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Facts
During a survey, the Assessing Officer (AO) found a negative cash balance of Rs. 18,49,318/- and admitted suppressed sales of Rs. 47,91,285/-. The assessee declared the profit from these sales under the PMGKY scheme. The AO also added Rs. 3,71,02,708/- as unexplained unsecured loans.
Held
The CIT(A) deleted the addition on account of cash sales/suppressed sales, stating that the income was already taxed under the PMGKY scheme and should not be taxed twice. The CIT(A) also deleted the addition for unsecured loans after verifying the identity and creditworthiness of the lenders, and noting that the aggregate unsecured loans had reduced. The Tribunal upheld the CIT(A)'s order.
Key Issues
Whether the CIT(A) was justified in deleting the additions made by the AO on account of unaccounted cash sales and unsecured loans, and whether the admission of additional evidence was proper.
Sections Cited
68, 133A, 143(3), 147, 142(1), 139(1), 148, 250(2), 46A(1), 46A(2), 46A(3)
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Before: SHRI DINESH MOHAN SINHA & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the revenue emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, 'the Act’) dated 06.12.2024 by the National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals) [in short, ‘the CIT(A)’] for the assessment year (AY) 2017-18, which in turn arises out of assessment order passed by the Assessing Officer (in short, ‘AO’) u/s 143(3) of the Act on 16.12.2019. 2. Grounds of appeal raised by the revenue are as under: “1. On the facts and circumstances of the case as well as law on the subject, the Ld. CIT(A) has erred in deleting the addition made of Rs.18,49,318/- by the AO on account of unaccounted cash sales within the meaning of section 68 of the Act.
ITA No.105/Srt/2025 A.Y 17-18 Mukesh A Maniya 2. On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition made of Rs.47,91,285/- by the AO on account of suppression of sales within the meaning of section 68 of the Act even though the assessee has failed to prove his contention before the AO along with supporting evidences.
On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made of Rs.27,00,000/- made on account of unsecured loan u/s 68 of the Income tax Act, 1961 when assessee failed to offer any satisfactory explanation about the unsecured loan credited in the books of accounts of the assessee and also not submitted the evidences to prove the rigors of the provisions of section 68 of the Act w.r.t. unsecured loans.
On the facts and circumstances of the case and in law, the Ld. CIT(A) has violated the principles of natural justice while admitting the additional evidences and not providing opportunity of being heard to the AO as per the provisions of section 250(2) of the Income tax Act, 1961 and Rule 46A(3) of the Income tax Rules, 1962 ?
On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in admitting the additional evidences, which were not produced before the AO during the course of the assessment proceedings, without appreciating the fact that the assessee has not satisfied the basic conditions laid down under Rule 46A(1) of the Income tax Rules, 1962.
On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the AO.
It is, therefore, prayed that the order of the Ld. CIT(A) may kindly be set aside and that of the AO be restored. 8. Appellant craves leave to add, alter, amend and/or withdraw any grounds of appeal either before or during the course of hearing of the appeal.” 2.1 The Ld. Sr-DR for the revenue submitted that the total tax effect of Rs.3,41,19,781/- in Form-36 is not correct and the correct tax effect stands at Rs.72,85,670/- only. 3. Brief facts of the case are that the assessee is the proprietor of Goldmoor Hospitality running two restaurants namely, Black Pepper and Black Walnut. For AY 2017-18, the assessee neither filed return of income u/s 139(1) nor in response to
ITA No.105/Srt/2025 A.Y 17-18 Mukesh A Maniya notice u/s 148 of the Act. A Survey u/s 133A of the Act was conducted at the premises of the assessee on 16.03.2017. During such survey, it was found as follows: (i) The cash book showed a peak negative cash balance of Rs.18,49,318/-. In his statement recorded during the survey proceedings, the assessee admitted that this negative cash balance represented unaccounted cash income from parcel food sales; (ii) The assessee also admitted suppression of sales from parcel business for the period December 2016 to February 2017 aggregating to Rs.47,91,285/-. The assessee had also deposited Specified Bank Notes (SBNs) amounting to Rs.51,23,000/- in his ICICI Bank account during demonetisation period. He stated that these deposits were part of the undisclosed cash sales. 4. The assessee agreed that the total sum of the above two findings being Rs.66,40,603/- (Rs.18,49,318/- + Rs.47,91,285/-) was his unaccounted turnover. Thereafter, the assessee computed G.P. on such undisclosed sales of Rs.66,40,603/- at Rs.16,94,000/-, being 25.5% of the turnover, and disclosed such profit under Pradhan Mantri Garib Kalyan Yojana, 2016 scheme on 10.04.2017 for FY 2016-17 (AY 2017-18). He also stated that the deposited cash during demonetization period was part of such undisclosed sales made in cash. Even though such income was declared under the PMGKY Scheme, the assessee had not submitted any regular return of income for AY 2017-18. Therefore, a notice u/s 148 of the Act was issued by the AO on 06.08.2019. However, assessee neither filed return of income in response to notice u/s 148 nor raised any objections against reopening of his case. The case of the assessee was also under scrutiny for
ITA No.105/Srt/2025 A.Y 17-18 Mukesh A Maniya cash deposits during demonetization period, under AIMS Module of ITBA and the e-proceedings for AY 2017-18 had been initiated previously. As two proceedings were underway for the same AY in the case of the assessee, it was proposed to conduct the inquiry in the present case u/s 147 along with the scrutiny u/s 142(1) r.w.s.144 so as to unify the assessment proceedings in the case of the assessee for the A.Y. 2017-18. During the proceedings various statutory notices were issued to the assessee. In response to same, the assessee furnished his reply along with copy of ITR, profit and loss account, capital account and balance sheet for AYs 2016-17 and 2017-18 and copy of PMGKY tax payment challan. After considering the facts, material and information available on records, AO passed the assessment order, making following additions u/s 68 of the Act: (i) negative cash balance of Rs.18,49,318/- as found during the survey (ii) suppressed sales of Rs.47,91,285/- for the period from December, 2016 to February, 2017 and (iii) addition of Rs.3,71,02,708/- towards unexplained unsecured loan. Accordingly, the AO passed the assessment order u/s.144 r.w.s 147 of the Act on 16.12.2019, wherein total income of the assessee was determined at Rs.4,37,43,311/-. 5. Aggrieved by the addition made by AO, assessee preferred appeal before CIT(A). During appellate proceedings, the assessee stated that the finding made during the survey of undisclosed sales was duly taken care of by him by disclosing the profit out of such sales by availing the PMGKY Scheme. Assessee further stated that the GP of 25.5% considered by him against such suppressed sale as his net profit was well within his disclosed GP from year to year. He also stated that the
ITA No.105/Srt/2025 A.Y 17-18 Mukesh A Maniya declaration was taken into account in the capital account as on 31.03.2017 as per the Audit report for the FY 2016-17 dated 07.11.2017. It was also stated that as per the audited account for FY 2016-17, the recorded sale of the assessee other than the disclosure made through PMGKY Scheme was for Rs.2,69,85,055/-. Assessee submitted corresponding audit report for the immediately preceding FY i.e., 2015-16, where sales were disclosed for a sum of Rs.2,00,87,586/-. During the AY 2015-16, the GP was 17.86% and for AY 2016-17, the GP was 32.57% which is a big jump from the preceding year. However, as per the audited accounts, assessee's net profit came down to loss of Rs.6,89,270/-, after considering the administrative and financial expenses. The assessee explained that because of the loss, he had not submitted any return of income for AY 2017-18. 5.1 The CIT(A), after considering the submission of the assessee, observed that the assessee had already considered the suppression of sales as found during the survey and disclosed the profit separately under the PMGKY Scheme. CIT(A) further noticed that the AO did not find any other irregularity in the submitted accounts other than the aforementioned two item founds during the survey. The CIT(A) directed the AO to delete the additions made u/s.68 of Rs.18,19,318/- and of Rs.47,91,285/- (aggregating to Rs.66,40,603/-), since no income can be taxed twice. 6. Regarding addition of Rs.3,71,02,708/- u/s 68 towards unsecured loan, the assessee submitted complete details of the accounts of the loan creditors as on 31.03.2016 and 31.03.2017. On comparing such list, the CIT(A) observed that there
ITA No.105/Srt/2025 A.Y 17-18 Mukesh A Maniya had not been any change in the list of sundry creditors and amounts payable to such creditors as loan between 31.03.2016 and 31.03.2017. The assessee admitted that he had taken only two additional loans for an aggregate sum of Rs.27,00,000/- . Such Rs.27,00.000/- was received from Meenalbhai Bailar for Rs.24,00,000/- and Shri Sunil R. Mehta for Rs.3,00,000/-. The assessee also stated that the aggregate sundry creditors on account of unsecured loan had actually reduced from Rs.5,46,20,487/- as on 31.03.2016 to Rs.3,71,02,708/- as on 31.03.2017. Other than the two fresh loans taken for Rs.24,00,000/- and Rs.3,00,000/-. the rest of the loan either remained as it is as on 31.03.2016 or had been repaid in full. The assessee submitted details of the loan creditors namely, Shri Meenalbhai Ballar and Shri Sunil R. Mehta. On perusal of such details, the identity, genuineness of the loans given or creditworthiness of the lenders were not doubted. The respective copies of balance sheet of the two lenders along with other final accounts and copies of income tax return for AY 2017-18 were duly submitted during the appeal stage. On consideration of the stated documents, the CIT(A) considered that there was no reason to doubt the unsecured loans claimed by the assessee in his balance sheet for 31.03.2017 and, therefore, the CIT(A) directed the AO to delete the addition made on account of unsecured loans for Rs.3,71,02,708/- as unexplained. Therefore, both the issues of additions are decided in favour of the assessee and appeal of the assessee was, therefore, allowed. 7. Aggrieved by the order of CIT(A), revenue filed present appeal before the Tribunal. The Ld. Sr. DR for the revenue submitted that the decision of the Ld.
ITA No.105/Srt/2025 A.Y 17-18 Mukesh A Maniya CIT(A) is not acceptable on merit as the assessee did not provide any explanation or supporting documentary evidence regarding the unaccounted sales, which he had admitted to offering for taxation, during the assessment proceedings. The Ld. Sr. DR further contends that the documents relied upon before the CIT(A) were not placed before the AO in the assessment proceedings despite opportunities given on 01.11.2019 and 15.11.2019 and therefore, the CIT(A) erred in admitting additional evidence. Also, the CIT(A) did not record reasons for admitting evidence as required under Rule 46A(2) and the AO was not afforded a chance to examine the evidence / rebut the assessee’s claim in violation of Rule 46A(3) and principles of natural justice [section 250(2)]. 8. On the other hand, Ld. AR of the assessee submitted a paper book consisting of copy of written submission filed before CIT(A), copy of reply filed before the AO in response to show cause notice, copy of show cause notices issued by the AO and copy of notices u/s 142(1) and u/s 148 of the Act, relevant portion of audited financial statements of the assessee, ITR acknowledgement along with computation of income, ledger account, ITR acknowledgement and computation of income and balance sheet of Minalbhai Vajubhai Balar and Sunil R. Mehta, copy of declaration made u/s PMGKY along with copy of tax challan. The Ld. AR relied upon the order of the CIT(A) and requested to uphold the order of CIT(A), in the interest of justice. 9. We have heard both the parties and perused the materials available on record. In ground Nos. 1 and 2, the revenue has contested deletion of additions of
ITA No.105/Srt/2025 A.Y 17-18 Mukesh A Maniya Rs.18,49,318/- and Rs.47,91,285/- towards unaccounted cash sales suppression of sales u/s 68 of the Act. It is a fundamental principle of taxation that the same income should not be taxed twice. Where a taxpayer discloses income and pays tax and that disclosure covers the same quantum of income that the AO proposes to levy by way of addition, the AO cannot re-characterise and tax the same quantum again. Once an assessee makes a valid declaration under PMGKY and pays the specified tax under the scheme, the declared amount is the assessee’s income in respect of which tax has been discharged as per the scheme. The AO’s addition is, therefore, not correct insofar as it adds amounts which have already been disclosed and offered for taxation by the assessee under the PMGKY scheme. In view of the above reason, we do not find any infirmity in the order of CIT(A), which we confirm. Accordingly, both ground Nos. 1 and 2 are dismissed. 10. Ground No.3 pertains to deletion of addition of Rs.27,00,000/- on account of unsecured loans u/s 68 of the Act. The revenue has challenged both the merit of deletion as well as admission of additional evidence by CIT(A). In the present case, CIT(A) has examined the audited financial statements of the assessee for AYs 2017–18 and 2016–17, the ledger account of loan creditors and found that the aggregate of sundry creditors (loans) had in fact decreased from Rs.5.46 Cr. as on 31.03.2016 to Rs.3.71 Cr. as on 31.03.2017 indicating that there were not much unexplained receipts during the year. He noted that only two loans aggregating to Rs.27,00,000/- were fresh loans. The assessee produced copies of balance sheet and ITRs of the two lenders and ledger entries which, on appraisal, satisfied the
ITA No.105/Srt/2025 A.Y 17-18 Mukesh A Maniya CIT(A) as to identity and creditworthiness of the two lenders and for the balance of loan amounts, CIT(A) accepted that they pertained to old loans already appearing in preceding year’s balance sheet. Accordingly, the CIT(A) deleted the entire unsecured loan comprising of the loan of earlier years as well as the fresh loan. As far as the loan of the earlier year of Rs.3,44,02,708/- is concerned, the revenue has not contested the addition. Regarding the fresh loan of Rs.27,00,000/-, the revenue has not brought any positive material that would discredit the lenders’ identity or creditworthiness. Hence, we uphold the deletion of unsecured loan by the CIT(A). This ground is accordingly, dismissed. 10.1 The revenue has also submitted that the CIT(A) admitted additional evidences without providing opportunity to rebut the same as per Rule-46A(3) and section 250(2) of the Act. The AO had given opportunities to the assessee for providing details on 01.11.2019 and 15.11.2019 but the assessee did not produce specific documentary evidence in support of the loans. It is, however, a matter of record that the assessee produced detailed loan particulars, audited accounts, copies of PMGKY declaration and tax challan, ledger entries and copies of lenders’ balance sheets and ITRs during appellate proceedings, which were considered by the CIT(A). It is settled law that admission of additional evidence at appellate stage is permitted provided the appellate autority is satisfied (i) as to the genuineness and relevance of the evidence (ii) that the evidence could not have been produced despite best efforts before the AO or that there is sufficient explanation for not producing earlier and (iii) admission of such evidence does not occasion prejudice
ITA No.105/Srt/2025 A.Y 17-18 Mukesh A Maniya to the Revenue. In the present case the CIT(A) applied his mind to the evidence produced and recorded satisfaction on merits. The CIT(A) found, on comparing balance sheets of consecutive years, that majority of the loans were old loans and only Rs.27,00,000/- were fresh. The CIT(A), therefore, concluded that there was no reason to doubt the loans reflected in balance sheet. Hence, he has given substantive reasons in the appellate order for admitting and relying upon the evidence and for deleting the addition. Where the appellate authority furnishes clear reasons and records the material on the basis of which evidence is admitted, the purpose of Rule 46A(2) i.e., recording reasons, is satisfied if the order discloses the basis for admission and contains the necessary findings. Besides, the revenue has not demonstrated any real and substantial prejudice caused by admission of documents at appellate stage. Absence of demonstrated prejudice is material in deciding whether an appellate authority’s admission of evidence should be set aside on procedural grounds. Be that as it may, even if a technical non-compliance with Rule 46A had occurred, the test is whether the non-compliance occasioned substantial prejudice to the revenue. The revenue has not pointed to any material which could not be produced before the CIT(A) or shown how the AO would have been prejudiced had the documents been placed earlier. On the contrary, the audited accounts, continuity of loan figures, ledger entries, copies of lenders’ accounts and ITRs points to bona fide loans and old outstanding balances. The balance sheet of earlier year is already in the record of AO. In such a factual backdrop, there is no indication that the AO would have been able to dislodge the
ITA No.105/Srt/2025 A.Y 17-18 Mukesh A Maniya assessee’s case even if given an additional opportunity. Thus, any procedural infirmity is not of such a nature as to vitiate the substantive findings. In the above circumstances, we are of the view that the CIT(A) was justified in deleting the addition of Rs.27,00,000/- and that the deletion does not suffer from any infirmity which would call for interference by this Tribunal. We therefore dismiss revenue’s challenge on this ground as well. 12. In the result, appeal of revenue is dismissed. Order pronounced in accordance with Rule 34 of ITAT Rules, 1963 on 03/11/2025 in the open court. Sd/- Sd/- (DINESH MOHAN SINHA) (BIJAYANANDA PRUSETH) �याियक सद�य/JUDICIAL MEMBER लेखा सद�य/ ACCOUNTANT MEMBER सूरत /Surat �दनांक/ Date: 03/11/2025 Dkp Outsourcing Sr.P.S* आदेश क� �ितिलिप अ�ेिषत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant ��यथ�/ The Respondent आयकर आयु�/ CIT आयकर आयु� (अपील)/ The CIT(A) िवभागीय �ितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT गाड� फाईल/ Guard File By order/आदेश से, // True Copy // सहायक पंजीकार आयकर अपील�य अ�धकरण, सूरत