Jayeshbhai Becharbhai Chovatiya Vs ITO (ITAT Surat)
The Income Tax Appellate Tribunal (ITAT), Surat, has partly allowed the appeal filed by assessee Jayeshbhai Becharbhai Chovatiya against the order of the National Faceless Appeal Centre (NFAC), Delhi, pertaining to the assessment year 2017-18. The NFAC had upheld the Assessing Officer’s (AO) addition of ₹72,81,670 under Section 69 of the Income Tax Act, 1961, treating all credits found in the assessee’s bank accounts as unexplained money. The AO had also applied a special tax rate of 60 percent under Section 115BBE of the Act.
The case originated from information received by the AO regarding cash deposits made by the assessee in three bank accounts during the demonetization period. The AO noted total credits of ₹72,81,674 in these accounts during the financial year 2016-17, including ₹18,05,620 deposited during demonetization. Despite issuing notices under Section 142(1) and 133(6), the AO recorded that the assessee failed to provide any explanation for these credits, leading to the entire amount being treated as unexplained income and taxed accordingly in the assessment order dated October 1, 2019.
Before the Commissioner of Income Tax (Appeals) [CIT(A)], the assessee submitted statements and written arguments. However, the CIT(A) upheld the AO’s action, stating that the assessee had not replied or furnished any submissions during the assessment proceedings. Subsequently, the assessee approached the ITAT. The assessee’s representative argued that notices were not received during the assessment, but detailed submissions were made before the CIT(A), including explanations for the bank credits, details of turnover, and the fact that a home loan of ₹44,01,180 was disbursed through one of the banks and wrongly added as income. It was also contended that the assessee had a cash-in-hand balance of ₹9,92,080 as of March 31, 2016, which was reflected in the previous assessment year’s return.
The ITAT, after considering the submissions and evidence, noted that a significant portion of the added amount, ₹44,01,180, was indeed a home loan disbursement. Adjusting for this, along with a deduction under Section 80TTA for bank interest and a minor totaling error by the AO, the remaining unexplained credit stood at ₹28,58,582. Further considering the assessee’s cash-in-hand balance of ₹9,92,080 from the previous year, the ITAT reduced the unexplained amount to ₹18,66,502. Observing that the assessee was engaged in the business of PVC pipelines and related items, the Tribunal estimated the taxable income at 10% of this amount, arriving at ₹1,86,650, which was rounded off to ₹2,00,000. Consequently, the ITAT restricted the addition made by the AO to ₹2,00,000, partly allowing the assessee’s appeal. The Tribunal held that while the assessee did not file a return due to having no taxable income based on their calculations, some addition was warranted based on the unexplained credits. The order was pronounced in open court on January 21, 2025.
FULL TEXT OF THE ORDER OF ITAT SURAT
