ACIT, CIRCLE 10(1), NEW DELHI vs. HITKARI INDUSTRIES LIMITED, NEW DELHI

आयकर अपीलीय अिधकरण, िद�ी पीठ�, नई िद�ी INCOME TAX APPELLATE TRIBUNAL, DELHI BENCHES, NEW DELHI BENCH: G BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 3095/Del/2026 (िनधा�रण वष�/Assessment Year: 2006-07) ACIT, CIRCLE 10(1) HITKARI INDUSTRIES LIMITED ROOM NO. 389A, C R BUILDING, IP E-44 ,OKHLA INDUSTRIAL AREA Vs. ESTATE, NEW DELHI-110002, DELHI PHASE-II, NEW DELHI 110020 अपीलाथ� / Appellant ��थ� / Respondent with ITA No.617/Del/2026 (िनधा�रण वष�/Assessment Year: 2006-07) HITKARI INDUSTRIES LIMITED ITO E-44 ,OKHLA INDUSTRIAL AREA WARD-12(4) PHASE-II, NEW DELHI 110020 DELHI अपीलाथ� / Appellant ��थ� / Respondent PAN of Assessee: AAACH 6856 L

Department represented by: Shri Bhogendra Prasad, Sr. DR Assessee represented by: Dr. Rakesh Gupta, Sr. Adv. & Sh. Deepesh Garg, Adv. सुनवाई की तारीख / Date of conclusion of hearing: 20-Aug-2026 घोषणा की तारीख / Date of pronouncement: 21-Oct-2026 आदेश / ORDER PER NAVEEN CHANDRA, JUDICIAL MEMBER: The above cross appeals are directed against the order of the learned Commissioner of Income Tax (Appeals) - National Faceless Assessment Centre [in short “NFAC”], Delhi dated 06.01.2026 arising from the Assessment order dated 29.12.2008 passed under section 143(3) of the Act by the Income tax Officer-12(4), New Delhi for the A.Y 2006-07. Since common issues are involved in both the appeals therefore, for the sake of convenience, these appeals are clubbed together for the purpose of hearing and adjudication. 2. The Revenue has raised the following grounds of appeal: i. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in granting substantial relief out of the addition made by the Assessing Officer on account of unverified sundry creditors without recording creditor-wise findings and without properly appreciating the discrepancies noted in the assessment order, thereby passing an order contrary to the requirement of a speaking order under section 250(6) of the Income-tax Act, 1961. ii. On the facts and circumstances of the case and in law, the Ld. CIT(A) has further erred in restricting the addition to 20% of the disputed amount on an ad hoc basis without any objective basis or proper verification of the liabilities and by relying on additional evidences furnished during appellate proceedings without ensuring due compliance with Rule 46A of the Income-tax Rules, 1962 and without affording the Assessing Officer adequate opportunity to examine the same. iii. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of Rs. 20,84,486/- made under section 36(1)(iii) on account of interest free advance to M/s Hitkari Potteries Ltd., without appreciating that the assessee failed to furnish fund flow statements or documentary evidence to prove that the advance was made out of its own interest-free funds. iv. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in allowing the reduction of Rs. 64,33,232/- from book profit under section 115JB, ignoring that the original provision for doubtful debts had not been debited to the Profit and Loss Account and, therefore, the write-back cannot be allowed as an adjustment under Explanation 1 to section 115JB (2). v. On the facts and in law, the Ld. CIT(A) erred in allowing deduction under sections 80- IB/80-IA without proper verification of statutory conditions, including computation of eligible profits and compliance with procedural requirements for the relevant assessment year, relying instead on general eligibility and acceptance in subsequent years.

vi. The appellant craves the leave to add, amend, vary, withdraw or modify all or any of the grounds on or before the date of hearing?

This issue recurs and was adjudicated in my orders for AYs 2007-08, 2008- 09, and 2009-10. In AY 2007-08 (disallowance Rs.16,49,727/- on Rs.1,31,91,792/- advance), CIT(Appeals) in their orders deleted it, noting: - - Agreements dated 01.09.1995 (job work/conversion, Clause 9 allowing advances), factory lease from 01.02.2002 (Rs.4-4.5 lakhs monthly rental), and 01.02.2007 processing agreement established clear business nexus. - Appellant had sufficient interest-free funds (capital + reserves > Rs.13 crores vs. advance). Presumption applied per CIT v. Reliance Utilities & Power Ltd. (313 ITR 340). - Advances reduced over years despite HPL's issues. Identical facts apply here: same entities, ongoing agreements from 1995, and own funds availability. For consistency in the appellant's cases and following my earlier reasoned orders (relied on judicial precedents like S.A. Builders), the disallowance is deleted in full. Ground No. 4: Disallowance of sundry debtors reserve write-back (Rs.64,33,232/-) in book profit u/s 115JB The AO disallowed reduction of Rs.64,33,232/- (provision for doubtful debts written back) from book profit, citing non-compliance with section 36(2)(i) as the original provision was not debited to P&L. The appellant submits the provision was created earlier without P&L debit (not claimed as expense), and write-back routed through P&L was credited (included in income). Thus, no addition required for MAT. Judicial view supports that where provision was not claimed/added earlier and simultaneous reduction from debtors makes it an actual write-off (not mere provision), clause (i) of Explanation 1 to section 115JB(2) does not apply (refer ITAT rulings like Vodafone Essar Gujarat Ltd., Peerless General Finance). Here, net debtors shown after reduction indicate write-off nature. Relief granted; adjustment allowed. 8. We find that the CIT(A) has given credence to the books maintained by the assessee and the reconciliation submitted by the assessee and thereafter, he has given a finding of fact that, after the remand proceedings, the assessee has been able to explain the sundry creditors to the tune of Rs 4,52,35,342/- out of a total of Rs 6,67,34,790/- and only sundry creditors amounting to Rs 2,14,99,448/- remains to be explained. We also find that the CIT(A) however, on account of partial verification of sundry creditors, restricted the disallowance to 20% of the disputed creditors. In such factual matrix of the instant case, we are of the considered view that there is no reason to interfere with the decision of the CIT(A). Grounds of Revenue as well as assessee is dismissed. 9. On the deletion of Interest added on account of Interest free advance to its group concern, disallowance of sundry debtors, we find that that the CIT(A) has given a reasonable decision. With respect to allowance of claim of deduction u/s 80IB(4), we find that the Revenue has not rebutted the findings of the CIT(A) that the assessee is eligible, has a unit in notified area and is manufacturing specified product. We are therefore of the considered view that that there is no error in allowing the claim u/s 80IB(4)/80IA. Grounds of Revenue are dismissed. 10. In the result, appeal of the Revenue in ITA 3095/Del/2026 and appeal of the assessee in ITA 617/Del/2026 are both dismissed. Order pronounced in the open court on 21-Oct-2026. Sd/- Sd/- NAVEEN CHANDRA SATBEER SINGH GODARA ACCOUNTANT MEMBER JUDICIAL MEMBER Delhi Dated : 21.10.2026 Copy to:

ACIT, CIRCLE 10(1) 1 ROOM NO. 389A, C R BUILDING, IP ESTATE, NEW DELHI-110002, DELHI

HITKARI INDUSTRIES LIMITED E-44 ,OKHLA INDUSTRIAL AREA PHASE-II, NEW DELHI 110020 ,DELHI, 2 INDIA NEW DELHI-110020, DELHI 3 THE PCIT / CIT, 4 THE D.R., ITAT, DELHI BENCH 5 GUARD FILE