ITAT Remands Case as Fresh Claim Cannot Be Rejected Solely Due to Delay

Sunanda Polymers LLP Vs DCIT (ITAT Mumbai)

The appeal before the Income Tax Appellate Tribunal (ITAT), Mumbai concerned the assessee’s claim for deduction under Section 32AC(1A) amounting to ₹19,11,38,877, raised for the first time during appellate proceedings for Assessment Year 2015–16. The assessee had made investments in new plant and machinery aggregating to ₹127,42,59,17 during the specified period but did not claim the deduction in the original or revised return due to an asserted oversight.

During appellate proceedings, the Commissioner (Appeals) admitted the additional ground relying on judicial precedents permitting fresh claims at the appellate stage. A remand report was obtained from the Assessing Officer (AO), who, while objecting to admissibility on legal grounds, verified voluminous documents such as invoices, delivery challans, and installation details, and found them consistent with the books of account.

However, the Commissioner (Appeals) rejected the claim on merits, citing delay, difficulty in verification due to lapse of time, and an inference that the claim was deliberately raised at the appellate stage to avoid scrutiny. It was held that verification of whether assets were new, installed, and used for business purposes was not feasible after several years.

Before the Tribunal, the assessee contended that once the additional ground was admitted, it had to be adjudicated on merits based on evidence. It argued that the AO had already verified documents in the remand proceedings and that depreciation allowed on the assets supported their existence and use. The assessee also challenged the adverse observations regarding alleged “design” as unsupported.

The Tribunal noted that the Commissioner (Appeals) had admitted the additional claim and, therefore, was required to adjudicate it on merits. It held that considerations such as delay or conduct, relevant at the stage of admission, could not be used later to reject the claim without proper examination. It also clarified that restrictions in entertaining fresh claims apply to the Assessing Officer and not to appellate authorities.

The Tribunal found that rejection of the claim solely on the ground of lapse of time was unsustainable where the claim was supported by documentary evidence and was capable of verification. It observed that the remand report did not provide a conclusive finding on whether the assets satisfied the definition of “new assets” under Section 32AC or whether all statutory conditions were fulfilled.

Balancing procedural considerations and substantive justice, the Tribunal held that the claim could not be denied merely due to omission in the return if otherwise admissible. At the same time, it noted that the existing verification was insufficient for a final decision.

Accordingly, the Tribunal set aside the order of the Commissioner (Appeals) on this issue and restored the matter to the Assessing Officer for fresh examination. The AO was directed to verify whether the assets qualified as “new assets,” whether acquisition and installation conditions were met, and whether the assessee was otherwise eligible for deduction, after providing an opportunity of hearing. The appeal was allowed for statistical purposes.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

1. The appeal in ITA Nos. 5075/Del/2025 and ITA No. 5076/Del/2025 for AYs 2017-18 and 2018-19, arises out of the order of the ld National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 24.06.2025 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 16.01.2021 for AY 2017-18 and dated 18.09.2021 for AY 2018-19 by the Assessing Officer, ACIT, Circle-50(1), Delhi (hereinafter referred to as ‘ld. AO’).

2. The Ground Nos. 1 and 4 raised by the assessee are general in nature and does not require any specific adjudication.

3. The Ground Nos. 2 and 3 are challenging the addition made on account of cash sales treating the same as income from undisclosed source u/s 68 of the Act.

4. We have heard the rival submissions and perused the material available on record. The assessee is a partnership firm engaged in the business of refinery of precious metal and also sale and purchase of precious metal. The return of income for AY 2017-18 was filed by the assessee firm electronically on 23.10.2017 declaring total income of Rs. 1,19,20,030/-. During the course of scrutiny proceedings, the ld AO noted that the assessee had deposited cash in specified bank notes during demonetization period in Punjab National Bank amounting to Rs. 1,18,00,000/-. The assessee was asked to explain the source for the sum in a tabular form. The assessee filed reply dated 03.12.2019 explaining that the source of cash deposit emanated out of cash sales made by the assessee and furnished all the requisite details in support of its contention in tabular form. It was submitted that assessee was having sufficient source and sufficient cash balance to make the cash deposit in the bank account including during demonetization period. The assessee also submitted that it had sufficient stock of quantity of gold in hand and to the extent of cash sales made by the assessee, corresponding reduction in stock has been duly made by the assessee. The cash sales has been included as part of total turnover credited in the profit and loss account and in the income tax return. It was also specifically submitted that no cash sale had happened after 08.11.2016 up to 31.12.2016 and that the cash sales made up to 08.11.2016 in the total sum of Rs. 1,19,05,334/- were deposited in Punjab National Bank during the demonetization period in specified bank notes as the said currency was not to be considered as a legal tender pursuant to announcement of demonetization by the Govt. of India. The ld AO disbelieved the contentions of the assessee and proceeded to treat the cash sales in the sum of Rs. 1,19,05,334/- as bogus and added the same as income from undisclosed sources and completed the assessment u/s 68 r.w.s. 115BBE of the Act. This action of the ld AO was upheld by the ld CIT(A).

5. It is not in dispute that the assessee had indeed shown cash sales and is part of the total turnover disclosed by it in the return of income and in the audited profit and loss account. The following points are undisputed and indisputable: –

a. The purchase made by the assessee has not been doubted by the revenue.

b. The total sales made by the assessee (both cash as well as credit sales) has not been doubted by the revenue.

c. The assessee had sufficient stocks to effect the said cash sales and generate cash as an independent source to prove the cash deposits.

d. To the extent of sales made by the assessee, corresponding reduction in stock had been duly made.

e . The assessee has furnished month-wise, purchase and sales, both cash as well as credit for the year under consideration as well as for the immediately preceding year. h. The assessee has furnished the complete cashbook, showing the month wise movement before the ld AO.

f. There is no negative cash balance on any day that has been alleged by the ld AO.

6. Further, we find that the ld AO had accepted the return of income by the assessee, which included this cash sales also. Hence, separately, making an addition on account of cash deposits in the sum of ₹1,19,05,334/- would only result in double addition. Hence, the addition made on account of cash deposits deserves to be deleted on that count itself. Further, we hold that the assessee had indeed proved the source of cash deposits by clearly establishing that the source emanated from the books of account and the cashbook regularly maintained. None of the books of account have been rejected by the ld AO. In these facts and circumstances, there is no case made out by the revenue for making an addition on account of cash deposit separately. Accordingly, the addition made is hereby directed to be deleted. Further, we also find that Hon’ble Madras High Court in the case of of SMILE Microfinance Limited vs ACIT in WP (MD) No. 2078 of 2020 and WMP (MD) No. 1742 of 2020 dated 19-11-2024 had held that the provisions of section 115BBE of the Act which enhanced the rate of tax could be made applicable only from 01.04.2017, relevant to assessment year 2018-19 onwards and not earlier. Accordingly, the Ground Nos. 2 and 3 raised by the assessee are allowed.

7. In the result, the appeal for AY 2017-18 is allowed.

ITA No. 5076/Del/2025 – AY 2018-19

8. Ground Nos. 1 and 4 raised by the assessee are general in nature and does not require any specific adjudication. Ground No. 2 raised by the assessee is challenging the confirmation of addition made on account of unsecured loans received from 6 parties in total sum of Rs. 28,26,73,077/-. The Ground No. 3 raised by the assessee is challenging the confirmation of disallowance of interest paid on aforesaid unsecured loans.

9. We have heard the rival submissions and perused the material available on record. The ld AO noted that the assessee had received unsecured loans of Rs. 28,26,73,077/- from following parties:-

A. Gogia Leasing Ltd

10. It is pertinent to note that the assessee had also received unsecured loans from Gogia Leasing Ltd in earlier year and that it is an existing loan creditor. Further, it was submitted that the assessee had given short term deposit to M/s. Gogia Leasing Ltd a sum of Rs. 26 crores and the same had been duly returned by Gogia Leasing Ltd in the very same year after a short span of time. It was submitted that Gogia Leasing Ltd is a Non-Banking Financial Company (NBFC) duly registered with Reserve Bank of India (RBI) from 19.03.1998. The said company had already advanced loans to the assessee in earlier years and the opening balance of such loans as on 01.04.2017 was Rs. 12,75,07,704/-. The transaction carried out with the said lender company are as under:-

11. From the above, it could be seen that there is effectively running account transactions between the assessee and Gogia Leasing Ltd which is a registered NBFC. The assessee had furnished the confirmation from the said lender, income tax return of the said lender, audited financial36 statements as on 31.03.2018 of the said lender, bank statement of the said lender before the ld AO. The ld AO noted that the confirmation of unsecured loan given by the assessee from Gogia Leasing Ltd was not authenticated document inasmuch as no signature and stamp was affixed in the place provided. Accordingly, the ld AO concluded that the assessee failed to furnish satisfactory explanation, creditworthiness and genuineness of the unsecured loan transaction.

12. During the appellate proceedings the assessee furnished additional evidence before the ld CIT(A) in terms of Section 46A of the Income Tax Rules. Notice u/s 133(6) of the Act stood issued to Punjab National Bank and to M/s. Gogia Leasing Ltd, which stood non complied. The ld CIT(A) noted that additional evidences submitted by the assessee cannot be admitted. For this purpose, he relied on the remand report furnished by the ld AO wherein, the ld AO had objected to the admission of additional evidences. The ld CIT(A) upheld the action of the ld AO by stating that the three ingredients of the Section 68 of the Act were not proved by the assessee herein.

13. At the outset, we find that a sum of Rs. 26 crores has been given as short term deposit by the assessee during the year through regular banking channels out of disclosed source and the same was duly returned back by the said party Gogia Leasing Ltd to the assessee within the same year after holding it for short span of time. Hence, the monies received in the sum of Rs. 26 crores is not in the nature of receipt of unsecured loan rather it is a repayment of short term deposit made by Gogia to the assessee. Since, these transactions are emanating out of disclosed bank source the same cannot be added as unexplained cash credit u/s 68 of the Act in the facts and circumstances of the instant case. It is pertinent to note that the ld AO had duly taken note of this transaction of Rs. 26 crores in his assessment order to represent the monies given by the assessee to Gogia Leasing Ltd and the same monies received back from Gogia Leasing Ltd during the year through regular banking channels. Despite that, he proceeded to make an addition by treating it as unexplained cash credit u/s 68 of the Act merely out of suspicion. It is trite law the suspicion howsoever strong cannot be the basis for framing of an addition. Hence, we have no hesitation in directing the ld AO to delete the sum of Rs. 26 crores from the addition made in respect of Gogia Leasing Ltd.

14. It is pertinent to note that Gogia is a registered NBFC and had already advanced loans in its regular course of business to the assessee with interest. In the regular course of lending business the said party had advanced loans to the assessee and had also received back some loans from the assessee. All the transactions are routed through regular banking channel and duly disclosed in the bank account of both the parties (i.e. lender and borrower). The lender is duly assessed to income tax and had filed its return of income duly disclosing the interest income earned from the assessee and other loans. It is not the case of the revenue that the amounts borrowed from Gogia Leasing ltd have been diverted by the assessee for non-business purposes. In absence of such finding by the revenue, the interest paid on such loan shall be allowable as deduction u/s 36(1)(iii) of the Act. As stated in the earlier part of the order for AY 2018-19, the assessee had furnished all the relevant documents from its side qua Gogia Leasing Ltd. In any event, the amount of loan received during the year is only Rs. 1,64,99,362/- which also stood repaid by the assessee during the year itself. The balance of unsecured loan outstanding loan as on 31.03.2018 represent the unpaid balance of opening balance of loan after making partial repayments during the year. From the perusal of all the financial statements of Gogia Leasing Ltd we find that as on 01.04.2017, the shareholders funds available with the lender of Rs. 18.43 crores which will sufficiently take care of amounts advanced during the year by the lender company to the assessee. This proves the creditworthiness of the lender company. All transactions are routed through the regular banking channels which proves the genuineness of the transactions. Hence, we have no hesitation to conclude that assessee had duly proved all the three ingredients of Section 68 of the Act qua Gogia Leasing Ltd i.e. identity of the creditor, genuineness of the transaction and creditworthiness of the creditor. Hence, no part of the unsecured loan received from Gogia Leasing Ltd as unexplained warranting invocation of Section 68 of the Act. Hence, the addition made on account of unsecured loan received from Gogia Leasing Ltd is deleted and disallowance of interest of such loan is also deleted.

B. G. R. D. Finlease Pvt. Ltd-Rs. 6,88,423/-

15. The assessee furnished the copy of the income tax return acknowledgement for AY 2018-19 of the lender together with audited business statement as on 31.03.2018 and bank statements of the lender company from the Financial Year 2017-18 before the ld AO. The copy of confirmation from the lender was also filed on record. We find from the confirmation that a sum of Rs. 77,56,000/- was lying as opening balance on the loan received from the said party and a sum 2 lakhs was repaid during the year. This goes to prove no fresh loan was received during the year. On the existing loan only the interest is found credited to the account of the lender. The orders of the lower authorities are completely silent as to whether any addition on account of unsecured loan was made in the year of receipt of loan.

Hence, it could be safely concluded that no amounts were received during the year and accordingly, no sum of money is found credited during the year and hence, no addition u/s 68 of the Act could be made as the said provision is not applicable at all. Consequentially, the interest disallowed on the said loan during the year is allowed.

C. Vinod Goel and Sons HUF

16. The assessee has furnished the copy of ITR acknowledgement of the lender for AY 2018-19, confirmation from the lenders, statement of affairs as on 31.03.2018 of the lender before the ld AO. On perusal of the said documents, we find that no no fresh loan was received during the year. On the existing loan, only the interest is found credited to the account of the lender. The orders of the lower authorities are completely silent as to whether any addition on account of unsecured loan was made in the year of receipt of loan. Hence, it could be safely concluded that no amounts were received during the year and accordingly, no sum of money is found credited during the year and hence, no addition u/s 68 of the Act could be made as the said provision is not applicable at all. Consequentially, the interest disallowed on the said loan during the year is allowed.

D. Pankaj Arora HUF

17. The assessee has filed ITR acknowledgement of the lender for AY 2018-19, together with the confirmation and bank statements of the lender. On perusal of the ledger account of the ledger account of the lender there was no receipt of fresh loans during the year and hence, provision of Section 68 of the Act shall not be applicable. Consequentially, the interest paid on such loan is allowed.

E. Ramesh Chand Arora

18. The assessee has filed ITR acknowledgement of the lender for AY 2018-19, together with the confirmation and bank statements of the lender. On perusal of the ledger account of the lender there was no receipt of fresh loans during the year and hence, provision of Section 68 of the Act shall not be applicable. Consequentially, the interest paid on such loan is allowed.

F. Pramod Goel HUF

19. The assessee has filed ITR acknowledgement of the lender for AY 2018-19, together with the confirmation and bank statements of the lender. On perusal of the ledger account of the ledger account of the lender there was no receipt of fresh loans during the year and hence, provision of Section 68 of the Act shall not be applicable. Consequentially, the interest paid on such loan is allowed.

20. In view of the aforesaid observations, the addition made u/s 68 of the Act together with the disallowance of interest on unsecured loan are hereby directed to be deleted. Accordingly, the Ground Nos. 2 and 3 raised by the assessee are allowed.

21. To sum up, both the appeals of the assessee are allowed.

Order pronounced in the open court on 16/04/2026.