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Judgment
PERAMITABH SHUKLA, AM:
This appeal has been preferred by the Revenue against the order dated 12.11.2025 of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, New Delhi,[hereinafter referred to as ‘ld. CIT(A)’] arising out of assessment order dated 28.03.2022 passed u/s 147 r.w.s. 144Bof the Income Tax Act, 1961. The word ‘Act’ herein this order would mean Income Tax Act, 1961,for the Assessment Year 2013-14. The assessee has also filed Cross Objection.
The Revenue has raised following grounds of appeal:-
1.Whether, on the facts andin the circumstances of the case, the Ld. CIT(A) has erred in law in treating unexplained cash deposits of Rs.3,76,59,000/- as “turnover” and estimating income @5%. instead of upholding the addition made u/s 68 r.w.s. 1158BE?
2.Whether the Ld. CIT(A) has erred in law in accepting additional evidence (affidavits, cash-flow statements) without ensuring satisfaction of the mandatory requirements of Rule 46A, and without proper verification of identity, creditworthiness and genuineness of alleged truck owners?
3.Whether the 1d.CIT(A) has erred in applying the principle of estimation of income in absence of books of account, when the statutory presumption under Section 68 ‘mandates addition of the entire unexplained cash credit?
4.Whether the 1d.CIT(A) has erred in law by relying on an unrelated third-party case (Shri Pradeep Singh. AY 2009-10) without establishing factual similarity or comparability, thereby ignoring the specific facts and failures of the present assessee?
5.Whether the Ld. CIT(A) has failed to appreciate that the assessee did not cast under Section 68 to prove the nature and source of the cash deposits, and therefore the AO was justified in treating the entire amount as unexplained.
6.Whether the 1d.CIT(A)’s action of granting relief without proper verification is perverse, contrary to evidence on record and in violation of the ratio laid down by various Courts that explained cash deposits cannot be presumed to be business receipts?
7.Whether the 1d.CIT(A) has erred in ignoring binding judicial precedents where courts have held that mere affidavits or self-serving statements without supporting evidence do not constitute valid proof under section 68?
ITA No.8606/Del/2025
We will take the appeal of the Revenue first. Heard rival parties in the light of material available on records. As per brief factual matrix of the case, the assessee had not filed its return of income despite indulging in substantial transaction amounting to Rs.3,76,59,000/-. The Revenue had conducted enquiries u/s 133(6) with the HDFC Bank, Muzaffarnagar and it transpired therefrom that the assessee had deposited large amounts of cash on various dates during the financial year under consideration. In response to notice u/s 148 dated 31.03.2021, assessee filed its return declaring income of Rs.1,94,150/- on 17.02.2022. Before the ld. AO, assessee admitted that it is engaged in the business of transport commission agent qua hiring of trucks by its clients. It was submitted that the cash receipts from the clients was deposited in his bank accounts and thereafter distributed to truck owners and service providers. The ld. AO noted that other than providing a list of truck owners, no other details was furnished casting doubt on the genuineness of cash deposits. He proceeded to make addition of Rs.3,76,59,000/- u/s 68 r.w.s 115BBE of the Act.
Aggrieved, the assessee filed appeal before the ld. CIT(A), who held that the amount of Rs.3,76,59,000/- be taken as turnover of the assessee and that 5% of the impugned turnover amounting to Rs.18,82,950/- was sustained as an addition and balance deleted. The ld. CIT(A) observed as under:-
“….4. A remand requisition was sent to the assessing officer on 22/09/2025 and inresponse to the same, the Remand report dated 22/10/2025 was received and the same is reproduced as under:-In this case it is submitted that the assessee is an individual and has not filed Return of Income u/s 139(1) or within the extended time limit prescribed u/s 139(4) of the IT Act, 1961 for the AY 2013-14. On the basis of information pushed under NMS category in AIMS module of ITBA, it was found that the assessee has made financial transaction of amounting to Rs. 3,76,59,000/-during the FY 2012-13 relevant to AY 2013-14. Accordingly, the notice u/s 133(6) of the Act was issued to the branch manager of HDFC bank, Muzaffarnagar after obtaining approval from the competent authority and called for bank statement of the assessee for the FY 2012-13. On perusal of the bank statement of the assessee, it was seen that the assessee has deposited cash on various dates in his bank account maintained with HDFC bank, Muzaffarnagar during the year under consideration but not filed ITR for the A.Y. 2013-14. The analysis of banking statement of the assessee confirmed that the source of cash deposit amounting to Rs. 3,76,59,000/- remains unexplained and undisclosed income of the assessee. Accordingly, the notice u/s 148 of the Act was issued to the assessee on 31.03.2021 and duly served to the assessee. In response, the assessee filed return of income on 17.02.2022 declaring a total income of Rs. 1,94,150/-. Subsequently, the notices u/s 143(2) and 142(1) of the Act were issued and the assessee responded and filed submission as per requirements from time to time. During the course of assessment proceedings, on perusal of submission made by the assessee, it was seen that the assessee has made cash deposit of amounting to Rs. 3,76,59,000/-in his bank account maintained with HDFC bank, Muzaffarnagar which has also been confirmed from the account statement of the assessee. In his reply, the assessee has stated that he is a transport commission agent and arrange trucks for clients on commission basis. The truck drivers received payments from the clients in cash and the same was deposited in the bank account of the assessee in Muzaffarnagar. After deducting commission from the amount received from the clients, the assessee paid the balance amount to the petrol pumps owners for supplying diesel and also to the spare parts shop owners for providing tyres and other accessories etc. to run the trucks on prior permission of the truck owners.During the assessment proceedings, the assessee was asked to furnish details of trucks hired, details of client's details of parties who received goods etc. The assessee furnished only list of trucks owners but no other details. Accordingly, after perusal of all the records furnished by the assessee as well as available on record of this office, it was found that the assessee has not proved the genuineness of the cash deposits/transactions and thus the assessment was completed on an assessed income of Rs. 3,78,53, 150/- after making an addition of Rs. 3,76,59,000/- u/s 68 of the Act r.w.s. 115BBE on 28.03.2022As per your direction for submission of remand report with reference to the appellant's submission one-filing portal (CPC 2.0), while going through the CPC 2.0, it has been found that no submission has been filed by the assessee on the portal. Accordingly, a letter was issued to the assessee on 25.09.2025 to furnishadditional evidence/facts/grounds. In response, the assessee has furnished additional evidence and facts in the form of affidavits received from the truck owners containing that they have advised the assessee to pay freight received from the clients to petrol pump owners as well as to spare parts shop owners for supplying diesel and other accessories supplied to the trucks from time to time during the transportation of goods of clients, bank statement for the F.Y. 2012-13 and cash flow statement of the assessee for the year ended on 31st March, 2013.
On perusal of bank statement and cash flow statement of the assessee, it has been gathered that the assessee has received commission of amounting to Rs. 3,76,600/- @ 1% while making payments of Rs. 3,76,60,082/- to the truck owners as freight received from the clients and paid the balance to the petrol pump and spare parts shops owners. On perusal of the bank statement of the assessee, it has also been noticed that the assessee has received payments of Rs. 3,75,29,007l- and the same was paid to the owners of filling stations as well as to the spare parts shop owners. Also, cash flow statement of the assessee for the year ended 31st March, 2013 reveals that the opening balance was at Rs. 1,20,000/- and the assessee received payments from the clients/parties in cash at amounting to Rs. 3,76,59,000/- and cheque of Rs. 1,22,029/- which comes to a total of Rs. 3,79,01,029. On the other side, the assessee has made payments to truck owners at amounting to Rs. 3,74,04,429/- and balance amount has been shown as expenses, drawings, cash in hand and cash at bank. Thus, the both sides of cash flow statement have been equally shown at amounting to Rs. 3,79,01,029/- which is apparent from the records. In addition, the assessee has also submitted copies of affidavits of the truck owners in which the truck owners have solemnly accepted the amount received as freight from the assessee and advised the assessee to pay the amount to the owners of petrol pumps as well as to the spare parts shop owners. In this regard, it is also pertinent to mention here that the assessee has submitted the copy of assessment order in a similar case of Pradeep Singh bearing PAN--(CLHPS4652Q) for the AY 2009-10 in which, the AO of Ward- 2(1), Muzaffarnagar has accepted the income of the assessee at estimated commission received @5% on totai freight receipts. Therefore, in view of the above, the justification of commission on freight received by the assessee on amount of freight received from the clients and thereafter balance amount of freight, paid to the petrol pump owners as well as to the owners of spare parts shop on the instruction of truck owners is being submitted for your kind perusal.
5.I have carefully considered the assessment order, the grounds of appealand the written submission of the appellant along with the supporting documents furnished. I have also perused the remand report submitted by the assessing officer in the case.
5.1.Upon thorough consideration of the assessment order, grounds of appeal, written submissions, affidavits, cash flow statement, and the remand report, as well as the precedent set in the case of Shri Pradeep Singh (A.Y. 2009-10, ITO Ward-2(1), Muzaffarnagar), it is clear that the appellant has provided sufficient evidence to support his business as a transport commission agent. The affidavits from truck owners and the cash flow statement substantiate the claim that the majority of the cash deposits represented freight receipts, which were subsequently disbursed to truck owners and service providers like petrol/fuel stations and spare part dealersas part of regular business practice.
5.2.The appellant relied on a similar case of Pradeep Singh, where the incomewas assessed by estimating commission income at 5% of the total freight receipts.This approach was accepted by both the Assessing Officer and the CIT (Appeals), Muzaffarnagar. The appellant has relied on this precedent to argue for a reasonable estimation of income, rather than the addition of the entire turnover as unexplained income. Further, the appellant had not maintained any regular books of accounts and supporting documents to claim lower profit as admitted by the appellant.
5.3.Therefore, considering the facts and circumstances of the present case, and in the interest of justice and consistency with the treatment accorded in the Pradeep Singh case, the Assessing Officer is directed to estimate the appellant's profit by applying a rate of 5% of the turnover (i.e., 5% of Rs, 3,76,59,000), and to assess the income accordingly. The addition made under section 68 r.w.s. 115BBE is to be restricted to the profit so estimated, and the balance is to be deleted.
6.In the result, the appeal is partly allowed….”
The ld. Sr. DR vehemently argued in favour of the order of the ld. AO and submitted that no Return of Income was originally filed by the assessee neither were the accounts audited. It was submitted that it was intriguing that all the cash deposits were made in the Muzaffarnagar bank branch only. The ld. DR therefore argued that the estimation of 5% profit in respect of total cash deposits of Rs.3,76,59,000/- was thus faulty.
Upon consideration of the order of the ld. AO, we have noted that the ld. AO has not disputed the principal business of the assessee of being a transport commission agent. It is not the case of the Revenue that the assessee was not doing transport commission business. The Revenue has primarily premised that non-submission of sufficient details of its business, cast a doubt upon the genuineness of cash deposits in its bank account. We have noted from the order of ld. CIT(A) extracted hereinabove that he had given the opportunity to the ld. AO to defend his addition and file a remand report. In the impugned remand report dated 22.10.2025, the ld. AO primarily repeated the arguments taken in the assessment order dated 28.03.2022, we have noted that towards the end of his remand report, the ld. AO himself has alluded and submitted before the ld. CIT(A) that in a similar case on identical facts of one Shri Pradeep Singh, the AO had estimated the commission received of 5% on total freight receipts.
Thus, the relief accorded by the ld. CIT(A) has a direct connection with the remand report of the ld. AO. As per para-5.2 of the appellate order (supra), the assessee had also relied upon the precedent alluded in the case of Shri Pradeep Singh. Thus, the assessee has himself indicated 5% commission qua case of Shri Pradeep Singh, and the ld. AO has also included the same precedence in his remand report. Accordingly, no fault can be attached to the conduct of ld. CIT(A) while estimating addition @5% of the turnover. The ground of appeal no.1, 3, 4, 5 and 6 raised by the appellant revenue is therefore dismissed.
The Revenue through ground of appeal no.2 has submitted that its right under Rule-46A have been violated as the ld. CIT(A) has considered which were not considered by the ld. AO. The impugned ground raised by the revenue has been found to be totally bereft of any meritorious consideration. In para-4 on page-4 of the appellate order, the ld. CIT(A) has clearly indicated that vide his letter dated 22.09.2025, it had called remand report. On page-5 of the order, he has written in the first line on the top that the ld. AO had submitted a remand report dated 22.10.2025. The argument of the appellant Revenue of violation of Rule-46A is thus not made out. The ground of appeal no.2 of the Revenue is therefore dismissed as infructuous.
Cross Objection No.97/Del/2026
The assessee has raised following grounds of appeal in his Cross objection:-
1.That, the assumption of jurisdiction U/s 147 and issuance of notice U/s 148 is illegal, bad in law and without jurisdiction and barred by time limitation.
2.That the order passed under section 147 is illegal, bad in law, without jurisdiction and against the material available on record.
3.That the NFAC has erred in law and on facts in estimating the G.P. @ 5 % of the total amount deposited at Rs.3,76,59,000.00 in the bank account and sustained the addition of Rs.18,82,950.00, which is highly arbitrary, unjustified and baseless.
4.That, the NF AC has erred in restricted the addition of estimation of profit U/s 68 r.w.s. 1115BBE of the ACT, which is highly arbitrary, unjustified and against the facts and circumstances of the case.
5.The addition made and the observations made are unjust, unlawful and based on mere surmises and conjunctures. The additions made cannot be justified by any material on record.
6.That the explanation given evidence produced, material placed and available on record has not been properly considered and judicially interpreted and the same do not justify the additions/ allowances made.
Heard rival parties in the light of material available on record.
No arguments with any evidences have been put-forth by the ld. Counsel for the assessee in respect of its grounds of appeal no.1 and 2 above and hence the same is dismissed as infructuous.
As regards grounds of appeal no.3, 5 and 6 regarding estimation of 5% of profits treating cash deposits as the turnover by the ld. CIT(A) , the same has been found to be in order as concluded in Revenue’s appeal discussed hereinabove. We have noted that the suggestion of 5% was given by the assessee himself by citing the case of Shri Pradip Singh (supra). The ground of appeal nos.3, 5 and 6 are also therefore dismissed.
The ground of appeal no.4 is regarding invocation of provisions of section 115BBE of the Act on addition made u/s 68 of the Act. We have noted from the para-5.3 of the appellate order (supra) that the estimation by Ld. CIT(A) has been made with the clear directions “…..The addition made under section 68 r.w.s. 115BBE is to be restricted to the profit so estimated, and the balance is to be deleted…”. We do not find any fault in the order of the ld. CIT(A) as he has given a clear finding that the estimation of 5% is to be added u/s 68 r.w.s. 115BBE of the Act. Now once a conclusion of the income falling in the realm of section 68 was taken, invocation of section 115BBE of the Act was natural corollary. Thus, no fault can be find to the order of the Ld. CIT(A). Ground of appeal no.4 of the assessee is also dismissed.
In the result, the Cross Objection of the assessee is dismissed.
Finally, appeal of the Revenue and Cross Objection of the assessee are dismissed.