RITHWIK PROJECTS PRIVATE LIMITED,HYDERABAD vs. DCIT CIRCLE -2(2), HYDERABAD

5. The Ld.CIT(A) ought to have appreciated that increase in authorised share capital of the company and is used for meeting the need for more working capital requirement and hence, therefore it is to be allowed as revenue expenditure.

6. The Ld.CIT(A) ought to have appreciated that the ROC expenditure is allowable u/s 37(1) of the Act since it is incurred exclusively for the purpose of business which is directly proportional to the business needs of the company.

7. Without prejudice to the above, the Ld. CIT(A) erred in not giving relief to assessee in accordance with the provisions of section 35D of the Act. The appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”

4. Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A). Before the learned CIT(A), the assessee challenged the disallowance of ROC fee made by the Assessing Officer contending, inter alia, that, the said ROC fee paid to the Registrar of Companies towards increase in authorized share capital of the Company and, therefore, it is a revenue expenditure as per provisions of sec.37(1) of the Act and as per the provisions of sec.35D of the Act stating that in 5 years i.e., 1/5th of the same is allowable in the current year. The learned CIT(A) after considering the submissions of the assessee, relevant provisions of the Act as well as the decisions relied by the assessee, held that, when the conditions u/sec.35D(1) and (2) are not satisfied, the fee paid to ROC is not an allowable expenditure. Further, the assessee has neither contended nor proved that, the fee paid to the ROC is in connection with the extension of the undertaking or in setting- up of a new industrial unit. Therefore, the learned CIT(A) held that, the ROC fee is not an allowable expenditure u/sec.35D of the Act and dismissed the appeal of the assessee.

5 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025

5. Aggrieved by the Order of the learned CIT(A), the assessee is now, in appeal before the Tribunal.

6. CA, P. Murali Mohan Rao, Learned Counsel for the Assessee submitted that, the Assessing Officer was erred in disallowing ROC fee amounting to Rs.9,38,000/- which is an allowable expenditure as per the provisions of sec.37(1) of the Act. The learned CIT(A) also without considering the submissions of the assessee, sustained the addition made by the Assessing Officer. He submitted that, the assessee company has paid the sum of Rs.9,38,000/- to the Registrar of Companies for the purpose of increase in the authorized share capital, which is expended wholly and exclusively for the purpose of the business and, therefore, the said expenditure has to be allowed. He further submitted that, the fee is paid to ROC to facilitate the assessee’s business operations and to enable it to carry-out it’s business more efficiently and profitably and, therefore, it is allowable as revenue expenditure as per the provisions of u/sec.37(1) of the Act. In support of this contention, the Learned Counsel for the Assessee relied on the decision of Coordinate Bench of ITAT, Hyderabad in the case of Madhucon Toll Highways Ltd., Hyderabad vs., ACIT, Circle-16(2), Hyderabad in ITA.No.1487/Hyd./2018 and ITA.No.2100/Hyd./2017, dated 13.04.2022; Order of ITAT, Mumbai in the case of Navi Mumbai SEZ (P.) Ltd., vs., ACIT 54 taxmann.com 259 (Mum.Tribu.); Order of ITAT, Jaipur in the case of Bhatia Corporation Pvt. Ltd., vs., ACIT in ITA.No. 1044/JP/2017, dated 23.02.2018 and Order

6 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 of ITAT, Delhi Bench in the case of Haryana Jewellers Pvt. Ltd., vs., ITO in ITA.No.2315/Del./2018, dated 10.09.2018.

7. Sri Madan Mohan Meena, learned Sr. AR for the Revenue, on the other hand, strongly relied on the order of the learned CIT(A) and submitted that, the fee paid by the assessee company to ROC is related to the capital expenditure incurred by the company, though, incidentally it would help in the business of the company, but, still it retains the character of ‘capital expenditure’. He submitted that, the learned CIT(A) has also considered the expenditure as capital expenditure by following Judgment of Hon’ble Supreme Court in the case of M/s. Punjab State Industrial Development Corpn. Ltd., vs., CIT 225 ITR 792 (SC) wherein the Hon’ble Supreme Court has considered the fee paid to Registrar of Companies for expansion of the capital base of the company was directly related to the capital expenditure incurred by the company and rejected the view taken by the Hon’ble Madras High Court in the case of Kisenchand Chellaram (India) (P) Ltd., [1981] 130 ITR 385 (Madras) (HC). He further submitted that, before the learned CIT(A), the assessee contended that the ROC paid is allowable as per provisions of sec.35D of the Act in 5 years i.e., 1/5th of the same is allowable in the current year. In this behalf, the Learned Sr. AR submitted that, as per the provisions of sec.35(D) of the Act, amortization of preliminary expenses are pertains to before the commencement of the business and as per provisions of sec.35D(1)(i) and 35D(i)(ii) any expenditure incurred after the commencement of it’s business, in connection with extension of his undertaking or 7 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 in connection with his setting-up of a new unit. He submitted that, in the instant case, the assessee had already commenced it’s business and, therefore, the sub-section relating to before the commencement of business is not applicable. Further, with respect to already existing business, the expenses incurred in connection with the extension of the undertaking or in connection with the setting up of a new unit, are allowable to the extent of 1/5th for the next 5 years, provided the expenses fall under sub-section (2) of Section 35D of the Act. Since, in the instant case, the assessee company has not brought out any fact on record that, the increased capital base was used for extension of the undertaking or in connection with setting up of a new unit. Therefore, the onus is on the assessee company to prove that, the increased capital base was used for setting-up of a new undertaking has not been proved that, the fee paid to the ROC is in connection with the extension of the undertaking or in setting-up of a new industrial unit, therefore, the order of the learned CIT(A) that, the ROC fee is not an allowable expenditure u/sec. 35D of the Act, should be upheld.

ITA.No.516/Hyd./2022 – A.Y. 2016-2017 [Revenue Appeal] :

1. The ld. CIT (Appeals) erred both in law and on facts of the case in granting relief to the assessee

2. On the facts and in the circumstances of the case, and in law, the ld. CIT (Appeals) erred in deleting the addition of Rs.2,42,00,000/- made towards unexplained expenditure which was rightly taxed as per the provisions of Section 1158BE as the assessee could not substantiate its claim.

3. On the facts and in the circumstances of the case, and in law, the ld. CIT (Appeals) erred in not following the due procedure prescribed under Rule 46A of IT Rules as no opportunity was given to the AO to examine the additional evidence/ledger extracts relating to the amount added as unexplained expenditure of Rs.2,42,00,000/-

10 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025

4. On the facts and in the circumstances of the case, and in law, the ld. CIT (Appeals) erred in holding that the expenditure of Rs.2.42,00,000/- was recorded in the books of accounts ignoring the fact that the said amount was sourced out of the amount received from various persons as recorded in the seized material and the assessee never explained the nature and purpose of the amount received and the manner in which it was accounted for in the books.

5. On the facts and in the circumstances of the case, and in law, the ld. CIT(Appeals) erred in discussing about specific points raised by the AO vide remand report dated 07 06-2022 in Para 4.3 in respect of two parties, ie, M/s RK Steel Udyog and M/s Jacon Vietnam Company Limited for deleting the addition made towards unproved purchases of Rs 9,71,21,390/- while not examining or commenting on the contentions raised in the case of 6 other parties in the same Para 6. On the facts and in the circumstances of the case, and in law, the ld. CIT(Appeals) erred in ignoring the submissions made at Para 42 of the remand report that the LC numbers furnished by the assessee for the amount of Rs. 9,71,21,390/- are different from the LC numbers mentioned in the bank account statements in respect of various vendors. 7. On the facts and in the circumstances of the case, and in law, the ld. CIT(Appeals) erred in deleting the disallowance of unproved purchases of Rs.9,71,21,390/- when in the remand report it was submitted that bills and vouchers were not submitted by the assessee in respect of two vendors namely M/s. CT Corporation and M/s. RK Steel Udyog Pvt Ltd. 8. On the facts and in the circumstances of the case, and in law, the ld. CIT (Appeals) erred in not dealing or examining the specific observations made in the remand report and giving relief on the general observation that the narration of bank account entries is matching when the assessment order and remand report have clearly stated that the addition is made due to non-submission of evidences by the assessee 9. On the facts and in the circumstances of the case, and in law, the ld. CIT(Appeals) erred in deleting the disallowance of cash expenditure of Rs.83,768/- holding that the amount of Rs.83,768/- is within the total amount claimed in the books of account of Rs 6.97.000/- when the assessee did not produce cash book/petty cash book to show that the said cash expenditure was recorded in the books. 10. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary.”

11 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 12.1 Briefly stated facts of the case are that, the assessee has filed return of income on 03.10.2016 admitting Rs.NIL income after set-off of losses under normal provisions and income Rs.17,65,99,000/- as per provisions of sec.115JB of the Income Tax Act, 1961. A search and seizure operation was conducted in the case of the assessee company on 12.10.2018. During the course of search in the office premises of assessee email sent by Sri Mastan Naidu were found and seized vide Annexure-A/RPPL/Off/07. Further, Sri Mastan Naidu has sent an email on 10.02.2016 containing details of expenditure amounting to Rs.2,42,00,000/- and during the course of assessment proceedings, the assessee submitted vide reply dated 21.04.2021 that, the amounts have been transferred through RTGS for making labour payments, other petty expenses and payments to equipment hire vendors, but, did not furnish any supporting evidence like ledger copies or copies of bank accounts in respect of amount of Rs.2.42 crores. Since, the assessee was failed to explain the expenditure of Rs.2.42 crores found during the course of search, therefore, the Assessing Officer treated the sum of Rs.2.42 crores as unexplained expenditure and taxed as per provisions of sec.115BBE of the Income Tax Act, 1961.

12.2. Further, as per the seized document vide Annexure- A/RPPL/Off/07, the Assessing Officer noticed that, Sri Mastan Naidu on 30.01.2016 sent an email containing details of LCs opened amounting to Rs.5,08,68,315/-. During the course of assessment proceedings, the assessee has furnished corresponding ledgers and way bills to the tune of 12 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 Rs.3,14,51,700/- only. Therefore, the Assessing Officer made addition of differential sum of Rs.1,66,90,201/- [i.e., Rs.5,08,68,315/- (-) Rs.3,14,51,700/-].

12.3. Further, during the course of assessment proceedings, the Assessing Officer noted that, as per seized document vide Annexure-A/RPPL/Off/07, an email was sent by Sri B. Saibaba on 22.12.2015 containing an excel sheet with details of LCs devolved to the tune of Rs.55,17,27,564/- and cash of Rs.12,24,52,000/-. The Assessing Officer after considering the submissions / detailed party-wise breakup furnished by the assessee noticed that, the assessee has received back amount through banking channel on account of purchase returns to the tune of Rs.30,00,57,707/-, but, not Rs.33.47 crores as claimed by the assessee and further, these transactions have not been charged to P & L A/c and the balance amount of Rs.2.32 crores consists of discounted amounts of LCs which is reflected in advances. Further, with respect to amount of Rs.12.24 crores, the assessee claimed that it was part of LC transactions which resulted in material purchase i.e., Rs.22.85 crores. Therefore, the Assessing Officer called-upon the assessee to produce bills along with delivery challans for Rs.22.85 crores. In response, the assessee has furnished LCs. The Assessing Officer after considering the documents placed by the assessee noted that, the assessee could produce evidence only to the extent of Rs.13,14,53,295/- out of Rs.22,85,74,685/-. Since the assessee failed to furnish evidence for the balance sum of Rs.9,71,21,390/- the Assessing Officer

13 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 disallowed the said sum of Rs.9,71,21,390/- and made addition to the total income of the assessee. The Assessing Officer also further noted that, the assessee has paid a sum of Rs.83,768/- in cash on account of advertisement, but, could not place any bills or vouchers. Therefore, the Assessing Officer in absence of any supporting evidence furnished by the assessee in the form of ledger accounts, made addition of Rs.83,768/-. Accordingly, the Assessing Officer assessed the total income of the assessee at Rs.30,29,76,655/- vide order dated 16.06.2021 passed u/sec.153A of the Income Tax Act, 1961.

12.4. Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A). Before the learned CIT(A) the assessee has furnished additional evidence under Rule 46A of I.T. Rules, 1962 to substantiate it’s claim. The learned CIT(A) after considering the remand report from the Assessing Officer, admitted the additional evidences furnished by the assessee. During the course of appellate proceedings, the learned CIT(A) deleted the addition of Rs.2,42,00,000/- made by the Assessing Officer on the ground that, the assessee has furnished ledger account of expenses of the project sites which are mostly in the nature of salary and wages, labour payments, diesel etc., wherein the transactions in the seized documents were reflected in those ledger accounts. Since, the expenditure is recorded in the books of accounts, the learned CIT(A) allowed the said expenditure of Rs.2,42,00,000/- as business expenditure u/sec.37(1) of the Act. Similarly, the learned CIT(A) deleted the addition of Rs.1,66,90,201/- made by the Assessing Officer

14 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 towards disallowance on account of purchases, after considering the payments for LCs which were made through banking channel and supporting way bills. The learned CIT(A) has also deleted the addition of Rs.9,71,21,390/- towards payment made for LCs as they were matched with the bank statement. Further, the learned CIT(A) has also directed to delete the addition of Rs.83,768/- made on account of advertisement expenses which sum is within the advertisement expenses of Rs.6,97,000/- claimed in the books of accounts that were allowed by the Assessing Officer and since the Assessing Officer has not brought on record any evidence to show that, the impugned sum of Rs.83,768/- is over and above the sum of Rs.6,97,000/- claimed in the P & L A/c. Thus, the learned CIT(A) has deleted the additions made by the Assessing Officer.

12.5 Aggrieved by the order of Ld. CIT(A), the Revenue is now in appeal before the Tribunal.

15 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 the course of search. The assessee replied that the same is a dumb document without any reference to the nature of document and the purpose of payment. The assessee further vide reply dated 21-04-2021 submitted that the amounts referred to in the seized document are the amounts transferred through RTGS and cash to different sites for making labour payments, other expenses, and payments to equipment hire vendors etc. The A.O. after considering relevant submissions of the assessee observed that the document found during the course of search clearly showed details of amounts sent through RTGS and cash. Therefore, it cannot be said that the said document is a dumb document. Further, although, the assessee explained that the said transaction relates to regular business expenditure incurred under normal course of business for incurring various expenditure, but failed to file relevant details. Therefore, rejected the explanation of the assessee and made addition of Rs.2,42,00,000/- and treated as unexplained expenditure.

16 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 reiterated the observations made during the course of assessment and claimed that the assessee could not furnish documentary evidences such as bank statements and bills and vouchers to prove that the said amount is for the purpose of the expenditure incurred at sites. The Ld. CIT(A) forwarded the remand report of the A.O., to the assessee for its comments and rebuttal. In response, the assessee filed a detailed rejoinder and claimed that the assessee has furnished various evidences including the nature of expenditure incurred at different sites. The Ld. CIT(A) after considering the relevant submissions of the assessee and also taking note of the remand report submitted by the A.O. observed that, as per the details submitted by the assessee, it shows that the email sent by Shri Mastan Naidu relates to various amounts transferred through RTGS and cash to different sites for incurring expenditure. Further, as per the narration, in the seized document, it shows that the amount has been sent to B.Palli, Anantapur site expenses, Kondapuram (cash and RTGS), Guntakal (cash), etc. The fact that the narrations related to project sites was also not disputed by the A.O. in the remand report. The assessee also furnished ledger accounts of expenses of the project sites, mostly in the nature of salary and wages, labour payments, and purchase of design etc. Since the expenditure was recorded in the books of account, the same is allowable as business expenditure under section 37 of the Act and accordingly deleted the addition of Rs. 2,42,00,000/-.

17 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 17. The Ld. CIT-DR Ms. U. Mini Chandran, submitted that the Ld. CIT(A) erred in deleting the addition made towards unexplained expenditure without appreciating the fact that the Ld. CIT(A) admitted additional evidences without following due procedure prescribed under Rule 46A of the Income Tax Rules, 1962, as no opportunity was given to the A.O. to examine the additional evidences/ledger extracts related to the amount added as unexplained expenditure of Rs.2,42,00,000/-. The Ld. CIT- DR further submitted that, the Ld. CIT(A) erred in holding that the expenditure of Rs.2,42,00,000/- was recorded in the books of account ignoring the fact that said amount was sourced out of the amount received from various persons as recorded in the seized material and the assessee never explained the nature and purpose of the amount received and the manner in which it was accounted for in the books. Therefore, submitted that the Ld. CIT(A) without appreciating the said fact, simply deleted the addition made by the A.O. by accepting additional evidences without providing opportunity to the A.O., Therefore, she submitted that the order of the Ld. CIT(A) should be set aside and the addition made by the A.O. be upheld.

18 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 that the said expenditure recorded in the seized material had already been accounted in the books of accounts maintained by the assessee for the relevant assessment years. The Ld. CIT(A) after considering the relevant facts has rightly deleted the addition made by the A.O. and thus, the order of Ld. CIT(A) should be upheld and the additions made by the A.O. should be deleted.

19 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 expenditure has already been recorded in the books of accounts of the assessee for the relevant assessment year. The factual finding recorded by the Ld. CIT(A) has not been controverted or disputed by the Revenue, except stating that the Ld. CIT(A) has given relief on the basis of additional evidence. In our considered view, there is no merit in the grounds taken by the Revenue for the simple reason that, before allowing relief to the assessee, the Ld. CIT(A) has forwarded the additional evidence filed by the assessee to the A.O. for verification and obtained his remand report. Therefore, the ground on Rule 46A of the Income Tax Rules, 1962 by the Revenue is devoid of merit and cannot be accepted. Insofar as various expenditure recorded in the seized material is concerned, in our considered view, the same is part of the regular books of accounts of the assessee for the relevant assessment year, and on the basis of the said evidence, the Ld. CIT(A) has rightly allowed relief to the assessee. Therefore, in our considered view, there is no merit in the arguments of the Ld. CIT-DR that the Ld. CIT(A) has deleted the addition made by the A.O. without considering the relevant receipts recorded in the very same seized material. Thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the grounds taken by the Revenue.

20 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 21. The facts with regard to the impugned dispute are that, during the course of search in the office premises of the assessee, email sent by Shri B. Sai Baba vide Annexure- /RPPL/Off/07 was found. The email sent on 22-12-2015 contains an Excel sheet with details of LCs, devolved to the tune of Rs. 55,17,27,564/- and cash of Rs. 12,24,62,000/-. During the course of assessment proceedings, the details of the same were called for from the assessee. The assessee, in reply, stated that the company has opened Letter of Credit for Rs. 55,17,27,564/- against the same, Rs. 33,47,00,000/- had been received back through RTGS on account of non-materialization of purchases and Rs. 21,70,27,564/- has resulted in purchases. The assessee had also furnished detailed party-wise break-up of purchases with corresponding LCs along with relevant bank account statements. The A.O., after considering the relevant submissions of the assessee, observed that out of total LC of Rs. 55,17,27,564/-, the assessee had received back Rs. 33,47,00,000/- on account of cancellation of LCs for non- materialization of purchases. The actual purchases out of LCs are to the tune of Rs. 22,85,74,865/-. The assessee has furnished details of purchases with bills from vendors to the tune of Rs. 13,14,53,295/-. For the remaining amount of Rs. 9,71,21,390/-, the assessee could not furnish relevant bills to support the payment against LCs. Therefore, the A.O. disallowed Rs. 9,71,21,390/- and added it to the total income.

21 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 along with Letters of Credits and also bank statements, indicating payments for purchases to the tune of Rs. 9,71,21,390/-. The additional evidences filed by the assessee has been forwarded to the A.O. for comments and remand report. The A.O., vide remand report dt.10.06.2022 has commented upon the additional evidences furnished by the assessee and also noticed various discrepancies in respect to bills submitted for purchases against certain parties. The remand report of the A.O. has been forwarded to the assessee for its comments and rebuttal. The assessee, in reply, has filed a detailed rejoinder and claimed that it has made purchases from various parties and made payments through Letters of Credits. In this regard, it has furnished a chart showing Letter of Credit number, name of the vendor, amount of purchases, and relevant payment through bank account.

“8.5.1 During the course of appellate proceedings, the AR furnished additional evidences in the form of copy of LC documents amounting to Rs.9,71,21,390/-. The AR has also furnished the copies of invoices and bank statement evidencing payment of LC amounting to Rs.9,71,21,390/-. The same was forwarded to the AO for a remand report. In the remand report, the AO made certain observations of various parties regarding the bills and vouchers submitted by the assessee. It was contended that the bank statement does not reflecting the details of the party to which the payment is made and also that certain bills and vouchers were not supporting the purchases. In view of the same, the AO stated that the additional evidence filed by the assessee may be considered on merits. Objecting to the remand report the AR filed counter comments wherein it was claimed that the appellant has duly submitted the evidences in paper book page nos.197-483 containing the details of bank payments, purchase bills, invoice/challan, way bills, transportation bills etc. In view of the same, the AR requested for deletion of the addition. 8.5.2 I have considered the submissions of the AR, the assessment order, the remand report and the counter comments of the AR. It is seen from the additional evidence, a chart containing date wise details of LCs that were opened and the value of the material received and the details of payments made totaling to Rs.22,85,74,685/- were furnished. Out of this, the AO has already verified LCs to the extent of Rs.13,14,53,295/- during assessment proceedings. Only the balance amount of Rs.9,71,21,390/- was disallowed as the assessee could not furnish the supporting evidences. From the evidences filed by the assessee and the bank statements there is no dispute that the assessee has made LC payments for material purchases amounting to Rs.22,85,74,685/- that included the impugned addition of Rs.9,71,21,390/-. The assessee has furnished bank statements to support the payments made for the Page 20 of 23 Α.Υ 2016-17 purchases. As regards the AO's comment that the details of the party to which payments were made is not reflected, it is seen that the narration of entry in the bank account contains transfer number, bill no. and has the LC number. The AO has not pointed out any instance of payments not being made for repayment of LCs. A generic observation has been made that the details of parties to whom payments have been made were not mentioned in the bank account. This cannot be the reason to treat the payments as bogus when LC numbers and bill

23 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 numbers were mentioned in the bank account. Coming to the AOs specific observations, it is seen that in the case of Jacon Vietnam Company Limited, the LC invoice value was USD 1,90,000 which approximately matches the value in rupees. In the case of M/s.R.K.Steel Udyog, the bill and vouchers were available in the additional evidence. As stated earlier, the payments made for LCs matched with the bank statement. Since, the assessee has provided the necessary details to substantiate the purchases, the addition of Rs.9,71,21,390/- cannot be sustained and is directed to be deleted. Accordingly, the grounds of appeal pertaining to this issue are ALLOWED.”

25 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 CIT(A) deleted the additions made by the A.O. on the ground that the assessee could be able to furnish relevant bills against each L.Cs along with corresponding bank statements indicating payments against the Letter of Credits. We find that, the excel sheet contains details of L.C. numbers, due dates of L.Cs., purpose of L.C., amount of L.C. and corresponding bill amounts, which also contains details of Letters of Credit opened in favour of beneficiary name, and also the names of the bank through which the payment has been made. As per the said excel sheet, the assessee had opened 30 Letter of Credits amounting to Rs.55,17,27,564/-, out of which, Letter of Credits to the tune of Rs. 33,47,00,000/- has been received back through RTGS on account of cancellation of purchases, and the same has been accepted by the A.O. The remaining amount of LCs to the tune of Rs. 22,85,74,685/- has resulted in the purchase of materials. The assessee furnished details of purchases in respect of six L.Cs with corresponding bills and payments to the tune of Rs. 13,14,53,295/-, and the same was accepted by the A.O. himself. The dispute is only with regard to the balance Letter of Credits amounting to Rs. 9,71,21,390/-. The A.O. was of the opinion that the assessee could not file bills and vouchers in respect of the remaining purchases against each L.Cs opened in favour of the beneficiary. The Ld. CIT(A) deleted the addition by stating that the assessee could able to furnish relevant bills and vouchers against each LCs and also filed relevant bank statement indicating payments through banking channels.

26 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 9,71,21,390/-, which pertains to 8 Letter of Credits opened in favour of different vendors. In the remand report, the A.O. referred to the bills submitted by the assessee and the corresponding amounts paid through bank accounts. Although the A.O. indicated in the remarks column that in few cases, the original L.C number and L.C. number indicted in the bank statements were different, but the Ld. CIT(A) has recorded a categorical finding that the Letter of Credit number against which the payment has been made through bank account is matching. The Ld. CIT(A) further noted that the A.O. has not pointed out any instance of payment not being made for repayment of LCs. Once the payment against L.Cs were made through bank account, it is proved that the corresponding L.C. has been issued in favour of the beneficiaries against purchases, and this fact is further strengthened by the bills submitted by the assessee. The Ld. CIT(A) has also indicated one L.C. in favour of Jacon Vietnam Company Limited for a value of USD 1,90,000/-, which also approximately matches with the value in Rupees. Further, in respect of purchases from R.K Steel Udyog Pvt. Ltd., the Ld. CIT(A) has noted that the assessee has furnished bills and vouchers. Therefore, in our considered view, the observations of the A.O. in the remand report that against purchases from R.K. Steel Udyog Pvt. Ltd. bills have not been submitted by the assessee is incorrect. Since the Ld. CIT(A) has recorded a categorical finding in respect of the remaining amount of L.Cs. and finds that the assessee has furnished relevant bills and vouchers in support of purchases, in our considered view, the A.O. was erred in making additions towards

27 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 purchases to the tune of Rs. 9,71,21,390/-. The Ld. CIT(A), after considering relevant details has rightly deleted the addition. Thus, we are inclined to uphold the findings of Ld. CIT(A) and reject the grounds taken by the Revenue.

C.O.No.19/Hyd/2025

ITA.No.517/Hyd./2022 – A.Y. 2017-2018 [Revenue Appeal]:

1. The Ld. CIT (Appeals) erred both in law and on facts of the case in granting relief to the assessee.

2. On the facts and in the circumstances of the case, and in law, the id CIT(Appeals) erred in deleting the addition of Rs 12,05,98,000/- made towards unexplained income without appreciating that the issue under dispute is the source of cash payment made by the assessee for making purchases as reflected in the seized document.

3. On the facts and in the circumstances of the case, and in law, the Id. CIT(Appeals) erred in granting relief in respect of the addition made towards unexplained income of Rs 12,05,98,000/-on the ground that the assessee has not debited the said amount to the P&L a/c ignoring the submissions made at Para 2.4 of the remand report dated 09.06.2022 that the amount was added towards unexplained payments made for making purchases.

4. On the facts and in the circumstances of the case, and in law, the Id. CIT (Appeals) erred in relying upon a chart submitted by the AR without supporting evidences.

5. On the facts and in the circumstances of the case, and in law, the Id. CIT (Appeals) erred in neither dealing with nor examining the implications of the cash entries passed in the seized document as discussed in the assessment order and the remand report when the same was failed to explain by the assessee.

29 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025

6. On the facts and in the circumstances of the case, and in law, the Id. CIT(Appeals) erred in deleting the addition of Rs.6,06,76,000/- made towards unexplained income when the assessee could not substantiate its claim by producing bills, vouchers and delivery challans etc.

8. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary.”

30 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 during the year, LCs encashed against purchases and LCs cancelled on account of cancellation of purchases and also filed relevant details along with bank statements. The A.O. after considering relevant submissions of the assessee and also taking note of the seized material, observed that the assessee could not explain the document found during the course of search which contains details of cash received against LCs for Rs. 12,05,98,000/-. Therefore, rejected the explanation of the assessee and made additions of Rs. 12,05,98,000/- as unexplained income of the assessee and brought to tax under section 115BBE of the Act.

33 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 with reference to LC value and also cancellation of said LCs and the refund of amount to the assessee. The assessee also furnished relevant details of bills and vouchers in respect of purchases made against LCs. The AO’s allegation that the assessee has paid cash for purchases is not backed by any evidences. The CIT(A), after considering relevant facts, has rightly deleted the addition made by the A.O. and thus, the order of the Ld. CIT(A) should be upheld.

36 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 account. The Ld. CIT(A) after considering relevant facts, has rightly given relief to the assessee on the ground that the assessee has given details of LCs and cancelled LCs and thus, there is no case for making addition of Rs. 12,05,98,000/- on account of the purported cash payment as per the seized document. The factual finding recorded by the Ld. CIT(A) is uncontroverted by the Revenue with any evidence. Since the document found during the course of search is not a speaking document and the A.O. made additions only on the basis of suspicion and further, the assessee has reconciled the said document with reference to books of accounts, in our considered view, the A.O. is erred in making addition of Rs. 12,05,98,000/- on the basis of excel sheet. The Ld. CIT(A) after considering relevant facts, has rightly deleted the addition. Thus, we are inclined to uphold the findings of Ld. CIT(A) and reject the grounds taken by the Revenue.

38 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 rejoinder, the assessee has furnished the details with regard to purchases made from each party and the payment made against purchases with corresponding entries in the seized document and claimed that these are regular purchases and accounted in the books of accounts of the assessee.

39 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 “7.2 I have considered the submissions of the appellant, the remand report, the counter comments on the remand report, the assessment order and the assessment record. As per the document seized during search, there were 16 entries wherein certain amounts under the head RTGS were mentioned. The ledger accounts of each of the parties were furnished by the assessee. It is seen that these entries were reflected in the ledger accounts and the narration showed that the amount was paid by way of cheques of various dates. These purchases were made for purchase of cement and steel and all the payments were made through bank account on various dates. The AO in the remand report has mentioned certain discrepancies in the accounts. Each of these are discussed hereunder. 7.2.1 In the case of Tanisha Steels Ltd., the assessee received cement and steel worth of Rs. 56.91.804/- against which payment was made for Rs. 56.90.000/- The seized document showed two entries for Tanishq steel amounting to Rs. 15 lakhs and Rs. 20.95 lakhs. In the ledger account of Tanishq steel which is running account there were two entries viz., on 03.03.2017 for Rs. 15 lakhs and on 06.03.2017 for Rs. 20,95,000/-. Both these accounts were paid by cheque and the cheque number and date are mentioned against these entries. In the case of Niradhar Steels Pvt. Ltd., the seized document shows RTGS amount of Rs. 90 lakhs. An entry for Rs. 90 lakhs was found in the ledger account on 03.03.2017 vide cheque No. 087748 dated 03.03.2017. In the case of Opus Holding Pvt. Ltd., entries in the seized document shows RTGS of Rs.83.91 lakhs. In the ledger account, there were two entries on 06.03.2017 for Rs. 45 lakhs and another for Rs. 38,91,000/- on the same date. Both these entries were made through bank towards purchase of steel and cheque numbers and date of payment were mentioned. In the case of Matrix Green Power Pvt. Ltd., there was an entry for Rs. 80 lakhs in the seized document. In the ledger account an entry for Rs.80 lakhs were shown to have been paid through bank on 17.03.2017 and the cheque number was also mentioned. In the case of Jonna Steels, the seized document contained an entry for Rs. 52.37 lakhs. In the ledger account of Jonna Steel on 17.03.2017, there was a debit entry for Rs. 52,36,000/- and the payment was made through bank and cheque number was mentioned against the entry. In the case of Neha Steel the seized document had the RTGS entry for Rs. 11 lakhs. The ledger account showed an entry on 06.03.2017 for Rs. 13.70.000/- for which payment was made for purchases and a cheque number and date of payments were mentioned. In the case of Darshna Vinimay Pvt. Ltd. the seized document showed an RTGS entry of 10.48 lacs in the ledger account, entry for Rs. 10.48 lakhs was reflected on 18.03.2017 wherein the amount was paid through bank and cheque number and date of payment was mentioned. 7.2.2 The above narration shows that the entries for RTGS amounts mentioned in the seized documents directly matches with the books of account of the appellant. Therefore, the addition of Rs. 6.06.76.000/

40 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 made on account of unexplained expenditure cannot be sustained. Accordingly, the AO is directed to delete the said addition. In the result, grounds pertaining to this issue are ALLOWED.

43 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 of Rs.10.48 lacs were made through bank on 18.03.2017. From the findings recorded by the Ld. CIT(A), it appears that the assessee has furnished all the details with regard to the entries contained in the seized document and also reconciled said entries into the books of account maintained for the relevant assessment year. Further, the assessee has explained the transactions with reference to purchases made from different parties. Therefore, in our considered view, the A.O. is erred in making addition of Rs.6,06,76,000/- on the basis of the seized document even though the assessee has explained the said document with relevant evidences. The Ld. CIT(A) after considering the relevant facts, has rightly deleted the addition made by the A.O. Thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the grounds taken by the Revenue.

C.O.No.20/Hyd/2025

44 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 53. In the result, the appeal filed by the Revenue in for A.Y. 2017-18 and the cross-objection filed by the assessee in C.O.No.20/Hyd/2025 are dismissed.

ITA.No.518/Hyd/2022 – A.Y. 2019-2020 [Revenue Appeal] :

“1. The Ld. CIT (Appeals) erred both in law and on facts of the case in granting relief to the assessee 2. On the facts and in the circumstances of the case, and in law, the Ld. CIT (Appeals) erred in deleting the addition of Rs 3,16,11,553/- made towards unexplained income even though the assessee failed to offer proper explanation for the said amount comprising of principal amount of loans payable of Rs. 2,97,20,000/- and interest thereon payable of Rs. 18.91,553/- as mentioned in the seized document, 3. On the facts and in the circumstances of the case, and in law, the Ld. CIT(Appeals) erred in deleting the addition made towards unexplained 45 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 income of Rs. 3,16,11,553/-while it was clearly mentioned in the seized document that "total principal payable was Rs. 2,97,20,000/-, "interest payable was Rs. 18,91,553/ indicating thereby that the assessee had taken loans bearing interest.

7. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary.”

46 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 that it is an estimated break-up of the expenses which were projected in the excel sheet, but had never materialized. The A.O. after considering the details of excel sheet and the reply of the assessee observed that, the reply of the assessee cannot be acceptable for the simple reason that all the digital data containing the mails and the annexures seized during the course of search which leads to various findings. Therefore, rejected the explanation of the assessee and made addition of Rs.3,16,11,553/- and brought to tax u/s 115BBE of the Act.

47 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 RTGS, Delhi etc. These particulars do not indicate that the particulars of the parties from whom hand loans were taken. Though the dates, number of days, and interest amounts were mentioned, in the absence of evidence to link the hand loan to any particular person or a lendor, makes the document unreliable. Therefore, the Ld. CIT(A) observed that the additions made by the A.O. on the basis of non-speaking document cannot be upheld. The Ld. CIT(A) further observed that the assessee also explained the LCs referred to in the said document with reference to purchases from A.A.K. Steel Corporation. This shows that L.C. was opened against purchases from A.A.K. Steel Corporation and payments have been made. Therefore, the Ld. CIT(A) observed that the A.O. has made the addition without there being any evidence to suggest that the assessee had borrowed loans and repaid loans. Therefore, directed the A.O. to delete the addition.

48 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 evidences and further, if you go by the document and corresponding L.Cs., it is very clear that the assessee had taken loans from various persons and repaid the said loans out of L.C. proceeds. Although the A.O. had brought out clear facts, the Ld. CIT(A) deleted the addition without assigning any reason. Therefore, she submitted that the order of the Ld. CIT(A) should be set aside on this issue and the addition made by the A.O. should be sustained.

49 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 5.7.1 of his order, which shows certain jottings with dates, period, number of days, and interest. The A.O. has made an addition of Rs. 3,16,11,553/- on the basis of the said excel sheet and opined that the assessee has borrowed loans from various persons and repaid the said loans out of proceeds from L.Cs opened in a bank.

50 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 L.C. has been opened for purchase of materials from A.A.K. Steel Corporation and the same has been substantiated with relevant evidences. Since the document relied upon by the A.O. is a non- speaking document without any details as to the nature of transactions and from whom the said transactions have been made, in our considered view, the additions made by the A.O. towards unexplained income on the basis of the said document cannot be sustained. The Ld. CIT(A), after considering the relevant facts, has rightly deleted the additions made by the A.O. Thus, we are inclined uphold the findings of the Ld. CIT(A) and reject the grounds taken by the Revenue.

51 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 expenditure incurred at Tupakulagudem and Veligonda project sites.

52 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 made to Shri Suresh Chukkapalli towards various expenditure at sites, the same is allowable as business expenditure under Section 37(1) of the Act. Therefore, the Ld. CIT(A) directed the A.O. to delete the addition.

53 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 72. We have heard both parties, perused the material available on record, and had gone through the orders of the authorities below. The A.O. made addition on the basis of an email sent by Shri Mastan Naidu on 06.10.2018, which contains details of a payment of Rs. 1,00,00,000/- to Shri Suresh Chukkapalli on the ground that the assessee could not explain the transactions with relevant evidence. The Ld. CIT(A) deleted the addition made by the A.O. on the ground that the amount paid to Shri Suresh Chukkapalli referred to in the email sent by Shri Mastan Naidu, is nothing but business expenditure incurred by the assessee at the Tupakulagudem project site and Veligonda project site. The Ld. CIT(A) further noted that the assessee has paid an amount of Rs. 64 lacs on 18-06-2019 through RTGS for the purpose of payment of salaries and wages for Tupakulagudem project. Further, an amount of Rs. 36 lacs had been paid on 05-01-2019 towards labour charges at the Veligonda project. Since the ledger account in the books of account of the assessee reflects payments made to Shri Suresh Chukkapalli towards various expenditure at sites, in our considered view, the additions made by the A.O. towards unexplained expenditure on the basis of the email sent by Shri Mastan Naidu cannot be sustained. The Ld. CIT(A), after considering the relevant facts, has rightly deleted the addition made by the A.O. Thus, we are inclined to uphold the findings of Ld. CIT(A) and reject the grounds taken by the Revenue.

54 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 C.O.No.21/Hyd/2025

Order pronounced in the Open Court on 31st October, 2025.