THE DY. CIT, CENTRAL CIRCLE-1(1), AHMEDABAD vs. KAMLESH PRAVINCHANDRA SHAH, BHAVNAGAR

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ITSSA 39/AHD/2023Status: DisposedITAT Ahmedabad20 June 2024AY 2020-219 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the Ld. CIT(A). The Tribunal noted that the Ld. CIT(A) had granted telescoping benefits of Rs. 78,09,680/- against additions totalling Rs. 84,09,680/- and Rs. 18,19,714/- against an addition of Rs. 27,00,000/-. The Ld. CIT(A) had considered expenses allowed as relief for the same AY 2020-21 in the appeals of partnership firms (M/s. Orchid Infracon and M/s. Orchid Developers), and profits confirmed in earlier years for these firms. The Tribunal found that the Ld. CIT(A) had correctly applied the principle of telescoping, which allows an assessee to explain expenditure by showing it was funded by income or receipts. The Tribunal observed that the Ld. CIT(A) had already decided appeals relating to the firms where the assessee is a partner, and the Ld. DR had not objected to this fact. The Tribunal agreed with the Ld. CIT(A)'s reasoning that the net result of unaccounted purchases and sales needed to be taxed and that income in the form of net profit from earlier years was available as cash in hand. The Tribunal concluded that the Ld. CIT(A)'s order was justified to avoid double taxation and found no reason to interfere. The grounds of appeal were partly allowed.

What were the facts?

The Revenue has appealed the order of the Ld. Commissioner of Income Tax (Appeals) – 11, Ahmedabad (Ld. CIT(A)) for Assessment Year 2020-21. The Assessing Officer (AO) had made additions of Rs. 84,09,680/- and Rs. 27,00,000/- based on WhatsApp chat analysis, invoking Section 69A of the Income Tax Act, 1961. These additions pertained to alleged unaccounted cash transactions. The Ld. CIT(A) deleted Rs. 78,09,680/- from the first addition and Rs. 18,19,714/- from the second, granting the benefit of telescoping. The original return declared an income of Rs. 9,09,030/-. A search under Section 132 was conducted on November 19, 2019, leading to proceedings under Section 153A for AYs 2014-15 to 2019-20, and AY 2020-21 was selected for compulsory scrutiny under Section 153B(1)(b).

What were the issues?

1. Whether the Ld. CIT(A) erred in deleting Rs. 78,09,680/- from the addition of Rs. 84,09,680/- made on account of WhatsApp chats with Shri Hitesh Pithadiya and Shri Jatin, by allowing the benefit of telescoping against confirmed net profit on 'on-money' receipts, despite the assessee not furnishing sufficient documentary evidence to establish the use of such cash in unaccounted expenditure for project development (Section 69A). 2. Whether the Ld. CIT(A) erred in deleting Rs. 18,19,714/- from the addition of Rs. 27,00,000/- made on account of unaccounted cash as per WhatsApp chats with Sanjay V. Patel, by allowing the benefit of telescoping against confirmed net profit on 'on-money' receipts and other confirmed additions, despite the assessee not furnishing sufficient documentary evidence (Section 69A). Revenue's Contention: The Ld. Departmental Representative (DR) argued that WhatsApp chats provided clear evidence of unaccounted cash transactions and these should be fully added. The Ld. DR highlighted the Ld. CIT(A)'s observation that the assessee had not provided sufficient supporting evidence for the transactions found in the chats. The Ld. DR also contended that the benefit of telescoping was incorrectly granted as income was earned after expenses/payments were made. Assessee's Contention: The Ld. Counsel for the assessee clarified that the Ld. CIT(A)'s observation regarding lack of evidence was in relation to an alternative ground on merits, not the telescoping claim. The assessee argued that the Ld. CIT(A) correctly restricted the telescoping benefit to profits from prior years, not for the same AY 2020-21, which was evident from the Ld. CIT(A)'s order.

Which sections of the Income-tax Act were involved?

Section 132,Section 143(3),Section 153A,Section 153B(1)(b),Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “ B ” BENCH, AHMEDABAD

Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR, ACCOUNTNAT MEMBER

For Appellant: Shri Sarju Mehta, AR
Hearing: 13/06/2024Pronounced: 20/06/2024

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त ( अपील ) / The CIT(A)-11, Ahmedabad 5. �वभागीय ��त�न�ध , आयकर अपील�य अ�धकरण , राजोकट/DR,ITAT, Ahmedabad, 6. गाड� फाईल /Guard file.

आदेशानुसार/ BY ORDER,

स�या�पत ��त //True Copy//

सहायक पंजीकार (Asstt. Registrar) आयकर अपील�य अ�धकरण, ITAT, Ahmedabad

1.

Date of dictation (word processed by Hon’ble AM in his laptop) : 18.6 .2024 2. Date on which the typed draft is placed before the : 18.6.2024 Dictating Member. 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating : Member for pronouncement. 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the : 20.6.24 Sr.P.S./P.S. 20.6.24 7. Date on which the file goes to the Bench Clerk. : 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar : for signature on the order. 10. Date of Despatch of the Order :

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