DY. COMMISSIONER OF INCOME TAX, GHAZIABAD V. ANUP JAIN, GHAZIABAD

ITA 377/DEL/2024

AI Insights

The case involves Anup Jain, who was engaged in wholesale trading of iron and steel, and was subjected to an audit under Section 44AB of the Income Tax Act. The ACIT noted discrepancies between the unsecured loans reported in the balance sheet and those in the tax audit report, leading to an addition of Rs. 1,65,00,000 as unexplained cash credits under Section 68 of the Act. The First Appellate Authority (CIT(A)) admitted additional evidence and deleted the addition, which the revenue challenged in the Tribunal. The Tribunal found that neither the ACIT nor the CIT(A) had conducted sufficient inquiries into the genuineness of the transactions and remitted the matter back to the ACIT for a fresh examination.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 653190 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Additional evidence; Unexplained cash credit
• Section: 143(3); 68

Judgement Text

"1 ITA No. 377/Del/2024 A.Y. 2017-18 Anup Jain IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F ”: NEW DELHI BEFORE MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND Ms. MADHUMITA ROY, JUDICIAL MEMBER ITA No. 377/DEL/2024 Assessment Year: 2017-18 ACIT, Circle-2(1)(1), Ghaziabad. Vs Anup Jain, 67/1 Loha Mandi, Bulandshahar Road Industrial Area, Ghaziabad-201001. PAN: ABCPJ 8802 E APPELLANT RESPONDENT Assessee represented by Shri Raj Kumar, CA; & Shri J.P. Sharma, Adv. Department represented by Dr. Maninder kaur, Sr. DR Date of hearing 09.04.2025 Date of pronouncement 20.06.2025 O R D E R PER Ms. MADHUMITA ROY, JM: The instant appeal filed by the revenue is directed against the orderdated 11.12.2023 passed by the National Faceless Appeal Centre (NFAC),Delhi, arising out of the assessment order dated 29.12.2019 passed by the Assistant Commissioner of Income Tax, Circle 2(1)(1), Ghaziabad under Section 143(3) of 2 ITA No. 377/Del/2024 A.Y. 2017-18 Anup Jain the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) for Assessment Year 2017-18. 2 We have heard the rival submissions made by the respective parties and we have also considered the materials on record including the orders passed by the authorities below and the judgments relied upon by the respective parties. 3 The brief facts leading to the case are that the assessee, an individual was engaged in the business of wholesale trading of Iron and Steel, in the name and style of Shree Shyamji Steels and for the year under consideration was liable to audit u/s 44AB of the Act. Learned AO has find that there is difference between unsecured loans, as per balance sheet and as per tax audit report u/s 44AB of the Act. Difference of unsecured loans between balance sheet and as per tax audit report was as much as, that even number of entities who grants loans to appellant are different, in fact there was additional entities in tax audit report which were not part of unsecured loans as per balance sheet. Therefore, the Ld. AO directed the assessee to explain the unsecured loans viz-z-viz difference of unsecured loans as per balance sheet and tax audit report. According to the Ld. AO, though the assessee in all earlier submission has acknowledged that unsecured loans have been received from these entities which were not included in unsecured loans as 3 ITA No. 377/Del/2024 A.Y. 2017-18 Anup Jain per balance sheet; however at the fag end of the time barring assessment, took a U- turn and adopted an altogether new line of claims/justification that these parties were categories as debtors in the books of accounts. Assessee claimed that the amounts in question were received as advances against supply of goods, however , the learned AO has not accepted the submission of assessee, as in his view, any advance which has not been squared up either by refund or supply or adjustment, must appear as a liability in the final account on the close of the year. Thus, the learned AO in these circumstances has made the addition of Rs. 1,65,00,000/- representing outstanding amount/closing balance in respect of following four entities, by holding them as unexplained cash credits u/s 68 of the Act: Sr. No. Entities Sr. No. of clause 31(a) of the tax audit report; however not included in unsecured loans as per balance sheet Closing Balance (in Rs.) i) Shashi Iron Syndicate 8 15,00,000 ii) L M Steel (P) Ltd. 9 10,00,000 iii) Sushil Enterprises 10 10,00,000 iv) Ankit Sales Corporation 11 1,30,00,000 Total 1,65,00,000 4 Being aggrieved by the aforesaid order of the Ld. AO, the assessee preferred appeal before the Ld. First Appellate Authority. Before the Ld. First Appellate Authority, assessee furnished additional evidences. Though the remand report has 4 ITA No. 377/Del/2024 A.Y. 2017-18 Anup Jain been called from the Ld. AO, however the Ld. AO has not given any specific comments on the additional evidences as well as comments on the claim made during the appellate proceedings. Furthermore, even as per the Ld. First Appellate Authority some inquiry are required, that he directed to the Ld. AO to do during remand proceedings. However, the Ld. AO did not make any inquiry as directed to him during the remand report proceedings. Despite that, the Ld. First Appellate Authority has admitted additional evidence and deleted the addition made by ld. AO. Relevant finding of the Ld. First Appellate Authority reproduced hereunder: “5.2 I have perused the assessment order, grounds of appeal, additional evidences, arguments made during VC, remand report and comment of the appellant on the remand report. I find that during the course of assessment proceedings, the AO noticed that there was discrepancy in the unsecured loans of Rs. 1,65,00,000/-in respect of 4 parties as per balance sheet and as per clause 31(a) of the Tax Audit report. Therefore the AO inferred that the unsecured loans of Rs. 1,65,00,000/- taken from 4 partjes (L. M. Steels Pvt Ltd Rs. 0,00,000/-, M/s. Shashi Iron Syndicate Rs. 15,00,000/-, M/s. Sushil Enterprises Rs. 10,00,000/- and M/s. Ankit Sales Corporation Rs. 1,30,00,000/-) is not disclosed in the balance sheet. During assessment proceedings the appellant claimed the said entries are sundry debtors and claimed to have filed confirmation letters, ITR acknowledgments and bank statements. However the AO noted that the appellant filed above details only in respect one party namely M/s. L. M. Steels Pvt Ltd and appellant failed to justify the main question as to why those loans were not reflected in the balance sheet Therefore AO made addition of Rs. 1,65,00,000/- as unexplained cash credits. During the course of appellate proceedings, the appellant contended that all the documents were provided to the AO. Further the appellant has submitted some additional evidences in support of 5 ITA No. 377/Del/2024 A.Y. 2017-18 Anup Jain his claim. The appellant admitted that there was error in the audit report and the debtors were wrongly shown by the auditor as part of unsecured loans. The submission of the appellant and additional evidences were shared with the AO to submit the remand report after examination of the additional evidences and claim made by the appellant. The AO was directed to make necessary inquiry, if required. The AO submitted the remand report on 17/10/2023 and requested that the additional evidences are not admissible since the appellant did not provide anyexplanation on the issue despite giving him ample opportunity of being heard. I find from the report that the AO has not given any specific comments on the additional evidences as well as comments on the claim made during appellant proceedings. The AO also did not make any inquiry as directed to do during remand report proceedings. Considering the facts of the case, I admit the additional evidence since the AO in the remand report has reported that the conditions mentioned in Rule 46A for admitting the additional evidences are fulfilled. The AO has not examined the additional evidence and not given any comments on the additional evidence except saying that 'the additional evidence submitted by the assessee is not admissible as the assessee during the course of assessment proceedings did not provide any explanation on the issue despite giving him ample opportunity of being heard'. I find from the submissions and additional evidences submitted by the appellant that the appellant has primarily discharged the onus of proving the identity, genuineness and creditworthiness of the loans/debtor transactions of Rs. 1,65,00,000/- but in the remand proceedings the AO did not make any inquiry to verify the correctness of the claim made by the appellant. Considering the facts of the case and submissions filed by the appellant, I find that the genuineness of the transactions under dispute has been explained by the appellant. Therefore the addition of Rs. 1,65,00,000/- made by the AO is deleted. Thus the grounds of appeal raised by the appellant are allowed.” (Emphasis Supplied by us)” 6 ITA No. 377/Del/2024 A.Y. 2017-18 Anup Jain 5 Thus the revenue filed an appeal against the order of the First Appellate Authority before us, challenging the only issue in respect of deletion of addition of Rs.1,65,00,000/- made by the AO, representing outstanding amount/closing balance in respect of four entities held as unexplained cash credits u/s 68 of the Act. 6 Ld. DR challenged the order of First Appellate Authority deleting the addition. On the other hand, the Ld. AR relied upon the order passed by the First Appellate Authority and has also placed reliance upon synopsis and paper book placed on record. 7 We have heard the rival submissions made by the respective parties and we have also perused the materials available on record including the paper book and the synopsis filed by the assessee. Written synopsis filed by assessee reproduced hereunder: “BRIEF SYNOPSIS Addition of Rs. 1,65,00,000/- U/s.68 as unexplained cash credit for closing balances of following 04 parties:- Sr. No. Name of Party Amount i) Shashi Iron Syndicate 15,00,000 ii) L M Steel (P) Ltd. 10,00,000 iii) Sushil Enterprises 10,00,000 iv) Ankit Sales Corporation 1,30,00,000 Total 1,65,00,000 7 ITA No. 377/Del/2024 A.Y. 2017-18 Anup Jain Brief Facts - A.O. noted that in balance sheet there were 04 parties for not appearing as unsecured loans.(Table-A/A.O. Pg.2) - The A.O. further noted that in tax audit report, the above closing balances are shown as unsecured loans (S.No.8 to 11 of Table-B). (Table-B/A.O. Pg-3-4) - A.O. held that the assessee could not explain as to why above 04 loans are not appearing in the balance sheet. - A.O. further held that the assessee could not provide the needful details of these 04 parties, therefore, he added the same U/s.68. - Before CIT(A) addl. evidences U/R-46A were filed. In view of the same, the CIT(A) deleted the addition. - Hence Deptt. is in appeal against deletion of this addition. Brief Contentions ONE - No discrepancy in the audited financial A/cs - From these 04 parties, the assessee receive advance against supplies to be made. - Hence these parties were debtors from whom advances were recd. i.e. being the debtors who were having credit balances as at the end of the year. - Hence in the balance sheet, these amts, were shown in the list of debtors (in the negative side) and the net of debtors were declared in balance sheet at Rs. 15,23,35,897/-.(94)(96-100/R/P-100) - Thus these 04 parties were shown in the balance sheet in the list of debtors. - The auditor under some bonafide confusion reported the same as in the nature of unsecured loan. - However during asstt., the auditor issued letter Dtd.28.12.19 clarifying that these parties are in the list of debtors (net). (140) - Only 03 parties are covered in auditors verification for the reason that during asstt., the A.O. issued SCN only in respect of these 3 parties. (A.O.Pg3/Para-2) - Hence, these 04 parties duly stands reflected in the balance sheet under \"debtors\". 8 ITA No. 377/Del/2024 A.Y. 2017-18 Anup Jain TWO - Following documents were furnished during asstt., wherein no discrepancies were found - In respect of these 04 parties, following documents were furnished to A.O. vide letter Dtd.24.12.19.(88-89) PB Pg. No. L.M. Steel Pvt. Ltd- Rs. 10,00,000/- (Closing Bal.) • Confirmation of A/c AY 2017-18 • Bank Statement of L.M Steel • ITR Ack of L.M Steel-A.Y 2017-18 • Bank Statement of Assessee 101 102-105 106 107-109 Shashi Iron Syndicate - Rs. 15,00,000/- (Closing Bal.) • Ledger A/c of Shashi Iron in books of \"A\" - A.Y 17-18 • Bank Statement of M/s Shri Shyam JI Steels (Assessee) • Ledger A/c of Shashi Iron in books of \"A\" - A.Y 18-19 • Banks statement of of M/s Shri Shyam JI Steels (Assessee) 110 111-114 115 116 Sushil Enterprises - Rs. 10,00,000/- (Closing Bal.) • Ledger A/c of Sushil Enterprises in books of \"A\" -Α.Υ 17-18 • Confirmation of A/c - A.Y 17-18 • Bank Statement of Sushil Enterprises • ITR Ack of Sushil Kumar Jain -A.Y 17-18 • Ledger A/c of Sushil Enterprises in books of \"A\" -Α.Υ 18-19 117 118 119 120 121 Ankit Sales Corporation-Rs. 1,30,00,000/- (Closing Bal.) • Ledger A/c of Ankit Sales in books of \"A\" - A.Y 2017-18 • Ledger A/c of Ankit Sales in books of \"A\" - A.Y 122 123 9 ITA No. 377/Del/2024 A.Y. 2017-18 Anup Jain 2018-19 • Ledger A/c of Ankit Sales in books of \"A\" - A.Y 2019-20 • Bank Statement of Ankit Sales • Bank Statement of Assessee 124 125-126 127-139 - No discrepancy was found therein. - Further, all these Cl. bal. stood squared up upto A.Y.19-20, partly by return/refund and partly by making sales as per chart.(141) - The sales as well as the refund in subsequent yearsupto A.Y.19- 20 already stands accepted by Deptt. although U/s.143(1). - Further, during appeal proceedings, vide application U/R-46A certain more relevant documents were furnished. (79) In remand report, the A.O. gave his no objection for admission of these evidences. L.M. Steels Pvt. Ltd. - Without prejudice, further very imp. to point out that A.O. himself admits that in the case of \"L.M. Steels Pvt. Ltd.\" the assessee filed all documents.(A.O. Pg.4/Last Para) - It is for this reason that even in SCN Dtd.27.12.19, he asked to furnish documents only in respect of balance 03 parties namely \"Shashi Iron Syndicate, Sushil Enterprises and Ankit Sales Corporation\" only. (A.O. Pg.5/Para-2) (90-91) - The only SCN issued Dtd.27.12.19, show caused as to why the amounts from bal. 03 parties only should not be added.(90-91) - Hence since all documents stood admittedly filed in the case of L.M. Steels Pvt. Ltd. and the only SCN Dtd.27.12.19 questioned the amounts in the name of rest 03 parties, so, in any case, no addition should be made in the case of L.M. Steels Pvt. Ltd. Shashi Iron Syndicate - Also, in the case of Shashi Iron Syndicate, the return of Rs.35 Lacs in the same year stands accepted, therefore there is no reason for doubting CL. bal. Rs.15 Lacs. - In view of above and the fact that all these accounts stands squared up upto A.Y.19-20 partly by refund and partly through sales, which all stands accepted, CIT(A) has been fully justify in deleting the complete addition.” 10 ITA No. 377/Del/2024 A.Y. 2017-18 Anup Jain 8 We have gone through the order passed by the Ld. First Appellate Authority; it is unequivocal that no inquiry has been made by the Ld. AO in the remand report proceedings in spite of the direction made by the Ld. CIT(A). The Ld. First Appellate Authority has noted that “in the remand proceedings the AO did not make any inquiry to verify the correctness of the claim made by the appellant”. Immediately after considering these facts the Ld. First Appellate Authority on his own, without any reasoning/basis, directly reaches to conclusion that “Considering the facts of the case and submissions filed by the appellant, I find that the genuineness of the transactions under dispute has been explained by the appellant.” Admittedly, Ld. AO has not made any inquiry to verify the correctness of the claim made by the appellant during remand proceedings and even the First Appellate Authority has also not made any enquiry from aforesaid entities under consideration. 9. Thus, having heard the ld. Counsels appearing for the parties and having regard to the facts and circumstances of the case, particularly in the absence of any inquiry conducted by the authority below in regard to the correctness of the claim qua the genuineness of the transaction we remit the issue to the file of the Ld. AO to deal with the same afresh, after making necessary enquiry in regard to the three ingredients of Section 68 of the Act and to pass orders accordingly, upon granting 11 ITA No. 377/Del/2024 A.Y. 2017-18 Anup Jain an opportunity of being heard to the assessee and upon considering the evidence on record or any other evidence which the assessee may choose to file at the time of hearing of the matter. In result ground of appeal is allowed for statistical purpose. 9. The appeal of the revenue is allowed for statistical purposes. Order pronounced in open court on 20.06.2025. Sd/- Sd/- (MS. ANNAPURNA GUPTA ) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 20.06.2025. *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "