WALTAIR TRADERS,VISAKHAPATNAM V. NEAC, DELHI

ITA 144/VIZ/2024

AI Insights

Waltair Traders, engaged in coal trading, filed an appeal against the additions made to their income by the Assessing Officer under various sections of the Income Tax Act, 1961, for the assessment year 2018-19. The additions included non-genuine purchases, unexplained expenditure, and unaccounted income from interest and contract receipts. The Tribunal found that the purchases from M/s. Adani Enterprises Ltd. were not properly verified and directed a re-examination. It was also found that the interest income and contract receipts were already accounted for in the Profit & Loss statements, leading to their deletion from the taxable income. The issue of unexplained cash deposits was sent back for further investigation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633182 (ITAT-VISAKHAPATNAM)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Business expenditure; Unexplained cash credit; Unexplained expenditure; FORM 26AS; Bogus
• Section: 143(3); 142(1); 68; 69; 133(6); 69C; 194C

Judgement Text

"आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM (HYBRID HEARING) श्री रिीश सूद ,न्याधयक सदस्य एिं श्री एस बालाक ृष्णन, लेखा सदस्य क े समक्ष BEFORE SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकर अपीलसं./I.T.A.No.144/VIZ/2024 (निर्धारण वर्ा/ Assessment Year: 2018-19) Waltair Traders 6-23-4/15, Flat No. IV Surya Residency East Point colony Visakhapatnam – 530017 Andhra Pradesh [PAN:AACFW4826C] v. ACIT – CIRCLE (3) Infinity Towers Visakhapatnam Andhra Pradesh (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Mrs. Hema Latha. K, CA राजस्व का प्रतततितित्व/ Department Represented by : Shri M.N. Murthy Naik, CIT(DR) सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 13.05.2025 घोर्णध की तधरीख/Date of Pronouncement : 09.06.2025 आदेश /O R D E R PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No. I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 2 ITBA/NFAC/S/250/2023-24/1060711824(1) dated 09.02.2024 for the A.Y.2018-19 arising out of order passed 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 26.04.2021. 2. Briefly stated the facts of the case are, assessee is engaged in the business of coal trading and has filed return of income for the A.Y. 2018-19 on 31.10.2018 admitting a total income of Rs. 2,95,50,830/-. The case was selected for complete scrutiny for examining the business expenses. Thereafter statutory notices under section 143(2) and 142(1) of the Act were issued and served on the assessee. Assessee did not respond to the above notices. Later, the case was referred to verification unit for physical verification and it was noticed that letter dated 26.02.2021 has been served physically on assessee on 27.02.2021. In response, assessee furnished information called for. On verification of the information furnished by the assessee, the Ld. Assessing Officer [hereinafter in short “Ld. AO\"] observed that there has been substantial increase in the sales and purchases when compared to previous year. Assessee furnished the details regarding sales and purchases above Rs.10,00,000/-. Ld. AO thereafter issued notice under section 133(6) of the Act to six parties seeking details from them regarding the purchases made by the assessee. The Ld. AO found that the following three parties have not responded or partly responded: - I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 3 Sl.No. Name of Purchase Party Amount (In Rs.) 1. M/s. Delta Global Inc. (Prop Anurag Goel) 16,01,00,000 2. M/s. Sri Balaji Coal Udyag (Prop. Karn Agarwal) 4,54,98,045 3. M/s. SMS Carbon and Minerals Pvt Ltd., 4,79,97,217 Total 25,31,95,262 3. Ld. AO thereafter concluded that these transactions are nothing the paper transactions and treated the same as non-genuine by adding an amount of Rs.25,31,95,262/- to the total income of the assessee. 4. Further, Ld. AO also noticed that assessee has claimed to have made purchase of Rs.46,06,78,644/- from M/s. Adani Enterprises Ltd., and therefore issued notice under section 133(6) of the Act to the party seeking details. In response, M/s. Adani Enterprises Ltdfurnished the requisite details. On going through the ledger account furnished by the party, Ld. AO observed that M/s.Adani Enterprises Ltd has made sales of Rs.87,08,56,625/- to the assessee and therefore the Ld AO considered the balance amount of Rs.41,01,77,981/- as unexplained under section 69C of the Act. 5. Further, Ld. AO also noticed that the assessee has received interest under section 194A of the Act of Rs.4,26,634/- and Rs. 28,89,339/- from Shri Brajrang Power &Ispat Ltd., and Shri Girija Alloy & Power (I) P. Ltd., respectively. Ld.AO observed that that the interest income has not been offered I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 4 for taxation and therefore added the sum of Rs. 33,15,973/- to the total income of the assessee. 6. Further on going through Form 26AS data, Ld. AO observed that assessee has received contract receipts under section 194C of the Act for Rs.48,70,809/- and Rs.7,99,730/- from M/s. Delta Paper Mills Ltd., and M/s.Waltair Traders respectively. Ld. AO observed that assessee has not offered income of Rs.56,70,539/- and therefore added the same to the total income of the assessee. Further on going through the 26AS, Ld. AO observed that an amount of Rs.1,17,68,558/- has been deducted as TCS where the assessee claimed Rs.1,18,97,704/- as TCS in the return of income and therefore added the difference of Rs. 1,29,146/- to the total income of the assessee. 7. Further, Ld. AO also noticed that assessee has deposited cash of Rs.63,00,000/- in its current account with HDFC Bank Limited and vide notice under section 142(1) dated 03.12.2020 asked the assessee to furnish the source of deposits with documentary evidences. Since the assessee did not furnish any details Ld. AO treated the cash deposits as unexplained credits under section 68 of the Act and added to the total income of the assessee. 8. Further, Ld. AO also observed difference in commission of sales amounting to Rs. 10,67,285/- and added the same to the total income of the assessee. Further Ld. AO also noticed that assessee has claimed Rs.95,42,395/- I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 5 as handling charges in the Profit & Loss Account whereas furnished details for an amount of Rs.75,21,530/-. Therefore, he added the difference of Rs.20,20,865/- to the total income of the assessee. 9. Ld. AO issued a show-cause notice dated 21.04.2021 asking the assessee to show cause why the assessment should not be completed as per the draft assessment order as discussed in the earlier paragraphs. Since the assessee did not respond to the notices, the Ld. AO proceeded to add an amount of Rs.68,18,77,051/- to the total income of the assessee. 10. Feeling aggrieved by the additions made by the Ld. AO, assessee filed an appeal before Ld. CIT(A). During the appellate proceedings, the assessee was asked to furnish its submissions on the additions made by the Ld. AO. The submissions of the assessee were forwarded to the Ld. AO for his comments and observations since the assessee has claimed that no proper opportunity was given to the assessee during the assessment proceedings. The Ld. AO submitted the Remand Report dated 13.11.2023. Considering the Remand Report furnished by the Ld. AO, the Ld. CIT(A) sustained the additions of the Ld. AO and partly allowed the appeal of the assessee. 11. On being aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising the following grounds of appeal : - I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 6 “1. That under the facts and circumstances of the case, the orders passed u/s 143(3) of the IT Act dt.26-04-2021 and partly confirmed by Commissioner of Income-tax (Appeals), (in short 'CIT(A)') dt.31-01-2024, is not in accordance with the provisions of law. 2. The Ld. CIT(A) erred in confirming the addition made by AO towards alleged unexplained expenditure u/s 69 of the IT Act amounting to Rs.41,01,77,981/-. 3. The Ld. CIT(A) erred in confirming the action of Assessing Officer in treating the purchases amounting to Rs.25,31,95,262/- as non-genuine, which is contrary to the facts of the case. 4. The Ld.CIT(A) erred in confirming the addition made by Assessing Officer towards interest income amounting to Rs. 33,15,973/-, without appreciating the fact that assessee has already accounted for them in its books of accounts. 5. The Ld. Commissioner of Income Tax (Appeals) (in short \"CIT(A)) erred in confirming the addition made by Assessing Officer treating the entire contract receipts amounting to Rs. 56,70,539/- reflected in Form 26AS as assessee's income, which addition was made and confirmed without considering the submissions made by assessee. 6. The Ld. Commissioner of Income Tax (Appeals) (in short \"CIT(A)\") erred in confirming the addition made by Assessing Officer u/s 68 of the IT Act towards the cash deposits in bank account amounting to Rs. 63,00,000/- 7. The Ld. Commissioner of Income Tax (Appeals) (in short \"CIT(A)\") erred in confirming the. disallowance of expenses claimed towards handling charges amounting to Rs. 3,39,675/-. 8. For these and other reasons that are to be urged at the time of hearing it is the prayer of the assessee before the Hon'ble bench that the additions /disallowance made by Assessing Officer and confirmed by CIT(A) may please be deleted in the interest of justice.” 12. Ground Nos. 1 and 8 are general in nature and needs no specific adjudication. I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 7 13. Ground No.2 agitated by the assessee is with respect to the confirming the addition as unexplained expenditure under section 69C of the Act amounting to Rs. 41,01,77,981/-. On this issue Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that during the remand proceedings the Ld. AO on going through the ledger account submitted by the M/s. Adani Enterprises Ltd., has confirmed that the entries mentioned as “sales - domestic” amounting to Rs.45,26,76,540/-. Ld. AO also accepted that the purchases as per the 26AS, insight portal and GST return amounts to Rs.44,35,66,767/-. Ld.AR pleaded that even though the Ld. AO concurred with the purchases and the Ld. CIT(A) admitted the purchase figures furnished by the assessee as correct but has erred in deciding in confirming the additions made by the Ld.AO. She also referred to the paper book Page No.86 wherein the ledger extract of M/s. Adani Enterprises Ltd., is submitted for perusal before the Revenue Authorities. She pleaded that even though the sum of the purchases matches with the ledger extract submitted by M/s. Adani Enterprises Ltd., addition sustained by the Ld.CIT(A) is not justifiable. She pleaded that the issue may be again remitted back to the file of Ld. CIT(A) for verification of the ledgers. 14. Per contra, Ld. DR heavily relied on the orders of the Ld. CIT(A). He also further submitted that the Ld. CIT(A) has not passed a reasoned order with respect to the addition made by the Assessing Officer. I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 8 15. We have heard both the sides and perused the material available on record. As argued by the Ld.AR, the Ld. AO while arriving at the purchases made by the assessee from M/s. Adani Enterprises Ltd., has resorted to add back the positive figures in the ledger accounts and therefore arrived at the figure of Rs.87,08,56,625/- It is noticed that the Ld. AO has not properly verified the ledger account of M/s. Adani Enterprises Ltd., regarding the purchases made by the assessee neither the Ld. AO has made any enquiry or obtained any confirmation for the purchases made from M/s. Adani Enterprises Ltd., There is merit in the submissions of the Ld.AR that the purchases made by the assessee which is shown as “sales domestic” and “plot rent” in M/s Adani Enterprises Ltd ledger should be considered for the purposes of the total purchases made by the assessee during the impugned assessment year. We therefore direct the Ld.AO to enquire and obtain necessary confirmation from M/s. Adani Enterprises Ltd., regarding the purchases made by the assessee during the impugned assessment year and decide the issue on merits accordingly. Thus, this ground is allowed for statistical purposes. 16. Ground No. 3 is with respect to considering the purchases amounting to Rs. 25,31,95,262/- as non-genuine by the Revenue. Ld.AR submitted that to prove the purchases are genuine assessee has furnished the GST Returns in Form 2A and also Form 26AS and the status report of vendors where the purchase transactions are reflected. She submitted that since the party did not I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 9 respond to the notice under section 133(6) of the Act cannot be a valid ground for considering the purchases as bogus. She also further pleaded that revenue has not raised any doubts regarding the sales made by the assessee. She also submitted that the sample invoices were produced before the Ld. AO and the bank statements reflecting the payments made by the assessee to the vendors are also furnished before the Revenue Authorities. She pleaded that the revenue has not raised any doubts regarding the GST records and sample invoices but merely made an addition since the suppliers failed to respond to the notices issued under section 133(6) of the Act which is not justifiable. 17. Per contra, Ld. DR heavily relied on the orders of the Revenue Authorities. He also conceded that the Ld. CIT(A) has not passed the reasoned observations while sustaining the additions made by the Ld. AO. 18. We have heard both the sides and perused the material available on record. It is an admitted and undisputed fact that the purchases made by the assessee are duly reflected in the GST records of the assessee as well as the vendors. It was also the submission of the Ld.AR that sample invoices were also furnished before the Revenue Authorities. It is not justifiable on the part of the revenue to make the addition based on the non-response by the vendors in respect to the notice issued under section 133(6) of the Act whereas the other evidences proves the genuineness of the transactions entered into by the assessee. Ld.AR also demonstrated before us the copies of sample invoices and I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 10 the transportation documents which was also furnished before Ld. AO. In the light of the above circumstances, we are of the considered view that the additions made by the Ld. AO is not justifiable on the sole reason that the vendors have not responded to the notice under section 133(6) of the Act whereas other evidences furnished by the assessee prove the genuineness of the transactions. We therefore direct the Ld. AO to delete the addition of Rs.25,31,95,262/- and thereby allowing this ground raised by the assessee. 19. Ground No. 4 is with respect to the confirming the addition of Rs.33,15,970/- towards interest income stating that the assessee has failed to declare the income while filing the return of income. On this issue, Ld.AR submitted that the interest reflected in Form 26AS pertains to amount received from Shri Brajrang Power &Ispat Ltd., and Shri Girija Alloy & Power (I) P. Ltd., towards Letter of Credit (LC) discounting charges. She also submitted that since the LC discounting charges paid is more than the LC discounting charges received and hence the net amount of Rs.5,82,641/- is disclosed as expenditure on the debit side in the Profit & Loss Account. She also referred to Page No. 94 of the paper book wherein the Profit & Loss Account is enclosed. She referred to the debit side of the Profit & Loss Account wherein the “interest & financial charges” is disclosed at Rs.32,66,957.02. Thereafter she also invited the attention to Page No. 92 of the paper book wherein the “schedule for interest and financial charges” is computed. She submitted that the “interest received” I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 11 from the LC discount has been netted off from the “Interest and Financial Charges” paid and hence the same was offered by the assessee after being netted off. She therefore pleaded that the addition sustained is not justifiable and deserves to be deleted. 20. Per contra, Ld. DR relied on the orders of the Revenue Authorities and submitted that the Ld. CIT(A) has not passed a reasoned order. 21. We have heard both the sides and perused the material available on record. It is an admitted fact that the assessee has netted off the interest received from the LC discount as displayed in Page No. 92 of the paper book which is reproduced below: - Sl.No Particulars Amount 1. Interest and finance Charges 26,76,724.77 2. Bank Charges 7,591.25 3. Interest Received from LC Discount (33,16,215) 4. Interest paid on LC discount 38,98,856 Total 32,66,957.02 22. The net amount of Rs.32,66,957.02 is claimed as expenditure in the Profit & Loss Account submitted by the assessee in Paper Book Page No. 94 which is extracted below:- I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 12 I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 13 23. These evidences are never disputed by the Revenue. In these circumstances, we are of the considered view that the assessee has disclosed the interest receipts who has netted off against the interest payment while preparing the Profit & Loss Account. Therefor, we do not find any merit in the addition made by the Revenue Authorities and we direct the Ld. AO to delete the addition of Rs. 33,16,215/-. Thus, this ground raised by the assessee is allowed. 24. Ground No. 5 is with respect to treating the entire contract receipts amounting to Rs. 56,70,739/- as reflected in Form 26AS as income of the assessee. On this issue, Ld.AR submitted that the contract income is in the nature of customs and handling charges received by the assessee which is being netted off against the customs and handling charges paid by the assessee during the impugned assessment year. She referred to Paper Book Page No. 100 wherein the Profit & Loss Account of the assessee is furnished. She referred to coal handling charges debited to the Profit & Loss Account amounting to Rs.95,42,395/-. She also referred to Page No. 98 of the paper book wherein the “Schedule regarding coal handling charges” paid and received has been netted off disclosing in the net figure in the Profit & Loss Account of the assessee. She therefore pleaded that addition made by the Ld. AO is not justifiable and hence deserves to be deleted. 25. Per contra, Ld. DR relied on the orders of the Revenue Authorities and submitted that Ld. CIT(A) has not passed the reasoned order. I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 14 26. We have heard both the sides and perused the material available on record. It is an undisputed fact that the assessee has admitted an amount of Rs.95,42,395/- as coal handling charges in the Profit & Loss Account for the year ended 31.03.2018 as disclosed in Paper Book at Page No. 100. Further in paper book at Page No. 98 assessee has prepared a schedule for coal handling charges which is extracted below: Sl.No Particulars Amount 1. Customs and Handling charges Paid 1,53,04,045.24 2. Customs and Handling charges Received 57,61,650.73 Total 95,42,394.51 27. From the above extraction, we notice that assessee has accounted for the coal and handling charges received amounting to Rs. 57,61,650.73 as against the coal and handling charges paid and has disclosed a net expenditure of Rs.95,42,394.51/- in the Profit & Loss Account of the assessee. Hence there is no merit in the addition made by the Revenue Authorities and we direct the Ld.AO to delete the additions of contract receipts of Rs.56,70,539/-. Thus, the ground raised by the assessee is allowed. 28. Ground No. 6 is with respect to the addition under section 68 of the Act on the cash deposits amount of Rs. 63,00,000/-. On this issue Ld.AR submitted that assessee frequently withdraws cash from the bank account to meet the handling and loading expenses in cash and the balance cash will be later redeposited into the bank account. She also submitted that the bank statements I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 15 and the cash book are enclosed in the paper book. Ld. AO erred in considering the cash book and bank statements filed by the assessee wherein the withdrawals and cash deposits were reflected, the Ld. AO has casually made an addition of Rs.63,00,000/- as unexplained credit. She therefore pleaded that matter may be remitted back to the file of the Ld. AO for proper verification. 29. Per contra, Ld. DR relied on the order of the Revenue Authorities and submitted that Ld. CIT(A) has not passed a reasoned order. 30. We have heard both the sides and perused the material available on record. Considering the nature of business of the assessee we find merit in the argument of the Ld.AR that the assessee regularly withdrawing cash from the bank account for meeting the loading and handling expenditure in cash. She also referred to various entries in the cash book regarding cash deposits made by the assessee which is reflecting in the books of accounts. The only grievance of the assessee is that the Ld.AO has not properly verified the cash book and the bank statements filed by the assessee wherein the cash withdrawals and cash deposits are reflected. In these circumstances, we consider it deem fit to remit the matter back to the file of Ld. AO to verify the cash withdrawals, cash book and bank statements submitted by the assessee and decide the issue on merits by providing one more opportunity to the assessee. Accordingly, this ground is allowed for statistical purposes. I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 16 31. With respect to Ground No. 7 regarding the disallowances of expenditure of handling charges amounting to Rs. 3,39,675/-. On this issue, Ld.AR submitted that the assessee has paid the custom duty amounting to Rs.13,49,610/- as submitted in Paper Book at Page No. 137 of the paper book. Further, assessee has incurred handling charges of Rs. 81,92,784/- wherein the ledger is attached in Paper Book at Page No. 130. She submitted that the Ld.CIT(A) has wrongly considered the amount paid towards custom duty as Rs.10,09,936/- as against Rs.13,49,610/- this being a clerical error by the Revenue, the Ld.AR pleaded that the addition cannot be justified. 32. Per contra, Ld. DR relied on the orders of the Revenue Authorities. 33. We have heard both the sides and perused the material available on record. On verification of the submissions made by the Ld.AR and Page Nos.137 and 138 of the paper book, assessee has incurred the following expenditure: - Sl.No. Particulars : Amount in Rs. (i) Customs duty : Rs.13,49,610.27 (ii) Handling charges : Rs.81,92,784.24 Total Rs.95,42,395/- Whereas we notice that while considering the payment towards customs duty the Revenue Authorities have considered and adopted a figure of I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 17 Rs.10,09,936/- as against the actual expenditure of Rs.13,49,610/-, thus resulting in difference. We therefore find no justification in the addition made on account of adopting the wrong figures and hence the addition of Rs.3,39,675/- is not justifiable and deserves to be deleted. We therefore direct the Ld. AO to delete an amount of Rs. 3,39,675/-. Thus, the ground raised by the assessee is allowed. 34. In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 09th June, 2025. Sd/- (रिीश सूद) (RAVISH SOOD) न्याधयक सदस्य/JUDICIAL MEMBER Sd/- (एस बालाक ृष्णन) (S. BALAKRISHNAN) लेखा सदस्य/ACCOUNTANT MEMBER Dated:09.06.2025 Giridhar, Sr.PS I.T.A.No.144/VIZ/2024 Waltair Traders Page. No 18 आदेश की प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee : Waltair Traders 6-23-4/15, Flat No. IV Surya Residency East Point colony Visakhapatnam – 530017 Andhra Pradesh 2. रधजस्व/ The Revenue : ACIT – CIRCLE (3) Infinity Towers Visakhapatnam Andhra Pradesh 3. The Principal Commissioner of Income Tax 4. नवभधगीयप्रनतनिनर्, आयकरअपीलीयअनर्करण, नवशधखधपटणम /DR,ITAT, Visakhapatnam 5. The Commissioner of Income Tax 6. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam "