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Facts
The assessee, dealing in mobile retail business, had their assessment for AY 2018-19 reopened under Section 148 due to significant cash deposits and share sales. The Assessing Officer made additions of 8% (Rs. 5,53,728) on total cash deposits of Rs. 69,21,600/- as unexplained under Section 69A, and Rs. 58,695/- for share sales proceeds. The CIT(A) upheld both additions, leading to the present appeal.
Held
The Tribunal noted the assessee's failure to file compulsory GST and VAT returns, making it impossible to verify the claim that cash deposits were from sales. While acknowledging the additions were partially justified, the Tribunal deemed the 8% estimation on gross deposits excessive for a retail mobile business and reduced this addition from 8% to 4% of the cash deposits. The addition for share sales proceeds was implicitly upheld.
Key Issues
1. Whether the addition of 8% on cash deposits as unexplained income under Section 69A was justified. 2. Whether the addition related to share sales proceeds was justified.
Sections Cited
148, 69A, 250(4), 263, 44AD
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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Dr. BRR Kumar & Ms. Suchitra Kamble
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
1. This is an appeal filed against the order dated 24-11- 2024 passed by National Faceless Appeal Centre (NFAC), Delhi for assessment year 2018-19.
2. The grounds of appeal
are as under:-
1. That the Learned CIT-Appeals is not justified by upholding the addition of Rs. 5,53,728 considering 5% of Rs. 69,21,600/- Ld. CIT(A) not justified by upholding an addition of Rs. 5,53,728/-by considering 8% of Rs. 69,21,500 without considering the reply and without taking into the consideration return filed by the assessee as the Rs. 69,21,600/- represents sales proceeds deposited in the Bank Account and which (sales proceeds) was very much apparent in ITR filed by the assessee. The Ld. A.O. make this addition only by mentioning in para 4 that there is no business proof provided by assessee. Hence, the shop establishment Act certificate as proof of business, sales and purchase bills, Copy of ITR, P&L, Balance sheet Soham Nitinbhai Bhadiyadra, A.Y. 2018-19 and Capital gain report was submitted to CIT Appeal along with application u/s 45A. However, Ld. CIT Appeals without considering the same or without asking for any other derails upholds the decision of Ld. AO by mentioning that “since no documentary proof is produced by assessee in support of business it would be fair and reasonable to make 8% of each deposit which comes to Rs. 5,53,728/-”.
2. Ld. CIT Appeal not justified by upholding the addition of Rs.58,695/- Ld. CIT Appeal not justified by upholding the addition of Rs. 58,695/- (i.e. Amount of sales proceeds of the shares) by mentioning that assessee has not famished the any details but Ld. CIT Appeals fails to consider the details of capital gain provided during the submissions as well as in ITR filled by the assessee. Further, the capital gain of Rs. 13,885/- already shown in the ITR and considered in return income and hence Ld. CIT Appeal grossly erred upholding addition of Rs. 58,695/-(i.e. Amount of sales proceeds of the shares even when Capital Gain which was already considered as income in the ITR.) 3. That the appellant craves to add, alter and amend any of the grounds of appeal either before or at the time of hearing of the appeal.”
3. The assessee is dealing in mobile business on retail basis. The assessee filed his return of income for assessment year 2018-19 and had incorporated trading account, profit and loss account and balance sheet. The case was reopened on the basis of information available thereby observing that the assessee deposited cash of Rs. 1,38,07,200/- and sold equity shares of Rs. 58,695/- during the year. Notice u/s. 148 of the Act was issued on 23-03- 2022 after recording reasons and was duly served upon the assessee. The Assessing Officer observed that the bank account details received from Botad Peoples Co-operative Bank indicates that total credit entries including cash deposits is that of Rs. 69,21,600/-. The statutory notices were issued to the assessee but no documentary evidence was placed on record and therefore the Assessing Officer made addition to the extent of 8% of cash deposits which in
4. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) dismissed (not allowed) the appeal of the assessee.
At the time of hearing, none appeared on behalf of the assessee but a written submission was filed by the assessee which was received on 01-07-2025, the same is as follows:-
“1: Addition of 5,53,728 on Account of Cash Deposits in Bank Account 1 The Ld CIT(A) has erred in law and on facts by upholding the addition of 5,53,728 calculated as 8% of 69,21,600 being cash deposits in the assessee's bank account, treating them as unaccounted business receipts without appreciating that: The said amount represents sales proceeds, which were duly declared in the return of income filed by the assessee.
Supporting documents such as Shop & Establishment Act Certificate, Sales and Purchase Bills, Copy of ITR, Profit & Loss Account, Balance Sheet, and Capital Gain Report were filed before the CIT(A) along with a petition under Rule 46A. The Acknowledgment of submissions before Commissioner appeal is attached here with this submission in Annexure A The Ld CIT(A) without calling for a remand report or seeking clarification under section 250(4), erroneously upheld the addition stating that no proof was furnished, despite having the records before him.
Further in CIT (appeal) order in Para xi the Ld. CIT (appeal) stated as follow "This Appellate authority had specifically asked the appellant assessee to provide GST and VAT returns (Month wise), but the appellant assessee has not provided any information nor have any returns been filed by the appellant assessee to this Appellate authority. It can be said that the appellant assessee has not filed the GST and VAT returns which was compulsory for the appellant assessee to file under the GST Act 2017. In absence Soham Nitinbhai Bhadiyadra, A.Y. 2018-19 of such proof it is difficult to accept the contentions of the appellant and hence Ld. CIT (Appeal) has disallow the appeal on this basis only.
But Ld. CIT (appeal) fails to consider the Assessee's reply dated 18.11 2024 which is attached in Annexure A
2. The Ld AO merely observed in para 4 of the assessment order that no business proof was submitted. However, all relevant documentary evidences were furnished during the appellate proceedings.
Further Assessee submits the CA certificate to this hon'ble court in Annexure B that all the entries appearing in the Bank statement are related to business activity of the assessee i.e. purchasing and selling of mobile phones only.
The addition of 8% as presumptive profit on the gross deposit without invoking section 44AD or considering actual business income is arbitrary and unjustified.
2: Addition of 58,695 on Account of Share Sales Proceeds 1 The Ld CIT(A) has further erred by sustaining the addition of 58,695 representing the gross sale proceeds of shares ignoring.
The fact that Capital Gains of 13,885/-arising from the said transaction were already disclosed in the ITR and duly considered in the computation of total income and also the capital gain report is also submitted at assessment and appeal level.
2 It is a settled principle that only the capital gain element is to be taxed and not the entire sale consideration, and the same was appropriately disclosed.
3. Despite the fact that all details of the capital gain transaction were furnished during assessment and appellate proceedings, the Ld. CIT(A) failed to consider them.
3: Parallel Proceedings under Section 263
It is further submitted that the Department has initiated revisionary proceedings under section 263, despite being informed that the matter is sub-judice before the Hon'ble ITAT.
The Hon'ble PCIT passed the order under section 263 dated 11.03.2025 without affording any further opportunity or seeking any additional clarifications from the assessee, which is against the principles of natural justice.
Soham Nitinbhai Bhadiyadra, A.Y. 2018-19 3. A copy of the assessee's reply before PCIT is annexed for kind consideration in Annexure C. Prayer In light of the above submissions and the documents placed on record, it is most respectfully prayed that the Hon'ble Tribunal may kindly: Delete the addition of 5,53,728/- made on account of alleged unexplained business income. Delete the addition of 58,695/- made towards the share sale proceeds Pass any other relief as deemed fit and proper in the interest of justice.”
The ld. D.R. relied upon the assessment order and the order of the CIT(A).
We have heard the ld. D.R. and perused the written submission filed by the assessee on 01-07-2025. From the perusal of the submission, it is clear that the assessee has not filed the GST and VAT returns which were compulsory to file for the assessee under the GST Act, 2017. Since the very basis of the assessee’s claim that the cash deposited was generated from sales cannot be verified, if the assessee has not filed GST and VAT returns, then the claim of the assessee was rightly considered by the Assessing Officer as well as the CIT(A). But the estimation of 8% on the gross deposits appears to be excessive in the present assessee’s case and therefore we restrict the same to 4% on the basis that the assessee is into the business of mobile business on retail basis. Therefore, the addition to the extent of 4% on
In the result, the appeal of the asses is partly allowed.
Order pronounced in the open court on 08-07-2025 Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member Ahmedabad : Dated 08/07/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद