ADHISHWAR NIVESH P.LTD,NEW DELHI vs. ACIT, CENTRAL CIRCLE-13, NEW DELHI
Income Tax Appellate Tribunal, DELHI BENCH, F: NEW DELHI
Before: SHRI MAHAVIR SINGH & SHRI BRAJESH KUMAR SINGH
PER BRAJESH KUMAR SINGH, AM,
This appeal by the assessee is directed against the order dated 19.11.2018 of the learned Commissioner of Income Tax (Appeals)-XXVI, New Delhi-
[hereinafter referred to as the ‘Ld. CIT(A)’] arising out of the order dated
29.12.2017 passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter
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referred to as ‘the Act’) passed by the ACIT, Central Circle-13, New Delhi,
(hereinafter referred to as the ‘Ld. AO’) pertaining to A.Y. 2015-16. 2. In this case, the above appeal of the assessee was dismissed by the Co- ordinate Bench of the Tribunal vide order dated 09.05.2024 ex parte as the assessee did not appear on the said date of hearing. Thereafter, the said order was recalled by the Tribunal vide order dated 2.07.2025 and the appeal was fixed for hearing and was heard on 25.09.2025. 3. Brief facts of the case: In the instant case, Income Tax Return was e-filed by the assessee on 24/09/2015 vide acknowledgement No. 815317531240915
showing total income of Rs.7,983/-.The case was selected for scrutiny assessment through CASS under the category "Limited Scrutiny" and accordingly notice u/s.143 (2) of the Act was issued on 21/04/2016 and duly served upon the assessee.
The Assessing Officer noted that during the relevant previous year, the assessee claimed to have earned income from Sale of Cotton Knitted Fabrics and sale of shares.
3.1. The AO noted from the assessment order passed u/s 143(3) of the Act in the case of the assessee for the previous assessment year i.e. A.Y. 2014-15, passed by the same office, wherein the AO had concluded that the assessee was a mere name lender and had acted as a conduit for parties / beneficiaries behind the company, and the assessee had not done any actual purchase or sale. According to the AO, these
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facts showed that sundry debtors of Rs. 26,05,460/- was created from fictitious sale made during the A.Y. 2014-15 had no worth and was only a book entry. Thereafter the AO quoted the relevant extract from the said assessment order for AY 2014-15
and asked the assessee vide letter dated 27.11.2017 to explain as to why all the receipts from trade receivable should not be liable to be added to its total income as unexplained. The relevant extract of the said assessment order for AY 2014-15as reproduced by the AO in the present assessment year in the case of the assessee and the letter dated 27.11.2017 of the AO to the assessee are reproduced as under:
(a)
Relevant extract of the Assessment Order in the case of the assessee for A.Y. 2014-15. “On verification of the statement of affairs of the assessee company for the current year as well as earlier assessment year for which debtors are available on record, following facts emerges: -
“The assessee company has hardly any business during the past few years.
Sales and purchases of fabrics and shares were purchased/sold to selective parties keeping huge Sundry debtor in the balance sheet.
Despite having stock of cotton knitted fabrics, no sign of commensurate expenses on account of rent, maintenance etc. is visible.
Despite some sales claimed to have effected during the year, no transportation cost found as debited in the P&L A/c. "
(b)
Relevant extract of the AO’s letter dated 27.11.2017
“2 This may be mentioned that based on immediately preceding years observation, it is found that your claim of purchases, sales as well stock having no genuineness. There is nothing available to hold otherwise for the current assessment year as well. In such a situation, all receipts from trade receivable liable to be added to your total income as unexplained. You are requested to explain your position in this regard."
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2. The assessee submitted its explanation and claimed that the said transactions were genuine and stated that the assessee company traded in shares & securities and cotton knitted fabrics and submitted the sale and purchase bills. The relevant explanation filed by the assessee vide letter dated 05.12.2017 as extracted in the assessment order is reproduced as under: “During the year under consideration the company had carried on Trading on Cotton Knitted Fabrics & Equity Shares and from which the company earned revenue and which is very much evident from the Audited Accounts of the company duly filed before our honour. The details of sales & purchase A/C of shares & Cotton knitted Fabrics alongwith the Sales & Purchase bill are enclosed herewith. From the enclosed details it may be evident that all the information required about the goods so purchased and sold are duly clarified in the bills and proper entries duly been incorporated in the Books of Account maintained by the company. The books of accounts duly been audited by the Auditor and on this basis the annual accounts were drawn and duly audited. Hence, there is nothing is genuine question of addition to the total income does not arise.”
3. However, the AO observed that the assessee had failed to submit any of the evidence in support of its claim that the sales was genuine and from the perusal of the details submitted by the assessee for the current year, the AO observed that same facts emerged as was emerged in the immediate previous year i.e. “From, the perusal of the above submission it can be said that assessee has failed to submit any fresh evidence in support of his claim that sale is genuine. From perusal of the details submitted by the assessee for the current year and placed on record same facts emerged as was emerged in the immediate previous year i,e. i) Sales and purchases of fabrics and shares were purchased/sold to selective parties keeping huge Sundry debtor in the balance sheet, ii) despite having huge stock of cotton knitted fabrics, no sign of commensurate expenses on account of rent, maintenance etc., and iii) despite some sales claimed to have effected during the year, no transportation cost found as debited in the P&L A/c
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And, from the aforesaid facts it is clear that assessee has not carried any business during the current year also.”
4. The AO further noted that the investments had been purchased from sundry debtors and sundry debtors of Rs.26,05,460/- relating to AY 2014-15 had been concluded as bogus during the assessment proceedings for AY 2014-15 and since current year sale was also not genuine on the same set of facts as discussed in the assessment order held that the sundry debtors of Rs. 39,14,350/- relating of current year was also fictitious and as such investment made during the year by the assessee company to the extent of aggregate of sundry debtors of A.Υ. 2014-15 & Α.Υ. 2015- 16 of Rs.65,19,810/- was treated as not genuine and added to the returned income of the assessee. Accordingly, the AO added a sum of Rs. 65,19,810/- which comprised the sundry debtors of Rs. 26,05,460/- relating to assessment year 2014-15 and Rs. 39,14,350/- relating to current assessment year i.e. 2015-16. The relevant discussion by the AO in this regard, is reproduced as under: “Since, investment has been purchased from sundry debtors and sundry debtors of Rs.26,05,460/- relating to A.Y. 2014-15 has been concluded as fictitious during the assessment proceedings of A.Y. 2014-15 and since, current year sale is also not genuine on same set of facts as discussed above, sundry debtors of Rs. 39,14,350/- relating of current year is also fictitious and as such investment made during the year by the assessee company to the extent of aggregate of sundry debtors of A.Υ. 2014-15 & Α.Υ. 2015-16 of Rs.65,19,810/- is hereby treated as not genuine and as such added to the returned income of the assessee.”
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Aggrieved with the said order, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) dismissed the appeal of the assessee and rejected the ground of the assessee that the assessment order passed by the AO and the additions made therein beyond the scope of the ‘limited scrutiny’ by observing as under: “I have considered the facts of the case, the basis of addition made by the AO and the arguments of the AR during assessment as well as appellate proceedings A. This matter has been examined. The AO has put the reasons for picking up the case for scrutiny. The AO has sought all the replies pertaining only to the issues as per criteria for scrutiny selection. This ground is not tenable. This ground is dismissed. It must be understood that in matter involving a corporate entity having engaged in complex transactions, it is but required to raise and seek replies to some queries in order to reach a reasonable and lawful conclusion. Similar issue has been decided in the cases pertaining to the group This ground is therefore, dismissed.
1. The Ld. CIT(A) also dismissed the appeal of the assessee on merits in respect of the addition of Rs. 65,19,810/-, wherein he agreed with the AO, that in view of the peculiar facts of the case, where the basic features of any commercial activity were simply missing and the assessee does not submit any justification of the same then the AO need not go into the other features of the basic accounts, as such all transactions were prima facie sham. The relevant extract of the order of the Ld. CIT(A) is reproduced as under: B. Grounds 2 & 3- a. The AO had concluded while framing assessment for AY 2014-15 that the assessee was not doing any actual purchase or sale and are the mere name lender. The AO sought to follow the same in this period also. The appellant has just stated that -
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"All the purchases and sale were genuine. It was submitted that the sale was out of the opening stock and there was no fresh purchase during the year. Therefore, the entire transaction was genuine b. The A.O. rejected the same as it was found to be a case of collusive transactions because -
the sale and purchase involved only a select set of selected parties,
the expenses did not commensurate with the business and there was no transportation cost despite sales during the year.
c. The AO, accordingly, concluded basis above factors that since Sundry Debtors of A.Y. 2014-15 of Rs. 26,05,460/- has already been found to be fictitious and the current year's sale are also not genuine and therefore the Sundry Debtors for Rs.39,14,350/- of the current year is also not genuine and as such the A.O. has made addition of Rs.65,19,810/- under the head of investments made during the year on account of bogus Sundry Debtors for A.Y. 2014-15 & 2015-16. d. The action of AO is quite agreeable in view of peculiar facts where very basic features of any commercial activity are simply missing and the appellant has no justification for the same. The AO need not go into other features of basic accounts as such all transactions are prima facie sham. The rejection of the accounts is plain and simple implicit and it is clearly writ large on the entire factual matrix built up by the AO. The action of the AO is upheld accordingly.”
Aggrieved with the said order, the assessee is in appeal before us, on the following grounds of appeal: “1. That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to confirm the addition made by the A.O. of Rs.65.19,810/- as unexplained investments on the reason that the Sundry Debtors are fictitious is contrary to the settled principles of law and the addition is arbitrary, excessive and illegal.
That on the facts and in the circumstances of the case the action of the Ld. .CIT(A) to confirm the addition of Rs.65.19.810/- made by the A.O. as unexplained investments by partly treating the bogus Sundry Debtors of A.Y. 2014-15 is against the settled principles of law and the addition is arbitrary, excessive and illegal.
That on the facts and in the circumstances of the case the action of the Ld. CIT(A) to hold that the sales for AY 2014-15 & 2015-16 were not genuine on the basis of expenses debited in the Profit & Loss Account is contrary to the material evidences on record and contrary to the expenses claimed and debited in the ITA No.- 568/Del/2019
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Profit & Loss Account and therefore, the addition confirmed by the Ld. CIT(A) of Rs.65.19.810/- is illegal and bad in law.
That on the facts and in the circumstances of the case the action Ld. CIT(A) to confirm the assessment made by the AO by rejecting the scope of limited scrutiny having being expanded by the AO without prior permission is in violation of the provisions u/s 119 of the Act and the assessments is illegal and bad in law.”
Before us, at the outset, the Ld. AR relied upon the order dated 25.04.2025 of the Co-ordinate Bench of the Tribunal Order in ITA No. 569/Del/2019 for A.Y. 2015-16 in the case of Fabulous Nivesh Pvt. Ltd. vs. ACIT (placed at page no. 67- 71 of the paper book filed by the assessee) and submitted that on similar facts the Tribunal in this case had deleted the addition of Rs.67,39,130/-, which comprised outstanding sundry debtors balance of Rs.29,35,130/- for AY 2014-15 and Rs.37,74,000/- for AY 2015-16 respectively which was held by the Assessing Officer to be fictitious and not genuine on the ground that the sale claimed by the assessee was not genuine as was held by the Assessing Officer in the case of the assessee for the present assessment year. The Ld. AR further, relying upon the details of “other expenses” of the assessee company for the assessment year 2015- 16 placed at page no. 14 of the Paper Book, stated that the assessee had incurred “freight and transportation charges” – Rs. 8,270/- and had also paid rent of Rs. 30,000/- along with other expenses other head totalling Rs. 48,817/-and therefore the observation of the Assessing Officer that no such expenses were incurred by the assessee was not correct. Further, the Ld. AR also drew our attention to page
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no. 36 of the Paper Book, in which the assessee in its letter dated 09.10.2017 to the Assessing Officer had intimated the address of the Office as - 302, Adhishwar
Apartment,34,Firoz Shah Road, New Delhi-110001 and of the Godown -cum-
Office as 46, B Chowringhee Road, Kolkata-700071.Further, the Ld. AR also drew our attention to page no. 43 of the Paper Book, wherein total purchase/sales in equity shares amounting to Rs. 37,05,750/- and Rs 38,03,350/- respectively was reflected and similar details of purchase/sales in respect of cotton fabrics amounting to Rs 77,89,050/- and Rs 39,14,350/-was also reflected on the said page of the paper book. In view of these facts the Ld. AR submitted that the business carried out by the assessee was genuine and the finding of the Assessing Officer that no genuine business was carried out by the assessee was not correct. Further, the Ld. AR also referred to page no. 12 of the Paper Book to show that the trade receivable i.e. the sundry debtors amounted to ‘Nil’ during the year and thus no addition on account of sundry debtors could be made by the Assessing Officer during the present assessment year.
7. The Ld. Sr. DR relied upon the orders of the authorities below.
8. We have heard both the parties and perused the material available on record.
In this case, the AO added a sum of Rs.26,05,460/- towards sundry debtors relating to Assessment Year 2014-15 and a sum of Rs.39,14,350/- for Assessment Year
2015-16 totalling Rs.65,19,810/-on the ground that the same was fictitious and not ITA No.- 568/Del/2019
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genuine as the assessee did not carry out genuine business as detailed earlier in this order. We further notice that on perusal of page no 12 of the Paper Book filed by the assessee, the trade receivable / sundry debtors balance as on 31.03.2015 was ‘Nil’. We agree with the submission of the Ld. AR that on similar facts, as narrated by him and noted in para no 6 of this order, the coordinate Bench of the Tribunal in the case of Fabulous Nivesh Pvt. Ltd. vs. ACIT (supra) deleted similar addition of sundry debtors. The relevant findings of the Tribunal of the said order are reproduced as under:
“5. We have heard both parties and have perused the material available on the record. The assessment order passed in this case has clearly held that the entire business transactions including trading and investments in shares are bogus/non- genuine. Therefore, such finding, being broad, is held falling within the following parameters of limited scrutiny:
i.
Low income in comparison to very high investments.
ii.
Low income in comparison to high loans/advances/investment in shares iii.
Large increase in investment in unlisted equities during the year Therefore, the issue raising scope of limited scrutiny is decided against the assessee and in the favour of the Revenue.
6. The AO, in the assessment order passed in this case, has held that the entire business transactions including trading and investments in shares are bogus/non- genuine. Therefore; in such circumstances, the AO should have taken pains to gather various details of real beneficiaries for passing such information to the AOs of beneficiaries for remedial measure. Once the AO has held the assessee's business as non-genuine, then the accommodation entry, if any, given through the Profit & Loss account and Balance Sheet should have been taxed in the hands of the beneficiaries as per the law. We find merit in the arguments of the Ld. Counsel as the anomalies/contradictions/factual inconsistencies pointed out by him as mentioned above in para 4.2 of this order; prima-facie, are convincing. When the AO had not held the sundry debtors of Rs.29,35,130/- existing as on 31.03.2014 as bogus/fictitious in the scrutiny assessment order of the AY 2014-15 even after questioning the same cannot be held as bogus/fictitious in subsequent order of the relevant year.
The AO has not given specific finding pointing out any bogus transaction in the relevant year with the help of any corroboratory evidence. Further, we find that the AO on one hand has held that the entire business transactions including trading
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and investments in shares are bogus/non-genuine, then no addition on account of purchases and sales treating then real and genuine can be made in the hands of the assessee. We are not able to persuade ourselves that how such contradictions will go together. As far as the addition on account of sundry debtors Rs.29,35,130/- for AY 2014-15 is concerned, we are of the considered view that the same cannot be taxed in the relevant year even if it is fictitious in nature. The current year sale of the shares i.e. Rs.37,74,000/- has not resulted any sundry debtor. Theassessment order does not pin-point say any adverse material regarding the sale of shares.
Further, the Revenue has not brought any material on the record to demonstrate that the trading of shares is non-genuine. Therefore, the addition of Rs.37,74,000/- cannot be sustained. Accordingly, the addition of Rs.37,74,000/- is deleted.
In the result, the appeal of the assessee is partly allowed as above.” (emphasized by us)
1 In this case, as noted above, the facts in the present case of the assessee are similar to the facts of the cited case. Further, the assessee has submitted documents/evidences in support of its claim of carrying out its business in sale of cotton fabrics and sale of shares as narrated in para no. 6 of this order, which was not been contradicted or commented upon either by the AO or by the ld. CIT(A). 8.2Therefore, considering the entire facts as discussed above and by following the above order of the Tribunal, we are satisfied that the addition of Rs.65,19,810/-on account of sundry debtors is not sustainable in this case and we accordingly delete the same. Ground nos. 1 to 3 of the appeal are allowed. 10. Ground no. 4 of the appeal is reproduced once again as under: “4. That on the facts and in the circumstances of the case the action Ld. CIT(A) to confirm the assessment made by the AO by rejecting the scope of limited scrutiny having being expanded by the AO without prior permission is in violation of the provisions u/s 119 of the Act and the assessments is illegal and bad in law.”
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1. In view of the ground no. 1 to 3 of the appeal being allowed, the ground no. 4 of the appeal becomes academic and is left open in this case. 11. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 10th December, 2025. [MAHAVIR SINGH]
[BRAJESH KUMAR SINGH]
JUDICIAL MEMBER
ACCOUNTANT MEMBER
Dated- .12.2025. Pooja/Shekhar