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Facts
The assessee filed its return of income and the case was selected for scrutiny. The Assessing Officer (AO) made additions of ₹1,74,40,994/- as unexplained expenditure under section 69C and ₹6,16,368/- as unexplained cash credit under section 68 of the Act. The CIT(A) confirmed the AO's order.
Held
The Tribunal found that the authorities below had factually misunderstood the transactions. The assessee recorded job work transactions by treating sundry creditors as debtors for administrative convenience. The additions made by the AO under sections 69C and 68 were found to be misapplied as section 69C is for unexplained expenditure and section 68 is for unexplained cash credits, neither of which applied to outstanding wages payable.
Key Issues
Whether the additions made by the AO under sections 69C and 68 of the Income Tax Act, 1961, were justified based on the facts and circumstances of the case.
Sections Cited
69C, 68, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 14.08.2025 for the AY 2016-17.
The issue raised in ground no.1 by the assessee is against the order of ld. CIT (A) confirming the action of the ld. AO in making the additions of ₹1,74,43,994/- as made by the ld. AO as unexplained expenditure u/s 69C of the Act and ₹6,16,368/- as unexplained cash credit u/s 68 of the Act. The remaining grounds are in support of ground no.1 only.
The facts in brief are that the assessee filed the return of income on 12.09.2016, declaring total income at ₹38,71,410/-. The case of the assessee was selected for scrutiny through Computer Assisted Scrutiny
In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO by simply upholding the same.
After hearing the rival contentions and perusing the materials available on record, we find that the assessee has been recording the transactions pertaining to Job Works executed by the assessee in respect of various customers in format where the sundry debtors (recipient of job work) are recorded in the books of account and the creditors/ expensive payable pertaining to the said job works of n debtor were shown by using name of the sundry debtors for administrative convenience. For example, in respect of the sundry debtors namely M/s ASG Leather Pvt. Ltd, M/s Crescent Export Syndicate, M/s D2 international, M/s Eco Jute Pvt. Ltd, M/s Grace Craft Pvt. Ltd. and M/s Unique International Pvt. Ltd., the corresponding the creditors/expenses payable were described as ASG Wages payable ( wages payable by the assessee to the laborers deployed by the assessee at customer named M/s ASG Leather Private Limited) and ‘Crescent staff Payable’ ( wages payable to the laborers as deployed by the assessee at M/s Crescent Exports Syndicate). However, these were misconstrued by both the authorities below:-
We note that the Ld. AO in the order under section 143(3) of the Act, made an adjustment of Rs. 70,19,867/- (Rs. 5,81,111/-+Rs. 25,06,717/-+Rs. 38,96,782/-+Rs. 35,257/-) towards differences arising from the comparison between balances attributable to "Crescent Staff Payable', 'D2 Staff Payable", "Eco Jute Staff Payable' and 'Grace Craft Staff Payable in the books of the appellant and the balances lying in the name of appellant in the books of account of the
We further note that the total adjustment of Rs. 1,80,57,362/-out of which a sum of Rs. 1,74,40,994/- ('ASG Wages Payable', 'D2 Staff Payable', 'Eco Jute Staff Payable and 'Unique Staff and Supervisor Payable') was made under section 69C of the Act and ₹6,16,368/- (‘Crescent Staff Payable and ‘Grace Craft Staff Payable’) was made under section 68 of the Act.”
Therefore, we find merit in the contention of the assessee that all the facts were factually misunderstood by the authorities below and there is no difference in the books of account as observed by the authorities below.
Moreover, the ld. AO has invoked the provisions of Section 69C of the Act for making the addition of ₹1,74,40,994/- as unexplained expenditure while the said provisions are applicable to a case where the assessee has incurred expenditure during any financial year and he offers no explanation about the source of such expenditure or part thereto or explanation, if any, offered by him is not in the opinion of the ld. AO satisfactory, then the amount covered by the said expenditure or part thereof, as the case may be, deemed to be income of the assessee for such financial year. Thus, in the present case, the
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 26.02.2026.