M/S RUP CHAND FILLING STATION,HARYANA vs. ITO WARD-2(4), HARYANA

ITA 1780/DEL/2026Status: DisposedITAT Delhi30 September 2026AY 2017-1811 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that credit in the capital account of a partner cannot be subjected to addition as deemed income under Section 68 of the Act, as this issue is settled in favour of the assessee. Reliance was placed on the Supreme Court decision in Vaishnodevi Refoils & Solvex Vs. Pr. CIT and the Madras High Court decision in CIT Vs. Metachem Industries. Regarding the addition for alleged suppression of sales and purchases, the Tribunal found that once sales are supported by sale bills, audit reports, and month-wise sales details, the assessee has discharged the burden of proof under Section 68. Taxing such sales again as income under Section 68 would amount to double taxation. The Tribunal also noted that the business of a petrol pump is regulated by statutory authorities, and tax authorities cannot discard evidence and allege suppression without proper verification. The assessee had provided necessary details of purchases from Essar Oil Ltd., and the rise in sales during demonetization was genuine. Therefore, making additions on mere surmises was not justified. Consequently, the grounds of appeal were sustained, and the impugned additions were deleted. The appeal was allowed.

What were the facts?

The assessee, M/s Rup Chand Filling Station, a partnership firm, filed a return of income for Assessment Year 2017-18 declaring an income of Rs. 30,500/-. The case was selected for scrutiny assessment. The Assessing Officer (AO) made additions of Rs. 84,70,500/- on account of alleged unexplained cash capital contribution by partners and Rs. 45,15,599/- on account of alleged suppression of sales and purchases, treating them as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The provisions of Section 115BBE were also invoked. The assessee's appeal before the National Faceless Appeal Centre (NFAC), Delhi, was dismissed. The assessee is now in appeal before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the Tribunal has erred in law and facts in upholding the determination of total income at Rs. 1,30,16,600/- against the declared income of Rs. 30,500/-, as per the assessment order dated 04.12.2019 under Section 143(3). 2. Whether the Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 84,70,500/- representing alleged unexplained capital contribution by partners, treating it as unexplained cash credit under Section 68 read with Section 115BBE of the Act. - Assessee's contention: Credit in a partner's capital account cannot be taxed as income of the firm under Section 68. The firm discharged its burden under Section 68 by establishing the source of cash in the hands of partners. The CIT(A)'s findings regarding the introduction of cash during demonetization and internal movement of funds are legally misconceived. - Revenue's contention: Not recorded in the judgment. 3. Whether the Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 45,15,599/- on account of alleged suppression of sales/purchases and suppressed profit, treating it as unexplained cash credit under Section 68 read with Section 115BBE of the Act. - Assessee's contention: The addition is based on surmises and conjectures. The sales pattern during the demonetization period was genuine due to increased circulation of old currency notes. Purchases from Essar Oil Ltd. were made before business commenced, and sufficient stock was available. VAT returns support the sales figures. - Revenue's contention: The AO noted purchases from Essar Oil Ltd. in August/September 2016 with NIL sales, while sales spiked in November 2016 (demonetization period). This indicated suppressed sales booked in November to launder cash. The large cash in hand and lack of banking of funds were also suspicious.

Which sections of the Income-tax Act were involved?

Section 68,Section 115BBE,Section 143(3),Section 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES, NEW DELHI

Before: SHRI ANUBHAV SHARMA & SHRI SANJAY AWASTHI

Pronounced: 30.09.2026

PERSHRI ANUBHAV SHARMA, JUDICIAL MEMBER:

This appeal is preferred by the assessee against the order dated 27.01.2026 of the Ld. National Faceless Appeal Centre, Delhi (hereinafter referred as Ld. First Appellate Authority or in short Ld. ‘FAA’) in DIN & Order

ITA 1780/DEL/2026 M/S RUP CHAND FILLING STATION

No: ITBA/NFAC/S/250/2025-26/1085172959(1) arising out of the assessment order dated 04.12.2019 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by ITO

The order continues below.

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