Prakashkumar Amratji Thakor Vs ITO (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, considered the assessee’s appeal against the order of the National Faceless Appeal Centre (NFAC)/CIT(A) for Assessment Year 2018-19. The Tribunal first condoned a delay of 103 days in filing the appeal after accepting the assessee’s explanation that the appeal could not be filed in time due to portal issues and the counsel’s absence from the country.
The assessee had filed a return declaring total income of ₹2,96,250. During scrutiny assessment under Sections 143(3) read with 144B of the Income Tax Act, the Assessing Officer noted that the assessee had admitted to carrying on a bogus billing business through Siddhi Trading Co. with the assistance of Shri Babulal Patel. As the assessee failed to furnish details of the said person and the Assessing Officer found substantial credits in the assessee’s bank accounts followed by cash withdrawals, the entire bank credits amounting to ₹31,74,50,788 were treated as unexplained income. The assessment was completed at a total income of ₹31,77,47,038.
The CIT(A) dismissed the assessee’s appeal. Before the Tribunal, the assessee submitted that he acted only as a name-lender under the directions of Shri Babulal Patel and Shri Mahendra Patel, received a salary of ₹25,000 per month, and that all transactions in the four bank accounts were carried out by those persons. It was argued that the Assessing Officer incorrectly treated the entire bank credits as unexplained income without considering the corresponding debit entries and that, at the highest, only the commission earned by the assessee could be brought to tax. The assessee also requested that the matter be restored to the CIT(A) because the appeal had been dismissed for non-compliance.
The Revenue supported the orders of the lower authorities but stated that it had no objection if the matter was restored to the CIT(A) for granting another opportunity to the assessee.
The Tribunal observed that although the CIT(A) had granted five opportunities, the assessee failed to comply. It also noted that while the CIT(A) held that the delay in filing the first appeal was not condoned, the appellate authority nevertheless confirmed the addition because the assessee had not furnished the required details.
On merits, the Tribunal found that the Assessing Officer had acknowledged that the assessee was engaged in the business of bogus billing. In such circumstances, the Assessing Officer ought to have determined the profit from that business instead of treating the entire bank credits as the assessee’s income. The Tribunal observed that only the profit arising from the business can be subjected to tax and that, even if the assessee himself had carried on the business, only the profit derived therefrom could be taxed. Accordingly, the Tribunal held that the addition of the entire bank credits of ₹31,74,50,788 was not justified.
Referring to the decision of the Gujarat High Court in Vareli Textile Industries Ltd. v. Commissioner of Income Tax [284 ITR 238 (Guj)], the Tribunal observed that a meritorious case should not be rejected on the ground of limitation. Considering both the merits and the assessee’s failure to comply before the CIT(A), the Tribunal set aside the matter to the file of the CIT(A) with directions to grant the assessee another opportunity, subject to payment of costs of ₹10,000 to the Prime Minister National Relief Fund within one month from receipt of the order. The assessee was directed to comply with the appellate proceedings and produce supporting material and evidence, after which the CIT(A) was directed to adjudicate the appeal on merits.
The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal is filed by the assessee against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 24.06.2025 for the Assessment Year (A.Y.) 2018-19 in the proceeding u/s 143(3) r.w.s 144B of the Income Tax Act [hereinafter referred as “the Act”].
2. There was delay of 103 days in filing of this appeal. The assesse has filed a condonation application explaining the reason for delay. It is submitted that the order of the Ld. CIT(A) was received by the assessee on 24.06.2025 and the assessee had approached his advocate Shri V.P. Patel for filing of second appeal and also paid the appeal fee of Rs.10,000/- on 02.07.2025. However, his counsel could not file the appeal immediately due to some portal issues for which the due date of filing of ITR was already extended. Further, his counsel was out of country for certain time. Due to these facts, there was delay of 103 days in filing of this appeal. Considering the explanation of the assessee, the delay in filing of the appeal is condoned.
3. The brief facts of the case are that the assessee had filed his return of income for A.Y. 2018-19 on 30.08.2018 declaring total income of Rs.2,96,250/-. The case was selected for scrutiny under CASS. The assessee had admitted before the AO that he had done business of bogus billing with the help of one Shri Babulal Patel under the name and style of Siddhi Trading Co. However, he could not furnish the details of the said Shri Babulal Patel, for whom he had claimed to have worked. According to the AO, the credits were appearing in the bank accounts of the assessee out of which he has made cash withdrawals. In the absence of any explanation for the source of the credits, the entire credit of Rs.31,74,50,788/- in the bank account was treated as unexplained and added to income. The assessment was completed u/s. 143(3) r.w.s. 144B of the Act on 19.04.2021 at total income of Rs. 31,77,47,038/-.
4. Aggrieved with the order of the AO, the assessee had filed an appeal before the first appellate authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
5. Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:
1. The Ld. CIT(A) has erred both in law and on facts in sustaining the order of AO, without appreciating the facts and nature of business.
2. The CIT(A) has grossly erred both in law and on facts in sustaining the addition of entire transactions with all the Banks of Rs.31.74 crores, considering as unaccounted income, where the appellant earned pity commission on it.
3. The CIT(A) has grossly erred both in law and on facts in ignoring the direct case of jurisdictional ITAT bench; where it is considered unaccounted income at the rate of 0.75% on such bank transactions on identical facts of the case.
4. The appellant craves leave to add, amend alter or modify any of the grounds of appeal at the time of or before the hearing of the appeal.
6. Shri Vishnubhai Patel, the Ld. AR of the assessee submitted that the assessee was only a name-lender, acting at the instance and under guidance of Shri Babulal Patel and Shri Mahendra Patel. He was only receiving salary of Rs. 25,000/- per month and all the transactions in the four bank accounts in the name of the assessee were carried out by Shri Babulal Patel and Shri Mahendra Patel. The Ld. AR submitted that the AO was not correct in treating all the credit entries in the bank accounts as unexplained income of the assessee, without taking into account the debit entries appearing in the bank accounts. He submitted that at the best only nominal commission earned by the assessee could have been added to the income of the assessee. The Ld. AR further submitted that the Ld. CIT(A) had dismissed the appeal of the assessee due to non-compliance. He, therefore, requested that the assessee may be allowed another opportunity of being heard by setting aside the matter to the file of Ld. CIT(A).
7. Per contra, Shri Kiran Unavekar, the Ld. CIT-DR supported the order of the lower authorities. He submitted that the assessee did not furnish any details of Shri Babulal Patel and Shri Mahendra Patel, on whose instance business of bogus billing was stated to be carried out by the assessee. However, he had no objection if the matter was set aside to the file of Ld. CIT(A) for allowing another opportunity to the assessee.
8. We have considered the rival submissions. It is found that the Ld. CIT(A) had allowed five opportunities to the assessee but no compliance was made on any occasion. There was delay in filing of the appeal before the Ld. CIT(A) as well. Though the Ld. CIT(A) had given a finding that the delay was not condoned, still he had confirmed the addition of Rs.31,74,50,788/- on account of cash deposits/credits for the reason that the details called for during appellate proceedings were not furnished. The AO had treated the entire credits appearing in the bank accounts of the assessee as unexplained income of the assessee without considering the debit entries appearing in the bank accounts. The AO had acknowledged the fact, in the assessment order, that the assessee was engaged in business of bogus billing only. Under the circumstances, the AO should have worked out the profit out of the business of bogus billing rather than treating the entire credit entries in the bank account as income of the assessee. It is a settled position of law that only the profit arising from the business can be subjected to tax. Even if it is held that the assessee was carrying on the business on his own, still only the profit derived from such business could have been subjected to tax. Under the circumstances, the addition of entire credit of Rs.31,74,50,788/- to the income of the assessee was not justified.
9. The Hon’ble High Court has held in the case of Vareli Textile Industries Ltd. v. Commissioner of Income Tax [284 ITR 238(Guj)] that the meritorious case should not be thrown out on the ground of limitation. Considering the merits of the case as discussed above, the Ld. CIT(A) was not correct in rejecting the appeal of the assessee on the ground of delay. Further, the decision of the Ld. CIT(A) in upholding the entire addition of Rs.31,74,50,788/- in respect of deposits in the bank accounts was also not correct. At the same time, the assessee has not explained the reason for non-compliance before the Ld. CIT(A). In the interest of justice, therefore, we deem it proper to set aside the matter to the file of Ld. CIT(A) with a direction to allow another opportunity to the assessee to make compliance, subject to payment of cost of Rs.10,000/-, which should be deposited to Prime Minister National Relief Fund within a period of one month from the date of receipt of this order. The assessee too is directed to make compliance before the Ld. CIT(A) and bring on record material and evidences in support of the grounds as taken before him and also comply to the directions of the Ld. CIT(A). Thereafter, the Ld. CIT(A) may adjudicate the grounds taken by the assessee on merits.
10. In the result, the appeal of the assessee is allowed for statistical purpose.
Order pronounced in the Court on 06/07/2026 at Ahmedabad.
