08.11.2016 from 58 parties. The assessee had given name of all the 58 debtors in his reply to show cause notice dated 24.12.2019. The Ld. AR submitted that among the 58 parties, cash received from 35 parties were from the credit sales made for the period April, 2016 to October 2016. The table showing list of names of all 58 parties are as follows:

Sr. Party’s Name Amount No. 1 Akshra Aqua Farm 3,49,870.00 2 Nandlal Gadri 93,600.00 3 Oma Ram 1,58,050.00 4 Mahendrabhai 2,50,000.00 5 Montubhai 2,00,000.00 6 Hari Om Agency 37,000.00 7 Vimalbhai B Patel 29,570.00 8 Udhham Aqva Farm 2,48,110.00 9 Mohan Aqva Farm 2,38,555.00 10 Vasantbhai Safri 6,12,370.00 11 Nakoda Paliwala 7,860.00 12 Chimanbhai Maganbhai Patel 72,104.00 13 Ratanlal Gadri 2,387.00 14 Roshanbhai Patel 1,03,000.00 15 Kurukshtra Mahadev Aqva Farm 75,000.00 16 Pratikbhai (Chiko) 25,500.00 17 Vijay K Patel 15,035.00 18 Kartvi Aqva Farm 39,920.00 19 Shrvankumar 2,58,140.00 20 Om Prakash Chaudhri 57,540.00 21 Kurukshtra Mahadev Aqva Culture 75,000.00 22 Manojbhai Ishwarbhai Patel 2,00,000.00 23 Yegeshbhai Agrawal 5,000.00 24 Nikunjbhai Morkar 20,000.00 25 Subhashbhai N Patel 1,31,230.00 26 Pankajbhai J Patel (Mor) 81,100.00 27 Dhirajbhai R Morkar 81,210.00 28 Nikeshkumar Modi 75,000.00 29 Wishdome Orgenic Pvt Ltd. 30,000.00 30 Champaben J Safri 40,110.00 31 Keshar Aqva Farm 87,700.00 32 Devaram Jetharam Patel 25,000.00 33 Ankitbhai Ranjitbhai Patel 11,920.00 34 Dhavalbhai G Patel 50,000.00 35 Akshar Enterprise 1,00,000.00 36 Tejashbhai Balvantbhai 20,000.00 37 Sanjaybhai Ishvarbhai Patel 60,220.00 38 Madhav Aqva Farm 1,69,915.00 39 Mahalaxmi Aqva Farm 1,82,156.00 40 Manan Aqva Farm 1,83,006.00 41 Maruti Aqva Farm 1,71,225.00 42 Jay Jalaram Aqva Culture 1,50,000.00 43 Manal Aqva (Madhubhai) 79,010.00 44 Manuben Manilal Khalashi 1,75,000.00 45 Krisha Aqva Farm 94,750.00 46 Prakashbhai H Patel 7,180.00 47 Ambica Sales Agency 11,750.00 48 Somnath Roadlines 3,130.00 49 Ketan Chasmawala 83,570.00 50 Aliment Knites 14,480.00 51 Dharmeshbhai Mandapwala 5,650.00 52 Khodiyar Aqva Farm 54,210.00 53 Bhavya Aqva Farm 81,210.00 54 Mularam Chaudhri 40,000.00 55 Saurabh Aqva Farm 1,00,000.00 56 Zeal Traders 10,000.00 57 Madhav Marin Products Pvt Ltd 19,853.00 58 Rent Income (Tyre & Tea Stall) 3,600.00 Total 56,06,796.00

The Ld. AR submitted that the cash received from the above 58 parties, majority of the parties were regular customers of the assessee who had purchased petrol and diesel on regular basis from the assessee and made payment in cash due to demonetization declared. The Ld. AR pointed out that there were not a single new or unknown party from whom the assessee had received cash during the period from 01.11.2016 to 08.11.2016. Moreover, the assessee had duly submitted a table showing total sales made into cash sales and credit sales for A.Y. 2017-18 and A.Y. 2016-17 in his reply dated 24.12.2019 to the show cause notice. The Ld. AR pointed out from the table that the total sales of the assessee consist of 70% -80% of credit sales and balance sales were made in cash.

A.Y. 2017-18 Month Cash Credit Total Sales % of Credit Sales Apr 64,11,914 1,26,73,502 1,90,85,416 66.40 May 65,79,439 2,23,32,728 2,89,12,167 77.24 Jun 61,15,240 2,70,94,003 3,32,09,243 81.59 Jul 59,00,198 1,75,70,137 2,34,70,335 74.86 Aug 50,07,136 1,29,93,263 1,80,00,399 72.18 Sep 46,90,367 96,72,567 1,43,62,934 67.34 Oct 48,49,661 1,06,07,842 1,54,57,503 68.63 Nov 74,71,612 1,23,40,860 1,98,12,472 62.29 Dec 13,83,928 1,75,47,620 1,89,31,548 92.69 Jan 10,35,118 2,38,31,367 2,48,66,485 95.84 Feb 13,52,602 1,83,34,846 1,96,87,448 93.13 Mar 15,93,151 1,94,62,444 2,10,55,595 92.43 Total 5,23,90,366 20,44,61,179 25,68,51,545 A.Y. 2016-17 Month Cash Credit Total Sales % of Credit Sales Apr 67,52,281 1,52,34,320 2,19,86,601 69.29 May 84,76,217 2,06,36,312 2,91,12,529 70.88 Jun 70,41,548 2,41,58,618 3,12,00,166 77.43 Jul 53,18,068 2,23,98,882 2,77,16,950 80.81 Aug 55,56,546 1,59,50,615 2,15,07,161 74.16 Sep 46,17,351 95,71,996 1,41,89,347 67.46 Oct 63,44,311 65,17,378 1,28,61,689 50.67 Nov 59,98,464 1,11,72,799 1,71,71,263 65.07 Dec 61,73,753 94,37,267 1,56,11,020 60.45 Jan 67,64,156 1,25,18,515 1,92,82,671 64.92 Feb 66,64,439 1,09,61,848 1,76,26,287 62.19 Mar 57,71,280 1,18,41,844 1,76,13,124 67.23 Total 7,54,78,414 17,04,00,394 24,58,78,808

From the table above, it is well observed that the assessee was regularly selling petrol and diesel on credit basis. The average credit sales during A.Y. 2016-17 and A.Y. 2017-18 were about 70%-80% of the total sales. Further, to justify the source of cash deposition made, the assessee had also submitted his cash book, bank book and bank statements for A.Y. 2017-18 along with a copy of table showing total collection from debtors during A.Y. 2017-18 and 2016-17. The said table is reproduced as under: Particulars AY 2017-18 AY 2016-17 Op Bal of Debtors 1,04,51,583 1,25,67,773 Add: Credit sales during the year as shown 20,44,61,179 17,04,00,394 in point no. 2 above Total 21,49,12,762 18,29,68,167 Less: Cl Bal of Debtors 95,76,329 1,04,51,583 Collection from Debtors 20,53,36,433 17,25,16,584

From the total collection from the debtors for A.Y. 2017-18, Rs. 1,04,51,583/- was from the previous year's sales. The Ld. AR submitted that the Assessing Officer has never challenged the debtors of the assessee for A.Y. 2017-18. He has never doubted any single sales transaction of the assessee. The books of accounts and audited financial statements of the assessee were duly accepted by the Assessing Officer for A.Y. 2017-18. Further, the books of accounts of the assessee was never subjected to scrutiny before A.Y. 2017-18. Hence, it is imprudent on the part of the Assessing Officer to make addition of the collection from the debtors when he has never asked any clarification with regards to the outstanding debtors of the previous year and year under consideration. Therefore, the Ld. AR submitted that when the Assessing Officer has not contested the debtors as on 31.03.2017, doubting on the part of realization from such debtors does not arise. Further, the assessee had also submitted quantitative details of opening, inward, outward and closing stock of petrol and diesel for A.Y. 2017-18 along with month wise summary details of cash collected from debtors with name, PAN and address details and monthly sales details of cash sales and credit sales for A.Y. 2017-18 with all the necessary explanations and documentary evidences during the course of assessment proceedings. The assessee had also made the cash deposits into his bank account purely from cash receipts from his debtors on account of credit sales and balance from cash sales of petrol and diesel. The Assessing Officer failed to appreciate the basic fact from the VAT returns produced before him that the said sales figures are duly reconciled from the VAT returns filed for A.Y. 2017-18. The assesse had duly explained the source of cash receipts and given all the explanations with regards to the sales and purchases along with quantitative details and audited financial statements. The assessee had submitted complete details showing cash deposit as well as month-wise cash sales and cash deposit in response to show cause notice in A.Y. 2016-17 and 2017-18. The Assessing Officer has not given any adverse finding on such details in his order nor has he rejected the books of accounts submitted by the assessee for A.Y. 2017-18. The Assessing Officer has duly accepted the sales as well as purchases in totality of the assessee with regards to quantitative details provided and submitted during the course of assessment proceedings. The books of accounts of the assessee are duly audited by a chartered accountant and the audit report along with the audited statement of accounts were duly submitted during the course of assessment proceedings and same were duly acknowledged by the Assessing Officer. The Ld. AR submitted that the Assessing Officer failed to consider the peculiarities pertaining to his nature of business wherein majority of the transactions take place in credit and also did not consider the trend of assessee's regular cash realization from debtors. Further, the Assessing Officer also failed to appreciate the fact that the assessee was regularly getting his books of accounts audited u/s. 44AB of the Income Tax Act, 1961. The Ld. AR submitted that the complete quantitative details of stock maintained by him was duly submitted during the course of assessment proceedings. The Assessing Officer had duly accepted genuineness of sales and purchases in totality and he had failed to find a single fabricated or a suspicious financial or quantitative transaction from his audited books of accounts produced before him for his verification. Thus, the Ld. AR submitted that the said addition of Rs. 36,67,012/- u/s 68 of the Income Tax Act, 1961 would not sustain and therefore, the same should be deleted.

6.

As regards Ground No. 2 relating to taxing the addition by taking the rate @ 77.25% by attracting S. 115BBE instead of normal tax rate, the Ld. AR pointed out that Mr. Gautam Babulal Jain was engaged in the business of running a petrol pump under the dealership of Indian Oil Corporation Limited. During the assessment proceedings it was clearly shown that assessee had received cash amounting to Rs. 56,06,796/-before the demonetization period. The said deposition was attributed only from credit and cash sales made out its routine business and not from any other sources. The Assessing Officer failed to detect any defects in the cash book, bank book, purchase register or sales register produced and submitted before him for his verification. The Assessing Officer has failed to pin point any other source of generation of cash in the case of the assessee nor has rejected the assessee firm's audited financial statements. The learned assessing officer has totally accepted the quantitative details provided and certified by the chartered accountant in the audit report with regards to the said sales and purchase of the petrol and diesel. Accordingly, since the firm has not got any other source of income and has derived income only from the business u/s. 28 of the I. T. Act, 1961, the amount deposited into the bank accounts of the firm is required to be considered as business income only and therefore S. 115BBE cannot be attracted in assessee’s case.

7.

The Ld. Departmental Representative (in short “Ld. DR”) for the Revenue relied upon the assessment order and the order of the Ld. CIT(A). The Ld. DR further submitted that during the assessment proceedings, the AO notice that cash receipt from the debtors by the assessee has drastically increased from 01.11.2016 to 08.11.2016. As indicated in the assessment order, the assessee received cash from debtors till October-2016 amounting toRs.2,66,08,692/-and average of it was worked out toRs.38,01,242/- per month, meaning thereby that the assessee received average cash amounting to Rs.9,50,310/- in a week from these debtors. Further, as indicated by the AO in the assessment order, the assessee had had received cash from debtors Rs.56,06,796/-during the period of 01.11.2016 to08.11.2016 i.e. before the demonetization period (within a week). As per reasoning given in the assessment order in paragraph 3,3.1, 3.2, 3.3, 3.4 and 3.5, the AO has fairly dealt with the submissions of the assessee.

8.

We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the assessee has given the details during the assessment proceedings. The only thing pointed out by the Assessing Officer is that the explanation given by the assessee related to the cash receipt from the debtors only during the period from 01.11.2016 to 08.11.2016 is not acceptable to him. In fact, till October, 2016 the assessee received Rs.13,31,452/- from the credit sale. The assessee while giving the details of 58 parties from whom the assessee received cash in respect of the loans given to these parties or the credit given to these parties is reflected on page 8, 9 & 10 of the submissions given by the assessee before the CIT(A) along with the details of the said parties. The said details are filed before us as well was produced before the Assessing Officer and the CIT(A). In fact, the assessee has also given the VAT returns to demonstrate that there was the sale in this particular year. The Assessing Officer has not doubted the credit sales and therefore the conclusion drawn by the Assessing Officer that it has to be taken as per the highest cash of receipt from debtors in the month of May 2016 for calculation appears to be non-justifiable. Thus, the addition does not sustain. Ground No. 1 is allowed.

9.

As regards to Ground No. 2 the same is consequential hence not adjudicated upon at this juncture.

10.

In result, appeal of the assessee is allowed. Order pronounced in the open court on 07.07.2026 Sd/- Sd/- (B.M. BIYANI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat; Dated: 07.07.2026 * Kishore, Sr. P.S.

Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Surat 5. Guard File By order,

Assistant Registrar/Sr.PS/PS ITAT, Surat Bench

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