KAUSHAL PRAVINKUMAR SHAH,AHMEDABAD vs. INCOME TAX OFFICER, AHMEDABAD

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ITA 2356/AHD/2026Status: DisposedITAT Ahmedabad28 September 2026AY 2023-244 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that the AO treated the entire difference in sundry creditors as bogus for want of evidence, despite not doubting purchases, sales, or trading results, and not rejecting the books. The Tribunal reasoned that if purchases are accepted, corresponding trade creditors cannot be treated as unexplained tax credits under section 68. The Tribunal also noted that the disallowance of Rs. 3,36,025/- was made based on a Form 3CD report without verifying all facts, and that other issues were not deliberated upon by the AO or CIT(A). In the interest of justice, the case was set aside to the AO for fresh examination of all materials, with a due opportunity of hearing to the assessee. The assessee was directed to comply with notices promptly, failing which the AO could pass orders based on available material. The appeal was allowed for statistical purposes.

What were the facts?

The assessee, Kaushal Pravinkumar Shah, proprietor of M/s Appar Chemicals, filed an appeal against the order dated 27-02-2026 passed by the CIT(A), NFAC, Delhi, under section 250 of the Income Tax Act, 1961, for Assessment Year 2023-24. The assessee had initially declared a total income of Rs. 19,40,180/-. The Assessing Officer (AO) completed a scrutiny assessment under section 143(3) read with section 144B, assessing the total income at Rs. 11,63,20,636/- due to non-compliance. This included additions for sundry creditors not proved (Rs. 11,20,13,185/-), disallowances under section 40A(ia) (Rs. 8,86,927/-), disallowances under section 37 (Rs. 3,36,025/-), and disallowance of 1/4 of total expenditure (Rs. 11,44,319/-). The CIT(A) dismissed the assessee's appeal for non-prosecution.

What were the issues?

1. Whether the learned CIT(A) erred in law and on facts in confirming the assessment order passed under section 143(3) read with section 144B of the Income-tax Act, 1961, by dismissing the appeal without properly appreciating the facts, evidences, and circumstances, and without granting an effective opportunity of being heard. Assessee's Contention: The assessee argued that the CIT(A) erred by dismissing the appeal without a proper appreciation of the facts and evidence, and without providing an effective opportunity to be heard. The assessee also implicitly challenged the additions made by the AO. Revenue's Contention: The revenue, through the CIT-D.R., did not explicitly record arguments in the judgment. However, the CIT(A) had dismissed the appeal for non-prosecution, implying the revenue's stance was to uphold the assessment order in the absence of the assessee's proper engagement.

Which sections of the Income-tax Act were involved?

Section 250,Section 143(3),Section 144B,Section 40A(ia),Section 37,Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH

Before: Shri Rahul Chaudhary & Shri R. Govindarajan

For Appellant: Shri Mehul K. Patel, Advocate
For Respondent: Shri Ram Tiwari, CIT-D.R

आदेश/ORDER

PER R. GOVINDARAJAN, ACCOUNTANT MEMBER:

The assessee has filed the appeal against the order dated 27-02-2026 passed by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre NFAC, Delhi (in short, referred to as the CIT(A)) u/s. 250 of the Income Tax Act, 1961 (herein referred to as “the Act”) relating to Assessment Year 2023-24.

I.T.A No. 2356/Ahd/2026 Kaushal Pravinkuamr Shah, A.Y. 2023-24 2. The assessee raised the following grounds of appeal:- “1. The learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, has erred in law and on facts in confirming the assessment order passed under section 143(3) read with section 144B of the Income-tax Act, 1961.

2.

The learned CIT(A) has erred in dismissing the appeal without properly appreciating the facts, evidences and circumstances of the case and without granting effective opportunity of being heard.

3.

The appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal before or at the time of hearing.”

3.

There was delay of 43 days in filing of appeal before the Tribunal. Lack of proper professional co-ordination, non-availability of supporting documents and difficulties in compiling necessary records are mentioned as some of the reasons for delay. The reasons are not satisfactory. However, in the interest of justice, delay is condoned.

4.

Brief facts of the case are that assessee, proprietor M/s Appar Chemicals, filed return of income on 26-10-2023 admitting total income of Rs. 19,40,180/-. AO completed scrutiny assessment assessing the total income at Rs. 11,63,20,636/- (due to non-compliance of assessee) by making the following additions: Sl. No. Description Amount In Rs. 1 Liability on account of sundry 11,20,13,185/- creditors not proved 2 Disallowance u/s. 40a(ia) 8,86,927/- 3 Disallowance u/s. 37 3,36,025/- 4 Disallowance ¼ of total 11,44,319/- expenditure

I.T.A No. 2356/Ahd/2026 Kaushal Pravinkuamr Shah, A.Y. 2023-24

5.

Aggrieved by this addition, assessee filed appeal. CIT(A) noted the non-prosecution of the appeal by the appellant and dismissed the appeal holding that there is no reason to interfere with the assessment order.

6.

Aggrieved by the order of CIT(A), assessee filed this appeal before ITAT.

7.

We have heard both the parties and perused the material available on record. It is undisputed fact that assessing officer treated the entire difference amount of sundry creditors i.e. Rs. 11,20,13,158/- (closing balance – opening balance of sundry creditors) during the year as bogus for want of necessary evidence. AO had not doubted the purchases, sales or trading results and the books had not been rejected. If the liability represents genuine purchases, and purchases themselves have been accepted, the corresponding trade creditors cannot be treated as unexplained tax credits u/s. 68 of the Act. Similarly in respect of other issues like disallowance on account of interest on GST etc. AO disallowed a sum of Rs. 3,36,025/- on the basis of Form 3CD report without verifying all relevant facts. Also, both AO and the CIT(A) did not deliberate on other issues. Therefore, in the interest of justice, we set aside the case to the file of AO for fresh examination of all relevant materials, after giving due opportunity of hearing to the assessee to present his case with supporting evidence. It may be mentioned that since the assessee did not cause appearance before the ld. AO and the ld. CIT(A), the assessee is directed to promptly comply with all notices of hearing and in case of any further default on the part

I.T.A No. 2356/Ahd/2026 Kaushal Pravinkuamr Shah, A.Y. 2023-24 of the assessee, Ld. AO would be at liberty to pass orders on the basis of materials on record in accordance with law.

8.

In the result, the appeal is allowed for statistical purposes.

Order pronounced in the open court on 28-09-2026

Sd/- Sd/- (RAHUL CHAUDHARY) (R. GOVINDARAJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 28/09/2026 a.k.

आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद

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