ARBIND RAY,KOLKATA V. D.C.I.T., CIRCLE - 40, KOLKATA

ITA 2321/KOL/2025

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The case involves Arbind Ray, who appealed against the order of the National Faceless Appeal Centre, Delhi, which confirmed the additions made by the AO for the Assessment Year 2016-17. The AO had added ₹1,74,43,994 as unexplained expenditure under section 69C and ₹6,16,368 as unexplained cash credit under section 68 of the Income Tax Act. The Tribunal found that the AO and the CIT(A) had misconstrued the entries in the assessee's books, which led to these additions. The Tribunal noted that the assessee had recorded transactions in a manner that linked creditors/expenses payable to specific debtors for administrative convenience, which was not correctly understood by the authorities.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840952 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 14-10-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D HEERAJ
• Assessee Lawyers: ANUP SINHA
• Keywords: Set aside; Unexplained cash credit; Unexplained expenditure
• Section: 143(3); 68; 133(6); 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No. 2321/KOL/2025 (Assessment Year: 2016-17) Arbind Ray 1, Arbinda Pally, Jinjira Bazar, Brace Bridge, S.O. Kolkata, Kolkata-700007, West Bengal Vs. DCIT, Circle-40 3, Govt. Place (West) Kolkata-700001, West Bengal (Appellant) (Respondent) PAN No. AQIPR9775R Assessee by : Shri Anup Sinha, AR Revenue by : Shri Dheeraj, DR Date of hearing: 09.02.2026 Date of pronouncement: 26.02.2026 O R D E R Per Rajesh Kumar, AM: 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. 2. 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. 3. 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 Printed from counselvise.com Page | 2 ITA No. 2321/KOL/2025 Arbind Ray; A.Y. 2016-17 Selection (CASS) under limited scrutiny and accordingly statutory notices along with questionnaire were issued and served upon the assessee. In response to the said notices, the assessee filed all the details before the ld. AO. The assessee is engaged in job of contract services. The ld. AO on the basis of examination of evidences such as audited balance sheet, books of accounts noted that the assessee has closing balance of sundry creditors of ₹5,47,73,250/-, whereas closing balance of sundry creditors as per ITR was ₹5,82,39,205/-. Accordingly, the notices u/s 133(6) of the Act were issued to some of the sundry creditors on test check basis and responses received from the sundry creditors were tabulated at page no.2 of the assessment order. The ld. AO noted that as per the closing balance as per assessee vis a vis closing balance as per sundry creditors , there was a difference of ₹1,80,57,362/-. The ld. AO also noted that in case of ASG Wages payable and Unique Staff N Supervisor payable, the notices were returned unserved. Consequently, the ld. AO issued the show cause notice to the assessee as to why the said different should not be added to the income of the assessee, which was replied by the assessee. According to the ld. AO, the assessee did not reply to the said notices and the ld. AO categorized the differences in two categories; (i) Where the creditors claim lower closing balance than the assessee and; (ii) Where the creditors claim the higher closing balance than the assessee which were tabulated at page no.4 and 5 respectively as table A and table B. As per table A the difference worked out to ₹1,74,40,994/- (Creditors claiming lower than the assessee) and second ₹6,16,368/- (creditors claiming more than the assessee). The ld. AO added the amount of ₹1,74,40,994/- as undisclosed expenditure u/s 69C of the Act and ₹6,16,368/- as undisclosed income u/s 68 of the Act to the Printed from counselvise.com Page | 3 ITA No. 2321/KOL/2025 Arbind Ray; A.Y. 2016-17 income of the assessee in the assessment framed u/s 143(3) dated 20.11.2018 . 4. In the appellate proceedings, the ld. CIT (A) confirmed the order of the ld. AO by simply upholding the same. 5. 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:- 6. 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 Printed from counselvise.com Page | 4 ITA No. 2321/KOL/2025 Arbind Ray; A.Y. 2016-17 debtors of the appellant such as Crescent Export Syndicate, M/s. D2 International, M/s. Eco Jute Pvt Ltd, M/s. Grace Craft Pvt Ltd. As M/s ASG Leather Pvt Ltd and M/s Unique International Pvt Ltd did not respond to the respective notices issued by Ld. Assessing Officer. The Ld. AO considered the entire balances attributable to 'ASG Wages Payable' and 'Unique Staff and Supervisor Payable in the books of the appellant as differences totalling to Rs.1,10,37,495/- (=Rs. 92,59,657/- Rs. 17,77,838/-) and finally computed the total difference of ₹ 1,80,57,362/- ( Rs.1,10,37,495/- Rs. 70,19,867/-). 7. 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.” 8. 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. 9. 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 Printed from counselvise.com Page | 5 ITA No. 2321/KOL/2025 Arbind Ray; A.Y. 2016-17 Section 69C of the Act is not applicable .Similarly the AO invoked the provisions of section 68 of the Act to the to the outstanding liabilities in the form of wages payable which is again wrong and the provisions of section 68 of the Act can not be invoked to such payables. The section 68 can be invoked where the assessee has received money during the year which are credited in the books of accounts. Therefore the ld. CIT(A) has also grossly failed to appreciate the facts correctly as well and invoking the section 68 and 69C of the Act to the instant facts. Consequently , we are inclined to set aside the order of ld. CIT (A) and direct the ld. AO to delete the additions. 10. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 26.02.2026. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 26.02.2026 Sudip Sarkar, Sr.PS Printed from counselvise.com Page | 6 ITA No. 2321/KOL/2025 Arbind Ray; A.Y. 2016-17 Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "