ITO 20(1)(1), MUMBAI, MUMBAI vs. AHMED ALI RIYAZ AHMED CHOUDHARY, MUMBAI
Facts
The Revenue preferred an appeal against an order regarding reassessment under section 143(3) read with section 147 of the Income-tax Act, 1961. The core issue was the Commissioner (Appeals) estimating profit at 12% on cash deposits instead of sustaining the Assessing Officer's addition. The Revenue's appeal was filed despite a low tax effect, citing an exception in CBDT Circular No. 5/2024.
Held
The Tribunal held that the case did not fall under the exception provided in paragraph 3.1(h) of CBDT Circular No. 5/2024, which pertains to organized tax evasion. The facts did not support allegations of organized tax evasion, bogus capital gains, or accommodation entries, and the matter was considered a routine CASS selection involving cash deposits.
Key Issues
Whether the appeal filed by the Revenue is maintainable despite a low tax effect, by invoking an exception under CBDT Circular No. 5/2024, when the facts do not demonstrate organized tax evasion.
Sections Cited
143(3), 147, Income-tax Act, 1961
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘A‘ BENCH
आदेश / O R D E R PER AMIT SHUKLA : The present appeal has been preferred by the Revenue against the order dated 18.09.2025 passed by the National Faceless Appeal Centre, Delhi, arising out of the reassessment framed under section 143(3) read with section 147 of the Income- tax Act, 1961 for Assessment Year 2011-12.
2 ITA No. 7634/Mum/2025 Ahmed Ali Riyaz Ahmed Choudhary 2. The solitary grievance of the Revenue, as emanating from the grounds of appeal, is directed against the action of the learned Commissioner (Appeals) in estimating the profit at 12% on the total cash deposits amounting to Rs.1,01,29,887/-, instead of sustaining the addition as made by the Assessing Officer. It is an admitted position on record that the resultant tax effect works out to Rs.27,52,000/-, which is below the monetary threshold prescribed for filing appeals before the Tribunal.
However, in the authorization memo accompanying the appeal, the Revenue has sought to justify the filing of the present appeal on the ground that, notwithstanding the low tax effect, the case allegedly falls within the exception carved out under paragraph 3.1(h) of CBDT Circular No. 5/2024 dated 15.03.2024, as amended by Circular No. 9/2024 dated 17.09.2024, whereby the monetary limit for filing appeals before the Tribunal has been enhanced to Rs.60,00,000/-.
At this stage, it would be apposite to briefly notice the statutory and administrative framework governing the issue. As per CBDT Circular No. 5/2024, appeals below the prescribed monetary limits are not to be filed, except in cases specifically falling under the enumerated exceptions. Paragraph 3.1(h) of the said Circular provides an exception in respect of:
“Cases involving organized tax evasion including cases of bogus capital gain/loss through penny stocks and cases of accommodation entries.”
3 ITA No. 7634/Mum/2025 Ahmed Ali Riyaz Ahmed Choudhary 5. The Revenue has invoked the aforesaid clause to contend that the appeal deserves to be entertained on merits, irrespective of the low tax effect. We have carefully perused the impugned appellate order as well as the assessment records placed before us. On a plain and objective reading of the material on record, we find no factual foundation whatsoever to even remotely suggest that the present case involves organized tax evasion, bogus capital gains or losses through penny stocks, or accommodation entries, which are the sine qua non for invoking the exception under paragraph 3.1(h).
On the contrary, the case before us is a routine CASS- selected matter, wherein the issue revolves around cash deposits in the bank account, which have been duly reflected in the assessee’s cash ledger. The learned Commissioner (Appeals), after examining the factual matrix, has merely estimated the profit element at 12%, a course of action which is well-recognized in law in cases where complete quantitative reconciliation may not be forthcoming. At no point, either in the assessment order or in the appellate proceedings, has the Revenue alleged or established the existence of any organized mechanism of tax evasion, much less one involving the specific mischief contemplated by clause 3.1(h) of the Circular. 7. The invocation of the said exception by the Revenue, in the absence of any supporting factual substratum, is therefore wholly misconceived and unsustainable. The Circular clearly postulates that the exception is not to be applied mechanically or by mere incantation of its language, but only where the facts demonstrably
4 ITA No. 7634/Mum/2025 Ahmed Ali Riyaz Ahmed Choudhary bring the case within its ambit. A routine estimation of income arising out of cash sales, without any allegation of accommodation entries or structured evasion, cannot, by any stretch of reasoning, be elevated to the status of organized tax evasion.
In view of the above discussion, we hold that the present appeal does not fall within any of the exceptions enumerated in CBDT Circular No. 5/2024. Consequently, the bar of low tax effect squarely applies, and the appeal filed by the Revenue is not maintainable.
Accordingly, the appeal of the Revenue is dismissed in limine on account of low tax effect, without entering into the merits of the additions made.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced on 30th January, 2026.
Sd/- Sd/- (MAKARAND VASANT MAHADEOKAR) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 30/01/2026 KARUNA, sr.ps
5 ITA No. 7634/Mum/2025 Ahmed Ali Riyaz Ahmed Choudhary
Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. BY ORDER, //True Copy//
(Asstt. Registrar) ITAT, Mumbai
