SAMAT KHIMABHAI SISODIYA,VERAVAL vs. INCOME TAX OFFICER WARD-1, JUNAGADH

ITA 1059/RJT/2026Status: DisposedITAT Rajkot12 October 2026AY 2017-186 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the Assessing Officer was not justified in making the impugned addition merely on the basis of the VAT return. The Tribunal noted that once the assessee produces contemporaneous books, ledgers, balance sheets, income tax returns, and other supporting material, the AO is required to examine that evidence objectively. The AO cannot reject it simply because a collateral record, like the VAT return, does not contain the particulars of plant and machinery. The Tribunal observed that if the plant and machinery was recorded in the books with an opening balance of Rs. 80,18,110/-, its source had already been accounted for or accepted in earlier years. Therefore, the AO could not treat the opening balance as an unexplained investment of the current assessment year without establishing that the investment was actually made during the year under consideration. The absence of machinery in a VAT return does not disprove its existence or establish that the investment is unexplained. The assessee had produced sufficient documentary evidence, and the AO had not pointed out any specific defect or brought any contrary evidence on record. Accordingly, the addition of Rs. 24,01,400/- was deleted. The appeal was allowed.

What were the facts?

The assessee, Samat Khimabhai Sisodiya, filed an appeal before the Income Tax Appellate Tribunal (ITAT), Rajkot Bench, for Assessment Year 2017-18. The appeal challenged an order passed by the National Faceless Appeal Centre (NFAC), Delhi, which upheld an assessment order passed by the Assessing Officer (AO) under Section 143(3) of the Income-tax Act, 1961. The AO had made an addition of Rs. 24,01,400/- on account of alleged income from the sale of machinery, treating it as an unexplained cash credit under Section 68. The assessee claimed the amount was received from the sale of old plant and machinery. The appeal was filed belatedly by 7 days, and the assessee sought condonation of delay, which was opposed by the revenue.

What were the issues?

1. Whether the Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 24,01,400/- made by the Assessing Officer on account of alleged income arising from the sale of machinery, treating it as an unexplained cash credit under Section 68 of the Income-tax Act, 1961. Assessee's Contention: The assessee argued that the amount represented genuine income from the sale of old plant and machinery. They submitted various documents, including audited balance sheets, ledger accounts of plant and machinery, and income tax returns, to substantiate the transaction. They contended that the AO wrongly rejected these documents and made the addition solely based on the absence of machinery details in the VAT return, which is irrelevant for plant and machinery transactions. Revenue's Contention: The revenue, through the Learned DR, primarily reiterated the stand taken by the Assessing Officer, which was that the assessee had not sold plant and machinery but had merely shown it in the books of account to build up cash on hand to establish the genuineness of cash deposited during the year.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 68,Section 250,Section 142(1),Section 120(2),Section 129

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC”

Before: Dr. Arjun Lal Saini

For Appellant: Shri R. D. Lalchandani, Ld. AR
For Respondent: Shri Ganesh Iyer, Ld. Sr. DR
Hearing: 01/10/2026

Per, Dr. Arjun Lal Saini, AM: Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2017-18, is directed against the order under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by the National Faceless Appeal Centre (NAC) Delhi/Commissioner of Income-tax (Appeals) [in short ‘NFAC/Ld.CIT(A)’], dated 01.06.2026, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Act, dated 28.12.2019. 2. When the matter was called for hearing, the Ld.

The order continues below.

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