KRISHNA PRABHAS AGRO OILS PRIVATE LIMITED,MAREDUBAKA V. ASSISSTANT COMMISSIONER OF INCOME TAX, KAKINADA

ITA 546/VIZ/2025

AI Insights

The case involves Krishna Prabhas Agro Oils Private Limited, which appealed against the order of the Commissioner of Income Tax (Appeals) confirming the addition of Rs. 41,74,755 as unexplained cash credit under Section 68 of the Income-tax Act, 1961. The addition was based on transactions with M/s Prithvi Traders, which the Assessing Officer (AO) initially treated as accommodation entries. The ITAT found that the sales proceeds were duly recorded in the company's audited books and accepted by the AO during the assessment, thus should not be re-characterized as unexplained cash credits.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 784771 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 17-09-2025
• Other Referred Cases: Raymond Woollen Mills Ltd. Vs. ITO, Rahul Cold Storage v. ITO, CIT v. Kailash Jewellery House, CIT v. Vishal Exports Overseas Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA VILLURI
• Assessee Lawyers: HEMALATHA. K
• Keywords: Set aside; Business income; Corroborative evidences; Unexplained cash credit; Reopening of assessment; Accommodation entries; Borrowed satisfaction; Bogus
• Section: 147; 148; 68

Judgement Text

" आयकर अपीलȣय अͬधकरण, ͪवशाखापɪटनम पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Visakhapatnam Bench, Visakhapatnam Before Shri Manjunatha G., Accountant Member and Shri Ravish Sood, Judicial Member आ.अपी.सं /ITA No.546/Viz/2025 (Ǔनधा[रण वष[/Assessment Year: 2017-18) Krishna Prabhas Agro Oils Private Limited, Maredubaka, Kakinada. PAN: AAICS2638B Vs. Assistant Commissioner of Income Tax, Kakinada. (Appellant) (Respondent) Ǔनधा[ǐरती ɮवारा/Assessee by: Mrs. Hema Latha. K, CA (Hybrid Hearing) राजè व ɮवारा/Revenue by: Dr. Aparna Villuri, Sr. AR सुनवाई कȧ तारȣख/Date of Hearing: 10/11/2025 घोषणा कȧ तारȣख/Date of Pronouncement: 12/11/2025 आदेश / ORDER PER. RAVISH SOOD, J.M: The present appeal filed by the assessee company, which is engaged in the business of manufacturing and sale of edible rice bran oil, is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated Printed from counselvise.com 2 ITA No. 546/Viz/2025 Krishna Prabhas Agro Oils Private Limited vs. ACIT 04.09.2025, which in turn arises from the assessment order passed by the Assessing Officer (for short, “AO”) under section 147 r.w.s. 144B of the Income-tax Act, 1961 (for short, “Act”) dated 27.03.2022 for the Assessment Year 2017–18. The assessee company has assailed the impugned order on the following grounds of appeal before us: “1. That under the facts and circumstances of the case, the orders passed by the Commissioner of Income-tax (Appeals) (in short 'CIT(A)') under section 250 of Income-tax Act, 1961 ('IT Act') dated 04-09-2025, confirming the order passed by Assessing Officer ('AO') under section . 147 r.w.s 144B of the IT Act dt.27-03-2022, is not in accordance with the fact and provisions of law. 2. The Ld. CIT(A) erred in not appreciating that the subject re-opening of subject assessment under section 147 of the IT Act is invalid, as the same was made on mere suspicion and surmises. 3. The Ld. CIT(A) ought to have appreciated that as per the reasons recorded for re-opening of assessment, made available to assessee vide notice dt.21-04-2021 and the Assessment order, Ld.AO had re- opened the case of assessee based on the information he received from DCIT, Central Circle, Agra, which information was not correlated with the facts of the present case, as to form an opinion/to suggest that the income chargeable to tax has escaped assessment. 4. The Ld. CIT(A) erred in confirming the addition of Rs. 41,74,755/- made by Ld.AO towards the transaction carried on with M/s Prithvi Trader treating the same as unexplained cash credit under section 68 of the IT Act. 5. The Ld. CIT(A) ought to have appreciated that the above transaction with M/s Prithvi Traders pertain to amounts received towards sales made by assessee, which was termed as accommodation entry by Ld.AO, without any basis. 6. The Ld. CIT(A) ought to have appreciated the fact that assessee filed all supporting evidences to prove the genuineness of the above sales transaction with M/s Prithvi Traders. 7. The Ld. CIT(A) erred in rejecting the documentary evidences placed by Assessee along with the written submissions, by citing certain Printed from counselvise.com 3 ITA No. 546/Viz/2025 Krishna Prabhas Agro Oils Private Limited vs. ACIT procedural defects in them, without considering the substance over form. 8. Without prejudice to the above grounds, even assuming that the said transaction with M/s M/s Prithvi Trader is to be considered as unexplained cash credits of assessee under section 68 of the IT Act, since the said amount was already included in the 'sales' reported by assessee in its P&L Account, out of which profit was declared, this subject addition made under section 68 has amounted to duplication. 9. For these and such other grounds, that may be urged at the time of hearing of subject appeal, the appellant prays before the Hon'ble ITAT that the directions be given to the Ld.AO to delete the additions made under section 68 of the IT Act or provide such other relief as the Hon'ble Tribunal may deem fit.” 2. Succinctly stated, the assessee company had filed its return of income for A.Y. 2017–18 on 18.10.2017, declaring an income of Rs. 1,45,17,660/–. The return of income filed by the assessee company was initially processed as such under section 143(1) of the Act on 04.03.2018. Subsequently, the AO, based on information received from the DCIT, Central Circle, Agra, that the assessee company was a beneficiary of accommodation entries routed through one concern, viz. M/s Prithvi Traders initiated proceedings under Section 147 of the Act, initiated proceedings under section 147 of the Act. Accordingly, notice under section 148 dated 31.03.2021 was issued and served upon the assessee company. In response, the assessee company e-filed its return of income on 19.04.2021, declaring the same income as was originally returned, i.e., Rs. 1,45,17,660/–. Printed from counselvise.com 4 ITA No. 546/Viz/2025 Krishna Prabhas Agro Oils Private Limited vs. ACIT 3. During the course of the assessment proceedings, the AO, relying on the information shared by the DCIT, Central Circle, Agra, observed that during the subject year i.e., AY 2017-18, a sum of Rs. 41,74,755/– was transferred from the bank account of M/s Prithvi Traders held with Bank of India to SBI Account No. 35820856196 held by the assessee company. On being queried, the assessee company submitted before the AO that it had sold edible rice bran oil to the aforesaid concern and had received through RTGS the subject amount of Rs. 41,74,755/- from the latter, as under: Sr. No. Date Mode Amount 1. 30.04.2016 RTGS Rs. 16,00,000/- 2. 03.05.2026 RTGS Rs. 22,00,000/- 3. 13.05.2016 RTGS Rs. 3,74,755/- Total Rs. 41,74,755/- 4. The assessee company, to fortify its aforesaid claim, submitted before the AO the copies of ledger accounts, bank statements, CST invoices, Form C, Form 16A, and other supporting documentary evidence. The assessee company clarified that the subject receipts were duly recorded in its “books of accounts” as sales proceeds and were also reflected in its audited financial statements that formed part of its return of income for the year under consideration. Printed from counselvise.com 5 ITA No. 546/Viz/2025 Krishna Prabhas Agro Oils Private Limited vs. ACIT 5. The AO, however, did not find favour with the explanation of the assessee company and held a conviction that it had failed to substantiate the genuineness of the transaction by placing on record confirmation from M/s Prithvi Traders or the commission agent. The AO, therefore, concluded that the impugned amount of Rs. 41,74,755/- represented accommodation entries and treated the same as unexplained cash credit under section 68 of the Act. 6. Aggrieved, the assessee company carried the matter in appeal before the CIT(A), who upheld the addition, observing that the assessee company had failed to furnish confirmation from M/s Prithvi Traders or from the commission agent, and that the supporting evidence, viz. CST forms, Form 16A, and invoices etc. were incomplete or lacked proper authentication. The CIT(A), being of the view that the assessee company had failed to discharge the onus that was cast upon it under Section 68 to establish the identity, creditworthiness, and genuineness of the transaction, confirmed the addition made by the AO. 7. The assessee company aggrieved with the CIT(A) order has carried the matter in appeal before us. 8. We have heard the Ld. Authorised Representatives of both parties, perused the orders of the lower authorities and the material Printed from counselvise.com 6 ITA No. 546/Viz/2025 Krishna Prabhas Agro Oils Private Limited vs. ACIT available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home her contentions. 9. Ms. Hemlatha, CA – the Ld. Authorised Representative (for short, “Ld. AR”) for the assessee company, at the threshold of the hearing of the appeal, submitted that the initiation of proceedings under Section 147 of the Act in the case of the assessee company is invalid as it was based merely on borrowed satisfaction as that of the DCIT, Agra, without any independent application of mind by the AO. On merits, the Ld. AR submitted that the addition of Rs. 41,74,755/– made by the AO under section 68 is unjustified as the said amount represents genuine sales proceeds that were duly recorded in the audited books of accounts of the assessee company that were accepted by the AO while computing its assessed income. Also, it was submitted by her that both the authorities below had erred in re-characterizing a part of the recorded turnover of the assessee company as unexplained cash credits, which, thus, had led to double taxation in its hands. Apart from that, the Ld. AR took us through the documentary evidence that was filed by the assessee company in the course of the assessment proceedings to support the authenticity of the subject sale transaction. Printed from counselvise.com 7 ITA No. 546/Viz/2025 Krishna Prabhas Agro Oils Private Limited vs. ACIT 10. We have given thoughtful consideration to the contentions of the Ld. Authorised Representatives of both parties in the backdrop of the orders of the authorities below. 11. As observed by us hereinabove, the AO had initiated proceedings under Section 147 of the Act based on the information shared by the DCIT, Agra, that the assessee company was a beneficiary of accommodation entries received through M/s Prithvi Traders. In our view, as the AO had material available before him to arrive at a bona fide belief that the income of the assessee company chargeable to tax had escaped assessment, therefore, no infirmity can be related to the initiation of the proceedings by him under Section 147 of the Act. It is a trite law that what is required at the stage of initiating proceedings under Section 147 is the availability of material on record based on which the AO can arrive at a belief that the income of the assessee chargeable to tax had escaped assessment, and the sufficiency of or correctness of the material is not a matter to be looked into at the stage of reopening. Our aforesaid view is supported by the judgment of the Hon’ble Supreme Court in Raymond Woollen Mills Ltd. Vs. ITO (1999) 236 ITR 34 (SC). Apart from that, we are of the view that as the Ld. AR has failed to produce before us any material which would reveal that the AO had acted upon a borrowed satisfaction for initiating proceedings under Printed from counselvise.com 8 ITA No. 546/Viz/2025 Krishna Prabhas Agro Oils Private Limited vs. ACIT Section 147 of the Act, therefore, finding no substance in the said hollow claim of the Ld. AR, we reject the same. Accordingly, in terms of our aforesaid observations, we uphold the validity of the jurisdiction that was assumed by the AO for initiating proceedings under Section 147 of the Act. 12. Apropos the merits of the case, we find that the assessee company had received the amount of Rs. 41,74,755/- from M/s Prithvi Traders through RTGS, which was duly recorded in its regular books of accounts as sale proceeds. The said receipts formed part of the turnover disclosed in the audited financial statements of the assessee company, on which “net profit” was computed and offered to tax. We find that the AO, while framing the assessment, had accepted the audited “books of accounts” of the assessee company and computed its income on the basis of its returned income, which in turn was based on the latter’s audited book results. Having thus accepted the sales and the resultant profits, we are of a firm conviction that there was no justification for the AO to have re-characterized one of the receipts forming part of those sales as an unexplained cash credit under section 68 of the Act. In our view, once the AO has accepted the trading results, he cannot thereafter selectively treat a part of the sale proceeds as unexplained, unless he rejects the “books of accounts” under Section 145(3) of Act, and Printed from counselvise.com 9 ITA No. 546/Viz/2025 Krishna Prabhas Agro Oils Private Limited vs. ACIT demonstrates that the sales are fictitious or bogus, which we find that he had miserably failed to do so in the present case before us. In fact, we find that a similar issue had came up before the ITAT, Raipur Bench, in the case of Rahul Cold Storage v. ITO, ITA No. 67/RPR/2023, dated 17.01.2024, wherein the Tribunal had held that when the sale proceeds are duly recorded in the “books of accounts” and form part of the turnover accepted by the AO, the same cannot again be treated as an unexplained cash credit under section 68 of the Act. We, thus, are of a firm conviction that once the “books of accounts” are accepted and the trading results are not disturbed, there is no scope for making a separate addition under section 68 in respect of such recorded receipts. In the case of Rahul Cold Storage vs. ITO (supra), the Tribunal had further observed that section 68 applies to credits in the books which are not explained by the assessee; however, when the receipts are accepted by the AO as business receipts already forming part of sales, there is no separate onus cast upon the assessee to prove their source again. The principle laid down therein squarely applies to the facts involved in the present case before us, wherein too the AO has neither rejected the books of account nor doubted the genuineness of the overall sales of the assessee company. Accordingly, we are of the view that the recharacterization of the recorded sale transaction by the AO as an Printed from counselvise.com 10 ITA No. 546/Viz/2025 Krishna Prabhas Agro Oils Private Limited vs. ACIT unexplained cash credit is legally unsustainable. Our aforesaid view on the subject issue is further fortified by the order of the Hon’ble High Court of Delhi in CIT v. Kailash Jewellery House (2010) 328 ITR 438 (Del) and that of the Hon’ble High Court of Gujarat in CIT v. Vishal Exports Overseas Ltd. (2012) 348 ITR 249 (Guj), wherein too it is held that when the receipts are part of business turnover, the same cannot be taxed again under section 68 of the Act. Accordingly, we are of the view that now when the impugned receipts have already been included in the turnover of the assessee company, and the resultant profit thereon had already been subjected to tax, therefore, the simultaneous addition of the entire gross amount of Rs. 41,74,755/- by characterizing it as an unexplained cash credit under Section 68 of the Act is in itself self- contradictory and militates against the view taken by the AO, and, thus, is unsustainable both on facts and in law. 13. Apart from that, we are of the view that even otherwise, now when the assessee company had substantiated the authenticity of the subject sale transactions by filing in the course of the assessment proceedings the requisite documentary evidence, viz. copies of ledger accounts, bank statements, CST invoices, Form C, Form 16A, and other supporting documentary evidence, then, the same could not have been brushed aside and arbitrarily rejected by the authorities below based on flimsy Printed from counselvise.com 11 ITA No. 546/Viz/2025 Krishna Prabhas Agro Oils Private Limited vs. ACIT observations. We thus, are of a firm conviction, that as the assessee company had based on supporting documentary evidence substantiated the authenticity of its claim that the subject amount of Rs. 41,74,755/- transferred through RTGS in its SBI Account No. 35820856196 from the bank account of M/s Prithvi Traders was towards the sale proceeds of edible rice bran oil, the AO could not have summarily discarded the same without placing on record any material irrefutably dislodging the veracity of the said claim of the assessee company. 14. In the result, we herein, in terms of our aforesaid observations, set aside the CIT(A) order and vacate the addition of Rs. 41,74,755/- made by the AO under Section 68 of the Act. 15. Resultantly, the appeal filed by the assessee company is allowed in terms of our aforesaid observations. Order pronounced in the open court on 12th November, 2025. Sd/- (MANJUNATHA G.) ACCOUNTANT MEMBER Sd/- (RAVISH SOOD) JUDICIAL MEMBER Hyderabad, Dated:: 12th November, 2025 OKK / SPS Printed from counselvise.com 12 ITA No. 546/Viz/2025 Krishna Prabhas Agro Oils Private Limited vs. ACIT Copy to: S.No Addresses 1 Krishna Prabhas Agro Oils Private Limited, D.No. 1-23, Kapileswarapuram Road, Maredubaka, Andhra Pradesh- 533308, Kakinada, Andhra Pradesh-533308. 2 Assistant Commissioner of Income Tax, O/o. ITO, 3rd Floor, Deepthi Towers, Main Road, Kakinada, Andhra Pradesh- 533001. 3 The Pr.CIT, Visakhapatnam 4 The DR, ITAT Visakhapatnam Bench 5 Guard File By Order Sr. Private Secretary, ITAT, Visakhapatnam. Printed from counselvise.com "