PAYAL PIYUSHBHAI JETHVA,RAJKOT vs. INCOME TAX OFFICER, WARD ,1(2)(1), RAJKOT

Succinctly, the factual panorama of the case is that assessee before me is an Individual. In this case Return of Income for the year under consideration i.e. assessment year (A.Υ.) 2019-20, was e-filed by the assessee on 16/09/2019, declaring therein total taxable income of Rs.3,96,850/-. The return of income so filed subsequently processed u/s 143(1) of the Act by CPC without making any adjustment to the taxable income of the assessee. Thereafter, the assessing officer was in possession of information flagged in Insight Portal under category "High Risk CRU/VRU Information" that a search and seizure operation carried on 24/08/2021 in various concerns of R. K. Group. During the search operation, it was unearthed that “on-money” in cash was received by the developers/builders of various concerns of R. K. Group. In search operation from impounded incriminating digital data, documents, books of accounts, loose paper etc, it was found that during the previous year relevant to assessment year under consideration, the assessee gave ‘on-money’ of Rs.4,33,333/- in cash towards purchase/booking of unit(s) in project "R K Imperia". Since the materials so disseminated pertained to or related to the assessee, a satisfaction was drawn as per the Explanation 2 to section 148 of the Income-tax Act, 1961 with the approval of specified authority, that is, Pr.CIT-1, Rajkot. This case was then reopened u/s 147 of the Income-tax Act, 1961 and a notice u/s 148 of the Income- tax Act, 1961 was issued on 31/03/2023 which was delivered through email. In response to this notice, the assessee filed return of income for the assessment year under consideration on 31/03/2023 declaring total income of Rs.3,96,850/- . Thereafter, a notice u/s 143(2) of the Income-tax Act, 1961 was issued and delivered through email on 26/06/2023.

Thereafter, assessing officer issued a show cause notice to the assessee to explain the ‘on-money’ of Rs.4,33,333/-. In response to the show cause notice, the assessee submitted its reply stating that it did not make any payment on account of “on-money” and also requested the assessing officer to provide the opportunity of cross examination in respect of the statement of Shri Girish Vanjani. The assessee also challenges the initiation of reopening. However, assessing officer noted that it is evident that the original return was processed u/s 143(1) of the Act and subsequently, tangible information came into possession of the assessing officer through search-related findings, wherein it was alleged that the assessee paid cash on- money of Rs. 4,33,333/- for purchase/booking of unit in "The Imperia /RK Imperia". The assessing officer has specifically recorded that the reopening was made after drawing satisfaction and after obtaining approval of the specified authority. The assessing officer, after considering the submissions of the assessee made an addition of Rs. 4,33,333/- under section 69A of the Act.

Aggrieved by the order of the assessing officer, the assessee, carried the matter in appeal before the Ld.CIT(A), who has confirmed the action of the assessing officer, therefore, assessee is in further appeal before this Tribunal.

I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel for the assessee submitted before the Bench that although the assessee challenges the initiation of reopening, and during the assessment proceedings, the assessing officer did not give an opportunity of cross-examination, however, learned Counsel further submitted that considering the smallness of the amount an ad-hoc, estimated addition may be made in the hands of the assessee and appeal of the assessee may be allowed, partly. On the other hand, Ld. DR for the revenue did not raise any objection, if an adhoc estimated addition may be made in the hands of the assessee, however, learned DR stated that to protect the interest of the revenue an estimated addition may be made at the rate of 20% of ‘on-money’.

I have considered the submissions of both the parties and note that Ld. Counsel for the assessee, argued that the total addition made by the assessing officer in the hands of the assessee, is only Rs. 4,33,333/-, therefore, considering the smallness of the amount, an adhoc estimated addition made in the hands of the assessee. The learned DR for the revenue, also fairly agreed that to protect the interest of the revenue, an estimated addition may be made at the rate of 20% of ‘on-money’. I note that Hon’ble Supreme Court in the case of Brij Bhusan Lal Praduman Kumar vs, CIT (1978) 115 ITR 524 (SC) held that estimate of income should be reasonable and have some nexus with income assessed and also assessing officer should take into consideration the debit entries in the bank statement. In a case where the evidence available on record contains details of corresponding unaccounted payments which are also partly included on the books, such partly recorded payments should also be taken into consideration. Taxing the receipts only has never been the motto of the Income-tax Act. In this regard, the observation of the Supreme Court in CIT v. Williamson Financial Services [2007] 165 Taxman 638 (SC) is reproduced below:

In the result, the appeal filed by the assessee is partly allowed, in above terms. Order was pronounced in the open Court on 06/07/2026.