JIGISHA SATISHKUMAR MEHTA,MUMBAI vs. THE DY.CIT, CIRCLE-2(1)(1) PREVIOUSLY DCIT, SABARKANTHA CIRCLE-HIMATNAGAR, AHMEDABAD

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT & SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No.1553/Ahd/2025 (Assessment Year: 2015-16) Jigisha Satishkumar Mehta, The Deputy Commissioner Vs. C-207, of Income Tax, Saidham Society, Circle-2(1)(1), Borivali West, Ahmedabad. Mumbai-400092. (Current Jurisdiction) Maharashtra. DCIT, Sabarkantha Circle, Himatnagar, (Previous Jurisdiction) [PAN :AIXPM4475 C] (Appellant) .. (Respondent) Appellant by : Shri Hardik Vora, AR Respondent by: Shri Abhijit, Sr. DR Date of Hearing 08.06.2026 Date of Pronouncement 12.06.2026 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:-

This appeal is filed by the Assessee against the appellate order dated 15.07.2025 passed by the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi, relating to the Assessment Year 2015-16.

ITA No.1553/Ahd/2025 Asst. Year : 2015-16 - 2– Rs.1,11,10,889/- u/s.68 of the Act, on account of alleged unexplained creditors in the books of account of appellant. 2. On the facts and circumstances of the case as well as law on the subject, Ld.CIT(A) has erred in confirming addition without considering that the notice u/s.133(6) were issued to the creditors during the remand proceedings without verifying their latest address with the appellant 3. On the facts and circumstances of the case as well as law on the subject the Ld.CIT(A) has erred in confirming the addition of unexplained cash credit for closing balance of M/s .Petrochem Middle East (India) Pvt ltd. 4. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the addition of unexplained cash credit for closing balance of M/s AB Enterprise without considering that the appellant had made payment through account payee cheque in the succeeding year i.e., FY 2016-17. 5. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the addition of unexplained cash credit for closing balance of M/s Forum Chemicals. 6. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the addition of unexplained cash credit for closing balance of M/s Mody Enterprise without appreciating that no credit was made during the year under consideration and the balance was brought forward as opening balance from immediately preceding assessment year and remained outstanding as at the end of assessment year under appeal. 7. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in not considering the signed and stamped ledger confirmations from the creditors as well as bank statements highlighting payment made to them.

ITA No.1553/Ahd/2025 Asst. Year : 2015-16 - 3– 8. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming the additions solely on the ground of non-receipt of responses under Section 133(6), without appreciating that the appellant had furnished sufficient evidence to establish the genuineness of the transactions. 9. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in treating the balance of creditors as unexplained when there is no dispute regarding the corresponding purchases. 10. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in confirming provisions of Section 115BBE of the Act. 11. It is prayed that the addition/disallowance may kindly be deleted, considering the facts and evidence on record. 12. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.

ITA No.1553/Ahd/2025 Asst. Year : 2015-16 - 4– ITR 202). The assessment proceedings were completed u/s 143(3) on 27.12.2017 by determining total income at Rs. 1,89,01,060/-.

“…8.8.4 I have carefully examined the appellant's submissions, the assessment order, and the remand report. During, the assessment proceedings, the AO issued notice u/s 143(2) on 19.09.2016 and notice u/s 142(1), for which the AR of the appellant attended and submitted details of the sundry creditors and other information. The AO also issued notices u/s 133(6) to the concerned sundry creditors in order to verify the identity, creditworthiness and genuineness of the transactions However, no replies were received from concerned sundry creditors. Subsequently, a detailed show-cause notice was issued on 05.12.2017, calling for various details including an explanation regarding sundry creditors. The appellant received the said notice on 09.12.2017 and was required to comply by 11.12.2017. No reply, however, was filed within the stipulated time, nor was any written or email request seeking adjournment submitted. The appellant's contention that a telephonic request for adjournment for 15 days was made is unsubstantiated by any contemporaneous record. 8.8.5 Subsequent to the issue of show cause notice, confirmations were received from four parties i.e Vitrag Chem - Rs. 45,84,812, Flora Chemicals Rs. 5,56,320, Hazle Mercantile Ltd. Rs. 75,81,882, Rushabh Rasayan Rs. 11,62,336. Considering the confirmations received from these parties, the AO accepted these balances as genuine and reduced the proposed addition accordingly. Consequently, due to non-receipt of replies to the notices issued u/s 133(6) from some of the parties and in light of the statutory time limit for completion of assessment, the AO finalized the assessment u/s 143(3) on 27.12.2017 by making additions based on the material on record. Hence, AO has granted even 15 days time supposedly requested by appellant telephonically on 11.12.2017 before passing assessment order on 27.12.2017. Therefore, it cannot be said that the assessment was completed in haste. As regards the reliance placed on Tin Box Co. (supra), it is distinguishable on facts. In that case, the assessment was set aside by the Hon'ble Court on the ground that no opportunity of hearing was given at all. In the present case, repeated

ITA No.1553/Ahd/2025 Asst. Year : 2015-16 - 5– opportunities were provided to the appellant and it is the appellant who chose not to avail them. 8.8.6 As the appellant did not respond to the show-cause notice dated 05 12.2017, which proposed to make an addition of Rs. 3,10,71,671 under section 68. In the assessment order, the AO recorded that the assessee "has nothing to say and made passing comments suggesting that the assessee had agreed to the proposed addition. However, such observation is only an inference drawn by the AO due to non-compliance and cannot be treated as the only basis for making addition while finalizing the assessment. Additions made by AO were based on outcome of enquiry conducted by him/her u/s133(6). 8.8.7 Further, reliance on CBDT Instruction No. 574 dated 27.07.1973 and Press Release dated 07.11.2014 is also misplaced. These are general administrative guidelines to promote fair assessments but cannot override express provisions of the Income Tax Act or nullify additions made on the basis of material on record and non-compliance by the assessee. Mere disparity between returned and assessed income, in itself, does not render the assessment invalid or "high-pitched" in law. In this case, the additions made were based primarily on the absence of replies to notices issued u/s 133(6) to various sundry creditors. However, it is also observed that the AO accepted and allowed certain amounts where replies or confirmations were received from some parties. Therefore, it cannot be said that the assessment was arbitrarily or disproportionately high-pitched, as the AO made additions selectively based on the availability of third-party confirmations and material on record. 8.8.9 Therefore, the contention that the assessment is perverse or legall invalid is not sustainable. Accordingly, Grounds of Appeal No. 1, 2, and 3 are dismissed. 8.9.1 Vide above ground of appeal, the appellant has challenged the addition of Rs 1,71,86,321 made by the AO u/s 68 of the Act, representing the closing balances of five sundry creditors. The appellant contended that these balances pertain to trade creditors against purchases made in the ordinary course of business and that the AO has already accepted the purchases and sales in full. The appellant further claims to have submitted confirmations, ledger accounts, and bank details in support of the creditors. 8.9.2 The appellant specifically submitted that the transactions are genuine trade payables, and the onus u/s 68 was duly discharged. It was also argued that the AO in the remand proceedings, failed to issue

ITA No.1553/Ahd/2025 Asst. Year : 2015-16 - 6– notices under section 133(6) at updated addresses and hence some replies were not received due to being sent to old or incorrect addresses. 8.9.3 However, the appellant's claim regarding incorrect address usage for notices issued under section 133(6) during remand proceedings is a mere presumption. The appellant has not placed any credible evidence on record showing that the AO had issued notices at old or invalid addresses despite being provided with updated contact details of concerned creditors. In the absence of such proof, the burden. cannot be shifted onto the AO. The principle of natural justice does not extend to speculative procedural lapses without substantiation. Further, the fact that AO has sent enquiry letters u/s 133(6) to, latest address provided by appellant is substantiated by the fact that one of the creditors i.e. M/s A B Enterprises has responded to notice u/s 133(6) issued by AO during remand proceedings and filed reply. It is noted that, the said creditor has not responded to earlier notice of AO during assessment proceedings which as per appellant has not been served on the creditor due to change of address. The fact that, M/s A B Enterprises responded during remand proceedings establishes that AO has taken cognizance of new address mentioned on confirmation letters (additional evidence) and sent notices to the latest address mentioned on the confirmation letters. If notices are sent to new address mentioned in confirmation letter of one of the creditor, why would AO send notices to old address in respect of remaining creditors ignoring current address readily available on confirmation letters by making special efforts to find out old address of creditors from the previous notices sent during assessment proceedings is beyond imaginable. Therefore, claim of the appellant that non response to notices of AO by creditors is due to the fact that AO has sent notices u/s 133(6) during remand with the assessment order, the appellant is in appeal. 8.9.4 In the case of M/s. KLJ Resources Ltd., the appellant has filed a duly confirmed ledger account and supporting records reflecting genuine purchase transactions. In the remand report, the AO mentioned that the creditor had also sent a confirmation to the AO during the original assessment proceedings via email. However, the said confirmation could not be received at that stage due to an error in entering the email address of the AO. The AO also noted that credit balance of Rs.60,75,432/- is correct and found to be explained. Further, during the remand proceedings, notice u/s. 133(6) was issued to creditor and a direct confirmation from this party, and no adverse observations were made by AO. Henec, the identity and genuineness of the transaction stand established, and no adverse remarks were offered by the AO in the remand report in respect of this party. In view of the availability of

ITA No.1553/Ahd/2025 Asst. Year : 2015-16 - 7– confirmation and supportive documentation, the credit in the name of M/s. KLJ Resources Ltd. amounting to Rs. 60,75,432/- stands satisfactorily explained. Accordingly, the addition of Rs. 60,75,432/- is deleted. 8.9.5 As regards M/s. AB Enterprise, the AO received a response from the creditor during remand proceedings categorically denying having entered into any transaction with the appellant. The appellant merely expressed doubt about the correctness of the party's response without producing any counter-confirmation or verifiable rebuttal such as delivery invoices, communication records, Lorry receipts etc. In absence of corroborating documents, the claim of the appellant remains unsubstantiated. The appellant relied on her own bank statement showing payments to concerned party. When other party has categorically denied transaction, evidence in the form of payment through bank does not come to the rescue of appellant to prove genuineness of outstanding balance in the name of the creditor. The fact that one of the creditors has outrightly denied the transaction raises serious doubts about the genuineness of other creditors also. In such circumstances, the claim of the appellant remains unsubstantiated. Accordingly, the addition of Rs. 8.67,405/- is sustained. 8.9.6 in the case of M/s. Petrochem Middle East (India) Pvt. Ltd., the AO has reported that no reply was received to the notice issued under section 133(6) during remand proceedings. Though the appellant claimed that the party is a reputed multinational entity and that communication failure occurred due to AO sending notice to the old address, no letter from concerned party regarding non receipt of any notice from AO during remand proceedings has been brought on record by the appellant. The fact that one of the creditors i.e. M/s A B Enterprises, to whom payments were claimed to have been made through bank account has denied the transaction with appellant during the year coupled with non-response from the creditor to the notice u/s 133(6) send by AO shows that appellant failed to establish outstanding balance in the name of above creditor. Accordingly, the addition of Rs 78,82,892/- is sustained. 8.9.7 With respect to M/s. Forum Chemicals, it is noted that no response was received by the AO to the notice issued under section 133(6) during remand proceedings to the latest address. Though the appellant claimed that communication failure occurred due to AO sending notice to the old address, no letter from concerned party regarding non receipt of any notice from AO during remand proceedings has been brought on record by the appellant. The fact that one of the creditors i.e. M/s A B

ITA No.1553/Ahd/2025 Asst. Year : 2015-16 - 8– Enterprises, to whom payments were claimed to have been made through bank account has denied the transaction with appellant during the year coupled with non-response from the creditor to the notice u/s 133(6) send by AO shows that appellant failed to establish outstanding balance in the name of above creditor. Accordingly, the addition of Rs. 18,35,351 is sustained. 8.9.8 In the case of M/s. Mody Enterprise, the appellant contended that the outstanding amount of Rs. 5,25,241 pertains to an opening balance carried forward from prior years and that no fresh credit was recorded during the year under appeal. The appellant stated that it was the balance outstanding as on 31.03.2013. However, the AO examined the ledger furnished by above creditor during assessment proceedings and concluded that there was no such carried forward balance substantiated from earlier year records. The appellant also failed to produce audited ledger extracts of the creditor or prior year financial statements to substantiate its claim. Accordingly, the addition of Rs. 5,25,241 is sustained. 8.9.9 In Shri Suresh Kumar T Jain vs The Income-Tax Officer on 20 November, 2018, Income Tax Appeal No.160 OF 2010 (Karnataka High Court), during the course of assessment proceedings, the assessee was asked to produce the details of sundry creditors with complete addresses and confirmation letters from the creditors. He furnished the list of creditors with addresses in 39 cases and in 10 cases, no addresses were provided. No confirmation letter was filed by the assessee, in spite of several reminders, except in 2 cases. Thereafter, letters were addressed to the sundry creditors as per the addresses given by the assessee. In response to these letters, 23 creditors have furnished the details called for. Out of the balance 26 creditors, in 4 cases, the credit balances were confirmed as nil. In 10 cases, the assessee did not furnish the addresses. In balance of 12 creditors, notices were returned unserved on the grounds of 'insufficient address', 'no such person', etc. Thereafter, the Assessing Officer came to the conclusion that the amount brought forward balances of creditors of Rs.50,09,199/- is proven to be no longer liable and as the trading liability ceased to exist, it was added back to the returned income as cessation of liability. In this case, Hon'ble High Court held that, unsubstantiated credit balances are taxable u/s 68 r ws 41 of IT Act. In view of the above facts. explanations and lack of documentary support in four out of five cases, the addition under section 68 is partially confirmed. The appellant has failed to discharge the onus of proving the identity, creditworthiness, and genuineness of the credits except in the case of M/s. KLJ Resources Ltd.

ITA No.1553/Ahd/2025 Asst. Year : 2015-16 - 9– 8.9.10 Accordingly, the AO is directed to delete the addition of Rs. 60,75,432 pertaining to M/s. KLJ Resources Ltd. and the balance addition of Rs. 1,11,10,889 (ie., Rs. 1,71,86,321 minus Rs. 60,75,432) is hereby confirmed. Accordingly, ground of appeal relevant to the issue is partly allowed…” 5. We have heard the rival submissions and perused the material available on record. We find that the addition under section 68 of the Act has been made and partly sustained by the Ld. CIT(A) primarily on account of non-response to notices issued under section 133(6) of the Act and the inability of the assessee to furnish complete supporting evidences to the satisfaction of the lower authorities. It is noticed that the impugned amounts represent outstanding balances of trade creditors arising in the course of regular business transactions. The assessee has contended that purchases corresponding to such creditors have been accepted by the Revenue and has also furnished certain documentary evidences including ledger accounts, confirmations and details of subsequent payments. At the same time, it is evident from the orders of the authorities below that complete verification of the evidences and reconciliation of the creditors' balances could not be carried out. Considering the totality of the facts and circumstances of the case, and in the interest of substantial justice, we are of the considered view that the issue requires fresh examination at the end of the Assessing Officer. In our opinion, one more opportunity deserves to be granted to the assessee to substantiate the genuineness of the outstanding trade creditors by furnishing all relevant documentary evidences, including confirmations, purchase invoices, bank statements, details of subsequent payments and such other supporting records as may be considered necessary. We,

ITA No.1553/Ahd/2025 Asst. Year : 2015-16 - 10– therefore, set aside the impugned order of the Ld. CIT(A) on this issue and restore the matter to the file of the Assessing Officer for fresh adjudication in accordance with law. The Assessing Officer shall examine the evidences to be furnished by the assessee, conduct such enquiries as may be deemed fit and thereafter decide the issue afresh by passing a order after affording adequate opportunity of being heard to the assessee. The assessee is also directed to furnish all requisite details called for by the Assessing Officer.

The order is pronounced in the open Court on 12.06.2026.

Sd/- Sd/- (RAHUL CHAUDHARY) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT (True Copy) Ahmedabad; Dated 12.06.2026 MV आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy

सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad