Amit Kedia Vs ACIT (ITAT Kolkata)
Kolkata ITAT: Section 69C Cannot Be Invoked on Recorded Sales Receipts; Cash Payments under Section 40A(3) Deleted on Commercial Expediency
The Kolkata ITAT deleted additions made under section 69C and section 40A(3) in the case of a wholesale hardware trader. The Tribunal found that the Assessing Officer had wrongly treated entries in loose sheets found during a survey as unexplained cash expenditure, whereas the impounded documents actually represented amounts received from debtors against sales, many of which were duly recorded in the books of account and corroborated by ledger accounts and cheque details. Holding that sales receipts cannot be characterised as unexplained expenditure, the Tribunal ruled that the very invocation of section 69C was misconceived and directed deletion of the entire addition. The Tribunal also deleted the disallowance under section 40A(3) in respect of cash payments towards salary, audit fees and sales promotion expenses, accepting the assessee’s explanation that the payments were made due to commercial expediency, as the recipients had declined to accept payment by cheque. The same relief was extended mutatis mutandis to the connected assessment years 2015-16, 2017-18 and 2018-19, resulting in all the assessee’s appeals being allowed.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
These are appeals preferred by the assessee against the order of the Commissioner of Income-tax (Appeals), Kolkata-21, (hereinafter referred to as the “Ld. CIT(A)”] dated 14.11.2025, 24.11.2025, 08.10.2025 for the AYs2 015-16, 2016-17, 2017-18, 2018-19.
For A.Y. 2016-17
ITA No. 3111/KOL/2025
2. Ground no.1 to 8 are not pressed.
3. The first issue raised in ground no.9 to 11 is against the part confirmation of addition to the extent of Rs. 112,79,989/- as against the total addition of Rs. 17,76,307/- made by the Id. AO u/s 69C of the Act in respect of expenditure.
3.1. The facts in brief are that the assessee filed the return of income on 05.10.2016, declaring total income at X29,61,590/. A survey u/s 133A (1) of the Act was conducted on the office and residential premises of the assessee and the records were impounded. A survey team noted that the assessee has made a payment of more than Rs. 120,000/- in violation of provisions of Section 40A(3) of the Act and AO also found that these transactions were not recorded in the regular books of account. Accordingly, the case of the assessee was reopened by issuance of notice u/s 148 of the Act. The assessee complied with the said notices by filing the return of income on 24.04.2021, declaring the same income as shown in the original return. Thereafter, the statutory notices along with the questionnaire were duly issued. The assessee filed the objection on 02.12.2021, which were also disposed off by the Id. Assessing Officer. The Id. AO summarized the documents impounded during the course of survey operation and noted that aggregate payment of Rs. 17,76,307/- were made in cash. Accordingly, a show case notice was issued as to why the same should not be added to the income of the assessee. Assessee during the course of hearing totally denied the cash transactions mentioned in the assessment order page no.2 to 4. The Id. AO accordingly treated the cash payments during the course of survey as per table 1 as unexplained expenditure and thus, came to the conclusion that the assessee has failed to discharge his onus and accordingly, added the same to the income of the assessee as unexplained cash credit in the hands of the assessee u/s 69C of the Act.
3.2. In the appellate proceedings, the Id. CIT (A) partly allowed the appeal of the assessee by observing and holding as under:-
“8.2.8 In Ground No. 5, the assessee has alleged that figures given in the order did not tally with the cash payments actually made by the assessee during the year. The appellant has stated that the break up given in the order did not match with the cash payments made by the assessee during the year. In order to substantiate this ground, the appellant through his submission made on 22.09.2025, has stated that the figures of the alleged cash payments made in excess of Rs. 20,000/- u/s 40A(3) of the Act which were duly recorded in the regular books of accounts, however the AO made addition u/s 69C of the Act, which is not applicable under such facts. All the entries in the impounded documents were recorded in the regular books of accounts. Further, he states that the said impugned pages referred to in the SCN on the basis of which addition was made u/s 69C of the Act relates to the payments received by the assessee from debtors and that too mostly via cheque and does not relate to payments made by the assessee. In support of his argument, he has referred to page no. 40 of the seized document KE-2 and has tried to explain that the amounts mentioned on these pages refer to the payments received by the assessee against sales made to the party- M/s Maamanasa Hardware. Hence, he has stated that the amounts referred to by the AO (mentioned on page no. 40 of the impounded document KE-2) are not the expenditure incurred by him, hence the provisions of Section 69C are not applicable in his case.
3.2.9 The contention of the appellant has been examined vis-à-vis the submissions made by him. On careful perusal of the submissions made by the appellant, it is noticed that he has provided bank account statement of Kedia Enterprise; proprietor Shri Amit Kedia and the ledger account statement of the debtor in his books of accounts, viz. M/s Maamanasa Hardware. Apart from this he has also furnished unsigned computer generated tax invoice. and credit note in respect of these entities, which he claimed to be debtors. On perusal of the ledger account of M/s Maamanasa Hardware in his books, it is noticed that total amount of payment received during the relevant financial year, from M/s Maamanasa Hardware was. Rs. 4,97,318/-. On the impounded documents, at the top, name of M/s Maamanasa Hardware is found mentioned. Few of such payments were received through cheque. The relevant impounded documents submitted by the assessee have been examined and it is found that against certain entries; cheque numbers are mentioned and the amounts are tallying with the ledger account furnished by the assessee during appellate proceeding. Hence, the addition to the extent of Rs. 4,97,318/-, out of Rs. 17,76,307/- u/s 69C of the Act is allowed to be deleted, subject to the verification of the A.O. from the records available with him and the counterparty to the impugned transactions. It is matter of fact that the appellant failed to explain the nature and source of incurring the expenses in cash of the remaining amount, both during the assessment proceeding as well as the appellate proceeding. Further, the appellant is silent about the entries mentioned on other impounded documents -KE-4,10,13,14,16 and 17. Hence, I find no reason to interfere with the order of the AO in respect of disallowance made by the AO of the unexplained expenditure u/s 69C of the Act to the tune of Rs. 12,78,989/-(Rs. 17,76,307/- Rs. 4,97,318/-). Hence, this ground of appeal is partly allowed.”
3.2.1. Thus, the Id. CIT (A) partly allowed the appeal of the assessee by deleting the addition at Rs. 14,97,318/- and by sustaining the addition of Rs. 112,79,989/-.
3.3. After hearing the rival contentions and perusing the materials available on record, we find that the assessee is engaged in the business of wholesale hardware and sundry trading in the proprietary concern M/s Kedia Enterprises. Survey u/s 133A of the Act was conducted on 26.02.2018, on the assessee residential and official premises and , no deposition was taken from the assessee. During survey, certain loose sheets were found which contained entries along with the cash receivable from the debtors and list of inventories. We note that the assessee has submitted before the Id. AO and Id. CIT (A) that the breakup of the cash payments as given by the Id. AO in the assessment order did match with the cash received made by the assessee which were duly recorded in the books of account. The assessee also objected that the payments in excess of Rs. 120,000/- u/s 48(3) of the Act were not recorded in the books of accounts and therefore, invocation of section 69C of the Act is wrong. It was also claimed by the assessee that in the show cause notice, the addition made u/s 69C of the Act referred to the payments received by the assessee from the debtors and thereto mostly by cheque and does not relate to the payments made by the assessee. The Id. AR therefore, referred to page no. 40 of the seized documents KE-2 and try to explain that the amount mentioned as payments by referring to these payments received by the assessee against the sale made to party M/s Maamanasa Hardware. The Id. AR therefore prayed that the cash amounts referred by the Id. AO are not expenses incurred by him and hence, section 69C of the Act is not applicable. The Id. CIT (A) after taking into account the contention of the assessee partly allowed the appeal of the assessee. We have also examined the documents impounded during the course of survey and found that the payments as mentioned in these documents were accounted for in the books of accounts of the assessee as payments received for sales made by the assessee. Even CIT (A) accepted the fact while deleting the addition that assessee received payments from sundry debtors by cheque and thus, deleted the addition of 14,97,318/-. We have also examined the facts before us that and find that the cash payments referred by the Id. AO in the assessment order in fact represented the receipts of cash against sales made by the assessee. Therefore, the provisions of Section 69C of the Act were wrongly invoked by the Id. Assessing Officer. Similarly, the same were also not fully appreciated by the Id. CIT (A). Considering the same, we are inclined to modify the order of Id. CIT (A) and direct the Id. AO to delete the addition. Ground nos.9 to 11 are allowed.
4. The second issue raised in ground no.12, is against the confirmation of addition of Rs. 1,18,300/- as made by the Id. AO to be in violation of Section 40A(3) of the Act, in respect of salaries and sales promotion.
4.1. The facts in brief are that the assessee during the course of assessment proceedings, accepted the following payments made in excess of limit of Section 40A(3) of the Act:-
| SI No. | Date | Particulars | Amount | Purpose |
| 1. | 05.06.2015 | Subham Kedia (salary | 26,300 | 4 month salary paid in cash although debited in the Books every moth Rs. 13,150/- |
| 2. | 05.11.2015 | Audit fee | 25,000 | 4 Month salary paid in cash although debited in the books every moth Rs. 12,225/- |
| 3. | 19.01.2016 | Sales promotion | 25,000 | Purchase of gold coin |
| 4. | 27.02.2016 | Sales promotion | 42,000 | Purchase of gold Coin |
4.2. The Id. AO accordingly, added the same to the income of the assessee.
4.3. In the appellate proceedings, the Id. CIT (A) also confirmed the said addition.
4.4. After hearing the rival contentions and perusing the materials available on record, we find that the payments were made to Subham Kedia on 05.06.2015, which is two-month salary of Rs. 13,150/- per month. Similarly, the audit fee was paid of Rs. 125,000/-. Likewise sale promotion expenses of Rs. 25,000/- and Rs.42,000/- were incurred. It was submitted that the payments were made out of commercial expediency as the concern persons have refused to accept the payments by cheque. Considering these facts of the case, we are inclined to set aside the order of Id. CIT (A) and direct the Id. AO to delete the addition. Ground no.12 is allowed.
5. The appeal of the assessee in ITA No. 3111/KOL/2025 is allowed.
For A.Y. 2015-16
ITA No. 3110/KOL/2025
6. Ground nos. 1 to 7 are not pressed.
7. The first issue raised in ground nos. 8,9 and 10 are similar to one as decided by us in ground no. 9 to 11 of ITA No. 3111/KOL/2025 for A.Y. 2016-17. Accordingly, our decision would, mutatis mutandis, apply to these grounds of assessee in ITA No.3110/KOL/2025 for A.Y. 2015-16. Hence, ground nos. 8 to 10 are allowed.
8. The Second issue raised in ground nos. 11 & 12 is similar to one as decided by us in ground no. 12 of ITA No. 3111/KOL/2025 for A.Y. 2016-17. Accordingly, our decision would, mutatis mutandis, apply to these grounds of assessee in ITA No.3110/KOL/2025 for A.Y. 2015-16. Hence, ground nos. 11 & 12 are allowed.
9. The appeal of the assessee in ITA No. 3110/KOL/2025 is allowed.
For A.Y. 2017-18
ITA No. 3112/KOL/2025
10. Ground nos. 1 to 8 are not pressed.
11. The first issue raised in ground nos. 9 to 11 are similar to one as decided by us in ground no. 9 to 11 of ITA No. 3111/KOL/2025 for A.Y. 2016-17. Accordingly, our decision would, mutatis mutandis, apply to these grounds of assessee in ITA No.3112/KOL/2025 for A.Y. 2017-18. Hence, ground nos. 9 to 11 are allowed.
12. The Second issue raised in ground no. 12 are similar to one as decided by us in ground no. 12 of ITA No. 3111/KOL/2025 for A.Y. 2016-17. Accordingly, our decision would, mutatis mutandis, apply to this ground of assessee in ITA No.3112/KOL/2025 for A.Y. 2017-18. Hence, ground no. 12 is allowed.
13. The appeal of the assessee in ITA No. 3112/KOL/2025 is allowed.
For A.Y. 2018-19
ITA No. 3113/01/2025
14. Ground nos. 1 to 3 are not pressed.
15. The first issue raised in ground nos. 4 &5 are similar to one as decided by us in ground nos. 9 to 11 of ITA No. 3111/KOL/2025 for A.Y. 2016-17. Accordingly, our decision would, mutatis mutandis, apply to these grounds of assessee in ITA No.3113/KOL/2025 for A.Y. 2018-19. Hence, ground nos. 4 to 5 are allowed.
16. The Second issue raised in ground no. 6 are similar to one as decided by us in ground no. 12 of ITA No. 3111/KOL/2025 for A.Y. 2016-17. Accordingly, our decision would, mutatis mutandis, apply to this ground of assessee in ITA No.3113/KOL/2025 for A.Y. 2018-19. Hence, ground no. 6 is allowed.
17. The issue raised in ground nos.7 and 8 does not require any specific adjudication.
18. The appeal of the assessee in ITA No. 3113/KOL/2025 is allowed.
19. In the result, all the appeals of the assessee are allowed.
Order pronounced on 24.07.2026.
