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Income Tax Appellate Tribunal, HYDERABAD “A” BENCH: HYDERABAD
Before: SHRI MANJUNATHA G & SHRI RAVISH SOOD
Date of Hearing : 09.09.2025 Date of Pronouncement : 31.10.2025 ORDER PER MANJUNATHA G. A.M. :
The assessee has filed appeal ITA.No.443/ Hyd/2022 against the Order dated 13.07.2022 of the learned CIT(A)-12, Hyderabad, relating to the assessment year 2020-2021. The Revenue has filed appeals ITA.Nos.516, 517 & 518/Hyd/2022, against the separate Orders dated 13.07.2022 of the learned CIT(A)-12, Hyderabad, relating to the assessment years 2016- 2017, 2017-2018 and 2019-2020, respectively. The assessee has also filed Cross Objection Nos.19, 20 & 21/Hyd/2025 in Revenue’s appeals ITA.Nos.516, 517 & 518/Hyd/2022, for the assessment years 2016-2017, 2017-2018 and 2019-2020, respectively. Since common issues are involved in all these appeals, these appeals were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity.
First, we take-up assessee’s appeal ITA.No.443/ Hyd/2022 for the assessment year 2020-21 appeal, in which, the assessee has raised the following grounds : “
1. The order of the Ld. CIT(A) is erroneous both on facts and in law to the extent the order is prejudicial to the interest of the appellant.
2. The Ld.CIT(A) ought to have considered that the AO has erred in disallowance of expenditure amount of Rs. 9,38,000/- for ROC fee paid towards increase in authorized share capital.
3 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 3. The Ld.CIT(A) ought to have appreciated the fact that the expenditure is in the nature of expenditure laid down for facilitating assessee's operations and to enable it to carry on its business more efficiently and profitably.
4. The Ld.CIT(A) ought to have appreciated that the filing fee has been paid to enhance the business operation of assessee, therefore it is fully revenue in nature.
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.”
Brief facts of the case are that, the assesse viz., “M/s. Rithwik Projects Pvt Ltd.,” engaged in the business of construction contracts and infrastructure developments and a regular filer of return of income. The appellant filed it’s return of income for the assessment year 2020-2021 on 03.02.2021, declaring a total income of Rs.22,92,29,940/-. The case of the assessee company was selected for scrutiny under CASS and notice u/sec.143(2) of the Income Tax Act, 1961 [in short “the Act”] was issued on 29.06.2021. A search and seizure operation was conducted u/sec.132 of the Income Tax Act, 1961 on 12.10.2018 on Rithwik Group of cases. As part of search operation, warrant was issued in the name of assessee and search was conducted u/s 132 of the Act. Subsequently, the Assessing Officer issued notices u/sec.142(1) of the Act from 4 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 time to time calling for information. In response, the assessee has furnished information/details. The Assessing Officer after considering the details/information filed by the assessee company, completed the assessment by disallowing ROC fee amounting to Rs.9,38,000/- and assessed the income of the assessee company at Rs.23,01,67,940/- as against the returned income of Rs.22,92,29,940/- vide order dated 29.03.2022 passed u/sec.143(3) of the Income Tax Act, 1961.
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.
We have heard both the parties, perused the material on record and the orders of the authorities below. There is no dispute with regard to the fact that the appellant has paid fee for increasing authorized share capital of the company for an amount of Rs. 9,38,000/- and claimed deduction under Section 37(1) of the Income Tax Act, on the ground that the said expenditure is in the nature of revenue expenditure, because increase in authorized capital of the company enhances the 8 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 working capital. The A.O. disallowed ROC fee on the ground that, it is in the nature of capital expenditure because any fee paid for increased authorized capital can only be allowed as deduction under Section 35D of the Act, if such increase in authorized capital is for the purpose of extension of existing business or in connection with setting up of a new unit. The A.O. took support from the decision of Hon'ble Supreme Court in the case of Punjab State Industrial Development Corporation Ltd. Vs. CIT 225 ITR 792 (1997). We find that, although the assessee claims deduction towards ROC fee under Section 37(1) of the Act, but failed to file relevant evidences to prove that the said increase in authorized capital is for the purpose of working capital of the company. Further, deductions towards fee paid to ROC for increase in authorized capital of the company has been dealt with under Section 35D of the Act, and where only the said expenditure is deductible, if it is for the purpose of extension of undertaking or setting up of a new unit as held by the Hon'ble Supreme Court in the case of Brooke Bond India Ltd. Vs. CIT reported in 225 ITR 798. Since the assessee failed to prove with relevant evidences that said ROC fee paid for increase in authorized capital of the company falls under the provisions of Section 35D of the Act, the deduction claimed by the assessee cannot be allowed as deduction.
Similarly, the deduction claimed by the assessee under Section 37(1) of the Act, also cannot be considered because once a particular expenditure has been dealt with under specific sections, then the same cannot be considered under the 9 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 residuary head of expenditure as provided under Section 37(1) of the Act. Insofar as various case laws relied upon by the assessee on the issue, we find that, facts of the above cases are entirely different and cannot be applied to the facts of appellant’s case and thus, we reject the case laws relied upon by the assessee.
In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that there is no error in the reasons given by the Ld. CIT(A) to sustain additions made by the A.O. towards disallowance of ROC fee paid for increase in authorized share capital of the assessee company. Thus, we are inclined to uphold the findings of Ld. CIT(A) and dismiss the appeal filed by the assessee.
In the result, the appeal of the assessee is dismissed.
ITA.No.516/Hyd./2022 – A.Y. 2016-2017 [Revenue Appeal] :
The Revenue has raised the following grounds in the instant 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.
The first issue that came up for our consideration from Ground Nos. 2 to 4 of Revenue Appeal is deletion of addition of Rs. 2,40,00,000/- made towards of unexplained expenditure and brought to tax under Section 115BBA of the Act, 1961.
During the course of search in the office premises of the assessee, an email sent by Shri Mastan Naidu was found vide Annexure-A/RPL/Off/07 and seized. An email sent by Shri Mastan Naidu on 10.02.2016 contain details of expenditure of Rs.2,42,00,000/-. During the course of assessment proceedings, the assessee was confronted with the documents found during
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.
Aggrieved, by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has filed various evidences in support of the documents found during the course of search and claimed that the said entries contained in the email pertains to the amount sent for various kinds of expenditure. During the course of appellate proceedings, the A.O. forwarded the additional evidences to the A.O. for comments and remand report. The A.O., vide remand report dated 26-12-2022 has commented upon additional evidence filed by the assessee and their admissibility and further
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/-.
Aggrieved, by the order of Ld. CIT(A), now the revenue is in appeal before the Tribunal.
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.
On the other hand, the Learned Counsel for the assessee Shri P. Murali Mohan Rao, C.A., supporting the order of Ld. CIT(A) submitted that, the email sent by Shri Mastan Naidu containing details of expenditure of Rs. 2,42,00,000/- pertains to the amount transferred at different sites for the purpose of various expenditure, including salary and wages, labour payments, equipment hire etc. The assessee had also furnished relevant evidences in the form of ledger accounts and proved
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.
We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the sole basis for the A.O. to make addition of Rs. 2,42,00,000/- as unexplained expenditure is on the email sent by Sri Mastan Naidu on 10-02-2016, which contained details of expenditure amounting to Rs. Rs. 2,42,00,000/-. In fact, the Ld. CIT-DR has furnished relevant incriminating material found during the course of search, which is available in the paper book filed by the Revenue in page no. 2. Upon perusal of the relevant incriminating material/email, we find that on various dates, the amounts had been sent to different places for the purpose of expenditure, against which various expenditures had been recorded for different purposes. The Ld. CIT(A) has recorded a categorical findings in light of the above seized material and corresponding documentary evidence filed by the assessee, including relevant ledger accounts of expenses that details contained in the email sent by an employee pertain to various amounts transferred through RTGS and cash to different sites for the purpose of expenditure like salary and wages, labour payment, equipment of hire, purchase etc. Further, the above
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.
The next issue that came up for our consideration from Ground Nos. 5 to 8 of the Revenue is deletion of addition of Rs. 9,71,21,390/- towards difference in purchases claimed to have been made by the assessee out of payment through Letter of Credit (LC).
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.
Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has furnished additional evidence in the form of bills and vouchers,
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.
The Ld. CIT(A) after considering the relevant submissions of the assessee and also taken note of the remand report of the A.O., deleted the addition made by the A.O. towards difference in purchases to the tune of Rs. 9,71,21,390/-, on the ground that the details furnished by the assessee, including bank statements support the payments made for purchases. The Ld. CIT(A) further observed that the assessee had furnished complete details of LC no, name of the vendor, corresponding bills for purchases of materials, and bank statements, indicating payments against purchases. The A.O. has not pointed out any instance for payment not being made for repayment of LC. A generic observation has been made that the details of parties to whom the payments have been made were not mentioned in the 22 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 bank account. Therefore, observed that this is not a reason for the A.O. to disbelieve the evidence filed by the assessee in support of purchases made through Letters of Credit. Thus, directed the A.O. to delete the addition made to the tune of Rs. 9,71,21,390/-. The relevant findings of the CIT(A) are as under :
“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.”
The Ld. CIT-DR submitted that the Ld. CIT(A) erred in deleting the additions made by the A.O. on the basis of the details submitted by the assessee, even though the A.O. in the remand report had made certain observations with regard to discrepancies in Letter of Credit numbers indicated by the assessee against the purchases and corresponding Letter of Credit Nos. appeared in the bank statements against the payments. The Ld. CIT-DR further submitted that the A.O., in the remand report, had made a comment in respect of R.K. Steel Udyog Pvt. Ltd., from whom the assessee claimed to have made purchases to the tune of Rs. 89,00,923/- and stated that the said purchases are not supported with bills and vouchers. Further, the bank statement submitted do not reflected the details of the party to which the payment is made against LC No. 438. A similar observation has been made with regard to City Corporation and R.K. Steel Udyog Pvt. Ltd., Although the A.O. had made observations with regard to the evidentiary value of the bills submitted by the assessee, the Ld. CIT(A) without considering the relevant observations of the A.O., deleted the addition made by the A.O. Therefore, she submitted that the 24 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 order of the Ld. CIT(A) on this issue should be set aside and the addition made by the A.O. be upheld.
The Learned Counsel for the assessee, on the other hand, supporting the order of the CIT(A), submitted that although the assessee could not furnish complete details and corresponding bills against each Letter of Credit, but during the course of appellate proceedings has filed relevant purchase bills against each Letter of Credit numbers, and the same has been verified by the A.O. during the remand proceedings. Further, the Ld. CIT(A) after considering the relevant evidences submitted by the assessee, has rightly held that the assessee is able to file corresponding bills and vouchers in respect of purchases made from various parties against Letters of Credits. Therefore, he submitted that there is no merit in the grounds taken by the Revenue against the order of the Ld. CIT(A), and thus, the additions made by the A.O. should be deleted.
We have heard both parties, perused the material on record, and had gone through the orders of the authorities below. We have also carefully considered relevant email found during the course of search, sent by Shri B. Sai Baba, which contained an Excel sheet with details of Letter of Credits devolved to the tune of Rs. 55,17,27,564/- and the corresponding cash column where the cash amounting to Rs. 12,24,52,000/- was recorded. The A.O. has made addition of Rs. 9,71,21,390/- towards purchases claimed to have been made by the assessee against the L.Cs on the ground that the corresponding bills for the said purchases has not been furnished by the assessee. The Ld.
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.
We find that, the A.O. has submitted a remand report in respect of the remaining number of LCs amounting to Rs.
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
The assessee has filed a cross-objection in support of the order of the Ld. CIT(A), and the said cross-objection filed by the assessee is time-barred by 871 days. The assessee could not explain the reasons for the delay in filing the cross-objection by furnishing relevant evidence. Since there is a delay of 871 days in the cross-objection filed by the assessee, which was not explained with reasonable cause, and further, the cross- objection filed by the assessee only supports the order of the Ld. CIT(A) without any grounds which can be independently adjudicated, in our considered view, the cross-objection filed by the assessee deserves to be dismissed as infructuous. Thus, we dismiss Cross-Objection No. 19/Hyd/2025 filed by the assessee.
In the result, the appeal filed by the Revenue and the cross- objection filed by the assessee are dismissed.
ITA.No.517/Hyd./2022 – A.Y. 2017-2018 [Revenue Appeal]:
Under identical set of facts, for the assessment year 2017-2018 [ITA.No.517/Hyd/2022], the Assessing Officer determined the total income of the assessee at Rs.39,06,28,846/- by making addition of Rs.12,05,98,000/- and Rs.6,06,76,000/- u/sec.115BBE of the Act, addition of 28 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 Rs.3,07,680/- not relating to business expenditure, addition of Rs.4,00,000/- on account of business expenditure [related to the Projects located at Kadapa District claimed by the assessee] vide order dated 17.06.2021 u/sec.153A of the Income Tax Act, 1961.
Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A). The learned CIT(A) under identical set of facts for the assessment year 2016-2017, deleted the additions made by the Assessing Officer for the impugned assessment year 2017-2018.
Aggrieved with the order of Ld. CIT(A), the Revenue is now in appeal before the us and has raised the following grounds : “
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.
On the facts and in the circumstances of the case, and in law, the Ld. CIT (Appeals) erred in deleting the addition of Rs 6,06,76,000/- solely placing reliance on the ledger entries in the books of the assessee, ignoring the objections raised by the AO vide Para 3.3 of remand report dated 09-06-2022 regarding nil and insufficient evidence with reference to specific parties.
8. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary.”
The first issue that came up for consideration from ground numbers 2 to 4 of Revenue appeals is deletion of the addition of Rs. 12,05,98,000/- made towards unexplained income on the basis of seized material vide Annexure-A/RPPL/Off/07. During the course of search, in the office premises of the assessee, email sent by Shri Mastan Naidu was found and seized which contains an excel file having the details of LCs opened from 01.04.2016 to 18.01.2017. The document further states that actual LCs of Rs. 36.76 crores and accommodation LCs of Rs. 128.85 crores. Further, in relation to the above transactions, cash to the tune of Rs. 12,05,98,000/- has been recorded.
During the course of assessment proceedings, details of the same were called. The assessee in reply dated 24.05.2021 submitted that the document found during the course of search is a dumb document without any details as to the nature of transactions and purpose of payment. Further, the company has not received any cash against the LCs opened during the year. The assessee had also explained the details of total LCs opened
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.
Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has furnished relevant evidences, including bills and vouchers for purchase of materials against LCs and also explained cancellation of LCs and refund of money. The assessee further submitted that the A.O. has misinterpreted the document and held that the assessee has opened two types of LCs., even though, the total LCs opened by the assessee in different banks was Rs. 128,85,81,000/- and out of which LCs to the extent of Rs. 36,76,37,000/- were encashed against supply of materials. The remaining number of LCs were cancelled and the amount has been returned to the assessee.
During the appellate proceedings, the Ld. CIT(A) forwarded the additional evidences filed by the assessee to the A.O. for remand report and comments. The A.O. submitted his remand report and commented on additional evidences filed by the 31 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 assessee and their admissibility and further reiterated the observations made during assessment proceedings in respect of LCs and cash transactions.
The Ld. CIT(A), after considering relevant submissions of the assessee and also taking note of the of the seized document found during the course of search, observed that although the assessee claimed that the document found in the course of search is a dumb document, but going by the facts available in the said document, it shows the details of Letter of credit opened in different banks and commission paid on such LCs. Therefore, the arguments of the assessee that it is a dumb document cannot be accepted. The Ld. CIT(A) further noted that the assessee has furnished various details, including date of LC, LC number, name of the beneficiary, amount of LCs, interest and charges on said LCs and also payment against said LCs through proper banking channels. The evidence filed by the assessee clearly shows that, out of the total LCs opened in different banks for Rs. 122,78,29,469/- the appellant has encashed LCs to the tune of Rs. 36,96,63,202/- against purchases. The balance amount of LCs for Rs. 122,78,29,469/- were cancelled due to rejection of materials and the same has been returned to the assessee.
Insofar as the balance amount of Rs. 5,87,27,328/-, the same is receivable by the assessee and shown as loans and advances. Since the assessee has filed relevant details and also reconciled each LCs with reference to payment, there is no case for making an addition of Rs. 12,05,98,000/- on the basis of the 32 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 document found in the course of search. Therefore, the Ld. CIT(A) deleted the addition.
Aggrieved by the said appellate order, the Revenue is now in appeal before us.
The Ld. CIT-DR Ms. U. Mini Chandran submitted that, the Ld. CIT(A) erred in deleting the addition made towards unexplained income without appreciating the issue under dispute that it is regarding source of cash payment made by the assessee for making purchases as reflected in the seized document. The Ld. CIT-DR further submitted that the Ld. CIT(A) erred in granting relief to the assessee on the ground that the assessee has not debited the said amount to the profit and loss account, ignoring the submissions made at paragraph 2.4 of the remand report dated 09-06-2022 that the amount was added towards unexplained payments made for making purchases. Although, the A.O. made out a case that the assessee has made cash payments and the source of said payment is not explained, but the Ld. CIT(A) has granted relief to the assessee on different grounds. Therefore, she submitted that the order of the Ld. CIT(A) should be set aside and the order of A.O. should be upheld.
The learned counsel for the assessee Shri P. Murali Mohan Rao, C.A. on the other hand, supporting the order of the Ld. CIT(A) submitted that, the document found during the course of search is a dumb document and it does not show any details of expenditure incurred or nature of transactions. Further, the assessee has explained the details contained in the excel sheet
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.
We have heard both the parties, perused the material on record and had gone through the orders of the authorities below. During the course of search in the premises of the assessee, an email sent by Shri Mastan Naidu on 10-12-2016 with an excel file containing tabulation of LCs opened from 01-04-2016 to 18- 12-2017 was found and seized. The said excel sheet contains details of name of the bank, L.C value, interest and discount charges, franking charges, commission, amount paid to bank and cash transactions and balance amount. The A.O. on the basis of said document, inferred that the assessee has made cash payment against LCs and the source of said cash payment has not been explained and thus, made additions of Rs. 12,05,98,000/- as unexplained income. The Ld. CIT(A) deleted additions on the ground that the assessee could be able to reconcile the document with reference to LCs and corresponding payments made through bank. The Ld. CIT(A) has recorded a categorical finding that out of the total LCs of Rs. 165,62,18,000/-, the assessee has encashed LCs to the tune of Rs. 36,96,63,202/- against purchase of materials, for which bills supporting the purchase have been furnished. Further, in 34 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 respect of balance LC amounting to Rs. 128,65,54,787/-, the LCs were cancelled on account of rejection of purchases by the assessee company and out of the said amount, Rs. 122,78,29,269/- has been returned to the assessee. The balance amount of Rs. 5,87,27,328/- was receivable by the company and the same has been shown as loans and advances. The Ld. CIT(A) has further recorded a finding that the assessee has not debited the LCs value cancelled on account of rejection of purchases into the profit and loss account. Since the assessee has not debited the rejected purchases in the profit and loss account, the same cannot be disallowed. The Revenue has aggrieved with the findings of the Ld. CIT(A) on the ground that the additions made by the A.O. is on account of unexplained cash payments against purchases, whereas the Ld. CIT(A) has deleted additions on the ground that there is no cash payments.
We have gone through the relevant seized document which is available at page number 10 of the paper book filed by the Revenue. Upon careful consideration of the relevant document, we find that in the said document, there are no details as to the nature of the LCs and the name of the beneficiary. Although name of the bank is mentioned against L.C. value with corresponding interest, discount charges, commission, etc., there are no specific details as to in whose favour L.C. has been opened or the date of the L.C. and the period of L.C. Further, there is no corresponding evidence with regard to what is the purpose of L.C. Furhter, certain details with regard to payment through bank and cash are referred, but there are no details as to whom such payment has been made and the purpose of 35 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 payment. Therefore, in our considered view, the said document cannot be considered as a document which shows certain business transactions with reference to the business of the assessee. Therefore, on this count itself, the additions made by the A.O. cannot be sustained.
Be that as it may, the fact remains that the A.O. had made additions of Rs. 12,05,98,000/- on the basis of the said excel sheet which contains one column for cash and in the said column, against each bank, it was referred to cash for some amount and the total of such amount is of Rs. 12,05,98,000/-. The A.O. treated the said amount of Rs.12,05,98,000/- as crores whereas in the document, there is no reference as to whether it is in lakhs, crores or thousands. Therefore, the additions made by the A.O. on the ground that the assessee has made cash payment of Rs. 12,05,98,000/- against purchases is not backed by any evidences, but purely on suspicion and surmises. Further, the appellant had also explained the said document with reference to regular books of accounts maintained for the year under consideration and reconciled the document with reference to total letter of credits opened during the year, letters of credit encashed against purchases, LCs cancelled during the year, amount received back by the assessee and balance amount receivable as on the end of the financial year. The appellant has also explained accounting treatment given in its books of account with reference to purchases and claimed that only amount encashed against LCs with reference to purchases has been debited into the profit and loss account. The remaining cancelled LCs amount has not been debited into profit and loss
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.
The next issue that came up for our consideration from ground nos.6 and 7 of Revenue appeal is deletion of the addition of Rs. 6,06,76,000/- towards unexplained income. The fact with regard to the impugned dispute is that, during the course of search in the office premises of the assessee, an email sent by Shri B. Sai Baba was found and seized vide Annexure A/RPPL/OFF/07. The email sent by Shri B. Sai Baba was on 20.07.2017 contains an excel sheet which has columns titled as “COMM” “REVD” and “RTGS” amounting to Rs.6,32,52,000/-. Out of the said amount, amount received back by the assessee to the tune of Rs. 6,06,76,000/-. During the course of assessment proceedings, the assessee was asked to explain the details and 37 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 also furnish relevant details. In response, the submitted that the entries pertaining to normal transactions in the ordinary course of business and were duly recorded in the books of account. The assessee further vide letter dated 22.02.2021 has claimed that these amounts were regular purchases made during the course of normal business and submitted the ledger copies of the same. The A.O. after considering the relevant details observed that although assessee claims that these transactions are purchases made in the ordinary course of business and duly recorded in the books of accounts, but failed to furnish the ledger bills/ invoices/ way bills in support of said purchases. Therefore, rejected the arguments of the assessee and made addition of Rs.6,06,76,000/- as unexplained income and brought to tax u/s 115BBE of the Act.
Aggrieved, by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee submitted details of purchases made from various parties along with payments made against purchases with corresponding ledger accounts and claimed that the entries contained in the excel sheet pertains to regular business transactions of the assessee and are duly accounted for in the books of accounts for the relevant assessment year under consideration. During the appellate proceedings, the additional evidences filed by the assessee have been forwarded to the A.O. for the remand report. The A.O. submitted his remand report and made certain observations with regard to the details submitted by the assessee and claimed that the assessee could not explained the transactions with relevant evidence. In his
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.
The Ld. CIT(A), after considering the submissions of the assessee and also taking note of the remand report of the A.O. observed that, as per the documents seized during the course of 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. As per the details furnished by the assessee, these entries were reflected in the ledger accounts, and the narration shows that the amount was paid by way of cheques on various dates. These purchases were made for purchase of cement and steel, and all the payments were made through bank account on various dates. Although, the A.O. mentioned certain discrepancies in the remand report in respect of various ledger accounts, but the assessee has explained the said discrepancy with reference to the total purchases from the parties, corresponding payments made on different dates and also reconciled the amount to the seized materials. Therefore, observed that the RTGS amounts mentioned in the seized documents directly matches with the books of account of the assessee and thus, directed the A.O. to delete the addition of Rs.6,06,76,000/- on account of unexplained income. The relevant findings of the Ld. CIT(A) are as under :
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.
Aggrieved by the order of Ld. CIT(A), the Revenue is in appeal before the Tribunal.
The Ld. CIT-DR Ms. U. Mini Chandran submitted that, Ld. CIT(A) erred in deleting the addition of Rs.6,06,76,000/- made towards unexplained income, even though the assessee could not substantiate its claim by producing bills, vouchers etc. The Ld. CIT(A) further submitted that the Ld. CIT(A) erred in neither dealing with nor examined the implications of the cash entries passed in the seized document as discussed in the assessment order and in the remand report and the same was explained to the assessee. The Ld. CIT-DR further submitted that, the Ld. CIT(A) even failed to take note of the observation of the A.O. in the remand report that the A.O. has made certain comments about the evidences filed by the assessee and therefore, she submitted that the addition made by the A.O. should be upheld.
The learned counsel for the assessee Shri P. Murali Mohan Rao, C.A. on the other hand, supporting the order of Ld. CIT(A), submitted that the assessee has explained the excel sheet contained in the email sent by the employee with reference to books of account to the satisfaction of the Ld. CIT(A), which is evident from the findings given in Para 7.2.1. where the Ld. CIT(A) has discussed payment made against each party towards purchase of materials. The Revenue although challenged the said findings, but could not explain as how the facts and 41 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 findings recorded by the Ld. CIT(A) is incorrect going by the facts available on record. Since the assessee has reconciled the seized documents with reference to the books of account, there is no scope for addition towards unexplained income. The Ld. CIT(A) after considering relevant facts has rightly deleted the addition made by the A.O. Thus, the order of Ld. CIT(A), should be upheld.
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 of Rs.6,06,76,000/-, on the basis of an excel sheet found from the email sent by Shri B. Sai Baba on 20.07.2017 which contains details of “COMM” “REVD” and “RTGS” amounting to Rs.6,32,52,000/-. According to the A.O., the assessee could not explain about the transactions with reference to the supporting bills and vouchers. Therefore, observed that the explanation of the assessee with regard to the transactions at one stage that there are purchase transactions and subsequent stage that partly it is purchase transactions and partly it is unsubstantiated. It was the explanation of the assessee before the A.O. that the details containing excel sheets pertaining to normal transactions of purchase of material from different parties for which necessary bills and vouchers, payment details has been furnished. We find that, the Ld. CIT(A) has recorded categorical finding in Para 7.2. of his order that as per the details furnished by the assessee, the entries contained in excel sheet were reflected in the ledger accounts and the narrations shows that the amount was paid by way of cheques on various dates. Further, these payments were made for the 42 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 purpose of purchase of cement and stell and all payments were made through bank account on various dates. The Ld. CIT(A) also discussed about the remand report and observations of the A.O. with regard to discrepancies in some of the ledger account and held that in case of Tanishq Steels Ltd., the assessee purchased cement and steel worth Rs.56,91,804/- against which payment was made for of Rs.56,90,000/-. The seized document shown two entries amounting to Rs.15 lacs and Rs.20.95 lacs on two dates. Both payments were made by cheque, and the cheque number and dates are matching with the bank account of the assessee. Similarly, in the case of Niradhar Steels Pvt. Ltd, the seized documents show RTGS amount of Rs.90 lacs with corresponding entries for Rs.90 lacs found in the ledger account on 03.03.2017. In the case of Opus Holdings Pvt. Ltd, the entries in the seized document shows RTGS of Rs.83.91 lacs with corresponding entries in the books for Rs.45 lacs on 06.03.2017 and Rs.38,91,000/- on the same date. Likewise, in the case of Matrix Green Power Ltd., there is an entry for Rs.80 lacs in the seized document with corresponding entry for Rs.80 lac in the paid through bank on 17.03.2017, which is part of regular books of account of the assessee. In the case of Jonna Steels, the seized document contained an entry for Rs.52.37 lacs with corresponding payment by way of cheque for Rs.52,36,000/- on 17.03.2017. In the case of Neha Steels, the seized document had the RTGS entry for Rs.11 lacs, the ledger account showed an entry on 06.03.2017 for Rs.13,70,000/-. In the case of Darshna Vinimay Pvt. Ltd., the seized document showed an RTGS entry of Rs.10.48 lacs, against this a payment
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
The assessee has filed a cross-objection in support of the order of the Ld. CIT(A), and the said cross-objection filed by the assessee is time-barred by 871 days. The assessee could not explain the reasons for the delay in filing the cross-objection by furnishing relevant evidence. Since there is a delay of 871 days in the cross-objection filed by the assessee, which was not explained with reasonable cause, and further, the cross- objection filed by the assessee only supports the order of the Ld. CIT(A) without any grounds which can be independently adjudicated, in our considered view, the cross-objection filed by the assessee deserves to be dismissed as infructuous. Thus, we dismiss Cross-Objection filed by the assessee.
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] :
Under identical set of facts, for the assessment year 2019-2020 [ITA.No.518/Hyd/2022], the Assessing Officer determined the total income of the assessee at Rs.47,75,52,353/- by making addition of Rs.3,16,11,553/- and Rs.1,00,00,000/- u/sec.115BBE of the Act vide order dated 16.06.2021 u/sec.143(3) of the Income Tax Act, 1961.
Aggrieved by the assessment order, the assessee preferred appeal before the learned CIT(A). The learned CIT(A) after considering the submissions of the assessee, under identical set of facts has deleted the additions made by the Assessing Officer and allowed the appeal of the assessee.
Aggrieved by the Order of the learned CIT(A), the Revenue is now in appeal before the Tribunal and has raised the following grounds :
“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.
On the facts and in the circumstances of the case, and in law, the Ld. CIT(Appeals) erred in granting relief on the issue of unexplained income of Rs. 3,16,11,553/-, stating that though the dates, number of days and interest amount were mentioned in the seized document there was no evidence to link the hand loans to any particular person or a lender, ignoring the legal position that burden lies on the assessee to produce necessary evidence to deny the transactions.
On the facts and in the circumstances of the case, and in law, the Ld. CIT(Appeals) erred in deleting the addition of Rs 1,00,00,000/- made towards unexplained expenditure which was rightly taxed as per the provisions of Section 115BBE when the assessee took contradictory stands that the seized document is a dumb document while claiming that the said transactions were forming part of the books of accounts.
On the facts and in the circumstances of the case, and in law, the Ld. CIT (Appeals) erred in granting relief on the unexplained expenditure of Rs. 1,00,00,000/- relying on the ledger account submitted by the assessee which were not produced before the AO both during the assessment proceedings as well as remand proceedings.
7. The appellant craves leave to amend or alter any ground or add any other grounds which may be necessary.”
The first issue that came up for our consideration from ground numbers 2 to 4 of the Revenue appeal is the deletion of the addition of Rs.3,16,11,553/- made towards unexplained income. During the course of search in the office premises of the assessee, an email sent by Shri B. Saibaba was found and seized by the department vide Annexure-A/RPPL/Off/07 which contains an excel sheet titled “Hand loans taken and the interest thereon.” The A.O. further noted that in this regard, an LC was opened for an amount of Rs. 3,60,87,350/- to make repayment of Rs. 3,16,11,553/-. During the course of assessment, the assessee was confronted with the findings. The assessee replied
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.
Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee challenged the additions made by the A.O. on the basis of the excel sheet and argued that the said document is a dumb document without there being any information with regard to loans taken by the assessee and consequent repayment of loans. The assessee further submitted that the letter of credit referred to in the said document relates to purchases from A.A.K. Steel Corporation and the payment against the said purchase has been made by opening L.C. with Andhra Bank. The Ld. CIT(A), after considering the relevant submissions of the assessee and also taking note of the relevant seized documents, observed that the above statement does not show the names of the persons from whom the hand loans were supposed to have been taken though the heading of the documents show “Hand loans details”. The narration of the details in the particulars column show from whom hand loans were taken reveals some unidentified names such as Roads, Banaganapally, Kurnool, Kishore – Office, Ravikrishna Legal, Proddutur-Deeksha, MSTC, Tupakulagudem
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.
Aggrieved by the order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal.
The Ld. CIT-DR Ms. U. Mini Chandran, submitted that the Ld. CIT(A) erred in deleting the addition of Rs. 3,16,11,553/- made towards unexplained income, even though the assessee failed to offer any explanation for the said amount, comprising a 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. The Ld. CIT-DR further submitted that the Ld. CIT(A) erred in deleting the addition without appreciating the fact that the assessee could not explain the documents with relevant
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.
The learned counsel for the assessee Shri P. Murali Mohan Rao, C.A., on the other hand, supporting the order of the Ld. CIT(A), submitted that the document relied upon by the Ld. A.O. is a dumb document without there being any details as to what is the nature or purpose of the transaction. Further, the assessee has also explained the details of the L.C. opened with reference to purchases from A.A.K. Steel Corporation with relevant evidences. The Ld. CIT(A), after considering the relevant facts, has rightly held that the document relied upon by the A.O. is unreliable and further, on the basis of said document, additions cannot be made. Therefore, he submitted that there is no error in the order of the Ld. CIT(A) deleting the additions made by the A.O. towards unexplained income, and thus, the order of the Ld. CIT(A) should be upheld.
We have heard both parties, perused the material available on record, and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the A.O. relied upon the excel sheet found in the email sent by Shri B. Saibaba, which has been reproduced by the Ld. CIT(A) in para
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.
We have gone through the relevant excel sheet, which is part of the order of the Ld. CIT(A), and we find that, the said document does not show any details about the name of the lender and also the purpose of the transaction. Although it contains certain irrelevant names like roads, names of places, but, there is no iota of evidence of the persons from whom the assessee had borrowed loans. Further, although it contains certain details with regard to the period and one column relates to interest, in the absence of any details of the persons from whom the loans were borrowed, it cannot be said that the said transactions relate to loans borrowed by the assessee for interest and the assessee has paid the interest. Therefore, in our considered view, the addition made by the A.O. on the basis of non-speaking document, which is a dumb document, cannot be sustained unless the said document is further supported by evidences.
Further, although there is a reference of L.C. opened for Rs. 3,60,87,350/-, and the A.O. opined the said L.C. is for the purpose of payment of “hand loans”, but by going by the evidences filed by the assessee before the Ld. CIT(A) and a categorical observation of the Ld. CIT(A), we find that, the said
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.
The next issue that came up for our consideration from Ground Numbers 5 and 6 of the Revenue appeal is the deletion of the addition of Rs. 1,00,00,000/- made towards unexplained expenditure.
The facts with regard to the impugned dispute are that, as per the digital data seized during the course of search, an email sent by Shri Mastan Naidu on 16.10.2018, containing details of receipts and further utilization, was found. It was further seen that a payment of Rs. 1,00,00,000/- was made to Shri Suresh Chukkapalli. The A.O. called upon the assessee to explain the document with relevant evidences. In response, the assessee stated that the transactions with Shri Suresh Chukkapalli was only a proposal and that the same did not take place. The assessee further submitted that Shri Suresh Chukkapalli was an employee and the amount referred to therein was payment made to Shri Suresh Chukkapalli for onward payment of business
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.
The A.O. after considering the relevant submissions of the assessee observed that, the assessee could not explain the amount recorded in the document with evidences. Although the assessee claims that the said amount pertains to transfer of funds for expenses at sites, but further evidence has not been filed. Therefore, rejected the explanation of the assessee and made an addition of Rs.1,00,00,000/- as unexplained expenditure and brought to tax as per the provisions of Section 115BBE of the Income Tax Act, 1961.
Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee furnished certain evidences and argued that the amount transferred to Shri Suresh Chukkapalli was for expenditure at sites, being salaries and wages of Tupakulagudem site, and a further sum of Rs. 36 lacs was paid for wages at sites. The Ld. CIT(A), after considering the submissions of the assessee and also taking note of the relevant evidences, observed that the assessee had produced the ledger accounts of salaries and wages paid at Tupakulagudem project site and Veligonda project site, wherein amounts of Rs. 64 lacs and Rs. 36 lacs were paid to Shri Suresh Chukkapalli. Further, an amount of Rs. 64 lacs was paid on 18-06-2019 for salaries and wages for the Tupakulagudem project, and further Rs. 36 lacs was paid on 05-01-2019 towards labour charges at the Veligonda project. Since the ledger account reflects payments
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.
Aggrieved by the order of the Ld. CIT(A), the Revenue is now in appeal before the Tribunal.
The Ld. CIT-DR submitted that the Ld. CIT(A) erred in deleting the addition of Rs. 1,00,00,000/- made towards unexplained expenditure, even though the assessee could not file any supporting evidences in support of its claim that the said amount has been given to Shri Suresh Chukkapalli for incurring salaries and wages, and labour charges at the project sites. Therefore, she submitted that the addition made by the A.O. should be upheld.
The Ld. AR for the assessee, on the other hand, supporting the order of the Ld. CIT(A), submitted that the assessee has furnished all details, including the relevant ledger account of expenditure at sites in the books of accounts of the assessee, wherein the payment made to Shri Suresh Chukkapalli was accounted. Further, the assessee has also explained the payment with reference to salaries and wages paid at different sites, including Tupakulagudem and Veligonda project sites. 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 addition made by the A.O. should be deleted.
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.
In the result, the appeal filed by the Revenue is dismissed.
54 ITA.Nos.443, 516, 517 & 518 /Hyd./2022 And C.O.Nos.19, 20 & 21/Hyd./2025 C.O.No.21/Hyd/2025
The assessee has filed a cross-objection in support of the order of the Ld. CIT(A), and the said cross-objection filed by the assessee is time-barred by 871 days. The assessee could not explain the reasons for the delay in filing the cross-objection by furnishing relevant evidence. Since there is a delay of 871 days in the cross-objection filed by the assessee, which was not explained with reasonable cause, and further, the cross- objection filed by the assessee only supports the order of the Ld. CIT(A) without any grounds which can be independently adjudicated, in our considered view, the cross-objection filed by the assessee deserves to be dismissed as infructuous. Thus, we dismiss Cross-Objection filed by the assessee.
To sum up, the appeal filed by the assessee in is dismissed and the appeals of Revenue in to 518/Hyd/2022 and Cross-Objections of assessee in C.O.Nos.19 to 21/Hyd/2025 are dismissed.
Order pronounced in the Open Court on 31st October, 2025.