THAKKAR MUKESHBHAI KESHAVLAL, HUF,AHMEDABAD vs. THE INCOME TAX OFFICE, WARD-3(3)(5), AHMEDABAD

However, the Assessing Officer noted that these submissions lacked critical supporting evidence such as sales bills, names, addresses or PAN details of customers. No retail invoices or register of cash sales exceeding Rs.50,000/- per transaction were furnished. The AO also observed that the assessee had not furnished the sales register, cash book, or any bank reconciliation to explain the nexus between sales and deposits. From the available data, it was further noted that the assessee reported no sales in F.Y. 2015–16, reported only Rs.1,70,000/- in F.Y. 2014–15, and reported Rs.88,21,636/- in F.Y. 2016–17, out of which a large component of Rs.57,57,257/- was shown as cash sales, predominantly during the narrow window from October to 08.11.2016.

The AO concluded that such a sudden and steep increase in cash sales, uncorroborated by documentary evidence or third-party confirmation, lacked commercial credibility. The explanation regarding demand surge during demonetization was treated as an afterthought and a colourable device to introduce unaccounted money into the books under the guise of cash sales. The AO also noted that frequent RTGS receipts from Ashutosh Suiting Pvt. Ltd. and Vishnu Laxmi Textiles pointed to the assessee’s core business activity being textile trading and not jewellery. Consequently, the Assessing Officer held the cash deposits as unexplained money under section 69A and made an addition of Rs.59,70,000/-, which was brought to tax under section 115BBE.

The assessee preferred an appeal before the Ld. CIT(A) against the order of AO. In the grounds of appeal, the assessee contended that the cash deposits were fully explained and duly supported by books of account, VAT returns, stock register, and bank statements, and that the assessment was made under section 143(3) without invoking section 145(3); therefore, the AO could not disregard the books and make any separate addition under section 69A. The assessee also contended that the cash sales had been accepted in the ITR and no objection was raised by the AO on the declared turnover under section 44AD. However, despite multiple notices issued during appellate proceedings between 2020 and 2023, the assessee did not file any substantive submissions. The Ld. CIT(A), relying on the assessment order and the absence of any material rebutting the findings of the AO, dismissed the appeal and confirmed the addition of Rs.59,70,000/- under section 69A r.w.s. 115BBE of the Act.

Aggrieved by the order of CIT(A), the assessee is in appeal before us raising following grounds:

Considering the sequence of events and the bona fide explanation offered, we are satisfied that the assessee was prevented by sufficient cause from filing the appeal within the prescribed time. In view of the settled legal position that substantial justice should not be denied on account of technicalities, and therefore the delay of 252 days in filing the appeal is condoned. The Departmental Representative (DR) raised no objection in condoning the delay.

During the course of hearing before us, the assessee moved an application under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, seeking admission of additional evidence in the form of various documents which, according to the assessee, could not be submitted either during the assessment proceedings or before the Ld. CIT(A). The application is supported by a detailed affidavit sworn by Shri Mukeshbhai Keshavlal Thakkar, Karta of the assessee-HUF, explaining the reasons for such non-submission. It is stated therein that the assessment proceedings were attended to by the assessee’s late brother and tax consultant, Shri Arvindbhai Thakkar, who, due to a bonafide belief that only the assessee's individual case was under scrutiny and due to his medical condition and limited familiarity with the technological changes under the faceless assessment regime, could not 7 properly upload or submit the relevant documents in the HUF case. The assessee has explained that complete books of accounts, cash sale bills containing details of customers including PAN/Aadhaar, VAT returns, stock register, purchase bills, and bank statements were physically produced before the Assessing Officer but were not uploaded electronically. It is further explained that the Ld. CIT(A) also disposed of the appeal ex-parte due to non-compliance arising from the same reasons.

The assessee has now filed a comprehensive Paper Book comprising the following:

The assessee contends that the aforesaid evidences are directly relevant to substantiate the explanation regarding source of cash deposits and genuineness of cash sales, and failure to produce the same earlier was due to circumstances beyond his control. It is submitted that non-consideration of these materials would cause serious prejudice to the assessee and defeat the cause of justice.

In view of the above, and considering the substantial nature of the documentary evidence now placed on record which goes to the root of the matter, we are satisfied that the requirements of Rule 29 are met. Accordingly, in the interest of justice and fair adjudication, the application for admission of additional evidence is allowed. The Revenue

During the course of hearing, the Authorised Representative (AR) of the assessee appeared and elaborated upon the factual matrix of the case, particularly with reference to the issue of opening stock as questioned by the Assessing Officer. The AR drew our attention to the Profit and Loss Account for the financial year 2016–17, wherein the opening stock has been disclosed at Rs.53,12,529.20, a figure duly reflected at page 149 of the paper book. It was submitted that the said figure represents the closing stock carried forward from the preceding financial year, and in support thereof, reliance was placed on a purchase invoice dated 31.03.2015 amounting to Rs.53,00,707/- raised by M/s. Shree Krishna Gold & Gems Pvt. Ltd., which forms part of the assessee’s records. Further, it was submitted that during the financial year 2015– 16, the assessee had not undertaken any sales transactions, and the entire closing stock of Rs.53,12,529/- was duly reported in the return of income filed for A.Y. 2016–17, a copy of which has been placed at page 443 of the paper book. Upon a specific query from the Bench as to whether any payment was made against the said invoice dated 31.03.2015, the AR clarified that no separate payment was made to the party during the year, as the ledger account of M/s. Shree Krishna Gold & Gems Pvt. Ltd. showed a continuing debit balance of Rs.56,55,207/- as on 31.03.2015, as evident from the ledger account extract placed at page 371 of the paper book.

We have carefully considered the rival contentions and perused the material available on record including the voluminous additional evidence filed by the assessee in support of the explanation for cash deposits treated as unexplained under section 69A of the Act. The 9 additional documents include books of accounts, cash sales bills containing identity details of purchasers, VAT returns, purchase bills, stock registers, profit and loss accounts, bank statements, and supporting financial records for preceding years. The assessee has explained that these records could not be properly submitted earlier due to circumstances beyond his control, which explanation has already been accepted by us while admitting the additional evidence under Rule 29 of the Appellate Tribunal Rules, 1963. Upon examining the nature and extent of such additional material placed before us, we are of the considered view that verification of the same is essential for proper adjudication of the issue at hand. The evidentiary contents involve complex factual aspects including reconciliation of purchases, stock position, movement of inventory, and sale transactions during the period relevant to the cash deposits under question. These are matters which fall within the domain of fact-finding and require examination and verification at the level of the Assessing Officer. We also note that during the course of hearing, the learned Departmental Representative did not raise any objection to the matter being restored to the file of the Assessing Officer for the purpose of verification of additional evidence.

In view of the foregoing discussion and in the interest of substantial justice, the impugned order passed by the Ld. CIT(A) is hereby set aside. The matter is restored to the file of the Assessing Officer for denovo adjudication after carrying out necessary verification of the 10 additional evidence now placed on record by the assessee. The Assessing Officer shall grant adequate opportunity to the assessee to present his case and furnish any further explanation or supporting material as may be required. The assessee is also directed to extend full cooperation in the remand proceedings. In case the assessee fails to comply or does not cooperate in the remand proceedings, the Assessing Officer shall be at liberty to decide the matter on the basis of material already available on record in accordance with law.

In the result, the appeal of the assessee is treated as allowed for statistical purposes.