RAYUDU LABORATORIES LIMITED,HYDERABAD vs. DCIT., CENTRAL CIRCLE-2(4), HYDERABAD

आयकर अपीलȣय अͬधकरण, हैदराबाद पीठ
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ‘B’ Bench, Hyderabad

BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT
AND SHRI MANJUNATHA G. ACCOUNTANT MEMBER

आ.अपी.सं /ITA No.725/Hyd/2025
Assessment Year 2020-2021

Rayudu Laboratories
Limited, Hyderabad.
PIN – 500 036. Telangana.
Central Circle-2(4),
Hyderabad.
(Appellant)

(Respondent)

िनधाŊįरतीȪारा /Assessee by:
-None-
राज̾ वȪारा /Revenue by:
Kritika Jaiswal, Sr. AR

सुनवाई की तारीख/Date of hearing:
16.12.2025
घोषणा की तारीख/Pronouncement:
19.12.2025

आदेश/ORDER

PER VIJAY PAL RAO, VICE PRESIDENT :

This appeal by the Assessee is directed against the Order dated 17.03.2025 of the learned CIT(A)-12, Hyderabad, for the assessment year 2020-2021. 2. None has appeared on behalf of the assessee when the appeal was called for hearing despite the fact that 2
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on the last date of hearing i.e., on 04.11.2025 the assessee sought adjournment and hearing was adjourned at the request of the assessee for today i.e., on 16.12.2025. Accordingly, the Bench proposed to hear and dispose of this appeal ex-parte.
3. The assessee has raised the following grounds of appeal:
1. The Appellant submits that under the facts and circumstances of the case, the orders passed by The Commissioner of Income Tax
(Appeals)-11, Hyderabad was against the law and contrary to the facts of the case, as the Appellant was not provided with a reasonable opportunity to present their case during the assessment proceedings. The appeal was dismissed on grounds of non-prosecution without considering the substantive explanations and the circumstances explained by the appellant regarding their inability to produce certain documents due to COVID-19 related lockdowns and operational hindrances.
2. The Assessing Officer erred in treating ₹21,71,361 comprising
₹18,49,620 received from sale of duty credit scrips under the Foreign Trade Policy and ₹3,21,741 from foreign exchange gain as "income from other sources." These are in fact business-related receipts and form an integral part of the core operations of the appellant.
3. While estimating income @ 8% of gross turnover including "other income," the AO separately taxed ₹21,71,361 under "other sources"

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without allowing any deductions, leading to duplication and overstatement of tax liability.
4. In a similar case, Aamor Inox Ltd., the Delhi ITAT recognized MEIS incentives as export-linked receipts, not taxable as income from other sources. It ruled that there's no estoppel against the statute- income initially offered to tax can still be contested. The appellant's situation is analogous, strengthening the claim that the scrip income is non-taxable capital receipt or part of business income.
5. In prior assessments, similar income components were accepted as business income. The change in treatment by the AO and CIT(A) without change in factual circumstances is arbitrary and lacks legal merit.
6. The duty credit scrips received are sanctioned under an export promotion scheme by the DGFT and are directly tied to the business activity. Ignoring their business-linked nature and classifying them under "other sources" is a misapplication of law.
7. The penalty levied u/s 270A was imposed without proving deliberate under-reporting or misreporting of income. The addition was made solely due to interpretational differences, not due to concealment or willful default.
8. The appellant seeks to set aside the previous orders and requests a reassessment with a proper hearing. Additionally, a stay on the existing demand until the resolution of this appeal is requested.
9. For these reasons and such other reasons that may be submitted at the time of hearing of the case, the appellant prays that the respected Commissioner of Income Tax (Appeals), Hyderabad:
i.
Quash the Orders passed u/s.250 of the Income Tax Act,
1961 by the Assessing unit of Income Tax, with DIN:
ITBA/APL/M/250/2024-25/1074578035(1) dated 17-03-
2025 in the interest of justice as the impugned orders are contrary to the provisions of law and facts of the case.

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ii.
Grant a temporary relief of keeping the demand of Rs.14,00,352 under section 156 of the income tax act 1961, which is demanded from the appellant through demand notice dated 31-03-2022 in abeyance pending disposal of this appeal.
iii.
Pass any other orders as may be deemed fit in the facts and circumstances of the case.
10. The appellant requests for an opportunity of a personal hearing before the case is decided by the Income Tax Appellate Tribunal
Hyderabad.”

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of accounts properly and was not able to substantiate with the bills and vouchers. Accordingly, the Assessing Officer rejected the books of accounts of the assessee by invoking provisions of sec.145(3) of the Act and estimated the total income of the assessee by adopting 8% net profit on gross receipts. The assessee challenged the action of the Assessing
Officer before the learned CIT(A) but could not succeed.
5. The learned DR has relied upon the impugned order of the learned CIT(A) and submitted that once the books of accounts of the assessee are rejected and the turnover of the assessee is more than Rs.5 crores, then the Assessing
Officer has rightly applied the income @ 8% but only grievance of the assessee in the grounds of appeal is that the Assessing Officer has separately assessed the income from sale of duty credit scrips and foreign exchange gain. At the outset, we note that the learned CIT(A) has considered and decided the issue in Paras- 6.4.1 and 6.4.2 as under:
“6.4.1. During the course of assessment proceedings, the assessee submitted information viz., computation of income, profit
& loss account, balance sheet, bank account statements etc. for AY
2020-21 in response to notice issued u/s 142(1) of the IT Act. On 6
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perusal of the information, the AO found that the assessee had gross receipts from business to the extent of Rs.5,10,36,478/-, other income of Rs.21,71,361/- and debited an amount of Rs.
4,93,41,319 to P&L A/c on account of various expenses for FY
2019-20 relevant to AY 2020-21. The assessee failed to submit documentary proof to substantiate the expenses debited to P&L
A/c ie., bills/vouchers, ledger accounts etc. Accordingly, the AO issued a notice dated 01.03.2022 and served upon the assessee to show cause as to why the assessment should not be completed based on information available on record and findings as per survey conducted u/s 133A of the Act. However, the assessee failed to provide any documentary proof in respect of expenses debited to P&L A/C. The AO opined that in absence of supporting documents, the correctness and completeness of the accounts submitted by assessee cannot be verified and rejected the assesse's books of account by invoking provisions of section 145(3). Thus, the AO estimated income of Rs.40,82,918/- @ 8% of gross receipts shown at Rs.5,10,36,478/- and other income of Rs.21,71,361/-considered separately.
6.4.2. During the appeal proceedings, the appellant has been provided with sufficient time and opportunities but the appellant failed to furnish any explanation or written submissions along with evidences against the grounds contested in the present appeal. In view of the discussion above, I do not find any reason to disagree with the findings of the AO. Hence, the action of the AO in estimating income @ 8% on gross receipts by rejecting books of accounts u/s 145(3) in the assessment order is confirmed.
Accordingly, the ground nos.1 to 10 are dismissed.”

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Order pronounced in the open Court on 19.12.2025. [MANJUNATHA G.]

[VIJAY PAL RAO]
ACCOUNTANT MEMBER
VICE PRESIDENT

Hyderabad, Dated 19th December, 2025

VBP

Copy to:

BY ORDER

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