ITAT Deletes ₹18.24 Crore Addition as Corrupted Computer Records cannot Override Audited Books

SV Milk & Milk Products Private Vs ACIT (ITAT Hyderabad)

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed the assessee’s appeals for Assessment Years 2011-12 and 2012-13. For AY 2011-12, the Tribunal considered additions relating to share application money under Section 68, negative cash balance treated as unexplained expenditure under Section 69C, and cash payments for milk purchases. For AY 2012-13, it examined additions arising from reassessment, including an addition already set aside in earlier proceedings and disallowance of depreciation.

Regarding the addition of ₹2.30 crore under Section 68 towards share application money, the Tribunal noted that the Assessing Officer had originally made the addition without conducting any enquiry because the assessee had not responded to the notice issued under Section 142(1). During appellate proceedings, the assessee furnished confirmations and supporting records. The Tribunal observed that the Assessing Officer had rejected these documents mainly because certain land records were in Tamil and the confirmations were stereotyped, without examining the shareholders or conducting any independent enquiry. Holding that the evidence could not be rejected without proper verification, the Tribunal remanded the issue to the Assessing Officer for fresh examination after permitting the assessee to furnish Telugu or English translations of the Tamil documents and after conducting an appropriate enquiry.

The Tribunal deleted the addition of ₹18.24 crore made under Section 69C on account of an alleged negative cash balance. It found that the addition was based solely on a cash summary generated during survey from data retrieved from the assessee’s computer. The Tribunal observed that the alleged deficiency arose because the receipts reflected in the computer data were lower than those recorded in the audited books of account and not because any suppression of income or unrecorded expenditure had been established. It also noted that the business had ceased in 2014 and the computer was lying inoperative when the survey was conducted in 2015, making the extracted data incomplete and unreliable. Since the audited books consistently reflected the closing cash balance, which also appeared as the opening balance in subsequent years without dispute, and no suppression of sales, receipts, or unexplained expenditure had been established, the Tribunal held that incomplete computer data could not override audited books of account. Accordingly, it deleted the addition of ₹18.24 crore.

On the addition of ₹25 lakh towards alleged cash payments for milk purchases under Section 40A(3), the Tribunal observed that no show cause notice had been issued and the assessment order did not clearly specify the nature of the transactions. Holding that the assessee had not been given an adequate opportunity to explain the issue, it remanded the matter to the Assessing Officer for fresh adjudication after providing an opportunity of hearing.

For AY 2012-13, the Tribunal held that an addition of ₹8.11 crore could not survive because an earlier assessment order containing that addition had already been set aside by the Tribunal for de novo adjudication. As no order giving effect to the earlier Tribunal decision had been passed within the limitation prescribed under Section 153(3), the Assessing Officer could not simply repeat the addition in the reassessment order. The Tribunal therefore deleted the addition. It also remanded the issue of depreciation after the assessee produced bills and vouchers, explaining that these documents had earlier remained with the financing banks. The Assessing Officer was directed to verify the documents after granting the assessee a reasonable opportunity of hearing. Consequently, both appeals were partly allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

These two appeals by the Assessee are directed against the two separate Orders of the learned CIT(A), Visakhapatnam-3, Visakhapatnam, both dated 30.09.2025 for the assessment years 2011-2012 and 2012-2013, respectively.

2. For the assessment year 2011-2012 [ITA.No.2102/Hyd./2025] the assessee has raised the following grounds of appeal:

GROUND NO.1 as Submitted in Form No.36.

“The Ld. CIT(Appeals) and the Ld. Assessing Officer have erred both in interpreting and applying the law based on the facts circumstances of the case and the provisions of the law.”

GROUND NO.2

“The Ld. CIT(Appeals) and the Ld. A.O. have erred in rejecting the confirmation letters and Statements given by the Share holders merely on suspicion, ignoring the ground realities, facts and circumstances of the case.”

GROUND NO.3

The fact that the share application money of Rs.2.30 crore is contributed by the M.D. and his family members with the borrowals from J. Srinivasan has not been considered, though mentioned in sworn statements.”

GROUND NO.4 as Submitted in Form No.35.

The Learned CIT (Appeals) and the Ld. A.O. erred in coming to the conclusion that cash deficiency of Rs. 18,24,80,886/- reported by ADI merely by preparing the summary sheets which are incomplete, without any concreate evidence and treating it as unexplained cash expenditure U/S. 69C.”

GROUND NO.5 as Submitted in Form No.35.

“It is not a fact that the company has paid Rs.25,00,000 to M/S. Purnima Dairy Products towards purchase of milk, as it is only a proposal, on paper.”

GROUND NO.6

Based on the above grounds the assessee pleads for the deletion of the above three additions i.e.,

GROUND NO. 7

“Further Grounds will be furnished at the time of hearing with the kind permission of Hon’ble ITAT”.”

3. Ground no.1 is general in nature and does not require any specific adjudication.

4. Ground nos.2 and 3 are regarding the addition made by the Assessing Officer and confirmed by the learned CIT(A) on account of share application money received from 48 persons. The assessee is a private limited company and was engaged in the business of milk and milk products. The assessee filed its return of income on 01.10.2011 admitting total income of Rs.1,49,66,680/-. There was a search and seizure action u/sec.132 of the Income Tax Act [in short “the Act”], 1961 conducted in the case of Sri J. Srinivasan on 28.01.2015 the transactions of large scale loan in cash taken by Sri P Munisekhar Naidu, Managing Director of the Company detected during the course of search and seizure action and consequently, a survey u/sec.133A of the Act was conducted in the case of the assessee on 28.01.2015. During the course of survey, certain records were impounded as taken from the computer of the assessee however, the issue of addition on account of share application money has nothing to do with the impounded material. Since there was no response on behalf of the assessee to the notice issued by the Assessing Officer u/sec.142(1) of the Act therefore, the Assessing Officer has made an addition of Rs.2.50 crores u/sec.68 of the Act on account of share application money received by the assessee. The assessee challenged the order of the Assessing Officer before the learned CIT(A) and also filed confirmation from the share applicants as well as the other details and evidence in support of the share application received by the assessee. The learned CIT(A) called for a remand report from the Assessing Officer and after considering the remand report has sustained the addition to the extent of Rs.2.30 crores as against Rs.2.50 crores made by the Assessing Officer. Thus, the learned CIT(A) has granted relief to the extent of Rs.20 lakhs by accepting the source in the hand of Sri P Munisekhar Naidu, Managing Director of the assessee company as the funds borrowed from Sri J Srinivasan.

5. Before the Tribunal, the learned Authorised Representative of the Assessee has submitted that the Managing Director of the assessee company has explained all the financial transactions with Sri J Srinivasan which are entered into in his individual capacity only. He has referred to the statement of Managing Director recorded on 28.01.2015 as well as statement dated 25.02.2015. He has further submitted that the assessee company was facing financial difficulties and therefore, the Managing Director of the company has taken loan from Sri J Srinivasan who runs a chit fund to the extent of Rs.39.80 crores which was found during the course of search and seizure operation in the case of Sri J Srinivasan. The said money was used by the Director for payment of the liability towards the purchase of milk. The learned Authorised Representative of the Assessee has submitted that the assessee has submitted all the relevant details of the share applicants along with the proof of source of income and confirmations during the appellate proceedings before the learned CIT(A) which were forwarded to the Assessing Officer for verification and remand report. The learned CIT(A) has confirmed the addition to the extent of Rs.2.30 crores without considering the relevant record filed by the assessee discharging its onus to prove the identity and creditworthiness of the share applicants as well as genuineness of the transaction. The learned Authorised Representative of the Assessee has submitted that in the financial year 2012-2013 shares were allotted to the share applicants after raising the authorised capital of the assessee company from Rs.2.50 crores to Rs.5 crores. Thus, it shows that the assessee has actually raised the share capital by issuing shares to the shareholders and therefore, the genuineness of the transaction cannot be disputed. The Assessing Officer in the remand report has commented that the amount was received in February 2011 and all the money is received in cash. The confirmation letters are stereotype and some of the land documents are in Tamil. Thus, the Assessing Officer has given the reasons without giving the concluding finding that the share application money received by the assessee against the allotment of shares is assessee’s own unaccounted money. On the one hand the Assessing Officer has made the addition to the extent of Rs.18.24 crores as negative cash balance whereas this addition made u/sec.68 of the Act is contradictory to the stand of the Assessing Officer. Thus, the learned Authorised Representative of the Assessee has submitted that the share application money was received from the persons all living in and around the milk factory of the assessee company and therefore, a small amount of share application money received from the nearby residents was essential for continuous supply of the milk and to make the people living in surrounding as part of the project. Thus, the management of the assessee company decided to admit the people living in the surroundings as shareholders for the smooth operation of the assessee company. He has further submitted that during the remand proceedings the Income Tax Inspector verified the identity and existence of the shareholders even after the lapse of more than 10 years which proves the identity and creditworthiness of the shareholders who paid the share application money and since the money was received against the allotment of shares therefore, the transaction is genuine as duly recorded in the audited books of account.

6. On the other hand, the learned DR has submitted that the assessee has claimed the share application money received entirely in cash and that too from 48 persons. During the assessment proceedings the assessee did not respond to the notice issued by the Assessing Officer u/sec.142(1) of the Act and therefore, the assessee failed to discharge its onus cast u/sec.68 of the Act. Before the learned CIT(A), the assessee has filed confirmations and land records of some of the share applicants. The Assessing Officer has filed the remand report giving reasons for not accepting the claim of the assessee that all the amounts were received in cash and at the same time various shares were allotted after a gap of more than one year. Further the assessee failed to produce any evidence regarding the creditworthiness of the share applicants and therefore, even during the remand proceedings the assessee failed to discharge its onus to prove the identity, creditworthiness of the creditors as well as genuineness of the transaction. He has relied upon the Orders of the authorities below.

7. We have considered the rival submissions as well as relevant material on record. At the outset, we note that the Assessing Officer has passed the assessment order u/sec.144 r.w.s.147 of the Act and made the addition on account of share application money as under:

“Share Application Money

The contents of the notice issued u/s.142(1) is reproduced as under:

“In the schedule I to Balance sheet a sum of Rs.2.5 crores is shown on share application money etc being received during the year. You are hereby required to furnish details of the persons from whom the Share application money was received with ledger account, mode and date of receipt. You may also furnish the status of share application money as on date.”

The assessee has introduced a share capital of Rs.2.5 Crores during the year under consideration. The assessee has failed to furnish the details called for with regard to share application money received during the year amounting to Rs. 2.5 crores. Accordingly the same is hereby treated as unexplained credits for taxation u/s.68 of the IT Act, 1961.”

7.1. Thus, the Assessing Officer has made the addition when the assessee has not responded to the notice issued u/sec.142(1) of the Act. The addition is made by the Assessing Officer summarily without even conducting any enquiry. Before the learned CIT(A), the assessee produced the confirmation of the said share applicants along with some records of land holdings. The Assessing Officer in the remand report has made the remarks in Para-5.3 of the report as under:

“5.3. Remarks:

The copies of agricultural land holdings are in Tamil language in majority of cases and it is not possible to decipher the same either into Telugu or English language. The A.R of the assessee has promised to submit the same in Telugu language. However, the same are not till date.

On perusal of the confirmation letters furnished, it is revealed that all the confirmation letters are stereo typed ones. For example, in the cases of Smt. P. Vasantha, W/o. P. Kodanda Naidu, Ramanaidu Colony, Nagari Town Chittoor Dist and Sri P. Bhaskar, S/o. Kodanda Naidu, 11 B R Layout, Bangalore, both the applicants are mother and son. As per the copy of household card details, they have no LPG cylinder. They do not have agricultural lands on their own names. At the same time, they have also not stated that they have carried out the agricultural operations on leased lands. They have lands only inherited from forefathers. Thus, it can be drawn an inference that they have no means to invest in the appellant company.

Further, it is noticed from the confirmation letters that all the applicants have invested in the month of February, 2011-the fag end of the financial year 2010-11.

The applicants who are stated to be assessed to income tax have also not furnished copy of relevant ledger account copies in support of investment made in the appellant company.

The assessee has also not furnished iota of evidence to prove that the crops are grown in the said lands and sale of crops grown in these agricultural lands was made.

It is also not out of place to mention here that all the share applicants have made the payment by way of cash which entails invoking the provisions of Section 269SS of 1.T.Act.”

7.2. Thus, the Assessing Officer has raised certain objections regarding the land holding records in Tamil and for not submission of the Telugu or English version by the assessee before the remand report was submitted by the Assessing Officer. Further the confirmation were found to be stereotype letters. By considering this remand report, the learned CIT(A) has confirmed the addition to the extent of Rs.2.30 crores in Para no.7.3.2 as under:

“7.3.2. On careful consideration, I find that the issue must be tested on the three parameters under section 68, namely identity, creditworthiness, and genuineness. As far as the contribution of Rs.20,00,000/- made in the name of Shri P. Munisekhar Naidu himself is concerned, his identity is not in dispute. The source of funds, namely borrowals from Shri J. Srinivasan, stands admitted in sworn statements recorded. These borrowal have separately been considered in the assessment of Shri Munisekhar Naidu, and therefore the same cannot once again be doubted when routed into the company as share application money. To this limited extent, the addition in the hands of the appellant company is not sustainable.

However, with respect to the balance amount introduced in the names of others, no satisfactory evidence has been produced to establish their independent creditworthiness. The confirmations filed are not corroborated by bank statements, income-tax particulars, or other primary records. Merely relying on the explanation that the family members’ contributions were also sourced from borrowals of Shri Munisekhar Naidu is not sufficient, especially when the transactions are admittedly in cash and outside the books and the nexus has not been substantiated. In the absence of such evidence, the identity and creditworthiness of the other members as contributors remain unproved, and the AO was justified in treating the balance amount as unexplained.

Accordingly, the addition of Rs.2.50 crores u/s 68 is partly sustained. Relief is granted to the extent of Rs.20,00,000/-contributed by Shri P. Munisekhar Naidu, and the balance amount is upheld as unexplained credit in the hands of the appellant company.”

7.3. Thus, from the remand report as well as from the impugned order it is manifest that due to certain objections regarding the land record in Tamil language and stereotype of the confirmations the Assessing Officer has rejected the supporting evidence filed by the assessee. In case the Assessing Officer has the doubt about the genuineness of the confirmations he would have undertaken an enquiry by examining the creditors/share applicants. Therefore, in the absence of conducting any enquiry the rejection of the evidence filed by the assessee is not justified. Hence, in the facts and circumstances of the case, when the documents filed by the assessee could not be examined by the Assessing Officer due to the language barrier, this issue is remanded to the record of the Assessing Officer for reconsideration and assessee is directed to file Telugu or English translation of the record filed in Tamil language. The Assessing Officer is also directed to conduct a proper enquiry before deciding this issue after giving an opportunity of hearing to the assessee. Ground nos.2 and 3 of the assessee’s appeal is allowed for statistical purposes.

8. Ground no.4 is regarding the addition made by the Assessing Officer on account of negative cash balance as on 31.03.2011.

9. During the course of survey proceedings conducted on 28.01.2015 a monthly cash summary for the financial year 2010-2011 was retrieved from a computer. The survey party has compiled the details taken from the computer and arrived to a negative cash balance of Rs.18.24 crores as on 31.03.2011. Based on the said calculation made during the survey the Assessing Officer has made the addition of Rs.18,24,80,886/- on account of unexplained expenditure. The assessee challenged the action of the Assessing Officer before the learned CIT(A) but could not succeed.

10. Before the Tribunal, the learned Authorised Representative of the Assessee has submitted that the assessee company was carrying on milk procurement processing and sale of milk product business till 2014 as it became sick in the year 2013 and stopped its business from 2014. The bank loans availed earlier were become non­performing assets and banks have started recovery proceedings against the assessee in the year 2014. Thus, there was no business after 2014 and the computer was also in non-operating condition at the time when survey was conducted by the department on 28.01.2015. Thus, the learned Authorised Representative of the Assessee has submitted that the details extracted from the survey from the inoperative and corrupted files from the computer are incomplete and unreliable documents. He has further submitted that there is no discrepancy as regards the cash balance shown by the assessee in the audited books of account of the assessee as on 31.03.2011 and in the subsequent assessment years. He has referred to the print out taken by the survey party as made part of the impounded material and submitted that the department has drawn a cash summary showing negative cash balance to the tune of Rs.18.24 crores in the month of March, 2011 whereas the opening cash balance as on 01.04.2011 is taken at Rs.9,49,155/- which is exactly the same cash balance as on 31.03.2011 shown in the audited financial statement of the assessee. The learned Authorised Representative of the Assessee has further submitted that this negative cash balance as drawn by the department is due to the discrepancies in the receipts recorded in the details extracted from the inoperating condition of the computer in comparison to the receipts recorded in the audited books of account. He has pointed out that the assessee has declared the receipts in the audited books of account at Rs.135.26 crores whereas the cash summary drawn by the department during the survey from the computer showing the receipt of Rs.115.34 crores and the differential amount was treated as negative cash balance. He has further submitted that the cash balance shown by the assessee as on 31.03.2011 as well as opening balance as on 01.04.2011 at Rs.9,49,155/- is also part of the cash balance of the subsequent years as on 31.03.2012 and 31.03.2013 and there is no discrepancy in the cash balance for the subsequent years. Thus, the learned Authorised Representative of the Assessee has submitted that the addition made by the Assessing Officer merely on the basis of the cash summary drawn by the survey party taken from the inoperative computer is highly arbitrary and unjustified. He has pointed out that the assessee is a company and statutory required to maintain the books of account as per the Company Law. The assessee is maintaining the regular books of account which are duly audited and therefore, when there is no discrepancy found either to suppress the income or the expenditure in the books of account of the assessee in comparison to the impounded details then, the short receipts as found in the details of the computer cannot be the basis of the addition. He has also referred to the returns of income filed for the subsequent years showing the cash balance taking from the opening balance as on 01.04.2011 and also the ROC documents comprising of audited balance-sheets to show that the cash balance reported by the assessee in the audited financial statements are the correct amounts as against he extracts taken by the department relying on the incomplete and incohesive data from the inoperative computer. In support of his contention, he has relied upon the following decisions:

i. M/s. Balar Marketing Pvt. Ltd., vs. ACIT, Central Circle-13, New Delhi ITA.Nos.3143 to 3148/Del./2023 dated 18.03.2026

ii. ACIT vs. Ashok Kumar Poddar [2008] 16 DTR 55 (Kolkata-Tribu.)

10.1. Thus, the learned Authorised Representative of the Assessee has submitted that the addition made by the Assessing Officer on the basis of the details taken from the corrupted inoperative computer which are not correct and complete data or reflecting the real state of affairs of the assessee is not sustainable in law when no discrepancy was found in the books of account of the assessee.

11. On the other hand, the learned DR has submitted that during the survey proceedings the department has found the details in the computer at the place of the assessee and the data taken from the computer shows that there is a deficiency of cash during the financial year 2010-2011 and a negative cash balance is drawn based on the monthly cash balance. Therefore, in the absence of plausible explanation regarding the deficiency of the cash leading to the negative cash balance, the Assessing Officer has made the addition on this account. The learned CIT(A) has considered the facts and the explanation of the assessee, but it was found that the assessee has failed to explain the cash deficiency of more than Rs.18 crores. He has relied upon the Orders of the authorities below.

12. We have considered the rival submissions as well as relevant material on record. The Assessing Officer has made the addition on account of unexplained expenditure as under:

“Unexplained Expenditure u/s. 69C of the IT Act, 1961;

The contents of the notice issued u/s. 142(1) is reproduced as under:

“In respect of the question no 28 of the sworn statement recorded on 28.1.2015 among other things, cash summary extracts of your company for the financial year 2010 11 was shown to you wherein a negative balance of Rs.18,24,80,886 was identified in the month of March 2011. You had stated that you were unable to explain the same for the time being and that you will offer your explanation subsequently in consultation with your Auditor. However, no clarification whatsoever has been furnished by you, neither while recording of statement on 28.1.2015 nor on 25.2.2018. in this connection you are hereby required to show cause as to why the negative balance of Rs.18,24,80,886/- should not be treated as unexplained expenditure in the hands of the company for the AY 2011-12.”

The assessee was asked to offer his explanation in respect of the negative cash balance identified during the survey operation wherein a sum of Rs.18,24,80,886/- was found to be not available in the books of account for the month of March 2011 and it was queried as to why the same should not be treated as unexplained expenditure for the year under consideration, The assessed has stated that due explanation will be offered in consultation with his Auditor. However nothing was brought on record subsequent to survey at any point at time. Again when the assessee has been asked to explain on the missing cash balance of Rs.18,24,80,886/ the assessee has not bothered to sincerely attempt to furnish the required reconciliation for the clarification sought for.

It is pertinent to mention that the assessee after having undertaken to provide the explanations on negative cash balances in sworn statement recorded on 28.01.2015. has not taken any effort to do the reconciliation inspite of the fact that almost a time gap of three years has elapsed. Since no explanation has been filed by the assessee fill date, the sum of Rs.18,24,80,886 being the negative cash balance in the cash summary retrieved during the course of survey for the month of March 2011 is hereby added to the income of the assessee as unexplained expenditure u/s.69C of the IT Act. 1961.”

12.1. Thus, for want of explanation on the part of the assessee the Assessing Officer has made the said addition on account of negative cash balance as on 31.03.2011 of Rs.18,24,80,886/-. The learned CIT(A) has confirmed the same by giving similar reasoning in Para nos.7.4.4 and 7.4.5 as under:

“7.4.4. I have carefully considered these submissions. The fact remains that during survey, contemporaneous data retrieved from the appellant’s own premises revealed a cash deficiency of Rs. 18.24 crores. The Managing Director himself admitted inability to reconcile and undertook to furnish details but never did so. The audited books relied upon by the appellant cannot override specific evidence found in survey. It is well settled that once incriminating documents are found in survey/search, the onus shifts on the assessee to disprove or reconcile the same. Failure to discharge this burden justifies addition.

7.4.5. The appellant has relied upon decisions such as S.K. Jain v. JCIT (2007) 108 TTJ (Nag) 575 and ACIT v. Ashok Kumar Poddar (2008) 16 DTR (Kol)(Trib) 55 to argue that loose sheets or trial balances found in survey cannot form the sole basis of addition when audited books are available. These authorities are distinguishable. In S.K. Jain (supra), the Tribunal deleted the addition since the Department had brought no corroboration to contradict the audited accounts, whereas here the negative cash balance emanates from the appellant’s own computer system and was specifically confronted to the Managing Director, who admitted his inability to explain and promised reconciliation that never came. In Ashok Kumar Poddar (supra), the Tribunal disapproved additions merely based on a trial balance printout without establishing its authenticity. In the present case, however, the impounded cash summary is not a stray printout but forms part of the material retrieved during survey from the company’s premises and has been corroborated by sworn statements. The failure of the appellant to reconcile or rebut the deficiency makes the evidentiary value of such document far stronger than in Ashok Kumar Poddar. Here, despite long lapse of time, the appellant has neither produced reconciliation of the cash deficiency nor any evidence linking borrowals from Shri J. Srinivasan to the alleged shortfall. The plea of duplication in subsequent year is separately adjudicated. In these circumstances, I hold that the Assessing Officer was fully justified in making the addition of Rs.18,24,80,886/- u/s 69C. Accordingly, this ground is dismissed and the addition is sustained in full.”

12.2. Neither in the remand report nor in the summary cash balance drawn by the survey party nor in the orders of the Assessing Officer as well as the learned CIT(A) it has been made out that the deficiency of the cash is due to the expenditure incurred by the assessee not recorded in the books of account but as it is evident from the record that this deficiency of the cash is due to the reason of less receipts found recorded in the details taken from the computer in comparison to the receipts recorded in the books of account. Thus, it is not a case of suppression of the receipt or income on the part of the assessee which is found during the course of survey from the computer but it is a case where the receipts in the computer are found less than the receipts recorded in the books of account. It is also an undisputed fact that the business of the assessee was closed in the year 2014 itself and therefore, the computer was lying inoperative for a long period and details as found in the computer in the absence of any corresponding transactions actually taken place cannot be relied upon. Even otherwise, the audited books of account are more reliable and authentic material than the incomplete details taken from an inoperative computer. Thus, when it is not a case of suppression of sales or receipts in the books of account but the department found less receipts as per the details extracted from the computer which has resulted in a cash balance deficiency in comparison to the cash reported in the audited books of account. Accordingly, in the facts and circumstances of the case when no suppression of income or any unexplained expenditure is found then the addition made by the Assessing Officer on account of negative balance due to less receipts found in the details extracted from the computer cannot be a basis for addition on account of negative cash balance. We further note that the cash balance as on 31.03.2011 shown in the audited financial statements is Rs.9,49,155/- which is also taken as opening cash balance as on 01.04.2011 and this fact is not disputed by the department for the cash balance of the assessment year 2011-2012 and subsequent assessment years. Accordingly, in the facts and circumstances of the case as discussed above and uncertified data taken from the computer, the addition made by the Assessing Officer is not sustainable in law and hence, the same is deleted. Ground no.4 of assessee is allowed.

13. Ground no.5 of assessee is regarding the addition made towards purchase of milk in cash.

14. We have heard the learned Authorised Representative of the Assessee as well as learned DR and considered the relevant material on record. The Assessing Officer has made the addition on account of cash payment of Rs.25 lakhs as under:

“Further, it was observed that the assessee has paid Rs.25.00,000/- in cash to M/s. Poornima Dairy Products towards purchase of milk. Since the said payments are made in the modes of cash, the amount of Rs.25.00.000/- is disallowed u/s.40A(3) and added to the taxable income.”

14.1. The learned Authorised Representative of the Assessee has submitted that the Assessing Officer has made this addition without even issuing a show cause notice to the assessee. He has referred to the notice issued u/sec.142(1) of the Act issued by the Assessing Officer and submitted that the Assessing Officer has not issued any show cause notice on this issue and made the addition at the back of the assessee. Thus, the Assessing Officer has not provide an opportunity to the assessee which is complete violation of principles of natural justice. The learned Authorised Representative of the Assessee has thus submitted that the transaction is not a real transaction but it was only a proposal for purchase of milk from M/s. Poornima Diary Products. The payment of Rs.25 lakhs was not made to M/s. Poornima Diary Products but each and every payment was made below Rs.20,000/- that too directly to the farmers which is exempt under Rule 6DD of IT Rules, 1962.

15. On the other hand, the learned DR has relied upon the Orders of the authorities below.

16. We have considered the rival submissions as well as relevant material on record. As it is apparent from the assessment order that the Assessing Officer has not issued any show cause notice on this issue and further the Assessing Officer has also not given the details of the transactions as whether this amount was paid in one go or this is an accumulated sum of various payments made by the assessee. It is also not clear from the Orders of the authorities below as to whether the cash payment is shown by the assessee in the books of account or it is a transaction found in the impounded material. Accordingly, in the facts and circumstances of the case and in the interest of justice, this issue is remanded to the record of the Assessing Officer to give an opportunity to the assessee to explain this issue and then adjudicate the same as per law. Ground no.5 of assessee’s appeal is allowed for statistical purposes.

17. In the result, ITA.No.2102/Hyd./2025 for the assessment year 2011-2012 of the assessee is partly allowed for statistical purposes.

18. For the assessment year 2012-2013 [No.2103/Hyd./2025] the assessee has raised the following grounds of appeal:

“1.GROUND NO.1

“The Ld. CIT(Appeals) and the Ld. Assessing Officer have erred both in interpreting and applying the law based on circumstances of the case and the provisions of the law.”

GROUND NO. 2

“The Ld. A.O. has erred in sustaining the addition of Rs.8,11,63,272/-without implementing the Order of the ITAT, while giving effect to the CIT-(Appeals) order, through his order dt.16.10.2025.”

GROUND NO.3.

“The Ld. CIT(Appeals) and the Ld. Assessing Officer are not justified in making disallowance of Depreciation of Rs.31,41,307/ on the ground that Bills for Fixed Assets required are not filed.”

GROUND NO.4.

“The appellant craves leave to add amend or alter any of the grounds at the time of hearing of appeal, with the Kind permission of the Hon’ble ITAT.“

19. Ground no.1 is general in nature and does not require any specific adjudication.

20. Ground no.2 is regarding the addition made by the Assessing Officer without implementing the order of this Tribunal dated 24.06.2021.

21. The learned Authorised Representative of the Assessee has submitted that the assessee has filed its original return of income for the year under consideration on 30.09.2012 admitting total income of Rs.1,99,43,084/-. The assessment was completed u/sec.144 of the Act on 31.03.2015 which was challenged by the assessee and the matter was taken up before this Tribunal in ITA.No.1758/ Hyd./2019. This Tribunal vide Order dated 24.06.2021 has set aside the Order of the learned CIT(A) and remanded the matter to the record of the Assessing Officer for de novo adjudication. However, the Assessing Officer has not passed the order to give effect to the Order of this Tribunal dated 24.06.2021. In the meantime, the Assessing Officer has reopened the assessment of the assessee twice and passed two assessment orders dated 21.12.2017 and 30.12.2019 respectively. The learned Authorised Representative of the Assessee has submitted that the income assessed by the Assessing Officer while passing the assessment order u/sec.144 dated 31.03.2015 is added in the subsequent re­assessment order passed by the Assessing Officer whereas the said order passed by the Assessing Officer u/sec.144 dated 31.03.2015 was set aside by this Tribunal with the direction for de novo adjudication. Thus, the learned Authorised Representative of the Assessee has submitted that in the absence of complying the directions of this Tribunal and passing giving effect order to the order of the Tribunal the addition made by the Assessing Officer to the tune of Rs.8,11,63,272/- is not sustainable and liable to be deleted. He has relied upon the Judgment of Hon’ble Supreme Court in the case of CIT, Bhopal vs. Shelly Products and Another [2003] 261 ITR 367 (SC).

32. On the other hand, the learned DR has submitted that the re-assessment order was passed by the Assessing Officer prior to the order of the Tribunal dated 24.06.2021 and therefore, there was no occasion for the Assessing Officer to pass the giving effect order prior to the re-assessment order passed by the Assessing Officer. He has relied upon the Orders of the authorities below.

33. We have considered the rival submissions as well as relevant material on record. There is no dispute that initially the Assessing Officer passed the assessment order u/sec.144 of the Act on 31.03.2015 by making an addition of Rs.8,11,63,272/-. The said order was challenged by the assessee and taken up to this Tribunal. This Tribunal vide order dated 24.06.2021 in ITA.No.1758/Hyd./2019 has set aside the matter to the record of the Assessing Officer in Para no.5 as under:

“5. After hearing both the parties and perusing material placed on record we observe from the order of AO that assessee did not appear before him and the AO applied provisions of sec. 144 of the Act and completed the assessment and the CIT(A) also has dismissed the appeal of the assessee vide his order dt. 9th October, 2019. As per our considered opinion we accept the request of the learned counsel of the assessee and remit the matter back to the file of Assessing officer for de novo consideration. Needless to mention that reasonable opportunity of hearing shall be afforded to assessee and assessee also is directed to appear before the Assessing officer with complete documents and cooperate in early completion of de novo assessment proceedings ad should not seek any further adjournments.”

23.1. Thus, the said addition made by the Assessing Officer of Rs.8,11,63,272/- while passing the order u/sec.144 of the Act on 31.03.2015 was no more in existence in view of the Order of this Tribunal dated 24.06.2021. In the meantime, the Assessing Officer has passed the re­assessment order u/sec.147 r.w.s.143(3) of the Act dated 21.12.2017 and assessed the income of the assessee as under:

“Income assessed as per assessment order

23.2. Thus, the Assessing Officer has taken the income assessed as per the Order dated 31.03.2015 which includes the addition of Rs.8,11,63,272/-. But the said addition made by the Assessing Officer is no more in existence in view of the Order of the Tribunal dated 24.06.2021 and no giving the effect order was passed by the Assessing Officer within the limitation provided u/sec.153(3) of the Act. As per the provisions of sec.153(3) read with proviso the Assessing Officer is required to pass the Order in pursuance to the Order of this Tribunal within a period of 12 months from the end of the financial year in which the Order of the Tribunal was received by the Pr. Chief Commissioner/Chief Commissioner. The department has not disputed the fact that Assessing Officer has not passed any order giving effect order in pursuance to the order of this Tribunal dated 24.06.2021 within the period of limitation. Therefore, in the absence of any giving effect order passed by the Assessing Officer within the period of limitation prescribed u/sec.153(3) of the Act the addition made by the Assessing Officer of Rs.8,11,63,272/- and set aside by this Tribunal is no more inexistence and the same cannot be simplicitor repeated in the re-assessment order passed by the Assessing Officer. Accordingly, the income assessed by the Assessing Officer to the extent of Rs.8,11,63,272/- while passing the re­assessment order dated 21.12.2017 is liable to be deleted. Ground no.2 of assessee appeal is allowed. We Order accordingly.

24. Ground no.3 of assessee’s appeal is regarding the addition made on account of disallowance of depreciation.

25. The learned Authorised Representative of the Assessee has submitted that the assessee has claimed the depreciation of Rs.31,41,397/- which was disallowed by the Assessing Officer while passing the assessment order on the ground that the assessee has not submitted the bills for acquiring the fixed assets. He has referred to the books of account and closing capital work in progress as on 31.03.2011 and submitted that the Plant were acquired in the earlier year as shown in the capital work in progress but the same were put to use only during the year under consideration and therefore, the assessee has claimed the depreciation for the year under consideration. He has further submitted that during the financial year relevant to the assessment year under consideration the assessee has acquired some of the fixed assets to the extent of Rs.1,08,66,777/- and balance was already shown as opening capital work in progress. During the course of assessment proceedings the assessee could not procure these bills/copies as they were with the bankers as term loan was taken by the assessee for purchase of these assets. The learned Authorised Representative of the Assessee has thus submitted that the assessee has now filed all the bills and vouchers for acquiring these fixed assets as additional evidence which may be verified and examined by the Assessing Officer. Thus, he has submitted that this issue may be remanded to the record of the Assessing Officer for verification and consideration of the bills and vouchers for acquiring the fixed assets.

26. On the other hand, the learned DR has relied upon the Orders of the authorities below and submitted that the assessee has failed to file the evidence for acquiring of the assets and therefore, the Assessing Officer has rightly disallowed the claim of depreciation while passing the re­assessment order.

27. We have considered the rival submissions as well as relevant material on record. The Assessing Officer has made the disallowance of depreciation by giving the reasons as under:

” The Authorized Representative was unable to provide the supporting documents in the form of bills/ vouchers in proof of addition to fixed assets. Additions to fixed assets used for more than 180 days during the year is Rs.28,95,345/- and less than 180 days is Rs.5,63,82,304/-. The Inability to provide bills for procurement of Plant and Machinery of such magnitude of approximately Rs.6 crores, is unacceptable. It is clear from this inaction to provide supporting documents that such corresponding addition is not genuine and therefore, the value of depreciation relating to such unproven addition to Fixed Assets amounting to Rs.45,85,840/- is disallowed and added to the taxable income.”

27.1. Thus, the addition to fixed assets was not substantiated by the assessee by furnishing bills for procurement of the plant and machinery and consequently, the Assessing Officer has disallowed the claim of depreciation. Now the assessee has filed the supporting bills and vouchers as taken from the bankers and also explained the reason for not producing the same before the Assessing Officer as these bills and vouchers were with the bankers who financed for the purchase of these assets. Accordingly, in the facts and circumstances of the case and in the interest of justice this issue is set aside to the record of the Assessing Officer for verification, examination and consideration of the bills and vouchers filed by the assessee. Needless to say, the assessee be given a reasonable opportunity of being heard before passing the fresh order. Ground no.3 of the assessee is allowed for statistical purposes.

28. In the result, both the appeals of the Assessee are partly allowed for statistical purposes. A copy of this common order be placed in the respective case files

Order pronounced in the open Court on 03.06.2026.