MANOJ KUMAR PANDURANG KHADE,PUNE vs. ITO, WARD-14(5), PUNE, PUNE

Facts of the case, in brief, are that the assessee is an individual and has not filed his return of income. Information was available with the department that the assessee Shri Manojkumar Pandurang Khade has deposited large cash amount of Rs.1,77,42,391/- in his account maintained with M/s. Shri Renukamata Multi State Urban Credit Cooperative Society Ltd during the financial year 2017-18 relevant to the assessment year 2018-19. Since the assessee has not filed his return of income, therefore, the source of such cash deposit made by the assessee in his bank account amounting to Rs.1,77,42,391/- remained unexplained. The Assessing Officer, therefore, after recording reasons, reopened the assessment and issued a notice u/s 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). Subsequently an order u/s 148A(d) of the Act was passed on 06.04.2022 by the JAO. Subsequently the Assessing Officer issued notice u/s 142(1) of the Act along with a questionnaire calling for certain details. The assessee in response to the said notice filed Profit and Loss Account, Balance Sheet, Cash Book, sample copy of invoice, bank account statement from Bank of India and Renuka Mata Multi State Urban Credit Co-Op. Society. The Assessing Officer, on verification of the bank accounts noted that the aggregate total deposits made in the bank accounts are amounting to Rs.1,88,11,912/- with other credits of Rs.15,28,909/- leading to total credit of Rs.2,03,40,821/-. Before the Assessing Officer the assessee claimed to be engaged in the business of retail and wholesale trading and purchase of fruit and vegetables. The Assessing Officer observed from the details that the Profit and Loss Account reflected meagre sales of Rs.14,53,254/- and purchases of Rs.11,51,155/- only whereas the assessee has made cash deposit of 3 Rs.1,88,11,912/-. Further, the assessee has claimed transportation expenses of Rs.21,951/- which according to the Assessing Officer was unrealistic for transportation purpose involving goods worth Rs.1.77 crores. Rejecting the various explanations given by the assessee, the Assessing Officer made addition of Rs.2,03,40,821/- u/s 69A of the Act by observing as under: “4.6 Conclusion draw:-

In appeal the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer by observing as under:

Aggrieved with such order of the Ld. CIT(A) / NFAC the assessee is in appeal before the Tribunal by raising the following grounds: The following grounds are taken without prejudice to each other- On facts and in law, 1] The Ld. NFAC/CIT(A) has erred in upholding the assessed income of the appellant at Rs.2,03,40,821/- thereby confirming the addition made by the Ld. AO in an ex-parte assessment order u/s. 144 r.w.s. 147 of the Act which is patently illegal and unsustainable in law and the same may please be deleted. 2] The Ld. NFAC/CIT(A) erred in not appreciating that the provisions of S. 69A of the Act were not at all applicable in the present case, as it was not a case where appellant is found to be in possession of any unaccounted money, bullion, jewellery etc. It was rather a case of sources & taxability of cash deposits in bank A/c. Thus, entire addition made is illegal. 3] The Ld. NFAC/CIT(A) has erred in upholding the addition of Rs.2,03,40,821/- treating entire cash deposit amount during the year under consideration as unexplained income of the appellant without considering the evidences furnished and facts of the case. 3.1] The Ld. NFAC/CIT(A) ought to have appreciated that entire cash deposits & credit entries in bank were sourced out of business receipts from the supply of fruits/vegetable and accordingly, only net income from business can be brought to tax and not entire cash deposits/business receipts. 3.2) The Ld. NFAC/CIT(A) failed to appreciate that all the cash deposits were duly accounted for in the cash books furnished before him and also failed to appreciate that only commission income from supply of farmer goods to traders was credited to Profit & Loss A/c. 3.3) The Ld. NFAC/CIT(A) failed to appreciate that the appellant was engaged into business of supply of perishable goods which is very thin margin business and that after taking into account all the expenses incurred, the appellant had earned a profit of Rs.2,60,395/-. The addition made, therefore, deserves to be deleted entirely. 4] Without prejudice, the Ld. NFAC/CIT(A) ought to have restricted addition to the extent of estimated profit @ 1-2% of the gross receipts/cash deposit amount as per industry norms considering the nature of business. 5] Without prejudice to above, the id. NFAC/CIT(A) failed to have appreciated that there were cash deposits as well as cash withdrawal in the bank statements and therefore if at all contention of business receipt was 8 not acceptable, the Ld. NFAC/CIT(A) ought to have restricted the addition to the extent of peak credit. 6] Without prejudice to above, the Ld. NFAC/CIT(A) ought to have taxed the profit from business receipts under the head 'Profit & Gains from Business & Profession' and not as Unexplained income' u/s. 69A r.w.s. 115BBE of the Act. 7] The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.

The Ld. Counsel for the assessee referring to pages 87 to 103 of the paper book drew the attention of the Bench to the bank account maintained with M/s. Renukamata Multi State Urban Credit Co-op. Society and submitted that there are continuous deposits and withdrawals in the said bank account. Therefore, the entire cash deposit could not have been added u/s 69A of the Act. Relying on various decisions he submitted that when there are continuous deposits and withdrawals in the said bank account, only the peak credit should be added which in the instant case is Rs.6,25,843/-, the calculation of which is placed at pages 104 to 109 of the paper book. Referring to various invoices, confirmations, PAN numbers and 7/12 extracts of farmers on sample basis, copies of which are placed at pages 24 to 59 of the paper book, he submitted that the assessee is engaged in the business of wholesale trading of vegetables and fruits. In his alternate contention he submitted that some fair and reasonable estimate may be made and the entire addition under no circumstances can be made.

The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. He submitted that the assessee failed to substantiate his claim with documentary evidence regarding his engagement in 9 wholesale trading of fruits and vegetables. Since the assessee failed to substantiate with evidence to the satisfaction of the Assessing Officer regarding the nature and source of cash deposit in the bank account maintained with M/s. Shri Renukamata Multi State Urban Credit Cooperative Society, therefore, the Assessing Officer was fully justified in invoking the provisions of section 69A in making addition of Rs.2,03,40,821/- and the Ld. CIT(A) / NFAC was fully justified in sustaining the same.

We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case invoking the provisions of section 69A of the Act made addition of Rs.2,03,40,821/- to the total income of the assessee being the unexplained cash deposit in the bank account maintained with M/s. Shri Renukamata Multi State Urban Credit Cooperative Society Ltd and Bank of India. We find the Ld. CIT(A) / NFAC upheld the addition made by the Assessing Officer, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that since the assessee is engaged in the business of wholesale trading of fruits and vegetables and there are continuous deposits and withdrawals of cash in various bank accounts maintained by the assessee, therefore, only the peak credit, at best, can be made. It is his alternate contention that some fair and reasonable estimate should be made and the entire cash deposit cannot be added to 10 the total income of the assessee by invoking the provisions of section 69A of the Act. A perusal of the bank account statements filed in the paper book shows that there are continuous deposits and withdrawals of cash in the said bank account. The various evidences filed in the paper book also indicate that the assessee in the instant case is engaged in the business of wholesale trading in fruits and vegetables. Under these circumstances, addition of the entire cash deposit in our opinion is not justified. We, therefore, accept the alternate contention of the Ld. Counsel for the assessee that some fair and reasonable estimate should be made in the instant case. Considering the totality of the facts of the case, we are of the considered opinion that profit percentage @ 6% of the total cash deposit of Rs.2,03,40,821/- will meet the ends of justice. Thus, the addition is restricted to Rs.12,20,449/-. We hold and direct accordingly. The grounds raised by the assessee are accordingly partly allowed.

In the result, the appeal filed by the assessee is partly allowed.

The concerned Pr.CIT, Pune

DR, ITAT, ‘B’ Bench, Pune 5. ग र्ड फ ईल / Guard file. आदेशानुसार/ BY ORDER, Sunil Kumar More Sunil Kumar More Date: 2026.10.24 12:53:11 +05'30'