SIGMA ORGANICS & CHEMICALS P.LTD.,INDORE vs. ITO-4(3), INDORE, INDORE

ITA 877/IND/2024Status: DisposedITAT Indore09 October 2026AY 2017-1816 pages
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What did the Tribunal hold?

The Tribunal held that the addition of Rs. 43,84,170 made by the Assessing Officer resulted in double taxation, as the cash sales forming the basis of this addition had already been offered for taxation by the assessee. The Tribunal relied on the Supreme Court judgment in CIT vs. Devi Prasad Vishwnath Prasad (1969) 72 ITR 194 (SC), stating that once sales are offered for taxation, the same income cannot be taxed again. The Tribunal also noted that the Assessing Officer found no evidence of backdating, bogus transactions, or non-existent cash, and the VAT returns were consistent with the accounting records. However, acknowledging that some documents were self-serving and lacked customer names, the Tribunal found merit in protecting the revenue's interest. Both parties agreed to an estimated disallowance. Following judicial pronouncements (CIT Vs. President Industries, CIT Vs. Gurubachhan Singh J. Juneja, CIT Vs. Saint Synthetics Mill, CIT v. Williamson Financial Services), the Tribunal held that only the profit element of the sales should be taxed, not the gross receipts. Therefore, an ad hoc estimated addition of 10% of Rs. 43,84,170, amounting to Rs. 4,38,417, was directed to be made to take care of inconsistencies and protect revenue leakage. The appeal was partly allowed.

What were the facts?

The assessee, Sigma Organics & Chemicals P. Ltd., filed an appeal against the order of the CIT(Appeals) for Assessment Year 2017-18. The appeal challenged the addition of Rs. 43,84,170, which represented cash deposited in bank accounts, upheld by the CIT(Appeals). This addition arose from an assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961. The assessee had declared a total income of Rs. 11,10,900. The Assessing Officer had questioned cash deposited in bank accounts and cash sales from the Raipur branch. The assessee explained these as sales to small producers of Diya (Deepak) during the demonetization period, citing government promotion of Indian products. The Assessing Officer allowed a relief of Rs. 2,71,830 as available cash in hand but added the balance of Rs. 43,84,170 under section 69A.

What were the issues?

1. Whether the learned CIT(Appeals) erred in upholding an addition of Rs. 43,84,170, representing cash in hand deposited in bank accounts by the assessee-company, as unexplained money under section 69A of the Act, when it represented duly recorded sales not rejected by the AO/CIT(A)? (Assessee's contention: The cash deposit represents duly recorded sales and should not be treated as unexplained money. Revenue's contention: The cash deposit is unexplained money under section 69A). 2. Whether upholding the addition of Rs. 43,84,170 as unexplained money, when it relates to sales offered as revenue receipt in the profit and loss account, resulted in a double addition? (Assessee's contention: The addition results in double taxation as sales were already offered for taxation. Revenue's contention: Not explicitly recorded, but implied by the addition made). 3. Whether the Assessing Officer was justified in making the addition of Rs. 43,84,170 when the cash sales were properly recorded and supported by VAT returns, and no evidence of backdating, bogus sales/purchases, or non-existent cash was found?

Which sections of the Income-tax Act were involved?

Section 69A,Section 143(3),Section 250

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Cause title — parties, addresses and appearances
आयकर अपीलीय अिधकरण, इंदौर "यायपीठ, इंदौर In The Income Tax Appellate Tribunal, Indore Bench, Indore Before Dr. Arjun Lal Saini, Accountant Member And Shree Paresh M. Joshi, Judicial Member आयकर अपील सं./ITA No. 877/IND/2024 [ िनधा"रण वष"/Assessment Year: 2017-18 ] Sigma Organics & Chemicals P. Ltd., ITO-4(3), Indore, 7, Sajjan House, New Agrawal Nagar, Vs. Aaykar Bhawan, Main Indore, Madhya Pradesh-452001 Building, Indore, Madhya Pradesh-452001 "थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAHCS6704R (अपीलाथ"/Appellant) (""यथ"/Respondent) Appellant by : Shri Ashish Goyal, Ld. AR Respondent by : Shri Vipul Chavda, Ld. Sr. DR Date of Hearing : 21/09/2026 : 09/10/2026 Date of Pronouncement

:ORDER: Per, Bench: Captioned appeal filed by the assessee, pertaining to Assessment Year 2017- 18, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by Commissioner of Income-tax (Appeals), dated 25.11.2024, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Act, on 24.12.2019. 2. Grounds of appeal raised by the assessee are as follows:

1.

On the facts and in the circumstances, the learned

The order continues below.

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