TaxTMI 
TaxTMI 
2026 (7) TMI 1474
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....(A) erred in deleting the addition of Rs. 16,44,63,532/- made by the Assessing Officer under section 68 r.w.s. 115BBE of the Income-tax Act, 1961 on account of unexplained cash credits, without appreciating that the assessee had failed to furnish any satisfactory explanation and necessary supporting evidences regarding the identity, creditworthiness, and genuineness of the sundry creditors during the course of assessment proceedings. "Ground No. 2" Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in admitting and relying upon additional evidences such as ledger accounts, GST invoices, RA bills, PFMS receipts and returns of income of consortium members, filed for the first time during appellate proceedings, without affording an opportunity to the Assessing Officer to examine and rebut such evidences, thereby violating the mandatory provisions of Rule 46A of the Income-tax Rules, 1962. "Ground No. 3" Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 1,37,56,657/- made by the Assessing Officer by disallowing liaisoning/technical consultan....
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....as filed the present appeal before us on the grounds mentioned herein above. 4. On the other hand the assessee had also contended before Ld. CIT(A) that no income is recognizable in this year, since the project is in the initial stage and the ICDS does not make is mandatory to recognize income during infancy stage of project. Since Ld CIT(A) rejected the same, therefore the assessee has also filed Cross objection challenging the said decision. The ground raised by the assessee are as follows: 1. On facts, in circumstances of the case and in law the NFAC erred in confirming assessment of total income at Rs. 17,82,20,189/- by Assessment Unit, Income Tax Department without considering the fact that since less than 25% of the value of the contract is complete, the question of recognizing any revenue does not arise, in view of Income Computation and Disclosure Standard ICDS-III applicable to Construction Contracts 2. The appellant craves leave to add, alter, modify or delete any of the above Grounds of Cross Objection Firstly, we shall take ITA No. 6487/Mum/2025, A.Y 2022-23 as lead case and facts narrated therein. 5. Ground Nos. 1 and 5 raised by the Revenue ....
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....nd the payments have been made by the assessee to NCCCL through banking channels. The corresponding entries are duly reflected in the books of accounts of NCCCL also. (d) Hence, the identity, creditworthiness and genuineness of transactions were duly proved by the assessee herein. Hence, the question of invoking provisions of sec. 68 of the Act for the amount of Rs. 15.80 crores appearing in the name of NCCCL does not arise at all. Hence, we contend that the Ld CIT(A) has rightly deleted the addition made by the AO u/s. 68 of the Act 9. In the alternate it was argued that assessee had discharged the primary onus u/s. 68 of the Act and it was also contended that the provisions of sec. 68 itself are not applicable to this credit, since the credits found in the account of NCCCL are trade credits. The details of transactions entered by the assessee with NCCCL during the year under consideration are summarized below:- Opening balance (Credit) 6,41,22,165,92 Add:- Trade Credits:- • Insurance Payable • Material supplies payable • Bank receipt on 15.2.22 (earlier paid on 31.12.21) 24,40,080.00 52,41,92,843.04 51....
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....as shown as sundry creditors in the balance sheet of the assessee. During the assessment proceedings, notices under section 133(6) of the Act were issued to the sundry creditors, however, there was no compliance from these parties. In support of its submission, the assessee provided the ledger extracts and submitted that the payments have been made through the banking channel. The assessee also furnished the sample bills of such parties evidencing the purchases made. However, in the absence of a response from these parties in compliance to notice issued under section 133(6) of the Act as well as the non-production of such parties by the assessee, the addition was made by treating the balance sundry creditors as unexplained. From the perusal of the ledger account of these parties in the books of the assessee, we find that the assessee made the purchases during the year Page | 7 Shri Rajesh G. Jain ITA no. 150/Mum./2022 and also made the payment. Accordingly, the balance outstanding was shown as sundry creditors in its balance sheet, which was added by the AO. Therefore, it cannot be disputed that the addition of outstanding trade creditors has been made under section 68 of ....
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....en the purchase has been accepted as genuine and a deduction therefore has been allowed. In all other cases including the case of a credit representing the sale proceeds of an asset, the provisions of section 68 are applicable and it is for the assessee to prove satisfactorily the nature and source of the monies....." 16. We find that in Smt. Madhu Solanki v/s ITO, ITA No. 974/Bang/2009, the coordinate bench of the Tribunal, vide order dated 09/08/2021, after considering the aforesaid decision held that the AO cannot make an addition of trade creditors under section 68 of the Act when the purchases made during the year and payments made during the year have been accepted. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as under:- "15. Similar view has been expressed by Hon'ble Delhi High Court in the case of CIT vs. Ritu Anurag Agarwal reported in 2009 (7) TMI 1247 as under:- "This finding of AO remained undisturbed before the CIT(A) as well and has been accepted by the ITAT. Proceeding on this basis, the ITAT observed that the soles, purchases as well as gross profits as disclosed by the assessee have been acc....
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....nue could not rely upon the decision rendered in the case of Sureshkumar T Jain. Under these set of facts, we are of the view that the AO could not have made addition of trade creditors w/s 68 of the Act. 17. Therefore, respectfully following the aforesaid decisions, since in the present case the purchases made by the assessee and the payment made during the year have not been disputed by the AO in respect of the parties shown as sundry creditors, we are of the view that the addition in respect of the balance sundry creditors is not sustainable. Accordingly, the AO is directed to delete the same. As a result, ground no. 6 raised in assessee's appeal is allowed." 13. Identical view has been expressed by Hon'ble Delhi High Court in yet another case of ITO vs. Attire Designers P Ltd (supra), wherein the decision rendered by Hon'ble Delhi High Court in the case of Ritu Anurag Aggarwal (supra) was followed. Identical view has been expressed by co-ordinate bench of Mumbai in the case of Mithilesh Mishra (supra). Accordingly, it was contended that the addition of Rs. 15.81 crores made by the AO u/s. 68 of the Act was rightly deleted by Ld CIT(A). Apart from this AO....
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....enting monies received from another person. It is because of this distinction, a liability for purchase which has been credited in the account of the supplier cannot be added under section 68 of the Act, more so when the purchase has been accepted as genuine and a deduction therefore has been allowed.". 16. As per records in the instant case, the amount of Rs. 63.75 lakhs represents outstanding trade liability. Even though the AO had disallowed a part of liaison expenses paid to KTIL, the Ld CIT(A) has deleted the said disallowance. Thus these facts would show that the assessee had not received any money by way of cash credits from KTIL. In the absence of receipt of fresh funds (fresh cash credits), the invoking of provisions of sec. 68 of the Act was not correct in law. (b) Since the disallowance of liaison expenses to the tune of Rs. 1.38 crores was deleted by Ld CIT(A), the addition u/s. 68 of the Act is not justified in respect of outstanding liability as held in the cases of (i) Rajesh G Jain vs. ITO 2(2) Thane in ITA 150/Mum/2022 (ii) PCIT vs. Attire Designers Pvt. Ltd. (2022)115 CCH 43, 455 ITR 697 (Del) (iii) ACIT vs. Mithilesh Mishra ....
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....tion of GST), ledger account copies in the books of the assessee and in the books of KTIL. 21. It was further submitted that the assessee has deducted TDS from the payments made to KTIL. It is also pertinent to note that the similar kind of expenditure incurred by the assessee in other years have not been questioned. The details of liaison charges paid to KTIL are summarised below:- Liaison charges - RA 1 and 2 16,99,135 Liaison charges - RA 3 and RA 10 1,37,56,657 (addition by AO) Total 1,54,55,792 Add:- GST @18% 27,82,042 Net Amount 1,82,37,834 22. The assessing officer had disallowed the sum of Rs. 1,37,56,657/- only, while he has allowed GST amount of Rs. 27,82,042/ raised in the bills. When the assessing officer is accepting the GST portion of the bill, thus, he was not justified in disallowing the other portion of the bill, i.e. when the AO is accepting one leg of the bills, he is not justified in rejecting other leg of the bills. The Ld.CIT(A) has deleted the disallowance by duly considering all the relevant aspects. The operative portion of the order of Ld.CIT(A) is reproduced herein:- "6.3.3 Further the AO has made addition stat....
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....ts cited before us, and the order passed by the Revenue Authorities. From the records, we noticed that : (a) The documents considered by Ld CIT(A) were copies of ledger account, copies of invoices, Consortium Agreements, correspondences between the assessee and SKDDCL, copies of ledger accounts from the books of NCCCL and KTIL, who are consortium members only. Thus, all these documents are part of books of accounts, which were considered by the AO. No new external documents was considered by Ld CIT(A). When the documents considered by Ld CIT(A) were part of books of accounts, they cannot be considered as additional evidences, as alleged by the Revenue. (b) In respect of MOU entered between the assessee and KTIL for payment of technical and liaison fees, which was titled as "liaison expenses", the AO has taken the view that the MOU was not either registered or notarized. In view of the above said observation made by the AO, the assessee has furnished a notarized copy of the MOU before Ld CIT(A). The notarized copy of a document already furnished to the AO cannot be considered as an additional evidence. (c) The view expressed by the AO that MOU has not been....