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Facts
The assessee, engaged in ticket booking and travel services, filed an income return for AY 2017-18. The case was selected for scrutiny due to cash deposits of Rs. 1,44,50,000 during the demonetization period.
Held
The Tribunal held that the assessee failed to explain the nature and source of cash deposited into his bank account, and the increase in gross receipts did not justify the net profit rate. The CIT(A) rightly confirmed the addition.
Key Issues
Whether the cash deposits made during the demonetization period were unexplained and rightly added to the assessee's income, or if they were part of a fraud committed by a third party.
Sections Cited
250, 69A, 115BBE, 69
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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 24-04-2025 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2017-18.
The grounds of appeal are as under:- “1.1 The order passed u/s. 250 passed on 24.04.2025 by NFAC.CIT(A), Delhi (For short 'CIT(A)') for A.Y.2017-18 upholding the addition of Rs. 1,44,50,000/- in respect of cash deposits made in bank accounts as made by the appellant and not Mr. Rajaiwala during demonetization period as unexplained moneys u/s 69A r.w.s. 115BBE of the appellant is wholly illegal, unlawful and against the principles of natural justice. 1.2 The Ld. CIT(A) has grievously erred in law and or on facts in not considering fully and properly the explanations furnished and the evidence Mohsin Iliyas Jaliyawala, A.Y. 2017-18 produced by the appellant. The Ld. CIT(A) has completely ignored the documents and evidence produced by the appellant to prove that the impugned cash deposit was not made by him but the same was a part of the fraud committed by Shri Rajaiwala with GST Authorities so that there was violation of the principles of natural justice. 2.1 The Ld. CIT(A) has grievously erred in law and or on facts in upholding impugned cash deposits in bank accounts during demonetization period to the extent of Rs. 1,44,50,000/- as made by the appellant and thereby confirming the same as unexplained moneys u/s 69A r.w.s. 115BBE of the appellant. 2.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT(A) has grievously erred in upholding impugned cash deposits in bank accounts during demonetization period to the extent of Rs. 1,44,50,000/-as made by the appellant and thereby confirming the same as unexplained moneys u/s 69A r.w.s. 115BBE of the appellant. 2.3 The averments and observations made and conclusion reached by CIT(A) to confirm the cash deposits of Rs. 1,44,50,000 made in bank accounts as belonging to the appellant and thereby unexplained cash credit are not admitted and the same are contrary to the evidence produced before him, apart from being presumption, surmise and conjecture so that they are not binding to the appellant. 2.4 The Ld. CIT(A) has grievously erred in law and or on facts in invoking the provisions of Sec 69A r.w.s. 115BBE to make impugned addition of Rs. 1,44,50,000/- in respect of cash deposits in bank accounts during demonetization period. 2.5 Without prejudice to above and in alternative, the impugned addition made by CIT(A) is highly excessive and calls for reduction. It is therefore prayed that the addition of Rs. 1,44,50,000/- made by the CIT(A) should be deleted.”
3. The assessee is an individual and carrying out the business as agent of Indian Railway for ticket booking, air ticket booking and allied services like hotel booking in the name of New Nobel Tours and Travels. The assessee filed return of income for assessment year 2017-18 on 30-10-2017 declaring income at Rs. 5,04,200/-. The case of the assessee was selected for scrutiny. The statutory notices were issued to examine the source of cash deposits of Rs. 1,44,50,000/- made in bank accounts with HDFC bank, Kotak Mahindra bank and ICICI bank during demonetization period. The assessee filed details along with list of regular customers, month-wise cash deposits and withdrawals from the relevant assessment year, credit note, register, cash book etc. The Assessing Officer rejected the explanation of the 2 Mohsin Iliyas Jaliyawala, A.Y. 2017-18 assessee and concluded that no satisfactory explanation regarding availability of cash in hand described by the assessee as well as there was no details of creditors till 10-11-2016 filed by the assessee and the overall monthly receipts for the immediately preceding year was around Rs. 2,00,000/- per month immediately preceding year and amount of Rs. 1.25 lacs per moth business in the financial year 2014-15. The Assessing Officer made addition of Rs. 1,45,50,000/- u/s 69 as unexplained cash.
The assessee filed appeal before the CIT(A). The CIT(A) dismissed the appeal of the assessee.
The ld. A.R. submitted that it is not correct on part of CIT(A) to observe in para 5.8 of the impugned order that there was no evidence on record that Shri Rajaiwala had made the cash deposits in to the assessee's bank account. The Ld. A.R. submits that voluminous documents were furnished as noted on page 17 to 19 of the appellate order with documentary evidence by way of certificates and bank slips of the bankers. The CIT(A) has not disputed the findings of the investigation carried out by the GST authorities that the said Mr. Rajaiwala had created several bogus firms in the name of family members, friends etc. for carrying out bogus billing activities and the assessee’s business concern figured at Sr. No.70. The CIT(A) has also completely ignored the arrest memorandum issued by GST Authorities in case of Shri Rajaiwala and other criminal proceedings initiated against him. The CIT(A) has committed a grave error in holding that Shri Chirag Solanki was authorized to deposit cash in assessee's bank account No. 1318 with HDFC Bank. During the course of appellate proceedings, the hearing Mohsin Iliyas Jaliyawala, A.Y. 2017-18 through video conference took place on 02.04.2025 during the course of hearing, the assessee was asked to furnish certain documents/evidence, in spite of the same already on record along with the submissions uploaded on IT Portal. Hence, in order to comply with the said direction, the Ld. A.R. submitted that the entire bone of contention of the assessee has been that his accountant-cum tax consultant Shri Rajaiwala had misused the documents of the assessee such as PAN, Aadhar Card and other KYC documents etc. and committed fraud with GST department so that the cash deposits made in various bank accounts did not belong to him nor he has received any advantage or benefit therefrom so that all those cash deposits should be held as belonging to Shri Rajaiwala and the impugned addition should be deleted. In order to support the aforesaid contention, the assessee has uploaded various documents/evidence/orders/criminal complaints etc. It was contended by the Ld. A.R. that Shri Tahir Mehmood Rajaiwala was searched by GST Department under the relevant provisions of Gujarat GST Act on 07.07.2022 on the ground of bogus input tax credit. Thereafter, the GST Department through Sales Tax Officer-2 Unit-6, Ahmedabad had filed criminal complaint before the Addl. Chief Metropolitan Magistrate, Ahmedabad being file No. ACST/U-6/Tahir/2022-23 and even the authorization was issued by Addl. Commissioner of Sales Tax, Enforcement, Ahmedabad on 14.07.2022 for the reason that he was found involved in issuing invoices or bills without supply of goods or services or both. The perusal of the criminal complaint filed by the GST Authority clearly establish that said Rajaiwala was managing various bogus firms/entities in the name of his family, members, relatives, clients and other persons for carrying out bogus billing activities (para-3.1.2 of complaint). The modus Mohsin Iliyas Jaliyawala, A.Y. 2017-18 operandi adopted by said Rajaiwala has been described in detail in para-4 of the complaint and para-5 contains the list of the parties through which the said modus operandi was carried out by him. Out of the list of 96 parties/entities, the name of the present assessee appears at sr.no.70 with the trade name of "New Noble Tours and Travels” and input credit passed on of Rs. 3.5 Cr. In other words, even GST authority have confirmed by para-5 of this complaint that said Rajaiwala had carried out the said fraudulent activities in the name of the present assessee and his trade name. The perusal of para-6 at page-13 of the complaint also mentioned, inter-alia that said Rajaiwala had floated, managed and operated several entities and issued fake invoices in order to pass on fraudulent ITC. The para-6.6 also in no unclear terms has stated that "the accused has gained and retained monetary benefit by executing the modus operandi and carrying out billing activities in all above mentioned firms. The assessee has also produced the bank pay-in slip and other record of the bank to prove that the handwritings and other details were not made by the assessee. The assessee had also filed FIR against said Rajaiwala before Navrangpura Police Station Ahmedabad with a copy to various Govt. functionaries. The assessee has stated the relevant facts in detail in this regard which may be referred to. The statement of the assessee was recorded by the GST authorities on 19.07.2022 during the course of search at his premises wherein the appellant had also clarified the matter. It may be noted that the GST authority has thereafter not issued any notice or taken any action against the present assessee in view of the fraud committed by Shri Rajaiwala and the present assessee was not involved in any such fraudulent activity. The assessee had made complaint to various higher authorities such as Chief Minister, Police Department, Mohsin Iliyas Jaliyawala, A.Y. 2017-18 Addl. Chief Secretary Home Department and others. The assessee had also filed with CIT(A) duly sworn affidavit dtd. 04.09.2024 once again confirming the modus operandi of Shri Rajaiwala and further stating that the assessee was not involved in any such activity and therefore the cash deposited by said Shri Rajaiwala did not belong to him. The assessee had also explained that looking to the nature and magnitude of the business carried on by the assessee - mainly Air & Railway Ticket booking, it was not possible to him such a huge business and that too without corresponding the invoices issued by Railway and Air Authority. The assessee has uploaded a detailed rejoinder to the remand report furnished by AO and denied various erroneous and unwarranted observations/averments made by AO in his report. Therefore, the same should not be relied upon. The AO has not made any further inquiry in this regard nor any material has been brought on record to disprove the explanation given by the assessee with evidence that the impugned cash deposits did not belong to him but it was part of the fraud committed by Shri Rajaiwala. In short, the assessee had discharged the primary onus which was on it by offering explanation, and the said explanation has not been found to be incorrect or false in any manner. The grievance made by the Assessing Officer that complete details and addresses of the depositors were not furnished has been categorically claimed to be incorrect in light of facts which have come on record. The Ld. A.R. submits that since the impugned cash deposits in bank accounts did not belong to him, the condition precedent for invoking the provisions of sec.69/69A are not satisfied in as much as the assessee has not been found to be owner of the impugned cash deposits in said bank accounts so that the Mohsin Iliyas Jaliyawala, A.Y. 2017-18 impugned addition is liable to be deleted. The ld. A.R. relied upon the following decision: CIT v Pragati coop Bank Ltd (278 ITR 170)(Guj.)
The ld. D.R. submitted that the assessee has not given the proper source of the income related to the cash in hand and in fact the cash deposits in assessee’s bank accounts did not belong to him but was deposited in his account by Shri Rajaiwala who was involved in fake invoice scam to pass fraudulent GST credit. The ld. D.R. relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that in the remand report, it was categorically mentioned that the assessee failed to explain the nature and source of cash deposited into his bank account. The ld. A.R. though pointed out that Tahir Rajaiwala was misusing the assessee’s GST No but during the demonetization period, the assessee has deposited the amounts which was categorically collected from the various parties in respect of tours and travels business. But the assessee could not bring on record that the cash deposited in the bank were not that of assessee and the same was not at all demonstrated, as the cash in hand by the assessee after perusal of the details, filed before the Assessing Officer as well as before the CIT(A). The CIT(A) categorically mentioned in para 5.8 and para 5.9 that the assessee himself is depositing the cash which was traced as per cash in hand of the assessee. There was an abnormal increase in gross receipts reflected by the assessee at Rs. 1.76 crores which was only Rs. 24.52 lacs and Rs. 15.89 lacs in the immediately to present years, whereas there was a drastic Mohsin Iliyas Jaliyawala, A.Y. 2017-18 fall in the net profit rate at Rs. 5,91,926/- being 3.3% out of gross receipts of Rs. 1,76,05,100/- while in the immediate preceding year, the assessee had declared net profit of Rs. 3,19,563/- out of gross receipts of Rs. 24,52,327/- i.e. more than 13%. The assessee has given the cash book as well as registers, details of expenses incurred and it categorically mentions that the opening cash in hand was less than 4 lacs and cash received on 31-10-2016 was less than 40 lacs out of which Rs. 37,45,910/- was deposited in banks. Thus, there was no evidence of creditors till that date of 10-11-2016. Thus, the Assessing Officer has rightly made the addition. The contention of the ld. A.R. submitted that the assessee’s CA Rajaiwala has misused his bank account by giving fraudulent GST credit appears to be not justified by observing the cash in hand as per the records produced by the assessee himself before both the authorities. Thus, the CIT(A) has rightly confirmed the addition. There is no need to interfere with the findings of the CIT(A). Hence, the appeal of the assessee is dismissed.
In the result, the appeal of the assessee is dismissed.