MOHAMMED SHOEB AZIZ HAQUE KHAN,VAPI vs. ITO, WARD-5, VAPI
Facts
The assessee, engaged in retail trading of scrap, filed a return for AY 2011-12. The case was reopened, and the assessee filed a revised return. The Assessing Officer (AO) made additions for cash deposits treated as unexplained money and for unsecured loans treated as unexplained cash credit. The assessee appealed to the CIT(A), who dismissed the appeal.
Held
The Tribunal found that the AO incorrectly treated cash deposits as unexplained income when the turnover was declared under presumptive taxation (Section 44AD). However, the Tribunal directed the AO to estimate income at 15% on the impugned deposit, restricting the addition. Regarding unsecured loans, while the assessee failed to provide evidence, the Tribunal noted that the revised addition for cash deposits would cover this amount.
Key Issues
Whether cash deposits can be treated as unexplained income when the turnover is assessed under presumptive taxation, and whether additions for unsecured loans are warranted when the AO accepted purchases but not sales, and whether the appeal should be allowed based on a previous year's estimation.
Sections Cited
147, 148, 69A, 68, 271(1)(c), 234B, 234C, 44AD
AI-generated summary — verify with the full judgment below
Before: SHRI T. R. SENTHIL KUMAR & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), dated 16.08.2024 by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2011-12. 2. The grounds of appeal raised by the assessee are as under: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer has erred in re-opening the assessment u/s.147 of the Act and issuing notice u/s. 148 of the L.T. Act, 1961. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in
ITA No.952/SRT/2024/AY 2011-12 Mohammad Shoeb Aziz Haque Khan confirming the action of the Assessing Officer has erred in making addition of Rs.24,39,500/- on account of alleged cash deposited in bank account treated as income u/s.69A of the Income Tax Act, 1961. 3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer has erred in making addition of Rs.3,39,000/- on account of alleged unsecured loan treated as alleged unexplained cash credit u/s.68 of the Income Tax Act, 1961. 4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer has erred in initiating penalty proceedings u/s.271(1)(c) of the Income Tax Act, 1961. 5. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer has erred in charging interest u/s.234B and 234C of the 1.T. Act, 1961. 6. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 7. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. The facts of the case in brief are that the assessee filed his return of income for the AY 2011-12 on 27.01.2012 declaring total income at Rs.6,48,270/-. The case of the assessee was reopened for the AY 2011-12 and notice u/s.148 of the Act was issued on 28.03.2018. In response to the same, assessee filed his return of income on 23.07.2018, declaring total income at Rs.7,76,080/-. The assessee derived income from retail trading of scrap. During the previous year relevant to the assessment year under consideration, the assessee had deposited cash aggregating to Rs.10,64,000/- in bank account held
ITA No.952/SRT/2024/AY 2011-12 Mohammad Shoeb Aziz Haque Khan with HDFC Bank Ltd. and cash aggregating to Rs.10,75,000/- in the bank account maintained with Sardar Bhilawada Pardi People’s Coop. Bank Ltd. The assessee was requested to furnish details regarding the nature and source of cash deposits amounting to Rs.24,39,500/-, however, assessee failed to prove with cogent evidence that the cash amount deposited in his bank accounts maintained with the HDFC Bank Ltd and Sardar Bhilawdwala Pardi People’s Bank Ltd., was out of the payment received from sale of scrap. Therefore, the cash deposit of Rs.24,39,500/- was treated as unexplained money u/s 69A of the Act. The AO also observed that the assessee received unsecured loans from various parties amounting to Rs.17,39,000/-. The assessee was requested to furnish documentary evidence to establish the identity, creditworthiness of the lenders and genuineness of the transactions but in cases of Fakhari Traders (Rs.1,50,000/-), Kaisar N. Malik (Rs.1,25,000/-) and Mohammedbhai (Rs.64,000/-), assessee failed to establish the identity, creditworthiness of the lenders and genuineness of the transactions. Since assessee failed to discharge the onus cast upon him to prove the cash credit found in his books of account, therefore, AO, relying upon the decisions given in the case of ‘Kale Khan Mohammad Hanif Vs. CIT (1963) 50 ITR 1 (SC), Roshan Hi Hatti Vs. CIT (1977) 107 ITR (SC) and CIT Vs. Oasis Hospitalities Pvt. Ltd. (2011) 333 ITR 119 (Del.), treated the unsecured loans of Rs.3,39,000/- as unexplained cash credit u/s 68
ITA No.952/SRT/2024/AY 2011-12 Mohammad Shoeb Aziz Haque Khan of the Act. As per the bank statement, the assessee had received interest on savings bank account amounting to Rs.9,760/-, however, assessee had offered interest income of Rs.5,904/- only in his return of income. Therefore, the difference of Rs.3,856/- was added to the total income of the assessee as his undisclosed interest income. The total income was assessed at Rs.35,58,440/- against the returned income of Rs.7,76,080/-. 4. Aggrieved by the assessment order, assessee preferred appeal before CIT(A). During appellate proceedings, assessee furnished his submissions and additional evidence and contended that the said cash deposits were made out of the sale proceeds. The assessee had declared the turnover in original return of income of Rs.8,50,895/-. However, in response to notice u/s.148 of the Act, the appellant filed his return of income declaring additional turnover of Rs.15,97,553/- u/s 44AD of the Act. The reason for increasing the turnover was stated to be due to clerical error in not considering the deposits maintained with HDFC Bank, in the original return of income. It was further contended that as the source of cash deposits of the assessee was out of sale proceeds, therefore, it could not be treated as unexplained money u/s 69A of the Act. It was also submitted that on one side the AO had accepted the purchases made by the appellant but on the other hand, he had not accepted the cash deposit made out of sale proceeds, which is not justifiable. During appellate
ITA No.952/SRT/2024/AY 2011-12 Mohammad Shoeb Aziz Haque Khan proceedings, assessee filed and requested to admit additional evidence filed under Rule 46A, certain documents, viz., copies of sales vouchers, bank statement, copies of invoices, etc. The CIT(A) called for a remand report from the AO. 5. The AO in remand report stated that the Xerox copy of vouchers submitted by the assessee were not countersigned by the assessee and pointed out other anomalies in such additional evidence and requested not to admit them under Rule 46A. The remand report was forwarded to the appellant and he was requested to file rejoinder to remand report. However, assessee made the old submissions again but did not file any rejoinder to the remand report. In view of the same, CIT(A) dismissed the appeal filed by the assessee. 6. Aggrieved by the order of CIT(A), the assessee filed appeal before this Tribunal. The learned Authorized Representative (ld. AR) of the assessee submitted the paper book containing copy of order of CIT(A), submission filed before CIT(A), ledger account of unsecured loans and compilation of case laws relied upon by him. The ld. AR submitted that the CIT(A) in assessee’s own case for AY 2010-11 computed net profit @ 15% of the turnover (page 20 of the paper book). He also submitted that loans were received, repaid and again received, which is evident from page 33 and 34 of the paper books. In any case, if the income is estimated @ 15%, it will take care of the unsecured loan.
ITA No.952/SRT/2024/AY 2011-12 Mohammad Shoeb Aziz Haque Khan 7. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the orders of lower authorities. 8. We have heard both the parties and perused the materials available on record. We have also considered the case laws relied upon by the ld. AR. The assessee declared turnover of Rs.8,50,895/- in the original return and subsequently enhanced it to Rs.15,97,553/- in the return filed in response to notice u/s.148, stating that certain deposits from HDFC Bank were inadvertently omitted earlier. The enhanced turnover was declared u/s.44AD, which provides for presumptive taxation. Under this scheme, the assessee is not required to maintain books of account or substantiate each transaction, provided the turnover declared is accepted and within the threshold limit. In this regard, it may be noted that when income is assessed under presumptive basis u/s.44AD, additions cannot be made separately for cash deposits as unexplained income, unless the turnover itself is found to be incorrect or not genuine. In the present case, the AO has not doubted the existence of the business nor has he rejected the books of accounts. The purchases made by the assessee have been accepted. It is not correct to accept purchases and disbelieve sales unless there is cogent material or evidence to indicate otherwise. The cash deposits in question are duly reflected in the bank accounts and correspond to business receipts. We find that the CIT(A), in assessee’s own case for AY 2010-11, has
ITA No.952/SRT/2024/AY 2011-12 Mohammad Shoeb Aziz Haque Khan estimated income @15% of turnover. For the same reason, we direct the AO to estimate income of the assessee @15% on the impugned deposit of Rs.24,39,500/-. Accordingly, the addition is restricted to Rs.3,65,925/- in place of Rs.24,39,500/-. The ground is partly allowed. 9. The next ground pertains to addition of Rs.3,39,000/- u/s 68 of the Act. The impugned addition pertains to amounts allegedly received from three persons, namely, M/s Fakhari Traders (Rs.1,50,000/-), Shri Kaiser N. Malik (Rs.1,25,000/-), and Shri Mohammadbhai (Rs.64,000/-). The assessee contended that (i) Fakhari Traders was a sundry creditor and not an unsecured lender; (ii) that the amounts were misclassified due to an accounting error and (iii) that no fresh loan was received from Fakhari Traders during the year under consideration. In this regard, it is observed that in spite of being given ample opportunities, appellant failed to furnish necessary documentary evidence to establish the identity, creditworthiness of the lenders and genuineness of the transactions in cases of the above three parties. Therefore, the addition was rightly made by the AO. However, we have directed AO to add Rs.3,65,925/-, which would take care of the impugned amount of Rs.3,39,000/-. Therefore, no separate addition is required on this issue. Accordingly, this ground is allowed. 10. In the combined result, appeal of the assessee is partly allowed.
ITA No.952/SRT/2024/AY 2011-12 Mohammad Shoeb Aziz Haque Khan Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 15/09/2025. Sd/- Sd/- (T. R. SENTHIL KUMAR) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat �दनांक/ Date: 15/09/2025 SAMANTA Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat
