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Facts
The assessee's appeals concern additions made on account of unexplained cash deposits in Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. The Assessing Officer reopened the assessment under Section 147 after receiving information about these deposits. The assessee contended that the account was used by Shri Natvarbhai Becharbhai Patel for his business of submersible pumps, and the deposits were sale proceeds.
Held
The Tribunal held that the entire deposits could not be added as income. Only the profit element involved in the transactions should be taxed. Accordingly, the profit element was estimated at 8% of the total deposits, and the addition was restricted to that extent.
Key Issues
Whether the reopening of assessment under Section 147 was valid, and whether the entire deposits in the assessee's name, allegedly used for another's business, should be treated as the assessee's unexplained income.
Sections Cited
147, 148, 133(6), 131, 144, 153A, 153C
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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: Shri Sanjay Garg & Annapurna Gupta
Consolidated Appeals (2)
Per Sanjay Garg, Judicial Member:
The captioned appeals have been preferred by the assessee against the separate orders of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] of even date 07/06/2024 pertaining to different Assessment Years (AYs). Since to 1386/Ahd/2024 Mehulkumar Ramabhai Chaudhari Asst. Years : 2013-14 to 2016-17
2 common facts and issues are involved in all these appeals, these were heard together and are being disposed of by this consolidated order. Assessee’s appeal in AY 2014-15 is taken as a lead case for the purpose of narration of facts.
AY 2014-15 2. The assessee in this appeal is aggrieved by the action of the Ld. CIT(A) in confirming the addition of Rs.45,46,467/- made by the Assessing Officer (AO) on account of unexplained cash deposits by the assessee in Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd.
The brief facts of the case as extracted from the assessment order are that the assessee filed his return of income for the year under consideration, i.e. AY 2014-15 on 04/03/2015 declaring total income of Rs.2,34,970/-. Thereafter, the AO got the information that the assessee has deposited a cash of Rs.45,46,467/- during the year under consideration in Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. On the basis of such information, the AO initiated enquiry and issued notices u/s. 133(6) of the Act and u/s.131 of the Act, which were returned ‘unserved’. In view of this, the AO formed the belief that the income of the assessee for the year under consideration had escaped assessment. He, therefore, re-opened the assessment u/s.147 of the Act by issuing notice u/s.148 of the Act on 31/03/2021. In response to the said notice, the assessee did not file any return of income u/s.147 of the Act. Even the subsequent notices issued by the to 1386/Ahd/2024 Mehulkumar Ramabhai Chaudhari Asst. Years : 2013-14 to 2016-17
3 AO were not complied with by the assessee. The AO, therefore, treated the entire deposits into Shri Renuka Mata Multi State Urban Co- operative Credit Society Ltd. as unexplained income of the assessee and made the impugned addition.
Aggrieved by the said addition made by the AO, the assessee preferred the appeal before the Ld. CIT(A). Before the Ld. CIT(A), it was submitted that though the assessee had complied with the notice of the AO dated 20/03/2022 vide letter dated 23/03/2023, however, the AO failed to consider the submissions of the assessee, while passing the impugned assessment order u/s.144 of the Act. It was also contended that the re-opening of the assessment u/s.147 of the Act was bad in law as the AO had not supplied the reasons recorded for re-opening of the assessment. Further, it was pleaded that the assessee had categorically mentioned that the said account with Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. was used by one Shri Natvarbhai Becharbhai Patel on assessee’s name. He had done business of trading in agricultural submersible pumps which were sold to agricultrists and sale proceeds were deposited by him in the said account. It was also explained that Shri Natvarbhai B. Patel was friend of the father of the assessee and that he was in the business of share of submersible pumps in Maharashtra State. That the assessee was a young boy and studying in college in the year-2012 and was not much aware about the implications of opening of account by Shri Natvarbhai B. Patel in his name and doing of the business in his name of sale of submersible pumps in Maharashtra. That when the assessee received to 1386/Ahd/2024 Mehulkumar Ramabhai Chaudhari Asst. Years : 2013-14 to 2016-17
4 the notice about the aforesaid deposits in the said bank account, the assessee tried to contact Shri Natvarbhai B. Patel, whereupon, he came to know that Shri Natvarbhai B. Patel had passed away on 21/12/2021 and that his legal heirs told that they did not have any record relating to the business transactions done by Shri Natvarbhai B.Patel. It was, therefore, requested that the aforesaid deposits were on account of business done by Shri Natvarbhai B.Patel and that the same may be assessed in the hands of Shri Natvarbhai B. Patel and further that only profit element should be added in respect of the aforesaid deposits on account of business done by Shri Natvarbhai B. Patel. The Ld. CIT(A), however, did not agree with the contentions raised by the assessee and dismissed the appeal of the assessee.
Being aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.
We have heard the rival contentions of the Ld. Representatives of the parties and gone through the record. The Ld. Counsel for the assessee has demonstrated that the deposits in the alleged account with Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. were small deposits done all over the State of Maharashtra by different persons. He has further demonstrated that it is not a case, where there was any lump sum deposit of any amount. He, in this respect, explained that submersible pumps were soled/supplied by Shri Natvarbhai B. Patel to various agriculturists at various remote places in the State of Maharashtra, who in turn deposited the sale proceeds in to 1386/Ahd/2024 Mehulkumar Ramabhai Chaudhari Asst. Years : 2013-14 to 2016-17
5 account of the assessee in Shri Renuka Mata Multi State Urban Co- operative Credit Society Ltd. He has further demonstrated that there were corresponding debit entries also. He, in this respect, had explained that the credit entries were against sales realization, whereas debit entries were regarding purchases of goods. He, therefore, has submitted that at the most even if the said deposits and withdrawal transactions are to be treated in the hands of the assessee, even then, apparently it was a case of deposits out of business transactions, i.e. sales of submersible pumps and that only the profit element had to be added.
The Ld. DR, on the other hand, has relied upon the findings of the lower authorities.
We have considered the rival contentions. The Ld. Counsel for the assessee has also taken legal pleas that this was not a case of simply information coming to the AO of the alleged deposits by the assessee in Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. He, in this respect, has stated that, in fact, a search action was carried out in the case of Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd, wherein, it was found that various persons had deposited amounts in their accounts running with Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. and that on the basis of said information, the re-opening of the assessment was done in the case of the assessee. He, in this respect, has submitted that as the provisions relating to assessment pursuant to search and seizure action to 1386/Ahd/2024 Mehulkumar Ramabhai Chaudhari Asst. Years : 2013-14 to 2016-17
6 is given u/s.153A to u/s.153C of the Act, which in itself a separate code in itself, and as per the aforesaid statutory provisions, the only course of action available to the AO was to proceed for assessment u/s.153C of the Act and not u/s.147/148 of the Act. He, in this respect, has relied upon various case-laws to contend that the reopening of the assessment in this case is bad in law as the only course available to the AO was to proceed u/s.153C of the Act and not u/s.147 of the Act. Further, he has submitted that mere deposit in the bank account itself did not give any presumption to the AO that the income of the assessee for the year under consideration had escaped assessment. He, in this respect, has submitted that the AO did not have any information that the assessee had deposited his unaccounted money in the said account and, therefore, there were no valid reasons to the AO to re-open the assessment.
8.1. In this case, the assessee has, from the accounts, shown that various small amount on different dates were performed deposits in the account of the assessee with Shri Renuka Mata Multi State Urban Co- operative Credit Society Ltd. Though, it is the case of the assessee that the said account was used by one Shri Natvarlbhai Becharbhai Patel for deposit of business receipts relating to his business of trading in submersible pumps, however, the fact on the file is that the said account was in the name of the assessee and the assessee has failed to produce on file any reliable evidence to show that the said account belonged to any person other than the assessee. However, as demonstrated by the assessee, the said account was used for deposit of sale proceeds of to 1386/Ahd/2024 Mehulkumar Ramabhai Chaudhari Asst. Years : 2013-14 to 2016-17
7 submersible pumps as there were numerous deposits of small amounts on different dates and there were corresponding debits also. Under the circumstances, in our view, the entire deposits cannot be added as income of the assessee. In our view, the only profit element involved in respect of the aforesaid credit and debit entries is required to be taxed. We, accordingly, estimate the profit element @ 8% of the total deposits and restrict the addition to that extent accordingly.
Now, we take up remaining Assessee’s appeals in 1385 and 1386/Ahd/2024 for AYs 2013-14, 2015-16 and 2016-17 respectively.
The facts and issues involved in all these appeals are identical except the amount of deposits with Shri Renuka Mata Multi State Urban Co-operative Credit Society Ltd. There was a deposit of an amount of Rs.29,13,108/- in the AY 2013-14, of Rs.40,78,467/- in AY 2015-16 and of Rs.51,65,100/- in AY 2016-17. In view of our findings given above, the addition is restricted to 8% of the corresponding amounts being the profit element involved in respect of the aforesaid deposits.
11.1. So far as the legal issues taken by the assessee are concerned, since we have decided the issue on merits and, hence, at this juncture, we are to 1386/Ahd/2024 Mehulkumar Ramabhai Chaudhari Asst. Years : 2013-14 to 2016-17 not inclined to decide the legal issues, and the same and are kept open to be decided at appropriate stage, if need be. With these observations, all these three appeals of the assessee are hereby partly allowed.
In the result, all the four appeals of the assessee are hereby partly allowed. Order pronounced in the Open Court on 15/12/2025.