K.M. Textiles Export Private Limited Vs ITO (ITAT Mumbai)
ITAT Mumbai allowed assessee’s appeal and dismissed Revenue’s cross appeal in reassessment proceedings u/s 147 r.w.s. 143(3), holding that additions on cash deposits and alleged bogus purchases were unsustainable. AO had added ₹4.60 crore treating entire year’s cash deposits as unexplained though demonetisation deposits were only about ₹16.69 lakh. Tribunal noted that regular books, cash book, cash flow statements and reconciliations established clear nexus between deposits and recorded sales; once sales were accepted, taxing cash receipts again would amount to double taxation.
Regarding foreign purchases from Hong Kong entity, AO made overlapping additions by clubbing advances, purchases and remittances. CIT(A) rightly deleted double additions, and ITAT further held that advances shown as recoverable cannot be treated as unexplained expenditure u/s 69C in absence of evidence that they were bogus or irrecoverable. The tabular reconciliation (page 4) itself showed duplication in AO’s computation.
Consequently, deletion of ₹4.60 crore cash deposit addition was upheld and balance addition of ₹67.92 lakh sustained by CIT(A) was also deleted. Assessee’s appeal allowed in full and Revenue’s appeal dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These cross appeals, one filed by the Revenue and the other by the assessee, are directed against the order dated 19.08.2025 passed by the National Faceless Appeal Centre, Delhi, for the assessment year 2017-18, arising out of reassessment framed under section 147 read with section 143(3) of the Income-tax Act, 1961. Since both the appeals emanate from the same impugned order and involve common facts and interlinked issues, they were heard together and are being disposed of by this consolidated order.
