DCIT CENTRAL CIRCLE 2(1), MUMBAI, MUMBAI vs. DOVAL CLOSURES PVT. LTD, UTTARAKHAND

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ITA 1026/MUM/2025Status: DisposedITAT Mumbai04 May 2026AY 2021-226 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The CIT(A) deleted the additions, finding no evidence of cash payment and relying on the assessee's bank statements and invoices. The Tribunal confirmed the CIT(A)'s order, stating the revenue failed to provide evidence contradicting the assessee's claim of banking channel payments.

What were the facts?

The Assessing Officer (AO) made additions of Rs. 19,50,000/- and Rs. 58,500/- based on information from a search in another company (SMIPL) which indicated cash sales. The assessee claimed payments were made through banking channels.

What were the issues?

Whether additions made on the basis of third-party statements regarding cash sales can be sustained when the assessee provides evidence of payment through banking channels.

Which sections of the Income-tax Act were involved?

Section 69C,Section 115BBE

AI-generated summary — verify with the full judgment below

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “D” BENCH, MUMBAI BEFORE SHRI SANDEEP GOSIAN, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.1026/MUM/2025 (AY: 2021-22) DCIT Central Circle 2(1), vs. Doval Closures Pvt. Ltd., Room No. 804, 8th Floor, Old CGO F 24, UKSIDC Industrial Area, Selaqui, Annexe Building, M. K. Road, Dehradun 248197, Uttarakhand- Marine Lines, Mumbai-400020. 248197. PAN/GIR No: AADCD1188N (Appellant) (Respondent) Assessee by Shri Dharan Gandhi Revenue by Shri Annavaram Kosuri (SR AR) Date of Hearing 04.05.2026 Date of Pronouncement 13.07.2026 O R D E R PER BIJYANANDA PRUSETH, AM:

This appeal filed by the assessee emanates from the order passed under

section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the Commissioner of

Income Tax, Appeal-48, Mumbai [in short, ‘CIT(A)’], dated 06.12.2024 for the

assessment year (AY) 2021-22.

2.

The grounds of appeal raised by the assessee are as under:

“1. "Whether on the facts and circumstances of the case and in law, the Ld. ITIA) is right in deleting the addition made in the assessment order of 19,50,000/-u/a 690 г.ш.. 115BBE of the Income Tax Act, 1961 in the form of unexplained expenditure on account of accommodation entries provided by issuing invoices which is recorded in their books for which they received payment through banking channels and assessee has provided cash against the cheque to M/s. Shuangma Machinery India Pvt. Ltd (SMIPL? 2. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in deleting the addition made in the assessment order of 258,500/- being comunission income received on account of

ITA No.1026/MUM/2025 Doval closures Pvt. Ltd. accommodation entries provided by issuing invoices which is recorded in their books for which they received payment through banking channels and assessee has provided cash against the cheque to M/s. Shuangma Machinery India Pvt. Ltd (SMIPL)?" 3. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in deleting the addition made in the assessment order of 119,50,000/-u/s 69C r.w.s. 115BBE of the Income Tax Act, 1961 in the form of unexplained expenditure on account of accommodation entries on the ground that AO has merely sought to place reliance on the statement of Shri Devang Mehta without any corroborative evidences ignoring the fact that during the course of search proceedings in the case of M/s. Shuangma Machinery India Pvt. Ltd (SMIPL) digital data backup of Shri Devang Mehta's phone and I pad has been taken and analysed from which it was found that name of assessee company was there in excel sheet which shows that order date21.10.2020, Amount of ₹19,50,000/-, Commission of ₹58,500/- and Shri Devang Mehta admitted that M/s. Shuangma Machinery India Pvt. Ltd (SMIPL) has involved in the cash sales?" 4. "Whether the Ld. CIT(A) is right, on the facts and circumstances of the case, to arrive at summary, sweeping and premature decisions in the matter of the enhancements made to the taxable incomes, without examining all of the applicable facts in an integrated manner, without reconciling all of the logical inconsistencies inherent in his arguments and without applying all of the applicable judicial ratios as laid down by the Hon'ble Courts?"

3.

Facts of the case, in brief, are that the assessee electronically filed return of income for the AY 2021-22 on 30.03.2022 declaring total loss of Rs.75,91,120/. Thereafter, it filed revised return on 21.06.2022 declaring loss of Rs.86,64,987/-. The case of appellant company was selected for compulsory scrutiny. There was a search and seizure action in case of M/s Shuangma Machinery India Pvt. Ltd. (SMIPL), which revealed that SMIPL was receiving 20-25% of the sale price in cash. There was an entry of order dated 21.10.2020 for Rs.19,50,000/- in the name of the assessee. Further, there was commission of Rs.58,500/-. During assessment proceedings, notice u/s. 142(1) along with questionnaire of the Act were issued

ITA No.1026/MUM/2025 Doval closures Pvt. Ltd. and served on appellant on time to time. The assessment was completed on 30.12.2022, where the AO made addition of Rs.19,50,000/- u/s. 69C of the Act and commission received of Rs.58,500/-, on the basis of seized material found from the premises of SMIPL. According to AO, the assessee had paid Rs.19,50,000/- in cash, which was added u/s 69C of the Act. 4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The assessee filed written submission which is at page 2 and 3 of the appellate order. After considering the submission of the assessee, the CIT(A) deleted the addition by stating that the assessee had paid the entire consideration through banking channel and there is no evidence to show cash payment. The CIT(A) has also relied on the decision of the Hon’ble Supreme Court in case of CIT vs. Odeon Builders Pvt. Ltd. (2019) 110 taxmann.com 64. 5. Aggrieved by the order of CIT(A), the revenue has filed appeal before the Tribunal. The Ld. Sr. AR submitted that the CIT(A) has deleted the addition only because payment was made by the assessee to banking channel. He submitted that the when addition to the income of the assessee was on the basis of statement recorded during the search, addition could not be deleted because the statement was given by the other party, because for every transaction there are two parties. 6. On the other hand, the Ld. AR of the appellant supported the order of CIT(A). He has also filed invoice of SMIPL as well as ledger account of SMIPL in the books of the assessee. He submitted that the CIT(A) has rightly deleted the

ITA No.1026/MUM/2025 Doval closures Pvt. Ltd. addition because there is no evidence of cash transaction for purchase of the

machine.

7.

We have heard both sides and perused the materials on record. The AO has made the addition on the basis of statement of Shri Devang Metha of SMIPL, who accepted that SMIPL was involved in cash sales and 20-25% of sale price of the machinery was received in cash. Before CIT(A), it was submitted that no payment in cash has been made and there is no supporting details in connection with cash sales. The relevant part of the order of CIT(A) is as below: “7.7 During the appellate proceedings, the appellant submitted the submissions along with copy of invoice dated 13.06.2020 issued by M/s. Shuangma Machinary India Pvt. Ltd. for an amount of Rs. 23,67,552/- which include basic cost of purchase of plastic injection moulding machine amounting of Rs. 19,50,000/-. The appellant also submitted bank statement and copy of ledger accounts which shows that the payments were made through banking channel on various dates. The contention of AO in the assessment order that there is some portion of cash sales around 20 to 25% made by SMIPL to the appellant is not correct as he did not mentioned any supportive details in connection of cash routed through sale transactions. The appellant submitted the related document which proves that purchases made by it are genuine in nature. The conclusion drawn by AO is merely based on a third party statement. No live link exits between the statement of third party and transactions undertaken by appellant. 7.8 Further, in this regards, reliance is placed on judicial pronouncements of Hon'ble Apex Court in the case of CIT vs. Odeon Builders Pvt. Ltd. [2019] 110 Taxmann.com 64 (SC), where it is stated as under. "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs. 19,39,60,866/-, is directed to be deleted." 4

ITA No.1026/MUM/2025 Doval closures Pvt. Ltd.

7.9 Accordingly, relying on the above decision of Hon'ble apex court and discussion on facts of the case, I am directed the AO to delete both the additions of Rs. 19,50,000/- and Rs. 58,500/- made in the assessment order. Thus, Ground No. 1 raised by appellant is allowed.”

7.1 The Ld. Sr. AR of the revenue has not been able to file any evidence to show

that the appellant actually paid anything over and above the invoice amount in

cash. The appellant has filed the bank statement and the tax invoice issued by

SMIPL and the entire payment was made through banking channels on various

dates. The finding of the CIT(A) has not been controverted either on fact or on

law by the revenue. No new material has been brought on record to deviate from

the finding of the CIT(A). Accordingly, the order of CIT(A) is confirmed and the

grounds of the revenue are dismissed.

8.

In the result, the appeal of the revenue is dismissed.

Order is pronounced on 13.07.2026.

Sd/- Sd/- (SANDEEP GOSAIN) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER

*Aniket Chand; Sr. PS MUMBAI Date: 13.07.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

ITA No.1026/MUM/2025 Doval closures Pvt. Ltd.

By Order

Assistant Registrar ITAT, MUMBAI

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