SHRI SAI SIRI ENTERPRISES,NAMAKKAL vs. ITO, WARD-1,, NAMAKKAL

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ITA 6/CHNY/2026Status: DisposedITAT Chennai17 June 2026AY 2022-236 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal found that the Assessing Officer and CIT(A) failed to properly appreciate the submissions and documents provided by the assessee. The additions made under Section 41(1) and Section 69C were deleted.

What were the facts?

The assessee firm engaged in maize trading had additions made to its income under Section 41(1) and Section 69C by the Assessing Officer. The CIT(A) upheld these additions, leading the assessee to appeal to the ITAT.

What were the issues?

Whether the additions made under Section 41(1) and Section 69C were justified given the evidence and submissions by the assessee, and whether proper procedures were followed by the lower authorities.

Which sections of the Income-tax Act were involved?

Section 41(1),Section 69C,Section 143(3),Section 144,Section 144B,Section 133(6),Section 37,Section 234B,Section 234C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: HONOURABLE SHRI ABY T. VARKEY & SHRI GAGAN GOYAL

Hearing: 11.06.2026Pronounced: 17.06.2026

आयकर अपीलीय अधिकरण ‘सी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI माननीय श्री एबी टी. वर्की, न्याययक सदस्य एवं श्री गगन गोयल लेखा सदस्य के समक्ष BEFORE HONOURABLE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI GAGAN GOYAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA No. 6/Chny/2026 ननिाारण वर्ा /Assessment Years: 2022-23 Shri Sai Siri Enterprises, v. The Income Tax Officer, No.81/29, A-213, Pr Building, Ward-1, Salem Road, Namakkal, Namakkal. Tamil Nadu-637 001. [PAN: ADVFS8964K] (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Mr. H. Yeshwant Kumar, Advocate, Ld. AR प्रत्यर्थी की ओर से /Revenue by : Mr.Guru Prasad, Addl. CIT, Ld. DR सुनवाईकीतारीख/Date of Hearing : 11.06.2026 घोषणाकीतारीख /Date of Pronouncement : 17.06.2026 आदेश / O R D E R PER GAGAN GOYAL, AM: GROUNDS OF APPEAL

1.

For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interest of the appellant and at any rate is opposed to the principles of equity, natural justice and fair play. 2. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction. Addition u/s. 41(1) 3. For that the Commissioner of Income Tax (Appeals) erred in upholding addition of Rs. 34, 43,215/- as business income of the appellant. 4. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 41(1) are not invocable in the facts and circumstances of the case. 5. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the payment to the creditors were made through banking channel. Page 1 of 6

ITA No.6/Chny/2026 (2022-23) Shri Sai Siri Enterprises 6. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the appellant had deducted TCS u/s. 194Q at the time of payment to the creditors. 7. For that the Commissioner of Income Tax (Appeals) erred in not considering the confirmation letter filed by the appellant which were obtained from the creditors. 8. For that the Commissioner of Income Tax (Appeals) ought to have called for a remand report from the Assessing Officer. 9. For that the Commissioner of Income Tax (Appeals) ought to have inform the appellant to file additional evidence in terms of Rule 46A of the Income Tax Rule. 10. For that the Commissioner of Income Tax (Appeals) failed to appreciate the explanation and documents furnished by the appellant. Addition u/s. 69C 11. For that the Commissioner of Income Tax (Appeals) erred in upholding addition of Rs. 10, 49,860/- as unexplained expenditure u/s.69C of Income Tax Act. 12. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the provisions of section 69C are not invocable in the facts and circumstance of the case. 13. For that the Commissioner of Income Tax (Appeals) erred in not considering the confirmation letter filed by the appellant which were obtained from the creditors. 14. For that the Commissioner of Income Tax (Appeals) ought to have called for a remand report from the Assessing Officer. 15. For that the Commissioner of Income Tax (Appeals) ought to have inform the appellant to file additional evidence in terms of Rule 46A of the Income Tax Rule. 16. For that the Commissioner of Income Tax (Appeals) failed to appreciate the explanation and documents furnished by the appellant. 17. For that the appellant objects to the levy of interest u/s.234B and 234C. For these grounds raised and such other grounds that may be raised, may be altered, amended or modified, with the leave of the Hon'ble Tribunal before or during the hearing of the appeal, it is most humbly prayed that the Hon'ble Tribunal may be pleased to

a) Delete the addition of Rs. 34, 43,215/- made u/s. 41(1) and/or b) Delete the addition of Rs. 10, 18,706/- made u/s.69C c) Pass such other orders as the Hon'ble Tribunal may deem fit. 2. The brief facts of the case are that the assessee firm filed its return of income on 26.09.2022 declaring total income at Rs. 43, 32, 660/-. The case was selected for limited scrutiny under CASS with the reason “substantial payments” shown to entities not registered under GST and high liabilities as compared to low income / receipts. Ultimately, assessment was completed by adding Rs. 34, 43, 215/- u/s. 41(1) of the

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ITA No.6/Chny/2026 (2022-23) Shri Sai Siri Enterprises Act and Rs. 10, 18, 706/- u/s. 69C of the Act. The assessee being aggrieved with this order of the AO preferred an appeal before the Ld. CIT (A), who in turn dismissed the appeal of the assessee and confirmed the order of the AO. The assessee being further aggrieved preferred the present appeal before us.

3.

We have gone through the order of the AO, order of the Ld. CIT (A) and paper book filed by the assessee along with arguments of both the sides. It is observed that the assessee firm is doing maize trading business and sold these items to various poultry forms and feed manufacturing units in Tamil Nadu, Karnataka and Kerala. For better appreciation of the matter we deem it fit to reproduce herein below the information pertaining to communication between the AO and the assessee as under:-

2.

Details of opportunities given Sl. Type of notice Date of notice Date of Response Date of Response Remarks No. communication communication compliance of the response if type (Full / if any. given assessee received part / received / adjournment) not received 1. Notice u/s. 02.06.2023 17.06.2023 Responded 14.06.2023 Part - 143(2) of the Act 2. Notice u/s. 25.07.2023 08.08.2023 Responded 07.08.2023 Part - 142(1) of the Act 3. Notice u/s. 10.01.2024 18.01.2024 Responded 13.01.2024 Adjournment - 142(1) of the Act 4. Notice u/s. 14.01.2024 24.01.2024 Responded 23.01.2024 Part - 142(1) of the Act 5. Notice u/s. 04.02.2024 12.02.2024 Responded 10.02.2024 Part - 142(1) of the Act 6. Notice u/s. 19.02.2024 22.02.2024 Responded 19.02.2024 Part - 142(1) of the Act 7. Show cause 25.02.2024 01.03.2024 Responded 29.02.2024, Part - notice u/s. 01.03.2024 144B (1) (xii) & (b) of the Act 02.03.2024

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ITA No.6/Chny/2026 (2022-23) Shri Sai Siri Enterprises In the light of the information tabulated above, the remarks of the AO as per page no. 9, para 3.1 is also relevant to be reproduced as under:-

“In the present ongoing time barring assessment proceedings under section 143(3) of the Income Tax Act, 1961, in view of the assessee’s part compliances to the notice issued, this office has no option but to pass an ex-parte assessment order under section 144 r.w.s. 144B of the Income Tax Act, 1961, proposing addition / variation on the basis of material available on record and considering the proposed addition as discussed in the present show cause notice.” 4. During the year under consideration the assessee had shown purchases of Rs. 83, 00, 72, 253/- and Sundry Creditors of Rs. 17, 92, 13, 913/- i.e. almost 21% of the total purchases and cannot be considered abnormal looking at the business of the assessee. But, in view of para 3 above still an addition of Rs. 34, 43, 215/- was made under section 41(1) of the act. Whereas, even if this addition is to be made should have been in section 37 of the Act and it reflects casual approach and poor understanding of the matter at the end of the assessing officer. The break up of amount of Rs. 34, 43, 215/- is as under with remarks:-

A Sl. Name & PAN Amount shown Findings / outcome Reply of the assessee No. by assessee discrepancies of 133(6) being Sundry Creditors in the Balance Sheet ended as on 31.03.2022(Rs.) 1. Anandahalli 12,62,117/- Notice u/s. 133(6) issued In this case, assessee Mathada on 10.01.2024 to the 3rd has submitted the ledger Gangadharaiah party / person. In reply, extract which is available (Siddharth the 3rd party shows the in its books of accounts Traders – closing balance of Rs. 5, which shows closing AFUPG5252K) 65, 716/- balance of Rs. 18, 27,833/- without confirmation of party, bills and vouchers. 2. Guruvalli 21,81,098/- Notice u/s. 133(6) issued In this case, assessee Karegouda (Shri on 10.01.2024 to the 3rd has submitted the ledger Ujaneshwar party / person. But no any extract which is available Traders – reply received till date. in its books of accounts BSRPG7937E) which shows closing balance of Rs. 21, 81, 098/- without confirmation of party, bills and vouchers.

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ITA No.6/Chny/2026 (2022-23) Shri Sai Siri Enterprises

3.

Narappa Notice u/s. 133(6) issued In this case, assessee Prasanna Kumar on 10.01.2024 to the 3rd has submitted the ledger (Narappa Traders party / person. But no any extract which is available – CXLPP0082K) reply received till date. in its books of accounts which shows closing balance of Rs. 12, 21,995/- and confirmation of the 3rd party. 4. Veeranna Notice u/s. 133(6) issued In this case, assessee Alavandi on 10.01.2024 to the 3rd has submitted the ledger (Alavandi Traders party / person. But no any extract which is available (Neelagunda) – reply received till date. in its books of accounts BKOPA0397M) which shows closing balance of Rs. 10, 74,456/- and confirmation of the 3rd party. 5. In view of the above facts, it is found that the books of accounts of the assessee was never under challenge and rather the purchase, sales and book results shown by the assessee are fully accepted. It is also observed that assessee furnished copy of ledger extracts of parties’ no. 1 to 4 above as per its books of accounts and as far as confirmation of balance are concerned in the books of 3rd parties were duly submitted before the Ld. CIT (A). The powers of Ld. CIT (A) are coterminous with that of the AO, but an AO do can also be done by the Ld. CIT (A). The Ld. CIT (A) can refer the documents filed before him to the AO for his remarks and reports. The AO also duly empowered and rather duty bound to refer the material filed by the assessee for verification to the verification unit as per the scheme of the Act. But, both the authorities miserably failed to discharge their duties and made / confirmed the additions in haste. The assessee submitted the relevant documents before us also vide paper book dated 06.04.2026. We have gone through the documents filed by the assessee.

6.

Here, it is pertinent to discuss in the light of para 5 (supra), when the purchases of the assessee were accepted by the AO, how he can made additions u/s. 41(1) of the Act when the assessee furnished ledger copies of the vendor parties and there is no evidence against the assessee which prompt the AO to treat the outstanding amounts as cessation of liability, specially, when the confirmations are already on record before the Ld. CIT (A). We do not find the action of the AO in

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ITA No.6/Chny/2026 (2022-23) Shri Sai Siri Enterprises order, which is further confirmed by the Ld. CIT (A). Although, the matter can be set- aside also to the file of the AO/Ld. CIT(A) for reconsideration, but in totality of the facts observed and discussed (supra), it will not be a fair treatment in the hands of the assessee by giving an another lease of life to the authorities below. In view of this, we direct the AO to delete the addition of Rs. 34, 43, 215/- made u/s. 41(1) of the Act, the order of the Ld. CIT (A) is also set aside and relevant grounds on this issue taken by the assessee are allowed.

7.

The next issue pertains to an addition made u/s. 69C of the Act amounting to Rs. 10, 49, 860/- as unexplained expenditure. The background of this addition is also similar to what we had discussed in the above paras’ w.r.t. additions made u/s. 41(1) of the act. Hence, no repetition is required and our observation and findings will apply mutatis mutandis here also. Moreover, the AO himself has agreed the transactions under consideration were part of regular books of accounts, application of section 69C of the Act by the AO is absurd in nature. In view of this, we direct the AO to delete the addition of Rs. 10, 49, 860/- made u/s. 69C of the Act, the order of the Ld. CIT (A) is also set aside and relevant grounds on this issue taken by the assessee are allowed.

8.

In the result, the appeal of the assessee is allowed with the above observations and directions.

Order pronounced on the 17th day of June, 2026, in Chennai.

Sd/- Sd/- (एबी टी. वर्की) (गगन गोयल) (ABY T. VARKEY) (GAGAN GOYAL) न्याययक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनाांक/Dated: 17th June, 2026. KB आदेश की प्रयतललपप अग्रेपषत/Copy to: 1. अपीलार्थी/Appellant K Digitally signed 2. प्रत्यर्थी/Respondent by K BABU BABU 3. आयकर आयुक्त/CIT, Chennai /Madurai/Coimbatore/Salem Date: 2026.06.30 08:58:21 +05'30' 4. पवभागीय प्रयतयनधि/DR 5. गार्ड फाईल/GF

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