Manishkumar Jadulal Thakkar Vs ITO (ITAT Rajkot)
Only Profit Element Taxable on Cash Deposits & Unsecured Loans – ITAT Rajkot Restricts Addition to 10% Instead of Entire ₹20 Lakhs
The Rajkot Bench of the ITAT partly allowed the assessee’s appeal in a reassessment for AY 2012-13 involving additions on account of interest-free unsecured loan of ₹13 lakhs and cash deposits of ₹7 lakhs (total ₹20 lakhs). The Assessing Officer had treated ₹13 lakhs as unexplained investment u/s 69 and ₹7 lakhs as unexplained money u/s 69A, which was confirmed by the CIT(A).
Before the Tribunal, the assessee demonstrated that the cash deposits were supported by opening cash balance, past savings, gift from father, receipts from mother, and sale of gold belonging to mother, supported by books of account, balance sheet and capital account. The Tribunal observed that the assessee was regularly maintaining books and filing returns for several years, and the AO had not recorded any finding that the books were false or fabricated. Relying on the Supreme Court ruling in Sreelekha Banerjee, the Tribunal held that evidences cannot be rejected without pointing out inherent defects.
However, considering inconsistencies and partly self-serving nature of documents, the Tribunal declined full relief and held that the entire ₹20 lakhs cannot be taxed as income. Instead, only the profit element embedded in the transactions should be brought to tax. The ITAT estimated income at 10% of ₹20 lakhs (₹2 lakhs) and directed that it be taxed under normal rates and not u/s 115BBE. The assessee’s appeal was thus partly allowed.
FULL TEXT OF THE ORDER OF ITAT RAJKOT
The present appeal has been filed by the Assessee, against the order passed by the Learned Commissioner of Income Tax (Appeal), National Faceless Appeal, Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”] dated 30.12.2025 arising in the matter of assessment order dated 27.12.2019 passed u/s. 143(3) r.w.s. 147 of the Income Tax Act, 1961 (here-in-after referred to as “the Act”) relevant to the Assessment Year 2012-13.
