TaxTMI 
TaxTMI 
2026 (3) TMI 1398
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....the Income-tax Act, 1961 (hereinafter referred to as 'the Act' in short) for Assessment Year for AY 2018-19 to 2021-22. IT(SS) Nos. 73 to 75/Ahd/2025 and ITA No. 1277/Ahd/2025 are the appeals filed by the Revenue against the orders of Ld. CIT(A), even dated 28.03.2025, for AYs 2015-16, 2016-17, 2017-18 and 2014-15 respectively. ITA No. 1392/Ahd/2025 is the appeal filed by the assessee against the order dated 28.03.2025 passed by the Ld. CIT(A) for AY 2021-22. 2. Since all these appeals pertain to the same assessee, arise out of the same search action, involve common facts and interconnected issues, they were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. We take-up IT(SS)A No.73/Ahd/2025 for AY 2015-16 as the lead case. In this appeal, the Revenue has raised following grounds of appeal:- "1. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 2,98,14,000/- made by the Assessing Officer under the provisions Section 68 of the Act on account of unsecured loans, despite the fact that the Assessee could not substantiate the same with cogent documentary ev....
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.... recorded in the books of account but cash transactions were out of books transactions." 4. Since the facts and issues involved in the other appeals are identical, our findings and conclusions recorded in IT(SS)A No.73/Ahd/2025 for A.Y. 2015-16 shall apply mutatis mutandis to the remaining appeals and the grounds raised therein are disposed of accordingly. 5. The brief facts of the case, as per AY 2015-16, are that the assessee company filed its original return of income under section 139(1) declaring total income at Nil. A search action u/s 132 of the Act was carried out in Kothi Group on 05.11.2020, wherein the assessee was also covered. Pursuant to the search, notice under section 153A was issued and assessment was completed determining total income at Rs. 3,03,82,267/-. 5.1 During the course of assessment proceedings, the Assessing Officer observed that the assessee had received unsecured loans aggregating to Rs. 2,98,14,000/- from seven parties. The Assessing Officer treated the said amount as unexplained cash credits under section 68 of the Act primarily on the basis of certain affidavits found during search and enquiries conducted by the Investigation Wing. Further,....
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....s, executed in 2016, contain details of the assets and liabilities of the respective individuals as of 31.03.2015 and have been reproduced at the beginning of the assessment order. Based on these affidavits, the Assessing Officer observed that the assets declared therein did not reflect any unsecured loans extended to the appellant, M/s HK Ispat Pvt. Ltd., despite the fact that the appellant had received unsecured loans from these individuals in its books of account for the Assessment Years 2015-16 to 2021-22. The AO had further referred to various enquiries conducted by the Investigation wing during the post-search proceedings regarding unsecured loans obtained by the appellant. These enquiries had been mentioned on pages 21 to 26 of the assessment order which include information gathered by issuing summons u/s 131 of the Act to several lenders, Inspector Reports, analyzing the income profiles and bank statements of the lenders, and other relevant verifications. Based on the affidavits of individuals of the Kothi Group and the findings of the investigation wing, the AO while passing the assessment order concluded that the unsecured loans recorded in the books of the appellant were....
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....e transactions under: (i) Confirmation of lender (ii) Relevant Extract from bank statement of appellant highlighting transaction with lenders (iii) Relevant Extract from banks statement of lender highlighting transaction (iv) Return of income of lender (v) Ledger copy of lender in books of appellant (vi) Explanation on Source of loan given to appellant (vii) Extract from books of accounts of the appellant for subsequent year evidencing repayment of loan 6.3 In addition to this, the appellant has raised following arguments vide submissions filed during the course of appellate proceeding:- (i) The appellant submitted relevant documents such as PAN Card, return of income and bank statement highlighting entries of loan given along with entries providing details of source, confirmation, etc pertaining to the lenders and discharged its primary burden of proving the identity, genuineness of transactions and creditworthiness of the lenders. (ii) The appellant has submitted that the creditworthiness of the parties cannot be doubted merely on the basis that income offered in their return of income is lo....
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....submitted that such amended provisions not applicable to current year, thus the appellant should not be asked regarding source of source of lender. (viii) The appellant has also claimed that loans take during the year are repaid in current year or subsequent period hence such loans cannot be subject matter of addition u/s 68 of the Act. The appellant has also relied upon various judicial pronouncements in support of its contentions. 6.4 I have carefully considered the relevant facts on record, observation of the AO as well as the submissions filed by the appellant. The brief facts as emanating from the assessment order are that Assessing Officer has treated loan taken by the appellant from various parties for Rs. 2,98,14,000/- as bogus mainly relying upon post-search investigation analysis by investigation Wing, which is summarized in assessment order. During the course of assessment proceedings as well as appellate proceedings the appellant has submitted various evidences which are summarized as under: Sr. No. Name of Lender Amount of addition as per assessment order Remark 1 Abedabibi Mehbub Foda 22,05,000 A statement giving explanation o....
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....d vide Paper Book Page no. 216 Relevant extracts from bank statement of the lender are attached vide Paper book Page No. 217 - 236 6.5 Before dealing with observation of the Assessing Officer and submission filed by the appellant, it is relevant to refer to provision of Section 68 of the Act prevailing in year under consideration as under: "68, Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year: Provided that where the assessee is a company (not being a company in which the public are substantially interested), and the sum so credited consists of share application money, share capital, share premium or any such amount by whatever name called, any explanation offered by such assessee-company shall be deemed to be not satisfactory, unless- (a) the person, being a resident in whose name such credit is recorded in the books of such compa....
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....elevant to refer to ratios laid down by few Courts as under: ...... ...... 6.11 with the above referred background and judicial pronouncements, loan taken by the appellant from each party and its applicability as per provision of section 68 of the Act is adjudicated in subsequent paras. 6.12 So far as loan taken from Abedabibi Mehboob Foda for Rs. 22,05,000/- is concerned (Sr. No.1), the appellant has submitted sufficient evidences as tabularized herein above (para 6.4) which prove that the appellant has discharged its onus as cast u/s 68 of the Act. [t is observed that depositor is relative of promoter Director and funds received from AK Traders as well as her savings were used for making deposits. The Assessing officer in assessment order has referred to summons issued u/s 131(1A) by investigation department wherein she has admitted that loan was given out of her savings and income earned from Embroidery with regard to observation of Assessing officer that there was credit entry of Rs. 22,05,000/- in the bank account of depositor which was used for giving loan to the appellant, it was explained that depositor has received such funds from AK Tra....
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.... and loan has been given out of such savings. It is found that loan taken during the year has been repaid in subsequent period. Considering the facts discussed herein above addition made by Assessing Officer for loan taken of Rs. 67,34.000/- is deleted 6.15 So far as lq2n from Irfan Kothi for Rs. 1,11,00,000/- (Sr. No. 4) is concerned the appellant has submitted sufficient evidences as tabularized herein above which prove that the appellant has discharged its onus as cast u/s 68 of the Act. It is observed that depositor is one of the Director-cum-promoter of the appellant Group who has given loan to the appellant as and when required. There is running account of said depositor with the appellant company. on perusal of such details, it is found that said person has given loan of Rs. 3.31 crores from AY 2015-16 to 2021-22 and the appellant has repaid loan of Rs. 3.03 crores during such period. It is also observed that there is no cash deposit in depositor's bank account prior to loan given to the appellant. The Assessing officer himself in the assessment order has mentioned that said depositor in response to summons issued u/s 131(1A) has confirmed that he has received r....
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.... the assessment order has mentioned that said depositor in response to summons issued u/s 131(1A) has confirmed that he has received remuneration from the appellant and loan has been given out of such savings. It is observed that assessment order u/s 153C of the Act for AY 2015-16 to 2021-22 was passed by same Assessing Officer on 10-05-2023 wherein he has not doubted the sources of loan given to the appellant. When the assessment of the depositor has been completed u/s 153C of the Act pursuant to same search as has been carried out in present case, addition u/s 68 of the Act for loan taken from such party does not survive. It is found that loan taken during the year has been repaid in subsequent period. Considering this fact, addition made by Assessing Officer for Rs. 3,00,000/- is deleted. 6.18 So far as loan of Rs. 70,55,000/- taken from Zainabbibi Kothi (Sr. No 7 of table) is concerned the AO has observed that the appellant has submitted evidences as required u/s 68 of the Act. It is observed that depositor is wife of one of the Director and shareholder. It is observed that in year under consideration the appellant has taken loan of Rs. 70,55,000/- only which has alrea....
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....ncome tax and have confirmed their transactions with the assessee company. It further shows that all the transactions are through bank only and therefore legitimate. Further the sources of the loans from the said parties have been explained by way of supporting documents such as bank statements, IT Returns, Computation, and ledger accounts. Further all the above loans were taken for business purpose only as is clearly evident from the bank statements of the assessee company submitted. ........ ....... (xi) Here, in the given case of the assessee the transactions are confirmed by the lenders themselves by way of confirmations. Their PAN, bank statements and copy of I.T. Returns has also been submitted to prove their identity and creditworthiness." In our opinion, the assessee has successfully discharged the primary onus cast upon it by Section 68 by submitting loan confirmations, bank statements, and PAN data. The assessee has provided sufficient evidences to discharge its onus as cast u/s 68 of the Act. Once this initial burden is met, the onus shifts to the Revenue to disprove the evidence provided. The Ld. CIT(A) has given finding of each lender base....
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....ble at the time of the transfer. 8.4 It is relevant to mention that the assessee has furnished evidence showing that the majority of these loans were repaid through account payee cheques, either in the year under consideration or in subsequent years. As held by the Hon'ble Gujarat High Court in the case of CIT vs. Ayachi Chandrashekhar Narsangji [42 taxmann.com 251], when the Department accepts the repayment of a loan in a subsequent year, the original loan cannot be treated as an unexplained cash credit. The logic is sound, an assessee would not "repay" its own undisclosed income to a family member or director through a recorded banking channel, as it would create a permanent trail of the very funds it sought to hide. The loan taken by the assessee are running loan account and Assessing Officer has made addition for credits only ignoring significant payment in current year as well as subsequent years. The Ld. CIT(A) has correctly reproduced chart of repayment of loan in the appellate order. Similarly, in PCIT v. Ambe Tradecorp Pvt. Ltd. (145 taxmann.com 27), the Gujarat High Court held that where the assessee furnished necessary material to prove identity of the lenders and....
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....epositors and even notarized copy of proof of identities have been submitted. Assessee had also submitted acknowledgement of Return of Income of all the depositors and bank passbook which reflects the credit worthiness of the depositors. Since all the confirmations from the depositors have been submitted, so there was no conclusion of any afterthought or make believe transactions. All the transactions are duly recorded in the regular books of accounts. Therefore, genuineness of those cannot be doubted. Even otherwise, Hon'ble jurisdictional Gujarat High Court in the case of DCIT Vs. Rahini Builders along with PAN and confirmation, then in that eventuality no additions are sustainable. Even in the case of CIT Vs. Ranchhold Jivabhai Nakhava (supra)it has categorically been held Hon'ble jurisdictional Gujarat High Court that when once the initial onus has already been discharged by the assessee, then in that eventuality it was the duty of the Id.AO to ascertain from the Id.AO's of those lendors, whether in the respective returns they have shown existence of such amount of money or not. The Id.AO in the present case has not carried out any such exercise as has been laid dow....
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....it is also pertinent to note that M/s Master Developers did not file the income tax returns for the assessment years 2008-09 to AY 2010-11 under section 139(1) of the Act. But M/s Master Developers has filed the returns of income in response to the notice issued under section 148 of the Act, declaring the income which has been elaborated in the preceding paragraph. Indeed, the returns were filed by the M/s Master Developers subsequent to the assessment order dated 30-03-2015 declaring the income which has been elaborated in the preceding paragraph. As such the income declared by the M/s Master Developers in its income tax returns were duly accepted by the Revenue. Though, these returns were filed by MD subsequent to the assessment in the hands of the assessee, but these returns in our considered view are crucial for determining the net worth of MD. These returns were filed before the learned CIT(A) and no doubt was raised on these returns. Assessee in respect of source of fund in the hands of the lender i.e. MD has furnished the sufficient documentary pieces of evidence such as bank statement, ledger copy of MD and Shri Rajnibhai Desai in the books of each other including ....
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.... depositors and the photocopy of their PAN card. It further appears that the assessee had received loans by Accounts Payee Cheque from these three persons. The Assessing Officer, without verifying whether those three creditors in their respective income tax return had shown those transactions, decided to examine those three persons under Section 131 of the Income Tax Act. Those persons stated that before receiving the cheques, the assessee had given cash to them which was deposited in the account of M/s. Vaibhav Enterprises on different dates, and against that, they had received cheque and out of that balance they had deposited the money with the assessee. The assessee was given opportunity to cross-examine two of the lenders. In the cross-examination, both the lenders had confirmed giving loan to the assessee, and in response to the question of the assessee about the source of the money, it was stated that they had received cash from the assessee which they had deposited in M/s.Vaibhav Enterprises and from that account cheques were issued in favour of the lenders, and in turn, the lenders issued cheques and deposited with the assessee. They, however, confirmed that signat....
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....the learned advocate appearing on behalf of the appellant and after going through the materials on record, we are unable to accept her contention that in this case the Revenue has discharged its onus and it was for the assessee to further prove the genuineness and creditworthiness of the creditors. In our view, once the assessee has established that he has taken money by way of accounts payee cheques from the lenders who are all income tax assessees whose PAN have been disclosed, the initial burden under Section 68 of the Act was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the tran....
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.... Income Tax (Appeals) and Tribunal both had come to the conclusion that the assessee had produced the copy of PAN card, address confirmation, copy of the return and the bank statements of the payee for the present assessment year as well as in the earlier assessment year where such an issue had cropped up. Essentially, Commissioner of Income Tax (Appeals) as well as the Tribunal held that the assessee established the genuineness of transaction, creditworthiness of payee and the source of the payment. The issue hinges on appreciation of material on record. No question of law arises. Tax Appeal is dismissed." (v) Decision of Hon'ble Gujarat High Court in case of Dharmadev Finance in 43 taxmann.com 395 "Section 68 of the Income-tax Act, 1961 Cash credits (Burden of proof) Various additions were made to assessee's income on account of cash credits - It was found that in respect of said credits assessee had filed PAN of creditors, their confirmation and their bank statement which established their creditworthiness Moreover, transactions were made through banking channels - Whether any addition could not be made to assessee's income under section 68 -Held, y....
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....in order to demonstrate that this assessee is assessable to tax, and it proves its identity. That concern, responded to the notice received under section 133(6) of the Act. The AO, thereafter did not conduct any inquiry. We deem it appropriate to mention that investigation wing of the department is able to unearth details of various accommodation entry providers mainly Kolkatta based companies, but the AO nowhere observed that these concerns were ever engaged in providing accommodation entries, and this fact came to notice of the Department through its investigation wing. Thus, if he has any doubt, he should have called for further information from the share applicants. He should have asked the assessee to produce directors of share applicant companies or Shri Anil Kumar who is brother of one of the directors. The AO could have issued summons under section 131 of the Income Tax Act. But instead of conducting any inquiry, he just draw certain inference for disbelieving the documents produced by the assessee or received by him in response to his notice under section 133(6) of the Act. it is also pertinent to observe that quantum of income mentioned in the return of income cannot be c....
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....der now. In the case of assessee A.O. did not make any enquiry, therefore, the facts of the case of assessee are clearly distinguishable from the Judgment in the case of PCIT vs., NRA Iron & Steel (P.) Ltd., (supra) relied upon by the Ld. D.R. 6.16. The A.O. merely doubted the financial capacity of the Investors because they have reported low income in their return of income. This cannot be the sole basis to doubt the explanation of assessee. It may be suspicion of the A.O. only without bringing any evidence on record. Rather the documentary evidences produced on record clearly support the explanation of assessee. The Hon'ble Bombay High Court in the case of Ami Industries (India) Pvt. Ltd., (supra) has distinguished the Judgment of NRA Iron & Steel (P.) Ltd., (supra) as reproduced above. It may also be noted here that the case of M/s. Adamine Construction Pvt., Ltd., (supra) is connected with the case of Bhushan Steel Group of cases as is also attributed in the case of assessee and on identical facts the Tribunal has dismissed the appeal of Revenue and the Order of the Tribunal has been confirmed by the Hon'ble Delhi High Court by dismissing the appeal of the Reve....
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.... Court in [2018] 99 taxmann.com 45. Hon'ble ITAT Ahmedabad in case of Deem Roll Tech Ltd vs. DCIT [2018] 92 taxmann.com 72: "I. Section 68 of the Income-tax Act, 1961 Cash credits (Share application money) - Assessment year 2011-12 - During relevant year, assessee received certain amount as share capital - Assessing Officer issued notice to assessee directing him to furnish identity, confirmation, creditworthiness of share applicants In response to said notice, assessee filed confirmation from applicants, bank statements, their PANs and, copies of their returns - Assessing Officer thereafter directed assessee to produce applicants before him - Since assessee failed to produce those applicants, Assessing Officer made addition of share capital to assessee's income under section 68 -Whether on facts, by submitting confirmation, bank statements, copies of returns, PAN data, assessee had discharged primary onus cast upon it by section 68 and thereupon, it was Assessing Officer who had to carry out investigation and demonstrate that those materials were not sufficient for discharging onus cast upon assessee - Held, yes - Whether since, Assessing Officer failed to carry o....
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....tement of such creditors are recorded by AO which can prove that such parties are bogus or providing accommodating entries. It is settled position of law that addition cannot be made merely on presumption and when the Assessee has discharged his initial onus casted under section 68 of the Act, the AO ought to have brought evidences to disprove such evidences. In absence of any corroborative evidence brought on record by the AO, addition made by him under Section 68 of the Act cannot be upheld........... 13.8. The Ld. CIT[A] further held that the AO in his show cause notice as well as in assessment order has referred inquiry report pertaining to loan taken from Anamika Dealmark Pvt. Ltd. from whom assessee has taken loan for Rs. 80,00,000 in current year and in such report, it was stated that such party was not found at address 3rd Floor, 28, Baroda Charan Bhattacharjee Lane, West Bengal. It is observed that during the course of assessment proceedings, the assessee has submitted copy of Return of Income of such party (AO has also received it from departmental record as mentioned in assessment order) and on perusal of such details, it is found that communication address was ....
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....ctions (P.) Ltd. [2018] 99 taxmann.com 44 held as under: ............... 13.10. In other words, on one hand cases where the AO has conducted an inquiry and disproved whatever submitted by the assessee and in other hand, the AO simply assumed existence of such facts. All Hon'ble High Courts are unanimous in their approach that where the AO remained silent, did not conduct any inquiry, and merely on the basis of certain details submitted by the assessee draw an inference in such cases, he cannot simply doubt the stand of the assessee. ....................... Ratio of above referred decisions are squarely applicable on present cases more particularly in case of assessee as exhaustive search was carried out and no evidences were found which prove that assessee has obtained accommodative loan from the above persons and cash is exchanged against such loans. ..................... 15.3. We have given our thoughtful consideration and perused the materials available on record. The addition made by the Assessing Officer invoking Section 68 does not hold it good, since the assessee has filed the confirmation from the lenders, Bank state....
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....y few Courts as under. (i) Decision of High Court of Gujarat in the case of Principal Commissioner of Income-tax v/s. Ambe Tradecorp (P.) Ltd vide 145taxmann.com27 dated 05.07.2022 wherein it was held as under: "Section 68 of the Income-tax Act, 1961 Cash credit (Bogus loan) Assessment year 2012-13 Assessee received loans from two parties Assessing officer treated same to be sham for reason that creditworthiness of loan givers was not established and, accordingly, made addition under section 68 It was noted that Tribunal recorded findings of facts that assessee had furnished details such as copy of ledger account, bank statements, income-tax returns, balance sheet etc. of loan givers - It was also recorded that notice under section 133(6) was issued to said loan givers which were duly responded by them, therefore, identity of parties could not be disputed-It was also noticed that assessee was not beneficiary as loan was repaid by assessee in subsequent year Whether, on facts, identity and creditworthiness of parties and genuineness of loan transactions were well established, therefore, impugned addition made under section 68 on account of said loan amount was unju....
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....g the credit of share application money and unsecured loan as unexplained cash credit under section 68 HELD THAT: Once the repayment of the loan received is established, then the genuineness cannot be doubted. In this respect we find support and guidance from the judgment of Hon'ble Gujarat High Court in the case of the CIT Vs. Rohini builders [2001 (3) TMI 9-GUJARAT HIGH COURT) Appeal of assessee allowed." (iii) Decision of Hon'ble ITAT Surat in the case of M/S White Willow Vishram Apartment Versus Income Tax Officer, Ward-1 (3) (5) vide order dated 14.08.2023 vide ITA No. 370/SRT/2022: "Addition on account of unsecured loan Addition of unsecured loans, merely on the basis of the statement of Rajendra Jain [entry provider]- CIT(A) upheld the addition of unsecured loan as well as disallowance of interest expense by holding that to prove the genuineness of unsecured loan it is the duty of assessee as mandated u/s 68 to prove the identity, creditworthiness and genuineness of such transactions - HELD THAT:- We find that in response to the show cause notice, the assessee furnished loan confirmation, PAN, bank statement along with ITR of lenders. We further fin....
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....e was the ultimate beneficiary of the impugned amount. Thus, we can assume that the impugned transaction was the business transactions between the assessee and the loan parties. We hold that the amount of loan received by the assessee represents the unexplained cash credit in its books of accounts. Accordingly, we set aside the finding of the CIT-A and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is allowed." (v) Decision of HIGH COURT OF GUJARAT in the case of (V) Commissioner of Income-tax, Rajkot-l v. Ayachi Chandrashekhar Narsangji [2014] 42 taxmann.com 251 wherein it was held as under: "Head Note: Section 68, read with section 143, of the Income-tax Act, 1961 Cash credit [Loans] - Assessment year 2006-07-Assessing Officer framed assessment under section 143(3) wherein he made addition of Rs. 1.45 crore under section 68 on ground that loan taken from one 'IA' was not explained satisfactorily - On appeal, Commissioner (Appeals) was satisfied with respect to genuineness of transaction and creditworthiness of 'IA' and, therefore, deleted addition - It was found that total loan of R....
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....earch, digital data was seized as Annexure - A/48, which contains various excel sheets having several entries where cash is written. During the post search inquiry, the appellant has claimed that these sheets are working for funds planning prepared by the appellant which includes fund flow, cash flow, LC payments, cash withdrawn from bank including name of the person who went to withdraw the funds, notings for cash discount to debtors, etc., which is duly recorded in books of account. The appellant has reiterated its submission before the Assessing officer. During the course of assessment proceedings, the Assessing officer has identified certain transactions which were duly recorded in books of account for which no addition has been made. However, where the notings were of "cash", the Assessing officer has considered such amount as unexplained expenditure u/s 69C of the Act. The Assessing Officer has made addition of following entries in year under consideration. Sheet Name Remarks Amount March Cash 5,00,000 7.2 During the course of Appellate proceedings, the appellant has reiterated its contentions as were raised before the Assessing Officer and....
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....ecord any instances of unaccounted receipts or expenses that have not been subjected to tax, and has failed to controvert the factual evidence proving the recorded source of the cash, the addition cannot be sustained. We find that the Ld. CIT(A) has correctly analyzed all aspects of the matter, including the physical verification of the bank trail. There is no reason for us to believe that a notation in a planning sheet represents a "bogus" expense when the corresponding amount is clearly reflected in the audited books of account and the bank-verified trail. The Assessee has explained that noting in such loose sheets represents entries already recorded in books of account like cash withdrawal from bank, sales made to parties, discount given to parties etc. which is not contravened by Ld. CIT(DR). Accordingly, we find no reason to interfere with the findings of the Ld. CIT(A) on this issue. The deletion of the addition of Rs. 5,00,000/- is hereby confirmed. The ground raised by the Revenue on this issue for all the aforesaid years is dismissed. ISSUE NO. 3 - ESTIMATION OF PROFIT @ 6% ON ALLEGED BOGUS PURCHASES (AYs 2018-19 AND 2019-20) - BY REVENUE & ASSESSEE 10. In AY 2018....
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....,624/- from AH Traders which was considered to be bogus by Assessing Officer. During the course of assessment proceedings, the appellant has submitted various evidences being purchase invoices, lorry receipts, GST returns, stock register, bank statement to prove the genuineness of the transactions. The Assessing Officer has prima facie treated such purchases to be bogus purchases on the basis of allegation of bogus purchase by group concern being Kothi Steel who was also covered under GST search. However, the appellant has submitted that it had purchased goods from AH Traders whose GST number has not been cancelled and proprietor of such concern is filing income tax as well as GST returns. On perusal of assessment order, it is apparent that Assessing Officer had made addition for bogus purchase from AH Traders on the ground that Inspector report during post- search inquiry suggests that premises of said concern was closed. Against this observation the appellant has claimed that due to Covid lockdown, business activity of said concern was reduced. However, in assessment order the Assessing Officer has pointed out that even during Covid period AH Traders had shown substantial busines....
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....hat conclusion arrived at by Tribunal of restricting disallowance at 6 per cent was based on facts before it which were duly analysed and thus, no interference was called for in findings of Tribunal - Whether, thus, following aforesaid view, Tribunal was justified in estimating addition at rate of 6 per cent of bogus purchase - Held, yes (Para 7] [In favour of assessee]" Decision of Hon'ble Gujarat High Court in case of Principal Commissioner of Income Tax Vs. Deepak Banwarilal Agarwal Tax Appeal No. 67 of 2024 dated 23/01/2024: "Section 69, read with section 260, of the Income-tax Act, 1961 - Unexplained investments (Bogus purchases) Assessment year 2008-09- Assessing Officer received information from Investigation Wing that assessee had obtained non-genuine purchase bills from a group which was engaged in business of issuing non-genuine purchase bills, unsecured loans and accommodation entries Assessing Officer, thus, reopened assessment and made addition of entire amount of nongenuine purchase bills to income of assessee Tribunal estimated addition in respect of bogus purchases at rate of 6 per cent of such purchases It was noted that in case similar to ass....
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....ficer further passed assessment order under section 144 read with section 147 and made addition under section 68 towards said bogus purchases -It was noted that Assessing Officer had made addition only on basis of information received from Sales Tax Department of State without any further inquiry being carried out as to whether purchases made by assessee were genuine or not in order to come to conclusion that assessee was also one of beneficiaries of bogus billing of said dealer - Whether in absence of any dependable material for Assessing Officer to come to conclusion about bogus purchases made by assessee to make addition of entire purchases under section 68 as income, Commissioner (Appeals) and Tribunal were right in restricting addition to 5 per cent of alleged bogus purchases Held, yes [Paras 5, 5.1 and 5.3) (In favour of assessee)." Decision of Hon'ble Gujarat High Court in case of Dilkhush Annraj Babel Vs. I.T.O Ward 2(3)(7) Tax Appeal No. 443, 444, 445, 446, 447, 448 and 456 of 2023 dated 29/10/2024 wherein it was held as under. "Section 69C, read with section 147, of the Income-tax Act, 1961- Unexplained expenditure (Bogus purchases) Assessment year 2....
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....nce during a post- search inquiry conducted years later. The Ld AR pointed out that the Assessing Officer did not doubt the production volume, the consumption of raw materials, or the final sales recorded in the books. The production yield and material consumption ratios were audited by independent cost auditors and tax auditors and were found to be in line with industry standards. The Ld AR further explained the cash withdrawal pattern noted by the AO. It was submitted that the scrap industry often involves procurement from small, unorganized vendors and "feriwalas" who do not possess bank accounts or the infrastructure to accept digital payments. Consequently, the first-tier scrap traders (like AH Traders) often withdraw cash to settle their liabilities with these small vendors. The assessee maintained that it had no control over the banking habits or cash requirements of its suppliers. The Ld AR has also stated that if an addition is to be made, it should be restricted to the "differential addition being profit estimated on bogus purchase as reduced by net profit shown in the books of account. 10.6 We have heard the arguments of both the parties and perused the material avail....
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....llowing 100% of that cost would mean taxing the assessee on a figure far exceeding its actual profitability. The AO has not doubted quantitative records maintained by the assessee as well as sales shown by the assessee hence the Ld. CIT(A) has correctly estimated profit on such alleged bogus purchase. The AO has even not doubted the sources of purchases as shown in books of account hence even on this ground 100% of such purchases cannot be disallowed. In CIT vs. Bholanath Poly Fab Pvt. Ltd. (2013) 355 ITR 0290 (Guj), the Court reinforced this logic. It held that whether the purchases were bogus or the parties were bogus was a question of fact. If the quantity of goods sold matches the quantity shown as purchased (plus opening stock), then the purchases themselves are genuine in volume, even if the source mentioned is not correct. As a natural corollary, only the profit element embedded in such purchases should be subjected to tax. The Ld CIT(A) has correctly followed binding decisions of Hon'ble Gujarat High court in the case of PCIT Vs Kesari Exports 168 taxmann.com 528. Deepak Agarwal Tax Appeal No 67 of 2024 dated 23/01/2024 etc. In PR. Commissioner of Income Tax 1, Surat v.....
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.... stock and made an addition of the same amount. 11.2 On further appeal, Ld CIT(A) has estimated net profit @ 6% on deficit of stock as book stock was higher than physical stock. The relevant finding of Id CIT(A) is reproduced herein below: "9.5 I have carefully considered assessment order and submission filed by appellant. The core issue in present ground of appeal is that AO made addition of Rs. 4,04,14,720/- representing the difference between the book value of the stock declared by appellant, for Rs. 20,84,26,720/- and the valuation arrived at by the scrap valuer, M/s IS Associates Pvt. Ltd., during the search proceedings at Rs. 16,80,12,000/-. It is observed that AO has considered book value of stock as on the date of search at Rs. 20,84,26,720/- whereas according to appellant such value was Rs. 18,89,53,164/- for which following tally data was provided." 11.3 Aggrieved by the order of the Ld. CIT(A), assessee filed appeal before the Tribunal on this issue. The revenue has not further filed appeal against order of CIT(A) which means that it has accepted the observation of CIT(A) to the extent of Rs 3,79,89,837/-. The Ld. AR has claimed that the department valuer&....
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....s later updated to Rs. 19,20,11,382 after accounting for pending transactions. We find significant merit in the Assessee's position. The statement of Mr. Anwar Bidani, the Senior Accountant, recorded under oath on 05/11/2020, is an exceptionally strong piece of evidence. He gave a specific figure and a category-wise breakdown of the stock summary. The excerpts of said statement is reproduced herein below: It was categorically stated that book stock including stores, finished goods and raw material is Rs 18,89,53,165/- whereas while passing the assessment order, the AO has considered such figure at Rs 20,84,26,720/- without any basis. It is observed that during the course of assessment proceedings, assessee has stated that actual inward and outward quantities prior to date of search was to be entered in tally stock register and after making such entries, correct book stock as on the date of the search was Rs. 19,20,11,382. The Assessing Officer has not doubted such reconciliation. It is a matter of fact that AO has not rejected the books of account even though he has found discrepancies in stock as per tally and physical stock found during the course of search. The Ld. CIT(A)....
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....utside the books. In the absence of such evidence, and given the successful reconciliation of the stock figures using the Assessee's contemporaneous Tally data and search statements, the entire addition must be deleted. The AO's reliance on the valuer's report, despite its admitted "approximation" and its categorical omission of stores, was a reversible error. In the result, we set aside the order of the Ld. CIT(A) to the extent of the sustained addition of Rs. 24,24,883/- and direct the Assessing Officer to delete the same. Hence this ground of appeal is allowed. ISSUE NO. 5 - THE UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT - RS. 41,31,648/- (ASSESSEE'S APPEAL - AY 2021-22) SEIZED MATERIAL PAGE NO. 44 OF ANNEXURE A-1. 12. The assessee has raised following grounds relating to addition of Rs. 41,31,648/- as unexplained expenditure u/s 69C of the Act for AY 2021-22. "3. In law and in the facts and circumstances of the Assessee's case, learned CIT(A) has erred in confirming the addition of Rs. 41,31,648/- as unexplained expenditure u/s 69C of the Act. The addition was on the basis of seized material page No.44 of Annexure-A-1." 12.1 The relevant facts of t....
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....tion for unexplained expenditure should be made. 8.3 I have carefully considered assessment order and submission filed by the appellant. While passing the assessment order, the AO has referred to Page No 44 and 45 of Annexure A-1 seized from the premises of director and treated noting as unexplained expenditure of the appellant. The page no.44 is reproduced herein below fore ready reference: On perusal of relevant seized material, it is observed that notings contains "HK" which is nothing but name of the appellant. The AO in assessment order has contended that notings has to be read by adding two zero which is not disputed by the appellant either before AO or undersigned. The appellant itself before AO has contended that notings relates to details of payment/projected purchase & other expenditure which means that such notings cannot be held to be dumb document as claimed by the appellant. Though notings contains no date, it does not mean that addition cannot be made as the appellant itself has contended that notings relates to payment hence the appellant is required to prove sources of such payment and whether such notings are recorded in books of account or not. ....
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.... in the interest of natural justice, we set aside this issue to the file of Assessing Officer for verification of the notings against actual transactions recorded in the books of account and to decide the issue in accordance with law. Accordingly, this ground of appeal is allowed for statistical purposes. ISSUE NO. 6 - DISALLOWANCES U/S 36(1)(va) - Rs. 2.65 lakhs. (ASSESSEE'S APPEAL FOR AY 2018-19) 13. In AY 2018-19, the Ld. CIT(A) confirmed disallowance of employees' contribution deposited beyond due date under respective Acts. Since the amount was deposited beyond due date prescribed under the respective Act, the disallowance is in accordance with law. This ground of assessee is dismissed. ISSUNE NO. 7 - DISALLOWANCES U/S 37 - Rs. 27,809/- (ASSESSEE'S APPEAL FOR AY 2018-19) 14. This ground was not pressed by the Ld. AR; therefore, the same is dismissed as not pressed. ISSUE NO. 8 - LEGAL GROUNDS CHALLENGING VALIDITY OF ASSESSMENT UNDER SECTION 153A (ASSESSEE'S GROUNDS IN AYs 2017-18 to 2019-20) 15. The assessee has raised legal grounds in certain years contending that the assessments u/s 153A are invalid in absence of incriminating material. The Ld. CIT(A) has r....