Loading judgment…
Facts
The assessee, Nilesh Bhai Utavadiya, was found with a large sum of cash along with Jaydeep Thakarshibhai Badrakia. The cash was seized, and during statements, Badrakia admitted to running a 'shroff business' (hawala) through M/s Sakshi Trading, where unaccounted cash from ceramic units was deposited and withdrawn, with a commission charged. The Assessing Officer made a substantive addition of Rs. 1,86,15,73,783/- as cash credit under Section 68 in the hands of Nilesh Bhai Utavadiya, treating him as the proprietor of M/s Sakshi Trading, while making a protective addition in Badrakia's hands.
Held
The tribunal noted that the CIT(A) had already confirmed the addition of Rs. 1,86,15,73,783/- on a substantive basis in the hands of Jaydeep T. Badrakia. Therefore, the tribunal upheld the CIT(A)'s decision to delete the substantive addition made in the hands of Nilesh Bhai S. Utavadia to avoid double taxation on the same income.
Key Issues
The key legal issues were the validity of the addition of cash credit under Section 68, the proper person in whose hands the addition should be made (substantive vs. protective), and the consideration of additional evidence during appellate proceedings.
Sections Cited
Section 68, Section 115BBE, Section 139, Section 132A(1), Section 131, Section 144, Section 250, Section 271AAB, Section 153A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & Dr. DINESH MOHAN SINHA
Captioned the four-appeal filed by the Revenue/assessee, pertaining to Assessment Year 2020-21 & 2021-22, is directed against the order passed under section 250 of the Income Tax Act, 1961 Commissioner of Income-tax (Appeal), dated 23.10.2023, which in turn arises out of an order passed by the Assessing Officer, u/s. 144 of the Act, on 23.03.2022.
Grounds of appeal raised by the Revenue are as follows, (A.Y. 2021-22): 1) On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in condoning the delay in filing of appeal by the assessee. 2) On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in considering the additional evidence produced by the assessee during the appellate proceedings and in allowing the assessee's appeal on the basis of the same, without recording proper reasons for the same and without allowing reasonable opportunity to the Assessing Officer examine the evidence, ignoring the provisions of Rule 46A(3) of the IT Rules, particularly when adequate opportunity had been given to the assessee by the Assessing Officer during the assessment proceeding. 3) On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs.1,86,15,73,783/- made by the Assessing Officer substantive basis, on account of cash credit u/s 68 of the IT Act, 1961. on 4) The Revenue craves leave to add/alter/amend and/or substitute any or all of the grounds of appeal.
Grounds of appeal raised by the Revenue are as follows, (A.Y. 2021-22):
DCIT vs. Nileshbhai , DCIT vs. Jaydipbhai Jaydeepbhai vs. ACIT 1. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in condoning the delay in filing of appeal by the assessee. 2) On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in considering the additional evidence produced by the assessee during the appellate proceedings and in deciding the assessee's appeal on the basis of the same, without recording proper reasons and without providing reasonable opportunity to the Assessing Officer to examine the evidence, ignoring the provisions of Rule 46A(3) of the IT Rules, particularly when the assessee had been given adequate opportunity by the Assessing Officer during the assessment proceeding. 3) On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in holding the addition on substantive basis in the hands of the assessee, as against protective addition made by AO and directing to delete the substantive addition of Rs.1,86,15,73,783/- on account of cash credit u/s 68 of the IT Act, 1961 in the case of Shri Nilesh S Utavadiya. 4) On the facts and in the circumstances of the case and in law the Ld.CIT(A) has erred in directing the Assessing Officer to verify the contention of the assessee and thereafter to delete duplicate additions and make further addition on the basis of details produced by the assessee during the course of appeal, particularly as these details were not available with the Assessing Officer and the appeal could not have been set aside by the first appellate authority as per law. 5) The Revenue craves leave to add/alter/amend and/or substitute any or all of the grounds of appeal.
Grounds of appeal
raised by the assessee are as follows, (A.Y. 2021-22):
1. The grounds of appeal mentioned hereunder are without prejudice to one another.
2. The learned Commissioner of Income Tax (Appeals)-11, Ahmedabad [hereinafter referred to as the "CIT(A)" erred on facts as also in law in confirming addition of credit entries in bank account without considering the submission of the appellant to tax the real commission income or at the most peak credit. The addition confirmed is unjustified and uncalled for, which deserves to be deleted, may kindly be deleted.
DCIT vs. Nileshbhai , DCIT vs. Jaydipbhai Jaydeepbhai vs. ACIT 3. The learned Commissioner of Income Tax (Appeals)-11, Ahmedabad [hereinafter referred to as the "CIT(A)" erred on facts as also in law in enhancing addition of Rs.6,26,79,958/- made on the alleged ground that the appellant failed to explain sources of cash deposit in the bank accounts no.919010080855651 held with Axis Bank Ltd. The addition confirmed is unjustified and uncalled for, which deserves to be deleted, may kindly be deleted.
Your Honour's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.
Grounds of appeal
raised by the assessee are as follows, (A.Y. 2020-21):
1. The grounds of appeal mentioned hereunder are without prejudice to one another.
2. The learned Commissioner of Income Tax (Appeals)-11, Ahmedabad [hereinafter referred to as the "CIT(A)" erred on facts as also in law in rejecting the ground of appeal related to validity of notice issued u/s 153A of the Income tax Act, 1961. That on facts as also in law, initiation of action u/s. 153A of the Act is invalid and assessment made on such invalid initiation deserves to be quashed and may kindly be quashed.
3. The Id. CIT(A)erred on facts as also in law in confirming addition of Rs.1,02,00,000/-made on the alleged ground that the appellant failed to explain sources of cash deposit in the bank accounts held with various banks. The addition confirmed is unjustified and uncalled for, which deserves to be deleted, may kindly be deleted.
4. Your Honour's appellant craves leave to add, to amend, alter, or withdraw any or more grounds of appeal on or before the hearing of appeal.
ITA No. 453/Rjt/2023, & Since, the issue involved in these cases are common and identical. Therefore, four appeal are disposed by common order.
DCIT vs. Nileshbhai , DCIT vs. Jaydipbhai Jaydeepbhai vs. ACIT 7. Facts of the Case in (Revenue appeal) (as per lead case) The assessee has not filed his return of income u/s 139 of the Act for the year under consideration. The assessee is proprietor of M/s Sakshi Trading. In this case, an information was received by the office of ADIT (inv.)-2, Rajkot from the P.I, Kuvadava Road Police Station, Rajkot that one ford endeavor car (GJ01 KX 2808) was intercepted wherein cash amounting to Rs. 1,73,60,000/- was found from the possession of Shri Jaydeep Thakarshibhai Badrakiya and the assessee Shri Nilesh Suresh Bhai Utavadia of Morbi, Gujarat. Thereafter the ADIT (inv.)-2 along with two inspectors went to Kuvadava Road Police Station, Rajkot on 02.11.2020. Necessary verifications were made regarding accountability of cash found from the possession of Shri Jaydeepbhai Thakarshibhai Badrakiya and Shri Nileshbhai Suresh Bhai Utavadia. Accordingly, the warrant of authorization under section 132A (1) of the Income-Tax Act 1961 was executed on 06.11.2020 upon P.I. Kuvadava Road police station Rajkot and the entire amount of rupees 1,73,60,000/- was seized as they were unable to give satisfactory explanation and no documentary evidences in support of the impugned cash of Rs. 1,73,60,000/-. During the course of search proceedings, two persons and statement on oath u/s 131 were recorded. On being asked about the cash of Rs. 1,73,50,000/- found from their possession, Shri Nileshbhai Suresh Bhai Utavadia has stated that he is working with Shri Jaydeepbhai T Badrakiya on salary at Rs. 15,000/- per month and the cash of Rs. 1,73,60,000/- belonged to Shri Jaydeepbhai T Badrakiya. He has stated that Shri Jaydeep Badrakiya has started Business in the hance of ‘M/s Sakshi Trading' as proprietor and having no knowledge of business activity and financial transactions of the firm. Shri Nilesh S Utavadia has further stated that Shri Jaydeepbhai Badrakiya sometimes called him and took signatures on different documents, cheque books etc. In continuation, he ITA No. 21/Rjt/2 DCIT vs. Nileshbhai , DCIT vs. Jaydipbhai Jaydeepbhai vs. ACIT stated that on 02.11.2020, Shri Jaydeepbhai has called him and took signatures on three different cheques i.e. SBI (Rs. 58 lakh), Bank of India (Rs. 42 Lakh) and Axis Bank (Rs. 73.60 lakh) and the cash was withdrawn from these banks and they were going to office of Jaydeep Badrakiya situated at Morbi. Accordingly, statement of Shri Jaydeep Badrakiya was also recorded on oath dated 03.11.2020 wherein he has stated that he is doing shroff business in the name of M/s Sakshi Trading. On being asked about the source of cash of Rs. 1,73,00,000/- found from his possession, he stated that the amount was withdrawn from the bank accounts of M/s Sakshi Trading. Further he has stated that the said cash belonged to the unaccounted income of ceramic units of Morbi which was deposited in the account of M/s Sakshi Trading from different locations throughout India and charges are Rs. 100/- as commission per one lakh for said transactions. He was asked to furnish the name of ceramic units of Morbi to whom he is rendering shroff services. Shri Jaydeep Badrakiya was unable to give the names of ceramics units as he was not maintaining the record of said ceramic parties to whom the cash belongs and shown his inability to furnish any supporting documents to substantiate the claim. Shri Jaydeep Badrakiya had confirmed that the cash of Rs. 1,73,60,000/- is his unaccounted income and he had no objection on the said addition of Rs. 1,73,60,000/- for the AY 2021-22. Shri Jaydeep Badrakia was agreed with the statement dated 03.11.2020 given by Shri Nilesh Utavadia. During the course of post search proceedings, on perusal of bank statements of the firm Sakshi Trading, it was noticed that there were huge amount of credit/debits took place within a short span of time. With respect to source of cash deposits in the bank account of M/s Sakshi trading, the assessee stated that he was doing business of shroff in which cash of Morbi based ceramic units have been deposited in the bank accounts of the firm. He usually withdrew the cash and hand over to the persons showing deposit details after deducting his commission. He has also admitted that such cash is unaccounted Page | DCIT vs. Nileshbhai , DCIT vs. Jaydipbhai Jaydeepbhai vs. ACIT income of the ceramic tiles manufacturing entities bases in Morbi. When specifically asked regarding the identity of depositors/beneficiaries, he stated that he doesn't know any of the depositors/beneficiaries and in not in position to give any details. On further verification of bank accounts, it was seen that there are large number of transactions made within short span of six months and majority transactions were made in cash. The cash was credited outside Gujarat and was then withdrawn from home branches. In the light of the facts discussed above the total income of the assessee is computed as under-
That the assessee filed an appeal before Ld. CIT(A) which was allowed with by Ld. CIT(A).
That the Revenue filed an appeal against the impugned order dated: 23.03.2022 before us. (i) During the course of argument Ld. DR. submitted that the addition deleted by Ld. CIT(A) is without any basis relied on the order of AO. (ii) On the contrary the Ld. AR has relied on the order of Ld. CIT(A).
We have heard rival contention of both the parties and perused material available on records. We note that the AO made an addition in income of Rs. 1,86,15,73,783/- u/s. 68 r.w.s. 115BBE of the I.T.Act. on the basis of following observation:
DCIT vs. Nileshbhai , DCIT vs. Jaydipbhai Jaydeepbhai vs. ACIT Therefore, it is correctly presumed that assessee has no explanation to offer. Hence, to protect the interest of revenue, the entire credits of Rs. 186,15,73,783/- in the bank account of M/s Sakshi Trading during the year should be added protectively to the total income of Shri Jaydeep Badrakia for the year under consideration. The same is being added to the total income of assessee Shri Nilesh S. Utavadiya on substantive basis as he is the proprietor of M/s Sakshi Trading. Penalty proceedings as per the provisions of sec. 271AAB of the Act are also initiated in this case for concerned year.
We further note that the Ld. CIT(A) during the appellate proceedings decided the appeal with an opinion: In this regard, it is stated that while adjudicating the similar ground of appeal
no. 3 in the case of Shri Jaydeep T. Badrakia at para no, 7(including para 7.3 regarding protective/substantive addition), addition of Rs.186,15,73,783/-u/s.68 is confirmed by the undersigned on substantive basis in the hands of Shri Jaydeep T. Badrakia. Therefore, in view of the detailed finding/discussions given in para 7, the addition made in the hand of Shri Nileshbhai S. Utavadia is deleted. Thus, the ground of appeal no. 3 is allowed.
(2021-22) (assessee appeal) ITA No. 21/Rjt/2024 (2021-22) (Revenue appeal) Appeal filed by the assessee. Facts are similar for A.Y. 2021-22 as state above and equally applicable to these cases. We have heard rival contention of both the parties and perused the material available on record. We Further not during the course of appellate proceedings, the appellant has find submission in support of his claim The appellant has admitted doing "Shroff Business in the name of M/s. Sakshi DCIT vs. Nileshbhai , DCIT vs. Jaydipbhai Jaydeepbhai vs. ACIT Trading for that assessee opened Bank account. The appellant has also stated that in this Shroff business. The money stand deposited out side Gujrat State and assessee withdraw the money and had deliver to those who show the evidence of deposit in the Bank of the assessee. The peritoneal gets commission of Rs. 100 per lakh from the transaction. It is further submitted by the appellant that the said cash belonged to the unaccounted income of ceramic units of Morbi which was deposited in the account of M/s. Sakshi Trading from different locations throughout India. The appellant has further contended that assessee should be considered as money transfer agent and only commission part should be taxed and not the entire deposit as it was evident from the Bank statement that the cash deposited was withdrawal and distributed to the customer. The appellant has alternatively stated that if commission income is not accepted then the addition should be based on the peak credit theory. The appellant has relied on the decisions of the Hon'ble ITAT, Rajkot and Ahmedabad in support of his contentions.
(2020-21) assessee appeal (facts) Brief facts are that no return filled by the assessee the assessment was completed u/s. 153A of the Act ex-parte u/s. 144 of the Act and addition was made u/s. 68 r.w.s. 115BBA of the Act. amount to Rs. 1,02,00,000/- upon appeal the Ld. CIT(A) has confirmed the addition of Rs. 1,02,00,000/- was upheld.
14. We do not have findings of Police report and conclusion reached by the Police authority besides this Bench has remitted back all the appeals pertaining to Aangadiya Shroff Business to the file of AO. We do not have necessary facts on record to adjudicate this appeal of assessee and revenue. Hence, we set aside the order of Ld. CIT(A) and remit all the appeals of the assessee and revenue to the file of AO. With the direction to the AO to DCIT vs. Nileshbhai , DCIT vs. Jaydipbhai Jaydeepbhai vs. ACIT consider the out come of Police report (if any) and other material as will be submitted by the assessee and adjudicate the issue in according with law.
In the result all the four appeal of Revenue and assessee are allowed for statical purpose.
Order pronounced in the open court on 15- 01-2026.