ADAM HARUN BHAYA,JAMNAGAR, GUJARAT vs. ITO WARD 1 DWARKA, JAMNAGAR, GUJARAT

ITA 473/RJT/2026Status: DisposedITAT Rajkot30 September 2026AY 2017-184 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal acknowledged that the assessee claimed the cash as advances on capital account, but it was treated as revenue. The assessee's explanation was that the money was collected from clients to be paid to insurance companies or port authorities, and that these amounts were deposited in the bank and then paid out by cheque or bank transfer. However, the Tribunal found that the assessee failed to provide sufficient documentary evidence to explain the cash received from customers. Considering the smallness of the amount and the agreement from both sides for an estimated addition, the Tribunal directed the AO to make an ad-hoc estimated addition of 10% of Rs. 4,60,000/-, which amounts to Rs. 46,000/-, to be taxed at normal rates. This decision was made to protect revenue interests and meet the ends of justice, with a clear note that it should not be treated as a precedent.

What were the facts?

The assessee, Adam Harun Bhaya, engaged in the business of insurance agent/adviser, filed his return of income for Assessment Year 2017-18. During assessment proceedings under Section 143(3) of the Income Tax Act, 1961, the Assessing Officer (AO) noted cash of Rs. 4,60,000 accepted by the assessee and recorded in his books. The assessee explained this cash as received from clients to be paid to insurance companies or port authorities on their behalf. However, the assessee did not provide supporting evidence. Consequently, the AO treated this amount as unexplained cash credit under Section 68 and taxed it at special rates under Section 115BBE. The Commissioner of Income-tax (Appeals) upheld the AO's order. The assessee appealed to the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the addition of Rs. 4,60,000/- as unexplained cash credit under Section 68 of the Income Tax Act, 1961, made by the Assessing Officer and sustained by the CIT(A), is justified? The assessee argued that the cash was received from clients as advances for payments to insurance companies and port authorities, and that the cash book and party-wise details were submitted. The assessee also suggested an estimated addition due to the smallness of the amount. The revenue contended that the assessee failed to prove the cash received from customers, making it taxable. The revenue also proposed an estimated addition of 10% to prevent revenue leakage.

Which sections of the Income-tax Act were involved?

Section 68,Section 143(3),Section 115BBE,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”

Before: Dr. Arjun Lal Saini

For Respondent: Shri Shishir Kumar, Ld. Sr. DR
Hearing: 30/07/2026Pronounced: 30/09/2026

Per, Dr. Arjun Lal Saini, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year 2017-18, is directed against the order under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by Commissioner of Income-tax (Appeals), dated 04.06.2025, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Act, on 18.12.2019. 2. The solitary grievance of the assessee in

The order continues below.

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