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Facts
The assessee's capital increased substantially, and the Assessing Officer made additions for unexplained credits (gifts/loans) and disallowed job work expenses. The CIT(A) allowed the assessee's appeal, deleting the additions and disallowances.
Held
The Tribunal held that the CIT(A) did not violate principles of natural justice by admitting additional evidence without a remand report, as verification at the appellate stage is permissible. The Tribunal found that the CIT(A) correctly deleted the additions related to unexplained credits and job work expenses after verifying the submitted documents.
Key Issues
Whether the CIT(A) erred in admitting additional evidence without a remand report and deleting additions made by the AO on account of unexplained credits and job work expenses.
Sections Cited
68, 250(2), 143(2), 142(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SURAT “DB” BENCH, SURAT
Before: Dr. BRR Kumar, Hon’ble & Ms. Suchitra Kamble
आदेश/ORDER Per Suchitra Kamble, Judicial Member:
This is an appeal filed against the order dated 29-04- 2024 passed by National Faceless Appeal Centre(NFAC), Delhi for assessment year 2016-17.
The grounds of appeal are as under:- “1. On the facts and circumstances of the case and in law, the ld.CIT(A) has violated the principles of natural justice while admitting the additional evidences and not providing opportunity of being heard to the Assessing Officer as per the provisions of section 250(2) of the Income tax Act, 1961 and Rule 46A(3) of the income tax Rules, 1962, as the assessee himself admitted the fact before the appellate authority that he could not have been produced the details fully during the assessment proceedings.
I.T.A No.679/Srt/2024, A.Y.2016-17
On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 2,35,40,000/- made on account of unexplained credits in the guise of gift/loan u/s. 68 of the income tax Act, 1961. 3. On the facts and circumstances of the case and in law, the Id. CITIA) has failed to appreciate the fact that Assessing officer has made the disallowances of Rs. 18,21,010/- on account of job work expenses as the assessee has not discharged his onus to prove the genuineness of expenses. 4. On the facts and circumstances of the case and in law, the ld. CIT(A) has failed to appreciate the fact that Assessing officer has made the addition as the assessee has not discharged his onus to prove the creditworthiness and capacity of the loan lenders during the assessment proceedings. 5. On the facts and circumstances of the case and in law, the Ld CIT(A) has not appreciated the fact the assessee has not proved the creditworthiness of the donors/lenders to gift/advance such huge amount to the assessee and hence, it proves that the assessee himself rotated his unaccounted money through these lenders in the form of unsecured loans. 6. It is therefore prayed that the order of the Ld. CIT(A) may kindly be set aside and that of the Assessing Officer be restored.”
The assessee filed his return of income showing total income of Rs. 16,68,390/- on 14.10.2016. The case was selected for " Limited scrutiny" under CASS and accordingly, notice u/s 143(2) of the Income Tax Act, 1961 was issued on 03.09.2017 and duly served upon the assessee. Subsequently, notices u/s 142(1) of the Income Tax Act, 1961 along with a questionnaire was issued on 07.05.2018, 12.07.2018 and served upon the assessee. In response to the notices issued u/s 143(2) and 142(1) of the I.T. Act, 1961, Shri N.K Phophalia, C.A., duly authorised by the assessee made e-submissions in response to notice u/s 142(1) from time to time and furnished the details called for. The assessee derives income from business and income 2
I.T.A No.679/Srt/2024, A.Y.2016-17
from other sources for the year under consideration. On perusal of the Balance sheet filed, it was noticed that there is a substantial increase in the capital from Rs. 43,28,838/- to Rs. 2,08,43,787/-, the assessee was asked to explain the increase in capital in response to which the assessee submitted personal capital account and capital account related to his proprietary concern M/S Raizada Exports. On perusal of the personal capital account of the assessee it is seen that the assessee has received gifts amounting to Rs. 28,50,000/-. The assessee was asked to furnish the copy of return, bank statements of the persons giving the gifts, copy of gift deed or confirmation account. Further perusal of the personal capital account it was noticed that the assessee has credited an amount of Rs. 15,00,000/- by transfer from Green Textiles. The assessee was asked to provide the details of the money lender such as copy of return, related bank statement reflecting the unsecured loan and confirmation account also vide notice u/s 142(1) dated 15.11.2018. Perusal of the capital account of M/s Raizada Exports has revealed that there is an entry of Rs. 1,92,40,000/- on account of "credit". Explanation along with necessary documents were called from the assessee. But no further explanation was provided with respect to the credit entries. The Assessing Officer therefore made addition of Rs. 2,35,40,000/- on account of unexplained credit, the Assessing Officer also made disallowance of Rs.18,21,010/- as relates to job work expenses.
I.T.A No.679/Srt/2024, A.Y.2016-17
Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.
The ld. D.R. submitted that the CIT(A) has admitted the additional evidences without following procedure prescribed under Rule 46A(3) of the Income Tax Rules, 1962 and has not called upon for the remand report. The ld. D.R. further submitted that the CIT(A) erred in deleting the addition of Rs. 2,35,40,000/- made on account of unexplained credits in the guise of gift/loan u/s. 68 of the Act. The ld. D.R. further submitted that the CIT(A) failed to appreciate the fact that the assessee has not discharged his onus to prove the genuineness of job work expenses amounting to Rs. 18,21,010/- and therefore the Assessing Officer rightly disallowed the same. The ld. D.R. submitted that the assessee did not discharge his onus to prove the creditworthiness capacity of the loan lenders during the assessment proceedings.
The ld. A.R. relied upon the order of the CIT(A) and submitted that the CIT(A) has after verifying the evidences has passed the order.
We have heard both the parties and perused all the 7. relevant material available on record. It is pertinent to note that while admitting the additional evidences submitted by the assessee, the CIT(A) has taken the cognizant view of verifying the documents at the appellate stage and it is not obligatory to call upon remand report. Thus, ground no. 1 of the Revenue’s appeal is dismissed. As regards ground no.
I.T.A No.679/Srt/2024, A.Y.2016-17
2 related to addition on account of unexplained cash credit u/s. 68, the assessee has submitted individual audited profit and loss account, capital account and balance sheet of proprietary concern, 4/7 Raizada Exports and in fact the amount of Rs. 1,92,40,000/- was transferred from individual book accounts to the bank account of proprietorship concern M/s. Raizada Export as capital therefore the addition was rightly deled by the CIT(A) after verifying the audited financial statements along with the confirmation, contra-accounts, ITR acknowledgement and bank account statement from the parties to whom the goods were sold in the individual accounts and payments received in individual bank account. The details are reproduced on page 10 and 11 of the order of the CIT(A). Beside this, the assessee has also given the details of gift received of Rs. 28 lacs and unsecured loan received of Rs. 97,54,000/- which were detailed at page 13-14 of the order of the CIT(A). Thus the entire addition was rightly deleted by the CIT(A). There is no need to interfere with the findings of the CIT(A). Hence, the ground no. 2 of the Revenue’s appeal is dismissed. As regards ground no. 3 that of disallowance of job work expenses, the assessee has given the details of the parties including their name, address, PAN No, confirmations, bank statements and the assessee has also given the explanation to that effect. The job work expenses has increased in this year. Thus, the finding given by the CIT(A) that the comparison is not correct to the earlier year as the turnover over of the assessee increased in the present
I.T.A No.679/Srt/2024, A.Y.2016-17
assessment year at almost 100%. Thus, ground no. 3 of the Revenue’s appeal is dismissed.
As regards ground no. 4 and 5, the same are in consonance with the ground nos. 2 and 3 hence ground nos. 4 and 5 are also dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 06-04-2026
Sd/- Sd/- (Dr. BRR Kumar) (Suchitra Kamble) Vice President Judicial Member a.k. Ahmedabad : Dated 06/04/2026 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Surat 6. Guard file. By order, Assistant Registrar, Income Tax Appellate Tribunal, Surat