MSG ALL TRADING INTERNATIONAL PRIVATE LIMITED,EAST AZAD NAGAR V. DCIT, CIRCLE-11(1), DELHI, DELHI

ITA 3195/DEL/2023

AI Insights

The case involves MSG All Trading International Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) confirming the addition of INR 1,12,86,648 to the assessee's income for the assessment year 2016-17. The addition was based on unexplained credits in two bank accounts. The assessee contended that all transactions were recorded in the books and explained, while the Revenue argued that the AO had sufficient grounds to reopen the assessment under section 148 of the Income Tax Act, 1961. The Tribunal upheld the reopening but directed a re-examination of the additions made.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712533 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2016-2017
• Other Referred Cases: Pure Departmental Store Pvt. Ltd. vs DCIT, PCIT v. Manzil Dinesh Kumar Shah, PCIT v. Maheshwari Devi, Smt. Meenaben Dilipkumar Soni vs ITO, Shri Budhu vs ITO, ITO 12 (3) (3) vs M/s. Manhattan Impex Pvt. Ltd., Smt. Meera Devi Agrawal vs ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIRENDER KUMAR SINGH
• Assessee Lawyers: VED JAIN
• Keywords: Set aside; Opportunity of being heard; Reassessment proceedings; Peak credit; Reopening of assessment; Principle of natural justice; Search and seizure; Reason to believe; Tangible material
• Section: 148; 143(3); 68; 234B

Judgement Text

"ITA No.3195/Del/2023 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “E” BENCH: NEW DELHI BEFORE MS.MADHUMITA ROY, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.3195/Del/2023 [Assessment Year : 2016-17] MSG All Trading International Pvt.Ltd., Office No.2, 3rd Floor, 80, East Azad Nagar, Raghuvarpura, Shahdara, Delhi-110051. PAN-AAJCM6792K vs DCIT, Circle-11(1), Delhi APPELLANT RESPONDENT Appellant by Shri Ved Jain, Adv., Shri Aman Garg, CA & Ms. Ishika Dua, CA Respondent by Shri Virender Kumar Singh, Sr.DR Date of Hearing 08.05.2025 Date of Pronouncement 31.07.2025 ORDER PER MANISH AGARWAL, AM : The captioned appeal is filed by the assessee against the order dated 14.09.2023 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No.CIT(A), Delhi-4/10345/2018-19 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the order dated 27.12.2018 passed u/s 143(3) r.w.s. 147 of the Act pertaining to assessment year 2016-17. 2. Brief facts of the case are that the assessee had filed its return of income on 12.10.2016, declaring total income of INR 29,10,300/-. The case of the assessee was re-opened on the basis of information received from the Investigation Wing, Rohtak that the Printed from counselvise.com ITA No.3195/Del/2023 Page | 2 assessee is having two bank accounts maintained with Oriental Bank of Commerce (“OBC”), Sirsa wherein deposits of INR 1,12,86,648/- were made and the source of the same were not verified as the assessment was not completed u/s 143(3) of the Act in the year under consideration. Accordingly, notice u/s 148 was issued on 08.08.2018 and thereafter, various notices were issued and finally the re-assessment order was passed on 27.12.2018 wherein addition of INR 1,12,86,648/- was made on account of credits in the two bank accounts maintained by the assessee with OBC, Sirsa. 3. Against this order, the appeal was preferred before Ld.CIT(A) vide impugned order dated 14.09.2023, dismissed the appeal of the assessee. 4. Aggrieved by the order of Ld.CIT(A), the assessee preferred appeal before Tribunal wherein following grounds of appeal are raised:- 1. “On the facts and circumstances of the case, the order passed by the learned Assessing Officer (AO) is bad both in the eye of law and on facts. 2. On the facts and circumstances of the case, the learned AO has erred, both on facts and in law, in passing the order without giving assessee an opportunity of being heard and in clear violation of the principle of natural justice. 3. On the facts and circumstances of the case, the order passed by the learned AO under section 148 of the Income tax Act is barred by limitation since the same is passed beyond the specified time limit. 4. On the facts and circumstances of the case, the order passed by the learned AO under section 148 of the Income tax Act is illegal, bad in law and has been passed without assumption of valid jurisdiction. Printed from counselvise.com ITA No.3195/Del/2023 Page | 3 5. On the facts and circumstances of the case, the learned AO has erred, both on facts and in law, in initiating the proceedings under Section 147 read with Section 148, ignoring the fact that the same was bad in the eye of law as the conditions and procedure prescribed under the statute have not been satisfied and complied with. 6. On the facts and circumstances of the case Ld. AO has erred both on facts and in law in reopening the assessment u/s 148 without obtaining valid approval as provided u/s 151 of the Act. 7. On the facts and circumstances of the case Ld. AO has erred both on facts and in law in reopening the assessment u/s 148 without application of mind. 8. (i) On the facts and circumstances of the case, the reassessment proceedings initiated by the learned AO are bad in the eye of law as the reasons recorded for the issue of notice under Section 148 are bad in the eyes of law and are vague. (ii) On the facts and circumstances of the case, the reassessment proceedings initiated by the learned AO are bad in the eye of law as there is no live nexus between the reasons recorded and the belief formed by the Assessing Officer. 9. On the facts and circumstances of the case, the learned AO has erred, both on facts and in law, in making assessment at an income of Rs.1,41,96.950/- as against returned income of Rs.29,10,300/- declared by the assessee. 10. (i) On the facts and circumstances of the case, the learned AO has erred, both on facts and in law, in making the addition of an amount of Rs. 1,12,86,648/- on account of credits in the bank accounts of the assessee treating the same as unexplained under Section 68 of the Act. (ii). That the addition has been made arbitrarily rejecting the explanation and evidences filed by the assessee. 11. On the facts and circumstances of the case, the learned AO has erred both on facts and in law, in making the addition despite the assessee has submitted the details of the deposits and those deposits have been duly accounted for in the books of accounts of the assessee. 12. On the facts and circumstances of the case, the learned AO has erred, both on facts and in law, in making the addition by indulging in gross conjecture and surmises without bringing any adverse material on record. 13. (i) On the facts and circumstances of the case, the learned AO has erred in confirming the action of the Ld. AO merely relying on the report of the investigation wing and without application of his own mind. Printed from counselvise.com ITA No.3195/Del/2023 Page | 4 (ii) That the addition is confirmed despite the fact that the same is made material collected at the back of the assessee without giving it an opportunity to rebut the same. 14. Without prejudice to the above and in the alternative the AO has erred both on facts and in law in making the various additions without giving assessee the benefit of peak credit. 15. On the facts and circumstances of the case the learned AO has erred both on facts and in law in charging interest under Section 234B of the Act. 16. The appellant craves leave to add, amend or alter any of the grounds of appeal.” 5. In Ground Nos. 1 to 7, the assessee has challenged the action of AO in re-opening the assessment u/s 148 of the Act. 6. Before us, Ld.AR submits that the assessee is engaged in the business of manufacturing and trading of FMCG products and disclosed all the deposits credited in the bank accounts in the financial statements based on which the return of income was filed alongwith the Tax Audit Report for the year under appeal. The notice u/s 148 of the Act was issued for the sole purpose of verification of the credits in the bank accounts maintained with OBC, Sirsa bearing No.981131002602 & Account No.- 9897015005383. For this, he drew our attention to the reasons recorded for re-opening the assessment wherein in para 6, it is observed by AO that the credits in the aforesaid two bank accounts were not verified at any stage since no assessment was completed u/s 143(3) for impugned year. Ld.AR thus, submits that 148 proceedings cannot be resorted for making verification and in this regard, reliance is placed on the judgement of Co-ordinate Bench of SMC, Delhi in the case of Pure Departmental Store Pvt.Ltd. vs DCIT in ITA Nos.2330,2331, 2232 & 2334/Del/2023. Ld.AR also filed Printed from counselvise.com ITA No.3195/Del/2023 Page | 5 the detailed submissions wherein certain other aspects with respect to re-opening of assessment raised. The said submissions read as under:- 1. “This is an assessee appeal against CIT(A) order dated 14.09.2023, wherein CIT(A) confirmed the addition of Rs. 1,12,86,648/- made by AO in his order u/s 147/143(3) of the Act dated 27.12.2018. The case has reopened the case to carryout verification which is not permissible in the law 2. Brief facts of the case are that assessee is engaged in the business of Manufacturing and Trading of FMCG products. 3. Assessee filed its return of income on 22.10.2016. (PB Pg. 3-5). 4. Assessee financial statements were also audited (PB Pg.6-32) and assessee has also filed Tax Audit report. (PB Pg.33-44). 5. At this juncture, it is relevant to mention that to mention the assessee has disclosed closing balance of all the bank accounts in the Audited Financial statement (PB Pg, 29, Notes to Account 13) and these financial statement were duly filed on Income Tax E-Filling Portal along with Tax Audit Report. 6. Thereafter, assessment proceedings u/s 147 of the Act were initiated against the assessee for the sole purpose of verification of source of credit in OBC Bank Account No. 981131002602 and A/C No. 9897015005383 and the same is evident copy of reason recorded (PB Pg.47-50, Relevant Page 49-50, Para. 4-6). 7. At this juncture is pertinent to mention that OBC A/c bearing Account No. 9897015005383 is Machinery Loan Account. 8. It is also relevant to mention that Ld. AO has not formed any independent belief or recorded a finding that income of assessee has escaped assessment but merely stated in the reason to believe that facts and information need proper verification. Hence, he has reopened the case to carryout verification which is not permissible in the law and this issue was examined by Hon'ble ITAT Delhi in the group case of Pure Departmental Store Pvt. Ltd. vs DCIT, Circile-11(1), ITA No.2330, 2331,2232 & 2334/Del/2023, wherein the reassessment proceedings were initiated on the verbatim same as in the present case and the Hon'ble Tribunal held as under- \"2. It emerges at the outset that the first and foremost substantive issue that arises for the undersigned adjudication is that of validity Printed from counselvise.com ITA No.3195/Del/2023 Page | 6 of the impugned reopening itself wherein the learned assessing authority duly observes in it's identical wordings that the credits forming subject matter of section 68 along with income from undisclosed source had not been verified in the course of normal assessment at any point. 3. The Revenue is indeed fair enough in not rebutting this clinching factual position emanating from the case files. 4. Faced with this situation, I hereby quote PCIT v. Manzil Dinesh Kumar Shah (2018) 406 ITR 306 (Guj.) and PCIT v. Maheshwari Devi (2023) 454 ITR 755 (Jharkhand) to conclude that such a recourse to 148/147 proceedings for the purpose of verification only is not sustainable in law. The impugned reopening stand quashed in very terms.\" 9. Further, the above-mentioned contention of assessee is supported by the following judicial pronouncements-  PRINCIPAL COMMISSIONER OF INCOME TAX 5 VERSUS MANZIL DINESHKUMAR SHAH, 2018 (5) TMI 1176, Dated: 7-5-2018, GUJARAT HIGH COURT  PRINCIPAL COMMISSIONER OF INCOME TAX-5 VERSUS MANZIL DINESH KUMAR SHAH, 2019 (1) TMI 1284, Dated:-4-1-2019, SUPREME COURT ➤ THE PRINCIPAL COMMISSIONER OF INCOME TAX, DHANBAD VERSUS MAHESHWARI DEVI, 2022 (11) TMI 1117, Dated: 21-11-2022, JHARKHAND HIGH COURT ➤ SMT. MEENABEN DILIPKUMAR SONI VERSUS INCOME TAX OFFICER, WARD-5 (2) (5), AHMEDABAD, 2022 (1) TMI 332-ITAT AHMEDABAD, Dated.-November 29, 2021, TAT AHMEDABAD ➤ SHRI BUDHU, C/O- AKHILESH KUMAR VERSUS ITO, WARD-1, SHAMLI, 2020 (12) TMI 980, Dated: 23-12-2020, ITAT DELHI ➤ INCOME TAX OFFICER 12 (3) (3), MUMBAI VERSUS M/S. MANHATTAN IMPEX PVT. LTD., 2021 (5) TMI 746, Dated: 8-3-2021, ITAT MUMBAI ➤ SMT. MEERA DEVI AGRAWAL VERSUS THE INCOME TAX OFFICER-1 RAIGARH, 2021 (8) TMI 161, Dated: 29-7-2021, ITAT RAIPUR Hence, in the view of above-mentioned submissions and judicial pronouncements, it is evident that Ld. AO has not formed any independent belief or recorded a finding that income of assessee has escaped assessment but merely stated in the reason to believe that facts and information need proper verification. Hence, he has reopened the case to Printed from counselvise.com ITA No.3195/Del/2023 Page | 7 carryout verification which is not permissible in the law and liable to be quashed. Reasons recorded cannot be supplement-reopening to be tested based on reason recorded 10. In this regard, it is submitted that assessee during the course of proceedings before the AO has disclosed all facts relating to deposits and thus there is no escapement of income. 11. Further, the reopening of assessment has to be tested upon the basis of reason recorded at the time of issuing notice under section 148 of the Act. The reasons cannot be improved upon and/or supplemented and this contention of assessee is supported by following judicial pronouncements-  NORTHERN EXIM (P) LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX & ANR, DELHI HICH COURT  TAO PUBLISHING (P.) LTD. VERSUS DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-7, PUNE, BOMBAY HIGH COURT  FIRST SOURCE SOLUTIONS LIMITED VERSUS THE ASSISTANT COMMISSIONER OF INCOME TAX-12 (2) (1), MUMBAI, PRINCIPAL COMMISSIONER OF INCOME-TAX-12, MUMBAI, BOMBAY HIGH COURT ➤ NEW DELHI TELEVISION LTD. VERSUS DEPUTY COMMISSIONER OF INCOME TAX, Supreme Court Reasons recorded are vague and are not based on any tangible material 12. In this regard, it is submitted that it can be observed from reason recorded that there is no nexus between the reasons recorded and tangible material, if any on the basis which Ld.AO has formed his belief. The reasons recorded for reopening of assessment proceedings are vague and merely based on suspicion. 13. It is further submitted that in the reason recorded Ld.AO observed that assessee has failed to disclose the source of acquiring/construction of immovable assets. 14. However, it is pertinent to mention that assessee has not acquired or constructed any immovable property during the year under consideration. 15. This substantiate the contention of assessee that the reasons recorded for reopening of assessment proceedings are vague and merely based on suspicion and therefore reassessment proceedings are liable to be quashed. This contention of assessee is supported by following judicial pronouncements- Printed from counselvise.com ITA No.3195/Del/2023 Page | 8 ➤ PRINCIPAL COMMISSIONER OF INCOME TAX-6 VERSUS MEENAKSHI OVERSEAS PVT. LTD., 2017 (5) TMI 1428DELHI HIGH COURT, Dated.- May 26, 2017 ➤ HINDUSTAN LEVER LTD. VERSUS RB. WADKAR, ASSISTANT COMMISSIONER OF INCOME-TAX AND OTHERS (NO. 1), 2004 (2) TMI 41- BOMBAY HIGH COURT, Dated.- February 25, 2004  M/S. INGRAM MICRO (INDIA) EXPORTS PTE LTD. VERSUS THE DEPUTY COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) - 2 (2) (1) & OTHERS, 2017 (1) TMI 854-BOMBAY HIGH COURT, Dated.- January 4, 2017 ➤ M/S PALTECH COOLING TOWERS AND EQUIP. LTD. VERSUS DCIT, CIRCLE-14 (1), NEW DELHI, 2017 (4) TMI 820-ITAT DELHI, Dated.- April 17, 2017 Approval granted by the prescribed authority u/s 151 of the Act for reopening of assessment proceedings in mechanical manner and without application of mind 16. In addition to above mentioned contention that reasons recorded are vague and are not based on any tangible material, it is also relevant to mention that in the present case approval granted by the prescribed authority u/s 151 of the Act for reopening of assessment proceedings in mechanical manner and without application of mind. 17. In this regard, it is submitted that in the reason recorded AO has mentioned that assessee has failed to disclose the source of acquiring/construction of immovable assets. However, it is pertinent to mention that assessee has not acquired or constructed any immovable property during the year under consideration. 18. It is relevant to mention that sanction under section 151 of the Act is salutary as it ensures that reopening notices are not lightly issued and the same is done to avoid harassment of the taxpayers. 19. In the present case, case has reopened the case to carryout verification which itself is not permissible in the law, further reasons recorded are vague and are not based on any tangible material and contain incorrect information. Hence, Asst. CIT has granted approval under 151 of the Act in mechanical manner and without application of mind. This contention of assessee is supported by Hon'ble ITAT Delhi judgement in the case of PREM PAL BHAYANA VERSUS ITO, WARD-44 (7), NEW DELHI., 2024 (12) TMI 1171 - ITAT DELHI, Dated.- December 20, 2024, wherein Hon'ble Tribunal has observed that approval granted based on such reasons is devoid of any objectivity then such approval is without application of mind. Relevant finding of the tribunal is as under- Printed from counselvise.com ITA No.3195/Del/2023 Page | 9 \"10.1. The jurisdiction assumed under s. 147 of the Act is in controversy. As pointed out on behalf of the assessee, the 'reasons to believe' contemplated under s. 147 has been held with reference to FY 2013-14 relevant to AY 2014-15 whereas the AY in consideration is AY 2012-13. Thus the entire foundation of holding the reason to believe has crumbled at the threshold. Besides, it is also noticed that the AO has made reference to certain information received from Investigation Wing based on search and seizure action carried out in ASL Group. However, the reference made to such information is non-descript and cryptic. The reasons recorded are shorn of any particulars of information whatsoever. The vague reasons cannot be the basis for assumption of jurisdiction under s. 147 of the Act as held in long line of precedents including: PCIT vs Meenakshi Overseas Pvt.Ltd. 2017 (5) TMI 1428-Delhi High Court dated 26.05.2017; Hindustan Lever Ltd. vs RB Wadkar, ACIT & Others (No.1), 2004 (2) TMI 41-Bombay high Court dated 25.02.2004; M/s. Ingram Micro (India) Exports Pte. Ltd. vs DCIT (International taxation)-2(2)(1) & Others, 2017 (1) TMI 854-Bombay High Court dated 04.01.2017; and M/s. Paltech Cooling Towers & Equip. Ltd vs DCIT, Circle-14(1), New Delhi, 2017 (4) TMI 820-ITAT, Delhi dated 17.04.2017. 11. Furthermore, the approval granted based on such reasons is devoid of any objectivity and formation of reasons to believe by AO is in relation to a different AY. The Ld.Pr.CIT has granted approval under 151 of the Act based on such reasons apparently without application of mind. The approval under s. 151 of the Act so granted thus cannot be countenanced in law. The notice issued under s. 148 of the Act based on reasons and approval suffering from the vice of substantive defect is clearly nonest. Thus, the jurisdiction assumed is without meeting the pre-requisites stipulated under s. 147 of the Act. Hence the re-assessment order thus is bad in law. Consequently, the re-assessment order in question is quashed.\" Reasons to Believe vs Reasons to Suspect 20. In this regard, it is submitted that the Ld. AO has alleged that the assessee company has failed to furnish the facts as well as documentary evidences regarding the source of credits during the investigation proceedings made by ADIT (Inv.), Rohtak, without pin-pointing the details which the assessee has failed to submit leading to his suspicion against it. This clearly proves that the Ld. AO has blindly accepted the information of the investigation wing without making any effort for making any further enquiry with regard to information received by him. Printed from counselvise.com ITA No.3195/Del/2023 Page | 10 21. Ld. AO has just relied on the information received from the investigation wing and did not make any further enquiry on his own to conclude whether the income has actually escaped assessment or not. On going through the reasons recorded, it can be observed that, just on the belief that the assessee is associated with Dera Sacha Sauda, the Ld. AO has reopened the case of assessee on the likelihood that there might be some income which could have escaped assessment in the case of the assessee company. 22. It is further submitted that re-opening the case u/s 148/147 of the Act, there should be a reason to believe, to be more specific, reopening on the basis of reason to suspect is held to be null and void. This contention of assessee is supported by following judicial pronouncements- a. Income-tax Officer vs. Lakhmani Mewal Das, 1976 (3) TMI 1 (SC), SUPREME COURT OF INDIA. b. CIT vs. Gupta Abhushan (P.) Ltd., High Court of Delhi, 2008 (10) TMI 31 c. Shamshad Khan vs. Assistant Commissioner of Income-tax, 2017 (6) TMI 599 In the view of above-mentioned submissions and judicial pronouncements, it is evident the assessment u/s 147 of the Act is bad in law initiated on the basis of vague reason without any tangible material and without application and hence, the same is liable to be quashed.” 7. On the other hand, Ld.Sr.DR vehemently supported the order of the lower authorities and submits that in the instant case, there was information that the assessee has not disclosed these two bank accounts regular return of income filed and accordingly, after recording the satisfaction, the case of the assessee is re-opened assessment by issue of notice u/s 148 of the Act. He further submits that the AO has followed the due procedure for re-opening the assessment and therefore, there is no error in the action of the AO in re-opening therefore, the assessment order deserves to be uphold. 8. Heard the contentions of both the parties and perused the material available on record. From the reasons recorded, it is seen Printed from counselvise.com ITA No.3195/Del/2023 Page | 11 that the AO has recorded the satisfaction that the income to the extent of INR 1,12,86,648/- had escaped assessment being the deposits in two bank accounts maintained with OBC, Sirsa. As from the face of the return of income filed, it could not be ascertained where these accounts declared in the return of income therefore, the AO has recorded the satisfaction of escapement of income which in our considered opinion is correct. It is further seen that merely stating that credits in these accounts were not verified at any stage does not lead to the satisfaction that re- assessment proceedings were initiated for mere verification of the fact rather in the reasons itself. The AO in categorical terms has recorded the satisfaction of escapement of income and therefore, we do not find any error in the re-opening of the assessee accordingly, the notice u/s 148 is hereby, hold as valid. Ground Nos. 2 to 7 raised by the assessee are accordingly, dismissed. 9. Ground Nos.8 to 10 are in respect to the addition of INR 1,12,86,648/- made by holding the credits in the bank accounts with OBC, Sirsa as unexplained and undisclosed income of the assessee. 10. Before us, Ld.AR submits that these bank accounts are duly recorded in the books of accounts and closing balances were duly incorporated in the final accounts. He also submits that the total entries contained in the bank account with OBC, having Account No.9891131992602 at INR 1,09,11,554/- are explained as inter bank transfer, rejection of payments and cash deposits of INR 01 Lakh. All these deposits were duly explained by the assessee. Printed from counselvise.com ITA No.3195/Del/2023 Page | 12 Further, with respect to the Account No.098911310026002 having deposits of INR 3,75,094/-, it was explained that these credit entries are transferred from other bank accounts with OBC and therefore, there is no entry which remained unexplained or undisclosed. In this regard, a detailed submission is also filed as under:- “Oriental bank of commerce (A/c No. 09891131002602): Addition of Rs. 1,09,11,554/- made on account of all credit entries appearing in bank statement 1. The Ld. AO has made the addition of Rs.1.12.86,648/- on account of all the entries appearing in the credit side of the bank account maintained during the year under consideration. While making the addition Ld. AO did not even tried to check the nature of credit entries appearing in the bank statement, he simply aggregated all the credit entries appearing in the bank statement by ignoring the documents and evidences submitted by the assessee at the time of assessment proceedings. 2. During the year under consideration, the assessee company has received bank credits amounting to Rs. 1,09,11,554/-in the bank account maintained with Oriental Bank of Commerce having account no. 09891131002602, (PB page no. 94-100), on account of following reasons: - S.No. Particulars Amount (Rs.) 1. Cash deposits 1,00,000/- 2. Inter Bank transfer 76,11,554/- 3. Payment rejected by bank 32,00,000/- Total 1,09,11,554/- 3. The cash deposits of Rs.1,00,000/- were made by the assessee out of the unutilized cash, earlier withdrawn by the assessee to carry out its business activities. In order to substantiate the same assessee has duly submitted the copy of cash book (PB Pg.74-80), before the Ld. AO at the time of assessment proceedings. 4. During the year under consideration assessee has made the following interbank transfers: Printed from counselvise.com ITA No.3195/Del/2023 Page | 13 5. Further, apart from the specific credit entries appearing in the bank statement of the assessee on account of cash deposits and inter-bank transactions as explained supra, there were few credits on account of reversed transactions or transactions declined by the bank due to some error. 6. The following entries appearing in the bank statement of the assessee was on account of system error: Printed from counselvise.com ITA No.3195/Del/2023 Page | 14 7. The entries mentioned in the above table amounting to Rs. 32,00,000/- were basically the amount paid by the assessee to the parties from whom machinery was purchased but actually could not materialize due to some technical errors and were rejected by the bank. The same can be made evident from the corresponding credit entries reflecting in the bank statement on the same day. Further, the narration reflecting in the bank statement against the above-mentioned transaction are self- explanatory which makes it clear that these debit transactions were declined by the bank. 8. During the year under consideration, the assessee company has received bank credits amounting to Rs. 3,75,094/-in the bank account maintained with OBC Bank having account по. 09897015005383, (PB Pg.101-103) on account of following reason: - S.No. Particulars Amount(Rs.) 1. Inter Bank Transfer from OBC bank a/c having account No.09891131002602 3,75,094/- Total 3,75,094/- 9. During the year under consideration assessee has made the following interbank transfers:- Date of transaction Narration as appearing in bank statement Name of the Bank from which amount is transferred AMoutn of transaction reflecting in bank statement 19.12.2015 Loan Coll. From 09891131002602 OBC A./c.No.09891131002602 52,753 (PB Page 95) 31.12.2015 Loan Coll. From 09891131002602 OBC A./c.No.09891131002602 16,950 (PB Page 95) 30.01.2016 Loan Coll. From 09891131002602 OBC A./c.No.09891131002602 64,655 (PB Page 97) 03.02.2016 Loan Coll. From 09891131002602 OBC A./c.No.09891131002602 1,03,050 (PB Page 98) 29.02.2016 Loan Coll. From 09891131002602 OBC A./c.No.09891131002602 66,567 (PB Page 98) 31.03.2016 Loan Coll. From 09891131002602 OBC A./c.No.09891131002602 71,119 (PB Page 98) Total 3,75,094/- 10. From the above table and bank statement, it is apparent that funds have been transferred from OBC current a/c (09891131002602) to loan a/c (09897015005383) to meet bank charges and interest obligations of the loan taken. Hence, in the view of above-mentioned submissions and judicial pronouncement, it is evident that Ld.AO has made the addition of Rs. 1,12,86,648/- by engaging in surmises and conjecture and the same was Printed from counselvise.com ITA No.3195/Del/2023 Page | 15 confirmed by CIT(A) by engaging in surmises and conjecture. Therefore, the addition is liable to be deleted.” 11. Ld.AR submits that since both bank accounts are forming part of the regular books of accounts and all the credit entries are duly incorporated therefore, no addition is required to be made on this account as undisclosed income of the assessee and he requested for the deletion of the addition made. 12. On the other hand, Ld.Sr.DR for the Revenue vehemently supported the orders of the lower authorities and submits that during the course of assessment proceedings, the assessee has failed to submit these details before the AO therefore, the matter may be sent back to the AO for necessary verification. 13. Heard the contentions of both the parties and perused the material available on record. From the financial statements of the assessee, filed in the Paper Book and the copy of the return of income, it is seen that these bank accounts are included in the bank accounts maintained by the assessee as declared in Note No.13 to the final accounts. Further, it is claimed by the assessee of the credit entries contained therein are duly recorded in the books of accounts for which the copy of the ledger accounts of both the bank accounts alongwith statement of accounts as issued by the bank are filed in the Paper Book and Ld.AR tried to demonstrate with these entries are recorded in the books of accounts. However, at this stage, we cannot verify each and every entry contained in the bank account with the entries recorded in the books of accounts Printed from counselvise.com ITA No.3195/Del/2023 Page | 16 and therefore, we set aside this issue to the file of AO with the direction to verify whether both these accounts are recorded in the regular books of accounts and all the entries appearing in these two bank accounts are forming part of the regular books of accounts and if the contention of the assessee is found correct, no additions required to be made in respect to the credit entries appearing in these two bank accounts. With these directions, Grounds of appeal Nos. 8 to 10 raised by the assessee are allowed for statistical purposes. 14. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 31.07.2025. Sd/- Sd/- (MADHUMITA ROY) JUDICIAL MEMBER *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "