BHAGWATI TRADING CO.,MEHSANA V. THE ITO, WARD-1, PATAN

ITA 2115/AHD/2025

AI Insights

The case involves Bhagwati Trading Co., which appealed against the order of the CIT(A) enhancing their income by Rs.11,05,019 for alleged violations under section 40A(3) of the Income Tax Act, 1961, concerning cash payments. Initially, the Assessing Officer (AO) did not make any addition regarding these cash payments after the assessee provided satisfactory explanations. However, the CIT(A) reversed this decision, leading to the current appeal. The Tribunal found that the CIT(A) exceeded her authority by re-examining an issue already decided by the AO in favor of the assessee.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839995 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2018-2019
• Appeal Filed On: 10-11-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURESH CHAND MEENA
• Assessee Lawyers: RUSHIN PATEL
• Keywords: Unexplained cash credit
• Section: 40A(3)

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ ‘एस.एम.सी’,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD \u001aी संजय गग , \u0011ाियक सद एवं अ!पूणा गु$ा, लेखा सद क े सम(। ] Before Shri Sanjay Garg, Judicial Member And Annapurna Gupta, Accountant Member आयकर अपील सं /ITA No.2115/Ahd/2025 िनधा \u000fरण वष\u000f /Assessment Year :2018-19 Bhagwati Trading Co. 38, Market Yard (Gunj Bazar) Visanagar Mehsana – 384 315 (Gujarat) बनाम/ v/s. The ITO Ward-1 Patan – 384 265 \u0013थायी लेखा सं./PAN: AABFB 5914 D (अपीलाथ+/ Appellant) (,- यथ+/ Respondent) Assessee by : Shri Rushin Patel, AR Revenue by : Shri Suresh Chand Meena, Sr.DR सुनवाई की तारीख/Date of Hearing : 19/02/2026 घोषणा की तारीख /Date of Pronouncement: 25/02/2026 आदेश/O R D E R Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 29/10/2025 passed u/s.250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for the Assessment Year (AY) 2018-19. 2. The assessee, in this appeal, is aggrieved by the action of the Ld. CIT(A) in enhancing the assessment by Rs.11,05,019/- for alleged violation u/s.40A(3) of the Act. Printed from counselvise.com ITA No.2115/Ahd/2025 Bhagwati Trading Co. vs. ITO Asst. Year : 2018-19 2 3. Originally, the assessment of the assessee was reopened u/s.147 of the Act on account of unexplained cash credits in the bank account of the assessee. During the assessment proceedings, the assessee explained the source of the cash deposits. The Assessing Officer (AO) did not get satisfied with the explanation given by the assessee about the source of such deposits and made the addition of Rs.42,09,324/- on account of unexplained cash credits. However, the AO also examined the issue of disallowance u/s.40A(3) of the Act of an amount of Rs.11,05,019/- being the amount paid in cash in violation of provisions of section 40A(3) of the Act. The assessee furnished the reply to the AO that it had not violated the said provisions, therefore, the AO did not make any addition on this issue also. 4. During the first appellate proceedings, the Ld.CIT(A) get satisfied about the explanation given by the assessee regarding the source of deposits and deleted the addition so made by the AO on this issue. However, the Ld. CIT(A) enhanced the income of the assessee reversing the decision of the AO in respect of the cash payments made by the assessee in violation of the provisions of section 40A(3) of the Act. 5. Being aggrieved by the said order of the Ld. CIT(A), the assessee has come in appeal before us. 6. The Ld. Counsel for the assessee has submitted that firstly, the assessment was not reopened by the AO on the issue of cash payments in violation of provisions of section 40A(3) of the Act. He has submitted that the issue on which the assessment was reopened and the addition was made by the AO, stand decided in favour of the assessee, therefore, the addition, if any, on any other ground could not have been made by the Ld. CIT(A). He has further submitted that even the issue relating to cash payments in Printed from counselvise.com ITA No.2115/Ahd/2025 Bhagwati Trading Co. vs. ITO Asst. Year : 2018-19 3 violation of provisions of section 40A(3) of the Act stood examined by the AO and no additions were made by the AO. Therefore, the Ld. CIT(A) was not empowered to re-examine this issue. He has further submitted that the assessee has made cash payments to various transporters and the prescribed limit for making such cash payments was Rs.35,000/-, whereas, the Ld. CIT(A) had assumed the said limit at Rs.10,000/-. The Ld. Counsel for the assessee has relied upon various bills/vouchers placed in the paper-book to show that the cash payments made to the transporters were less than the prescribed limit of Rs.35,000/-. 7. In view of this factual evidence on the file, the impugned addition is not sustainable. Even the AO has already examined the said contention and finding force in it, has not made any addition on this issue. Therefore, the impugned addition made by the Ld. CIT(A) is ordered to be deleted. 8. In the result, the appeal of the assessee stands allowed. Order pronounced in the Open Court on 25 /02/2026. Sd/- Sd/- (Annapurna Gupta ) Accountant Member ( Sanjay Garg) Judicial Member अहमदाबाद/Ahmedabad, िदनांक/Dated 25/02/2026 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की \"ितिलिप अ#ेिषत/Copy of the Order forwarded to : 1. अपीलाथ$ / The Appellant 2. \"%थ$ / The Respondent. 3. संबंिधत आयकर आयु& / Concerned CIT 4. आयकर आयु& ) अपील ( / The CIT(A)- 5. िवभागीय \"ितिनिध , अिधकरण अपीलीय आयकर , अहमदाबाद/DR,ITAT, Ahmedabad. 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, //True स%ािपत \"ित // पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad Printed from counselvise.com "