ITO-9(3)(1), MUMBAI vs. OHMS ENERGY PRIVATE LIMITED, MUMBAI

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JM & SHRI ARUN KHODPIA, AM I.T.A. No.8678/Mum/2025 (Assessment Year: 2018-19) ITO – 9(3)(1) OHMS Energy Private Limited 419, 4th floor, Aayakar Bhavan, 132, 3rd floor Building No.1, Vs. Mumbai-400020 SolatireCarporate Park, Chakala, Andheri East, Mumbai-400093 PAN: AADCD4903H Revenue- अपीलाथ� / Appellant Assessee-��थ�/ Respondent :

Assesseeby : Shri Satish Mody Revenueby : Shri Virabhadra Mahajan, Sr. DR : 26.03.2026 Date of Hearing : 18.06.2026 Date of Pronouncement

O R D E R Per Arun Khodpia, AM: This appeal is preferred by the Revenue, against the order of the Commissioner of Income Tax Appeals, National Faceless Appeal Centre (NFAC), Delhi [in short, “the Ld. CIT(A)”], dated 24.10.2025 for the Assessment Year (AY) 2018-19, arises from the assessment order under section 143(3) of the Income Tax Act, 1961 [in short, “the Act”] dated 15.03.2021, passed by National e-Assessment Centre, Delhi [in short, “the Ld.AO”].The grounds of appeal raised by the Revenue are as under: “1. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition made towards unexplained cash credit amounting to

ITA No. 8678/Mum/2025 OHMS Energy Private Limited Rs.3,87,40,918/- made u/s 68 of the Act relying upon the additional evidence filed during the appellate proceeding without giving opportunity of being heard to AO, thereby violating the provisions of Rule 46A(2) and 46A(3) of the IT Rules. 2. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition made to Net Profit amounting to Rs. 1,03,77,455/-by applying net profit ratio at the rate 4 percent without appreciating the fact that assessee company had reported low net profit' for the year as compared to earlier years.”

ITA No. 8678/Mum/2025 OHMS Energy Private Limited selection of the case. The assessee filed part response on 08.10.2020 in compliance to the notice u/s 142(1) dated 30.09.2020. However, no response was made in compliance to the notice u/s 142(1) dated 18.01.2021. 4. Ld. AO observed that despite sufficient opportunities granted, the assessee has not provided requisite details, therefore, further show-cause notice was issued and finally the assessee has responded on 27th February, 2021 which is considered. On perusal of the balance sheet of assessee, the Ld. AO noticed that the assessee-company has issued 95947 shares at face value of Rs.10/- along with share premium of Rs.393.77/- per share. Accordingly, the assessee has issued share capital and received an amount of Rs.3,87,40,918/- during the year under consideration. To examine the Fair Market Value of shares allotted, a query was raised to the assessee in terms of provisions of section 56(2)(viib) to explain the genuineness of the share capital received. In response, assessee submitted copies of PAN or passport, acknowledgement of ITRs and computation of income for AY 2018-19 in respect of the shareholders. Further, the assessee-company has also submitted copies of its own bank statement and claimed that the entire amount of share capital and share premium has been routed through banking channels. 5. Regarding creditworthiness of the shareholders, the assessee clarified that the investments are made out of their past savings, income from salary or sale of mutual funds during the year. The assessee-company submitted that it has satisfactorily explained the source of share capital received during the year and 3

ITA No. 8678/Mum/2025 OHMS Energy Private Limited claimed that the same ought not have to be treated as unexplained cash credit u/s 68 of the Act. 6. The Ld. AO was not convinced with the submissions of assessee, therefore, had made certain observations, as under: “7. Claim of the assessee regarding discharge of its onus to establish genuineness of share capital stated to be received during the year is not acceptable in view of the following facts: - (a) The assessee company has not even furnished confirmation letters from the share holders to whom fresh shares have been stated to be issued. (b) The assessee company has failed to furnish copies of the bank statements of share holders to establish genuineness of the transaction and creditworthiness of the persons. (c) Copies of PAN or passport, acknowledgement of ITRs and computation of income for A.Y. 2018-19 of the share holders cannot be accepted as conclusive evidences in respect of creditworthiness of these persons particularly in a situation where the assessee company was specifically asked to submit copies of their bank statements. (d) Sources of investment by share holders as claimed in the submission is very general and not acceptable.” 7. It is further noted by the Ld. AO that mere confirmation letter is not sufficient to prove the genuineness of cash credit u/s 68, the onus is on the assessee to establish not just the transactions but more importantly the identity and financial capacity of the creditors/investors/lenders. Accordingly, Ld. AO made an addition of Rs.3,87,40,918/- treating the amount of share capital/premium received by assessee as unexplained cash credit u/s 68 of the Act. Ld. AO further observed that the assessee had claimed huge losses during the year under consideration, however, the reasons for such losses were not explained by the assessee. Ld. AO also noted that the assessee advanced Inter- Corporate Deposits (ICD) amounting to Rs.7,03,10,500/- on which no interest has been received by the assessee, whereas it has claimed finance cost of 4

ITA No. 8678/Mum/2025 OHMS Energy Private Limited Rs.41,98,872/- consisting of interest paid and bank charges. The assessee was requested to provide explanation as to why interest expenses should not be disallowed. As per Ld. AO, the assessee has not offered any explanation in this regard. Ld. AO also noted that the assessee’s net profit rate for preceding AY 2017-18 was 12.22% whereas in the year under consideration, the assessee has declared a loss of Rs.77.52 lakh therefore, taking the turnover of current year for Rs.6.56 crore,why the profit of assessee should not be determined at Rs.80,15,685/- (12.22% of the turnover) and accordingly, an addition of Rs.1,57,68,440/- to be made. 8. In response, the assessee submitted that the interest is in the nature of corporate deposit to M/s. DK Infrastructure Pvt Ltd. and the concerned entity is the main customer of the assessee-company and 90% turnover is derived from the said entity. The inter-corporate deposit was given considering the business exigencies and hence disallowance of interest expense u/s 36(1)(iii) is not attracted. The assessee has reduced its claim of loss from business in the revised return filed on 03.01.2019. Regarding reason for such huge loss, the assessee- company stated that it is mainly on account of considerable reduction in operating revenue as compared to last year. It is also clarified that there is no change in the operating expenses and the increase in finance cost is due to additional long-term borrowings for meeting working capital requirements.

ITA No. 8678/Mum/2025 OHMS Energy Private Limited 9. The Ld. AO further noted from the P & L Account of the assessee that there was a huge increase in the purchases of the assessee from Rs.15.70 lakh in AY 2017-18 to Rs.4.36 crore in AY 2018-19 for which the assessee-company has not offered any explanation. It is also noted that the assessee-company has not shown any closing stock even though the purchase has increased manifold. 10. With such observations, the Ld. AO has made an addition of Rs.1,03,77,455/- to the net profit of the assessee after making following deliberations: “15. Considering the facts of the case in totality, it will be appropriate to adopt a net profit rate of 4% against 12.22% shown in previous year as the contention of the assessee regarding decrease in turnover has merit and deserves consideration. By applying this net profit of 4% on total turnover of Rs. 6,56,17,439/-, net profit of Rs. 26,24,700/- is hereby estimated for the period under consideration. The assessee has disclosed net loss of Rs. 77,52,755/- in Schedule-BP of ITR for the purposes of determination of income from business. Accordingly, addition of Rs. 1,03,77,455/- is hereby made on account of net low profit declared by the assessee. The aboveaddition is inclusive of disallowance of interest expenses u/s 36(1)(iii) and hence no separate addition on that account is being made. As the assessee has under reported its income, penalty proceedings u/s 270A are also initiated. 16. Subject to above discussion, income of the assessee is determined as under:- Income as per Return Rs. (-) 21,15,334/- Add:- 1. Unexplained cash credit u/s 68 Rs. 3,87,40,918/- 2. Addition to net profit Rs. 1,03,77,455/- Assessed Income Rs. 4,70,03,039/- R/o Rs. 4,70,03,040/- 11. Being aggrieved with the aforesaid additions by the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A), wherein the Ld. CIT(A) had dismissed the assessee’s ground regarding no sufficient opportunity by the AO. Further, on merits, Ld. CIT(A) deleted the addition of Rs.3,87,40,918/- on account of cash credit u/s 68 in the garb of share capital and share premium

ITA No. 8678/Mum/2025 OHMS Energy Private Limited received by the assessee. The observation of Ld. CIT(A) on the issue of share capital and share premium are as under: “5.7 Appellant’s submissions were carefully considered. Appellant had submitted copies of PAN/Passport, acknowledgement of ITRs and computations statement for AY 2018-19 of the shareholders. Appellant also furnished its bankstatement, reflecting the receipt of share capital/premium. These documents were sufficient enough for the AO to conduct further enquiries to establish the genuineness of the transactions or otherwise. In order to get satisfied with the identity creditworthiness of the shareholders, AO could have conducted enquiries by issuing notice u/s 133(6) of the Act, to the shareholders, asking for the sources of their investments. AO could have obtained the bank statements of the shareholders, by conducting enquiries with the appellant’s bank. AO could have also made enquiries through the verification unit to obtain the bank accounts of the shareholders. However, AO did not conduct any such enquiry. AO simply observed that the appellant had not furnished the bank statements of the shareholders and hence the genuineness of the transactions and creditworthiness of the shareholders could not be established. 5.8 By furnishing the PAN, ITR and computation statement of the shareholders, appellant had discharged its onus in proving the identity and creditworthiness of the shareholders. By providing its bank statement, appellant also prove the genuineness of the transactions. Now, the onus shifted on the AO, to prove that the transactions were not genuine and the shareholders were not creditworthy. However, AO had not made any effort or conducted any enquiry to prove that the transactions were not genuine. On the other hand, appellant had furnished confirmations from the shareholders and bank statement of the shareholders, as additional evidences during the course of appeal proceedings. These additional evidences are admitted under rule 46A of IT Rules, since the appellant was prevented by the challenges posed by COVID19 pandemic during the course of assessment proceedings to furnish the same. These additional evidences are not referred to AO, for remand report, since these evidences only add to the submissions made during the course of assessment proceedings. Since these evidences could have been obtained by the AO himself, by conducting enquiries u/s 133(6) or issuing summons u/s 131 of the Act, the same are not being referred to the AO. 5.9 Based on the submission made by the appellant and the evidences in the form of ITR, bank statements, ledger confirmations and financials of the investor company, appellant had proved the identity and creditworthiness of the shareholders also the genuineness of the transactions. In view of the above, the addition of Rs.3,87,40,918/- u/s 68 of the Act, is deleted. Appeal on this ground is allowed.” 12. Regarding the estimated addition of 4% in the form of net profit on the turnover of assessee, Ld. CIT(A) rejected the findings of AO and directed to delete the same with the following observations:

ITA No. 8678/Mum/2025 OHMS Energy Private Limited “6.6 Appellant’s submissions were carefully considered. Appellant had clearly explained the reasons for increase in purchases in the present AY under consideration. The turnover of the appellant from project implementation services had reduced, whereas the turnover of the EPC and supply of solar panels had increased. Further, AO had not verified the genuineness of the purchases. No enquiry was conducted with respect to any supplier to prove that the purchases were not genuine. Without pinpointing any such discrepancy, AO simply observed that the purchases had increased in the current AY as compared to the previous AY and hence the same could not be accepted as genuine. AO is not correct in concluding that appellant had inflated the purchases, without adducing any evidence. 6.7 Appellant also explained the reason for making interest free intercorporate deposit of Rs.7,03,10,500/- to its contractor, DK Infrastructure Pvt Ltd. Without conducting any enquiries from DK Infrastructure Pvt Ltd. AO observed that non charging of interest from the intercorporate deposit made the assessee to incur loss. AO is not correct in making such observation. AO had not adduced any reason as to why the profit had to be estimated at 4% of the turnover. Further, AO had not rejected the books of accounts of the appellant on any valid reason. 6.8 From the above discussions, it can be concluded that the AO had made arbitrary addition to the net profit. AO had not proved that the purchases were not genuine. Neither the books of accounts were rejected. No enquiry was conducted to show that the intercorporate deposit advanced by the appellant was not for the purpose of business. In view of the above, the ad-hoc, estimated addition, made to the net profit of Rs. 1,03,77,455/- is deleted. Appeal on this ground is allowed.” 13. At the outset, Ld. DR representing the Revenue submitted that during the appellate proceedings before ld. CIT(A), the assessee had submitted various additional evidences under Rule 46A of Income Tax Rules which is evident from para 5.5 of the order of Ld. CIT(A), however such documents were never referred back to the AO for his comments in the form of remand report. The Ld. CIT(A) has admitted such additional evidences under the circumstances that the assessee was prevented by the challenges posed by COVID-19 pandemic during the course of assessment proceedings to furnish the same. He also mentioned that the additional evidences were not referred to AO for remand report,since these evidences only added to the submissions made during the course of assessment proceedings. Also, such evidences could have been obtained by the AO himself, 8

ITA No. 8678/Mum/2025 OHMS Energy Private Limited by conducting enquiries u/s 133(6) or issuing summons u/s 131 of the Act, so the same are not being referred to the AO. It was the submission that such approach of Ld. CIT(A) was violative to the provisions of Rule 46A of the Income Tax Rules, as any additional evidence furnished before the Ld. CIT(A) having an effect on his decision needs to be referred back to the AO for calling a remand report in order to preserve the principle of natural justice. Therefore, the matter needs to be remanded back to the file of Ld. AO for fresh adjudication. 14. Regarding the issue of reductionin net profit, Ld. DR submits that the assessee-company had reported low net profit for the year under consideration compared to the earlier year and the AO has reasonably estimated the profit at 4%, which was wrongly reversed by the Ld. CIT(A), with no plausible explanation, but only by finding faults in the conduct of AO that the AO has not verified the genuineness of the purchases, had not conducted any enquiry with respect to suppliers of purchases, nopinpointing discrepancies could be pointed out by the AO etc. Under such circumstances, there was a gross error in the order of ld. CIT(A), the addition made by AO, thus, deserves to be upheld. 15. Per contra, the Ld. Authorized Representative (AR) of the assessee submits as under – Regarding creditworthiness of investors/shareholders, it is submitted that the assessee has furnished ledger account confirmation, ITR, bank statement and the balance sheet to prove beyond doubt that every subscriber of shares had sufficient funds for purchasing the shares of the assessee company. 9

ITA No. 8678/Mum/2025 OHMS Energy Private Limited

ITA No. 8678/Mum/2025 OHMS Energy Private Limited purchases. Therefore, there is no abnormal increase in the purchase, when it is compared with the increase in sales in the same line of business.

ITA No. 8678/Mum/2025 OHMS Energy Private Limited was, therefore, the submission that the addition made by the AO u/s 68 as well as estimated addition to the profit of the assessee are liable to be deleted, which the Ld. CIT(A) has rightly and judiciously adjudicated. Accordingly, the order of Ld. CIT(A) deserves to be upheld.

ITA No. 8678/Mum/2025 OHMS Energy Private Limited asking for source of their investment.Ld. CIT(A) also stressed upon conduct of the AO,stating that he was unable to obtain the bank statement of the shareholders by conducting enquiries with the banks. It was the conclusion by Ld. CIT(A) that the AO has simply observed that the assessee had not furnished the bank statement of the shareholders and hence genuineness of the transactions and creditworthiness of the shareholders could not be established. The Ld. CIT(A) has passed adverse remarks against the actions of AO however, had not made any comment qua the identity, creditworthiness of the investors and genuineness of the transactions. In nutshell, he accepted the assessee’s contention that the assessee had proved the identity and genuineness of the shareholders and the genuineness of the transactions, however, had not referred to the financials of the shareholders as to how they are creditworthy and the transactions are genuine.

ITA No. 8678/Mum/2025 OHMS Energy Private Limited additional evidence by sending them for reference to the AO to call for remand report and then decide the issue accordingly on merits.

ITA No. 8678/Mum/2025 OHMS Energy Private Limited averments remains, subject to a check. We, thus, find it appropriate to restore this issue also back to the file of Ld. CIT(A) to verify all these aspects and assertions of the assessee by analyzing the financials of the assessee in detail, so as to find out and arrive at a logical conclusion instead of justifying the results of the assessee-company by adverse remarks about the conduct of the Assessing Officer.

ITA No. 8678/Mum/2025 OHMS Energy Private Limited "8. From the aforesaid provisions, it is very clear once an appeal is preferred before the CIT(A), then in disposing of the appeal, he is obliged to make such further inquiry that he thinks fit or direct the AO to make further inquiry and report the result of the same to him as found in Sec. 250 of the Act. Further, Sec. 250(6) of the Act obliges the CIT(A) to dispose of an appeal in writing after stating the points for determination and then render a decision on each of the points which arise for consideration with reasons in support. Sec. 251(1)(a) and (h) of the Act provide that while disposing of appeal the CIT(A) would have the power to confirm, reduce, enhance or annul an assessment and/or penalty. Besides Explanation to sub-s. (2) of s. 251 of the Act also makes it clear that while considering the appeal, the CIT(A) would be entitled to consider and decide any issue arising in the proceedings before him in appeal filed for its consideration, even if the issue is not raised by the appellant in its appeal before the CIT(A). Thus once an assessee files an appeal unders. 246A of the Act, it is not open to him as of right to withdraw or not press the appeal. In fact the CIT(A) is obliged to dispose of the appeal on merits. In fact w.e.f. 1st June, 2001 the power of the CIT(A) to set aside the order of the AO and restore it to the AO for passing a fresh order stands withdrawn. Therefore, it would be noticed that the powers of the CIT(A) are co-terminus with that of the AO i.e. he can do all that A.O could do. Therefore, just as it is not open to the AO to not complete the assessment by allowing the assessee to withdraw its return of income, it is not open to the assessee in appeal to withdraw and/or the CIT(A) to dismiss the appeal on account of non-prosecution of the appeal by the assessee. This is amply clear from the s. 251(1)(a) and (b) and Explanation to Sec. 251(2) of the Act which requires the CIT(A) to apply his mind to all the issues which arise from the impugned order before him whether or not the same has been raised by the appellant before him. Accordingly, the law does not empower the CIT(A) to dismiss the appeal for non-prosecution as is evident from the provisions of the Act."

ITA No. 8678/Mum/2025 OHMS Energy Private Limited

Sd/- Sd/- (ARUN KHODPIA) (AMIT SHUKLA) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated : 18-06-2026. Ankit K., Sr. PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai