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Judgment
PER AMITABH SHUKLA, AM
This appeal filed by the Assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, New Delhi, dated 22.07.2025 arising out of assessment order dated 06.12.2019 passed under section 143(3) for the Assessment Year 2017-18. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.On the facts and circumstances of the case, the order passed by Commissioner of Income Tax (Appeals) -National Faceless Appeal Centre [CIT(A)] u/s 250 of The Income Tax Act, 1961 (‘the Act) is bad both in the eye of law and on facts.
2.On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in passing the order without giving assessee an opportunity of being heard in violation of the principle of natural justice.
3.(i) On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the addition of Rs. 3,72,67,756/- under section 68 of the Act on account of unexplained trade payables. (ii) That the aforesaid addition has been confirmed without citing any basis for the same and without considering the explanation and documentary evidences submitted by the assesse in support of its contention.
4.(i) On the facts and circumstances of the case, the Ld. CIT(A) has erred both on facts and in law in confirming the addition of Rs. 9,80,500/- under section 68 of the Act on account of cash deposits. (ii) That the aforesaid addition has been confirmed without citing any basis for the same and without considering the explanation and documentary evidences submitted by the assesse in support of its contention.
5.On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of the AO in levying tax by invoking the provisions of section 115BBE of the Act despite the fact that the provisions of the said section having came into force w.e.f. 01.04.2017 same cannot be applied in the relevant assessment year considering the same as having retrospective effect.
Ground of appeal no.1 and 2 are general in nature and hence the same are dismissed as infructuous.
The first issue emanating from ground of appeal no.3 is regarding an addition of Rs.3,72,67,756/- made u/s 68 of the Act by the ld. AO. As per brief factual matrix of the case, the ld. AO had noted that the assessee had shown creditors/trade payables of Rs.3,72,67,756/- as on 31.03.2017. The ld. AO queried the assessee as regards the justification for the said amounts which remained uncomplied. Consequently, the AO proceeded to make the impugned addition. Before the ld. First Appellate Authority, the appellant introduced fresh evidence under Rule-46A. The Ld. AO during the remand proceedings submitted before the ld. CIT(A) that the assessee has not been able to provide sufficient evidence and details so as to justify the impugned credits in its books of accounts. The ld. CIT(A) upheld the findings of the AO while observing as under:-
“…9. Ground of appeal 2 The facts of both these appeals, the findings recorded by the Assessing Officer, and the arguments advanced by the Authorized Representative (AR) of the appellant are identical. The issue involved in both appeals pertains to unexplained cash credits under section 68 of the Income Tax Act, 1961, relating to the Financial Year 2017- 18. Accordingly, in the interest of judicial consistency and to avoid repetition, both appeals are being adjudicated through a common appellate order.
Out of the two appeals, the appeal filed by M/s Ambica Timbertrade Private Limited, bearing Appeal No. NFAC/2012-13/10289765 dated 14.06.2023 for the AY 2013-14, is treated as the "Lead Case". The findings and conclusions drawn in the Lead Case shall apply mutatis mutandis to the connected appeal filed by the same assessee.
In view of the findings recorded in the Lead Case, Ground No.2 raised in the other appeal does not require separate adjudication and is accordingly dismissed……..”
The ld. Counsel for the assessee vehemently argued that against the decision of the lower authorities. Before us, the assessee produced a tabular chart so as to indicate that the ld. AO has added those cases also where there was no change in opening and closing balances. It was further contended that under Rule-46A, the assessee had given all the requisite evidences. The ld. Counsel further submitted placing reliance upon a Catina of judgments that trade creditors cannot be added u/s 68 of the Act. It was stated that the order of ld. CIT(A) is bereft of any application of mind. The ld. Counsel vehemently argued that it had given all the evidences to suggest genuineness of its transactions. Thus, it was contended that inter alia following were given to the lower authorities.
- Copy of relevant extracts of the bank statements highlighting the above stated payments made to the stated parties in the subsequent year i.e. FY 2017-18.
The AO in the assessment order has alleged that the assessee had not submitted any documentary evidences for the amount of Rs. 3,72,67,751/- and has made an addition of that amount.
In order to further strengthen the genuineness of the transaction, the assessee, during the course of appellate proceedings before the CIT(A) had submitted the following additional evidences under Rule 46A of Income Tax Rules, 1962, in respect of the above stated 8 parties as applicable to them :
- Copy of Letter of Credit
- Copy of certificate of insurance issued for goods imported by appellant
- Copy of Packing List containing the description and quantity of goods imported by the appellant
- Copy of Bill of Lading issued at the time of loading of goods at the foreign port
- Copy of Commercial Tax Invoice issued in the name of appellant containing the details of goods imported
- Copy of Payment Receipts
- Copy of Bill of Entry filed with Indian Customs Authority at the time of arrival of goods in India
- Copy of Phytosanitary certificate depicting the details of disinfection treatment conducted for goods imported
- Copy of Certificate of origin indicating the place of origin of goods exported
- Copy of Beneficiary certificate issued by the supplier in the name of appellant company
- Copy of Inspection Report for goods inspected
- Copy of High seas purchase documents [High Seas Sales Invoices, Invoices issued by Logistics company for Cargo handling charges, High Seas Sale Agreement, High Seas Sale letter furnished by Zamindara Timber Pvt. Ltd. to Custom Officer, High Seas Purchase letter furnished by the appellant to Custom Officer, Bill of Entry, Document Transfer of Ownership agreement, Transfer documents]
In support of its contentions, the ld. Counsel had filed a voluminous paper book comprising documents and evidences produced before the lower authorities.
The ld. DR would like to make us believe on the correctness of the order of the lower authorities.
We have heard rival submissions in the light of material placed on record. We have noted from the perusal of the paper book, the appellant that it had provided a large number of evidences to support its case. We have also noted that the ld. CIT(A) though relying upon his order for AY 2013-14 has not established as to how the facts of the two years are identical. As regards, the argument regarding the non-invocation of provisions of section 68 in respect of trade liabilities, we find sufficient force in the arguments of the assessee. Accordingly, we are of the considered view that invocation of section 68 in respect of trade creditors is not liable in cases no challenge is raised by AO towards sale purchase transactions. We have further noted that the principal of allegation of Revenue of the appellant not providing sufficient evidences to the lower authorities is not established in view of the detail paper book of the assessee. Accordingly, we set-aside the order of the lower authorities and direct the ld. AO to delete the impugned addition of Rs.3,72,67,756/-/- u/s 68 on account of trade creditors deleted.
The next issue raised by the appellant through its grounds of appeal no.4 is regarding the addition of Rs.9,80,500/- on account of cash deposits. As per brief factual matrix, the ld. AO had noted that that there was deposit of even amount in the assessee’s bank account with HDFC and Corporation Bank. Considering non-compliance of the assessee to satisfactorily explain the source of cash deposits, the ld. AO proceeded to make the addition. The ld. CIT(A) confirmed the addition observing as under:-
“…….This ground of appeal, as per the remand report mentioned in para 6, refers to the Assessing Officer's perusal of the appellant's books of accounts, which reveals that the appellant has deposited cash amounting to Rs.9,80,500/- (Rs.6,00.000/- in the HDFC Bank account, Rs.3,60,500/- in the Corporation Rs.20,000/- in the Karur Vysya Bank account). However, the appellant has not explained the source of the cash, the nature of the transactions, or submitted any supporting evidence in this regard. As the appellant failed to furnish the source of the cash deposits made during the year, and in view of the non-compliance, the amount of Rs.9,80,500/- was added to the income of the assessee under section 68 of the Income Tax Act. Therefore, Ground of Appeal No. 3 is hereby dismissed……”
The ld. Counsel for the assessee argued that the addition has been confirmed by ld. CIT(A) on incorrect grounds. It was stated that the impugned cash deposits are linked to cash sales of about Rs.4 lakh as well as withdrawals made in the past. The ld. Counsel argued that the ld. AO had neither rejected it sales/purchases nor the books of accounts. In support of its contentions, it was submitted that during the FY., the appellant had made cash withdrawal of Rs.8,60,000/- and cash sales of Rs.4,79,660/-. The ld. Counsel drew our attention to the fact that at the beginning of the year, it had opening cash in hand of Rs.12,89,399/-.
The ld. DR placed reliance upon the order of the lower authorities.
We have heard rival submissions in the light of material placed on record. Perusal of page 10 and 11 of the ld. CIT(A) shows that he has extracted contents of the remand report of the AO. Perusal thereof alludes that the ld. AO has drawn unilateral conclusions based up on conjectures and surmises. We have noted that the ld. CIT(A) has also confirmed the AO’s finding in a summary and cryptic manner. From the perusal of the cash flow statement of the assessee, we have noted that there was sufficient cash in books to justify cash deposit in bank. Accordingly, we are of the considered view that there is no merit in the addition made by the ld. AO. We, therefore set-aside the order of the lower authorities and direct the ld. AO to delete the impugned addition of Rs.9,80,500/-. The ground of appeal no.4 raised by the assessee is therefore allowed.
The ground of appeal no.5 is regarding the invocation of provisions of section 115BBE of the Act. So far as assessee’s assessment under section 115BBE is concerned, we quote S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. The assessee is accordingly directed to be assessed under the normal provision as per law.
In the result, the appeal of the assessee is partly allowed.