SRINIVASA RAO CHEEDELLA,GUNTUR vs INCOME TAX OFFICER, WARD-1, BAPATLA

Income Tax Appellate Tribunal, Visakhapatnam Bench, Visakhapatnam

For Appellant: CA राजस्व का प्रतततितित्व/, Shri Badicala Yadagiri

PER OMKARESHWAR CHIDARA, A.M : This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax (Appeals) [Ld.CIT(A)], National Faceless Appeal Centre (NFAC), Delhi vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1080910085(1) dated 19.09.2025, arising out of order passed by the Ld.AO u/s 143(3) of the Income Tax

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Act, 1961 (“the Act”), dated 20.03.2024, pertaining to the assessment year 2022-23. 2. In this case, the Ld.AO made an addition of Rs.7.28 crores u/s 69C of the Act, by disallowing 15% of the purchases. The second addition of Rs.40,00,000/- made by the Ld.AO relates to addition u/s 68 of the Act, as the appellant did not file evidences relating to the loans taken during the year under consideration. Aggrieved by the additions made u/s 69C and 68 of the Act, the appellant filed an appeal before the ITAT.

From the assessment order, it is observed that the Ld.AO has stated that the data submitted by the appellant with regard to purchases from the parties was not properly scanned and hence, not readable. It was also mentioned that the party-wise purchase data was not furnished. Out of the purchases of Rs.48.55 crores, the appellant submitted data of Rs.3.59 crores only. In other words, the appellant could not corroborate the purchases claimed to the tune of Rs.45 crores approximately. The Ld.AO had concluded that most of the parties from whom the appellant had purchased the goods were not registered under GST and hence treated the same as unexplained. In the absence of documentary evidence relating to the purchases for which the details of parties, documentary evidences/vouchers were not 3 Srinivasa Rao Cheedella

produced, an adhoc disallowance of 15% of the total purchases was made on estimation basis and the addition was made u/s 69C of the Act. Apart from this, during the year, the Ld.AO found that the appellant has introduced new loans of Rs.40 lakhs from 4 lenders. As the assessee has not submitted the identity of the lenders and the genuineness of the loan transaction was not proved, nor creditworthiness of the lenders was established, the Ld.AO held that the appellant has failed to satisfactorily explain the source of money credited in the books of accounts, therefore, Rs.40,00,000/- was added as per the provisions of section 68 of the Act. Thus, the Ld.AO made addition of Rs.7.28 crores u/s 69C of the Act and Rs.40,00,000/- towards cash credits u/s 68 of the Act, while completing the assessment.

Aggrieved by the addition made by the Ld.AO, an appeal was filed before the Ld.CIT(A), who passed the order u/s 250 of the Act. After obtaining the details from the appellant, the Ld.CIT(A) observed that 77% of the total purchases were made by the appellant in cash, for which no complete details to establish genuineness thereof was filed by him till the date of passing the appeal order. The appellant has stated that an amount of Rs.22.8 crores was paid directly to the farmers, out of the total purchases of Rs.48.55 crores. During the 4 Srinivasa Rao Cheedella

appeal proceedings before the Ld.CIT(A), the appellant has claimed that he was sick and hence the details required by the Ld.AO in his show cause notice could not be furnished. The appellant wanted to submit the details before the Ld.CIT(A), invoking Rule 46A of Income Tax Rules, 1962 and the appellant requested the Ld.CIT(A) to permit him to file additional evidence before the First Appellate Authority. The Ld.CIT(A) refused to entertain new evidences and held that there was no sufficient cause, filing these evidences before the AO during the course of proceedings. The Ld.CIT(A) has held that only under four circumstances, additional evidences could be entertained by the First Appellate Authority, namely, where the AO refused to admit the evidences, where the appellant was prevented by sufficient cause from producing evidences, where the appellant was prevented by sufficient cause from producing before the AO any evidence which is relevant to any ground of appeal or where the AO has made order appealed against without giving sufficient opportunity to the appellant to adduce evidence relevant to any ground of appeal. Since the appellant’s case does not fall in any of the above 4 clauses, the Ld.CIT(A) did not entertain the fresh evidences filed before him. As additional evidences were not entertained, the Ld.CIT(A) confirmed the addition made by the Ld.AO and the appeal of the appellant was accordingly dismissed.

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Aggrieved by the orders of the Ld.AO and the Ld.CIT(A), an appeal was filed before ITAT, stating that the additions made u/s 69C and 68 of the Act were based on presumptions and assumptions and there is no basis for addition of 15% of total purchases. Moreover, the Ld.AO did not bring any cogent material on record to make the additions and the additions made were without proper appreciation of facts and evidences. The Ld.AR of the appellant has further argued that the disallowance of 15% of the purchases is not having any basis and this adhoc addition made by the Ld.AO was confirmed by Ld.CIT(A) without any basis. It was argued by the Ld.AR of the appellant that the Ld.CIT(A) dismissed the appeal solely by not admitting the additional evidences filed under Rule 46A of Income Tax Rules. If only additional evidences were admitted and considered, the assessee’s case would have been duly substantiated and the additions would have been deleted by the First Appellate Authority himself.

The Ld.DR relied on the orders of the lower authorities.

After hearing both sides, the Bench decided to set aside the whole matter to the file of Ld.AO for the following reasons :

(a) From the order of the Ld.AO, it is observed that the details furnished by the appellant were not in a readable

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form. As most of the purchases were made from the farmers and more than Rs.22 crores was paid directly to the farmers by cash, the Ld.AO disbelieved the total purchases and made this adhoc addition of 15%. Neither the Ld.AO nor the Ld.CIT(A) has given cogent reasons for disallowing 15% of total purchases only because, the amount was paid to farmers and those parties did not have GST registration. Under these circumstances, the AO should have obtained the particulars and conducted enquiries on a test check basis and then only addition should have been made, because the purchases were not genuine.

(b) The order of the Ld.CIT(A) in refusing to entertain additional evidences is incorrect, because the appellant had been stating that the books of accounts were audited and transactions were entered in the regular books of accounts. Neither the AO nor the Ld.CIT(A) found any mistakes or fictitious purchases. The Ld.CIT(A) should have entertained the additional evidences and come to a conclusion. Refusal to admit the additional evidences

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before Ld.CIT(A) tantamount to principles of natural justice were not being followed, it was submitted.

It is not the case of either the Ld.AO or the Ld.CIT(A) that the purchases or credits introduced in the year under consideration are fictitious. From the record, it is observed that both the officers below have not conducted any enquiries to come to the conclusion that part of the purchases are fictitious and are not genuine. The Ld.AO and the Ld.CIT(A) could not point out any mistakes in the regular books of accounts maintained nor in the audit report given by the certified accountant. The Ld.CIT(A) is incorrect in not taking the additional evidences, because the appellant claims that he was sick during the assessment proceedings and hence could not furnish all the required evidences. This is the sufficient cause and the Ld.CIT(A) should have entertained additional evidences and adjudicate the issues as per law. Without conducting any enquiries, the Revenue cannot make addition and that is the settled law. In the absence of conducting any enquiries and in the absence of pointing out the defects in the audited books, adhoc additions cannot be made. As there is no basis for the additions made and also because the Ld.CIT(A) refused to 8 Srinivasa Rao Cheedella

entertain the additional evidences, it is a fit case to be remanded to the file of the Ld.AO to conduct necessary enquiries and make addition if any, after giving proper opportunity to the appellant before completing the assessment.

With the above observations, the issue is remitted back to the file of the Ld.AO. The appeal of the assessee is allowed for statistical purpose.

In the result, the appeal of the assessee is allowed for statistical purpose.

Order pronounced in the Open Court on 27th February, 2026. (रवीश सूद) (ओम्कारेश्वर चिदारा) (OMKARESHWAR CHIDARA) (RAVISH SOOD) लेखा सदस्य/ACCOUNTANT MEMBER न्याययक सदस्य/JUDICIAL MEMBER Visakhapatnam dated 27.02.2026. L.Rama/sps

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आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाऩरती/The : Shri Srinivasa Rao Cheedella 17-2-24, Ponnur S.O., Ponnur, Guntur Assessee 2. रधजस्व/ : The Income Tax Officer, Ward-1, Bapatla The Revenue

The Principal Commissioner of Income Tax, Visakhapatnam 4. नवभधगीय प्रनतनिनर्, आयकर अपीलीय अनर्करण, नवशधखधपट्िम / The DR, ITAT, Visakhapatnam 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER LOKIREDDI RAMA cn=LOKIREDDI RAMA c=IN o=INCOME TAX APPELLATE TRIBUNAL ou=INCOME TAX APPELLATE TRIBUNAL 2026-03-06 13:47+05:30 Sr. Private Secretary ITAT, Visakhapatnam

SRINIVASA RAO CHEEDELLA,GUNTUR vs. INCOME TAX OFFICER, WARD-1, BAPATLA