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Facts
The assessee, M/s NM Industries, faced additions under Section 68 for two assessment years. For AY 2013-14, Rs. 3.75 Crores were added as unexplained money routed through Nikhil Agencies from Nikhil Overseas. For AY 2014-15, additions related to Rs. 50.96 Lakhs and Rs. 17.51 Crores from Lal Ji Agencies and Lokendra Trading Company respectively, where the genuineness of sales transactions was questioned by the AO. The CIT(A) deleted these additions in both years, considering them legitimate sales receipts or double additions.
Held
The Income Tax Appellate Tribunal upheld the CIT(A)'s decision to delete the additions for both assessment years. The tribunal found that the CIT(A) correctly observed that the amounts represented legitimate receipts from sales debtors, which were already accounted for in the trading, profit, and loss account, or constituted impermissible double additions. Consequently, the Revenue's appeals were dismissed.
Key Issues
Whether additions made under Section 68 for alleged unexplained credits/sales receipts, where the amounts were claimed as legitimate trade receivables or double additions, were sustainable.
Sections Cited
147, 144, 147B, 68
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Income Tax Appellate Tribunal, “E” BENCH, DELHI
Before: MS. MADHUMITA ROY&
These two appeals and Cross Objections filed by the Revenue and assessee respectively are directed against the common order passed by the Ld. National Faceless Appeal Centre (NFAC) Delhi dated 29.08.2024 arising out of the Assessment Orders dated 25.05.2023 & 26.05.2023 passed by the DEL-C(36)(1) under Section 147 r.w.s 144 of the Income Tax Act for Assessment Years 2013-14 & 2014-15 respectively.
The assessee, a private limited company, carrying on business of purchase and sale of edible oils, has filed its return of income for the year under consideration on 26.04.2014 declaring total income at Rs.389,25,858/-. On the basis of information from the DDIT Investigation Wing -1, Indore, that the assessee has routed its own unexplained money amounting to Rs.3.75 crores in the bank account, notice under Section 148 of the Act was issued by JAO on 31.03.2021 and subsequently, show cause dated 14.10.2022 was issued. It was observed that funds were routed with in related accounts and finally cash was withdrawn. The transfer was reported from bank account of Nikhil Agencies lying with Axis Bank statement whereof establishes the fact of credit was mainly through cash deposit and RTGS and debited through RTGS to the assessee before us i.e. M/s N.M. Industries Private Limited along with other beneficiaries. Different documents in support of the explanation rendered by the assessee that the credit entries of Rs.3,75,00,000/- represented the receipts from the sales debtor namely & 4982/Del/2024 CO. 99 & 100/Del/2025 NM Industries (AY: 2013-14 & 2014-15)
Nikhil Overseas, were produced before the Ld. AO; However, such proceeding was culminated in the order of addition dated 29.05.2023 under Section 147B r.w.s 144 to the tune of Rs.3,75,00,000/- under Section 68 of the Act treating the amount received from the said M/s Nikhil Overseas as unexplained credit which was, in turn, deleted by the First Appellate Authority. Hence, the instant appeal before us by the Revenue.
Heard the parties, perused the records including the orders passed by the authorities below and the documents placed by the Revenue and assessee. The documents placed by way of a paper book filed by the assessee were duly submitted before the authorities below as certified.
At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee has drawn our attention to the trade receivable shown in the books of accounts of assessee appearing at page 72 of the assessee’s paper book filed before us serial No. 23 whereof speaks of amount receivable to the tune of Rs.3,75,38,969/- from Nikhil Overseas as on 31.03.2012. Similarly, attention was invited to page 53 where trading receivables in the books of accounts of the assessee as on 31.03.2013 is reflecting at serial No. 12 which speaks of amount of Rs.38,969/- from Nikhil Overseas. Under this facts and circumstances of the matter, he has drawn our attention to the observation made by the Ld. CIT(A) while granting relief to the assessee by deleting the impugned addition which is as follows:
& 4982/Del/2024 CO. 99 & 100/Del/2025 NM Industries (AY: 2013-14 & 2014-15)
“The Appellant was carrying out business of purchase and sale of edible oils etc. The sales turnover of the Appellant for FY 2011-12 was Rs. 254.38 Crores and FY 2012-13 was Rs. 257.40 Crores. The total of balance sheet of the Appellant as at 31/03/2012 was Rs. 147.75 Crores as at 31/03/2013 was Rs.121.18 Crores. The Appellant filed its ITR for AY 2013-14 declaring total income at Rs. 3,89,25,858/-. The Assessment Unit of Income Tax Department proceeded to make addition of Rs.3,75,00,000/- merely on the basis of the report of the DDIT (Inv)-I Indore relating to M/s Nikhil Overseas. It is apparent from the assessment order that the Assessment order that the Assessment Unit of Income Tax Department did not carry out any exercise to cross verify the allegations leveled against the Appellant by the DDIT( Inv)-1 Indore. On the contrary the Appellant demonstrated with documentary evidences that Rs. 3,75,38,969/- was due to it from M/s Nikhil Overseas who happened to be one of its sales deptors, by making reference of the list of Trade Receivables as on 31/03/2012. The Appellant explained that it received Rs.3,75,00,000/- in FY 2012-13 through banking system, out of Rs.3,75,38,969/- due to it from M/s Nikhil Overseas. The Appellant's such explanation was cross verified by me, by comparing the list of Trade Receivables as on 31/03/2012 and 31/03/2013. I have found that the amount receivable from M/s Nikhil Overseas was scaled down from Rs.3,75,38,969/- as on 31/03/2012 to Rs.38,969/- as on 31/03/2013. The difference between these two figures is Rs.3,75,00,000/-. I also found force in the Appellant's argument that the sales made to M/s Nikhil Overseas were credited to the Trading, Profit & Loss Account for the year in which sales were made thus were already considered while computing the income for that year. By making addition of Rs.3,75,00,000/- which was nothing but the receipt from the old Sales Debtor namely M/s Nikhil Overseas, and the addition made which was actually a double addition of the same amount. It is a settled law that double addition is not permitted under the Act. I therefore delete the addition of Rs.3,75,00,000/- which was made by the AO during the course of assessment proceedings.”
It appears that the appellant explanation of receivables of Rs.3,75,38,969/- from Nikhil Overseas out of which Rs.3,75,00,000/- was received through banking channel from the said M/s Nikhil Overseas; the list of receivables as on 31.03.2012 and 31.03.2013 as mentioned in the foregoing paragraph was duly cross verified by the Ld. CIT(A) and it was found that the amount receivable from Nikhil Overseas was scaled down from Rs.3,75,38,969/- as on 31.03.2012 to Rs.38,969/- as on 31.03.2013 meaning thereby the difference amount of Rs.3,75,00,000/- being the sales made to the said Nikhil Overseas were credited to the trading, profit and loss account for the year in which sales were made. This amount has rightly been considered as the receipt from & 4982/Del/2024 CO. 99 & 100/Del/2025 NM Industries (AY: 2013-14 & 2014-15) the old sales debtors namely M/s Nikhil Overseas and addition by way of assessment order by the Ld. AO is nothing but a double addition has rightly been observed and deleted by the Ld. CIT(A) so as not warrant interference. Hence, this appeal filed by the Revenue is found to be devoid of any merit and thus, dismissed.
The Cross Objection No. 99/Del/2025 preferred by the assessee is not pressed. Thus, the Cross Objection filed by the assessee is dismissed as not pressed.
ITA No.4982/Del/2024 (AY: 2014-15)
In this case the assessee had explained the impugned amount of Rs.50.96,000/- during the course of assessment proceeding. The impugned addition of Rs.50,96,000/- represented the receipts from the sales debtors namely M/s Lal Ji Agencies and Rs.17,51,85,000/- represented the receipts from another sales debtors namely M/s Lokendra Trading Company, relevant documents in support of such explanation were also produced which was ultimately not found to be acceptable by the Ld. AO. As the genuineness of the sales transaction to both the parties was not found to be established by the assessee the same were added in the hands of the assessee which was in turn deleted by the First Appellate Authority. Hence, the instant appeal before us.
In this regard, the Ld. Counsel appearing for the assessee has drawn our attention to page 105 of the paper book filed before us containing the list of trading receivables by the assessee as on & 4982/Del/2024 CO. 99 & 100/Del/2025 NM Industries (AY: 2013-14 & 2014-15)
31.03.2013 serial Nos. 9 & 10 whereof speak of M/s Lokendra Trading Company & Lal Ji Agencies of an amount of Rs.17,91,34,566/- Rs.8,20,69,006/- as on 31.03.2013. Page 57 contains the list of trading receivables as on 31.03.2014 serial No. 15-16 whereof speaks of Lokendra Trading Company & Lal Ji Agencies of Rs.13,99,566/- and Rs.3,53,95,511/- respectively as on 31.03.2014. It was further pointed out by him that considering this particular aspect of the matter the Ld. CIT(A) granted relief with the following observation:
“The Appellant was carrying out business of purchase and sale of edible oils etc. The sales turnover of the Appellant for FY 2011-12 was Rs. 254.38 Crores and FY 2012-13 was Rs. 257.40 Crores. The total of balance sheet of the Appellant as at 31/03/2012 was Rs. 147.75 Crores as at 31/03/2013 was Rs.121.18 Crores. The Appellant filed its IT for AY 2013-14 declaring total income at Rs.3,89,25,8581-.
The Assessment Unit of Income Tax Department proceeded to make addition of Rs.3,75,00,000/- merely on the basis of the report of the DDIT (Inv)-I Indore relating to M/s Nikhil Overseas. It is apparent from the assessment order that the Assessment order that the Assessment Unit of Income Tax Department did not carry out any exercise to cross verify the allegations leveled against the Appellant by the DDIT( Inv)-1 Indore. On the contrary the Appellant demonstrated with documentary evidences that Rs. 3,75,38,969/- was due to it from M/s Nikhil Overseas who happened to be one of its sales deptors, by making reference of the list of Trade Receivables as on 31/03/2012. The Appellant explained that it received rs.3,75,00,000/- in FY 2012-13 through banking system, out of Rs.3,75,38,969/- due to it from M/s Nikhil Overseas. The Appellant's such explanation was cross verified by me, by comparing the list of Trade Receivables as on 31/03/2012 and 31/03/2013.
I have found that the amount receivable from M/s Nikhil Overseas was scaled down from Rs.3,75,38,969/- as on 31/03/2012 to Rs. 38,969/- as on 31/03/2013. The difference between these two figures is Rs,3,75,00,000/-. I also found force in the Appellant's argument that the sales made to M/s Nikhil Overseas were credited to the Trading, Profit & Loss Account for the year in which sales were made thus were already considered while computing the income for that year. By making addition of Rs.3,75,00,000/- which was nothing but the receipt from the old Sales Debtor namely M/s Nikhil Overseas, and the addition made which was actually a double addition of the same amount. It is a settled law that double addition is not permitted under the Act. I therefore delete the addition of Rs. 3,75,00;000/- which was made by the AO during the course of assessment proceedings.”
& 4982/Del/2024 CO. 99 & 100/Del/2025 NM Industries (AY: 2013-14 & 2014-15)
We note that identical observation on identical facts has also been considered by the Ld. CIT(A) for Assessment Year 2013-14 in deleting addition in respect of trade receivable by the assessee which was not considered in its proper perspective by the Ld. AO and added in the hands of the assessee has been taken care of by the Ld. CIT(A) which was in our considered opinion is just and proper so as not to warrant interference. This appeal preferred by the Revenue, is therefore, found to be devoid of any merit and thus, dismissed.
The Cross Objection No. 100/Del/2025 preferred by the assessee is not pressed. Thus, the Cross Objection filed by the assessee is dismissed as not pressed.
The appeals preferred by the Revenue are dismissed and Cross Objection filed by the assessee are dismissed as not pressed.
Order pronounced in the open court on 26.08.2025