M/S. ARTHUR TURNKEY PROJECTS LTD.,KOLKATA vs. DCIT/ACIT, CIRCLE - 1(1),, KOLKATA

Per Pradip Kumar Choubey, Judicial Member:

The captioned appeals and the cross-appeal, one filed by the revenue and the other by the assessee are directed against the order both dated 24.04.2025 of the National Faceless Appeal Centre [‘CIT(A)’]
passed under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2017–18 respectively.
Since, the issues involved in both the appeals are common and relate to ITA No.1724/Kol/2025 & ITA No.1193/Kol/2025
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the same assessee, therefore, these appeals have been heard together and are being disposed of by this consolidated order.
2. Brief facts of the case are that the assessee filed its return of income for the assessment year 2017-18 declaring total income Rs.Nil and book profit u/s 115JB of Rs.6,16,244/-. The return was selected for scrutiny through CASS. Notices u/s 143(2) and 142(1) of the Act was issued and duly served upon the assessee. the Assessing Officer in the assessment order has made an addition of Rs.34,96,000/- as unexplained cash deposits during the demonetisation period, disallowance of import and export expenses of Rs.2,18,82,543/- and disallowance u/s 68 of the Act on account of difference in opening and closing balance of sundry creditor of Rs.2,09,38,259/-.
3. Aggrieved by the said order, the assessee filed an appeal before the CIT(A) wherein the appeal of the assessee has been partly allowed on the addition of Rs.2,18,82,543/- and Rs.2,09,38,259/- but dismissed the appeal of the assessee in respect of addition of Rs.34,96,000/-.
4. Being aggrieved and dissatisfied, the department has come in appeal vide ITA No.1724/Kol/2025 and the assessee filed the appeal in ITA No.1193/Kol/2025. We first deal with ITA No.1724/Kol/25 filed by the revenue.
5. ITA No.1724/Kol/2025 – The revenue has filed the present appeal before us by raising the following grounds:

ITA No.1724/Kol/2025 & ITA No.1193/Kol/2025
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ledger indicating custom duty paid, bill of lending expenditure, clearing and forwarding charges, shipping expenses and air freight expenses along with relevant bills. In respect of addition of Rs.2,09,38,259/- u/s 68 of the Act, the ld. AR submit that the sole reason for the Assessing
Officer for doubting the creditors is the increase in the value of creditors.
His submission is that the assessee was engaged in purchase transactions with various parties and transactions were conducted in the ordinary course of business which are duly supported by proper documentations and correspondence entries in the books of accounts.
He further submits that the closing balances of the creditors comprised amounts carried forward from opening balances as well as new liabilities arising from purchases made during the year and the total closing balances of creditors of Rs. 30,76,54,557.14/-, creditors to the tune of Rs. 28,51,71,546.56/- is coming from the opening balances of the creditors itself. The ld. AR contends that the Assessing Officer has not disputed or disallowed any of the purchase transactions undertaken by the assessee during the relevant assessment year and all the purchases were duly recorded by the assessee in its books of accounts and also the sales corresponding to these purchases, as duly reflected in the books of account of the assessee.
8. Upon hearing submission of the counsels of the respective parties and on perusal of the material available on record, we find that the assessee is carrying on manufacturing of engineering and mechanical items and made imports of goods, specifically marbles from various international suppliers as part of its regular business operations and these imports were necessitated for the purpose of assessee's business and were executed in accordance with applicable laws and procedures governing international trade. It is important to mention here that the import purchases by the Assessee for this year i.e. F.Y 2016-17 was ITA No.1724/Kol/2025 & ITA No.1193/Kol/2025
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Rs.7,83,07,326.84 whereas the import purchases during the earlier year i.e. F.Y. 2015-16 was Rs.1,44,13,693.78, thus, the increase in the import and export expenses during the year is on account of the increased import purchases made by the Assessee during the year under consideration. We further find that as part of the import process, the assessee was required to incur various expenses that are essential to ensure the smooth transportation, clearance, and delivery of goods and pay import duty for the imports made and these expenses have been duly accounted for under the head "Import and Export Expenses" in the books of account, the chart is as under:
Air freight
2436
Bill of lading expenses
14,112
Clearing and forwarding charges
7,16,140
Shipping expenses
76,85,982
Custom duty paid
2,10,59,855
Total
2,94,78,525/-

ITA No.1724/Kol/2025 & ITA No.1193/Kol/2025
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Officer has not cast any doubt on the import and export expenditure booked by the assessee and also the assessee submitted copies of ledger of import and export expenses along with bills which clearly proves that the expenditure has been borne by the assessee during the year. We also note that the total expenditure of Rs.2,94,78,525 incurred under the head "Import and Export Expenses" is wholly and exclusively for the purpose of the assessee's business. The ld. CIT(A) has discussed this fact at length in his impugned order and held as under:
“6.3 I have gone through the assessment order, written submission of the appellant along with the evidences submitted. The AO has mechanically applied the formula on total purchase during the previous FY(2015-16) and multiplied it with percentage increased of purchases for FY 2016-17. The AO has not discussed anything about custom duty paid by the appellant through banking channels and has not cast any doubt on the import and export expenditure booked by the appellant. The appellant had submitted copies of ledger of import and export expenses along with bills which clearly proves that the expenditure has been born by the appellant and there is a substance in his contention that the substantial portion of the imported goods were not sold during the year and hence, its affect is not captured in the corresponding increase in turnover.”
8.2
Going over the above discussion, we do not find any infirmity in the order of the ld. CIT(A) regarding the addition of Rs.2,94,78,525/- and the order of the ld. CIT(A) on this issue is confirmed.
8.3
Coming to another addition of Rs.2,09,38,259 u/s 68 of the Act, we find that the sole reason for the Assessing Officer of doubting the creditors is the increase in the value of creditors. It was important to mention that the assessee was engaged in purchase transactions with various parties and transactions were conducted in the ordinary course of business which are duly supported by proper documentations and correspondence entries in the books of accounts. We further find that the closing balances of the creditors comprised amounts carried forward from opening balances as well as new liabilities arising from purchases

ITA No.1724/Kol/2025 & ITA No.1193/Kol/2025
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made during the year. It is not in dispute that the total closing balances of creditors were Rs.30,76,54,557.14/- which is evident from pages 14 to 16 of the order of the ld. CIT(A) itself and it is needless to reproduce the same again. We also find that out of the said closing balances of Rs.30,76,54,557.14/-, Rs. 28,51,71,546.56/- is coming from the opening balances of the creditors itself. We note that Assessing Officer has not disputed or disallowed any of the purchase transactions undertaken by the assessee during the relevant assessment year and all the purchases were duly recorded by the assessee in its books of accounts and also the sales corresponding to these purchases were duly reflected in the books of account of the assessee, which was not controverted by the Assessing Officer. The ld. CIT(A) has discussed this fact at length after considering various judicial pronouncements in his impugned order and finally held as under:
“7.3 I have gone through the assessment order, written submission as well as the evidences submitted by the appellant, the AO has had disallowed the decrease of sundry creditors for trade in a very superficial manner and without bringing anything concrete in his assessment order neither has he casted any doubt on purchase parties nor has brought anything on record which could substantiate his findings in the assessment order. The AO has accepted both the purchases and the resultant sales as genuine but has casted apprehensions on the genuineness of the trade creditors arising from these vary purchases without giving any specific reasons. If purchases are being disallowed to the extent of Rs. 2,09,38,259/- , what will happen to the corresponding sales being shown. The corresponding purchases were admitted and payments made to sundry creditors continuing from earlier years were accepted by the AO which in itself means genuinety of payments of these creditors. Where purchases made from sundry creditors had been duly accounted for and were part of trading account and neither debit side nor credit side of trading results had been disturbed nor books of accounts had been rejected, then no addition on account of sundry creditors could be made.”
8.2
Going over the above discussion, we do not find any infirmity in the order of the ld. CIT(A) regarding the addition of Rs.2,09,38,259/- and the order of the ld. CIT(A) on this issue is confirmed.

ITA No.1724/Kol/2025 & ITA No.1193/Kol/2025
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9. ITA No.1193/Kol/2025 – The ld. AR challenges the very impugned order thereby submitting that the ld. CIT(A) did wrong in ignoring that the assessee submitted detail of individuals to whom it has made cash sales amounting to Rs.35,41,847/- from 17.10.2016 to 04.11.2016. The ld. AR contended that the assessee disclosed the cash sales in VAT returns and Assessing Officer has neither disputed the turn over disclosed by the assessee nor has raised any objection with regard to the payment of taxes on such sales. He placed the following case laws in support of this contention:
1. Jitendra Kumar Tahilramani vs. ITO [2025] 171 taxmann.com
229 (Jaipur-Trib)
2. ACIT vs. Ramlal Jewellers (P) Ltd. [2023]154 taxmann.com
584(Mumbai-Trib)
9.1
Contrary to that, the ld. DR supports the impugned order.
9.2
Upon hearing submission of the counsels of the respective parties and perused the material available on record, we find that the assessee has submitted the details of the case sales made by the assessee which is as under:

ITA No.1724/Kol/2025 & ITA No.1193/Kol/2025
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ITA No.1724/Kol/2025 & ITA No.1193/Kol/2025
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that in the case of Jitendra Kumar Tahilramani vs. ITO (supra), the Coordiante Jaipur Bench of the Tribunal has held that “Where assessee, engaged in trading of gold and diamond jewellery deposited cash of Rs.50
lakhs during demonetization period in his bank accounts and claimed that said cash was proceeds of cash sales, since assessee furnished all sales invoices with complete year cash book, names, addresses and telephone numbers of person to whom cash sales were made, such sales could not be considered as unexplained money and that too when profit derived from those sales proceeds was already taxed as part of sales”.
Further, in the case of ACIT vs. Ramlal Jewellers (P) Ltd. (supra), the Coordiante Jaipur Bench of the Tribunal has held that “once the assessee's books of accounts were accepted by the AO and no specific defects were pointed out in the stock records or purchases, the corresponding cash sales could not be treated as bogus”. Going over the above discussion and considering the judicial precedents, we find that the addition of Rs.34,96,000/- made on account of cash deposits during demonetization period is not justified and the same is hereby deleted.
10. In the result, ITA No.1724/Kol/2025 filed by the revenue is dismissed and the appeal of the assessee being ITA No.1193/Kol/2025 is allowed.
Kolkata, the 12th November, 2025. [Rajesh Kumar]

[Pradip Kumar Choubey]
Accountant Member

Judicial Member

Dated: 12.11.2025. RS

Copy of the order forwarded to:
1. Appellant -
2. Respondent -

ITA No.1724/Kol/2025 & ITA No.1193/Kol/2025
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3. CIT(A)-
4. CIT- ,

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By order