DCIT, CIRCLE 1(1)(1), AHMEDABD, AHMEDABAD vs. DHARMDEEP COMMODITIES PVT LTD, AHMEDABAD

The Department has raised the following grounds of appeal:

The brief facts of the case are that the assessee company is engaged in the business of trading in cotton bales and also acts as a commission agent. For the year under consideration i.e. A.Y. 2014-15, the assessee filed its return of income on 28.11.2014 declaring total income of Rs.98,32,060/-. The original assessment under section 143(3) of the Act was completed on 25.11.2016 accepting the returned income without making any addition. Subsequently, the case of the assessee was reopened and reassessment proceedings under section 147 read with section 143(3) were completed on 31.12.2019 wherein the Assessing Officer made two additions, namely disallowance of Rs.43,48,272/- under section 37 and addition of Rs.5,45,43,550/- under section 68 of the Act in respect of commodity trading transactions executed through M/s Anand Rathi Commodities Ltd. on the NSEL platform. According to the Assessing Officer, such transactions involved client code modification (CCM) and therefore the purchases and

Thereafter, on the basis of another set of commodity transactions executed through the same broker and on the same NSEL platform, the Assessing Officer initiated a second round of reassessment proceedings by issuing notice under section 148 dated 30.03.2021. In response thereto, the assessee filed return of income on 06.12.2021 declaring the same income of Rs.98,32,060/-. The second reassessment proceedings were completed under section 147 read with section 144B on 29.03.2022 determining total income at Rs.11,53,81,550/- after making further addition of Rs.4,66,57,670/- under section 68 of the Act.

During the course of reassessment proceedings, the Assessing Officer observed that the assessee had entered into transactions of purchase and sale of commodities through broker M/s Anand Rathi Commodities Ltd. on the National Spot Exchange Limited (NSEL) platform and that such transactions were carried out through client code modifications involving original clients namely Navratan Mal Gupta, Ashrit Holdings Ltd., Borosil Glass Works Ltd. and Shirish Rege. According to the Assessing Officer, the assessee had not genuinely executed the transactions in its own client code and therefore the purchase value of the trades was liable to be treated as unexplained cash credit under section 68 of the Act.

The assessee, however, submitted before the Assessing Officer that all commodity transactions were genuine business transactions carried out in the ordinary course of business through registered broker Anand Rathi

Aggrieved by the reassessment order, the assessee preferred appeal before the Ld. CIT(A). During the course of appellate proceedings, the assessee reiterated that the impugned transactions represented genuine

The assessee submitted before the Ld. CIT(A) that the transactions involved in the present reassessment proceedings were exactly similar to those already adjudicated by the Tribunal in the earlier round and therefore judicial consistency required that the same view should be followed. The assessee further submitted that the total profit of Rs.17,59,312/- from all

The Ld. CIT(A), after considering the submissions of the assessee, examining the assessment order, documentary evidences placed on record and the order passed by the Hon’ble ITAT in the assessee’s own case for the same assessment year, granted substantial relief to the assessee. The CIT(Appeals) observed that the nature of transactions, broker involved, allegations relating to client code modification and surrounding facts in the present reassessment proceedings were completely identical to those already adjudicated by the Hon’ble Tribunal in the earlier reassessment proceedings for the same year. The Ld. CIT(A) noted that the Tribunal had already held that in such cases only the profit element embedded in the transactions could be brought to tax and not the entire transaction value.

The Ld. CIT(A) thereafter examined the contract notes, broker ledger accounts and bank statements furnished by the assessee and recorded detailed findings regarding purchase value, sale value and profit element arising from the impugned commodity transactions. The CIT(Appeals) observed that the total purchase value involved in the present reassessment proceedings aggregated to Rs.4,66,57,670/- and the corresponding profit element embedded in such transactions worked out to Rs.8,33,212/-. The

Following the binding order of the Hon’ble ITAT in the assessee’s own case for the same assessment year, the Ld. CIT(A) held that the entire transaction value of Rs.4,66,57,670/- could not be brought to tax under section 68 of the Act and only the profit element embedded in the transactions could be considered for taxation. Accordingly, the addition made by the Assessing Officer under section 68 was restricted from Rs.4,66,57,670/- to Rs.8,33,212/-.

At the same time, the Ld. CIT(A) also noted that such amount of Rs.8,33,212/- already formed part of the total trading profit offered to tax by the assessee in its original return of income. However, following the earlier order of the Hon’ble Tribunal, the CIT(Appeals) treated the said amount as taxable under section 68 of the Act in substitution of business income without enhancing the assessed income. Consequently, the balance addition was deleted and substantial relief was granted to the assessee.

The Department is in appeal before us against the order passed by CIT(Appeals) allowing the appeal of the assessee.

We have heard the rival submissions and perused the material available on record. The sole grievance of the Revenue in the present appeal is against the action of the Ld. CIT(A) in restricting the addition made under section 68 of the Act from Rs. 4,66,57,670/- to Rs. 8,33,212/- in respect of

The assessee company is engaged in the business of trading in cotton bales and also acts as a commission agent. During the year under consideration, the assessee entered into purchase and sale transactions of commodities through broker M/s Anand Rathi Commodities Ltd. on the NSEL platform. The Assessing Officer treated the purchase value of certain trades amounting to Rs.4,66,57,670/- as unexplained cash credit under section 68 of the Act on the ground that such trades involved client code modification (CCM) carried out by the broker with original clients namely Navratan Mal Gupta, Ashrit Holdings Ltd., Borosil Glass Works Ltd. and Shirish Rege.

We find that identical issue involving the same assessee, same assessment year, same broker and same allegation of client code modification had already travelled before the Coordinate Bench of Ahmedabad Tribunal in assessee’s own case arising out of the first reassessment proceedings for A.Y. 2014-15 in ITA No.398/Ahd/2023 order dated 24.06.2025. The Coordinate Bench, after detailed examination of the nature of transactions, contract notes, ledger accounts and banking trail, held that the entire transaction value could not be added under section 68 and only the profit element embedded in such trades could be brought to tax.

The relevant findings of the Coordinate Bench in assessee’s own case read as under:-

We further notice that the assessee had furnished complete documentary evidences before the authorities below including contract notes, ledger accounts of broker and bank statements evidencing corresponding payments and receipts through banking channels. The assessee had consistently explained that the transactions were executed in the normal course of business and the profits arising therefrom had already been offered

The Ld. CIT(A), after examining the documentary evidences, recorded categorical finding that the total purchase value involved in the impugned trades aggregated to Rs.4,66,57,670/- whereas the corresponding profit embedded therein worked out only to Rs.8,33,212/-. The Assessing Officer himself had not disputed the correctness of such purchase and sale figures or the resultant profit computation. Therefore, respectfully following the earlier order of the Coordinate Bench in assessee’s own case, the Ld. CIT(A) restricted the addition only to the profit element embedded in the transactions.

We also find merit in the contention advanced by the Ld. Counsel for the assessee that even the said profit element of Rs.8,33,212/- already formed part of the total trading profit of Rs.17,59,312/- voluntarily disclosed by the assessee in the original return of income. Thus, effectively no income had escaped taxation. However, since the Ld. CIT(A) has already followed the earlier order of the Tribunal and sustained the addition to the extent of profit element only, no further interference is called for.

Considering the totality of facts and respectfully following the order of the Coordinate Bench of Ahmedabad Tribunal in assessee’s own case in ITA No.398/Ahd/2023 dated 24.06.2025, we find no infirmity in the well- reasoned order passed by the Ld. CIT(A) restricting the addition under section 68 to the extent of profit element of Rs.8,33,212/- and deleting the balance addition.

ITA No. 1967/Ahd/2026 is the Department’s appeal against relief granted to the assessee by CIT(Appeals) with respect to penalty order u/s 271(1)(c) of the Act passed by the Assessing Officer for the aforesaid additions.

Since in the preceding part of order, we have dismissed the Department’s appeal against the relief granted by CIT(Appeals) against the quantum addition, accordingly, we find no infirmity in the order of Ld. CIT (Appeals) granting relief to the assessee in penalty proceedings as well, so as to call for any interference.

In the combined result, both the appeals filed by Department are dismissed. This Order pronounced in Open Court on 26/05/2026