Case Law Details
Ashaben Atulkumar Patel Vs ITO (ITAT Ahmedabad)
The ITAT Ahmedabad partly allowed the assessee’s appeal against the order of the National Faceless Appeal Centre (NFAC) dated 20.01.2026 arising from an assessment made under Sections 147, 144 and 144B of the Income Tax Act, 1961 for Assessment Year 2014-15. The principal dispute related to the addition of ₹1,50,00,500 under Section 69A in respect of cash deposits in the assessee’s account with Shri Renukamata Multi State Urban Co-operative Credit Society Ltd.
The assessee had originally filed a return declaring income of ₹1,96,768. Reassessment proceedings were initiated after the INSIGHT portal flagged cash deposits of ₹1,50,00,500. During reassessment, the assessee explained that cash was deposited at one branch and withdrawn at another, that the account was used for cash movement, and that she earned a commission of ₹500 per lakh. The Assessing Officer rejected the explanation and treated the entire cash deposits as unexplained money under Section 69A read with Section 115BBE.
Before the CIT(A), the assessee contended that she was a person of meagre means, that her account had been misused by persons connected with Shri Renukamata Co-operative Society, and that she merely allowed the account to be used as a conduit in return for a small commission. Affidavits were filed in support, and reliance was placed on earlier Tribunal decisions involving similar transactions. The CIT(A), however, held that the affidavits and explanations did not displace the findings of the Investigation Wing and confirmed the addition.
Before the Tribunal, the assessee submitted that she was similarly placed to other account holders who had received relief in earlier cases and argued that only commission income should be taxed. The Revenue contended that the assessee had failed to establish the source and ownership of the deposits and had not produced documentary evidence regarding commission receipts or confirmations from the alleged depositors or beneficiaries.
The Tribunal noted that search and seizure operations had revealed that accounts maintained with Shri Renukamata Co-operative Society were used to route undocumented cash income. It observed that relief granted in earlier cases depended on their specific facts. After examining those decisions, the Tribunal found that the assessee had consistently maintained before the Assessing Officer and the CIT(A) that she was not the real owner of the funds, had participated in the proceedings, produced the available documentary evidence and affidavit, and that the pattern of deposits and withdrawals supported her claim that she acted only as a name-lender.
Following its earlier decision in a similarly placed case, the Tribunal held that taxing the entire deposits was not justified. It restricted the addition to 0.25% of the cash deposits, in addition to the commission income already disclosed by the assessee. Grounds relating to the Section 69A addition were partly allowed, while the remaining grounds challenging the reassessment proceedings and other issues were dismissed as not pressed since no arguments were advanced on them. Accordingly, the appeal was partly allowed.
Cases Discussed
- Kaushik Pravinchandra Gohel vs. JCIT (ITAT Ahmedabad), ITA Nos. 690 to 694/AHD/2023, Assessment Years 2015-2016 to 2017-2018, Dated 17/04/2024
- Lucky Bajoria v. ITO (ITAT Ahmedabad), ITA No. 345/Ahd/2021
- Chintan Niketan Bhandari v. DCIT (ITAT Ahmedabad), IT(SS)A Nos. 495, 496, 497, 498, 499, 500 & 1604/Ahd/2019
- Geetaben Dineshchandra Gupta v. ITO (Gujarat High Court), 129 taxmann.com 346 (Gujarat)
- PCIT v. Alag Securities (P.) Ltd. (Bombay High Court), 117 com 292 (Bombay)
- Manoj Kumar Jain v. DCIT (ITAT Delhi), ITA No. 554/Del/2017
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
1. The present appeal preferred by the Assessee is directed against the Order, dated 20/01/2026, passed by National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as the ‘CIT(A)’] whereby Learned CIT(A) had dismissed the appeal against the Assessment Order, dated 18/04/2023, passed under Section 147 r.w.s 144 read with Section 144Bof the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’], for the Assessment Year 2014-2015)
2. The Assessee has raised the following grounds of appeal:
1. The learned CIT(Appeals) / NATIONAL FACELESS APPEAL CENTRE [ NFAC] DELHI has grievously erred both in law and on facts in AFIRMNG THE DECISION AND ACTION OF THE Ld.AO in initiating reassessment proceedings without any valid REASON TO BELIEVE AS ENVISAGD BY SECTION 147 OF THE it Act, 1961 and there being no escapement of income , the order passed ought to be cancelled. It be so held now.
2. Without prejudice to the aboveground, the reassessment proceedings are illegal , bad in law and without jurisdiction as the condition of approval by authority specified as required by amended provisions of section 151(ii) were not fulfilled when notice u/s 148 was issued after 1st April 2021 after lapse of three years from end of assessment year. It be so held now.
3. Without prejudice to the above grounds, the Ld CIT(a)/ NFAC further grievously erred in law and on facts in confirming addition of Rs. 1,50,00,500/- made by wrongly invoking section 69A of the Act making huge gross deposits in the bank account for which proper explanations were furnished. It be so held now and addition be deleted.
4. The Ld CIT(A)/ NFAC also grievously erred in law and on facts in not properly considering the fact that the Appellant having very meagre source of income and in view of the submissions made as regards deposits in her bank account by Shri Renuka Multi State Urban Coop Credit Society, Ltd. could not be treated as appellants deemed income. It be so held now and addition of Rs. 1,50,00,500/- be deleted.
5. The Ld CIT(A)/NFAC also erred in law and on facts in not considering and cross examining the Affidavits filed explaining the true facts about the use of appellants bank account which made it clear that there was no such cash deposits made by appellant. It be so held now.
6. The Ld. CIT(A)/NFAC further erred in law and on facts in not considering and not following the judgments of Jurisdictional Ahmedabad ITAT following Mumbai ITAT decision where in the facts and modus operandi of said Society making such cash deposits in various persons bank accounts were explained and accepted .It be so held now and huge addition of gross credits without considering similar debits be deleted being illegal and against sanction of law.
7. Without prejudice to the above grounds, the Order passed by the LD AO is otherwise also bad in law as the same is passed without following specific special provisions of section 153C of the IT Act. It be so held now and Order passed u/s 147 be, it is prayed, quashed.
8. The NFAC/CIT(A) erred in not properly considering appellants submissions. The ld CIT(A)/NFAC ought to have accepted the appeal in toto.”
3. The Assessee has raised multiple grounds in the present appeal challenging, inter alia, (i) the initiation and validity of reassessment proceedings and (ii) the addition of Rs. 1,50,00,500/- made under Section 69A on account of cash deposits in the account maintained with Shri Renukamata Multi State Urban Co-operative Credit Society Ltd. [for short ‘Shri Renukamata Co-operative Society’], as confirmed by the learned CIT(A).
4. Briefly stated, the Assessee, an individual, filed her original Return of Income on 01/10/2014 declaring total income of Rs. 1,96,768/-, which was processed under Section 143(1) of the Act. Subsequently, information flagged on the Department’s INSIGHT portal on account of cash deposits aggregating to INR.1,50,00,500/- in the bank account of the Assessee maintained with Shri Renukamata Co-operative Society reassessment proceedings were initiated in the case of the Assessee. During reassessment, statutory notices under Section 142(1), along with detailed questionnaires, were issued which were initially not responded to by the Assessee. Subsequently, the Assessee filed bank account statement and written submissions. It was explained that cash was deposited at one branch and withdrawn at another branch, that the Assessee was charging commission of INR.500/- per lakh on such cash movement business. It was submitted that from the bank statement it was clear that the cash was deposited and thereafter, withdrawn on the same day. The Assessing Officer, not being satisfied with the explanation offered by the Assessee, treated the entire cash deposits of INR.1,50,00,500/- as unexplained money under Section 69A r.w.s. 115BBE of the Act and determining total income of the Assessee for the Assessment Year 2014-2015 at INR.1,51,97,268/-.
5. In the statement of facts and grounds filed before the Learned CIT(A), the Assessee reiterated her stand. It was contended that the Assesseee was a person of meager means, that her account had been misused by others connected with the other persons related to Shri Renukamata Co-operative Society, and that cash deposits and withdrawals broadly matched so that there was no real accretion in her hands. Affidavits were filed by the Assessee asserting that she merely allowed her account to be used as a conduit in return for a small commission and was not the beneficial owner of the impugned funds. The Assessee also placed reliance on decision of of the Co-ordinate Benches of this Tribunal in other Shri Renukamata Co-operative Society cases where, on similar modus operandi and background, additions had been substantially reduced. The learned CIT(A), after examining the Shri Renukamata Co-operative Society ledger for A/c No. 109204003000037, recorded that the entries clearly showed systematic remote credits and withdrawals aggregating to INR.1,50,00,500/-during the relevant year and accepted this as the factual quantum of deposits. However, the Learned CIT(A) held that the Assessee had not produced any independent corroborative material identifying true beneficiaries, and that the affidavits/explanation offered by the Assessee could not, by itself, displace the presumption arising from the findings of investigation carried out by the Investigation Wing on Shri Renukamata Co-operative Society. On the above reasoning, the Learned CIT(A) upheld the action of the Assessing Officer and dismissed the appeal in toto.
6. Before us, the Learned Authorised Representative submitted that the Assessee is a small low-income earning individual. Placing reliance on the decision of the Ahmedabad Benches of the Tribunal, it was submitted that the profile of the Assessee was similar to other Shri Renukamata Co-operative Society account-holders who has been granted substantial relief by the Tribunal. It was contended that the pattern of cash deposits and withdrawals was identical to the modus operandi noted by the Investigation Wing and that in several cases such account-holders have been treated as name-lenders, with additions being restricted to commission income.
7. The Learned Departmental Representative, per contra, supported the orders of the Assessing Officer and the learned CIT(A) and contended that the Assessee had failed to discharge the primary onus to explain the source and ownership of the deposits of INR.1,50,00,500/-. It was pointed out that no contemporary documentary evidence of commission receipts, and confirmations of alleged depositors or beneficiaries had been produced by the Assessee.
8. We have considered the rival submission and have perused the material on record.
9. It is admitted position that in search and seizure operations conducted by the Investigation Wing it emerged that the accounts maintained with Shri Renukamata Co-operative Society were being used to route undocumented cash income into books of accounts. Assessment/reassessment proceedings were initiated in the case of various account holders and addition @100% of aggregate cash deposits were made in the hands of account holders under Section 68/69/69A of the Act. During the course of hearing the Learned Authorised Representative had placed reliance on the decisions of the Co-ordinate Benches of the Tribunal in the case of other account holders and had contended that the Assessee was placed similarly and therefore, addition in the hands of the Assessee be restricted to 0.25% of the aggregate cash deposits.
10. On perusal of the judicial precedents we find that the conclusion drawn was based upon the specific facts and circumstances of each case.
11. In Kaushik Pravinchandra Gohel vs. JCIT [ITA Nos. 690 to 694/AHD/2023, Assessment Years 2015-2016 to 2017-2018, Dated 17/04/2024], the Tribunal had noted that the assessee in that case was an illiterate individual belonging to a poor strata of society who had allowed the bank account to be opened and operated by officials of Shri Renukamata Co-operative Society. The assessee had signed blank forms and documents on the advice of the society’s officials and tax consultant acting in good faith and not being aware of the scheme being operated for the benefit of real beneficiaries. In the light of the aforesaid facts, the Tribunal accepted the contention that the assessee was merely a name lender and granted substantial relief by restricting the addition to 0.25% of the aggregate cash deposits.
12. The above decision was distinguished by the Tribunal in the case of Kanubhai Ambalal Patel Vs. Income Tax Officer – Ward2(1)(2), Ahmedabad observing, inter alia, that in the case before the Tribunal the assessee had failed to produce any material identifying the persons who allegedly deposited the cash or the beneficiaries to whom the funds were transferred. The Tribunal remitted the issue back to the file of the Assessing Officer giving the following directions:
“13. Nevertheless, considering the pattern of deposits and withdrawals in the bank account and taking into account the possibility that the assessee might have been involved in routing unaccounted funds on behalf of other persons, it would be reasonable to conclude that the assessee had participated in accommodation entry transactions and would have earned commission income therefrom.
14. Considering the totality of the facts and circumstances of the case, and in order to meet the ends of justice, we are of the considered view that taxing the entire deposits under section 69 of the Act would be excessive. At the same time, the assessee cannot escape taxation altogether in view of the failure to explain the nature and source of the deposits. Accordingly, the Assessing Officer is directed to work out the peak balance of the bank account and thereby tax the same accordingly, in the hands of the assessee, as per law.
15. In the result, the appeal of the assessee is partly allowed.” (Emphasis Supplied)
13. In the present case, it is a matter of record that the Assessee had participated in the assessment as well as appellate proceedings had filed bank statement and had taken consistent stand before the Assessing Officer and the CIT(A) that she was not the real owner of the funds and has allowed her account to be used in consideration of a small commission. While it is admitted position that cash deposits aggregating to INR.1,50,00,500/- were made in the Assessee’s bank account maintained with Shri Renukamata Co-operative Society during the relevant year, the pattern of deposits and withdrawals supported the stand of the Assessee that she was acting as name lender. The Assessee has participated in the proceedings, placed before the Assessing Officer the available documentary evidence and the supporting affidavit. Considering the totality of facts and in the light of the approach adopted by the Co-ordinate Benches in identical matters, we are of the view that this is not a fit case where the entire deposits should be taxed in the hands of the Assessee. We are of the view that in the facts and circumstances of the present case, the decision of the Tribunal in the case of Kaushik Pravinchandra Gohel vs. JCIT (supra) would apply wherein it was held as under:
“15. Accordingly, on going through the above report by the Investigation Wing and the order passed by ITAT, Mumbai Bench in the case of Penukamat Multi State Cooperative Union Credit Society Ltd. (supra), we are of the considered view that the assessee was not the real beneficiary of substantial cash deposits / credits which were made in his bank account held with Penukamata Society. From the above facts placed on record, it is observed that these bank accounts were being operated in the name of the assessee by the real beneficiaries / depositors, in collusion with Penukamata Society and the assessee, cannot be saddled with the ownership of the entire income deposited / credited in his bank account with Penukamata Society.
16. This brings to the next question as to what could be the reasonable amount which could be held to be taxable in the hands of the assessee, for allowing the Penukamata Society / real beneficiaries to operate the bank accounts, held in the name of the assessee. In the case of Geetaben Dineshchandra Gupta v. ITO 129 taxmann.com 346 (Gujarat), the Gujarat High Court made the following observations:
“a-vis considering the settled legal position, it appears that there is direct nexus/live link between the material coming to the notice of the Assessing Officer and that for formation of his belief that there has been escapement of the income of the assessee from assessment in the year under consideration because of his failure to disclose fully and truly all material facts as from the inquiry/investigation by the Investigation Wing, some tangible material was found to substantiate the fact that the assessee was the provider of accommodation entries and that, the income from commission, ranging from 0.5 per cent to 1 per cent was not disclosed in return and thereby, the income chargeable to tax had escaped assessment for the year under consideration. As emerges from the record, the petitioner has filed Rol for the assessment year 2012-13 disclosing income of Rs. 1.42,694 despite showing a huge turnover of Rs. 24,10,82,501 in the audited books of account. Further, a detailed investigation is carried out by the Investigation Wing and the outcome of the same prima facie substantiates the case of the department. Thus, formation of belief by the Assessing Officer that the income chargeable to tax has escaped assessment, based upon material derived during inquiry/investigation, appears to be justified. Thus, the petition failed and dismissed.”
17. In the case of PCIT v. Alag Securities (P.) Ltd 117 com 292 (Bombay), the High Court held that 0.15% rate of commission offered to tax by the assessee was a reasonable rate in facts of the assessee’s case.
18. In the case of Manoj Kumar Jain v. DCIT ITA No. 554/Del/2017, the Delhi ITAT held that commission of 0.5% to be reasonable considering the facts of the case. While passing the order, the ITAT observed as under:
“3. The moot issue involves assessment of cash deposits found in the bank account of the assessee of Rs.7.37 Crs. and commission earned at the rate of 3% on the said amount of Rs.7.37 Crs. to the tune of Rs.22.12 lacs. The assessee has been alleged to be an entry operator providing bills of purchase & sales without any actual business transactions.
4. The amount of Rs.7.37 Crs. has been added on protective basis and information regarding the beneficiaries was passed on to the Assessing Officer having jurisdiction over the beneficiaries for substantive assessment. The commission of Rs.22.12 lacs has been added on substantive basis.
5. The Co-ordinate Bench of ITAT in ITA No.3561/Del/2015 vide order dated 22.05.2020 has adjudicated on both the issues. The addition being protective in nature has been deleted by the order of the Tribunal. The commission charged @3% has been brought down to 0.5%.
6. Since, the issues stands squarely covered by the earlier order of the Tribunal in the absence of any material change and the facts of the case except the amount involved, we hereby hold as under:
a) The addition made on protective basis is directed to be deleted b) The commission to be charged @0.5%”
19. In the case of Chintan Niketan Bhandari v. DCIT IT(SS)A Nos. 495, 496, 497, 498, 499, 500 & 1604/Ahd/2019, the jurisdictional Ahmedabad ITAT vide order dated 29-11-2022 held that since the assessee failed to provide complete details regarding the commission income, the commission income may be computed @ 0.25% in the hands of the assessee. While passing the order, the ITAT made the following observations:
“8.2 Now coming to the instant facts, we observe that the assessee has been running several concerns in the name of himself and in the name of other persons who are engaged in the activities of taking cheques and cash and deposited the same in their bank accounts. The assessee’s contention is that he is merely acted as a commission agent and hence only the commission amount should be subject to tax in its hands. However, the Department has observed that the assessee could not produce that complete details of beneficiaries with their names, complete addresses, PAN and other details of transactions. In the instant case, there are approximately more than 7000 beneficiaries and only in the case of 116 beneficiaries, the PAN has been identified. For 2752 entries, PAN has not been identified. For balance entries, only part details are available. If the assessee is submitting that he is liable to be taxed only on the commission income so earned, then the onus is on the assessee to provide the basis as to how such commission income has been arrived at and list of beneficiaries and other details so that whether the correct amount of “commission income” has been offered to tax may be verified by the Department. The Department cannot be expected to find out the details of all beneficiaries itself and cannot accept whatever income or expenses are offered/claimed by the assessee, without the assessee providing any methodology of arriving at the same along-with supporting evidence viz. details of beneficiaries, details of middlemen, basis of arriving at commission etc. In the instant facts, the assessee has submitted that he was operating through middlemen and does not know the name of beneficiaries in most of cases. However, most times, even the middlemen could not be contacted by the Department, since notices could not be served upon them as they were not available. Accordingly, in absence of details forthcoming from the assessee, a reasonable percentage may be arrived at, in the instant facts to arrive at the “commission” income earned by the assessee. In our view, looking into the totality of facts, it would be reasonable to take 0.25% of total deposits in the bank accounts owned/ operated by the assessee (₹ 295,56,30,168 for assessment year 2017-18), as commission income of the assessee for the assessment year under consideration.”
20. In the case of Lucky Bajoria v. ITO in ITA No. 345 /Ahd/2021, the ITAT Ahmedabad while holding that rate of 0.25% would be a reasonable rate, made the following observations:
“7.4 Now coming to the instant facts, we observe that the assessee has submitted that it has earned commission income, however, no details regarding the commission income earned by the assessee was furnished to the Department during the course of assessment or appellate proceedings. As held in the judicial precedents highlighted above, if the assessee is submitting that he is liable to be taxed only on the commission income so earned, then the onus is on the assessee to provide the basis as to how such commission income has been arrived at and also to provide list of beneficiaries and other details so that whether the correct amount of “commission income” has been offered to tax may be verified by the Department. However, the assessee has not maintained any books of accounts, has not maintained cash book and bank book, he has not submitted any details of parties from whom the commission income has been earned, the assessee has not given any supporting documents to corroborate the correct rate at which commission income may be computed and the assessee has also not provided details/ list of parties who have made deposits to the tune of ₹ 158 crores in the bank accounts held by the assessee. The assessee has not come up with any details to substantiate its stand that the commission income may be restricted to 0.1% to 0.15%. Accordingly, looking into the instant facts, in the interests of justice, it would be reasonable to restrict the net commission income @0.25% of the total deposits in the bank account held by the assessee. In the result, ground number 1 of the assessee’s appeal is partly allowed.”
21. Accordingly, in the interest of the justice, looking into the instant facts it is held that 25% of the deposits/credits made in the bank accounts held by the assessee with Penukamata Society would be the income of the assessee, so as to serve the ends of justice.
22. Since, similar facts and issues for consideration are under consideration in ITA No. 692/Ahd/2023 & 694/Ahd/2023 for A.Y. 2016-17 & 2017-18, our observations for A.Y. 2015-16 would apply to other years as well” (Emphasis Supplied)
14. Respectfully following the above decision of the Tribunal in the case of similarly placed Assessee, we restrict the addition to 0.25% of cash deposits in addition to commission income already disclosed by the Assessee. In terms of the aforesaid, Ground No. 3 to 6 raised by the Assessee are partly allowed. As regards, all the other grounds raised by the Assessee are concerned the same are dismissed as not pressed since no arguments were advanced on the same during the course of hearing and the Learned Authorised Representative had restricted the submissions to grounds raised on merits.
15. In result, the present appeal preferred by the Assessee is partly allowed.
Order pronounced on 03.07.2026.
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