MULLOLY MAHESH,MANGALURU vs. INCOME TAX OFFICER, WARD-2(3), MANGALURU

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ITA 2743/BANG/2025Status: DisposedITAT Bangalore22 June 2026AY 2017-184 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found that the credits were from customers for tyre sales and the advance payment was for tyre purchases. Therefore, the entire amount should not be treated as unexplained income. The Tribunal estimated the profit on these transactions at 8%.

What were the facts?

The assessee, a partner in two firms, had credits in his bank accounts treated as unexplained by the AO. The assessee explained these credits as customer deposits for bill amounts, which were subsequently withdrawn and paid to the firms. The AO also treated an advance payment as unexplained money.

What were the issues?

Whether credits in the assessee's bank account and an advance payment were unexplained money, and if so, how should they be taxed.

Which sections of the Income-tax Act were involved?

Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘SMC’ BENCH : BANGALORE

Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K.

For Appellant: Shri Srinivas Kamath, CA, Shri Ganesh R Ghale, Standing

IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH : BANGALORE

BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER

ITA No. 2743/Bang/2025 Assessment Year : 2017-18

Shri Mulloly Mahesh, H No. 17-20-1465, Bhavanthi Street Car The Income Tax Street, Officer, Ramesh Sadan, Ward – 2(3), S L Mathias Road, Mangalore. Falnir, Vs. Mangaluru – 575 001. PAN: ACLPM6230F APPELLANT RESPONDENT

Assessee by : Shri Srinivas Kamath, CA : Shri Ganesh R Ghale, Standing Revenue by Counsel for the Dept. Date of Hearing : 10-06-2026 Date of Pronouncement : 22-06-2026 ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER

This is an appeal filed by the assessee challenging the order of the NFAC, Delhi dated 16/10/2025 in respect of the A.Y. 2017-18.

2.

The brief facts of the case are that the assessee is an individual and partner in M/s. Bombay Tyres Sales & Service and M/s. Bombay Tyres, Mangalore. The assessee filed his return of income on 29/03/2018. The return was processed and refund has been granted. The AO took up the case for complete scrutiny under CASS. Notices u/s. 143(2) and 142(1)

Page 2 of 4 ITA No. 2743/Bang/2025 were issued. Based on the bank account details obtained by the AO, the total credits in the two bank accounts were treated as not considered while filing the return of income. The assessee submitted the customers will deposit the bill amount into his bank account and the assessee subsequently withdraw the bill amount and paid to the firm. The assessee also submitted the partywise details of the cash deposits and the date of withdrawals and payment to the firm in the format given by the AO. In spite of the said details, the AO had treated the opening balance as unexplained one. The AO also treated the advance paid by Senthil and Lakshmi Tyres as unexplained money and treated the amount of Rs. 4,82,850/- as unexplained money u/s. 69A of the Act.

3.

Against the said order, the assessee had filed an appeal before the Ld.CIT(A). The Ld.CIT(A) had dismissed the appeal on the ground that there is no sufficient and verifiable evidence.

4.

As against the said order, the present appeal has been filed by the assessee before this Tribunal.

5.

At the time of hearing, the Ld.AR submitted that the addition made u/s. 69A is not correct, since all the details were furnished to the AO and also confirmation letter was given by Shri Senthil who had made the advance payment. The Ld.AR further submitted that party wise details were given and the withdrawal date and payment made to the firm were given and therefore the AO should not have added as unexplained money u/s. 69A of the Act. The Ld.AR further submitted that all the deposits are by the customers.

6.

The Ld.DR relied on the orders of the lower authorities and prayed to dismiss the appeal.

7.

We have heard the arguments of both sides and perused the materials available on record.

Page 3 of 4 ITA No. 2743/Bang/2025 8. We have perused the assessment order. The AO had made the addition u/s. 69A of the Act on the credits made by the customers against the bill amount. The assessee had also furnished the details of the customers and the bill amount credited into the bank account of the assessee and the withdrawal of the said cash and the remittance made into the firm’s account. We have perused the confirmation letter given by Shri Senthil and his ledger account. From the above details furnished by the assessee, we are able to ascertain that the credits are from the customers which in turn are withdrawn and paid to the firm account. Similarly, the assessee also produced the evidence to show that the advance was received from Shri Senthil for purchasing the Tyres. Considering the entire facts, we are of the view that the credits are nothing but the sale of tyres. If that is so, the entire credit should be taken as the consideration received for the sale of tyres. In that circumstances, the entire sale consideration should not be added as income. Therefore, we are estimating the income at 8% as a reasonable profit obtained in the business.

9.

We, therefore, set aside the additions made u/s. 69A of the Act and direct the AO to estimate the income at 8% of the additions.

10.

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

Order pronounced in the open court on 22nd June, 2026.

Sd/- Sd/- (WASEEM AHMED) (SOUNDARARAJAN K.) Accountant Member Judicial Member

Bangalore, Dated, the 22nd June, 2026. /MS /

Page 4 of 4 ITA No. 2743/Bang/2025 Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Bangalore 5. Guard file 6. CIT(A) By order

Assistant Registrar, ITAT, Bangalore

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