Bogus Billing Business: ITAT Ahmedabad Holds That Entire Bank Credits Cannot Be Assessed as Income — Only Profit Is Taxable
Case Overview
Case Name: Prakashkumar Amratji Thakor Vs ITO (ITAT Ahmedabad)
Appeal Number: ITA No. 2471/AHD/2025
Date of Order: 06/07/2026
Assessment Year: 2018-19
Forum: Income Tax Appellate Tribunal, Ahmedabad
Background of the Dispute
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, recently delivered a significant ruling in the matter of Prakashkumar Amratji Thakor Vs ITO, addressing a fundamental question in income tax assessments — whether the entire aggregate of bank credits in the account of an assessee engaged in a bogus billing operation can be brought to tax as unexplained income, or whether taxation must be restricted to the actual profit derived from such activity.
The assessee, for Assessment Year 2018-19, had filed his return of income on 30.08.2018, declaring a total income of ₹2,96,250. The case was subsequently picked up for scrutiny through the Computer Aided Scrutiny Selection (CASS) mechanism. During the course of assessment proceedings under Section 143(3) read with Section 144B of the Income Tax Act, a rather damaging admission came to light — the assessee had himself acknowledged before the Assessing Officer (AO) that he had been engaged in running a bogus billing operation under the trade name Siddhi Trading Co., allegedly at the behest of one Shri Babulal Patel.
The Assessment and Addition Made
Despite the assessee's contention that the entire business was operated by Shri Babulal Patel and that he himself merely served as a name-lender, the AO observed that substantial credits were flowing into the assessee's bank accounts, followed by systematic cash withdrawals. Since the assessee was unable to furnish the identity, address, or verifiable details of Shri Babulal Patel, and since no satisfactory explanation was forthcoming regarding the source of these credits, the AO proceeded to treat the entire bank credit of ₹31,74,50,788 as unexplained income in the hands of the assessee.
As a result, the assessment was completed under Section 143(3) read with Section 144B of the Income Tax Act on 19.04.2021, and the total assessed income was determined at ₹31,77,47,038 — a staggering escalation from the declared income of under ₹3 lakh. It is noteworthy that in arriving at this figure, the AO entirely disregarded the corresponding debit entries appearing in the very same bank accounts.
Proceedings Before CIT(A) — National Faceless Appeal Centre
Aggrieved by the assessment order, the assessee preferred a first appeal before the National Faceless Appeal Centre (NFAC)/CIT(A). However, the appeal journey before the CIT(A) was far from smooth. The appellate authority extended five separate opportunities to the assessee to present his case and furnish the required documentation, but compliance was made on none of those occasions.
The CIT(A), while noting that even the delay in filing the first appeal had not been formally condoned, nonetheless proceeded to confirm the addition of ₹31,74,50,788 on the ground that the assessee had persistently failed to produce the details sought during the appellate proceedings. The appeal was accordingly dismissed.