INCOME TAX OFFICER, WARD-11(1),KOL, KOLKATA V. KISH ENGINEERING PVT LTD, KOLKATA

ITA 1566/KOL/2025

AI Insights

The case involves an appeal by the Income Tax Officer against the order of the CIT (A), which partly allowed the appeal of Kish Engineering Pvt. Ltd. for the assessment year 2015-16. The Revenue challenged the CIT (A)'s decision to delete 50% of the disallowance made on 'other expenses and interest expenses' amounting to 5,76,473, and the deletion of an addition of 3,60,00,000 as unexplained cash credit from Wesman Thermal Engineering Process Pvt. Ltd. The Tribunal found the CIT (A)'s decisions reasonable and supported by evidence, thus dismissing the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784013 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-11-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2015-2016
• Appeal Filed On: 17-07-2025
• Other Referred Cases: PCIT Vs. Montage Enterprises Pvt. Ltd., Narendra Nath Paul Vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DIPU KOLEY
• Assessee Lawyers: S. K. TULSIYAN; LATA GOYAL
• Keywords: Additional evidence; Corroborative evidences; Unexplained cash credit
• Section: 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.1566/KOL/2025 (Assessment Year: 2015-16) Income Tax Officer, Ward 11(1) Kolkata Aayakar Bhawan P-7, Chowringhee Road, 6 th Floor, Room No.6/20, Kolkata-700069, West Bengal, Vs. Kish Engineering Pvt. Ltd. 138Q, Pinic Garden Road, Kolkata-700039, West Bengal (Appellant) (Respondent) PAN No. AABCK3454G Assessee by : Shri S.K. Tulsiyan & Ms. Lata Goyal, AR Revenue by : Shri Dipu Koley, DR Date of hearing: 28.10.2025 Date of pronouncement: 11.11.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 29.05.2025 for the AY 2015-16. 02. In all the grounds there are two effective issues raised by the Revenue. 03. First, effective issue is against the order of ld. CIT (A) deleting the addition partly equal to 50% of the total disallowance of ₹25,76,473/- in respect of “other expenses and interest expenses” without any basis that too without any evidences from the assessee. Printed from counselvise.com Page | 2 ITA No. 1566/KOL/2025 Kish Engineering Pvt. Ltd.; A.Y. 2015-16 04. The facts in brief are that the assessee filed the return of income on 31.10.2015, declaring total loss of ₹3,77,85,008/-. The case of the assessee was selected for scrutiny and the statutory notices along with questionnaire were issued and duly replied by the assessee. During the course of assessment proceedings, the ld. AO noted that the case was heard with the authorized representative of the assessee. The ld. AO during the course of assessment proceedings upon perusal of the evidences and accounts of the assessee observed that the assessee has debited a sum of ₹20,84,784/- under the head of other expenses and ₹4,91,689/- under head interest expenses. Accordingly, the AO called upon the assessee to furnish the breakup/ details of such expenses along with evidences. When assessee failed to furnish the evidences, the ld. AO disallowed the entire expenses claimed aggregating to ₹25,76,473/- in profit and loss account and added the same to the income of the assessee. 05. In the appellate proceedings, the ld. CIT (A) partly allowed the appeal of the assessee by deleting 50% of the total disallowances after taking into consideration all submissions/ evidences furnished by the assessee. The ld. CIT (A) while partly allowing the appeal of the assessee on this issue noted that the ld. AO has only disallowed these expenses on the ground that breakup and supporting evidences were not furnished. The ld. CIT (A) in para no.10.3 of the appellate order noted that the assessee submitted the expenses incurred during the year were in the nature of electricity charges, legal fee, printing and stationery, telephone expenses and interest expenses. The ld. CIT (A) examined the breakup of such expenses. The ld. CIT (A) thereafter noted that these expenses were required to be incurred for running the business on day-to-day basis. However, in absence of any documentary evidences of these expenses being incurred wholly and Printed from counselvise.com Page | 3 ITA No. 1566/KOL/2025 Kish Engineering Pvt. Ltd.; A.Y. 2015-16 exclusively for the purpose of business, the ld. CIT (A) confirmed the disallowance equal to 50% of the total expenses thereby deleting the addition to the extent of ₹12,88,286/- and sustaining the addition to an equal extent. 06. After hearing the rival contentions and perusing the materials available on record, we find that the ld. CIT (A) noted that these expenses were incurred by the assessee under various heads such as electricity charges, legal expenses, printing and stationery, travelling, telephone and interest etc. which are normally incurred for the purpose of business .However, the ld. CIT (A) noted that in absence of any documentary evidences, whether these expenses were wholly and exclusively incurred for the purpose of business could not be ascertained. Therefore, restricted the addition to 50% of the total disallowance. In our opinion, the order of ld. CIT (A) is very reasonable. Therefore, we are inclined to uphold the same by dismissing the first issue raised by the Revenue. 07. The second effective issue raised by the Revenue is against the order of ld. CIT (A) deleting the addition of ₹3,60,00,000/- as made by the ld. AO in respect of unsecured loans of ₹3,60,00,000/- from Wesman Thermal Engineering Process Pvt. Ltd. 08. Accordingly, the assessee was called upon to furnish he details/ evidences qua the said loan creditor. However, the assessee failed to furnish any reply except the copy of account and therefore, the assessee has failed to discharge the onus cast upon the assessee under section 68 of the Act. Accordingly, the ld. AO disallowed and added a sum of ₹3,90,00,000/- as unexplained cash credit u/s 68 of the Act in the books of the assessee comprising ₹3,60,00,000/- from Printed from counselvise.com Page | 4 ITA No. 1566/KOL/2025 Kish Engineering Pvt. Ltd.; A.Y. 2015-16 Wesman Thermal Engineering Process Pvt. Ltd. and ₹30,00,000/- as advance towards rehabilitation charges. 09. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee by deleting both the additions of ₹3,60,00,000/- being received from Wesman Thermal Engineering Process Pvt. Ltd. and 30,00,000/- lacs on account of rehabilitation charges. The Revenue has challenged before us only deletion of amount received from Wesman Thermal Engineering Process Pvt. Ltd. The ld. CIT (A) in Para 3.3. noted that ₹3,60,00,000/- received from Wesman Thermal Engineering Process Pvt. Ltd. was a trade advance received from the Wesman Thermal Engineering Process Pvt. Ltd. for carrying out conversion works in the ordinary course of business. The ld. CIT (A) noted that advance was received against the sales bills raised by the appellant and thus, the said amount was received in the ordinary course of business and the transactions were explained satisfactorily. Accordingly, the ld. CIT (A) deleted the addition. 010. After hearing the rival contentions and perusing the materials available on record, we note that the assessee has not raised any loan from Westman Thermal Engineering Process Pvt. ltd. as observed by the ld. AO and ld. CIT (A) has correctly observed that amount received was on account of trading advance received in the ordinary course of business which was adjusted against the sale bills. We note that the assessee has regularly been receiving advances from said customer which were being regularly adjusted against the sale bills as is apparent from the copies of ledger accounts available in the paper book from page no.108 to 122 in respect of A.Y. 2015-16 and from page no. 134 to 175 in respect of A.Y. 2016-17. The case of the assessee is squarely covered by the decision of Hon'ble Apex Court in Printed from counselvise.com Page | 5 ITA No. 1566/KOL/2025 Kish Engineering Pvt. Ltd.; A.Y. 2015-16 the case of PCIT Vs. Montage Enterprises Pvt. Ltd. reported in (2018) 100 taxmann.com 100 (SC), wherein Hon'ble Supreme Court has held as under:- “\"Section 68, of the Income-tax Act, 1961-Cash credit (Trade advance) - In course of assessment, Assessing Officer made additions to assessee's income under section 68 in respect of trade advances - Commissioner (Appeals) and Tribunal deleted said addition finding that trade advances received by assessee were adjusted against sales made in subsequent years. High Court upheld order passed by Tribunal. Whether, on facts, SLP filed against decision of High Court was to be dismissed Held, yes [Para 2][In favour of assessee].\" 011. Similarly, the case of the assessee find support from the decision of co-ordinate Bench in case of Narendra Nath Paul Vs. ITO in ITA No. 2284/KOL/2014, wherein it has been held as under:- “Reliance is also placed on the decision of the Hon'ble jurisdictional Tribunal in the case of Narendra Nath Paul vs. ITO (ITA No.2284/Kol/2014), wherein it was held as under: copy enclosed at pages 179-181 of the P/B. I have considered the rival submissions and also perused the relevant material available on record. It is observed that the advances in question were stated to be received by the assessee from his dealers and two of such dealers had also appeared before the Assessing Officer and confirmed of having given such advances to the assessee. Moreover, the said advances were adjusted against the sale subsequently made by the assessee to the concerned M.R. Dealers and such sale was duly accounted for by the assessee in his books of account regularly maintained. It appears that these vital facts, however, have been lost sight off by the authorities below and they have mainly decided the issue going by the aspect of preponderance of probabilities. No doubt the preponderance of probabilities can be taken into consideration for deciding the issue if itis found that what is apparent is not real. However, if the facts of the present case are considered in the light of the evidence brought on record by the assessee, it was a case of advances received by the assessee in cash from his dealers and the same having been adjusted against the sale subsequently made to the said dealers, there was no reason to apply the theory of preponderance of probabilities, especially when there was nothing brought on record to doubt the explanation offered by the assessee. There was also no inquiry made by the Assessing Officer with the concerned dealers to establish that what was stated by the assessee is not correct. On the other hand, at least two dealers were produced by the assessee for verification before the Assessing Officer and they admitted of having been given the cash advances to the assessee. Having regard to all these facts of this case, I am of the view that all the advances except the advance of Rs.1,20,000/-received by the assessee on 30.03.2009 having been Printed from counselvise.com Page | 6 ITA No. 1566/KOL/2025 Kish Engineering Pvt. Ltd.; A.Y. 2015-16 already adjusted against the sales made by the assessee to the concerned Dealers and the sales so made having been duly accounted for by the assessee, the corresponding advances could not be added to the total income of the assessee under section 68 treating the same as unexplained. As regards the advance of Rs.1,20,000/- claimed to be received by the assessee on 30.03.2009, 1, however, find that the assessee has failed to explain the same in terms of section 68 and the addition made by the Assessing Officer and confirmed by the Id. CIT(Appeals) to this extent is liable to be sustained. 1, therefore, modify the impugned order of the Id. CIT(Appeals) and sustain the addition of Rs. 11.15.131/- made by the Assessing Officer under section 68 to the extent of Rs. 1,20,000/-” 012. Therefore, considering the facts of the assessee’s case in the light of the aforesaid decisions, we are inclined to uphold that the ld. CIT (A) on this issue who has correctly passed the order by holding that advances received in the normal course of business cannot be added u/s 68 of the Act when the advances are adjusted against the sale bills . Therefore, we do not find any infirmity in the order of ld. CIT (A) and accordingly uphold the same on this issue by dimssing the appeal of the revenue on this issue. 013. On the additional evidences, we note that all the details were available before the ld. CIT (A) which were filed by the assessee in compliance to direction of ld. CIT (A). Therefore, the same cannot be considered as additional evidences. Therefore, issue raised by the Revenue is devoid of any merit and accordingly, dismissed. 014. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 11.11.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 11.11.2025 Sudip Sarkar, Sr.PS Printed from counselvise.com Page | 7 ITA No. 1566/KOL/2025 Kish Engineering Pvt. Ltd.; A.Y. 2015-16 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 "