THE DEPUTY COMMR. OF INCOME TAX, CEN. CIR.1,, RAJKOT vs. JAYESH HARAKHJI PATEL,, RAJKOT

2. Addition of Rs. 4,58,91,736/- by presuming profit @25% (arbitrarily) and investment @5% (without any rational) on the gross cash deposits made in the bank account and not restricting the addition to the extent of Commission element embedded therein, which was evidently Rs. 50/- to Rs. 300/- per lakh i.e. from 0.05% to 0.30%.

3. Not restricting the addition up to the PEAK investment in the deposits with bank as held by jurisdictional high court in the case of Indrajeet Zandusingh Tomar (TA No.: 908 of 2015) and other decisions. All the grounds stated hereinabove are without prejudice to each other. The assessee craves leave to add, delete, amend, alter or withdraw one or more grounds of appeal.”

5.In response, the assessee vide letter dated 20.3.2014 submitted that during the relevant previous year, he was deriving commission Income. This commission was given to him by the ceramic manufacturers of Morbi, whose sales proceeds were deposited in cash at respective station by their dealers, which the assessee would withdraw and hand it over to the manufacturers.

6. However, the assessing officer rejected the contention of the assessee and observed that the assessee was not a commission agent, as no proof in this regard was submitted by him viz., who was the manufacturer who had supplied the goods, name of the dealer who had remitted the money, confirmation from the manufacturer that the cash deposits actually belonged to them, etc. When there are cash deposits in the said account. It is obvious that the explanation as to the source of such cash deposits has & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) to be furnished by the assessee. Merely by stating that somebody's cash was deposited which he withdrew and handed it to them, does not exempt the onus cast upon the assessee to prove the source of such huge cash deposits. Without prejudice to the above, if at all it was the sales proceeds of the manufacturers, then why would the dealer not deposit this cash into the accounts of the manufacturers directly. Why has he got to route this through the assessee's bank account and why would the assessee risk of carrying cash and handing it over to the manufacturers. Therefore, in the absence of any explanation as to the source of cash deposits, the assessing officer have no alternative but to treat the same as unexplained cash belonging to the assessee, and tax the same in his hands. The total of cash deposits made into the above mentioned bank accounts for the year under consideration, runs to Rs 4,92,45,263/- for account No. 015305001905 and Rs. 10,37,27,193/- for account No. 015305003488, aggregating to Rs.15,29,72,456/-, which was added to the assessee's returned income.

7. Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has partly deleted the addition made by the assessing officer.Aggrieved by the order of the Ld.CIT(A), the assessee as well as Revenue both are in appeal before us.

8. Learned Counsel for the assessee argued that assessee is doing angadia business since last 100 years, and this fact has been confirmed by the Director General of Central Excise and Intelligence (DGCEI) in the case of ceramic industries, therefore, Commission income may be taxed and addition sustained by the Ld. CIT(A) may be deleted.

& 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) 9. On the other hand, Ld. DR for the Revenue submitted that assessee is neither shroff nor angadia, but assessee is in the business of money laundering, and engaged in criminal activities since more than hundred years, which has been confirmed by the ld. Counsel for the assessee, in his arguments. Therefore, money laundering business is a criminal activity and, hence, such person should be penalized. The Ld. DR also pointed out that assessee has not given name from whom cash was received. Moreover, the assessee has not explained that weather he has engaged in an illegal business or not and if the credit side is accepted in assessee’s case, then debit side naturally be accepted and since, the assessee is the owner of the transaction, therefore, addition made by the assessing officer should be confirmed. Moreover, to engage in illegal business is not a commercial activity, therefore, addition made by the assessing officer should be confirmed.

“11. Before us Ld. CIT-DR for the Revenue submitted that assessee is neither shroff nor angadia but he is a businessman. Therefore, the entire addition made by the assessing officer should be sustained. The Ld.CIT-DR for the Revenue stated that assessee deals with contents and not with the container. The assessee is dealing with contents and does not demonstrate & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) that he is dealing with container. Therefore, assessee is neither shroff nor angadia, hence the addition made by the assessing officer should be sustained.

12. Before us, Ld.CIT-DR submitted written submission also, which are reproduced below:

1.

1. The appeals are categorized under 2 categories for ease of reference. a. Category A – Search & Seizure related appeals (date of search 17.01.2013). and b. Category B – Reopening/ Review related assessment and subsequent appeals. (Please refer to the enclosed chart for relevant assessment year, IT(SS)appeal/ ITA appeal number and other factual details pertaining to the appeal.) 2. In these cases (category A), Search & Seizure operation happened on 17.01.2013 which resulted into seizure of incriminating materials and statement under oath of the assessee and his family members wherein the Modus Operandi adopted by the assessee was described by the assessee as follows: - “The assessee is the owner of multiple bank a/cs in his name and name of his family members. Huge cash deposits running into more than about 191 crores between A.Y.2007- 08 to A.Y.2013-14. The assessee informed that he was engaged in the business of transfer of ‘money’ on commission basis which is mostly unaccounted/ illicit cash of tiles- manufacturers, flowing from the purchaser to the sellers. Such ‘cash’ deposited in the bank account of the assessee is either the result of undisclosed sales or the suppressed sales (for e.g. the actual sale price being Rs.100/-, out of which Rs.80/- is the disclosed sales while Rs.20/- is the suppressed sales). The assessee is in contact with the sellers and the purchasers. Since the purchasers are bound by sec.40A (3) and other provisions of I.T.Act by virtue of which it is not permissible for them to make payment of about Rs.20,000/- in cash, for purchases without attracting disallowance in the assessment proceedings; Hence, such ‘illegal cash payment transactions” is added and abetted by the assessee and his associates whereby the purchaser deposits the differential cash amount in the bank a/c of the assessee. The assessee is contacted by the seller about the said deposit or informed by the purchaser about it. The assessee verifies the deposits in his bank a/c and after deducting definite transaction-fee based on deposited amount, withdraws the cash and hands over the cash to the seller. The assessee also, at times transfers the deposited cash from one a/c to another belonging to him or his associates or other similarly engaged entities in order to provide layering to the ‘money’ in the money laundering process.”

4. Proceedings before Ld. assessing officer: a. The assessee has in his contentions before Ld.assessing officer argued that based on voluminous material seized/ impounded during the course of Search & Seizure, respectively; and in view of categorized statement accepting the Modus Operandi, the department may be pleased to accept that it was his business to earn commission by facilitating money transactions between third parties. That, the amounts credited in his bank accounts belonged to third parties and hence entire amount may not be considered in assessee’s hand. b. Ld.assessing officer has on the other hand invoked deeming provisions of I.T.Act, 1961. Upon being satisfied that the assessee has not been able to substantiate the source of credit in his bank a/cs, proceeded to conclude that the assessee has failed to give proper explanation about the nature and source of deposits in his bank a/cs and accordingly considered it as unexplained cash credit and taxed the amount credited in bank a/c. Ld.assessing officer has simultaneously initiated penalty and charged interest. Assessment for A.Ys. 2007-08 to 2012-13 are u/s.153A r.w.s. 143(3) of the I.T.Act, 1961. The assessment for search related A.Y.2013-14 is u/s.143(3). The Ld assessing officer has used the term ‘unexplained credit’ but not specified the specific section.

& 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani)

5.Proceedings before Ld.CIT(A): a. Before Ld.CIT(A), the assessee raised multiple grounds of appeal which primarily relate to addition by the assessing officer on account of unexplained cash deposits. b. Ld.CIT (A) has passed a common order on 27th September 2017 wherein he has decided appeals for A.Y.2007-08 to A.Y.2013-14. c. Before Ld.CIT (A), the assessee briefly submitted that he is engaged as Angadia under the name and style: Shree Maruti Enterprise, Akshar Enterprise, OM Enterprise, Sagar Enterprise, M.M. Enterprise, etc. It was submitted that the assessee has been working for various tiles manufacturers (herein after, TM), wherein the assessee provided his bank a/c number to the TM who in turn provided the same to its customers/ dealers. The customers/ dealers of TM on instruction of TM deposits cash/ cheque in the bank a/c of the assessee and deposits the bank slip to the TM. The TM produces that slip to the assessee, who after verifying the bank balance used to withdraw the said deposit from his bank a/c and pay to the TM after deducting his commission which was ranging from Rs.250 to Rs.300 per lacs. d. Ld. CIT(A) on page 6 has further reproduced that one of the depositions referred to in the name of the assessee in Q.No.12. Also, the response to Q.No.12.1.7 on page.7 specify that the cash/ cheque dealt with by the assessee is unaccounted cash. e. Ld.CIT(A) has further reproduced the authorities referred upon by the assessee from page.8 onwards. f. The decision of Ld.CIT(A) is from page.20 onwards. (i) In para.5 Ld.CIT(A) states that the only effective grounds of appeal is against the addition made by the assessing officer by considering deposits in bank a/cs as ‘deemed’ income of the assessee. (ii) In para.5.1 THE Ld.CIT(A) has mentioned about the undisputed facts of the existence of multiple bank a/cs of the assessee and the modus operandi. It is also stated that the assessee’s major plea is that only the commission income may be taxed in his hands, while the assessing officer has found response of the assessee as not satisfactory and taxed the entire income. (iii) In para.5.2 Ld.CIT(A) speaks about the contention of the assessee about him being Angadia, and that the assessment was passed without giving opportunity of being heard to the assessee; alternatively, that if the cash deposited in the bank is considered assessee’s turnover than only the profit/ income from the turnover should be taxed. (iv) In para5.3 Ld.CIT(A) holds that the additions of total cash deposits made by the assessing officer is excessive because there is a continuous cash deposit and withdrawal on daily basis from these a/cs. (v) In para.5.4 Ld.CIT(A) rejects the contention of the assessee that he is working as Angadia/ Shroff, mainly because the deposits and withdrawals both are only in cash. Further, Ld.CIT(A) has also rejected the claim of commission stated to be earned by the assessee. Further, Ld.CIT(A) has dismissed the contention of the assessee that he is merely facilitator and the actual beneficiaries are ceramic manufacturers in and around Rajkot. He has held that the assessee is master of facts and he should have told the whole truth. He should have submitted complete details of person wise transactions so the department could have taken action to access the income related to these transactions in their hands. But the assessee failed to do so during assessment proceedings and even during appellate proceedings. These facts show that the assessee is a partner with other black money generators/ holders. Therefore, the contention that the assessee is earning only commission income on these transactions and real beneficiaries are others is not found acceptable.

& 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani)

(vi) Simultaneously, Ld.CIT(A) went ahead and dismissed all other contentions of the assessee regarding natural justice, lack of seizure of cash and jewellery etc. He also distinguished the case laws citied by the assessee stating that the assessee is neither an Angadia nor a Shroff. (vii) Thereafter in para.5.6 Ld.CIT(A) has considered that the cash deposits in the bank a/c of the assessee is turnover of the assessee. On this in para.5.7, based on the gross profit shown by the ceramic manufacturers in the region he has decided that an amount of 30% of the turnover is income of the assessee. Accordingly, as per chart on page.27 of his order, Ld.CIT(A) has partly allowed the appeal by confirming 30% of the addition made by the assessing officer and deleting 70% of the addition from A.Y.2007-08 to A.Y.2013-14. Though Ld. CIT(A) has not mentioned any specific section, from the language adopted he has considered the cash deposited as Business Turnover.

8. Proceedings before Ld.CIT(A): With respect to A.Ys.2008-09 & 2009-10, the assessee has not pressed the addition on account of peak credits but has provided a reduced computation which has been conditionally approved by the Ld. CIT(A). For A.Ys.2010-11, 2011-12 & 2013-14, Ld. CIT(A) has confirmed 30% of the additions made by the assessing officer and deleted 70% of the additions.

& 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani)

That as on date there are varied orders by the Ld. ITAT, Rajkot. This can be broadly divided into two types of orders :- (i) Decisions in which the activity of the assessee has been considered as business activity, the amounts found deposited in bank accounts has been considered as business turnover and Ld. ITAT has variously directed that only commission income ranging from 0.25% of the turnover onwards has to be determined and taxed. In these orders Ld. ITAT has ignored the applicability of deeming provisions u/s 68, 69, 69A to 69D of the IT Act. [In the matter of KK Enterprises ITA 419 & 434/RJT/2017; Aniruddh Solanki ITA 454/Rjt/2018 & 02/Rjt/2019; Vallabhbhai K Hirani IT(SS)A 94 to 96/Rjt/2018] (ii) The other categories of assessee are 3 orders in the case of Dhanji L Chikaliya , Paresh D. Patel and Ashok Parmar Ld. ITAT has confirmed the entire addition equal to credit in the bank account of the assessee, thus, agreeing with the view of the Assessing Officer that unexplained credit has to be taxed in the hands of the assessee in whose bank accounts such money has been found to be deposited. [ITA No. 23/Rjt/2016; 74/Rjt/2018; 81/Rjt/2017; 75 Rjt/2018; ITA No. 24/Rjt/2016]. (iii) In this regard, it was submitted that taxpayer, as-well-as authorities are equally bound by the provisions of section 68, 69, 69A to 69D of the IT Act and as such, in the light of non-disputed fact that unexplained credit whether found in the bank statement of the assessee, who regularly maintain books of accounts. Ld. ITAT should have agreed to legal-plea of the Revenue that till onus with respect to identity, credit worthiness and genuineness is discharged, the unexplained credit have to be added in the hands of the assessee. In other words, the orders of Ld. ITAT wherein deeming provisions have not been considered may be considered “erroneous” and it is prayed that perpetuation of error needs to be prohibited. Reliance in this regard is placed on the decision of Honourable Supreme Court in the matter of Distributor (Baroda) Private Limited vs Union of India (1985) 22 taxman 49 (SC) (para 19) copy of decision was supplied to Ld. ITAT during the course of hearing. (iv) That Ld. ITAT may consider their decisions in the matter of Dhanji L Chikaliya , Paresh D. Patel and Ashok Parmar, as applying the correct provisions of Law. b) Powers of ITAT to decide taxable income afresh. The Ld. ITAT is the highest fact-finding authority as per provisions of Income Tax Act,1961 that it has been held that proceeding of Ld. ITAT are also not meant to score a point but are meant to determine the correct income of tax payer for the year in question in accordance with provision for Income Tax Act. Reliance in this regard was placed on the decision of CIT vs Indian Express (Madurai) Private Limited (1983) 140 ITR 705 (Madras) which is bound form in Ramco Cement Limited Vs DCIT (2015) 55 Taxmann.com 79 (Madras) and which also mentions the decision of State of Tamil Nadu vs Arulmurugan and Company (1982) 51 STC 381 (Madras) (copy enclosed). It is, hence, requested that irrespective of decision of Ld. assessing officer and Ld. CIT(A), Ld. ITAT may independently examine the facts of the case and apply legal provisions, including the settled law that unexplained credit shall be taxed under deeming provisions. Reliance in this regard is further placed on the order of Honourable Supreme Court the case of Jute Corporation of India Limited vs CIT (1991) 187 ITR 688 (SC). In this regard it is further clarified that there is no new source of income in category ‘A’ case, as defined by Honourable Supreme Court in CIT Vs Shapoorji Pallonji Mistri (1962) 44 ITR 891 (SC). To summarize, Ld. ITAT as plenary powers which Ld. CIT(A) as well as Ld. assessing officer possess and the prayer of Revenue is limited to sustaining additions already made by Ld. assessing officer by applying deeming provisions.

& 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) c) Whether the assessee is an Angadiya/ Shroff? or is engaged in extra Commercium Activity? a) In various orders of Ld. ITAT/ CIT(A)/A.O., the assessee has been submitted and discharged as bound the Angadiya/Shroff/Commission agent dealing with money. In this regard it was submitted that the assessee is neither Angadiya, nor Shroff but is engaged in money laundering / Hawala which can be categorized as extra commercium activity in accordance with the ratio of decision in the case of State of Bombay vs RMD Chamarbaugwala (SC) 1957 AIR 699. b) In a hawala, a certain amount of ‘cash’ is transported from one place to another, or handed over through a chain of intermediaries, and/or, from one person to another, for a certain commission. It can be said with certainty that such cash is ordinarily illicit and black-money, otherwise, with the advance of internet based universal banking operations, the transfer of money through bank accounts is easily executable at the click of a button and with utmost confidentiality. c) c) The money-laundering also deals with illicit ‘cash’ as a commodity, and coverts it into ‘legal wealth.’ Unlike hawala, which is completely out of legal channels, the money laundering utilizes the available legal channels, viz. multiple bank accounts located in multiple places, owned by multiple entities, in a well-orchestered ‘layering’ process, to hide the reality of illegal wealth and to ‘make-believe’ that ultimate outcome is a ‘legal wealth.’ d) Angadiya/Shroff vis-à-vis the hawala/money-launderers i. Defining an Angadiya: Angadiya are couriers. The profession is one of trust and secrecy. Angadiya are historically known to be backbone of diamond and precious commodity business, carrying on person precious metals for display, transport and sale since ancient times. The Angadiyas are known to issue a receipt to their customers with valid recognizable details. Angadiya business is a legally recognized business. As of now there is a GST registration of courier business. How an Angadia business is generally conducted:

Step 2: Step 1: Business entities Step 3: Step 4: Angadia Angadia issues with accounted Cash-in- Angadia maintains books of proper receipts hand / valuables/ transfers accounts, files Return of with necessary precious metals/ the Parcel Income and upon details and important documents with cash/ enquiry/ Search action/ In the eyes of judiciary, the Angadiya are couriers who deal with enters intending to “Courier” valuables Survey action by the ‘container’ and not with ‘content’. Elaborate discussion was held necessary the same to their own to the Tax/Enforcement amongst member agencies on the “legal connotation” of subject details in book branches/ customers/ specified departments, specifies between the members of the Study Group. The decision of the of account with associates contact location the details of owners of Hon’ble Ahmedabad Income Tax Appellate Tribunal in the credentials of angadiya. and earns case of Patel Somabhai Kanchanlal & Co Vs. cash/valuable article or DY. CIT the owner. (The transport of cash commissio (indiankanoon.org/doc/1381120; ITAT thing and corroborates The angadiya n for such Ahmedabad order dated 26/12/1996) held that “Angadiya” is the receipt and payment has been severely is supposed to dealing with “Container” and not courier with “Contents”. Similar as a ‘courier’ from his contentions of Angadiyas receive parcels are also seen in High Court decisions on disincentivized after service documents. related matters, viz. Kanchanlal Trikamlal Patel vs Shyamal where the Real Angadia do not amendments in IT Act unopened deposit any ‘cash’ in ‘parcels / 1961 and introduction of their ‘bank account’ Page | 11 S 269ST vide FA 2017 restricting cash deposits of above Rs 2 Lakhs & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) Ghosh (1975) 16GLR675, wherein the Angadiyas have submitted that they are ‘couriers. These legal positions imply that ‘Angadiya’ as a courier cannot deal in cash/ precious metal by transferring it in its books of account as Cash in hand/ goods in stock and deliver it through “hawala” at other locations in lieu of commission. The ‘Angadiya’ can only accept ‘parcel’ or ‘container’ and has no right to deal with the ‘content.’ ii. Defining a shroff: The business of ‘shroff’ or “bill-discounter/ Invoice-discounter” is a permissible legal business. Its origin lies in the concept of maintaining uninterrupted cash-flow in any business, while respecting the requirement of ‘credit period’ for payment of accepted Bills/Invoices. A shroff or Invoice Discounter, on being satisfied with the Invoice of sale (accepted by Buyer), pays the supplier of goods on behalf of seller, after deducting finance charges. It receives from Buyer payment on behalf of seller after the credit-period is over. The transactions are through regular banking channels and accounted for in Books. Thus, while the Seller gets immediate funds for a small cost, the ‘shroff’ earns on Bill- discounting, and the Buyer is able to pay after the declared credit-period. It is a win-win situation for everyone. In modern times, the Government and RBI are encouraging Bill-discounting/factoring services for improving cash-flow of MSMEs and everyone in general. The Government’s TReDS platform is being encouraged with policy interventions, including amendments in tax-laws. Trade Receivables electronic Discounting System (TReDS) is an online electronic platform and an institutional mechanism for factoring of trade receivables of MSME sellers. It enables discounting of invoices through an auction mechanism to ensure prompt realisation of trade receivables. How a Bill discounting/ Shroff business is generally conducted: Step 5: Shroff/ Step 6: Step 1: Sellers in Step 2: Step 3: Step 4: Financer remit an Shroff need of Shroff Shroff Shroff amount based on earns a immediate money verifies and a calculated differential and with an Invoice Client contacts an percentage of commissio authentic Invoice and agree on approved Invoice Value. n; Shroff raised on a Buyer, credentials a The money is maintains contact of the particula financer transferred to the proper Shroff/Bill Seller and r rate of (RBI Bank account of books of discounter/factor Buyer and interest Seller. Accounts Discounter/ other and other approved In due course, and files Invoice Purchaser documents charges Bank/ when Buyer Return of (in-order to of KYC for releases payment Income; manage (iii) Comparing activities of Hawala operators/ Money launderers with Angadiya and shroff the norms, Bill/Invo NBFC) of Invoice, the Financer cash-flow of Credibility ice [Shroff Shroff/ Financer complies a. The hawala operators/ money launderers are self-styled Angadiya, but are not comparable business after , past discounti receive the to the real Angadiya, as these persons are indulging in large scale aid and abetment of tax- with RBI sales has taken business ng/ may also financed amount evasion activities. guidelines place while history, Invoice I. While the real Angadiya deal with ‘container’ or ‘parcel’, these hawala operators deal with be an RBI and the payment from etc. of purchase the ‘content,’ i.e. cash, valuables, precious metals. transaction is buyer is pending Seller , etc. approved II. It is observed in almost all cases that such content, ie cash is deposited in the Bank squared off due to credit accounts operated by hawala operator/money lender, or their associates and a regular account of such cash is maintained in the manner of carrying a routine business, in most & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) cases. However, the Angadiya, as a courier, being not concerned with the ‘content’ is not required to deposit such illicit cash in their bank accounts. That such cash found with such money-launderers/hawala operators is illicit black money can also be understood from a simple logic- the purpose of utilization of bank account of hawala operators/money launderers, rather than the actual depositor and beneficiary is to hide the ‘source’ of funds as well as the real beneficiary. These come to light only when an enforcement action occurs, which is rare, in statistical terms. III. While real Angadiya deal with “courier/parcel as a commodity’ which is safely and discretely transferred from sender to receiver, while maintaining necessary due diligence on the details of sender and receiver, the hawala operators/money launderers deal with ‘cash/valuable as commodity.’ IV. While real Angadiya earn from service charges for courier, these hawala operators/ money lenders earn commission based on the quantum of cash/valuables/ precious metals they transport. b. Similarly, hawala operators/ money launderers are self-styled shroff, but are not comparable to the real shroff, as these persons are indulging in large scale aid and abetment of tax-evasion activities. i. The work of a real shroff commences when a seller presents a duly stamped and accepted bill of Sale. The shroff finances the Bill after deducting the finance charges. Thus, the basis of invoice-discounting is a sales-bill. The hawala operators/ money launderers neither have any such basis nor do the work of finance. They simply transport money from one place to another and deduct their commission. ii. The cycle of shroff ends when the purchaser makes payment on the accepted bill of sales after the end of credit-period. This squares-off the transaction. However, the hawala operators/ money lenders have no comparable transaction. iii. The shroff works on accounted bill of sales and accounted payment by seller. In the case of hawala operators/ money launderers, the entire cash transaction is illicit black money. (iv) Highlights of difference between the affairs of a hawala-operator/ money-launderer with a Legitimate shroff/ Angadiya/ Money Remitter have been summarized in a chart, as follows: Sr. Item of Implied from Shroff/Bill Angadiya Money Remitter No. Comparison submissions of Discounter assessee, and similar persons 1 Statutory NIL RBI Instructions; GST/Service Tax Prevention of Compliance Payment and registration in the Money Settlement Systems category of Courier laundering Act Act,2007; CBDT Service; CBDT (PMLA)/Foreign instructions on instructions on Cash Exchange Cash Receipts/payments management Act Receipts/payments (FEMA); RBI 2 Cash Yes, Huge cash No Only as a “container” Yes, foreign cash handling deposits found and not “content”; to domestic cash in bank Angadia do not conversions and accounts owned deposit the cash of vice versa by Assessee customer in any bank Account 3 Basis of No documentary Value of an Receipt raised on Application/ receipt of Basis authentic Invoice owner of cash as a Form to be filled & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani)

Sr. Item of Implied from Shroff/Bill Angadiya Money Remitter No. Comparison submissions of Discounter assessee, and similar persons Cash raised on Buyer courier enterprise. up by the person after sales intending for money remittance/ money exchange 4 Basis of No documentary Percentage of The cash-container is Rate of remittance basis computed discount delivered; or the conversion of based on agreed ‘unopened parcel’ is respective upon interest rates, delivered Currencies minus duration, etc. and commission charges 5 Identity of Not provided / Identity of Details of “Container” Identity of both owner of not available/ Financer is on owner is available; parties available Cash/ incomplete records Details of receiver is Financer details available available like mobile number 6 Confirmation Not provided / Records contain It is possible; In Records contain from owners not available details and multiple adjudications, details and documents of including documents of financer and hence adjudications by the transacting confirmation is Ahmedabad Tribunal, parties and hence possible instances have been confirmation is mentioned wherein the possible Angadia have been able to submit confirmation from parties; have also been able to produce owners before Department in Search and Seizure actions e.g. NIA plus IT action on Angadiya’s in Mumbai 7 Nature of Unknown in Bill Discounting Courier services/ Money exchange business common services/ Shroff Angadiya services/ money parlance, but remitter styled as Angadiya/ shroff v. The misuse has been discovered by GST/IT department in a large number of cases, where in garb of being ‘Angadiya’/‘shroff’ several unscrupulous entities, have engaged themselves in money-laundering and hawala and similar non-commercium activities. It has been observed in a number of cases that ‘cash-discounting’ is a type of discounting being practiced in which the money-launderer permits use of its bank account for deposit of cash at one location, and withdraws the cash/bank transfer at another location, earning commission on such transaction. There is no Invoice/Bill accepted by Buyer on supplies by Seller in these cases, or & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) in other words, there is no basis of such deposit and discounting of cash. In a similar fashion, DGCEI detected GST evasion whereby the declared price of Tiles was lower than the actual sales price. As per IT Act, any purchase in cash above Rs. 20,000 (now 10,000) is not permitted. Buyers across India deposit the cash purchase-amount into the bank-account of self-styled Angadiya/shroff, who remitted cash to seller, after deducting commission. In certain instances, such Bank-accounts were also used for layering and delayering of funds in the process of money laundering. Upon detection, the Income Tax department has treated these sums as unexplained cash deposits and taxed the entire amount as deemed income. The ‘Angadiya/shroff’ have disclosed the modus-operandi in clear terms. vi. The “Angadiya” is a very common term in Gujarat. Another common term related to monetary transactions is “shroff.” While “Angadiya services” and “shroff services” are comparatively accounted transactions, the enforcement agencies also come across the term ‘hawala’ which indicates a complete unaccounted transaction of cash. The concern related to enforcement agencies is the veil of Angadiya and shroff to conduct unaccounted hawala business. In a most daring manner, hundreds of Bank-accounts have been used by vested groups to transfer and disseminate hundreds of Crores of unaccounted money, in the garb of cheque discounting/ cash discounting/ shroff and Angadiya business. vii. In last decade, several decisions of ITATs in Gujarat, and Hon. High court of Gujarat can be found wherein the term Angadiya /shroff have been used interchangeably to cover the cases of unaccounted transactions of cash. Due to lack of clarity between these terms, several decisions of Ld. ITAT and Hon. HC have actually considered the activity of depositing many crores of cash in bank account and disseminating them to beneficiaries as a ‘business transaction’ and have directed the Income Tax department to levy taxes on profits ranging from 0.25% to 5% or so. Such decisions have the implied effect of legitimizing these transactions as the gains far outweigh the risks/tax/ penalty involved. There is no doubt that these activities aid in large scale tax-evasion. However, due to many reasons, the judiciary has been having differing views on these transactions undertaken by such entities, and their taxability – while one view amongst Gujarat Income Tax Appellate Tribunal/ Hon. HC is that such cash-deposits have been rightly treated by Income tax department as unexplained cash credits, while the other, divergent view is that such Cash-deposits are “Business Turnover” of these entities, despite being illegal. Consequently, these can be taxed variously at 0.5% to 3 percent of Turnover. Primafacie, this view is fallacious when one looks at the decision and deliberations of Hon. SC in the above referred case of State of Maharastra vs RMD Chamarbaugwala, supra. e) That activities of assessee are not ‘business’ but ‘extra commercium’ and ‘taxable’ It is apt to reproduce the discussion in the order of Hon. Supreme Court of India in the matter of State of Maharastra vs R.M.D Chamarbaugwala 1957 AIR 699, 1957 SCR 874, AIR 1957 SUPREME COURT 699, 1957 SCJ 607, 1957 (1) MADLJ(CRI) 558, 1959 BOM LR 945 “The first branch of the argument on this part of the appeal raises a question of a very far- reaching nature. The question posed before us is: Can the promotion of prize competitions, which are opposed to public policy, be characterised as a " trade or business " within the meaning of Art. 19(1)(g) or "trade, commerce and intercourse" within Art. 301 ? (Page 20) It will be noted that Art. 19(1) (g) in very general -terms guarantees to all citizens the right to carry on any occupation, trade or business and el. (6) of Art. 19 protects legislation which may, in the interest of the general public, impose reasonable restrictions on the exercise of the right conferred by Art. 19(1) (g). Likewise, Art. 301 declares that trade, commerce and intercourse throughout the territory of India shall be free but makes such declaration subject to the other provisions of Part XIII of the Constitution. Arts. 302,304, which are in that Part, & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) lay down certain restrictions subject to which the declaration contained in Art. 301 is to operate. Article 302 empowers Parliament by law to impose restrictions on the freedom of trade, -commerce or intercourse not only between one State and another but also within the State, provided in either case such restrictions are required in the public interest. Article 304 (b) authorises the State Legislatures to impose reasonable restrictions on the freedom of trade, commerce or intercourse with or within the States as may be required in the public interest, provided the formalities of procedure are complied with Arts. 19(1) (g) and 301, it is pointed out are two facets -of the same thing-the freedom of trade Art. 19(1)(g) looks at the matter from the point of view of the individual citizens and protects their individual right to carry on their trade or business, Art. 301 looks at the matter from the point of view of the country's trade and commerce as a whole, as distinct from the individual interests of the citizens and it relates to trade, commerce or intercourse both with and within the States. The question which calls for our decision is as to the true meaning, import and scope of the freedom so guaranteed and declared by our Constitution. (p 20) The scheme of our Constitution, as already indicated, is to protect the freedom of each individual citizen to carry on his trade or business. This it does by Art. 19(1)(g). This guaranteed right is, however, subject to Art. 19(6) which protects a law which imposes, in the interest of the general public, reasonable restrictions on the exercise of the fundamental right guaranteed by Art. 19(1) (g). Our Constitution also proclaims by Art. 301 the freedom of trade, commerce and intercourse throughout the territory of India' subject to the provisions of Arts. 302-305 which permit the imposition of reasonable restriction by Parliament and the State Legislatures. The 'underlying idea in making trade, commerce and intercourse with, as well as within, the States free undoubtedly was to emphasise the unity of India and to ensure that no barriers might be set up to break up the national unity. One important point to note is that the language used in Art. 19(1) (g) and Art. 301 is quite general and that the provisions for restricting the exercise of the fundamental right and the declared freedom of the country's trade, commerce and intercourse are made separately, e.g., by Art. 19(6) and Arts. 302-305. (p 28) Our attention has been drawn to Art. 25 where the limiting words " subject to public order, morality and health " are used and it is pointed out that no such limiting words are to be found in Art. 19(1)(g) or Art.

301. In short, the argument is that Art. 19(1) (g) and Art. 301 guarantee and declare the freedom of all activities undertaken and carried on with a view to earning profit and the safeguard is provided in Art. 19(6) and Arts. 302-305. The proper approach to the task of construction of these provisions of our Constitution*, it is urged, is to start with absolute freedom and then to permit the State to cut it down, if necessary, by restrictions which may even extend to total prohibition. (p 29) On this argument it will follow that criminal activities undertaken and carried on with a view to earning profit will be protected as fundamental rights until they are restricted by law. Thus, there will be a guaranteed right to carry on a business of hiring out goondas to commit assault or even murder, of housebreaking, of selling obscene pictures, of trafficking in women and so on until the law curbs or stops such activities. This appears to us to be completely unrealistic and incongruous. We have no doubt that there are certain activities which can under no circumstance be regarded as trade or business or commerce although the usual forms and instruments are employed therein. (p.29) The question arises whether our Constitution makers ever intended that gambling should be a fundamental right within the meaning of Art. 19(1)(g) or within the protected freedom declared by Art.

301. The avowed purpose of our Constitution is to create a welfare State. The directive principles of State policy set forth in Part IV of our Constitution enjoin upon the State the duty to strive to promote the welfare of the people by securing and protecting, as effectively as it may, a social order in which justice, social, economic and political, shall inform all the institutions of the national life. The question canvassed before us is whether the & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani)

Constitution makers who set up such an ideal of a welfare State could possibly have intended to elevate betting and gambling on the level of country's trade or business or commerce and to guarantee to its citizens, the right to carry on the same. There can be only one answer to the question. (p 29) It will be abundantly clear from the foregoing observations that the activities which have been condemned in this country from ancient times appear to have been equally discouraged and looked upon with disfavour in England, Scotland, the United States of America and in Australia in the cases referred to above. We find it difficult to accept the contention that those activities which encourage a spirit of reckless propensity for making easy gain by lot or chance, which lead to the loss of the hard earned money of the undiscerning and improvident common man and thereby lower his standard of living and drive him into a chronic state of indebtedness and eventually disrupt the peace and happiness of his humble home could possibly have been intended by our Constitution makers to be raised to the status of trade, commerce or intercourse and to be made the subject-matter of' a fundamental right guaranteed by Art. 19(1) (g). We find it difficult to persuade ourselves that gambling was ever intended to form any part of this ancient country's trade, commerce or intercourse to be declared as free under Art.

heinous and are an outright crime, without any form of regulation by the Government. While Gambling is a regulated activity, the IT Act provisions outrightly prohibit procurement in ‘Cash’ above a prescribed limit. f). On addition u/s 68, reliance is placed on the following authorities:

1.

1. In the matter of Sudhir Kumar Sharma (HUF) V/s Commissioner of Income Tax- III, Ludhiana [2016] 69 taxmann.com 219 (SC)- 46 taxmann.com 340 (Punjab & Haryana), in a similar case of assessment the Assessing Officer made an addition of entire amount of cash found credited in the books of the assessee amounting to Rs. 7.81 crores. On appeal Ld. CIT(A) partly allowed the appeal and sustained the addition on the basis of the peak deposits to the tune of Rs. 17,66,000/- thereby deleting the addition of Rs. 7.64 crores. On appeal by the assessee as well as by the department, Hon’ble Tribunal dismissed the appeals of the assessee and allowed the appeal of the Revenue. Thereafter the matter came up for consideration of Hon’ble High Court of Punjab & Haryana which confirmed the additions made by the assessing officer and held as follows:  “A perusal of the findings recorded by the authorities below clearly spells out that admittedly, various amounts in cash were deposited in the bank account of the assessee and the onus was upon the assessee to explain the nature and source of the said cash deposits. The assertion of the assessee in this regard was that it was the amount received from his clients.  However, the assessee failed to give the lists of persons along with confirmation in respect of the said cash credits nor any of the persons were produced for examination, who had advanced cash to him, before the Assessing Officer. The assessee also failed to bring on record any evidence to prove that it was the amount received from such persons who were his clients.  The Assessing Officer had repeatedly provided opportunities to the assessee to produce the persons but they were not produced. The Tribunal had also noticed that in spite of opportunity having been provided to the assessee, in such circumstances, there was not justification to allow the assessee further opportunity to produce the persons. The parameters for leading additional evidence were not fulfilled.  Further, the Tribunal had rightly held that there were cash deposits in the bank account and thereafter cheques were issued to different parties and in such circumstances, the theory of peak credit could not be accepted. Moreover, the assessee had not been able to show that there existed any nexus whereby the amount deposited in cash had been withdrawn in cash and thereafter redeposited to take benefit under peak credit theory. [Para 9]  In view of the above, no substantial question of law arises. The assessee’s appeal stands dismissed. [Para 11]” Hon’ble Supreme Court thereupon, Sudhir Kumar Sharma (HUF) V/s Commissioner of Income Tax- III, Ludhiana [2016] 69 taxmann.com 219 (SC), dismissed SLP against High Court ruling that where assessee had failed to give list of persons who advanced cash to him along with their confirmation in respect of huge amount of cash deposited in his bank accounts, Assessing Officer was justified in adding said amount to assessee’s taxable income.

2. In the matter of Ravinder Kumar V/s Income Tax Officer [2020] 118 taxmann.com 166 (Delhi) it has been held that where assessee had failed to produce any material to authenticate his contention that cash deposits in his account were on account of sales being made by him from Kirana business, tax authorities were justified in making addition of unexplained cash entries in bank account in hands of assessee.

3. In the matter of Nemi Chand Kothari V/s CIT [2004] 136 Taxman 213 (Gauhati)/ [2003] 264 ITR 254 (Gauhati)/[2003] 185 CTR 635 (Gauhati) , it has been observed that merely because a transaction takes place by cheque is not sufficient to discharge the burden. The assessee has to prove the identity of the creditors and genuineness of the transaction. “It & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct. Once the assessee has proved the identity of his creditors the genuineness of the transactions which he had with his creditors, and the creditworthiness of his creditors I the transactions which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself.”

4. Reliance is also placed on the decision of High Court of Bombay in the matter of Arunkumar J. Muchhala V/s Commissioner of Income Tax – 8 reported in [2017] 85 taxmann.com 306 (Bombay) wherein it has been held that where assessee failed to produce relevant documents and confirmation in respect of loan taken from various parties, mere fact that he did not maintain proper books of account could not be accepted as a valid plea and, thus, amount in question was to added to assessee’s taxable income under section 68.

6. In Commissioner of Income Tax V/s DK Garg [2017] 84 taxmann.com 257 (Delhi)/[2017] 250 Taxman 104 (Delhi)/[2018] 404 ITR 757 (Delhi)/[2018] 300 CTR 510 (Delhi) wherein it has been held that where assessee, an accommodation entry provider, was unable to explain all sources of deposits and corresponding payments, he would not entitled to benefit of peak credit.

1.

2. That even if the deeming provisions are not specified in the Assessment order, the additions of unexplained credits have to be made under the general principles of taxation. Reliance in this regard has been placed on the following authorities: a. Manoj Aggarwal (Spl Bench ITAT Delhi) (2008) 113 ITD 0377 (Del-Trib) b. Namdeo Arora (2016) 72 taxmann.com 124 (P&H) c. Shri Arif v ACIT (ITAT Bangalore) d. Dr Prakash tiwari vs CIT (1983) 14 taxman 252 (MP) e. Rajmeet Singh vs ITO, (2024) 160 taxmann.com 83 (Jharkhand)

& 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani)

4. That the activities of the assessee have been incorrectly considered as ‘business’ by Ld. CIT(A) as well as Ld. ITAT Rajkot. The activities undertaken by the assessee are non- commercium activities , in violation of the provisions of Income Tax Act whereby the assessee is aiding and abetting activities in violation of public policy, i.e. restriction on cash-purchases in business. The activities of assessee are akin to hawala, i.e. transporting “cash-as a commodity” while covering the details of “source” and “beneficiary”; and, money-laundering, ie. Layering illicit/unaccounted wealth by use of multiple bank accounts to give it a colour of legal-wealth. Reliance in this regard is placed on the decision and discussion by Hon’ble SC in the matter of State of Maharastra vs R.M.D. Chamarbaugwala, infra.

6. It is also requested to consider commission income on money transaction of the assessee, as well as deeming income on S. 68 of the IT Act. S. 68 is being proposed because the assessee has been maintaining books of accounts in one form or another. Alternatively, assessee can be considered owner of cash-deposited in bank-accounts owned by the assessee under Sec. 69A, even under general provisions of taxation, as per relied upon authorities, supra.

13. Notice of hearing of this appeal was sent to the assessee at the address given by the assessee in Form No.36. More than 25 adjournments were granted to the assessee. Notices were sent to the assessee through registered post. The said notice has been returned unserved. During the appellate proceedings, before Ld. CIT(A), Shri S.G. Bhuptani, Chartered Accountant appeared, who is also appearing before this Tribunal, he informed the Bench that assessee is not available on his home address/ office address, and it is not known whether assessee is in India or not. Today when the case was called for hearing none appeared on behalf of the assessee nor any request for adjournment was made. It means that assessee is not interested in prosecuting these appeals.

15. In these appeals some of the assessment orders were passed by the Assessing Officer under section 143(3) read with section 263 of the Act and some of the assessment orders were passed by the Assessing Officer under section 153A r.w.s. 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).The main ground of appeal by the department (Revenue) is pertaining to assailing and deletion of 70% of additions made on account of unexplained cash deposits. The assessee, on the other hand is assailing the confirmation of 30% of cash deposits, in addition to other legal grounds regarding not considering assessee, as an Angadia, not adopting peak & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) balance in the bank account, not giving credit/ benefit of telescopic effect of intangible addition and not considering decision relied upon by the assessee etc. The Learned CIT- DR for the revenue, argued before us that in the eyes of judiciary, the Angadiya are couriers who deal with ‘container’ and not with ‘content’. Learned CIT- DR pointed out that in many decisions, it has been held that “Angadiya” is dealing with “Container” and not with “Contents”. Similar contentions of Angadiyas are also seen in High Court decisions on related matters, viz. Kanchanlal Trikamlal Patel vs Shyamal Ghosh (1975) 16GLR675, wherein the Angadiyas have submitted that they are ‘couriers. These legal positions imply that ‘Angadiya’ as a courier cannot deal in cash/ precious metal by transferring it in its books of account as Cash in hand/ goods in stock and deliver it through “hawala” at other locations in lieu of commission. The ‘Angadiya’ can only accept ‘parcel’ or ‘container’ and has no right to deal with the ‘content.’ In the assessee`s case under consideration, the assessee has deposited the cash in his own bank account and withdraw the cash from his own bank account, therefore the assessee has ownership of all the transactions in his bank account. Hence, the assessee under consideration cannot be treated as ‘Angadiya’. Besides, the shroff works on accounted bill of sales and accounted payment by seller. Therefore, assessee under consideration is not a shroff also. Thus, ld CIT- DR pointed out that assessee is a hawala operator (businessman) therefore, addition made by the assessing officer should be sustained.

16. Since none appeared on behalf of the assessee, before the Bench to argue, the case, on merit. Therefore, Bench is not aware about the essential facts, such as maintenance of books of accounts by the assessee, cash book, purchase book, sales book, Bank book, Journal book, stock register etc, to understand about the ownership of the transactions of the assessee. Therefore, we do not wish to make any comments on the merits of the grounds raised

by the assessee and revenue and argued by ld. CIT -DR for the revenue.

17. We note that assessing officer, made addition on account of Commission income as well as on account of cash deposited in the bank account treating the assessee as a businessman. For example, in for assessment year 2008-09, assessing officer framed assessment under section 143(3) r.w.s. 263 of the Act and Assessing Officer made following addition: i. Addition an account of commission income of Rs. 8,61,446/-. ii. Addition of peak credit in bank account of Rs. 46,50,353/-. On appeal, before Ld. CIT(A), the assessee did not press ground relating to commission income of Rs. 8,61,446/-, therefore, Ld. CIT(A) dismissed the same. About addition of Rs. 46,50,353/-, made by the assessing officer, on account of peak investment in respect of undisclosed bank accounts, since the assessee did not press this ground before the Ld.CIT(A), hence Ld. CIT(A) dismissed the same. In respect of addition made by the assessing officer an account of separate peak investment, in respect of each undisclosed bank account, instead of consolidated peak, of all bank accounts together, the Ld. CIT(A) noted that assessee submitted calculation of peak of Rs. 35,99,721/- and Ld.CIT(A) in turn, by following the judgement of Hon’ble Karnataka High Court, in the case of Parag Kotecha 61 DTR 19 and Co-ordinate Bench of Kolkata, in the case of Golam Mostafa, and 405/kol/2012, directed the assessing officer to restrict the addition of consolidated peak investment of Rs. 35,99,721/-. During the appellate, proceedings, the assessee also prayed for seeking credit of intangible addition made in the year under consideration, however, the Ld. CIT(A) did not accept the argument of the assessee, as the assessee has not accepted the addition made of the assessee, as the assessee has not accepted the addition made in his case, either in this year or in earlier year. The assessee has agitated the matter before ‘Higher Form’ and hence unless and until the matter is finalized, the credit of the disputed addition cannot be given, therefore, the Ld. CIT(A) dismissed the same. In these cases, Ld.PCIT has exercised his jurisdiction u/s 263 of the Act, and directed the assessing officer to verify the source of cash deposited in the bank accounts, which have been left out, during the course of original assessment proceedings. Accordingly, assessing officer made addition of peak credit in individual bank accounts. However, on further appeal by & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) assessee, before the Ld. CIT(A), the Ld. CIT(A), directed the assessing officer to make the addition as per consolidated peak, ( not individual, bank peak) investments. Aggrieved by this action of the ld CIT(A), the revenue is in appeal before this Tribunal.

18. From the above discussion, it is vivid that ld CIT(A) sustained the addition on account of Commission income of the assessee, as well as addition on account of cash deposited in the bank account, treating assessee, as a businessman. In our view, both the additions should not be made in the hands of the assessee by the Ld CIT(A). If the Revenue authorities, treat the assessee, as a businessman, addition on account of commission income, should not be made, in the hands of the assessee, therefore, we direct the ld. CIT(A) to delete the addition made by the assessing officer on account of ‘Commission income’, treating the assessee, as Angadia.

19. We note that it is the contention of the assessee that he was only a commission agent and derives commission for transfer of money on behalf of the manufacturers of tiles and ceramics of Morbi. However, no proof in this regard was submitted by him viz., who was the manufacturer who had supplied the goods, name of the dealer who had remitted the money, confirmation from the manufacturer that the cash deposits actually belonged to them, etc. When there are cash deposits in the said bank accounts, it is obvious that the explanation as to the source of such cash deposits has to be furnished by the assessee. Merely by stating that somebody's cash was deposited which assessee would withdraw and hand it to so-called manufacturers, does not exempt the onus cast upon the assessee to prove the source of such huge cash deposits. The ld CIT(A) has co-terminus power, as that of assessing officer, however, ld CIT (A) failed to ask the assessee, name of the dealer who had remitted the money, confirmation from the manufacturer that the cash deposits actually belonged to them.The ld CIT(A) also failed to ask the assessee to furnish the list of the persons whose cash was remitted to assessee`s bank accounts and also list of the beneficiaries. The ld CIT(A) failed to do so. Had the assessee furnished the list of the persons, whose cash was remitted to assessee`s bank accounts, the revenue authorities, would have reopened the assessment of those persons whose cash was deposited in the assessee`s bank account. The ld. CIT( A) also failed to ascertain the source of the cash deposits, therefore, in the absence of any explanation as to the source of cash deposits, we do not wish to comment on the merits of the grounds raised

by the revenue and assessee. Besides, as noted above, assessee did not appear before us and did not explain about the essential facts, such as maintenance of books of accounts by the assessee, cash book, purchase book, sales book, Bank book, Journal book, stock register etc, to understand and to ascertain about the ownership of the transactions of the assessee, whether assessee is Angadia or a businessman.

20. We also note that during the assessment proceedings, there was a Non-Co-operation, on the part of the assessee, and this non-co-operative attitude of the assessee, is proved from the facts narrated by the assessing officer, in para number one of the assessment order, which reads as follows: “A search action u/s 132 of the Act, was carried out at the premises of the assessee on 17.01.2013. Consequent to search u/s 132 of the Act, proceedings u/s 153A of the Act was initiated by issuing notice, dated 30.07.2014, which was duly served upon the assessee. The assessee was required to file return of income within 30 days of the receipt of the notice. In response to notice, the assessee had not filed his return of income. Therefore, a notice u/s 142(1) was issued on 16.01.2014, requesting the assessee to file his return of income. Since no return was coming forth, a show cause notice for initiation of prosecution proceedings was issued on 23.07.2014. Again no return was coming forth, therefore, the assessee was issued one final show -cause notice for initiation of prosecution proceedings, vide notice dated 24.04.2014. However, despite these notices and reminders, no return has been filed. Therefore a final notice along with show- cause notice was issued on 02.03.2015, asking the assessee to show -cause as to why his assessment should not be completed ex-parte, on the basis of material available on record.”

& 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) 21. Therefore, we note that the assessing officer issued several notices to the assessee, however, at the end, the assessee submitted, return of income on 16.03.2015, and assessment order was framed only after six days on 23.03.2015, therefore, we find that assessment order was framed in haste, which is against the principle of natural justice, and this way, the assessing officer, could not get proper opportunity to examine the assessee`s facts, by issuing notices to various beneficiaries involved with the assessee. Therefore, we are of the view that entire matter should be remitted back to the file of the lower authorities for fresh adjudication on facts and merit.

22. In these circumstances, we set aside the order of the learned CIT(A) and remit the issue back to the file of the ld. CIT(A) to ascertain the above facts by appointing Departmental Inspector on the business premises of the assessee/ by issuing notices to various beneficiaries, or by calling a remand report from the assessing officer in respect of the above facts, and then, adjudicate the issue in accordance with law. Therefore, we deem it fit and proper to set aside the order of the ld. CIT(A) and remit the matter back to the file of the ld. CIT(A) to adjudicate the issue afresh on merits. For statistical purposes, all appeals of the assessee and all appeals of Revenue, are treated as allowed.

23. For the sake of convenience, the grounds as well as the facts narrated in Revenue`s appeal in IT(SS)A No.103/RJT/2017, for assessment year 2007-08, have been taken into consideration, for deciding the appeals of Assessee and Revenue. Since, we have adjudicated the issue by taking the “lead” case in IT(SS)A No.103/SRT/2017 in the case of Karim K. Makhani, for A.Y 2007-08 and the same identical and similar facts are involved in other remaining appeals of assessee and revenue, therefore, our instant adjudication shall apply mutatis mutandis to other appeals of assessee and revenue, also.

24. In the combined result, all appeals filed by the Revenue, and all appeals filed by the Assessee, are allowed for statistical purposes, in above terms.”

The facts of the case of the assessee are exactly identical to the facts of the case of Shri Karimbhai K. Makhani for A.Y. 2007-08 to 2013-14 and being (being CIT(A)-4, Ahmedabad) decided appeals of all those assessment years in the case of Shri Karimbhai K. Makhani vide order dated 27 September, 2017. In the assessee's case, facts are exactly identical, submissions of the assessee are also Identical and the AR of the assessee in both these cases are the same person. The AR of the assessee himself filed a copy of the appeal decided by myself in the case of Shri Karimbhai K. Makhani, as mentioned above in support of his contentions. Looking to these facts, it is worthwhile to reproduce the decision taken by me in the case of Shri Karikbhai K. Makhani for A.Y. 2007-08 to 2013-14.

ITA No. 59/18 (Assessee) (AY 2006-07) 147 15.3.13 142(1) 14.12.13 142(1) 1.10.13 SCN 3.1.14 Reply 12.3.14 143(2) 12.3.14 Reply 20.3.14 Assessment order 24.3.17 , U/s. 143(3) and 147 Because of the notice remain uncomplied with notice and the assessment order passed in this short period. In the absence of explanation of Source of cash deposit (Department) (AY 2006-07) 147 15.3.13 142(1) 14.12.13 142(1) 1.10.13 SCN 3.1.14 Reply 12.3.14 143(2) 12.3.14 Reply 20.3.14 Assessment order 24.3.17 , U/s. 143(3) and 147 Because of the notice remain uncomplied with notice and the assessment order passed in this short period. In the absence of explanation of Source of cash deposit (Assessee) (AY 2008-09) 153A 30.7.14 142(1) 16.1.14 & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) SCN 23.7.14 Reply 24.11.14 143(2) 21.11.14 Letter 2.3.15 Assessment order 12.3.15 u/s. 153A, 144 Because of the notice remain uncomplied with notice and the assessment order passed in this short period. In the absence of explanation of Source of cash deposit (Assessee) (AY 2010-11) 153A 30.7.14 142(1) 16.1.14 SCN 23.7.14 Reply 24.11.14 143(2) 21.11.14 Letter 2.3.15 Assessment order 12.3.15 u/s. 153A, 144 Because of the notice remain uncomplied with notice and the assessment order passed in this short period. In the absence of explanation of Source of cash deposit (Department) (AY 2011-12) 153A 30.7.14 142(1) 16.1.14 SCN 23.7.14 Reply 21.11.14 143(2) 21.11.14 Letter 2.3.15 Assessment order 12.3.15 u/s. 153A, 144 Because of the notice remain uncomplied with notice and the assessment order passed in this short period. In the absence of explanation of Source of cash deposit (Department)(AY 2008-09) 153A 30.7.14 142(1) 16.1.14 SCN 23.7.14 Reply 24.11.14 143(2) 21.11.14 Letter 2.3.15 & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) Assessment order 12.3.15 u/s. 153A, 144 Because of the notice remain uncomplied with notice and the assessment order passed in this short period. In the absence of explanation of Source of cash deposit (Department)(AY 2010-11) 153A 30.7.14 142(1) 16.1.14 SCN 23.7.14 Reply 24.11.14 143(2) 21.11.14 Letter 2.3.15 Assessment order 12.3.15 u/s. 153A, 144 Because of the notice remain uncomplied with notice and the assessment order passed in this short period. In the absence of explanation of Source of cash deposit (Department)(AY 2011-12) 153A 30.7.14 142(1) 16.1.14 SCN 23.7.14 Reply 21.11.14 143(2) 21.11.14 Letter 2.3.15 Assessment order 12.3.15 u/s. 153A, 144 Because of the notice remain uncomplied with notice and the assessment order passed in this short period. In the absence of explanation of Source of cash deposit

“17. On the other hand, ld. DR for the Revenue submitted that during the assessment proceedings, the assessee has not co-operated and did not submit the details of the beneficiaries. Had the assessee filed the details of the beneficiaries, the department would have initiated re-opening proceedings under section 147 of the Act, on these beneficiaries, hence there is a loss to the revenue because of the non-cooperative & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) attitude of the assessee. Therefore, matter may be remitted back to the file of the assessing officer, with the direction to the assessee to file the name and address of the beneficiaries and produce the beneficiaries before the assessing officer. Besides the reasons recorded under section 147 of the Act, are in accordance with law and assessee has not demanded the copy of the reasons recorded, during the assessment proceedings.

We find that during the course of assessment proceedings, the assessee has not raised this issue and did not object the reopening of assessment. Thus, the reopening and jurisdiction of the AO to proceed with the re-assessment u/s. 147 of the Act is fully in compliance with the decision of Hon'ble Supreme Court as held in GKN Drivsshafts. In view of these facts, the ground of appeal challenging the reopening is not entertainable. The objection raised by the assessee regarding the assumption of jurisdiction by assessing officer by issuance of notice u/s 148 of the Act, is devoid of merits and facts. The assessee never objected to the issuance of the notice u/s 148 of the Act during the assessment proceedings. Besides, the Hon`ble Gujarat High Court in some of the recent judgments has held reopening on the basis of the information of the Investigation Wing is valid. In the case of Peass Industrial Engineers Pvt. Ltd 73 taxmannn.com 185(2016) (Gujarat) it was held whether at the instance of same material of another wing, whether reopening is permissible or not. While dealing with said issue this Court has examined the said aspect and has come to the conclusion that reopening is permissible. In the said group of appeals, the substantial question of law posed before the Court, whether the ITAT was justified in setting aside the reassessment orders on the ground that reopening of assessment under Section 147 of the Act was bad in law. In that particular group of matters, the reopening was initiated by the authority based upon the show cause notice along with accompanied, material forwarded by the Excise Department to the Income-Tax Department and on the basis of said material provided by the Excise Department, the Assessing Officer has reopened the assessment of the assessee by issuing notice under Section 148 of the & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) Act. The assessee of that case in the similar manner in this case has contended that the information provided by a different Investigating Team may not be ipso facto utilized to reopen the assessment which has become final by the Income-tax authority. It was also contended by the assessee of that case that there was no independent application of mind on the part of Assessing Officer and just based upon said information provided by the Excise Department, the authority resorted to Section 148 of the Act to reopen the assessment. This issue in extenso dealt with by the Division Bench and by a detailed judgment, came to conclusion that the Assessing Officer has merely relied upon the show cause notice issued by the Excise Department and has not concluded finally and therefore, there is no illegality or irregularity in arriving at a belief that assessment deserves to be reopened. Relying upon the decision delivered by the Apex Court in the case of Purushottam Das Bangur & Another, 224 ITR 362 (SC), it was held that action of reopening of assessment was found to be justified. Therefore, ground nos.1 and 5 raised by the assessee are dismissed.

& 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani)

143(2) 142(1) 142(1) Letter 12.07.2013 19.09.2013 NO NO Reply Reply Reply Reply 01.08.2013 14.02.2014 NO NO Because of the notice remain uncomplied with on 14.12.2014 and the assessment order passed on 20.02.2014 in this short period. The Ld. AO was having not sufficient time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted. 143(2) 142(1) 142(1) 142(1) Summon 30.07.2015 29.07.2015 15.08.2015 29.01.2016 02.02.206 Reply Reply Reply Reply Reply No NO 09.09.2015 NO 15.02.2016 Because of the notice remain uncomplied with on 15.02.2016 and the assessment order passed on 22.03.2016 in this short period. The Ld. AO was having not sufficient time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted. ITA No. 19/Rjt/2023 143(2) 142(1) 142(1) Letter 29.07.2016 24.08.2016 15.11.2016 05.12.2016 Reply Reply Reply Reply No 23.11.2016 22.11.2016 12.12.2016 23.11.2016 Because of the notice remain uncomplied with on 12.12.2016 and the assessment order passed on 27.12.2016 in this short period. The Ld. AO was having not sufficient ITA Nos. 59 & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted.

143(2) 142(1) 142(1) Letter 29.07.2016 24.08.2016 15.11.2016 05.12.2016 Reply Reply Reply Reply No 23.11.2016 22.11.2016 12.12.2016 23.11.2016 Because of the notice remain uncomplied with on 12.12.2016 and the assessment order passed on 27.12.2016 in this short period. The Ld. AO was having not sufficient time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted. 143(2) 142(1) 142(1) Letter 29.07.2016 24.08.2016 15.11.2016 05.12.2016 Reply Reply Reply Reply No 23.11.2016 22.11.2016 12.12.2016 23.11.2016 Because of the notice remain uncomplied with on 12.12.2016 and the assessment order passed on 27.12.2016 in this short period. The Ld. AO was having not sufficient time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted. ITA No. 22/Rjt/2023 143(2) 142(1) 142(1) Letter 29.07.2016 24.08.2016 15.11.2016 Reply Reply Reply Reply No 23.11.2016 22.11.2016 12.12.2016 23.11.2016 Because of the notice remain uncomplied with on 12.12.2016 and the assessment order passed on 27.12.2016 in this short period. The Ld. AO was having not sufficient time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted. ITA No. 23/Rjt/2023 143(2) 142(1) 142(1) Letter 29.07.2016 24.08.2016 15.11.2016 05.12.2016 Reply Reply Reply Reply No 23.11.2016 22.11.2016 12.12.2016 23.11.2016 Because of the notice remain uncomplied with on 12.12.2016 and the assessment order passed on 27.12.2016 in this short period. The Ld. AO was having not sufficient ITA Nos. 59 & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted.

143(2) 142(1) 142(1) Letter 29.07.2016 24.08.2016 15.11.2016 05.12.2016 Reply Reply Reply Reply No 23.11.2016 22.11.2016 12.12.2016 23.11.2016 Because of the notice remain uncomplied with on 12.12.2016 and the assessment order passed on 27.12.2016 in this short period. The Ld. AO was having not sufficient time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted. 143(2) 142(1) 142(1) Letter 23.08.2016 24.08.2016 15.11.2016 05.12.2016 Reply Reply Reply Reply No 23.11.2016 22.11.2016 12.12.2016 23.11.2016 Because of the notice remain uncomplied with on 12.12.2016 and the assessment order passed on 27.12.2016 in this short period. The Ld. AO was having not sufficient time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted. ITA No. 429/Rjt/2017 143(2) 142(1) 142(1) SCN NO 23.09.2016 20.10.2016 21.11.2016 Reply Reply Reply Reply No NO NO 20.12.2016 Because of the notice remain uncomplied with on 20.12.2016 and the assessment order passed on 26.12.2016 in this short period. The Ld. AO was having not sufficient time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted. ITA No. 430/Rjt/2017 143(2) 142(1) 142(1) SCN NO 23.09.2016 20.10.2016 21.11.2016 20.12.2016 Reply Reply Reply Reply NO NO NO 22.12.2016 Because of the notice remain uncomplied with on 22.12.2016 and the assessment order passed on 26.12.2016 in this short period. The Ld. AO was having not sufficient time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted.

& 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani)

143(2) & 142(1) 142(1) SCN 02.06.2017 02.11.2017 NO Reply Reply Reply 13.11.2017 29.11.2017 NO Because of the notice remain uncomplied with on 29.11.2017 and the assessment order passed on 19.12.2017 in this short period. The Ld. AO was having not sufficient time to issue notice u/s. 133/136(6) of the act and investigate the matter by the Ld. AO. No person beneficial detail submitted.”

raised by the assessee as per lead case in are as under: “1. The Ld. CIT(A) erred on facts as also in law in confirming the additions made vide order under section 144 r.w.s. 263 of Act without affording constructive and real opportunity of hearing.

2. The Ld. CIT(A) grievously erred on facts as also in law in not considering the fact that such high pitched addition made was without giving prior and specific show cause notice. Therefore, only on this ground alone assessment order may kindly be quashed.

3. The Ld. CIT(A) grievously erred on facts as also in law in taking on record the additional evidences submitted under section 46A during the appellate proceedings only for the limited period where in fact such evidences submitted pertained to all the assessment years under appeal. Therefore, only on this ground alone assessment order may kindly be quashed.

4. The Ld. CIT(A) grievously erred on facts as also in law in (i) rejecting various factual aspects and contentions of the assessee which were supported by the seized/impounded materials and additional submissions made during the course of assessment as also appellate proceedings (ii) confirming the addition Rs. 16,21,71,996/- treating it & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) as unexplained cash deposits in bank account, which may kindly be deleted.

5. The Ld. CIT(A) grievously erred on facts as also in law in holding that assessee is not angadia / shroff and has earned profit / income on commission basis. Such addition made is arbitrary and without any base therefore the same may kindly be deleted.

6. Without prejudice to the above your assessee craves leave to add, alter, vary, or withdraw all or any of the grounds on or before the hearing of the appeal.

14. This Bench has also remitted the issue back relating to all Angadias cases and their beneficiaries to the file of the AO vide IT(SS)A No.118 to 125/Rjt/2018 & others in the case of National Shroff & Co. and for AY 2017-18 in the case of Pareshkumar Narsibhai Siroy(to order u/s.263 of the Act confirmed by the Bench) and in the case of Shri Saurabh M. Kathwadia and IT(SS)A No.103-108/Rjt/2017 & others in the case of Karim K. Makhani, & ITA No.376 & 377/Rjt/2024 in the case of Leader Electric Company (to order u/s.263 of the Act confirmed by the Bench). In these cases the Bench has observed that during the assessment proceedings there was a non- compliance on part of the assessee and in case of order pertaining to u/s.263, the AO has not taken the plausible view which can be sustainable in the eye of Law. Most of the Angadia and their beneficiaries, maintain their books of accounts, such as cash book, ledger, bank pass book, stock & 76/RJT/2018 (Jayesh Harakhji Patel & IT(SS)A Nos. 86 to 89 & 97 to 99/Rjt/2018 (Ravi V. Hirani) statements about movement of goods, therefore, they have ownership on the transactions. In addition to this it has not been decided by any lower authorities whether these Anghadias and their beneficiaries are dealing with “contents” or “container”. If these Angadias and their beneficiaries deal with contents then in that circumstances entire addition should be made in their hands. However, if these Angadias and their beneficiaries deal with container then only commission income is to be added in their hands. Therefore, in order to decide these basic facts with documentary evidences the all cases are remitted back to the file of the AO. These assessee’s are directed to file the relevant documents and evidences before the AO to prove their stand whether they deals with “contents” or “container”.

Order is pronounced in the open court on 28/03/2025