RAVI LALWANI,AHMEDABAD vs. THE ITO, WARD-7(2)(1), AHMEDABAD

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ITA 747/AHD/2025Status: DisposedITAT Ahmedabad29 June 2026AY 2016-177 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the entire credit entries in the bank account could not be treated as income. Only the profit element of the transactions was taxable, and the addition was restricted to 8% of the credit entries, with credit for the profit already offered.

What were the facts?

The assessee failed to disclose a bank account and its transactions in his books of account. The Assessing Officer treated the entire credit entries in this undisclosed account as unexplained income. The assessee claimed these were part of his sales turnover but couldn't provide supporting evidence.

What were the issues?

Whether the entire credit entries in an undisclosed bank account can be treated as unexplained income, or only the profit element. Whether the reopening of assessment was valid.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B,Section 148,Section 69A,Section 115BBE,Section 271(1)(c),Section 234A,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD

Before: MS SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Parin Shah, AR
For Respondent: Shri Sher Singh, CIT-DR
Hearing: 23.04.2026Pronounced: 29.06.2026

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 18.03.2025 for the Assessment Year (A.Y.) 2016-17 in the proceeding u/s 147 r.w.s. 144B 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. 2016-17 on 28.09.2016 declaring total income of Rs. 8,17,630/-. The AO had received an information that the assessee had received unexplained credits in the bank account maintained with M/s.

ITA No.747/Ahd/2025 Ravi Lalwani Vs ITO, AY- 2016-17 2 Shri Renuka Multi State Urban Co-operative Credit Society Limited (in short “Renuka A/c”) to the tune of Rs.6,96,60,251/-, which was not disclosed in the books of account. Therefore, the case of the assessee was reopened by issue of notice u/s 148 of the Act on 31.07.2022 after passing an order u/s. 148A(d) of the Act. In response to notice u/s. 148 of the Act, the assessee had filed return declaring total income of Rs.29,55,780/-. Before the AO, the assessee had claimed that the credits appearing in the account maintained with Renuka A/c were part of his sales turnover from sale of milk and related products. However, the assessee was unable to substantiate his claim with supporting evidences in the form of sales/purchase bills, vouchers, invoices etc. Further, no evidence for transport/delivery of goods was brought on record. Therefore, the AO had treated the entire credit of Rs.6,75,91,673/- appearing in the Renuka bank account as unexplained income of the assessee. The assessment was completed u/s. 147 r.w.s. 144B of the Act on 30.05.2023 at total income of Rs.7,04,88,883/-.

3.

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

4.

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

1.

The order passed by lower authorities is bad in law and required to be quashed. 2. Ld. NFAC erred in law and on facts in reopening of assessment.

ITA No.747/Ahd/2025 Ravi Lalwani Vs ITO, AY- 2016-17 3

3.

Ld. NFAC erred in law and on facts in confirming addition of Rs. 6,75,91,673/- by invoking section 69A of the Act ignoring fact that same has been considered in filing return of income in response to notice u/s 148 of the Act. 4. Both lower authorities erred in law and on facts in treating transactions found from Shree Renuka Mata Multistate Urban Credit Co Operative Society as unexplained cash credit ignoring fact that such section is not applicable to these transactions. 5. Ld. NFAC ought to have considered fact that transactions of Rs. 6,94,15,390/- has been considered as sales by appellant and profit on sales has already offered in return of income and accordingly no addition has been warranted 6. Ld. NFAC erred in law and on facts in not granting credit of net profit declared by the appellant in return of income filed in response to notice u/s 148 of the Act 7. Without prejudice to the above and in alternative, if contention regarding sales and profit was not accepted then only peak balance ought to have been taxed. 8. Both lower authorities erred in not issuing notice under section 133(6) of the Act to the debtors to verify genuineness in the contention of the appellant as name and address of debtors has already on record. 9. Both lower authorities erred in law and on facts in taxing addition made at special rate as per section 115BBE of the Act. 10. Initiation of penalty proceedings under section 271(1)(c) of the Act is unjustified. 11. Ld. AO erred in law and on facts in not giving tax credit for tax paid while filling return of income in response of notice u/s. 148 of the Ac.t 12. Charging of interest u/s. 234A, 234B, and 234C is unjustified.

5.

Shri Parin Shah, the Ld. AR of the assessee submitted that the bank account of the assessee with Shri Renuka Multi State Urban Co- operative Credit Society Limited was not disclosed in the books of account. However, on receipt of notice u/s. 148 of the Act, the assessee had taken into account the transactions made through the Renuka bank account and the income derived on those transactions was duly disclosed in the return filed u/s. 148 of the Act, and an additional income of Rs.20,68,578/- was also offered in the revised return of income. The Ld. AR submitted that the AO was not correct in treating the entire credit

ITA No.747/Ahd/2025 Ravi Lalwani Vs ITO, AY- 2016-17 4 entries in the bank account as unexplained income of the assessee by ignoring the debit entries appearing in the bank account. He explained that the nature of activity carried out through the Renuka bank account was identical with the regular business activity duly disclosed in the return of income. Explaining the reason for opening this account, the Ld. AR submitted that many of the customers of the assessee were based in the state of Maharashtra and for this purpose the assessee had opened an account with Shri Renuka Multi State Urban Co-operative Credit Society Limited. He further submitted that the net profit disclosed on the accounted turn-over of the assessee was 2.98% and by applying the same rate, the assessee had disclosed profit of Rs.20,68,578/- on the turn-over of Rs. 6,94,15,390/- made through Renuka bank account. The Ld. AR submitted that only the profit element of the undisclosed turn-over of the assessee was required to be considered as income and the AO was not correct in treating the entire credit entries in the bank account as income of the assessee. In this regard he relied upon the following decisions:

1.

MukeshKumar Patel [ITA No. 1461/Ahd/2024, A.Y. 2015-16] 2. Mehulkumar R Chaudhari [ITA No 1383/Ahd/2024, A.Y 2013-14] 3. Hindva Builders [182 taxmann.com 628], Ahmedabad-Trib. 4. Conor Granito (P) Ltd.[159 taxmann.com 1209], Rajkot Trib. 5. Rohit Goel [176 taxmann.com 520], Delhi-Trib.

6.

Per Contra, Shri Sher Singh, the Ld. CIT-DR, supported the order of the lower authorities. He submitted that the assessee was unable to bring on record any evidence to establish that the transactions made in the Renuka bank account represented sales turn-over from sale of milk and

ITA No.747/Ahd/2025 Ravi Lalwani Vs ITO, AY- 2016-17 5 related products. In the absence of any purchase and sale bills/invoices, transport documents etc., the AO had rightly treated the entire credit in the bank account as unexplained income u/s. 69A of the Act.

7.

We have considered the rival submissions. As regards grounds taken by the assessee on reopening, we do not find any merit. The fact that the bank account with Shri Renuka Multi State Urban Co-operative Credit Society Limited was maintained and operated by the assessee has not been denied. It is found from the balance sheet of the assessee that this bank account was not disclosed and the transactions made through this account were also not accounted for. The assessee had disclosed only the bank account with HDFC in his balance sheet. Further, the total turn-over of Rs.2,97,63,202/- disclosed in the ITR, all pertained to HDFC bank account only. Thus, neither the bank account of the assessee with Shri Renuka Multi State Urban Co-operative Credit Society Limited is found disclosed in the balance sheet nor the turn-over appearing in this bank account is found part of the turn-over reflected in the P&L account. In fact, the assessee had also admitted that the transactions made through the bank account of Shri Renuka Multi State Urban Co-operative Credit Society Limited were not accounted for and had disclosed additional profit of Rs.20,68,578/- in the return filed in response to notice u/s. 148 of the Act. Hence, the grounds taken by the assessee on the issue of reopening are dismissed.

8.

On merits, the addition of the entire credits appearing in the bank account of Shri Renuka Multi State Urban Co-operative Credit Society Limited, without taking into account the debit entries appearing therein,

ITA No.747/Ahd/2025 Ravi Lalwani Vs ITO, AY- 2016-17 6 cannot be held as correct. From the bank statement it was evident that the deposits in the bank account were followed by withdrawals, mostly in cash. Further, the deposits/credits entries in the bank account are found made from various places, for which remote transaction charges are debited to the account. As explained by the assesse these deposits were made by the outstation customers and thereafter the assessee has withdrawn cash from the bank account for making payment towards purchases/creditors. Thus, the credit entries in the bank account are found to have a corresponding debit entry and under such circumstances the entire credit entries appearing in the bank account could not have been held as income of the assesse. It is a settled position of law that only the profit element involved in respect of credit and debit entries are required to be taxed. Therefore, the AO was not correct in treating the entire credit entries in the bank account as income of the assessee. The Co-ordinate bench of this Tribunal in the case of MukeshKumar Patel (supra), wherein identical deposits in the bank account of Shri Renuka Multi State Urban Co-operative Credit Society Limited were made, had held that only profit element of the transactions are required to be taxed and profit of 8% was held as reasonable. In the case of Mehulkumar Ramabhai Chaudhari (supra) also, the profit in respect of credit entries in the bank account of Shri Renuka Multi State Urban Co-operative Credit Society Limited was upheld at the rate of 8%. Respectfully following the decision of the Co- ordinate bench of this Tribunal on the identical issue, the addition made by the AO is restricted to 8% of the credit entries appearing in the bank account of Shri Renuka Multi State Urban Co-operative Credit Society Limited, being the profit element involved in respect of the aforesaid deposits/credits of Rs. 6,75,91,673/- appearing in the said

ITA No.747/Ahd/2025 Ravi Lalwani Vs ITO, AY- 2016-17 7

bank account. The assessee should be allowed set-off for additional profit of Rs.20,68,578/- offered in the revised return filed in response to notice u/s. 148 of the Act, in respect of profit element pertaining to the transactions/ credit entries in the bank account of Shri Renuka Multi State Urban Co-operative Credit Society Limited. Accordingly, the ground taken by the assessee is partly allowed.

9.

The grounds taken by the assessee in respect of penalty proceeding u/s. 271(1)(c) of the Act and levy of interest u/s. 234 of the Act, being consequential in nature, are dismissed.

10.

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

Order pronounced in the Court on 29/06/2026 at Ahmedabad.

Sd/- Sd/- (SUCHITRA KAMBLE) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 29th June, 2026 Neelesh, Sr. PS (True Copy) 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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