INCOME TAX OFFICER, WARD- 3(3)(1), SURAT, SURAT vs. NILESHKUMAR JAYNTILAL PATEL, SURAT

PDF · subscribers
ITA 898/SRT/2025Status: DisposedITAT Surat07 April 20266 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee was engaged in the cheque discounting business and earning commission income, and declined to interfere with the CIT(A)'s order. The CIT(A) had confirmed a part of the addition as commission income and another part as embroidery job work income.

What were the facts?

The Revenue appealed against the CIT(A)'s order which partly deleted additions made by the AO on account of unexplained cash credits. The AO had added the entire credit entries of Rs. 3,16,45,470/- as unexplained cash credit as the assessee did not comply with notices and was untraceable.

What were the issues?

Whether the CIT(A) erred in deleting additions on account of unexplained cash credits by treating them as turnover from cheque discounting and embroidery job work, and whether additional evidence was rightly accepted.

Which sections of the Income-tax Act were involved?

Section 68,Section 144,Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT “DB” BENCH, SURAT

Before: DR. B.R.R. KUMAR, VICE- & MS. SUCHITRA KAMBLE

For Appellant: Shri Suresh K Kabra, CA
For Respondent: Shri Mukesh Jain, CIT. D.R
Hearing: 23.01.2026Pronounced: 07.04.2026

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT “DB” BENCH, SURAT BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. Nos. 898 & 899/SRT/2025 (Assessment Years:2010-11 & 2011-12) Nileshkumar Jayantilal Income Tax Officer Vs. Patel Ward-3(3)(1), 108, Opp. Gadhiya Surat Township, Shivanjali Row House, Kathodara Road, Kathodara, Surat, Surat, Gujarat – 394326 PAN : AQVPP0759L (Appellant) (Respondent) .. Appellant by : Shri Suresh K Kabra, CA Respondent by: Shri Mukesh Jain, CIT. D.R. Date of Hearing 23.01.2026 Date of Pronouncement 07.04.2026 O R D E R PER SUCHITRA KAMBLE, JUDICIAL MEMBER:-

These two appeals filed by the Revenue against the order dated 17-06-2025 passed by National Faceless Appeal Centre (NFAC), Delhi for Assessment Years 2010-11 & 2011-12.

2.

The Revenue has raised following grounds in ITA No. 898/SRT/225 for A.Y. 2010-11:

“(1) On the facts and circumstances of the case and in law the Ld CIT has erred in deleting the addition made of Rs. 3,16,45,470/ by the AO on account of unexplained cash credits within the meaning of section 68 of the Act for not substantiating the source & genuineness of such substantial credits.

ITA Nos. 898 & 899/Srt/2025 ITO vs. Nileshkumar Jayantilal Patel Asst.Years :2010-11 & 2011-12 - 2– (ii) On the facts and circumstances of the case and in law the Ld. CIT has erred in accepting the additional evidences although there was no valid reason for the same as per Rule 46A of Income-Tax Rule. (iii) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in treating the unexplained credits of as turnover of the assessee from cheque discounting and estimated commission @ 0.15% on the same despite the Assessing Officer's detailed findings clearly establishing substantial unverifiable transactions during remand proceedings. (iv) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in treating the unexplained credits of Rs.5,26,545/- as his embroidery job work turnover and estimated NP @ 8% of the same without any supporting evidences and confirmations of the parties. (v) On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in appreciating the fact that after through verification, the AO had observed that the assessee failed to provide necessary documentary evidences viz. Name, Address, PAN, and confirmations of the parties with respect to transactions appearing into his bank account statements to substantiate the source & genuineness of such substantial credits. (vi) On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer. (vii) It is therefore prayed that the order of Ld. CIT(A) may kindly be set aside that of the Assessing Officer be restored. (viii) The appellant craves leave to add, alter, amend and/or withdraw any ground of appeal either before or during the course of hearing of the appeal.” 2. The brief facts of the case are that in this case, the assessee has filed his return of income for the A.Y. 2010-11 on 18.08.2010 declaring total income at Rs.2,50,520/-. In this case, information has been received from the ADIT(Inv.)-1, Surat that assessee was having five bank accounts bearing No.058405500365, 005205005378, 58405000812, 58405000610

ITA Nos. 898 & 899/Srt/2025 ITO vs. Nileshkumar Jayantilal Patel Asst.Years :2010-11 & 2011-12 - 3– & 058101510247 maintained with ICICI bank, Surat in the name of Jashraj Creation, Shree Krishna Enterprise. The total credits in these accounts were of Rs.3,22,46,830/- for the year under consideration. The assessee was not traceable during the course of inquiry made by the ADIT(Inv.)-1, Surat and even summons issued by the ADIT(Inv.)-1, Surat was remained unserved and returned with remarks Party Left'. Moreover, it is observed by the ADIT(Inv)-1, Surat that essessee's nature of business prima facie appears as a cheque discounter but no corroborative evidence could be seen to establish the business genuineness. Accordingly, the case of the assessee was reopened for assessment. During the assessment proceedings, the assessee did not comply to the notices issued by the assessing officer and the proceedings were completed u/s 144 r.w.s. 147 of the Act assessing total income of the assessee at Rs.3,18,95,990/- after adding all credit entries of Rs.3,16,45,470/- to the income of the assessee on account of unexplained cash credit.

3.

Aggrieved with the assessment order, the assessee preferred appeal before the Ld. CIT(A) who has partly allowed the appeal of the assessee by observing as under: Appellant during the course of appellate proceedings has filed confirmations and ledger account of few of the individuals/firms/companies. Since the appellant failed to furnish confirmations and other evidences of all the lenders/borrowers, in support of his contention, investment of money of the appellant cannot be ruled out and therefore, profit earned by appellant from its investment should be charged to tax. The appellant in his written submission stated that during the year under consideration the total gross amount on which discounting income was earned is Rs. 5,09,07,495/ Thus, in view of the above discussion and case laws

ITA Nos. 898 & 899/Srt/2025 ITO vs. Nileshkumar Jayantilal Patel Asst.Years :2010-11 & 2011-12 - 4– cited, as 0.15 is a rational rate taken, the addition made by the AO to the extent of Rs. 76,361/ (0.15% of Rs. 5,09,07,495/-) is Confirmed. Further, regarding the addition made by the AO on account of embroidery job work income, I find it necessary to mention that the AO has picked up transactions which have been received as job work charges, however, did not even discuss about the job work charges received through cheques. As per the remand report submitted by the AO the assessee had shown total turnover of Rs. 6,01,360/- for AY 2010-11 wherein embroidery job work of Rs. 5,26,545/- was included. Therefore, the AO was not justified in making additions of total amount on assumption and presumption basis. In such type of business, the NP rate varies from 5 to 15%. In the absence of any satisfactory documents submitted nor brought on record by the AO, I deem it fit to apply a NP rate of 8%. Therefore, the addition made by the AO to the extent of Rs. 42,124/- (08% of Rs. 5,26,545/-) is Confirmed. Therefore, the additions made by the AO to the extent of Rs. 1,18,485/- ( Rs.76,361 Rs. 42,124) is Confirmed. The appellant gets relief of Rs. 3,15,26,985/- (Rs: 3,16,45,470 Rs: 1,18,485). Therefore, the appeal on these grounds is Partly Allowed." 4. Aggrieved with the order of the Ld. CIT(A), the Revenue preferred appeal before us.

5.

Before us, the Ld. DR argued that the Ld. CIT(A) has also erred in accepting the contention of the assessee merely on the basis of his statement of having engaged in the business of cheque discounting. Under the circumstances as well as absence of any supporting evidences to prove the source & genuineness of the transactions appearing into his bank accounts cannot absolve the assessee from his obligation to provide the details. It was argued that the taxation of commission income and taxation of unexplained credits are two different things. Ld. DR argued that the Ld. CIT(A) has erred in treating unexplained credits as assessee's turnover from cheque discounting business and estimated commission @ 0.15% as

ITA Nos. 898 & 899/Srt/2025 ITO vs. Nileshkumar Jayantilal Patel Asst.Years :2010-11 & 2011-12 - 5– cited by the assessee, which is unjustified and warrants reconsideration.

6.

On the other hand, Ld. AR relied on the order of the Ld. CIT(A) and submitted that the addition was rightly deleted by the Ld. CIT(A).

7.

Heard the arguments of both the parties and perused the material available on record. We have perused the bank statements and the discounting charges earned by the assessee. Based on the entries in the bank statements, it can be held that the assessee is in the cheque discounting business and earning commission income. Hence, we decline to interfere with the order of the Ld. CIT(A) on both the counts. 8. In the result, appeal filed by the Revenue is dismissed.

9.

As regards ITA No.899/SRT/2025, the facts are identical to that of ITA No.898/SRT/2025, hence, the appeal is dismissed.

10.

In the combined result, both appeals filed by the Revenue are dismissed.

Order is pronounced in the open Court on 07.04.2026

Sd/- Sd/- (DR. B.R.R. KUMAR) (SUCHITRA KAMBLE) VICE-PRESIDENT JUDICIAL MEMBER Surat; Dated 07/04/2026 SKSinha, Sr.PS True Copy

ITA Nos. 898 & 899/Srt/2025 ITO vs. Nileshkumar Jayantilal Patel Asst.Years :2010-11 & 2011-12 - 6– आदेशकी�ितिलिपअ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ�/ The Appellant ��थ�/ The Respondent. 2. 3. संबंिधतआयकरआयु�/ Concerned CIT ( ) 4. आयकरआयु� अपील / The CIT(A)- , , 5. िवभागीय�ितिनिध आयकरअपीलीयअिधकरण /DR,ITAT, Surat, 6. / Guard file. गाड�फाईल आदेशानुसार/ BY ORDER, TRUE COPY सहायकपंजीकार (Asstt. Registrar) आयकरअपीलीयअिधकरण ITAT, Surat

More judgments on Section 68

All 29,931 judgments and leading authorities on Section 68 →

Recent GST High Court judgments

Search GST case law →