DHCUBE INDUSTRIES PVT. LTD.,AHMEDABAD vs. THE ITO, WARD-1(1)(1), AHMEDABAD

ITA 382/AHD/2026Status: DisposedITAT Chandigarh30 September 2026AY 2023-243 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 4,60,415/- is unsustainable. The AO's approach of estimating 5% of fresh unsecured loans as income, without bringing specific material on record to establish that the borrowings represented unexplained income, is wholly unsustainable. The Tribunal emphasized that an addition cannot be sustained merely on an ad hoc percentage. The burden lies on the revenue to demonstrate, with specific facts and material, why and to what extent any part of the loans is liable to be treated as unexplained income. There is no statutory presumption that 5% of a loan transaction represents income. The Ld. CIT(A) failed to examine the evidentiary basis and legal justification for the estimation. Accordingly, this addition was deleted. Regarding the disallowance of expenses, the Tribunal found that all evidences like bills and vouchers were on record, and no tangible reason was given by the AO for the disallowance. Therefore, no addition is called for on this ground. The appeal of the assessee is allowed.

What were the facts?

The assessee, DHCUBE Industries Pvt. Ltd., filed an appeal against the order of the Ld. CIT(A) for Assessment Year 2023-24. The Assessing Officer (AO) made an addition of Rs. 4,60,415/-, representing 5% of fresh unsecured loans of Rs. 2.30 crore received during the year. The Ld. CIT(A) upheld this addition. Separately, the AO disallowed 20% of expenses totaling Rs. 71,86,418/-, citing low profit despite substantial turnover and significant expenses. The Ld. CIT(A) confirmed this disallowance. The appeal challenges both these additions.

What were the issues?

1. Whether the addition of Rs. 4,60,415/- made by the AO, representing 5% of fresh unsecured loans, and sustained by the Ld. CIT(A), is legally sustainable, particularly under Section 68 of the Income Tax Act, 1961, in the absence of specific material to establish unexplained income. Assessee's Contention: The addition is unsustainable as it is based on an ad hoc percentage without any specific material on record to demonstrate that the borrowings represent unexplained income. The AO and CIT(A) failed to discharge their burden of proof. Revenue's Contention: Not recorded. 2. Whether the disallowance of 20% of expenses amounting to Rs. 14,37,284/- is justified, given that the assessee has provided bills and vouchers for the expenses incurred, and the AO has not provided tangible reasons for the disallowance, as per Section 37 of the Income Tax Act, 1961. Assessee's Contention: The disallowance is unjustified as all evidences (bills, vouchers) are on record, and the AO has not provided any tangible reason for the ad-hoc disallowance. Revenue's Contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 68,Section 250,Section 37

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: DR. B.R.R. KUMAR, VICE-SHRI RAHUL CHAUDHARY

For Appellant: Shri Jimi Patel, AR
For Respondent: Shri Drop Singh Meena, Sr. DR
Hearing: 08.07.2026Pronounced: 30.09.2026

PER DR. B.R.R. KUMAR, VICE-PRESIDENT:

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The captioned appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals) (hereinafter referred to as “Ld. CIT(A)”), National Faceless Appeal Centre (NFAC), Delhi vide order dated 19.12.2025, under section 250 of the Income-Tax Act, 1961 (hereinafter referred to as “the Act”) for the AY 2023-24. Ground No. 1 - Addition of Rs.4,60,415/-

2.

The facts on record reveal that the assessee had total unsecured loans of Rs.6.43 crore, comprising an opening balance of Rs.4.13 crore and fresh unsecured loans of Rs.2.30 crore received during the year und

The order continues below.

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