Zakir Yakubbhai Patel Vs ITO (ITAT Surat)
44AD Case Can’t Be Turned Into Blanket Cash Addition: ITAT Surat Sets Aside ₹5.09 Cr Assessment for Fresh Verification
Surat ITAT set aside the assessment and appellate orders and restored the entire matter to the file of the AO for fresh adjudication.
The Assessee, a trader, had declared income u/s 44AD and admittedly did not maintain regular books of account. The AO, while scrutinising demonetisation-period transactions, treated entire bank deposits and credit entries aggregating to ₹2.43 crore as unexplained income, and further made additions of ₹71.87 lakh towards unsecured loans and ₹1.79 crore towards loans & advances, completing assessment at ₹5.09 crore. The CIT(A), NFAC dismissed the appeal without proper examination on merits.
The Tribunal noted glaring discrepancies—
• The Assessee claimed actual cash deposits were only ₹89.16 lakh, whereas additions were made based on incorrect / third-party bank data.
• Once income is declared u/s 44AD, the AO cannot mechanically treat entire bank credits as income.
• No clarity existed as to how figures of unsecured loans and advances were arrived at, especially when the Assessee had stated that such balances related to earlier years and books were not maintained.
Holding that the additions were made without proper verification and reconciliation, and that the first appellate authority failed to adjudicate the grounds effectively, the ITAT set aside the entire assessment and remanded the matter to the Jurisdictional AO. The AO was directed to re-examine cash deposits, loans and advances after giving the Assessee a fresh opportunity, with liberty to complete assessment based on material on record in case of non-cooperation. The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT SURAT
