INCOME TAX OFFICER WARD 42 1 1 MUMBAI, MUMBAI vs. A V CORPORATION, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 9379/MUM/2025 Assessment Year: 2013-14 Income Tax Officer, Ward A V Corporation 42(1)(1), A 104 Riddhi Siddhi Mumbai M G Road Vs. Borivali East Mumbai - 400066 (PAN: AARFA1711D) (Appellant) (Respondent) CO. No. 147/MUM/2026 Assessment Year: 2013 A V Corporation Income Tax Officer, Ward A 104 Riddhi Siddhi, 42(1)(1), M G Road Mumbai Vs. Borivali East Mumbai - 400066 (PAN: AARFA1711D) (Appellant) (Respondent) Present for: Assessee : Shri A. K. Sharma, CA Revenue : Shri Surendra Mohan, Sr. DR Date of Hearing : 04.05.2026 Date of Pronouncement : 03.08.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:

This appeal filed by the Revenue and cross objection by the assessee are against the order of ld. CIT (A), National Faceless Appeal

2 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 Centre (NFAC), vide order No. ITBA/NFAC/S/250/2025- 26/1081986644(1), dated 24.10.2025, passed against the assessment order by Assistant Commissioner of Income Tax, Circle 33(1), Mumbai, u/s. 143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 29.03.2016, for Assessment Year 2013-14.

2.1. Grounds taken by the assessee in its cross objection are reproduced as under:

3 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14

3.1. For the delay of 55 days in filing of the present cross-objection is concerned, it is pertinent to note that Section 253(4) authorizes the respondent to file cross-objection against any part of the impugned order by which it is aggrieved. The procedure contemplated in the Income-tax Rules, 1962 and followed by the Registry is that on receipt of an appeal from the appellant, it issues notice to the respondent. Though, it is not a notice fixing the actual hearing of the appeal. It is for the purpose of completion of formalities so that, it can be posted before the Bench when it’s turn comes.

4 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14

3.2. In the present case, the assessee has filed the cross-objection on 16.04.2026 which is before the date of hearing fixed on 04.05.2026 for the appeal by the Revenue. First date fixed for hearing was on 23.03.2026 when assessee sought an adjournment by submitting for its intention to file the cross-objection and paper book for making an effective representation. It is also to be noted that the impugned order on which the cross-objection has been filed by the assessee was open for debate in the appeal of the Revenue. Therefore, for the just decision of the controversy, it is incumbent upon us to condone the delay. The assessee has explained the reason for such delay in the application placed on the record. We have gone through the same. This application in itself contains detailed explanation. In the conspectus of the aforesaid deliberation, we condone the delay in filing of the cross-objection and proceed to adjudicate on merits.

4.1. Aggrieved, by the above additions made in the assessment order, assessee preferred appeal before the ld. CIT(A). Ld. CIT(A), after considering the submissions of the assessee, material available on record and the findings of the Assessing Officer, deleted the aforesaid

5 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 additions. Aggrieved, by the relief granted by the ld. CIT(A), Revenue is in appeal before the Tribunal.

Amount Received Sr. Name of the Opening Balance as Closing Balance as during No. Party on 01.04.2012 (Rs.) on 31.03.2013 (Rs.) the year (Rs.) 1. Uday Realty 1,25,00,000/- — 1,25,00,000/- Ushika Merchant 2. 1,10,00,000/- — 1,10,00,000/- Pvt. Ltd. Dutta Buildcom 3. 45,00,000/- — 45,00,000/- Pvt. Ltd. Total 2,80,00,000/- Nil 2,80,00,000/-

6.1. Ld. CIT(A), after considering the submissions of the assessee and the material available on record, accepted the explanation of the

6 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 assessee that the said amount represented opening balances and that there is no fresh credit received during the year, thereby deleting the addition made by the Assessing Officer.

6.2. It is noted that section 68 is attracted 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 is not satisfactory in the opinion of the Assessing Officer. In the present case, the finding recorded by the ld. CIT(A) is that the impugned amount of Rs.2,80,00,000/- represented opening balances and did not constitute fresh credits arising during the year under consideration. Revenue, before us, has not brought any material on record to controvert this factual finding of the ld. CIT(A) or to demonstrate that the said amount was in fact credited in the books of the assessee during the previous year relevant to the assessment year under consideration. Once the amount represents an opening balance brought forward from an earlier year, the same cannot be treated as unexplained cash credit u/s 68 in the year under consideration merely because the assessee may not have satisfactorily established the identity, creditworthiness and genuineness of the parties in the course of assessment proceedings. In view of the above, we find no infirmity in the order of the ld. CIT(A) in deleting the addition of Rs.2,80,00,000/- made u/s 68. Accordingly, ground no. 1 raised by the Revenue is dismissed.

7 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 called upon to furnish loan confirmations along with copies of returns of income and bank statements of the respective lenders. On perusal of the details furnished by the assessee, ld. Assessing Officer observed that an amount of Rs.38,63,820/- was shown in the Balance Sheet as on 31.03.2013 as unsecured loan received from Shri Ramakant Pandey. However, the confirmation furnished from Shri Ramakant Pandey confirmed an amount of only Rs.28,63,820/- and not Rs.38,63,820/- as reflected in the Balance Sheet. Further, in respect of unsecured loan of Rs.25,00,000/- stated to have been received from Nightshine Commercial Pvt. Ltd., assessee failed to furnish the confirmation of the said loan. Ld. Assessing Officer, therefore, concluded that the assessee had failed to discharge the onus cast upon it to establish the creditworthiness of the creditors and genuineness of the transactions. Accordingly, an amount of Rs.35,00,000/- (Rs.10,00,000/- + Rs.25,00,000/-) was added to the total income of the assessee under section 68 of the Act.

7.1. During the first appellate proceedings, assessee submitted that out of the total addition of Rs.35,00,000/-, the amount of Rs.10,00,000/- had been received from Shri Ramakant Pandey during financial year 2011-12 and, therefore, was not a fresh loan received during the year under consideration. It was accordingly contended that the provisions of section 68 could not be invoked in respect of the said amount. In respect of the balance amount of Rs.25,00,000/- received from Nightshine Commercial Pvt. Ltd., assessee submitted that the amount had been received through proper banking channels. It was further submitted that the lender was a private limited company having PAN - AADCN9144N and was an income-tax assessee. On this basis, the assessee contended that it had discharged its initial burden of proof.

8 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 7.2. Ld. CIT(A), after examining the submissions of the assessee, the documents uploaded during the appellate proceedings and the remand report of the Assessing Officer, observed that the assessee had discharged its initial burden of proof. Ld. CIT(A) further observed that the amount of Rs.10,00,000/- received from Shri Ramakant Pandey in financial year 2011-12 could not be held as a cash credit under section 68 during the year under consideration. On these observations, ld. CIT(A) directed the Assessing Officer to delete the entire addition of Rs.35,00,000/-.

7.3. We find that in so far as the amount of ₹10,00,000/- is concerned, ld. CIT(A) has recorded a categorical finding that the said amount was received during Financial Year 2011-12 and represented an opening balance. Revenue has not brought any material on record to controvert this finding. It is a settled proposition that an opening balance cannot be brought to tax under section 68 of the Act in the year under consideration. As regards the amount of ₹25,00,000/- received from Nightshine Commercial Pvt. Ltd., ld. CIT(A), after examining the documentary evidences furnished by the assessee as well as the remand report of ld. Assessing Officer, has recorded a finding that the amount was received through banking channels from an identifiable company having PAN and that the assessee had discharged the initial onus cast upon it under section 68. Revenue has not placed any cogent material before us to dislodge these factual findings recorded by the ld. CIT(A). We find that the order of the ld. CIT(A) is based on appreciation of the evidences placed on record and there exist no infirmity, warranting our interference. Accordingly, we uphold the order of the ld. CIT(A) deleting the addition of ₹35,00,000/- made under section 68. Ground no. 2 raised by the Revenue is dismissed.

9 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 8. Ground no. 3 relates to deletion of addition of Rs.1,24,91,050/- made by ld. Assessing Officer as deemed dividend u/s 2(22)(e) in respect of amount received from Chaubey Realtors Pvt. Ltd. During the course of assessment proceedings, ld. Assessing Officer called upon the assessee to furnish details of unsecured loans along with confirmations. On examination of the details furnished, it was observed that assessee had shown an amount of Rs.1,24,91,050/- as unsecured loan from Chaubey Realties Pvt. Ltd. Assessee also furnished the loan confirmation, audited Balance Sheet as on 31.03.2013 and Profit & Loss Account of the said company. On verification of the shareholding pattern, ld. Assessing Officer observed that the assessee was holding 1,26,670 equity shares constituting about 12.67% of the share capital of Chaubey Realties Pvt. Ltd. Ld. Assessing Officer further noticed that the said company was not engaged in the business of money lending and that its Balance Sheet reflected Reserves and Surplus of Rs.1,85,23,360/-. Proceeding on the aforesaid basis, ld. Assessing Officer concluded that the amount received by assessee was liable to be treated as deemed dividend under section 2(22)(e) and accordingly made the addition of Rs.1,24,91,050/-.

8.1. During the first appellate proceedings, assessee submitted that it had regular debit and credit transactions with Chaubey Realties Pvt. Ltd. on account of transfer of funds as and when required. It was pointed out that there was a debit balance of Rs.44,05,000/- as on 01.04.2012 and, thereafter, there were reciprocal debit and credit entries resulting in a closing credit balance of Rs.1,24,91,050/- at the end of the previous year. According to assessee, these were current account transactions between associate concerns and not loans or advances. It was further contended that the amount of Rs.1,85,23,360/- shown under "Reserves and Surplus" represented

10 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 share premium and not accumulated profits. Reliance was also placed upon various judicial precedents to contend that current transactions are outside the ambit of section 2(22)(e).

8.2. Ld. CIT(A), after examining the facts recorded the finding that transactions between the assessee and Chaubey Realties Pvt. Ltd. were in the nature of a current adjustment account and not in the nature of loans and advances. On that basis, the ld. CIT(A) held that the provisions of section 2(22)(e) were not attracted and directed ld. Assessing Officer to delete the addition so made.

8.3. Before us, ld. Sr. DR relied upon the assessment order and submitted that assessee admittedly possessed substantial interest in Chaubey Realties Pvt. Ltd. and that the company was not engaged in the business of money lending. It was submitted that the conditions prescribed under section 2(22)(e) stood fulfilled and, therefore, ld. CIT(A) was not justified in deleting the addition. Per contra, the ld. Counsel for the assessee supported the order of the ld. CIT(A) and reiterated that the transactions represented reciprocal movement of funds through a running current account and not loans or advances contemplated under section 2(22)(e). It was also reiterated that the amount reflected under "Reserves and Surplus" substantially represented share premium and not accumulated profits.

8.4. We have carefully considered the rival submissions and perused the material available on record. We find that the controversy involves examination of various factual aspects, namely, the true nature of the running account between the assessee and Chaubey Realties Pvt. Ltd., nature of debit and credit entries, whether the impugned transactions constitute loans or advances within the meaning of section 2(22)(e), the

11 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 composition of "Reserves and Surplus" and the availability of accumulated profits, if any, for the purpose of the said provision. Although, ld. CIT(A) has recorded a finding that the transactions are in the nature of a current accommodation adjustment account, we find that these factual aspects require a more detailed verification on the basis of the complete ledger account, financial statements, shareholding details and other contemporaneous records. In our considered view, the issue has not been examined in its entirety so as to enable a conclusive adjudication at this stage.

8.5. Accordingly, in the interest of justice, we find it appropriate to set aside the impugned order of ld. CIT(A) on this issue and restore the matter to the file of ld. Assessing Officer. Ld. Assessing Officer is directed to examine the complete ledger account between the assessee and Chaubey Realties Pvt. Ltd., nature of debit and credit transactions, composition of reserves and surplus including the claim relating to share premium, existence of accumulated profits, and thereafter determine the applicability of section 2(22)(e) afresh in accordance with law, keeping in perspective the list of exclusions provided in the said section itself and after affording adequate opportunity of being heard to the assessee. Assessee shall be at liberty to place on record all documentary evidence and judicial precedents in support of its claim. Ground no. 3 raised by the Revenue is allowed for statistical purposes.

12 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 Ld. Assessing Officer noticed the difference between the amount of advances from customer reflected in the balance sheet and the details furnished by the assessee. The difference of Rs.48,487/- was accordingly treated as unexplained and added to the income of the assessee. Before the ld. CIT(A), assessee explained that the difference arose on account of certain expenses incurred on behalf of the customer and that the amount did not represent any income earned by it. Assessee also furnished reconciliation and supporting explanations in this regard. Ld. CIT(A), however, confirmed the addition made by the Assessing Officer.

9.1. We have considered the rival submissions. We note that assessee furnished an explanation regarding the nature of the difference and has contended that the same arose on account of expenses incurred on behalf of the customers. Revenue has not brought any independent material on record to establish that the differential amount of Rs.48,487/- represented income accrued to or received by the assessee during the year under consideration. A mere difference in figures, without establishing the underlying transaction and its income character, cannot by itself justify an addition as income of the assessee. The explanation furnished by the assessee has also not been shown to be factually incorrect by bringing any contrary material on record. In view of the above, we find merit in the contention of the assessee. The addition of Rs.48,487/- is accordingly deleted. Ground No. 2 raised by the assessee is allowed.

13 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 computation of income. Out of total addition of Rs.2,10,025/-, an amount of Rs. 1,89,300/- has been made on account of delayed payment of MVAT which is inclusive of Rs. 10,000/- being interest paid for delayed payments and balance Rs.20,725/- has been made on account of difference between service tax received and provisions made but not claimed as an expense. None of these amounts have been debited to the profit and loss account and therefore disallowance is bad in law.

10.1. We have considered the rival submissions and perused the material available on record. Section 43B provides for allowability of certain specified expenses only on actual payment, subject to the conditions prescribed therein. Therefore, the applicability of the said provision has to be examined with reference to the nature of the liability and the manner in which the same has been claimed in the computation of income. In the present case, we note that the assessee had furnished the relevant explanation in respect of the liabilities in question. It is the specific contention of the assessee that the impugned amount was paid within the prescribed time and was not claimed as deduction in the computation of income. In our considered view, the provisions of section 43B cannot be invoked mechanically without first establishing that the liability in question was otherwise claimed as a deduction in computing the taxable income and that the statutory conditions for disallowance were attracted. Accordingly, the disallowance of Rs.2,10,025/- made by the Assessing Officer u/s 43B and confirmed by the ld. CIT(A) is hereby deleted. Ground no. 3 raised by the assessee is allowed.

14 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 dealing with ground no. 3 of the cross-objection on disallowance made u/s 43B, this amount is towards interest paid for delayed MVAT payment.

11.1. The issue before us is whether the payment of Rs.10,000/- made under the MVAT provisions is penal in nature so as to attract the provisions of Explanation 1 to section 37(1). We note that the payment in question is compensatory in nature and is not shown to have been levied for any offence or for any purpose which is prohibited by law. A payment which is compensatory in character cannot be equated with a penalty imposed for an infraction of law. In the present case, the Assessing Officer has treated the payment as penal in nature without bringing any material on record to establish that the amount was imposed by way of penalty for an offence or for a purpose prohibited by law. The mere fact that the payment was made in connection with delayed payment of MVAT would not, by itself, render the payment penal in character.

11.2. In view of the above, we hold that the payment of Rs.10,000/- is compensatory in nature and is not hit by Explanation 1 to section 37(1). Accordingly, the disallowance made by ld. Assessing Officer and confirmed by the ld. CIT(A) is deleted. Ground no. 4 raised by the assessee is allowed.

15 ITA No.9379/Mum/2025 and CO No. 147/Mum/2026 AV Corporation AY 2013-14 which may be taken up by the assessee at appropriate forum as and when the situation so warrants.

Order is pronounced in the open court on 03 August, 2026

Sd/- Sd/- (Pawan Singh) (Girish Agrawal) Judicial Member Accountant Member Dated: 03 August, 2026 MP, Sr.P.S. Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai