SHRI VIJAYBHAI BAVABHAI JAPDA,RAJKOT GUJARAT vs. THE ASSTT. COMMR. OF INCOME TAX, CEN. CIR. 1, RAJKOT GUJARAT

आयकर अपीलीय अिधकरण, राजकोट �ायपीठ, राजकोट। In The Income Tax Appellate Tribunal, Rajkot Bench, Rajkot Before Dr. Arjun Lal Saini, Accountant Member And Shri Dinesh Mohan Sinha, Judicial Member आयकर अपील सं/.ITA No. 152/Rjt/2017 (िनधा�रणवष�/ Assessment Year: 2007-08) & IT(SS)A Nos. 18 to 23/RJT/2017 िनधा�रणवष�/ Assessment Years: 2008-09 to 2013-14 Shri Hari Vijaybhai Japda L/R. of Assistant Commissioner of बनाम Late Shri Vijay Bavabhai Jadpa, Income-tax, “Vijay Niwas”, 2 - Gadhiya Nagar, Vs. Central Circle – 1, Rajkot Sant Kabir Road, Rajkot, Gujarat - Aayakar Bhavan, Race Course 360001 Ring Rajkot – Gujrat - 360001 (अपीलाथ�/Appellant) : (��थ�/Respondent) PAN No. AGAPJ1572E िनधा�रती की ओर से/Assessee by : Shri Mehul Ranpura, Ld.AR राज� की ओर से/Revenue by : Shri Abhimanyu Singh Yadav, Ld. Sr. DR सुनवाई की तारीख/Date of Hearing : 24/02/2026 घोषणा की तारीख/Date of Pronouncement : 16/04/2026 ORDER Per, Dr. Arjun Lal Sain, AM:

These six appeals and one penalty appeal have been filed by the assessee, against the separate orders passed by the Learned Commissioner of Income Tax (Appeals)-11, Ahmedabad, [hereinafter referred to as “CIT(A)”],arising in the matter of separate assessment orders passed by the assessing officer u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 and penalty order under section 271AAB of the Income Tax Act (in short ‘the Act’), relevant to the Assessment Years 2007-08 to 2012-13.

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 2 2. Since, the issues involved in all these appeals are common and identical; therefore, these appeals have been heard together and are being disposed of by this consolidated order. For the sake of convenience, the grounds as well as the facts narrated in ITA No.152/Rjt/2017 for assessment year (A.Y.) 2007-08, have been taken into consideration for deciding the above appeals en masse. 3. Although, these appeals filed by the assessee for Assessment Years 2007- 08 to 2012-13, contains multiple ground of appeals. However, at the time of hearing we have carefully perused all the grounds raised by the assessee. We find that most of the grounds raised by the assessee, are either academic in nature or contentious in nature. However, to meet the end of justice, we confine ourselves to the core of the controversy and main grievances of the assessee. With this background, we summarize and concise the grounds raised by the assessee, as follows:

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 3 (This is assessee’s ground no.4 in ITA No. 152/RJT/2017 for A.Y. 2007-08, Ground No. 4 in IT(ss) No. 18/Rjt/2017 for A.Y. 2008-09, Ground No. 3 in IT(ss) No. 19/Rjt/2017 for A.Y. 2009- 10,Ground No. 4 in IT(ss) No. 20/Rjt/2017 for A.Y. 2010-11,Ground No. 4 in IT(ss) No. 21/Rjt/2017 for A.Y. 2011-12, Ground No. 4 in IT(ss) No. 22/Rjt/2017 for A.Y. 2012-13)

4.“The Ld. CIT(A) erred in law as also on facts in alleging that the assessee did not make payment of the tax while filing return of income and therefore, immunity from penalty u/s. 271AAB, can not be granted and thereby confirming the penalty of Rs. 64,50,000/-, levied u/s 271AAB of the Act on the disclosure income of Rs. 2,15,00,000/- made an ad-hoc basis. The penalty levied u/s 271AAB of the Act is totally unjustified on facts as also in law may kindly be deleted.” ( This is assessee’s ground No.1 in penalty appeal in IT(ss)A No. 23/Rjt/2017 for A.Y. 2013- 14,)

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 4 income showing total income of Rs. 2,85,470/- was filed by the assessee, on 12.09.2013. A notice u/s 143(2) of the Act was issued on 23.07.2014, which was served upon the assessee. Further detailed questionnaire was issued on 27.08.2014, by the assessing officer alongwith a notice u/s. 142(1) of the Act. In response to the notices of hearing, authorized representative of the assessee, attended to the assessment proceedings, from time to time and filed details called for and written submissions, before the assessing officer.

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 5 7. In reply, the assessee submitted that during the course of search at the residential premises of the assessee, various note books /materials containing cash receipts and payments towards the financing business were seized. Noting in the said note books / materials were in the nature of loans given to various persons and repayment including interest received from them at periodical interval. On the basis of the said seized note books /materials, a cash flow statement has been worked out and the interest income of Rs. 2,32,225/- has been worked out. The assessee also submitted working of interest income on the basis of the seized materials. It was further submitted that the cash flow statement prepared in the basis of seized records / data reflected the excess outflow of cash and therefore, the said excess outflow of Rs. 1,65,000/-, is the income from financing activities. On going through the details of statement of income and expense account prepared by the assessee on the basis of the prime records available with him and also with the department, the net income has been arrived as under: Income Interest income from financing activities 2,32,225 Other income 1,65,000 Total 3,97,225 Expenses Bad debts 2,53,000 Interest expenses 4,500 Total 2,57,500 Net of income over expenses 1,39,725 Income offered in the return against this actual income 2,00,000

From the above it can be seen that, there is marginal difference in the gross income worked out by the assessee and that worked out by the Investigation Wing in the appraisal report. But there is difference between the net income worked out by the assessee and that worked out by the department. This difference is primarily on account of bad debt and interest expenses. The assessee was therefore asked to justify the claim of bad debt and interest expenses.

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 6 8. The assessee, also submitted during the course of hearing, (vide written submission submitted by the assessee before the assessing officer) that the incidence of bad debt in the assessee's business is very high. This is due to the fact that the assessee charges interest at as high as 10% per month. This can be seen from the seized materials itself. The advances are made to persons of lower strata, like street vendors, vegetable vendors, tea-stalls, etc. Even this fact can be seen from the seized materials because, there are persons like Jitu Mistri (Carpenter), Baba Pan (pan shop), Raju Vanand (hair cutter), Raju Dabeli (street food vendor), etc. Therefore, there is high chances that these people might vanish when their small businesses runs into rough weather. The assessee further submitted that, looking to the high incidence of risk, he always deducts the interest of the first month and the remaining amount of principle is handed over. This fact is also clearly mentioned in the seized materials. The assessee further submitted that looking to the risk of the business, the period of loan is usually for a very short term, that is, at the most 10-12 months. In fact, according to the assessee, due to the risk of business, he has to resort to muscle power and therefore, has been booked by the Police department. So far as interest expenses are concerned, the assessee submitted that, it can be seen from the seized materials that there are instances where he has recorded details of payment of interest. He often takes loans from outsiders at lower interest, which is then lent at higher interest rates. The assessee also highlighted the fact that, as per the working of interest income and other income done by the department, the entire gross receipt is taken as the net income of the assessee. The assessee submitted that, it is never possible that the entire gross receipt is the net receipt and that there would not be any expenses.

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 7 whenever he receives back his interest and principal amount, he crosses the paper of that diary which means that the account has been closed. Therefore, wherever the paper has not been crossed, it means that the interest or principle is outstanding. In light of all the factors, the assessee requested that the claim of bad debt and interest expenditure may be allowed to him.

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 8 interest by giving advance to several parties and income from the interest was worked out to Rs.4,57,660/-. However, income of only Rs.2 lakhs was offered under this head by the assessee. The assessing officer after considering the submission of the assessee worked out income from interest income at Rs. 4,57,660/-.

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 9 14. Aggrieved by the order of the learned CIT (A), the assessee is in further appeal before us.

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 10 18. Learned Counsel for the assessee, relied on the submissions made by the assessee before the lower authorities, in respect of all these appeals. On the other hand, the Ld. DR for the Revenue submitted that all these lis may be restored back to the file of the assessing officer, with the direction to the assessee, to file the reconciliation statement between the seized material and book of accounts, to justify the interest income, with cogent evidences. The assessee also needs to file the reconciliation statement between interest expenses shown in the seized material and shown in the books of accounts of the assessee, as there is wide gap between these expenses, therefore assessee needs to explain the difference with help of the reconciliation statement and with cogent evidences. Regarding bad debts, there is a wide difference between the seized documents and assessee’s book of accounts which needs to be explained with the reconciliation statement and with cogent evidences. In real sense, the assessee has not claimed any bad debts in its books of accounts, however, assessee has shown the bad debts expenses, after conclusion of the search proceedings, to inject more expenses, to evade payment of tax, hence it is afterthought to claim these expenses and to cheat the revenue. There is also a wide difference between the gross receipts calculated by the search team and the gross receipts calculated by the assessee. The assessee was not able to reconcile the same, during the assessment proceedings as well as during the appellate proceedings. The ld.CIT(A) has partly allowed the bad debts based on the guess work, which is not accepted, particularly when there is seized documents, which clearly shows that there is no so much bad debts expenses. Therefore, assessee is directed to file the reconciliation of gross receipts considering the amount mentioned in the seized material and the amount mentioned in the books of account with cogent evidences. Therefore, learned DR has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 11 19. We have considered submissions of both the parties. We note that during the course of search at the residence of the assessee on 17.01.2013, eight note books and three diaries were found and seized. These seized notebooks and diaries contained person wise details of loans advanced to various persons by the assessee. They also contained the details of interest collected from them. On the basis of these materials collected, the Investigation Wing had collated these data into tally accounting software, in order to work out the advances made by the assessee for each year and also to determine the interest earned from such advances. Accordingly, on the basis of data gathered from the seized materials, the interest income and other income of the assessee was worked out. However, assessee has failed to file the reconciliation in respect of the figures/amount mentioned in eight note books and three diaries. The assessee has not explained with cogent evidences, the person wise details of loans advanced to various persons, and interest received by the assessee, before the assessing officer. In the return of income filed by the assessee, in response to the notice issued u/s 153A of the Act, the assessee had offered such interest income on ad-hoc basis, which is not acceptable, particularly when the real figure is available in the seized documents and books of accounts of the assessee, for that assessee needs to submit reconciliation statement, showing the difference between the seized documents and his book of accounts, with cogent evidences, however, assessee has failed to do so, during the assessment proceedings. 20. Besides, in the working of the department ( Revenue authorities) the entire gross receipt were taken as net taxable income because there is no mention of bad debt or interest expenditure in the seized materials. Hence, assessee cannot claim bad debts and interest expenses which is not even recorded in the seized documents and in the books of accounts. Therefore, according to us, if the assessee wants to claim gross receipts as per its book of accounts, then in that circumstances, the assessee needs to submit the reconciliation statement, showing

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 12 the difference of gross receipts as per seized documents and as per books of accounts of the assessee, which the assessee has failed to do so.The fact that the assessee crosses the page ( seized documents) when the account is settled and that, when the page is not crossed it means that the interest or principle is outstanding. Further, no clear working of interest expenses and bad debt has been furnished by the assessee, before the assessing officer with corroborative evidences. So far as the assessee's contention that the risk involved in his business is very high, is concerned, it is equally true of the reward.Therefore, we find merit in the arguments advanced by the Ld. DR for the Revenue to the effect that all these lis should be restored back to the file of the assessing officer, with the direction to the assessee, to file the reconciliation statement between the seized material and book of accounts, to justify the interest income, interest expenses, bad debts, gross receipts etc. with cogent evidences.

Vijaybhai B. Japda vs. ACIT ITA No. 152/Rjt/2017 & IT(SS)A Nos.18 to 23/RJT/2017 13 4.“The Ld. CIT(A) erred in law as also on facts in alleging that the assessee did not make payment of the tax while filing return of income and therefore, immunity from penalty u/s. 271AAB, can not be granted and thereby confirming the penalty of Rs. 64,50,000/-, levied u/s 271AAB of the Act on the disclosure income of Rs. 2,15,00,000/- made an ad-hoc basis. The penalty levied u/s 271AAB of the Act is totally unjustified on facts as also in law may kindly be deleted.” ( This is assessee’s ground No.1 in penalty appeal in IT(ss)A No. 23/Rjt/2017 for A.Y. 2013- 14,) 24. Since we have restored back the quantum appeals to the file of the assessing officer for fresh adjudication, therefore, penalty does not have leg to stand. However, in fresh assessment proceedings, the assessing officer, may initiate, penalty proceedings, if any, in accordance with law. 25. In the result, appeal filed by the assessee in IT(ss)A No. 23/Rjt/2017, is allowed, for statistical purpose, in above terms.

Sd/- Sd/- [ Dr. Dinesh Mohan Sinha ] [ Dr. Arjun Lal Saini ] Judicial Member Accountant Member

//True Copy// राजकोट /Rajkot िदनांक/ Date: 16/04/2025 By order/आदेशसे,

/T Assistant Registrar/Sr. PS/P.S. ITAT, Rajkot