RAMESHBHAI MANGALBHAI PATEL,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-1(3)(1),, AHMEDABAD

These are two appeals preferred by the same Assessee for the Assessment Year 2015-2016 and 2016-2017. Since the appeals involved identical issues, the same were taken up together and are being disposed off by way of a common order.

We would first take up ITA No. 175/AHD/2025 preferred by the Assessee against the Order, dated 27/11/2023, passed by the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the ‘CIT(A)’] whereby the Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 26/03/2022, passed under Section 147 read

The assessing officer as well as first appellate authority has erred in law and on facts in adding and confirming respectively the unexplained cash deposit of Rs.5,16,01,955/-. The same deserves to be deleted. Without prejudice to above benefit of peak credit may be given if addition is sustained”

We have heard both the sides and have perused the material on record.

It emerged that the reassessment proceedings under Section 147 of the Act were initiated in the case of the Assessee for the Assessment Year 2016-2017 since the Assessing Officer had information that substantial cash deposits were made in the bank account of the Assessee maintained with Shri Renukamata Multi State Urban Co-operative Credit Society Ltd. [for short ‘Shri RenukamataCo-operative Society’] during the relevant previous year. Since the Assessee did not respond to the notices issued by the Assessing Officer during the assessment proceedings, vide Assessment Order, dated 26/03/2022, the Assessing Officer made addition of aggregate amount of cash deposits of INR.5,16,01,955/- in the hands of the Assessee invoking provisions contained in Section 69A of the Act.

In appeal preferred before the Learned CIT(A), the Assessee contended that the tax practitioner appointed by the Assessee failed to file proper response during the assessment proceedings. The Assessee stated that the Assessee was undertaking anagadiya business and was earning meager commission of about 0.15%. A list of 20 parties along with Permanent Account Number and amount transferred was also furnished by the Assessee. It was also contended that the Assessee was not the Assessment Year: 2015-2016 and 2016-2017

Being aggrieved, the Assessee has preferred the present appeal after a delay of 54 days. In the application seeking condonation of delay it has been stated that the delay in filing appeal was, in effect, caused on account of lack of communication between the Assessee and the tax consultant entrusted with the filing of appeal. Taking note of the aforesaid explanation offered by the Assessee, we condone the delay of 54 days in filing the present appeal and proceed to adjudicate the grounds raised.

The case set-up by the Assessee is that the Assessee belonged to a lower middle class family and was earning very small amount of money income the relevant previous year. Being 10th/12th class pass out and the Assessee was aware of legal intricacies and tax proceedings. The Assessee was approached by manager of Shri Renukamata Co-operative Society with an offer to open a bank account in his name. The Branch manager had told the Assessee that the Assessee would not be required to make any deposits in the bank account and the same would be operated by third parties. In consideration, the Assessee would be able to earn commission income. Bases upon the assurances given, opened bank account with Shri Renukamata Co-operative Society and signed blank forms, cheques and other documents etc. It has been claimed by the Assessee that the Assessee had no knowledge of the alleged transactions undertaken by syndicate of the bank employees and anagdiya firm. In support the Learned Authorised Representative for the Assessee placed reliance on judicial precedents forming part of legal paper-book filed by the Assessee.

Per Contra, the stand taken by the Revenue is that the Assessee had failed to discharge even the primary onus to prove that the cash deposited did not belong to the Assessee by furnishing the details of the actual beneficiaries. In this regard, the Learned Departmental Representative reiterated the findings returned by the Assessing Officer and the Learned CIT(A).

We have considered the rival submission and have perused the material on record.

It is admitted position that in search and seizure operations conducted by the Investigation Wing it emerged that the accounts maintained with Shri Renukamata Co-operative Society were being used to route undocumented cash income into books of accounts. Assessment/reassessment proceedings were initiated in the case of various account holders and addition @100% of aggregate cash deposits were made in the hands of account holders under Section 68/69/69A of the Act. During the course of hearing the Learned Authorised Representative had placed reliance on the decisions of the Co-ordinate Benches of the Tribunal in the case of other account holders and had contended that the Assessee was placed similarly and therefore, addition in the hands of the Assessee be restricted to 0.25% of the aggregate cash deposits.

On perusal of the judicial precedents we find that the conclusion drawn was based upon the specific facts and circumstances of each case.

In Kaushik Pravinchandra Gohel vs. JCIT [ITA Nos. 690 to 694/AHD/2023, Assessment Years 2015-2016 to 2017-2018, Dated 17/04/2024], the Tribunal had noted that the assessee in that case was an illiterate individual belonging to a poor strata of society who had allowed the bank account to be opened and operated by officials of Shri Renukamata Co-operative Society. The assessee had signed blank forms and documents on the advice of the society’s officials and tax consultant acting in good faith and not being aware of the scheme being operated for the benefit of real beneficiaries. In the light of such peculiar facts, the Tribunal accepted the contention that the assessee was merely a name lender and granted substantial relief by restricting the addition to 0.25% of the aggregate cash deposits.

The above decision was distinguished by the Tribunal in the case of Kanubhai Ambalal Patel Vs. Income Tax Officer – Ward2(1)(2), Ahmedabad observing, inter alia, that in the case before the Tribunal the assessee had failed to produce any material identifying the persons who allegedly deposited the cash or the beneficiaries to whom the funds were transferred. Therefore, the decision of the Tribunal in the case of Kaushik Pravinchandra Gohel (supra) was not applicable. After taking note of pattern of cash deposits and withdrawals, the Tribunal remitted the issue back to the file of the Assessing Officer giving the following directions:

In the present case, we find that the Assessee has neither filed the bank statement nor has the Assessee given information/details of the beneficiaries. Further, during the appellate proceedings before the Learned CIT(A) the Assessee furnished details of 20 parties and stated that the Assessee was carrying out angadiya business, whereas in the submission filed before the appellate proceedings before this Tribunal the Assessee has stated that the Assessee was incorrectly advised to take the aforesaid stand before the Learned CIT(A). At the same time we find merit in the contention of the Assessee that entire amount of cash deposits or credits in the bank account of the Assessee cannot be added in the hands of the Assessee. It is admitted position that the investigating agencies have been investigating and prosecuting past- officers of the Shri Renukamata Co-operative Society. Therefore, the contention of the Assessee that his bank account was being misused by third parties and that the Assessee was drawn into signing cheque and other documents for earning commission income cannot be rejected as being completely frivolous. We note that in the case of Manubhai Babalbhai Patel Vs. Income Tax Officer Ward 1(2)(1), Baroda: ITA No. 605/AHD/2024, Assessment Year 2016-2017, Dated 02/09/2025, the Co-ordinate Bench of the Tribunal had set aside the additions made by the Assessing Officer in identical facts and circumstances; and had restored the issue back to the file of the Assessing Officer after taking into consideration other decision of the Tribunal where the Assessing Officer was directed to confront the Assessee with the information available and the Assessee was directed to co-operate in assessment proceedings and produce before the Assessing Officer details/documents in support of his stand. The relevant extract of the aforesaid decision of the Tribunal reads as under “7. We have heard the rival contentions and perused the material on record. We observe that in the instant case, order was passed by CIT(Appeals) on ex-parte basis without giving an opportunity of hearing to the assessee to present the case on merits. We note that on similar facts, Ahmedabad ITAT in the case of Naravatsinh Jagatsinh Chauhan in ITA No.1253, 1254 and 1255/Ahd/2024 vide orders dated 09/05/2025, restored the matter to the file of the Assessing Officer foe de-novo consideration. In this case the ITAT considered appeals against ex parte assessment and penalty orders passed under sections 147 r.w.s. 144 and 271(1)(c) of the Act. The assessee in that case was an uneducated individual engaged in Angadia business and had not filed return of income and accordingly, the assessments were made based on cash deposits of over ₹14 crores and ₹2.32 crores found in his bank accounts, allegedly operated by third parties. The CIT(A) had dismissed his appeals ex parte due to non-compliance. The assessee explained that he was misled by an accountant and unaware of the proceedings due to his limited education and background. The Tribunal found merit in the assessee's explanation, particularly since no opportunity was provided to rebut evidence, and no proper inquiry was conducted into his claim that he had no ownership over the funds. The ITAT set aside the orders of the AO and CIT(A), restored the matters to the AO for fresh adjudication after providing relevant materials and an opportunity of hearing. Again, in the case of Bhavin Manoharbhai Parmar vs. Income Tax Officer, Ward-5, Mehsana [ITA No.1826/Ahd/2024, A.Y. 2016-17 vide order dated 06.05.2025], the Ahmedabad Bench of the ITAT considered an appeal against the order passed by the CIT(A), NFAC, confirming an addition of ₹1,38,32,749/- made under section 69 of the Act. The addition was based on unexplained cash deposits found in the assessee’s account with Sri Renuka Mata Multi-State Co-op Credit Society Ltd. The ITAT noted that the assessee had failed to provide any supporting evidence during the assessment proceedings or before the CIT(A). During the hearing before the Tribunal, the assessee filed an adjournment application. However, considering that no prejudice would be caused to the Revenue, the Tribunal remanded the matter back to the Assessing Officer with a direction to examine any explanations or documents the assessee may submit and to decide the issue afresh in accordance with law. The assessee was also directed to cooperate fully and avoid unnecessary adjournments. The appeal was allowed for statistical purposes. Accordingly, we note that since the facts of the assessee’s case are on an identical footing wherein no substantive evidence was furnished by the assessee during the course of assessment proceedings before the Assessing Officer and Assessment Year: 2015-2016 and 2016-2017

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

The above decision of the Tribunal would apply to the facts and circumstances of the present case. Accordingly, we set aside the addition of INR.5,16,01,955/- made by the Assessing Officer with the directions to adjudicate the issue of ownership of cash deposits/credits to the account of the Assessee and the role of the Assessee in the same afresh after considering the details/submission filed by the Assessee. The Assessee is directed to furnish to the Assessing Officer all the details of third parties [including details of 20 parties filed before the Learned CIT(A)] to the extent available with the Assessee. The Assessing Officer would be at liberty to examine the same. The Assessing Officer is directed to confront the Assessee with the details of deposits made in the bank account of the Assessee. The Assessee is directed to file response to the same. In case the Assessee fails to appeal and/or cooperate in the assessment proceedings, the Assessing Officer would at liberty to adjudicate the issue on the basis of material on record keeping in view the decisions of the Tribunal discussed hereinabove. It is clarified that the Assessee would be granted an opportunity of being heard. Since we have restored the issue back to the file of the Assessing Officer, the Assessee would be at liberty to contend before the Assessing Officer that the additions be restricted to peak credit in the bank account and the Assessing Officer would be at liberty to adjudicate the upon the aforesaid contention as per law. In terms of aforesaid, Ground No.2 raised by the Assessee is treated as allowed for statistical purposes while Ground No.1 is dismissed without returning any finding on merits.

In result the appeal preferred by the Assessee is partly allowed

Next, we would take up ITA No. 176/AHD/2024 filed by the Assessee challenging the Order, dated 27/11/2023, passed by the CIT(A) whereby the Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 26/03/2022, passed under Section 147 read with Section 144 and 144B of the Act for the Assessment Year 2016-2017. Delay of 6 days in filing the appeal is condoned.

The Assessee has raised following grounds of appeal in ITA No.176/AHD/2024:

During the course of hearing both the sides had agreed that our finding/adjudication in pertaining to the Assessment Year 2015-2016 shall apply mutatis mutandis to the present appeal for the Assessment Year 2016-2017. Therefore, in view of the common factual matrix and adopting the reasoning given while allowing appeal for the Assessment Year 2015-2016 hereinabove, we set aside the addition of INR.13,90,27,037/- made by the Assessing Officer with the directions to adjudicate the issue of ownership of cash deposits/credits to the account of the Assessee and the role of the Assessee in the same afresh after considering the details/submission filed by the Assessee. The Assessee is directed to furnish to the Assessing Officer all the details of third parties to the extent available with the Assessee. The Assessing Officer would be at liberty to examine the same. The Assessing Officer is directed to confront the Assessee with the details of deposits made in the bank account of the Assessee. The Assessee is directed to file response to the same. In case the Assessee fails to appeal and/or cooperate in the assessment proceedings, the Assessing Officer would at liberty to adjudicate the issue on the basis of material on record keeping in view the decisions of the Tribunal discussed hereinabove. It is clarified that the Assessee would be granted an opportunity of being heard. Since we have restored the issue back to the file of the Assessing Officer, the Assessee would be at liberty to contend before the Assessing Officer that the additions be restricted to peak credit in the bank account and the Assessing Officer would be at liberty to adjudicate the upon the aforesaid contention as per law. In terms of aforesaid, Ground No.2 raised by the Assessee is treated as allowed for statistical purposes while Ground No.1 is dismissed without returning any finding on merits.

In result the appeal preferred by the Assessee is partly allowed.

In conclusion both the appeals preferred by the Assessee are partly allowed.

""यथ"/ The Respondent. 3. संबंिधतआयकरआयु"/ Concerned CIT 4. आयकरआयु"(अपील) / The CIT(A) 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण/ DR, ITAT, 6. गाड"फाईल /Guard file. आदेशानुसार/BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.