TaxTMI 
TaxTMI 
2026 (8) TMI 1576
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....nufacturing of motorcycles and assembly of spare parts and components. It filed its return of income electronically on 11-03-2022, declaring a business loss of Rs. 6,83,00,490/- for the AY. 2021-22. The Centralized Processing Centre ("CPC") issued an intimation order u/s. 143(1) of the Act, dt. 24-05-2022, proposing an adjustment of Rs. 1,80,08,945/- on account of a mismatch in reporting as per the Tax Audit Report (TAR) in Form-3CD and return of income, which reduced the assessee's current year's business loss to Rs. 5,02,91,545/-. Thereafter, the case of the assessee was selected for scrutiny assessment. The Ld. Assessing Officer ("AO") made a reference u/s. 92CA(1) to the Ld. Transfer Pricing Officer ("TPO"). Various notices were issued from time to time to the assessee seeking clarifications and information. The Ld. TPO after considering assessee's submissions passed the order u/s. 92CA(3) of the Act on 31-10-2023 without making any adjustment on account of international transactions. Subsequently, a show cause notice was issued by the Ld.AO on 23-11-2023 proposing addition u/s. 68 of the Act in relation to the trade payables, purchases and advance received from customers. ....
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..... Bharat Aluminium Co. Ltd. (2010) 187 Taxman 111 (Delhi), the burden lies squarely on the Appellant to demonstrate that this principle applies in the present case. In this case, the Delhi High Court held that a refund or recovery cannot be treated as income unless it represents a prior claim of deduction or expense. However, this principle applies only when it is factually established that no such benefit was previously availed. 16. The Appellant's submissions are generic and merely assert that GST is routed through the balance sheet and not through the Profit and Loss account. However, no specific documentary evidence-such as ledgers, GST refund reconciliation, tax payment challans, or corresponding GST input credit details-has been furnished to establish that the amount refunded had neither been expensed nor capitalized in the current or earlier years. The absence of such verifiable evidence leaves the mismatch unexplained and unresolved. The Hon'ble ITAT in ITO v. Sanjiv Gupta [2013] 35 taxmann.com 543 (Delhi - Trib.) held that bald assertions by the appellant, without documentary corroboration, cannot be accepted in income-tax proceedings, especially when a pr....
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....4. The Learned AO's addition is based purely on the difference in the reconciled balance (Rs. 1,50,14,517), coupled with the non-compliance of Section 133(6) notices and the Appellant's failure to provide stamped and signed reconciliations. The AO's approach suffers from a significant legal deficiency: the AO failed to make a finding that the underlying purchase transactions were non-genuine or fictitious. The Appellant is a company engaged in manufacturing and trading, and its creditors are known parties (Kawasaki Heavy Industries Limited and UNO Minda Ltd.). Once the Appellant demonstrated that the amounts relate to liabilities for goods purchased, the onus shifts to the AO to dispute the genuineness of the purchase itself, which was not done. 25. The reliance by the AO solely on the failure of third parties to respond to Section 133(6) notices and the absence of formally signed reconciliations, in the face of the Appellant providing specific, detailed explanations for timing differences (e.g., invoices booked in April 2021 accounted for differences in the 31 March 2021 balance of UNO Minda Ltd.), is insufficient and arbitrary for invoking the severe conseque....
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....llant the Learned AO has considered erroneous current year loss from business or profession of INR 5,02,91,545 instead current year loss from business or profession of INR 6,83,00,490 as per return of income. 3. Ground No. 3: Addition under section 68 for 'trade payables' amounting to INR 1,50,14,517. 3.1 On the facts and in the circumstances of the case and in law, the Learned AO has erred in making addition on account of trade payables of INR 1,50,14,517 under section 68 of the Act. 3.2 On the facts and in the circumstances of the case and in law, the Learned AO has erred in not appreciating that the provisions of section 68 of the Act are not applicable in the present case. The Appellant has purchased goods from said creditors during the year. The balance of trade payables represents the value of goods purchased by the Appellant which is unpaid at the end of the year. Further, the Appellant had given necessary documentation to substantiate the said amounts of Trade Payables. Thus the same ought not to be treated as unexplained cash credit and the provisions of section 68 ought not to apply. Ground No. 4: Interest levied under section 2....
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.... instant case, the assessee failed to provide complete reconciliations, invoices, or proof of goods/services. 4. The appellant craves leave to add, amend and alter any of the above grounds of appeal." 7. The assessee has filed cross objection in Revenue's appeal, raising the following grounds: "Ground 1: On the facts and in the circumstances of the case and in law, the Respondent has adequately and successfully established the identity of the creditors and the genuineness of the transactions giving rise to the outstanding liabilities, which was verified by the learned CIT(A) and taken into consideration while passing its order in favour of the Respondent. Proper invoices, creditor confirmations, and reconciliations for differences in balances in the books of creditors and Respondent were provided during the assessment and appellate proceedings to prove the genuineness of the transactions. Accordingly, the provisions of Section 68 should not be invoked against the Respondent. Ground 2: As rightly held by the learned CIT(A), the Respondent craves to submit that section 68 of the Act does not apply in case of trade payables. Section 68, specifically aimed....
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.... been raised by the assessee, all these relate to the addition of Rs. 1,80,08,945/- made by way of reduced loss in the intimation u/s. 143(1) of the Act and carried forward in the assessment which has been confirmed by the Ld.CIT(A) for the reasons which we have already reproduced in the preceding paragraphs. We observe that the Ld.CIT(A) has sustained the said addition due to the assessee's failure to submit documentary evidence to rebut the adjustment. Before us, the Ld. AR submitted that the documentary evidences could not be produced before the lower authorities as the relevant records pertained to earlier years and formed part of archived data, which were not readily retrievable at the relevant time. Further, the Ld.AR submitted that no specific directions were issued during the appellate proceedings requiring the assessee to furnish such documents by the Ld. CIT(A). The Ld.AR has submitted affidavit of the Managing Director of the assessee-company in support thereof. It is the contention of the Ld.AR that the adjustment of Rs. 1,80,08,945/- made by the Ld.AO and consequently confirmed by the Ld. CIT(A) is factually incorrect and it results in double taxation of the same incom....
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....explained trade payable u/s. 68 of the Act made by the Ld.AO, we find that although several grounds of appeal have been raised by the assessee, the main grievance of the Revenue is that the addition should not have been deleted by the Ld. CIT(A) as during the assessment proceedings, the assessee failed to provide complete reconciliations, invoices or proof of goods/services. 12. The Ld. DR argued that the Ld. CIT(A) has given relief to the assessee holding that the assessee had successfully established the identity of the creditors and genuineness of the transaction giving rise to the outstanding liabilities and that the assessee had reasonably explained the balance mismatch through reconciliations and timing differences. However, whilst deciding the issue, the Ld. CIT(A) did not call for any remand report and hence, the Ld. AO had no opportunity to verify the assessee's claim. 13. The Ld.AR, on the contrary, submitted that proper invoices, creditor confirmations, and reconciliations for differences in balances in the book of the creditor and the assessee were provided during the assessment and appellate proceedings to prove the genuineness of the transactions. The Ld. AR sub....