ADHUNIK TECHNOLOGY PVT. LTD,NEW DELHI V. ACIT, CENTRAL CIRCLE-18, NEW DELHI

ITA 8847/DEL/2019

AI Insights

The case involves appeals by M/s Adhunik Technology P. Ltd. against the orders of the Commissioner of Income-tax (Appeals)-31, New Delhi, which confirmed additions made by the ACIT, Central Circle-18, New Delhi under Sections 144 and 271(1)(c) of the Income Tax Act, 1961. The additions were initially made on the grounds that certain creditors were either non-existent or the transactions were not genuine, leading to the conclusion that the amounts were undisclosed income channelized under the disguise of these companies. The Tribunal examined whether the additions under Section 68 were justified, focusing on the nature of the entries (journal entries vs. cash credits) and the burden of proof regarding the genuineness of the creditors.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 777581 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 14-11-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJINDER KAUR
• Assessee Lawyers: K. SAMPATH; V. RAJKUMAR
• Keywords: Unexplained cash credit; Accommodation entries; Bogus
• Section: 144; 271(1)(c); 68; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: F : NEW DELHI BEFORE SHRI ANUBHAV SHARMA, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER ITAs No.8848 & 8847/Del/2019 Assessment Year: 2012-13 M/s Adhunik Technology P. Ltd., (Earlier known as I.P. India Pvt. Ltd.), House No.2162/T-10, 103, 1st Floor, Guru Arjun Nagar, Village Shadi Khampur City, New Delhi – 110 008. PAN: AABCI0760K Vs ACIT, Central Circle-18, New Delhi. (Appellant) (Respondent) Assessee by : Shri K. Sampath, Advocate & Shri V. Rajkumar, Advocate Revenue by : Ms Rajinder Kaur, CIT-DR Date of Hearing : 30.07.2025 Date of Pronouncement : 30.09.2025 ORDER PER ANUBHAV SHARMA, JM: These are appeals preferred by the assessee against the orders dated 09.10.2019 of the Commissioner of Income-tax (Appeals)-31, New Delhi (hereinafter referred to as the ld. First Appellate Authority or ‘the Ld. FAA’ for short) in Appeals No.415/19-20/574/14-15 and 414/19-20/58/17-18 arising out of the appeals before it against the order dated 25.02.2015 and 30.03.2017 passed u/s 144 and 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred Printed from counselvise.com ITAs No.8848 & 8847/Del/2019 2 as ‘the Act’), respectively, by the ACIT, Central Circle-18, New Delhi (hereinafter referred to as the Ld. AO). 2. The assessee’s return of income was taken up for scrutiny and notices were issued to the assessee seeking explanation of unsecured loans for which the assessee had submitted that no unsecured loans were taken during the year under consideration. The ld.CIT(A) observes in para 2.1 as follows:- “2.1. After considering the submission of the assessee, the AO observed that the assessee submitted details of sundry creditors amounting to Rs. 15,37,15,000/- in respect of 8 parties. In order to verify the genuineness, the summons were issued to M/s IKF Green Fuel Ltd and M/s Urja Global Ltd, but the same remained uncomplied with and the Income Tax Inspector also found that these companies were not existing on the given address. Letters issued u/s 133(6) were also returned by the postal authorities with the remarks \"office closed\", \"addressee moved\" etc. Only few companies filed confirmatory letters with bank statements which reflected that before issuing cheques to the assessee company, the identical amount was deposited therein. Accordingly vide questionnaire dated 14.01.2015, the assessee was required to explain the source and nature of transaction in respect of all the entries appearing in bank account exceeding Rs. 10,00,000/-. Since assessee did not furnish any reply AO held that the creditors were either a non existing company or undisclosed income of the assessee was channelized under the disguise of these companies. Accordingly addition of Rs. 15,38,64,403/- was made on account of unexplained cash credits.” 3. The assessee has challenged the addition before the ld.CIT(A), but, failed for which the assessee is in appeal raising the following grounds:- “On the facts and in the circumstances of the case and in law the Ld. CIT (Appeals) erred in confirming the addition of Rs.10,51,15,000/- being the amount of share application money / advance received during the year treating the same as unexplained invoking Section 68 of the Income Tax Act, 1961 (‘the Act’). The above action being erroneous unlawful and untenable it is prayed that the same must be quashed with directions for appropriate relief.” Printed from counselvise.com ITAs No.8848 & 8847/Del/2019 3 4. On hearing both the sides, we find that primarily the case of the assessee is that no cash credit entry is there in the books of the assessee so as to invoke the provisions of section 68 of the Act and there were only journal entries. 4.1 The ld. DR has opposed the same submitting that summons issued to the lenders were not complied with and there was Inspector Report submitting that parties did not exist. It was also submitted that tax authorities have examined the fact that there was cash deposits immediately before the investment. 5. Now what we find is that two facts emerge out of the remand report, which is there on record, that the AO fairly conceded that the addition of Rs. 15,38,64,403/- as made in assessment to the returned income was improper and incorrect and out that the addition should be limited to the credit pertaining to the year of assessment alone which is in a sum of Rs. 10,51,15,000/-. That detail is listed in the table on page 37 of the impugned order in the name of five creditors as under:- S.No. Name of Creditor Credit during the year (Rs.) 1. IKF Technologies Ltd. 6,29,70,000 2. Virtual Global Education Ltd. 35,00,000 3. Adbhut Construction Pvt Ltd. 1,85,000 4. IKF Green Fuel Ltd. 3,74,60,000 5. Utility Agency (P) Ltd. 10,00,000 Total 10,51,15,000 Printed from counselvise.com ITAs No.8848 & 8847/Del/2019 4 6. The second important admission of the AO is the case of assessee that the Assessee-Company had passed a journal entry debiting V & K Softech Ltd. and crediting IKF Technologies Ltd. This is extracted by the Ld. CIT(A) from the remand report of the AO in para 7.2 at page 20 of his order which is verbatim cited as under:- “7.2 In the instant case, the genuineness of transaction undertaken by assessee could not be established. The assessee has failed to prove beyond doubt for what purpose and how this creditor has emerged in its books. The assessee has not purchased any goods or incurred any expenses for this amount and has also not taken any unsecured loans from this creditor. Further, on perusal of copy of ledger account of assessee-company in the books of M/s IKF Technologies Ltd., it has been clearly seen that the amount was credited to one M/s V & K Softech Ltd. (that too through journal entry) and not to the assessee company.” 7. In the context of the credit entry in the name of IKF Technologies Ltd., the Ld. CIT(A) observed as under:- “The AO in his remand report has very clearly stated that IKF Technologies Ltd. in response to notice u/s 133(6) had denied any Banking Transaction, but furnished ledger account showing entry of Rs. 6,29,70,000/- through journal in favour of V & K Softech Ltd. Undisputedly identity and creditworthiness of V & K Softech Ltd. is not proved by the appellant. Proof of filing of return, carrying out of genuine business, Bank statement, Balance sheet etc. have not been furnished either in respect of IKF Technologies Ltd. or V & K Softech Ltd. This company is registered in Kolkata. Under these circumstances, it is clear that the creditor is a shell entity engaged only in the business of providing accommodation entries.” 8. Quite apparently the Ld. CIT(A) has made very general assertions and with regard to issue that a journal entry could not be the basis for making an addition and that too on the ground of its being an accommodation entry u/s 68 of the Act no findings are given. The factual aspect though not disputed that the Printed from counselvise.com ITAs No.8848 & 8847/Del/2019 5 the credit in the account of IKF Technologies Ltd. was a result of a journal entry to the debit of V & K Softech Ltd. Thus to conclude, the involvement of any cash or its equivalent in the journal entry has not been alleged at any stage of the transaction by any Authority at any time. 9. We find substance in the contention of ld. Counsel that an addition u/s 68 of the Act can be made only for an unexplained entry by way of a cash credit. A cash credit is a credit in the account of a creditor in the account-book of an assessee for a loan taken in cash or by cheque. At the cost of repetition it is stated that the credit in this case had to have essentially appeared out of a transaction involving cash or its equivalent. In the subject case the credit is incontrovertibly arising, not out of cash or of its equivalent, but wholly through a journal entry. Both parts of the journal entry i.e. Dr and Cr conjointly appear in the books of the Assessee-Company. The credit in the account of IKF Technologies Ltd. is clearly traceable to a corresponding debit to the account of V & K Softech Ltd. Being so, the credit entry in IKF Technologies Ltd. arises, not out of the exchange of any cash or its equivalent, but merely out of an adjustment entry of a matching nature passed in its books of accounts by the Assessee-Company. The deeming provision invariably involves a credit out of a transaction of cash or its equivalent culminating in a liability for a credit. Absent such credit liability, the basic ingredients of Section 68 of the Act get to be conspicuously rendering the section has inapplicable. Printed from counselvise.com ITAs No.8848 & 8847/Del/2019 6 10. The other major addition is with respect to a sum of Rs. 3,74,60,000/- made u/s. 68 of the Act pertaining to IKF Green Fuel Ltd., as well as other entities alleged credit entries added u/s 68 of the Act, we find from the impugned orders that ld. Tax authorities have examined the issue on the basis that the assessee was asked to explain the details of ‘sundry creditors’ reflected in the balance sheet and in order to verify the genuineness of the sundry creditors, summons were issued to the concerned parties. We find that throughout the impugned orders, the ld. tax authorities have examined the issue in the context of sundry creditors but applied principles of examining a transaction about genuineness of share investment/unsecured loans. The assessee had provided all the relevant documents with regard to the identity of the sundry creditors in the form of registration of corporate entity with ROC, PAN and ITR. Since it is a case of examining the sundry creditors, the scope of examining source of source by casting burden on assesse is not justified. 11. Then it also comes up from the material on record that these parties had opening balance also which stand accepted. This leaves us with ambiguity as to if the ld. tax authorities have at all examined the nature of credit on the basis of books of assesse to question what was the nature of supplies giving rise to sundry creditors. The impugned order show that in a very general manner and quite likely on the basis of certain findings arrived at by the Investigation Wing, the existence of the sundry creditors was disputed and the transactions were doubted. We are of the considered view that since the ld. tax authorities were Printed from counselvise.com ITAs No.8848 & 8847/Del/2019 7 examining the issue of cash credit u/s 68 of the Act and if same were on account of supply of goods or services, and if the AO was doubting the supplies, then, it is doubtful that the case would fall u/s 68 of the Act, without showing that purchase were bogus. Thus, without showing the impugned credit in the books to be cash credits, it is not justified to make an addition u/s 68 of the Act. If the case is only of failure to establish the existence of sundry creditors at the given address then being case of either cessation or remission of the liabilities, the tax authorities could have had more appropriate recourse available u/s 41(a) of the Act. Thus, as a wholesome effect of the aforesaid discussion, we find that the additions made u/s 68 of the Act are not sustainable. Consequently, we sustain the grounds. The appeals are allowed. The impugned additions are deleted. Order pronounced in the open court on 30.09.2025. Sd/- Sd/- (AMITABH SHUKLA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 30th September, 2025. dk Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Printed from counselvise.com "