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Facts
The assessee, an individual, did not file an Income Tax Return for AY 2018-19 but made substantial cash deposits of Rs. 5.73 crores and withdrawals of Rs. 82.58 lakhs in a bank account. The Assessing Officer added Rs. 4.78 crores as unexplained money under Section 69A, rejecting the assessee's claim of Shroff business income. The CIT(A) restricted the addition to 1% of the total credit (Rs. 4.70 lakhs), treating it as commission income chargeable under normal provisions.
Held
The ITAT set aside the CIT(A)'s order, noting that the CIT(A) restricted the addition without verifying the genuineness of the assessee's Shroff business, especially given the non-filing of ITR and lack of a statutory license. The tribunal directed the Assessing Officer to provide another opportunity to the assessee to establish the genuineness of the Shroff business for the relevant assessment year and pass orders in accordance with the provisions of law.
Key Issues
Whether the CIT(A) was justified in restricting the addition of unexplained cash deposits under Section 69A to 1% as commission income, particularly when the assessee had not filed ITR and the genuineness of the Shroff business was not adequately verified.
Sections Cited
143(3), 144B, 148A(b), 148A(d), 148, 69A, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH
Before: DR. BRR Kumar & Shri T. R. Senthil Kumar
ITA No: 178/Ahd/2025 Assessment Year: 2018-19 The ITO Dharmesh Rajnikant Trivedi Ward-3(3)(1), 12, Panchvati Society, Ahmedabad Vs Panchvati Second Lane, Ahmedabad-380015 (Appellant) Gujarat PAN: ADQPT4177J (Respondent) Revenue Represented:Shri Rajenkumar M Vasavda, Sr. D.R. Assessee Represented: None Date of hearing : 06-01-2026 Date of pronouncement : 08-01-2026 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Revenue as against the appellate order dated 28-11-2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2018-19.
Brief facts of the case is that the assessee is an individual has not filed the Return of Income for the Asst. Year 2018-19, however the assessee has made substantial cash deposit of Rs.5,73,86,000/- in his bank account maintained with Central Bank of India and also made cash withdrawal of Rs. 82,58,000/-. Hence a show cause notice u/s. 148A(b) was issued to the assessee on 20-03-2022 to make reply within seven days. Since the assessee has not complied to the show cause notice, order u/s. 148A(d) was passed on 31-03-2022 and notice u/s. 148 was issued on 04-04-2022 and duly served on the assessee. The assessee filed a belated return on 09-02-2023. The assessee explained that it has been engaged in the Shroff business and earning commission income by issuing cheques to various parties, wherein the parties returned the money within short period along with his commission. The explanation offered by the assessee was not accepted by the assessing officer, therefore the credit entries in the bank accounts aggregating to Rs. 4,78,08,900/- is added as the unexplained money u/s. 69A and also taxed u/s. 115BBE of the Act.
Aggrieved against the assessment order, the assessee filed an appeal before Ld. CIT(A) who restricted the addition at 1% of the total credit namely at Rs. 4,70,084/- and also chargeable at normal provisions of the Act being the commission income earned by the assessee by observing as follows: “With regards to the second ingredient, the appellant has duly explained before the AO and during the appeal proceedings as well about the source of the said sum and its utilization in the 'Shroff business. The Appellant has also submitted various explanations and evidences in response to the notices issued by the AO and the list of documents are mentioned in para 5.4 above. Now coming to the third ingredient which is alternate to the second, the AO has not brought on record about his dissatisfaction of the A.Y. 2018-19 Page No 3 ITO Vs. Dharmesh Rajnikant Trivedi
explanations presented by the appellant before him nor did he contradict the claims. Thus, it is seen that the mandated ingredients in invoking section 69A of the Act are misplaced in the instant case of the appellant. 5.9 It is further evident that the appellant has claimed in his submissions that the commission income in the 'Shroff business varies from 0.10% to 0.50% and as such he has earned commission income of Rs. 75,550/- and the same has been declared in the return of income. However, I opine that the percentage of commission income declared by the appellant appears to be very low in compare to the decisions cited supra, wherein, various courts have charged the said percentage @ 0.15% to 0.50% of the total credits. In regards to the chargeable percentage for commission income, Hon'ble Jurisdictional Tribunal in the case of Chintan Niketan Bhandari Vs DCIT in IT(SS)A Nos. 495 to 500 & 1604/Ahd/2019 dated 29/11/2022 has considered 0.25% of the total deposits in the bank accounts to be reasonable. Hon'ble Mumbai High Court in the case Gold Star Finvest (P) Ltd (supra) and Alag Securities Pvt Ltd (supra) reasoned the same @0.15%, whereas, Hon'ble ITAT Delhi held the same @ 0.5%. The appellant further makes an alternate plea to restrict the addition to 0.75% of the total actual credit amounts of Rs. 4,70,08,359/- (ΑΟ computed the total credits of Rs. 4,78,08,900/-) under the normal provisions of the Act. Considering the plea of the appellant and the decisions of various courts, I find it justified to restrict the addition @ 1% of the total credits of Rs. 4,70,08,359/- i.e. at Rs. 4,70,084/- chargeable at the normal provision of the Act considering the net commission income earned during the normal course of business. Thus, ground nos. 2 and its sub grounds are allowed partly.”
Aggrieved against the appellate order, Revenue is in appeal before us raising the following Grounds of Appeal: (a) The Ld.CIT(A) has erred in law and on facts in restricting the addition @ 1% of total credits of Rs4,70,08,359/- i.e. 4,70,084/- chargeable at the normal provision of the Act considering the net commission income earned out during the normal course of business, out of total addition of Rs.4,70,08,359/made by AO on account of unexplained money u/s. 69A r.w.s. 115BBE of the Act ignoring that: (i) The assessee has failed to furnish any satisfactory reply or supporting documents to establish the source of cash deposit and credit entries found in the bank account. (ii) The assessee has failed to establish the identity, genuineness and creditworthiness of the persons/entities from which cash or cheque were received. Hence, it is not established that cash or cheques received by the assessee on account of commission basis. (b) The appellant craves leave to add, alter and/or to amend all or any the ground before the final hearing of the appeal.
None appeared on behalf of the assessee in spite of service of notice through Department. Today is the 12th time of hearing of this appeal. Even earlier occasions notices were served through Department and Acknowledgements are available on record. This clearly shows that the assessee is not interested in pursuing this appeal.
Ld. Sr. D.R. Shri Rajenkumar M. Vasavda appearing for the Revenue submitted that the assessee neither filed the Return of Income nor discharged his initial onus cast upon him, whereas the Ld. CIT(A) restricted the addition to 1% considering the assessee’s transaction as Shroff business without proper verification. Therefore the same is liable to be modified. In support of the arguments, Ld. Sr. D.R. relied upon the grounds of appeal.
7. We have perused the materials available on record including the Paper Book filed by the Revenue. Ld. CIT(A) restricted the addition to 1% of the total credit and also treated as commission income of the assessee being the course of Shroff business. Ld. CIT(A) relied upon the Co-ordinate Bench of this Tribunal decision in ITA No. 454/RJT/2018. However the Ld. CIT(A) failed to verify whether the assessee obtained statutory license to run the Shroff business?; Why the assessee not filed the regular Return of Income? and what is the Return of Income for the previous year or subsequent year, whether that includes this Shroff business income. Thus without making any such verification Ld. CIT(A) considered the transaction as Shroff business of the assessee and restricted the addition to 1% of the total credits in the bank account, which in our considered A.Y. 2018-19 Page No 5 ITO Vs. Dharmesh Rajnikant Trivedi view is not correct proposition of law more particularly assessee has never filed the Return of Income. Thus the conclusion arrived by the Ld. CIT(A) is against the provisions of law. Therefore we hereby set-aside the order passed by Ld. CIT(A) with a direction to the Jurisdictional Assessing Officer to give one more opportunity of hearing to the assessee to establish its case whether genuine Shroff business was conducted by the assessee for the present assessment year and pass orders in accordance with the provisions of law.
In the result, the appeal filed by the Revenue is treated as allowed for statistical purpose.
Order pronounced in the open court on 08-01-2026