ACIT CIRCLE-1(1), RAJKOT, RAJKOT vs. GRENIC TILES PVT LTD, MORBI

आयकर अपीलȣय अͬधकरण,राजकोट Ûयायपीठ,राजकोट।
IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT
BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER
AND DR. DINESH MOHAN SINHA, JUDICIAL MEMBER

आयकर अपील सं./ITA No. 624/RJT/2025
Assessment Year: (2017-18)
(Physical Hearing)

Grenic Tiles Pvt. Ltd.,
S. No. 81, 8-A National Highway At Jambudiya, S. O. Khijadiya,
Wankaner (Guj) – 363621

बनाम/
Vs.
DC/ Asstt. Commissioner of Income-tax, Circle – 1(1),

5th Floor, Income Tax Office,
Aayakar Bhavan, Vatika Race
Course, Ring Road, Rajkot-360001
Öथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAECG3765D
(Assessee)

(/Respondent)

आयकर अपील सं./ITA No. 682/RJT/2025
Assessment Year: (2017-18)
(Physical Hearing)

Assistant Commissioner of Income- tax, Circle – 1(1),
5th Floor, Income Tax Office,
Aayakar Bhavan, Vatika Race Course
Ring Road, Rajkot-360001

बनाम/
Vs.
Grenic Tiles Pvt. Ltd.,
S. No. 81, 8-A National Highway At Jambudiya, S. O. Khijadiya,
Wankaner – 363621(Guj)
Öथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAECG3765D
(Assessee)

(/Respondent)

िनधाŊįरती की ओर से/Assessee by : Shri R. K. Doshi, Ld. AR
राजˢ की ओर से/Respondent by : Shri Abhimanyu Singh Yadav, Ld.Sr.DR
सुनवाई की तारीख/Date of Hearing

: 06/01/2026
घोषणा की तारीख/Date of Pronouncement : 11/03/2026

आदेश /ORDER
Per, Dr. Arjun Lal Saini, AM:

Captioned cross appeals filed by the assessee, as well as revenue, pertaining to assessment year (AY) 2017-18, is directed against the common order passed by the Commissioner of Income Tax (Appeals) [in short ‘Ld.CIT(A)’] which in turn arise out of an assessment order passed by the Assessing Officer (in short ‘assessing officer’), u/s 143(3) of the Act.

ITA No. 624 & 682/RJT/2025
Grenic Tiles Pvt. Ltd. V. ACIT
2. The grounds of appeal raised by the revenue in ITA No. 682/Rjt/2025, are as follows:
“(1) On facts and in law, the Ld. CIT(A), NFAC erred in deleting Rs.98,14,434/- out of the total addition of Rs. 1,11,45,163/- made u/s 68, on account of unexplained cash deposits during the demonetization period, without proper verification or calling for a remand report from the Assessing Officer.

(2) The Ld. CIT(A) failed to appreciate that the assessee did not discharge its onus under section 68 to prove the identity, capacity, and genuineness of the cash credits, as the alleged cash sales and receipts from debtors remained wholly unverifiable and most notices u/s 133(6) were either unserved or replied to by the assessee itself.

(3) The Ld. CIT(A) erred in accepting self-generated records such as cash book,
VAT and excise returns, and in ignoring the abnormal pattern of cash flow and deposits immediately preceding demonetization, thereby overlooking material findings recorded by the Assessing Officer.

(4) The order of the Ld. CIT(A) is non-speaking, contrary to evidence and law, and based on misapplication of judicial precedents, the Department therefore prays that the order of the Ld. CIT(A) be set aside and the assessment order u/s 143(3) be restored to the extent of the addition deleted.

(5) The assessee craves leave to add, alter, amend, or withdraw any of the above grounds of appeal at the time of hearing.”

ITA No. 624 & 682/RJT/2025
Grenic Tiles Pvt. Ltd. V. ACIT
422305010037111, maintained with Union Bank of India during demonetization period (i.e. 09.11.2019 to 30.12.2019). Since the primary onus to prove the identity and creditworthiness of the creditors and the genuineness of the transaction so involved has been entrusted on the assessee, during the course of these proceedings, the assessee was requested to furnish the confirmations of the persons from whom such credit entries in the form of cash were being reflected in its books of accounts along with their name & complete correspondence. The assessing officer, also issued a show cause notice on 21/10/2019 which was duly served electronically on its registered email id.
5. In response to the show-cause notice (SCN) so issued, the assessee has e-filed its reply to the SCN along with other remaining details which were asked vide notice u/s 142(1) of the Act. The assessee has furnished the copy of cash book for the period from 01.04.2016 to 31.03.2017, along with copy of bank account statements. However, no other detail to explain the source of such alleged cash deposit was furnished by the assessee.The assessing officer noticed that there was closing balance of Rs. 75,17,280/-, as on 31.03.2016, as per the audited account and ITR for FY 2015-16. The same has been carried forward as opening cash balance of current year. The said cash balance was available with the company as per cash book and utilized for deposit in bank due to demonization of currency, audited report and income tax return (ITR) for Financial Year (FY) 2015-16, and already filed with IT office, cash book for the current year is submitted along with other details. Further from 01.04.15 to 08.11.2016, assessee had received cash, from debtors aggregating to Rs. 61,45,755/-. Statement of debtors form whom the assessee has received cash along with name, address of debtors were submitted by the assessee, before the assessing officer. The assessee has made cash sales of Rs.30,34,780/-, during the period. Details of cash sales is also submitted by the assessee. The assessee submitted that their

ITA No. 624 & 682/RJT/2025
Grenic Tiles Pvt. Ltd. V. ACIT cash sales for the financial year (FY) 2015-16 was 2,23,76,666. Month- wise cash sales for assessment year (AY) 2015-16, were also submitted before the assessing officer. Various expenses incurred in cash up to 08.11.2016 aggregates to Rs.46,49,944/-. The net cash on hand available as on 08.11.2016, was Rs.1,20,67,848/- as per cash book. Out of said cash on hand available with assessee, the assessee has deposited Rs.1,13,50000/- in the bank account. A statement showing month -wise cash balance, cash sales, cash receipt from debtors cash withdrawn and cash deposited with bank and cash expenses for the period 01.04.2016 to 08.11.2016, as well as for assessment year (AY) 2015-16 was submitted, before the assessing officer.
6. However, the assessing officer rejected the above contention of the assessee and observed that assessee has deposited cash in its UBI Bank
Current
Account number
422305010037111
amounting to Rs.
Rs.1,11,45,163/-, during demonetization period, and the assessee has not been able to discharge its primary onus under Section 68 of the Act, the cash to the tune of Rs.1,11,45,163/- deposited during demonetization period in various bank accounts of the assessee was therefore treated by the assessing officer, as unexplained cash credits within the meaning of section 68 of the Act.

Opening Balance of cash as per cash book as on 01.04.2016
75,37,280/-

Cash Expenses

46,49,944
Cash Sales during
01.04.2016 to 08.11.2016
30,34,780

Collection form
Debtors during
01.04.2016 to 08.11.2016 as discussed above
40,97,155
Closing balance of cash on hand as on 08.11.2016
1,00,19,271
Total
1,46,69,215
Total
1,46,69,215

Thus, out of cash deposit of Rs.1,13,50,000/-, the source of deposits of Rs.1,00,19,271/- was treated by ld.CIT(A) as explained and that of Rs.13,30,729/- (Rs.1,13,50,000/- minus Rs.1,00,19,271/-) was treated as not explained. Therefore, the addition of Rs.13,30,729/- made by the assessing officer out of total addition of Rs.1,11,45,163/- was confirmed by ld.CIT(A). Therefore, revenue, as well as assessee, both are in appeal before us.

Cash Expenses

46,49,944

Cash Sales
30,34,780

Collection from Debtors
61,45,732

Closing balance of Cash on Hand as on 08.11.2016
1,20,67,848
Total
1,67,17,795

Total
1,67,17,792

ITA No. 624 & 682/RJT/2025
Grenic Tiles Pvt. Ltd. V. ACIT
As may be seen from the above summary of month- wise cash book, the assessee had received cash from cash sales of Rs. 30,34,780/- and collection from the debtors of Rs. 61,45,732/-.
15. To give a comparative view, month wise cash book for Financial Year
(FY) 2014-15, was furnished before the assessing officer, which is reproduced below:

ITA No. 624 & 682/RJT/2025
Grenic Tiles Pvt. Ltd. V. ACIT to be maintained. The Books of Accounts and other documents to be kept and maintained under Section 44AA(3) are prescribed under Rule 6F of the Income Tax Rules. Section 44AA r.w.r 6F prescribes the books of accounts and other documents to be maintained. Rule 6F(2)(iv) prescribes that copy of serially numbered invoices is required to be maintained. The assessee is liable to Excise and VAT and has duly maintained copy of invoices, serially numbered.
20. The ld.Counsel for the assessee submitted before us that there is no requirement of mentioning address in case of cash sale invoice. In view of the facts of the case explained, as above, it was submitted that the sales made by cash invoice cannot be considered as unexplained cash credit. The sales invoices are maintained in the manner prescribed under the Act, showing full particulars of goods sold, quantity, rate etc. The sales made through cash invoice are liable to Excise and VAT and the assessee has reported the cash sales invoice in its excise and VAT return and the same is not disputed by the Excise and VAT Department. Full day to day quantitative details of goods produced and goods sold including cash invoice sales is maintained by the assessee. The assessing officer has not disputed quantitative record. The cash sale invoices are recorded in sales register and cash books and it is considered as Sales in audited books of accounts. The assessing officer has not disputed sales. There is a history of sales being made against cash payment. Sales through Cash sale invoice is quite comparable with past year. In these facts of the case, the cash received on cash sale invoice cannot be considered as unexplained cash credit.The Hon'ble Supreme Court in the case of CIT vs. Devi Prasad Vishwnath
Prasad (1969) 72 ITR194 (SC) held that "It is for the assessee to prove that even if the cash credit represents income, it is income from a source, which has already been taxed".The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income

ITA No. 624 & 682/RJT/2025
Grenic Tiles Pvt. Ltd. V. ACIT cannot be taxed again. Reliance is further placed on the decision of Hon 'ble
298 ITR 349 in which it was held that "Addition u/s 68 could not be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them". Decision of Hon'ble ITAT, Nagpur Bench in the case of M/s Heera Steel Limited vs
ITO (2005) 4 IT J 437 in which it was held that "Both the lower authorities failed to appreciate the case of the assessee that these were the trade advances and not cash credits and against such advance, the assessee has supplied the material in due time as per details available on record. In view of the above, there is no justification for the revenue authorities to treat these cash advances as unexplained cash credit u/s 68". Again, the reliance is placed on the decision of Hon'ble M.P. High Court in the case of Addl.
Reliance is further placed on the decision of the ITAT, Mumbai Bench in the case of ITO vs. Surana Traders, (2005)93 TTJ 875: (2005)92 ITD 212, the relevant observation of the Mumbai Bench are as under:
"So merely because for the reasons that the purchaser parties were not traceable, the assessee could not be penalized. In the sales documents, the assessee has made available all necessary details, i.e. the total weight sold as well as the rate per kilogram.
Undisputedly, the assessee has maintained complete books of accounts along with day to day and kilogram to kilogram stock register. These were produced before the assessing officer by the assessee. The assessee also submitted stock tally sheet along with the audited accounts. The audit report of the assessee also bears ample testimony in favour of the assessee. The factum of the assessee having maintained stock register and quantitative details have been mentioned by the assessing officer in the assessment order. No mistakes were pointed out by the assessing officer in these records maintained by the assessee. Since, the purchases have been held to be genuine, the corresponding sales cannot, by any stretch of imagination be termed as hawala transaction. It is the burden of the department to prove the correctness of such additions. When, in such like cases, a quantitative tally is furnished, even if purchases are not available no addition is called for.

ITA No. 624 & 682/RJT/2025
Grenic Tiles Pvt. Ltd. V. ACIT
7. In view of aforesaid discussions, the additions made by the A.O. u/s. 68 of the Act at Rs, 6,47,03,548/- by considering the sale proceeds as cash credits, cannot be sustained and the same is deleted in full. 8. In the result the appeal is allowed".
21.Considering the above facts, we find that assessee has placed on record the details of cash sales made, and it contains the details namely the date of sale, the voucher number, the name of the party, the amount of sales. It is also an undisputed fact that on the aforesaid sales, VAT as per the applicable rates has been paid by the assessee and the payment of VAT is also reflected in the VAT returns filed by the assessee. The Revenue has not placed any material on record to demonstrate that the details of cash sales filed by the assessee are fictitious or bogus. Further, the Revenue has also not placed any material on record to demonstrate that the VAT return filed by the assessee before the Appropriate Authorities have been rejected by the Authorities. It is also a fact that the assessee is having only one source of income which is also not in dispute. Further the purchase of goods from which the alleged sales have been made by the assessee has also not been rejected by the Revenue. When the sales have been accepted as revenue receipt, the same could not have been again added as income. In such circumstances and in absence of any contrary material brought on record by the Department, we are of the view that in the present case no addition is called for.
22. So far sash received from Debtors is concerned we note that assessee had received cash from various debtors during 01.04.2016 to 08.11.2016
aggregating to Rs 61,45,735/-. The statement of debtors from whom cash was received was furnished to assessing officer. The cash was received from 23 debtors against the sales made to the in Financial Year (FY) 2015-
16. The sales made to the said parties was duly recorded in books in FY
2015-16 and the amount receivable from the said debtors was duly reflected in audited Financial Accounts of AY 2015-16. Copy of audit report for FY

ITA No. 624 & 682/RJT/2025
Grenic Tiles Pvt. Ltd. V. ACIT
2015-16 was submitted by the assessee, by way of Annexure -I. During the year under appeal, assessee received cash from the said parties against the dues in respect of sales made to them in FY 2015- 16. The ledger accounts of the said parties for AY 2016-17 being the year in which sales is made and AY 2017-18, being the year in which parties have paid their dues was submitted by the assessee, before the assessing officer, by way of Annexure
J. The sales register for FY 2015-16 being the year in which sales were made is submitted at Annexure K. The Copy of relevant sales invoice of F.Y. 2015-16, in respect of which cash is received during the year under appeal is submitted at Annexure L1, L2 & M. The Assessee has filed VAT and Central Excise returns where in the sale invoice are duly reported.
Invoice No. is reported in Annexure to Excise returns Form ER 1. Copy of Excise Returns highlighting cash sale invoices is submitted at Annexure
N1, N2,N3. In case of VAT returns, the details of sales made to buyers of Gujarat State who have VAT Registration No is furnished in VAT Return
Form 201 -A and details of out of Gujarat State buyers having CST No. is furnished in Annexure to CST Return Form 3B. Copy of VAT Return and CST Return is furnished at Annexure O. Central Excise Department and VAT Department have not disputed the said sales invoices and have accepted assessee’s tax returns. In these circumstances, amount received from debtors, should not be treated bogus.
23. We note that Ahmedabad Bench of the Tribunal in the case of Shree
Sanand Textile Industries Ltd. vs. DCIT while deleting the addition made by the A.O. under section 68 of the Act, on account of cash deposit has observed as under:
"9.5 From the above, we note that the provisions of section 68 of the Act can be attracted where there is a 'credit found in the books of accounts and the assessee failed to offer any explanation or the offer made by the assessee is not satisfactory in the opinion of the assessing officer. The assessee has explained to the authorities below that the impugned amount represents the sale which has not been doubted by the authorities

ITA No. 624 & 682/RJT/2025
Grenic Tiles Pvt. Ltd. V. ACIT below. Thus in our considered view, the impugned amount cannot be treated as unexplained cash credit under section 68 of the Act merely on the ground that the assessee failed to furnish the details of the existence of the parties. 9.6 We also note that the provisions of section 68 cannot be applied in relation to the sales receipt shown by the assessee in its books of accounts. It is because the sales receipt has already been shown in the books of accounts as income at the time of sale only. 9.7. We are also aware of the fact that there is no iota of evidence having any adverse remark on the purchase shown by the assessee in the books of accounts. Once the purchases have been accepted, then the corresponding sales cannot be disturbed without giving any conclusive evidence/finding. In view of the above we are not convinced with the finding of the learned CIT(A) and accordingly we set aside the same with the direction to the assessing officer to delete the addition made by him."
24. Considering the above facts and circumstances, we dismiss the appeal of the revenue.
25. In the result, appeal filed by the revenue (in ITA No. 682/RJT/2025)is a dismissed.
26. Coming to the assessee’s appeal in ITA No. 624/RJT/2025, as we have noted earlier that the main contention of the assessee, is that ld.CIT(A) treated 33% debtors, as non- genuine, whereas 67% debtors were considered by the learned CIT(A) as genuine. Such a treatment adopted by the Ld. CIT(A) is not correct, as per learned Counsel for the assessee, either entire debtors should be treated as genuine or the entire debtors should be disallowed as non-genuine, therefore, part debtors cannot be considered as non-genuine, hence, addition sustained by the learned CIT(A) to the tune of Rs.13,30,729/-, should be deleted, as it is business receipt.

ITA No. 624 & 682/RJT/2025
Grenic Tiles Pvt. Ltd. V. ACIT to examine each debtor independently, and accept those supported by proper evidence and reject those where the assessee fails to discharge the burden of proof. Therefore, partial disallowance or partial acceptance is legally permissible. If the assessee claims that debtors are genuine, the assessee must generally establish: (i)Identity of the debtor, (ii)Genuineness of the transaction. If evidence is available only for 67% debtors, the CIT(A) can legitimately treat those as genuine and disallow the remaining 33%.
28.However, we note that position regarding “business receipt”, if the amount represents sales already recorded in books, some courts have held that separate addition for debtors may not be justified, because the receipt is already reflected in turnover. In the assessee’s case, the assessing officer accepted entire sales/turnover as genuine. There is no part disallowance @
33% of sales/turnover by the learned CIT(A) or by assessing officer.
Therefore, ld.CIT(A) ought not to have disallowed part debtors @33%.
Based on this factual position, we delete the addition of Rs.13,30,729/- and allow the appeal of the assessee.
29.In the combined result, the appeal of the assessee is allowed, whereas appeal of the revenue is dismissed.

Order is pronounced in the open court on 11/03/2026. (Dinesh Mohan Sinha) (Dr. Arjun Lal Saini)
Æयाियक सदÖय/ Judicial Member
लेखा सदÖय/Accountant Member

Rajkot
Date: 11 /03/2026. आदेश की Ůितिलिप अŤेिषत/ Copy of the order forwarded to :

अपीलाथŎ/ The Assessee

ŮȑथŎ/ The Respondent

आयकर आयुƅ/ CIT

आयकर आयुƅ(अपील)/ The CIT(A)

िवभागीय Ůितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT

गाडŊ फाईल/ Guard File

ITA No. 624 & 682/RJT/2025
Grenic Tiles Pvt. Ltd. V. ACIT
By order,

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