Case Law Details
Hanif Osman Ravda Vs ITO (ITAT Rajkot)
Presumptive Income u/s 44AD Covers Cash Deposits – No Further 69A Addition; Entire ₹13.71 Lakh Deleted in Assessee’s Favour
Assessee, a small trader in cutlery, did not file return u/s 139(1) as his income was below taxable limit. AO obtained information of cash deposits of ₹13,71,365 in Union Bank account & issued notice u/s 148 on 27.03.2019. Assessee replied but did not file return in time. AO completed assessment u/s 143(3) r.w.s. 147, treating the entire cash deposits as unexplained money u/s 69A, ignoring Assessee’s business explanation.
Before CIT(A)/NFAC, Assessee explained that he was doing small cutlery trading, had given names, addresses & contact details of customers, & that deposits represented business turnover. He also filed return u/s 148 declaring gross receipts of ₹16,50,675 & income of ₹2,72,140 under presumptive taxation u/s 44AD, & paid tax thereon. However, CIT(A) confirmed the addition without proper appreciation.
Before ITAT, there was a delay of 68 days in filing appeal, which was condoned considering sufficient cause. Assessee argued that AO & CIT(A) failed to verify customer details, ignored that income was already taxed u/s 44AD, & made addition merely on cash deposits without adjusting cash withdrawals used in business. He submitted that once income is offered u/s 44AD, no further books are required & no separate addition for cash deposits can be made unless source is disproved.
ITAT observed that:
- Assessee declared turnover of ₹16.50 lakh & paid tax u/s 44AD.
- Cash deposits were part of business cycle & supported by withdrawals.
- AO ignored withdrawals & business nature.
- AO failed to give credit of ₹2,72,140 income already taxed.
- Authorities acted only on suspicion, without independent verification of customer details already furnished.
ITAT quoted Supreme Court in CIT vs. Simon Carves Ltd. that tax authorities must act fairly & cannot always lean against Assessee.ITAT held that once income is offered u/s 44AD, & tax paid, no further addition is justified on same cash deposits unless contrary evidence is brought. The addition u/s 69A was deleted in full.
Result:
- Delay condoned
- Addition of ₹13,71,365 u/s 69A deleted
- Appeal allowed in full in favour of Assessee
FULL TEXT OF THE ORDER OF ITAT RAJKOT
Captioned appeal filed by the assessee, pertaining to Assessment Year 2012-13, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals), dated 20/02/2025, which in turn arises out of an order passed by the Assessing Officer dated 09/12/2019 u/s 143(3) r.w.s147of the Income Tax Act, 1961.
2. Although, this appeal filed by the Assessee, for Assessment Year 2011-12, contains multiple ground of appeals. However, at the time of hearing, I have carefully perused all the grounds raised by the Assessee. I find that most of the grounds raised by the Assessee, are either academic in nature or contentious in nature. However, to meet the end of justice, I confine myself to the core of the controversy and main grievances of the Assessee. Therefore, the solitary grievance of the assessee in this appeal is that on the basis of the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) and Income Tax Officer has erred in passing the order by making an addition of Rs. 13,71,365/- under section 69A without bringing any contrary evidence or conducting independent verification of the names, addresses and contact details of customers already furnished by the assessee.
3. The appeal filed by the assessee for the Assessment Year 2012-13, is barred by limitation by 68 days. The assessee has moved a petition requesting the Bench to condone the delay. I have heard both the parties on this preliminary issue. Learned DR for the revenue, opposed the prayer of the assessee for contention of delay. However, the learned Counsel adverted my attention to the reasons for condonation of delay, and urged for a benign view and sought condonation of delay of 68 days in filing the appeal before the Tribunal. A perusal of the reasons and sufficient cause explained by the ld. Counsel for the assessee, gives me an impression of existence of mitigating circumstances to enable me to exercise my discretion in favour of the assessee. Accordingly, the delay is condoned in filing the appeal.
4. The facts of the case which can be stated quite shortly are as follows: The sole issue involved in the present appeal, relates to addition of Rs. 13,71,365/-made by the assessing officer as unexplained money u/s 69A of the I.T. Act. Briefly stated the facts of the present case is that the assessing officer was in possession of information that during the relevant previous year the assessee has deposited cash of Rs. 13,71,365/- in the bank account no.314002010108823 maintained with Union Bank of India, Porbandar however, assessee has not filed his return of income within the time frame as provided under the provision of section 139(1) of the I.T. Act. Therefore, assessing officer initiated assessment proceedings u/s 147 of the I.T. Act and issued notice u/s 148 of the I.T. Act on 27.03.2019, which was served on the assessee. However, assessee did not file return of income within the time provided in the notice u/s 148 of the I.T. Act. Subsequently assessing officer vide letter dated 12.07.2019 reminded the assessee to file return in response to notice issued u/s 148 of the I.T. Act. However, assessee submitted reply before the assessing officer, however, the assessing officer did not accept the reply of the assessee. The assessing officer therefore resorted to completion of assessment u/s 143(3) r.w.s. 147 of the I.T. Act vide impugned order dated 09.12.2019, bringing to tax cash deposit of Rs. 13,71,365/- as unexplained money u/s 69A of the I.T. Act.
5. Aggrieved by the above action of the assessing officer, the assessee carried the matter in appeal before the learned CIT(A), who has confirmed the action of the assessing officer, therefore, the assessee is in appeal before this Tribunal.
6. I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel for the assessee submitted that during the assessment proceedings, the assessee had submitted a detailed explanation of the cash deposits, including particulars of his trading activity in cutlery, details of customers including address and phone number of the parties, and the method of business at the time of assessment proceeding. The ld. Counsel further argued that assessee is a simple person doing small cutlery business and is not familiar with income tax rules and procedures. The assessee genuinely believed that he was not required to file a return of income, as his income was below the maximum amount which is not chargeable to tax. The assessing officer passed the order by making addition under section 69A of the Act, without bringing any contrary evidence or conducting independent verification of the names, addresses and contact details of customers already furnished by the assessee, during the assessment proceedings. The learned Counsel also stated that the assessee had already shown gross business receipts of Rs. 16,50,675/- in the return filed under section 148, as per section 44AD of the Act and paid the taxes thereon. Therefore, the assessing officer erred in passing the order without giving credit for the income amounting to Rs. 2,72,140/- which was already declared by the assessee in the return filed under section 148 of the Act. The income was offered under the presumptive taxation scheme as per section 44AD of the Act, therefore, further addition should not be made in the hands of the assessee. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
7. I have considered the submissions of both the parties, I note that on account of cash deposited in the bank account, the assessee has shown turnover of Rs. Rs. 16,50,675/- and paid the taxes of Rs. 2,72,140/-, (including other income), under section 44AD of the Act. I note that despite the return being filed under section 44AD of the Act, where books of accounts are not required, to be maintained and business involving normal cash transactions, both authorities, that is, assessing officer as well as ld CIT(A) ignored these facts. I also find that assessing officer, has erred in passing the order by making the addition solely on the basis of cash deposits in the bank account, without considering the corresponding cash withdrawals made from the same account for the purpose of retail business of the assessee. I also find that assessing officer has not given credit to the extent of the income already taxed in the return of income filed by the assessee under section 44AD of the Act. At this juncture, I would like to quote golden words of Hon’ble justice H. R. Khanna from the decision of CIT Vs. Simon Carves Ltd. (1976) 105 ITR 212 (SC)where applying the legal maxim of ex majorie cautela (out of abundant precaution) he said that.
“the taxing authorities exercise quasi-judicial powers and in doing so they must act in a fair and not in a partisan manner. Although, it is a part of the duty to ensure that no tax which is legitimately due from an assessee should remain unrecovered, they must also at the same time act in a manner that might indicate scales are weighed against the assessee. We are wholly unable to subscribe to the view that unless those authorities exercise the power in a manner most beneficial to the revenue and subsequently most adverse to the assessee they should be deemed not have exercised it in a proper and judicial manner.”
8. Considering these facts, I find that assessee has paid the legitimate taxes on the cash deposit in the bank account by showing the turnover at Rs. 16,50,675/-and paid the taxes of Rs. 2,72,140/-, (including other income), under section 44AD of the Act. Therefore, assessee under consideration does not have any further liability to pay the tax. Hence, I am not inclined to accept the contention of the Assessing Officer in any manner and hence the addition so made is deleted. Hence this ground of the assessee is allowed.
9. In the result, appeal filed by the assessee, is allowed.
Order pronounced in the open court on 15/10/2025.
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