Dhwani Jayeshkumar Patel Vs ITO (ITAT Ahmedabad)
The ITAT, Ahmedabad Bench held that entire cash deposits in bank a/c cannot be treated as unexplained u/s 68 when the assessee acts only as a commission/discounting agent and has offered commission income to tax. In this case (AY 2017-18), the assessee deposited ₹31.28 crore across five bank accounts, which the AO taxed in full as unexplained cash credits, despite the assessee’s explanation that the funds belonged to 266 third parties and were merely routed through his accounts for cash-to-cash settlement at Halol, a major plastics trading hub.
The Tribunal noted key facts:
- Identical issue in AY 2016-17 was examined in reassessment and no addition was made, accepting the commission-agent model.
- The assessee maintained books, explained the modus operandi, and showed that each credit had a corresponding debit, evidencing pass-through funds.
- Confirmations and details of depositors were furnished; discrepancies/denials by some parties were explained by non-recording or partial recording in their own books—common in cash trades.
- Applying preponderance of probabilities, the Bench held the assessee was not the owner of the funds; taxing gross credits would amount to double taxation where only commission is income.
Accordingly, the entire addition of ₹31.28 crore was deleted, and the assessee’s appeal was allowed in full.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 25/07/2025 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2017-2018.
