NIKOM PHARMACEUTICALS PRIVATE LIMITED,BANDRA EAST vs. DCIT, CIRCLE 14(1)(1), MUMBAI

Ld. Counsel for the assessee, at the outset, referring to Ground No. 1 of the grounds of appeal, submitted that there is a violation of principles of natural justice as the Ld. CIT(A) denied hearing through video conferencing, though the assessee had explicitly requested a personal hearing in its submissions. Ld. Counsel further submitted that the observation of the Ld. CIT(A) that the assessee failed to respond to the video conferencing notice dated 25.12.2025 is unjustified, as the assessee was not properly served and the matter was closed in haste without ensuring a fair and effective video conferencing hearing. Ld. Counsel also submitted that an additional ground raised by the assessee in respect of the addition made u/s 69A of the Act was also not adjudicated by the Ld. CIT(A). However, Ld. Counsel submitted that the Tribunal may decide all the grounds on merits.

Coming to Grounds Nos. 2 and 3 of the grounds of appeal, which relate to the addition made u/s 68 of the Act, we observe that in the course of the assessment proceedings a show cause notice was issued by the Assessing Officer requiring the assessee to furnish confirmations and supporting documents in respect of unsecured loans taken during the year amounting to ₹71,02,340/-. The assessee, vide submission dated 07.12.2019, furnished the details of creditors and trade payables in the format required by the Assessing Officer. The assessee also furnished the details of all debtors and trade receivables in the format required by the Assessing Officer. However, the Assessing Officer treated the difference between the opening balance as on 01.04.2016 and the closing balance as on 31.03.2017 in respect of unsecured loans, advances and inter-corporate debts amounting to ₹71,02,340/- as unexplained income u/s 68 of the Act. The said addition was sustained 2 by the Ld. CIT(A), observing that no cogent material was furnished establishing the identity, creditworthiness and genuineness of the transactions.

Before us, Ld. Counsel for the assessee, referring to page 69 of the paper book, submitted that the details of unsecured loans were furnished according to which the assessee had obtained unsecured loans from four parties. The assessee had also furnished confirmations which are appearing at pages 71 to 77 of the paper book. Ld. Counsel for the assessee submitted that it is not known as to how the Assessing Officer treated the difference between the opening and closing balances of unsecured loans and inter-corporate debts as unexplained income of the assessee u/s 68 of the Act. Ld. Counsel further submitted that in spite of the assessee's request the working of the proposed addition was not furnished by the Assessing Officer. Ld. Counsel submitted that the assessee had furnished all the information relating to the unsecured loans and, therefore, there is no justification in treating ₹71,02,340/- as unexplained cash credit u/s 68 of the Act.

Heard rival contentions, perused the orders of the authorities below and the material placed before us. We observe that during the assessment year under consideration, the assessee had obtained loans from Jayant S. Mirani and Khandelwal Labs Limited and had repaid part of the loans. It is also observed that the assessee had an opening balance with Mirani Laboratory Limited, since there was no repayment during the year, the same was reflected as the closing balance. The details of loans, i.e., the opening balance and the closing balance, are as under:

Coming to Ground No. 4 of the grounds of appeal, which relates to the addition made u/s 69A of the Act in respect of cash deposits during the year, we observe that the Assessing Officer in paragraph 8.2 of the assessment order, recorded a finding that the assessee had deposited the following amounts into bank accounts: - S No Name & address of bank Bank Account Cash deposit No. (Rs.) 1 Bank of Baroda, Balard 03830200000434 37,50,000 Estate, Mumbai 2 HDFC Bank, Bandra (East) 08352560001564 11,63,000 3 03830200000434 65,13,000 Bank of Baroda, Balard Estate, Mumbai TOTAL 1,14,26,000

The assessee was required to explain the source of such cash deposits. It appears that the Assessing Officer also issued notice u/s 133(6) of the Act to Bank of Baroda for furnishing the KYC details. It is observed from the assessment order that the assessee, vide letter dated 24.12.2019, furnished the details of cash deposits made during the demonetisation period stating that during the financial year 2016-17, from 19.11.2016 to 30.11.2016, an amount of ₹45,90,000/- was deposited and during the period from 01.12.2016 to 30.12.2016, an amount of ₹3,23,000/- was deposited. However, the Assessing Officer treated ₹1,14,26,000/- observing that the assessee had deposited cash and another credit entries appearing in the Bank of Baroda and HDFC Bank accounts as unexplained money. According to AO, the assessee did not explain the source of cash deposits.

During the appellate proceedings, the assessee apart from raising an additional ground on this issue, also furnished the details of cash deposits made during the demonetisation period, according to which the total cash deposits were only ₹49,13,000/-, out of which ₹37,50,000/- was deposited into Bank of Baroda Account No. 03830200000434 and ₹11,63,000/- into HDFC Bank Account No. 08352560001564. It was submitted that the Assessing Officer had erroneously made an addition of ₹1,40,26,000/- as against the actual cash deposits of ₹49,13,000/-. It was further submitted that the Assessing Officer mistakenly treated ₹65,13,000/- as deposits into the same Bank of Baroda account by duplicating the very same account number and thereby added an incorrect amount of ₹65,13,000/-. However, though the Ld. CIT(A) called for a remand report from the Assessing Officer, no finding was rendered on the submissions made by the assessee.

Before us, Ld. Counsel for the assessee reiterated the submissions made before the Ld. CIT(A). Ld. Counsel further submitted that during the remand proceedings before the Assessing Officer the assessee furnished the cash transactions reported to the Income Tax Department, showing that between 09.11.2016 and 30.12.2016 an amount of ₹37,50,000/- and Rs.11,63,000/- was deposited and cash of ₹33,90,000/- and ₹8,63,000/- was withdrawn respectively from the Bank of Baroda and HDFC Bank accounts. The details of withdrawals were also furnished. The assessee also furnished the bank statements of both Bank of Baroda and HDFC Bank to establish that only ₹49,13,000/- was deposited. Ld. Counsel further submitted that the source of cash deposits of ₹49,13,000/- was the opening cash balance as on 09.11.2016 of ₹22,98,000/- and contra entries from other banks amounting to ₹26,15,000/-, as reflected in the source chart of cash 7 deposited during the demonetisation period from 19.11.2016 to 30.12.2016 appearing at page 97 of the paper book. Referring to the said statement, Ld. Counsel submitted that the assessee had withdrawn cash from Central Bank of India, HDFC Bank and also Bank of Baroda itself, and the same was deposited into the Bank of Baroda account in the ordinary course of business. Referring to page 112 of the paper book, being the cash book, Ld. Counsel submitted that the assessee had an opening cash balance of ₹40,12,718/- as on 01.04.2016 and that the cash book reflected the cash withdrawals and contra entries from various banks, thereby establishing the source of the cash deposits. Therefore, Ld. Counsel submitted that there is no justification in treating the cash deposits of ₹1,14,26,000/- as unexplained money u/s 69A of the Act.

Heard rival contentions, perused the orders of the authorities below. We find considerable merit in the submissions of the Ld. Counsel for the assessee that the total cash deposits during the demonetisation period were only ₹49,13,000/- and not ₹1,14,26,000/-. The form submitted during the demonetisation period before the Income Tax Department clearly suggests that the cash deposits between 19.11.2016 and 30.12.2016 in the Bank of Baroda and HDFC Bank were only ₹37,50,000/- and ₹11,63,000/- respectively. It is also evident that the cash withdrawals during the same period from the Bank of Baroda and HDFC Bank were ₹33,90,000/- and ₹8,63,000/- respectively. The bank statements furnished by the assessee relating to Bank of Baroda, HDFC Bank and Central Bank of India establish that 8 the assessee had made corresponding cash withdrawals before making the cash deposits during the demonetisation period. As a matter of fact, the cash withdrawals as reported by the assessee to the Income Tax Department in the cash transaction statement for 2016 were to the extent of ₹42,53,000/- as against the cash deposits of ₹49,13,000/-. Therefore, all the evidences placed on record by the assessee in the form of bank statements, cash transaction statements furnished to the Income-tax Department during the demonetisation period and the cash book clearly suggest that the cash deposits were made out of cash withdrawals in the course of the business of the assessee. In the circumstances, we direct the Assessing Officer to delete the addition made u/s 69A of the Act. Ground No. 4 of the grounds of appeal is allowed.

Since we have decided the grounds on merits, Ground No. 1 of the grounds of appeal becomes academic in nature and, therefore, the same need not be adjudicated at this stage.

In the result, the appeal of the assessee is partly allowed as indicated above. Order pronounced in the open court on 14/07/2026