ASSISTANT COMMISSIONER OF INCOME TAX, DELHI vs. LOOM CRAFTS SHADE SYSTEMS PRIVATE LIMITED, DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH, E: NEW DELHI BEFORE SHRI RAJ KUMAR CHAUHAN, JUDICIAL MEMBER AND SMT. RENU JAUHRI, ACCOUNTANT MEMBER ITA No.- 7770/Del/2025 [Assessment Year: 2016-17] Assistant Commissioner of Income Loom Crafts Shade Systems Pvt. Tax, Ltd., Room No.- 316A, CR Building, IP Vs 204-205, Pankaj Plaza, 15 LSC, Estates, New Delhi-110002. Kalkaji, New Delhi-110019. PAN- AACCH1281R Revenue Assessee Assessee by None Revenue by Shri Gouranga Das, Sr. DR Date of Hearing 04.06.2026 Date of Pronouncement 22.06.2026 ORDER Per Renu Jauhri, Accountant Member:

This appeal by the Revenue is directed against the order dated 16.09.2025 of the National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the Assessment Order dated 28.12.2019 passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘the Act’) by the ACIT, Circle-15(2), Delhi, (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2016-17.

ITA No.- 7770/Del/2025 Loom Cra�s Shade Systems Pvt. Ltd. 2. Grounds of appeal filed by the Revenue are reproduced as under: “1 On facts and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 3,98,76, 128 made under section 68 of the Income Tax Act, 1961, without appreciating that the assessee failed to substantiate the identity, creditworthiness, and genuineness of the creditors. 2. The Ld. CIT(A) erred in accepting the assessee claim that the loan from M/s Hotel Vakratunda was a brought forward balance, despite in absence of any supporting evidence such as bank statements OR confirmations for earlier years. 3. The Ld. CIT(A) erred in relying on fresh evidence produced for the first time at the appellate stage without calling for a remand report from the Assessing Officer, thereby violating Rule 46A and principles of natural justice. 4. The Ld. CIT(A) erred in deleting the addition made in respect of Shri Nasir Saleem Haji despite the confirmation being post-dated and unsupported by proof of source of funds. 5. The Ld. CIT(A) failed to appreciate that mere production of a 5 confirmation OR self- generated ledger accounts does not discharge the onus under section 68 of the Act 6. The order of the Ld. CIT(A) is perverse, contrary to the material on record, and liable to be set aside. 7. The appellant craves leave to add, amend, modify or withdraw any of the aforesaid grounds of appeal at any time before or during the course of the hearing.”

ITA No.- 7770/Del/2025 Loom Cra�s Shade Systems Pvt. Ltd. case was selected for limited scrutiny for verification of unsecured loans and current liabilities. During the course of scrutiny proceedings, the AO noted that the following amounts received from creditors were not properly explained by the assessee:

“ Name of Party/ Customer Amount Hotel Vakratunda 11778667 Nasir Saleem Haji 28097461 Total 39876128

4.1 After examining the loans received from above entities, the AO held that the onus on the assessee to prove the identity and the creditworthiness of the creditors and genuineness of the transactions has not been discharged. Accordingly, the AO proceeded to finalize the assessment after making addition of Rs. 3,98,76,128/- u/s 68 of the Act on account of unexplained cash credits.

ITA No.- 7770/Del/2025 Loom Cra�s Shade Systems Pvt. Ltd. 5.1. The assessee furnished copies of ledger accounts, sales invoices bank statements and other supporting evidences before the CIT(A) to demonstrate the genuineness of these transactions, which were stated to be brought forward balances. After examining the documentary evidences in the light of assessee’s explanation, the CIT(A) deleted the addition vide his order dated 16.09.2025.

5.2 Aggrieved with the order of the Ld. CIT(A), the Revenue is in appeal before us.

“10. Discussion of Jurisprudence and Commercial Realities The AO's order, despite correctly citing the legal principles of Section 68, failed to apply them appropriately to the facts of the case. The core principle of Section 68 requires the assessee to explain the nature and source of a credit found in its books of account for the relevant financial year. In this instance, the amounts in question were not fresh credits for AY 2016-17 but were simply carried-forward balances from prior financial years (FY 2013-14 and FY 2014-15). The proper time to question the genuineness of these credits was in the respective assessment years in which they were first entered into the books. Attempting to add them as unexplained credits in a 4

ITA No.- 7770/Del/2025 Loom Cra�s Shade Systems Pvt. Ltd. subsequent year without invoking the proper statutory mechanisms for reopening past assessments is a misapplication of legal authority. The AO also failed to appreciate the commercial reality of the Appellant's business model. A company engaged in large-scale fabrication and manufacturing of customized products, such as the Appellant, routinely receives advances from customers to cover material and production costs. The documentary evidence, including the per forma invoice for Mr. Nasir Saleem Haji's project in Jammu, clearly establishes a commercial relationship between the advances and the services rendered or goods supplied. The advances were not isolated, suspicious transactions but part of a normal trade practice, and the Appellant has demonstrated a clear audit trail showing how these advances were progressively adjusted against sales over multiple years. The AO's reliance on the principle of human probabilities, in this context, is misplaced, as all aspects of the transactions—identity, genuineness, and creditworthiness—are supported by verifiable documentary evidence. … … 11. Based on the comprehensive review of the assessment order, the grounds of appeal, and the documentary evidence provided, the conclusion is inescapable. The AO's addition of Rs.3,98,76,128/- under Section 68 of the Income Tax Act, 1961, cannot be sustained. The Appellant has successfully discharged the burden of proof by establishing the identity, creditworthiness, and genuineness of the transactions in question. The documentary evidence, including ledger accounts, bank statements, confirmations, PANs, and passports, irrefutably proves that the amounts were genuine trade advances. A more fundamental flaw in the assessment is the fact that the credits were received in prior financial years, making the invocation of Section 68 in the current assessment year inappropriate and legally untenable. Accordingly, the following decision is rendered: i. Ground of Appeal challenging the addition of Rs.3,98,76,128/- under Section 68 of the Act: This ground of appeal is hereby allowed. The addition is found to be legally and factually unsustainable and is directed to be deleted in its entirety. ii. Ground of Appeal concerning the factual mistake of doubling the addition in the computation sheet: This ground of appeal is hereby dismissed as being consequential to the primary ground. With the deletion of the entire addition, this ground becomes moot.”

6.1 In view of the facts and circumstances of the case discussed hereinbefore, we are of the considered view that the CIT(A) has passed a well-reasoned and speaking order based on the documentary evidences furnished by the assessee and has rightly

ITA No.- 7770/Del/2025 Loom Cra�s Shade Systems Pvt. Ltd. deleted the addition u/s 68 of the Act made by the AO. Hence, we find no reason to interfere with the order of the Ld. CIT(A).

Order pronounced in the open court on 22.06.2026.

Sd/- Sd/- [RAJ KUMAR CHAUHAN] [RENU JAUHRI] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated- 22.06.2026. Pooja. Copy forwarded to: 1. Assessee 2. Respondent 3. CIT 4. CIT(A) 5. DR

Asst. Registrar, ITAT, New Delhi,