PARESHBHAI VALJIBHAI MAVANI,SURAT vs. ITO WARD 3(3)(5), SURAT, SURAT

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ITA 1132/SRT/2025Status: DisposedITAT Surat09 June 2026AY 2010-116 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal found the addition on contractual income incorrect and directed its computation at 8% as per Section 44AD. The addition for unexplained bank credits was set aside to the AO for fresh consideration, allowing the assessee an opportunity to explain the credits and debits.

What were the facts?

The assessee failed to file a return and did not comply with notices from the AO and CIT(A). The AO made additions for unexplained bank credits and contractual income. The CIT(A) upheld these additions.

What were the issues?

Whether the additions made by the AO for unexplained bank credits and contractual income were justified, and whether the assessee should be granted another opportunity to explain the transactions.

Which sections of the Income-tax Act were involved?

Section 144,Section 147,Section 271(1)(c),Section 68,Section 44AD

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, BENCH

Before: SHRI T.R. SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Aditya Jain, A.R, Shri Ajay Uke, Sr. DR
For Respondent: Shri Ajay Uke, Sr. DR
Pronounced: 09/06/2026

PER SHRI NARENDRA PRASAD SINHA, AM:

These two appeals are filed by the assessee against the separate orders of the National Faceless Appeal Centre (NFAC), Delhi, (in short ‘the CIT(A)’), both dated 05.08.2025 for the Assessment Year 2010-11 in the proceedings under Section 144 read with Section 147 of the Income Tax Act, 1961 (in short ‘the Act’) & u/s. 271(1)(c) of the Act.

ITA Nos.1132 & 1133/SRT/2025 [Pareshbhai Valjibhai Mavani vs. ITO] A.Y. 2010-11 - 2 – 2. The brief facts of the case are that the assessee didn’t file his original return of income for A.Y. 2010-11. The case of the assessee was reopened on the basis of information received by the AO that the assessee has made certain financial transactions during the year, which were not found disclosed. Accordingly, the case of the assessee was reopened by issue of notice u/s.148 of the Act on 28.03.2017. In the course of assessment proceeding, no compliance was made by the assessee in spite of repeated opportunities provided by the AO. As per information received through ITS data, the assessee has received contractual income of Rs.5,42,197/-. In the absence of any explanation, the AO had treated 25% of the receipt as income and made addition of Rs.1,35,549/-. Further, the entire credit of Rs.40,86,132/- appearing in the bank accounts of the assessee was also held as unexplained and added to the income of the assessee. The assessment was completed u/s.144 r.w.s. 147 of the Act on 01.12.2017 at total income of Rs.42,21,680/-. The AO had also initiated penalty proceeding u/s.271(1)(c) of the Act while completing the assessment and a separate penalty order was passed on 26.06.2018 imposing penalty of Rs.12,05,619/-, @ 100% of tax sought to be evaded.

3.

Aggrieved with the orders of the AO, the assessee had filed appeals before the First Appellate Authority, which was decided by the Ld. CIT(A) vide the impugned orders and the appeals of the assessee were dismissed.

4.

Now, the assessee is in second appeal before us.

ITA Nos.1132 & 1133/SRT/2025 [Pareshbhai Valjibhai Mavani vs. ITO] A.Y. 2010-11 - 3 –

ITA No.1132/SRT/2025

5.

The following grounds have been taken in this appeal:

“1. 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 making addition of bank credit entries of Rs 40.86.132/- as unexplained u/s. 68 of the Income Tax Act, 1961. 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 making addition of deemed profit of Rs. 1,35,549/- at 25% on contractual receipts. 3. It is prayed that the assessment may please be quashed and/or disallowance made by the assessing officer and confirmed by CIT(A) may please be deleted. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”

6.

Shri Aditya Jain, Ld. AR appearing for the assessee fairly admitted that no compliance was made by the assessee either before the AO or before the Ld. CIT(A). He explained that the assessee had taken loan from Citi Bank for the purpose of business in the year 2006 and due to continuous losses, the assessee was in financial distress and, therefore, could not attend the proceedings before the lower authorities. He further submitted that the notices were sent by the Ld. CIT(A) on the email ID of the consultant and the assessee was not aware about the non-compliance made by the consultant. He, therefore, requested that the assessee may be allowed another opportunity to explain the credits in the bank account as well as contractual income by setting aside the matter to the file of the Ld. Jurisdictional AO. He submitted that the Department was not correct in treating the credits in the bank account as income without considering the debit entries.

ITA Nos.1132 & 1133/SRT/2025 [Pareshbhai Valjibhai Mavani vs. ITO] A.Y. 2010-11 - 4 – 7. Per contra, Shri Ajay Uke, Ld. Sr. DR supported the orders of the lower authorities. He, however, had no objection if the matter was set aside to the AO for allowing another opportunity of hearing to the assessee.

8.

We have considered the rival submissions. There is no dispute to the fact that no compliance was made by the assessee either before the AO or before the Ld. CIT(A). We are not convinced with the explanation of the assessee regarding the non- compliance. In fact, the assessee had not given any cogent explanation for non-compliance before the AO. Regarding proceedings before the Ld. CIT(A), once the appeal was filed by the assessee, it was his responsibility to ensure that proper compliance was made. The assessee cannot escape by merely placing the blame on his consultant. We, therefore, deem it proper to impose a cost of Rs.20,000/- on the assessee, which should be paid to the Prime Minister Relief Fund within a period of 15 days from the date of the receipt of the order.

9.

As regarding the addition of 25% of the contractual receipt as made by the AO, there is no dispute to the fact that the assessee’s case was covered under the provision of section 44AD of the Act. Therefore, the AO was not correct in treating the income out of the contractual receipts @25% and making addition of Rs.1,35,549/-. The AO is directed to compute the income of the contractual receipt by applying net profit rate of 8% in accordance with the provisions of Section 44AD of the Act.

ITA Nos.1132 & 1133/SRT/2025 [Pareshbhai Valjibhai Mavani vs. ITO] A.Y. 2010-11 - 5 – 10. As regards, treating the entire credit entries of Rs.40,86,132/- in the bank account as unexplained income of the assessee, it is true that no compliance was made by the assessee and the nature of the credit entries were not explained. At the same time, treating all the credit entries as income of the assessee without considering the debit entries, also could not be justified. In the interest of justice, therefore, we deem it proper to set aside this matter to the file of the Jurisdictional Assessing Officer (in short ‘JAO’) with a direction to allow another opportunity to the assessee to explain the source of credit entries in the bank account. The assessee is also directed to make compliance before the AO in the course of set aside proceeding and bring on record the evidences explaining the credits in the bank account. In case the assessee does not make compliance, the JAO will have liberty to pass order as per law, by taking both the credit as well as the debit entries appearing in the bank statements.

11.

In the result, appeal of the assessee is partly allowed for statistical purposes.

ITA No.1133/SRT/2025

12.

This appeal pertains to imposition of penalty u/s.271(1)(c) of the Act. Since, the appeal in respect of quantum addition has been set aside to the file of the JAO, we deem it proper to set aside the present matter as well to the file of the JAO. The AO will be free to re-impose the penalty u/s.271(1)(c) of the Act after first completing the assessment in the set aside proceeding.

ITA Nos.1132 & 1133/SRT/2025 [Pareshbhai Valjibhai Mavani vs. ITO] A.Y. 2010-11 - 6 –

13.

In the result, the appeal of the assessee is allowed for statistical purposes.

14.

In the combined result, appeal of the assessee in ITA No.1132/SRT/2025 is partly allowed for statistical purposes and the appeal of the assessee in ITA No.1133/SRT/2025 is allowed for statistical purposes.

This Order pronounced on 09/06/2026

Sd/- Sd/- (T.R. SENTHIL KUMAR) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 09/06/2026 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. संबंिधत आयकर आयु� / Concerned CIT 3. 4. आयकर आयु�(अपील) / The CIT(A)- 5. �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / सूरत / ITAT, Ahmedabad / Surat

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