ACIT, CHENNAI vs. CHANDANMAL NAGARAJ , CHENNAI

आयकर अपीलीय अिधकरण, ’ ए’ �ायपीठ, चे�ई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI �ी यस यस िव�ने� रिव, �ाियक सद� एवं सु�ी पदमावती यस, लेखा सद� के सम# BEFORE SHRI SS VISWANETHRA RAVI, JUDICIAL MEMBER AND MS. PADMAVATHY.S, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 793/Chny/2026 िनधा$रण वष$/Assessment Year: 2017-18 ACIT, Vs. Chandanmal Nagaraj, No.46, MG Road, 26, Kanniah Naidu Street, Nungambakkam, Koondithope, Chennai – 600 034. Chennai – 600 079. [PAN: AACPN-6711-D] (अपीलाथ'/Appellant) (()थ'/Respondent) अपीलाथ' की ओर से / Appellant by : Mr. L. Christopher Vasanth, JCIT ()थ' की ओर से/Respondent by : Mr. D. Anand, Advocate सुनवाई की तारीख/ Date of hearing : 02.06.2026 घोषणा की तारीख /Date of Pronouncement 25.08.2026 : आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:

This appeal filed by the Revenue is directed against the order dated 28.11.2025 passed by the ld. Commissioner of Income Tax (Appeals), Chennai-20, for the assessment year 2017-18.

2 ITA No. 793/Chny/2026 find the reasons stated by the assessee are bonafide which really

prevented the assessee in filing the appeal in time. Thus, delay of 11

days condoned.

engaged in the business of purchase and sales of Stainless Steels,

Pipes, rods etc and conducts its business under the name and style as

M/s. Manoj Metals. The assessee filed its return of income on

29.03.2018 declaring total income of Rs.14,37,640/-. The said return

was processed u/s. 143(1) of the Act, under scrutiny, notices u/s. 143(2)

and 142(1) of the Act were issued. In response to the said notices, the

assessee submitted details and documents as called for. Not satisfied

with the submissions, the AO completed the assessment, inter alia, by

making addition under unexplained expenditure u/s. 69C of the Act and

assessed income of Rs.7,88,19,828/-. Aggrieved by the order of the AO,

the assessee preferred an appeal before the ld.CIT(A). The ld.CIT(A)

deleted the addition on the ground that when the purchases were

recorded in the books of accounts, source of funds remains explained.

Aggrieved by the order of the ld.CIT(A), the Revenue is in appeal before

us.

3 ITA No. 793/Chny/2026 4. The ld.DR, Shri. L. Christopher Vasanth, JCIT, argued that the ld.

CIT(A) has erred while deleting the bogus purchases of Rs.

7,73,82,188/- as untenable addition u/s 69C while the genuineness of

the transaction has not been established. The ld.DR submits that the

ld.CIT(A) failed to consider that that the assessee did not establish any

direct nexus between the impugned payments and corresponding

purchases or outstanding trade liabilities during the relevant previous

year and that merely proving that the payments were made through

banking channels does not, by itself, explain the nature and purpose of

the expenditure. He also submits that the ld.CIT(A) erred while deciding

that application of section 69C is not correct merely because the

payments were made through banking channels, while the assessment

findings had clearly established that the transactions were not genuine.

The ld.DR also submits that the ld.CIT(A) failed to consider that section

69C requires not only an explanation of the source of funds but also a

satisfactory explanation regarding the incurring of expenditure and that

this requirement was not fulfilled by the assessee. Further, he submits

that the ld.CIT(A) failed to consider that the assessee had not submitted

any documentary evidence for the incurred expenditure either during the

course of assessment proceedings or the appellate proceeding and that

4 ITA No. 793/Chny/2026 the Ld. CIT(A) has himself recorded adverse observations regarding the

genuineness of purchases in earlier years and prayed to restore the

order of the AO. He prayed to allow the grounds raised by the Revenue.

furnished all the required details as sought by the AO i.e., books of

accounts, computation of total income, profit and loss account, balance

sheet, Form-3CD, audit report, cash book, bank account statement, VAT

returns, details of purchases and sales and stock summary etc during

the course of assessment proceedings. The AO verified the books of

accounts and found the same as correct. Further, the ld.AR submits that

the assessee made payments to certain parties in the course of business

out of known sources through banking channels. He drew our attention

to the assessment order at page no.2 and submits that the assessee

made payments to four parties and the details are also before the AO.

Further, he argued vehemently that the addition made by the AO u/s.

69C of the Act is not justified as the said payments made to four parties

were made out of known sources in the normal course of business and

not incorporated in the expenditure outside the books of accounts.

Further, he argued that the AO made addition u/s. 69C of the Act only

5 ITA No. 793/Chny/2026 on the basis of suspicion and surmises which cannot be accepted.

Further, he argued the provisions u/s. 69C of the Act are not at all

applicable to the facts and circumstances of the case and prayed to

confirm the order of the ld.CIT(A).

We find there is no dispute with reference to submissions of all required

details in the assessment proceedings, which is evident from para no.2

of the assessment order. Further, the contention of the assessee is that

the payments made to four parties which are reflecting in page no.2 of

the assessment order to settle the closing balance of trade creditors from

earlier years and all such payments rooted through brokers, as per the

common business practice in the line of trade involving stainless steel,

pipes, rods, hotel items and ancillary products etc. The AO verified all

such information as provided by the assessee in the assessment

proceedings itself including the opening balances in respect of such four

parties. We find that the ld.CIT(A) observed the source of payments

made during the year under consideration was fully explained and

traceable to business receipts, primarily from sale proceeds and

realization from trade debtors. Further, there is also no dispute in

6 ITA No. 793/Chny/2026 respect of explanation that the funds available in the bank accounts were

realised from sale proceeds at the time of making such payments were

generated from sale of goods and recovery of outstanding balances from

customers. Further, there is no dispute with reference to all the said

transactions were duly recorded in the books of accounts supporting by

corresponding entries in the bank statement, cash/bank book forming

part of audited financial statements. Therefore, we find force in the

arguments of the ld.AR that there is no scope for invoking provisions u/s.

69C of the Act. The ld.CIT(A) examined said issue and found that all the

payments to those parties are been made through banking channel and

the same also been reflected in the books of accounts of the assessee.

Therefore, we are of the considered opinion that the assessee explained

the source for the addition made by the AO during the course of

assessment itself and we find no adverse reference by the AO in respect

of the details as furnished by the assessee during the course of

assessment proceedings. Therefore, we agree with the reasons

recorded by the ld.CIT(A) in para no. 6.3 of the impugned order and it is

justified. Thus, we find no infirmity in the order of the ld.CIT(A) and

grounds raised by the revenue are dismissed.

7 ITA No. 793/Chny/2026

Chennai, Dated: 25.08.2026 JPV आदेश की (ितिलिप अ.ेिषत/Copy to: 1. अपीलाथ'/Appellant, 2.()थ'/ Respondent, 3. आयकर आयु//CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय (ितिनिध/DR & 5. गाड$ फाईल/GF. Digitally signed by PRASANNA PRASANNA VANI JETTY VANI JETTY Date: 2026.08.28 14:08:09 +05'30'