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Facts
The assessee, a partnership firm dealing in liquor, declared income of INR 1,17,490/- for AY 2020-21. The AO made additions for cash received from a partner (INR 30 Lakhs) and for purchases treated as bogus (INR 1,16,12,999/-), and tax paid to the Excise Department (INR 56,95,000/-). The CIT(A) partly allowed the appeal, directing deletion of these additions after verification.
Held
The Tribunal held that the Ld. CIT(A) had correctly directed the AO to verify the transactions. Following the AO's subsequent verification and deletion of the additions, the Tribunal found no error in the CIT(A)'s order and dismissed the Revenue's appeal.
Key Issues
Whether the additions made by the AO for cash received from a partner and for alleged bogus purchases were justified, and if the deletion of these additions by the CIT(A) after verification was correct.
Sections Cited
143(3), 144B, 250, 133(6), 206C, 154
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI “G” BENCH: NEW DELHI
Before: SHRI ANUBHAV SHARMA & SHRI MANISH AGARWAL
ORDER
PER MANISH AGARWAL, AM :
The captioned appeal is filed by Revenue and the Cross- objection is by the assessee against the order dated 12.03.2024 passed by Ld. Commissioner of Income Tax (A), National Faceless C.O-48/Del/2025 Appeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No. NFAC/2019-20/10178323 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 13.09.2022 passed u/s 143(3) r.w.s. 144B of the Act pertaining to Assessment Year 2020-21.
Brief facts of the case are that assessee is a partnership firm, filed its return of income on 12.01.2021, declaring income of INR 1,17,490/-. The assessee is engaged in the business of liquor trading and case of the assessee was selected for scrutiny under CASS. During the course of assessment proceedings, various notices were issued for filing the details and assessee had filed part details on few occasions. After considering the details filed by assessee, AO observed that assessee firm has received cash from one Shri Rajnish Panwar on three occasions, totaling to INR 30 Lakhs. The assessee was asked to explain the creditworthiness of Shri Rajnish Pawar, for which it was stated by the assessee that he is regularly assessed to tax and is one of the partners of the assessee’s firm and his ITR alongwith computation of income were filed before the AO. The AO observed that Shri Rajnish Panwar has declared less income and therefore hold the receipt of INR 30 Lakhs as unexplained and made the addition of the same. AO further observed that assessee has made payments to two parties namely, Shivin Liquor LLP of INR 3,52,323/- and Sudhir Sharma of INR 1,12,60,676/- and it is claimed that assessee had purchased the goods from these two parties. During the course of assessment C.O-48/Del/2025 proceedings, assessee filed the details of both the parties and it was claimed that most of the payments were made to these parties through banking channel and since both are the wholesalers and authorized by the State Aabkari Department to sell the liquor therefore, purchases made from these two parties are genuine. However, the AO treated the purchases of INR 1,16,12,999/- made from these two parties as bogus for the reason that both the parties have not complied with the notices issued u/s 133(6) of the Act. AO has also made the addition of INR 56,95,000/- which was the amount of tax paid to State Excise Department by holding the same as unexplained.
Aggrieved by the said order, assessee preferred appeal before Ld.CIT(A) who vide order dated 12.03.2024, has partly allowed the appeal of the assessee wherein the addition of INR 30 Lakhs was directed to be deleted after verification of claim regarding source in the hands of Shri Rajnish Panwar and addition made towards purchase of INR 1,16,12,999/- was directed to be deleted after verification of the same of from 26AS statement and delete the addition of INR 56,95,000/- made towards the payment of tax made to Excise department.
Aggrieved by the order of Ld.CIT(A), Revenue is in appeal before the Tribunal by taking following grounds of appeal:-
1. “On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 30,00,000/- made by Page | 3 C.O-48/Del/2025 the AO ignoring the fact that neither the creditworthiness of the purported lender i.e Shri Rajneesh Panwar was proved by the assessee nor the genuineness of these transactions were proved by the assessee.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in law in deleting the addition of Rs. 1,16,12,999/- made by the AO ignoring the fact that neither confirmations regarding purchases were received from parties which were called u/s 133(6) of the Act nor the assessee has filed any VAT/GST return.
3. That, the appellant craves leave to add or amend any other more ground of appeal as stated above as and when needs for doing so may arise.”
5. The assessee has also filed Cross-objection wherein assessee supported the order of Ld.CIT(A).
Ground of appeal No.1 raised by the Revenue is with respect 6. to the deletion of the addition of INR 30 Lakhs made towards the cash receipt of one of the Partner, Shri Rajnish Pawar.
7. Before us, Ld.Sr.DR for the Revenue vehemently supported the order of the AO and submits that assessee has failed to provide the bank statement of Shri Rajnish Pawar and income declared of Shri Rajnish Pawar was INR 14,57,180/- which is very low as compared to the amount of loan of INR 30 Lakhs advance to the assessee. It is further submitted by Ld. Sr. DR that amounts were deposited at three occasions and it is first year of business of assessee therefore, creditworthiness of Shri Rajnish Pawar is not established. Accordingly, he prayed for the confirmation of the addition made by the AO.
C.O-48/Del/2025 8. On the other hand, Ld.AR for the assessee vehemently supported the order of Ld.CIT(A) and submits that Ld.CIT(A) has directed the AO to verify the bank statements of Firm M/s. Atma Ram Pawar & Co. from where the payment was withdrawn by Shri Rajnish Panwar and deposited with the assessee firm. He further submits that AO had verified the bank statements and deleted the said addition in terms of the order passed u/s 250/154 of the Act dated 04.04.2024 therefore, there is no occasion with the Revenue to challenge this addition before the Tribunal.
Heard the contentions of both the parties and perused the material available on record. At the outset, from the perusal of the order passed u/s 250/154 of the Act dated 04.04.2024 incompliance to the directions given by Ld.CIT(A), AO in para 2.1 of the order, has categorically observed that bank statement was examined and transactions claimed by the assessee are reflected therefore, the addition is deleted. The relevant observations in para 2.1 is reproduced as under:-
2.1. “Addition of Rs.30,00,000/- regarding the capital introduction from the partner:-The AO held that the appellant though filed copy of copy of ITR and computation of Mr. Rajneesh Panwar. As the appellant failed to provide bank account statement, the AO disallowed the same as unexplained. On the other hand the appellant contended that the amount of Rs.30,00,000/- was capital contribution from the partner Mr. Rajneesh Panwar. During the course of appeal proceedings, the appellant filed copies of three bank account statements. On verification of Punjab National Bank statement noticed that an amount of Rs.17,00,000/- was transferred to M/s. Atma Ram Panwar & Co on 03.04.2019 of Allahabad bank, Shamli. With regard to Bank of Baroda, Dehradun statement, this account is C.O-48/Del/2025 in the name of M/s. Data Ram & Sons, Dehradun from which an amount of Rs.8 lakhs was transferred to M/s.Atma Ram Panwar & Co on 04.04.2019. On perusal of ICICI Bank account, this account also pertains to M/s. Data Ram & Sons, there is a transfer of Rs.5,00,000/- to the account of M/s. Atma Ram Panwar & Co on 04.06.2019. The appellant also produced copy of bank statement of M/s. Atma Ram Panwar & Co, which shows the credit of above amounts. As the amount of Rs.30 lakhs has been received from the banks, the genuineness of the credit has been proved. However, the AO directed to verify the same from the bank account statements and delete the addition so made. The bank statements have been examined and these transactions are reflecting. Hence, the addition is deleted.”
Since the issue has already been examined and accepted by the AO in set aside proceedings where AO has deleted the addition after verification from bank account therefore, there remained no issue to be challenged by the Revenue before us. Accordingly, Ground of appeal No.1 raised by the Revenue is dismissed.
Ground of appeal No.2 raised by the Revenue wherein Revenue has challenged the deletion of addition of INR 1,16,12,999/ by Ld.CIT(A).
12. After hearing both the parties, we find that Ld.CIT(A) has directed the AO to verify from Form No.26AS to ascertain whether assessee had made purchases from these parties and whether necessary TCS was made or not? The AO in set aside proceedings vide order dated 04.04.2024 passed u/s 250/154 of the Act, made the verification of this fact and after being satisfied with the 2.2 “Addition of Rs.1,16,12,999/- treating the purchases as bogus:- The appellant in his submissions before the AO explained the cash deposited in bank account amounting to Rs.3,89,66,000/-, which has been brought out in the assessment order by the AO. Out of Rs.3,89,66,000/-, an amount of Rs.2,73,53,001 was accepted by the Assessing Officer and balance amount of Rs.1,16,12,999/- was not accepted. For the balance amount of Rs.1,16,12,999/-, the appellant explained that this amount pertains to the purchases made with M/s. Shivin Liquor LLP for an amount of Rs.3,52,328/- and from Mr. Sudhir Sharma purchases made for Rs.1,12,60,676/-. The appellant during the course of appeal proceedings submitted that the above two entities are wholesalers and have been authorized by Aabkari Department to sell the goods on wholesale basis for which license is allotted for one year and the same can be verified from Form No.26AS which was filed with the AO. It is seen from the assessment order that the issued notice u/s.133(6) of the Act to the above two entities for confirmation of purchases made by the appellant. No reply was received from the above two entities with regard to purchases made by the appellant. The appellant in the submissions submitted that it had made purchases from government approved vendors and the vendors duly collected TCS @ 1% under section 206C on entire purchases which was reflected in 26AS of the appellant. The appellant further furnished full details of M/s. Shivin Liquor LLP and Shri Sudhir Sharma, viz PAN, contact number, mail id and full address. It can be stated that the appellant has submitted necessary documents in support of the claim, the AO is directed to verify Form 26AS and delete the addition so made. The AO is also directed to verify the cash purchases, if any, in excess of Rs.20,000/-, should be disallowed to that extent as per the Act. The 26AS of the assessee have been examined and it is found that the details of above parties are reflecting in 26AS. Further, the ledger accounts of the parties are examined and it is noted that no cash payment of more than Rs.10,000/- has been made. Hence, the addition is deleted.”
In view of the above facts, we find no error in the order of Ld.CIT(A) more particularly, when after making verification as per Page | 7 C.O-48/Del/2025 the directions given by Ld. CIT(A), AO himself has deleted both the additions. Thus the grounds taken by the revenue has no legs to stand. Therefore, ground of appeal No.2 taken by the Revenue is dismissed.
Since the C.O. filed by the assessee is in support of the grounds of appeal raised by the Revenue wherein appeal of the Revenue is dismissed, the Cross-objections filed by the assessee is also dismissed.
ITA 15. In the result, appeal of the Revenue in No.1932/Del/2024 and cross-objection by the assessee in C.O. No.48/Del/2025 for Assessment Year 2020-21, both are dismissed.
Order pronounced in the open Court on 12.09.2025.