Alikhan Mohammad Adilabad Vs ITO (ITAT Hyderabad)
SEO Title
ITAT Partly Allows Appeal: Section 68 Addition Sustained, 115BBE Rate Relief Granted for AY 2017-18
SEO Description
ITAT sustains ₹12.92 lakh Section 68 addition but grants relief by directing 30% Section 115BBE tax rate for AY 2017-18.
Summary: The appeal was filed by Shri Alikhan Mohammad against the order dated 21.01.2026 passed by the Learned Addl/JCIT(A)-2, Ludhiana for A.Y. 2017-18. The assessee had declared total income of Rs. 3,34,580/- in the return filed on 25.09.2017. In scrutiny assessment under section 143(3), the Assessing Officer made an addition of Rs. 25,622/- towards disallowance of expenditure and Rs. 12,92,305/- towards unexplained cash credits under section 68, assessing total income at Rs. 16,52,507/-. The Addl/JCIT(A) deleted the Rs. 25,622/- disallowance but confirmed the Rs. 12,92,305/- addition.
Before the Tribunal, the assessee contended that the Rs. 12,92,305/- represented advances received against sales from 67 parties and that the advances were subsequently adjusted against sales made to those parties in the immediately succeeding financial year. The Tribunal, however, found that the ledger accounts did not contain postal addresses, PANs or other identification particulars and that no independent documentary evidence had been furnished to establish the identity and creditworthiness of the parties or genuineness of the transactions. The Tribunal also noted that the amounts were generally in the range of Rs. 19,000/- to Rs. 20,000/-, were received in cash, and that in all 67 cases the subsequent sales corresponded exactly with the respective advances. It held that subsequent accounting entries in the assessee’s own books could not, by themselves, establish the genuineness of the original credits. Accordingly, the Tribunal found that the assessee had failed to discharge the onus under section 68 and sustained the addition of Rs. 12,92,305/-.
The assessee’s additional ground challenging application of the enhanced 60% rate under section 115BBE was admitted under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963, as it raised a legal issue stated to arise from the existing record. The Tribunal noted its earlier decision in Soma Shekhar Bingumalla Vs. ITO, ITA No. 76/Hyd/2026 for A.Y. 2017-18, dated 29.07.2026, which had considered the decisions in Deepak Maratha Vs. Union of India & Others and Maruti Babu Rao Vs. ACIT and held that the enhanced 60% rate under section 115BBE was not applicable to A.Y. 2017-18. Respectfully following that decision, the Tribunal held that the enhanced rate was not applicable and directed the Assessing Officer to compute tax liability on the impugned addition at the rate applicable under the unamended provisions of section 115BBE. The appeal was consequently partly allowed.
List of Cases Discussed / Relied Upon
- National Thermal Power Co. Ltd. Vs. CIT,(1998) 229 ITR 383 (SC) — relied upon in admitting the additional legal ground under Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963. :contentReference[oaicite:1]{index=1}
- Soma Shekhar Bingumalla Vs. ITO, ITA No. 76/Hyd/2026, A.Y. 2017-18, dated 29.07.2026 — followed by the Tribunal on the applicability of the enhanced 60% rate under section 115BBE to A.Y. 2017-18.
- Deepak Maratha S/o Ramchandra Maratha Vs. Union of India, Rajasthan High Court, Civil Writ Petition No. 3625/2020 — decision considered in the Tribunal’s earlier ruling concerning the applicability of the enhanced section 115BBE rate. :contentReference[oaicite:2]{index=2}
- Maruti Babu Rao Vs. ACIT, Kerala High Court — decision relied upon by the Department and considered in the Tribunal’s earlier ruling concerning the enhanced rate under section 115BBE.
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Hyderabad ITAT: ₹12.92 Lakh Cash Credits Sustained, but 60% Tax Rate Under Section 115BBE Held Inapplicable for AY 2017-18
In Alikhan Mohammad v. ITO, ITA No. 355/Hyd/2026 (AY 2017-18), order dated 21.08.2026, the Hyderabad ITAT considered an addition of ₹12,92,305 under Section 68 representing alleged advances received in cash from 67 parties against future sales.
The assessee contended that the advances were subsequently adjusted against sales made to the same parties in the succeeding financial year. However, the Tribunal noticed that the assessee produced only self-maintained ledger accounts and failed to furnish basic particulars such as addresses, PANs or other identification details, or independent evidence establishing the identity and creditworthiness of the parties and genuineness of the transactions.
The ITAT also found the transaction pattern unusual: most advances were cash receipts of around ₹19,000–₹20,000, and in all 67 cases, the subsequent sale amount exactly matched the earlier advance. The Tribunal held that subsequent entries showing sales could not by themselves establish the genuineness of the original credits. Accordingly, the ₹12.92 lakh addition under Section 68 was sustained.
However, the assessee succeeded on the Section 115BBE tax rate. Following its earlier decision in Soma Shekhar Bingumalla v. ITO, and considering the conflicting Rajasthan and Kerala High Court views, the Tribunal held that the enhanced 60% rate introduced by the Taxation Laws (Second Amendment) Act, 2016 was not applicable to AY 2017-18. The AO was directed to tax the Section 68 addition at the rate applicable under the unamended Section 115BBE—effectively the earlier 30% rate.
Thus, the assessee’s appeal was partly allowed: Section 68 addition sustained, but enhanced 60% Section 115BBE rate rejected for AY 2017-18
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by Shri Alikhan Mohammad (“the assessee”), feeling aggrieved by the order passed by the Learned Addl/JCIT(A)-2, Ludhiana (“Ld. Addl/JCIT(A)”) dated 21.01.2026 for the A.Y. 2017-18.
2. The assessee has raised the following grounds of appeal:
“1. On the facts and in the circumstances of the case, the order of the Id. CIT(A) is erroneous both on facts and in law.
2. The Id. CIT(A) erred in sustaining the addition made by the AO of Rs.12,92,305/- as unexplained credits u/s.68 of the Act. The Id. CIT(A) failed to appreciate the evidences filed in proper perspective.
3. The Id. CIT(A) erred in sustaining the addition without calling for remand report on the additional evidences filed by the appellant. (Tax Effect: Rs.9,98,306/-).
4. Any other ground that may be urged at the time of hearing.”
3. The assessee has also raised the following additional ground before us: “On the facts and circumstances of the case, the A.O is not justified in levying tax at increased rate of 60% under section 115BBE of the Act in as much as the amendments made by the Taxation (Second Amendment) Act, 2016 to Finance Act, 2016 are made effective from the 1st day of April 2017 and are applicable for assessment year 2018-19 onwards. The authorities below ought not to have applied the same to the assessment year 2017-18”.
4. The Learned Authorized Representative (“Ld. AR”) submitted that additional ground so filed is admissible in view of judgment rendered by the Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT (1998) 229 ITR 383 (SC). The Learned Departmental Representative (“Ld. DR”) also did not raise any objection for admission of the additional ground. The prayer for admission of additional ground noted above which is not in memorandum of appeal is being admitted for adjudication in terms of Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 owing to the fact that objections raised in additional ground is legal in nature for which relevant facts are stated to be emanating from the existing records.
5. The brief facts of the case are that the assessee is an individual who filed his return of income for the assessment year 2017-18 on 25.09.2017, declaring total income of Rs. 3,34,580/-. The case of the assessee was selected for complete scrutiny and, accordingly, notice under section 143(2) of the Income-tax Act, 1961 (“the Act”) dated 21.09.2018 was issued by the Assessing Officer. After considering the submissions of the assessee, the Assessing Officer passed the assessment order under section 143(3) of the Act dated 30.12.2019, making an addition of Rs. 25,622/- on account of disallowance of expenditure and Rs. 12,92,305/- on account of unexplained cash credits under section 68 of the Act and, accordingly, assessed the total income of the assessee at Rs. 16,52,507/-.
6. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. Addl/JCIT(A). The Ld. Addl/JCIT(A) deleted the addition of Rs. 25,622/- made by the Assessing Officer on account of disallowance of expenditure; however, the addition of Rs. 12,92,305/- made under section 68 of the Act on account of unexplained cash credits was confirmed. Accordingly, the appeal of the assessee was partly allowed by the Ld. Addl/JCIT(A).
7. Aggrieved by the order of the Ld. Addl/JCIT(A), the assessee is in appeal before the Tribunal. Before us, the Ld. AR submitted that the only issue arising out of the grounds raised by the assessee is with regard to the addition of Rs. 12,92,305/- made by the Assessing Officer under section 68 of the Act on account of unexplained cash credits. In this regard, the Ld. AR submitted that the amount of Rs. 12,92,305/- represented advances received by the assessee against sales from 67 parties, the details of which have been reproduced by the Assessing Officer at page nos. 3 to 7 of the assessment order. Inviting our attention to the ledger accounts of all the 67 parties placed at page nos. 14 to 78 of the paper book, the Ld. AR submitted that the assessee had subsequently made sales to all the said parties in the immediately succeeding financial year and the advances standing to their credit were accordingly adjusted against such sales. It was submitted that the ledger accounts were also made available before the Assessing Officer. According to the Ld. AR, once the advances received from the parties were adjusted against actual sales made in the subsequent financial year and the corresponding sales were duly accounted for by the assessee, the Assessing Officer was not justified in treating the said advances as unexplained cash credits under section 68 of the Act. Accordingly, the Ld. AR prayed for deletion of the addition.
8. Per contra, the Ld. DR relied upon the orders of the lower authorities. Inviting our attention to the list of 67 parties from whom the assessee claimed to have received advances against sales, as reproduced by the Assessing Officer at page nos. 3 to 7 of the assessment order, the Ld. DR submitted that the amounts claimed to have been received from a large number of such parties were almost similar, generally ranging between Rs. 19,000/- and Rs. 20,000/-. The Ld. DR further submitted that, except for producing the ledger accounts of the alleged creditors, the assessee failed to furnish their PANs, returns of income or any other supporting evidence from which their identity, creditworthiness and the genuineness of the transactions could be verified. Therefore, the assessee had failed to discharge the onus cast upon him under section 68 of the Act. The Ld. DR further invited our attention to the ledger accounts placed at page nos. 14 to 78 of the paper book pertaining to the immediately succeeding financial year, wherein the assessee had shown sales to the said 67 parties. He submitted that ordinarily, where an advance is received against a proposed sale, the final amount of sale may be either higher or lower than the amount initially received as advance, depending upon the actual transaction. However, in the present case, in respect of all the 67 parties, the sales subsequently shown by the assessee were for exactly the same amounts as the advances allegedly received from the respective parties. According to the Ld. DR, this unusual feature of the transactions, coupled with the absence of basic particulars and independent evidence regarding the 67 parties, supports the findings of the lower authorities that the assessee had failed to substantiate the genuineness of the credits. Accordingly, the Ld. DR submitted that no interference with the order of the Ld. Addl/JCIT(A) is called for.
9. We have heard the rival submissions and perused the material available on record. The undisputed fact is that an amount aggregating to Rs. 12,92,305/- was found credited in the books of account of the assessee in the names of 67 parties. The assessee has explained these credits as advances received from the said parties against sales to be effected subsequently. It is also the contention of the assessee that sales were actually made to these parties in the immediately succeeding financial year and the advances were adjusted against such sales. In this regard, we have gone through the ledger accounts of all the 67 creditors for the financial year 2017-18 placed at page nos. 14 to 78 of the paper books, the contents of all the ledger accounts are identical. Therefore, for the sake of brevity, we are reproducing the copy of ledger account in one case, placed at page no. 14 of the paper book, as under:
10. On perusal of the above, we find that, except for the names and place of the creditors, no other particulars such as their postal addresses, PANs or other identification details have been provided therein. Further, before us also, the assessee has failed to furnish any documentary evidence in support of its claim so as to establish the identity and creditworthiness of the said persons and the genuineness of the transactions. Thus, except for the ledger accounts maintained by the assessee itself in the names of the aforesaid 67 parties, no independent evidence has been placed on record to establish that the amounts in question were actually received as advances against sales from the said parties. Mere entries in the books of account maintained by the assessee, by themselves, cannot establish the genuineness of the credits when even the basic particulars of the persons from whom such amounts are stated to have been received have not been furnished. We also find merit in the submission of the Ld. DR regarding the pattern of the transactions. The amounts claimed to have been received from a large number of the 67 parties are in a similar range of approximately between Rs. 19,000 to Rs. 20,000. Further, in all the cases, the amount has been received in cash. More importantly, on perusal of the ledger accounts for the immediately succeeding financial year placed at page nos. 14 to 78 of the paper book, we
find that the assessee has subsequently shown sales to each of the said parties for exactly the same amount as the advance standing in the name of the respective party. Thus, in all the 67 cases, the amount of the subsequent sale corresponds exactly with the amount of the advance earlier shown as received from the respective party. The assessee has not brought any supporting material before us explaining this uniform pattern or independently establishing that actual sales of precisely such amounts were made to each of the said parties. Therefore, in our considered view, the subsequent adjustment of the credits against sales entries in the books of account cannot, by itself, establish the genuineness of the original credits when the assessee has failed to furnish even the basic particulars of the persons from whom such advances were allegedly received. The subsequent accounting entries are part of the assessee’s own books and cannot substitute for independent evidence establishing the identity and creditworthiness of the creditors and the genuineness of the transactions. In the present case, despite the specific doubts raised by the Assessing Officer, the assessee has failed to place sufficient material on record to substantiate that the credits aggregating to Rs. 12,92,305/- represented genuine advances received from the stated 67 parties against sales.
11. In view of the above facts and circumstances, we are of the considered opinion that the assessee has failed to satisfactorily explain the nature and source of the credits of Rs. 12,92,305/- appearing in his books of account and has also failed to discharge the onus cast upon him under section 68 of the Act. We, therefore, find no infirmity in the order of the Ld. Addl/JCIT(A) confirming the addition of Rs. 12,92,305/- made by the Assessing Officer under section 68 of the Act. Accordingly, the grounds raised by the assessee on this issue are dismissed.
12. The assessee has also raised an alternative contention by way of an additional ground regarding the applicability of the enhanced rate of tax under section 115BBE of the Act. The assessee has challenged the levy of tax at increased rate of 60% under section 115BBE of the Act instead of 30% applicable for the year under consideration i.e. A.Y. 2017-18. We find that an identical issue has already been considered by this Tribunal in the case of Soma Shekhar Bingumalla Vs. ITO in ITA No. 76/Hyd/2026 for the assessment year 2017-18, dated 29.07.2026, wherein, at para nos. 18 to 21 of the order, the Tribunal has held as under:
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13. On perusal of the above, we find that the Tribunal has considered the reliance placed by the assessee on the decision of the Hon’ble Rajasthan High Court in the case of Deepak Maratha Vs. Union of India & Others (supra) as well as the reliance placed by the Department on the decision of the Hon’ble Kerala High Court in the case of Maruti Babu Rao Vs. ACIT (supra), and ultimately held that the enhanced rate of 60% under section 115BBE of the Act is not applicable for the assessment year 2017-18. In the present case also, the assessment year under consideration is 2017-18. Therefore, respectfully following the aforesaid order of the Tribunal in the case of Soma Shekhar Bingumalla Vs. ITO (Supra), we hold that the enhanced rate of 60% under section 115BBE of the Act is not applicable to the assessment year under consideration. Accordingly, we direct the Assessing Officer to compute the tax liability of the assessee on the impugned addition by applying the rate of tax as applicable under the unamended provisions of section 115BBE of the Act.
14. In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Open Court on 21st August, 2026.
