Opening Balances Cannot Be Added Under Section 68 as They Relate to Earlier Years

Audinarayana Reddy Papareddy Vs DCIT (ITAT Hyderabad)

In Audinarayana Reddy Papareddy Vs DCIT, the ITAT Hyderabad dealt with multiple appeals for AYs 2016-17 to 2019-20 arising from reassessment proceedings initiated after a survey under Section 133A at the assessee’s business premises. The survey resulted in impounding of loose sheets and other materials allegedly reflecting unexplained transactions, sundry creditors, unsecured loans, and discrepancies in sundry debtors relating to the assessee’s aqua feed business and related entities.

For AY 2016-17, the Assessing Officer treated sundry creditors of Rs. 14.13 crore as unexplained cash credits under Section 68 because the assessee failed to furnish confirmations, PAN details, addresses, and supporting documents. The assessee argued that once purchases and sales were accepted, related creditors could not be treated as bogus, and further contended that opening balances could not be added under Section 68. The Tribunal held that the assessee failed to establish genuineness of the creditors and transactions. However, it accepted the legal position that opening balances brought forward from earlier years cannot ordinarily be added under Section 68. Since complete details were not furnished, the issue was restored to the Assessing Officer for verification limited to whether any portion represented opening balances from earlier years.

For AY 2017-18, addition of unsecured loans of Rs. 1.34 crore under Section 68 was challenged. The assessee contended that Rs. 1.27 crore represented opening balances from the previous year. The Tribunal observed that no complete details of opening balances, fresh borrowings, repayments, and closing balances were filed. While reiterating that opening balances cannot be taxed under Section 68, the ITAT restored the matter to the Assessing Officer for verification of the assessee’s claim with supporting evidence.

For AY 2018-19, the assessee challenged the validity of reassessment proceedings on the ground that approval under Section 151 should have been obtained from the Principal Chief Commissioner because the final notice under Section 148 was issued on 31.03.2023, beyond three years from the end of the relevant assessment year. The Tribunal rejected this argument and held that reassessment proceedings had originally been initiated within three years through notice dated 31.03.2022 after obtaining approval from the Principal CIT (Central), Visakhapatnam. The subsequent order and notice issued in 2023 were only in continuation of earlier proceedings pursuant to directions of the Telangana High Court and were protected by the sixth proviso to Section 149. Therefore, sanction from the Principal CIT was held valid.

The Tribunal also examined additions relating to discrepancies in sundry debtors based on loose sheets found during survey. The assessee argued that the loose sheets were “dumb documents.” However, the Tribunal observed that the assessee itself had reconciled substantial entries in the loose sheets with the audited books of Kamakshi Aqua Feeds and Kamakshi International. Since unreconciled debtors amounting to Rs. 11.42 crore remained unexplained, the ITAT upheld the CIT(A)’s finding that such unreconciled amounts represented business turnover. The Tribunal sustained estimation of 8% profit on the differential amount instead of treating the entire amount as unexplained investment.

In the appeal of Kamakshi International for AY 2019-20, the Tribunal considered addition of Rs. 25 lakh based on additional income admitted during survey but not disclosed in the return. The ITAT held that since the unreconciled sundry debtors and corresponding estimated profit had already been taxed in the hands of the proprietary concern, a separate addition based on the survey admission would amount to duplication. Accordingly, the addition of Rs. 25 lakh was deleted.

The appeals for AYs 2016-17 and 2017-18 were allowed for statistical purposes, appeals for AYs 2018-19 and 2019-20 were partly allowed for statistical purposes, and the appeal of Kamakshi International for AY 2019-20 was allowed.

SEO-Friendly Titles with Descriptions

ITAT Restores Section 68 Addition Because Assessee Failed to Prove Sundry Creditors Fully

SEO Description: ITAT Hyderabad held that the assessee failed to establish genuineness, identity, and creditworthiness of sundry creditors by furnishing confirmations and supporting details. However, the Tribunal directed verification of whether part of the balances represented opening balances from earlier years.

Reassessment Held Valid Because Original Section 148 Notice Was Issued Within Three Years

SEO Description: ITAT Hyderabad rejected the challenge to reassessment proceedings by holding that the original notice under Section 148 had been validly issued within the statutory limitation period. The later notice issued after High Court directions was treated as continuation of the earlier proceedings.

Section 151 Approval From Principal CIT Valid Because Later Notice Was Continuation of Earlier Proceedings

SEO Description: The Tribunal held that sanction from the Principal CIT was proper since reassessment proceedings had originally commenced within three years from the end of the relevant assessment year. Proceedings undertaken after the High Court order were protected under the sixth proviso to Section 149.

Loose Sheets Not ‘Dumb Documents’ Because Assessee Reconciled Entries With Books, Says ITAT

SEO Description: ITAT Hyderabad held that loose sheets found during survey could not be dismissed as meaningless documents because the assessee itself reconciled substantial entries with audited accounts. Unreconciled entries were therefore treated as unexplained business transactions.

FULL TEXT OF THE ORDER OF ITAT HYDERABAD

The appeals filed by the captioned assessees are directed against the separate orders of the learned Commissioner of Income Tax (Appeals) – 3, Visakhapatnam – 3, dated 04.09.2025 pertains to the assessment years 2016-17 to 2019-20. Since common issues are involved in all these appeals, the same were heard together and are being disposed of by this single consolidated order for the sake of convenience and brevity.

2. First, we take up appeal in ITA No. 1950/Hyd/2025. The grounds raised by the assessee in this appeal are re-produced as under:

“1. The Learned CIT(A) erred in confirming the action of L.d. AO in treating sundry creditors reported in the audited Balance Sheet amounting to Rs. 14,13,12,472/-as unexplained cash credits um 60 of the IT Act

2. The Learned CIT(A) ought to have appreciated that when the purchases, sales and the resultant profit declared by assessee in his return of income was accepted, the corresponding trade creditors, which arises from credit purchases, cannot be treated as non-genuine.

3. Without prejudice to the above grounds, Learned CIT(A) ought to have appreciated that out of the total amount of Sundry creditors of Rs. 14,13,12,472/- treated by Ld.AO as unexplained, Rs. 1,49,63,543/-pertains to opening balances, which cannot be added as unexplained credits in the impugned year, considering the provisions of section 68 of the IT Act.

4. The Learned CIT(A) erred in confirming the interest under Section 234A and Section 234B which is consequential to the additions made above.

5. For these and such other grounds, that may be urged at the time of hearing of subject appeal, the appellant prays before the Hon’ble ITAT that the above additions made by Ld.AO and confirmed by Ld.CIT(A) be deleted or provide such other relief as the Hon’ble Tribunal may deem fit.”

3. Thereafter, the assessee had raised the following additional ground :

“Learned CIT(A) ought to have appreciated that the notice u/s 148 issued by The Assistant Commissioner of Income Tax, Central Circle, Tirupati u/s 148 dt.24-04-2023 is invalid in terms of section 151A as per which notice u/s 148 shall be issued through automated allocation by National Faceless Assessing Officer (NFAC) and this action of JAO rendered the entire reassessment proceedings u/s 147 void ab initio.”

4. The brief facts of the case are that, the assessee is an individual engaged in the business of purchase and sale of aqua feeds under the name and style of his proprietary concern M/s. Kamakshi Aqua Feeds. The assessee filed return of income for the assessment year 2016-17 on 18.10.2016 declaring total income of Rs. 19,70,380/-. Subsequently, the case of the assessee was centralized and based on information available with the Department, proceedings were initiated to examine the correctness of the return of income filed by the assessee. During the course of survey proceedings under Section 133A of the Income Tax Act, 1961 conducted on 18.03.2019, certain incriminating material in the form of loose sheets were found and impounded vide Annexure I/2. On perusal of the said impounded material, particularly page No. 12, it was noticed that the assessee had allegedly made cash payments to M/s. GYRR Industries on various dates during the financial year 2015-16 relevant to the assessment year under consideration, aggregating to Rs. 1,20,00,000/-. The said entries in the impounded documents indicated cash outflows, however, the nature and source of such payments were not explained by the assessee at the time of survey proceedings.

5. During the course of assessment proceedings, the A.O. initiated proceedings under Section 148A of the Act, on the basis of the information gathered during the survey and issued show-cause notice under Section 148A(b) of the Act. After considering the reply of the assessee, the A.O. passed order under Section 148A(d) and issued notice under Section 148 of the Act. In response, the assessee failed to file return of income within the prescribed time and also did not furnish complete details as called for by the A.O. despite providing sufficient opportunities through notices issued under Section 142(1) of the Act. The assessee furnished only partial information and failed to substantiate the transactions reflected in the impounded material as well as entries in the books of account with necessary documentary evidences. Therefore, the A.O. proceeded to complete the assessment ex-parte under Section 144 r.w.s. 147 of the Act.

6. The A.O., on the basis of the impounded material and the information available on record, treated the alleged cash payments of Rs. 1,20,00,000/- to M/s. GYRR Industries as unexplained expenditure under Section 69C of the Act, on the ground that the assessee failed to explain the source of such payments. Further, the A.O. disallowed 10% of the expenses claimed in the Profit & Loss account for want of supporting bills and vouchers. The A.O. also made addition towards sundry creditors amounting to Rs. 14,13,12,472/- under Section 68 of the Act, as the assessee failed to establish identity, creditworthiness and genuineness of the creditors by furnishing confirmations and other relevant details. Accordingly, the A.O. determined total income at Rs. 15,66,05,656/- as against returned income declared by the assessee.

7. Aggrieved with the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee has challenged the additions made by the A.O. towards unexplained expenditure under Section 69C of the Act, disallowance of expenses and addition towards sundry creditors under Section 68 of the Act on the ground that the additions were made merely on the basis of loose sheets impounded during the course of survey without any corroborative evidence and without establishing any nexus between the assessee and the alleged transactions.

8. The Ld. CIT(A) after considering the submissions of the assessee and also taking note of the material available on record observed that the impounded loose sheets were found from the premises of the assessee during the course of survey and in view of the provisions of Section 292C of the Act, a presumption arises that the contents of such documents are true and correct. Since the assessee failed to rebut such presumption with cogent evidences, the Ld. CIT(A) upheld the addition made by the A.O. towards unexplained expenditure under Section 69C of the Act. The Ld. CIT(A) further observed that the assessee has not furnished supporting evidences for the expenses claimed and therefore, confirmed the disallowance of expenses. Similarly, in respect of sundry creditors, the Ld. CIT(A) held that the assessee has failed to establish identity, creditworthiness and genuineness of the creditors and accordingly sustained the addition made under Section 68 of the Act. Thus, the Ld. CIT(A) confirmed the additions made by the A.O. and dismissed the appeal of the assessee.

9. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

10. The main issue that came up for our consideration from ground nos.2 to 4 of assessee’s appeal for AY 2016-17 is addition towards sundry creditors appearing in the balance sheet as unexplained cash credits for Rs. 14,13,12,472/- under section 68 of the Income Tax Act, 1961.

11. During the course of assessment proceedings, the A.O. called upon the assessee to furnish details of sundry creditors in the format provided with the show cause notice, including name, PAN number and complete address of the creditors, opening balance and additions during the year, payments during the year, closing balance and in remarks column – specify the nature of transactions with the party. In response, the assessee submitted only copy of ledger extract detailing the breakup of sundry creditors outstanding as on 31.03.2016 without providing complete details like PAN, complete address, nature of transactions, confirmation letters of the creditors and the income tax assessment particulars. Therefore, the A.O. treated the entire amount of sundry creditors as unexplained cash credit and taxed under section 68 of the Income Tax Act, 1961. On appeal, the Ld. CIT(A), for the reasons stated in their appellate order dated 04.09.2025 and also by following certain judicial precedents, including the decision of Hon’ble Supreme Court in the case of Ramchandra Singh Vs. CIT reported in (2024) 466 ITR 260 (SC), rejected the explanation of the assessee and upheld the addition made by the A.O. towards the sundry creditors under section 68 of the Income Tax Act, 1961.

12. The learned counsel for the assessee, Ms. K. Hemalatha, C.A. and Shri B. Ramakrishnan, C.A. submitted that, the Ld. CIT(A) erred in sustaining additions made by the A.O. towards sundry creditors under section 68 of the Income Tax Act, 1961, without considering the fact that when the purchases and the business results are accepted by the A.O. as genuine, then the creditors arising out of purchases cannot be treated as unexplained cash credits under section 68 of the Income Tax Act, 1961. The Ld. counsel for the assessee, further referring to the financial statements for the year under consideration and previous financial year, submitted that the assessee is having substantial amount of creditors brought forward from earlier financial years and the A.O. made addition towards sundry creditors, including the opening balance brought forward from earlier financial years without appreciating the fact that, under section 68 of the Act, additions cannot be made to the creditors which are carried forward from the earlier financial years. The Ld. counsel for the assessee further submitted that, the sundry creditors appearing in the balance sheet directly correspond to these purchases and therefore, doubting the genuineness of the sundry creditors alone is not logically correct and without any basis. In this regard, they relied upon the following judicial precedents :

1. Nagendra Constructions Vs. CIT in ITA No. 198/Hyd/2022 (Hyderabad – Trib.).

2. ITO Vs. Sri Tadi Vasudeva Rao in ITA No. 371/Viz/2018 dated 20.03.2019 (Visakhapatnam – Trib.).

3. Standard Leather Pvt. Ltd. Vs. DCIT in ITA No. 2620/Kol/2013 dated 07.09.2016 (Kolkata – Trib.).

4. M/s. Gulf Steel & Minerals Vs. ITO in ITA No. 57/Ran/2016 dated 04.05.2018 (Ranchi – Trib.).

5. Smt. Sudha Loyalka Vs. ITO reported in (2018) 97 taxmann.com 303 (Delhi – Trib.).

6. CIT Vs. Jagatkumar Satishbhai Patel reported in (2014) 45 com 441 (Gujarat).

7. Kalavakuntala Sudhir Rao Vs. ITO reported in (2023) 150 com 14 (Hyderabad – Trib.).

13. The Ld. CIT-DR, Shri P. Dhivahar, and the Ld. Sr. A.R. for the Revenue, Shri Dr. Sachin Kumar, on the other hand, supporting the order of the Ld. CIT(A), submitted that the assessee could not furnish any details as to the nature of the transactions with the creditors by filing name, address and PAN numbers of the creditors. Further, the assessee has also failed to furnish confirmation letters from the parties related to the nature of transactions, etc. Since the assessee has failed to prove the nature of transactions with the sundry creditors, the A.O. has rightly made addition towards sundry creditors under section 68 of the Income Tax Act, 1961. The Ld. CIT(A), after considering the relevant facts, has rightly sustained the addition made by the A.O. Therefore, they submitted that, the addition made by the A.O. should be upheld.

14. We have heard both parties, perused the material available on record, and had gone through the orders passed by the authorities below. There is no dispute with regard to the fact that the assessment proceedings in the present case has been reopened on the basis of a survey conducted under section 133A of the Act, in the business premises of the assessee, where certain incriminating material was found and impounded which reveals certain transactions of the assessee outside the books of accounts maintained for the relevant assessment years. During the course of survey under Section 133A of the Act, the assessee could not satisfactorily explain the transactions recorded in the excel sheets which pertain to the sundry creditors and debtors and for this reason, the assessee has come forward to offer additional income in the hands of the assessee and also Kamakshi International. During the course of assessment proceedings, the A.O. called upon the assessee to file details of sundry creditors in the specified format, for which the assessee has furnished only ledger account, without filing complete details of address and PAN number of the creditors. The assessee has also failed to file confirmation with the sundry creditors explaining the nature of the transactions with the creditors. From the above, it is very clear that the assessee could not establish the genuineness of the transactions in respect of sundry creditors appearing in the balance sheet. Although the Ld. counsel for the assessee argued that when financial results have been accepted as genuine, then the sundry creditors arising out of purchases cannot be doubted, but the fact remains that when the assessee has failed to file details of sundry creditors and the nature of the transactions with the assessee, then it is difficult to accept the arguments of the Ld. counsel for the assessee that the entire sundry creditors appearing in the balance sheet are arising out of purchases. No doubt, if the sundry creditors are arising out of purchases, then once the purchases have been accepted as genuine, the sundry creditors cannot be disputed. In the present case, the assessee has failed to prove the nature of transactions with the sundry creditors, and thus, the A.O. has rightly treated the sundry creditors as non-genuine. Therefore, to this extent, we cannot find fault with the reasons given by the A.O.

15. Insofar as the arguments of the Ld. counsel for the assessee in light of addition towards entire sundry creditors, including the opening balance brought forward from earlier financial years, we find that, the Ld. counsel for the assessee has made an argument and submitted that, the additions cannot be made under section 68 of the Income Tax Act, in respect of opening balance of sundry creditors. We do fully agree with the contention of the Ld. counsel for the assessee. However, facts with regard to the details of the sundry creditors, including the opening balance, additions during the year, repayment during the year and closing balance and particulars of sundry creditors has not been furnished by the assessee either during the course of assessment proceedings or appellate proceedings and even before the Tribunal. In absence of any details as to opening balance, additions during the year and closing balance, the arguments of the assessee cannot be accepted that too on the basis of total sundry creditors appearing in the balance sheet of the previous financial year and the current financial year. Further from the balance sheet filed by the assessee for two financial years, it cannot be ascertained as to whether the sundry debtors appearing in the balance-sheet as on 31.03.2016 is fully brought forward from the earlier financial year or fresh credit taken by the assessee during the financial year. Therefore, it is for the assessee to file complete details of creditors, including the opening balance, transactions during the year and closing balance so as to verify whether the credits appearing in the balance sheet are fresh credits taken during the year are brought forward from the earlier financial years. Since the assessee has failed to file complete details of transactions with creditors, in our considered view, there is no error in the reasons given by the Ld. CIT(A) to reject the explanation of the assessee. Further, since the assessee has made an argument in light of balance of two financial years and claimed that few credits are brought forward from earlier financial years, in our considered view, this fact needs to be verified by the A.O. with reference to the details of creditors that may be filed by the assessee. Thus, we set aside the issue under Section 68 of the Act, to the file of the A.O. and direct the A.O. to verify the claim of the assessee and in case, the assessee is able to prove that few credits are opening balances brought forward from the earlier financial years, then to that extent, the A.O. is directed to delete the addition made under section 68 of the Income-tax Act, 1961.

16. The next issue that came up for our consideration from the ground no.5 of assessee’s appeal is levy of interest under section 234A and 234B of the Act.

17. In our considered view, levy of interest under the said provisions is consequential in nature and depends upon the total income computed by the A.O. Therefore, we direct the A.O. to compute interest under section 234A, 234B and 234C of the Act, as applicable, on the basis of total income determined for each assessment year. Since similar issue arises in other appeals, our findings with respect to the levy of interest under Sections 234A/B/C herein shall apply mutatis mutandis to remaining appeals as well.

18. In the result, the appeal filed by the assessee for AY 2016-17 is allowed for statistical purposes.

ITA No.1951/Hyd/2025 for A.Y. 2017-18

19. Coming to A.Y. 2017-18. The main issue that came up for our consideration from ground nos. 2 and 3 of assessee’s appeal for A.Y. 2017-18 is addition of Rs. 1,34,31,017/- towards unexplained unsecured loans appearing in the balance sheet under section 68 of the Income Tax Act, 1961.

20. During the course of assessment proceedings, the A.O. noticed that, the assessee has shown unsecured loans of Rs. 1,34,31,017/-in the balance sheet for the year ending on 31.03.2017. The A.O. called upon the assessee to provide list of unsecured loans along with complete details like names, PAN numbers, complete address details, confirmation letters of the lenders and income tax assessment particulars. In response, the assessee submitted only ledger extract of the balance sheet pertaining to unsecured loans without providing details like names of persons, PAN numbers, complete address, confirmation letters and their income tax assessment particulars. Therefore, the A.O. treated the entire amount of unsecured loans as non-genuine and made addition under section 68 of the Income Tax Act, 1961.

21. The Ld. counsel for the assessee submitted that the Ld. CIT(A) erred in sustaining the additions made by the A.O. towards unsecured loans for Rs. 1,34,31,017/- without appreciating the fact that out of the total outstanding loans of Rs. 1,34,31,017/-, an amount of Rs. 1,27,24,680/- pertains to the opening balance outstanding as on 01.04.2016. In this regard, they relied upon the decision of Hon’ble High Court of Gujarat in the case of CIT vs. Jagatkumar Satishbhai Patel reported in (2014) 45 taxmann.com 441 (Guj) and also the decision of ITAT, Mumbai Bench in the case of Sai Shiva Educational Trust Vs. ITO reported in (2025) 174 taxmann.com 806 (Mumbai – Trib.).

22. The Ld. CIT-DR, on the other hand, supporting the order of the Ld. CIT(A), submitted that, once again the assessee failed to file basic details like name and complete details of loan creditors and their PAN numbers, ITRs and confirmation letters, and in the absence of basic details, the A.O. has rightly assessed the same as unexplained unsecured loans under section 68 of the Income Tax Act, 1961. The Ld. CIT(A), after considering the relevant facts, had rightly sustained the addition made by the A.O. Therefore, he submitted that the order of the Ld. CIT(A) should be upheld.

23. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. The A.O. made addition of Rs. 1,34,31,017/- under section 68 of the Income Tax Act, 1961 towards unproved unsecured loans appearing in the balance sheet as on 31.03.2017 on the ground that the assessee could not prove the identity of the loan creditors, genuineness of the transactions and credit worthiness of the parties. It was the argument of the Ld. counsel for the assessee that out of the total outstanding loan of Rs. 1,34,31,017/- an amount of Rs. 1,27,24,680/- is the opening balance outstanding as on 01.04.2016 and the same cannot be added as unexplained cash credits under section 68 of the Act. To support their contention, they have referred to ITR filed for the assessment years 2016-17 and 2017-18. From the ITRs filed by the assessee, it appears that there are unsecured loans outstanding as on 31.03.2016 to the extent of Rs. 1,27,24,680/-. However, fact remains that whether the closing balance of Rs. 1,34,31,017/- includes the opening balance of Rs. 1,27,24,680/- or whether the assessee has fully repaid the earlier loans and has taken fresh loan during the year, there are no details forthcoming from the financial statements, and the assessee also has not furnished any details. In the absence of the details of loans, including opening balance, credits taken during the year, repayment during the year and closing balance, simply on the basis of balance sheet of two years, the arguments of the assessee cannot be accepted. No doubt it is well settled principle of law as per the decision of Hon’ble Gujarat High Court and ITAT, Mumbai Bench Court in the case of CIT Vs. Jagatkumar Satishbhai Patel (supra) and Sai Shiva Educational Trust Vs. ITO (supra) that no addition can be made towards opening balance of credits brought forward from earlier financial years. However, it is for the assessee to file the details and prove that the credits appearing as on the end of the financial year represent opening balances and credits taken during the year.

24. Since the assessee has failed to file the details of the opening balance and closing balance including the additions during the year, except filing balance sheet of two years, the arguments of the assessee cannot be accepted. However, since the assessee claims that the outstanding unsecured loans, includes opening balance of Rs. 1,27,24,680/- from earlier financial year, in our considered view, to verify the facts with regard to the period of credit in the books of accounts of the assessee, the matter needs to be set aside to the file of the A.O. Thus, we set aside the order of the Ld. CIT(A) on this issue and restore the issue back to the file of the A.O. The A.O. is directed to verify the claim of the assessee in light of evidences that may be filed during the course of proceedings to explain his case.

25. In the result, the appeal filed by the assessee for AY 2017-18 is allowed for statistical purposes.

ITA No.1952/Hyd/2025 for A.Y. 2018-19

26. The first issue that came up for our consideration from ground no.2. of the assessee’s appeal is challenging the validity of reassessment under section 147 of the Income Tax Act, 1961, in light of approval under section 151 of the Act.

27. The Ld. counsel for the assessee submitted that the assessee had not challenged the legality of the reassessment proceedings before the Ld. CIT(A). The assessee has filed a petition for admission of additional grounds before the Tribunal and for the first time had taken a ground challenging the validity of reopening of assessment in light of approval obtained from the appropriate authority as prescribed under section 151 of the Act. The Ld. counsel for the assessee, referring to certain dates and events, submitted that, the assessment has been reopened by issuing a show cause notice under section 148A(b) of the Act on 14.03.2022 and served upon the assessee after obtaining approval from the specified authority under section 151 of the Act. In response to notice under section 148A(b) of the Act, the assessee has contested the issue vide letter dated 25.03.2022. The A.O. has passed the order under section 148A(d) of the Act, on 29.03.2022 and issued notice under section 148 of the Act on 31.03.2022. The assessee has filed Writ Petition No. 12693 of 2022 before the Hon’ble High Court of Telangana and challenged the order passed by the A.O. under section 148A(d) and consequent notice issued under section 148 of the Act. The Hon’ble High Court of Telangana in W.P. No. 12693 of 2022, order dated 26.12.2022, set aside the order passed by the A.O. under section 148A(d) of the Act, dated 31.03.2022 with a direction to the A.O. to furnish the relevant material which prompted to initiate reassessment proceedings to the petitioner within two weeks from the date of receipt of the copy of the order. Pursuant to the directions of the Hon’ble High Court, the A.O. has passed the order under section 148A(d) of the Act, on 30.03.2023 and issued notice under section 148 of the Act, on 31.03.2023. Since the A.O. has issued notice under section 148A of the Act, on 31.03.2023, which is beyond three years form the end of the relevant assessment year, the approval required under section 151 of the Act, should have been taken from the Principal Chief Commissioner of Income Tax, whereas in the present case, the A.O. has taken approval from the Principal CIT (Central), Visakhapatnam, and thus, the notice issued under section 148 of the Act, dated 31.03.2023 is without proper approval and sanction under Section 151 of the Act, and consequently, the entire assessment proceedings becomes void and liable to be quashed. In this regard, they relied upon the decision of Hon’ble High Court of Telangana in the case of Deloittee Consulting India (P). Ltd Vs. Assessment Unit, Income Tax Department, NFAC, Delhi reported in (2025), 178 taxmann.com 781 (Telangana) and also the decision of Hon’ble Delhi High Court in the case of Vikram Kapahi Vs. ACIT reported in (2025) 170 taxmann.com 592 (Delhi). The Ld. counsel for the assessee also relied upon the decision of ITAT, Hyderabad in the case of Sanjeev Kumar Nalam Vs. ITP in ITA No. 669/Hyd/2025 dated 19.12.2025.

28. The Ld. CIT-DR, on the other hand, submitted that there is no merit in the legal ground taken by the assessee challenging the validity of the notice issued under section 148 of the Act, in light of approval granted under section 151 of the Act, by the Principal CIT (Central), Visakhapatnam, because in the present case, the assessment has been reopened within three years from the end of the relevant assessment year by passing an order under section 148A(d) of the Act, on 29.03.2022 and notice under section 148 of the Act, has been issued on 31.03.2022. The subsequent order passed by the A.O. under section 148A(d), dated 30.03.2023 and notice issued under section 148 of the Act, dated 31.03.2023 is only in compliance with the directions of the Hon’ble High Court of Telangana in Writ Petition No. 12693 of 2022 dated 26.12.2022 and the period taken by the A.O. for passing the order and issuance of notice under section 148 of the Act, dated 31.03.2023 shall be excluded in view of sixth proviso to section 149(1)(b) of the Act, where it has been clearly stated that for the purpose of computing the period of limitation, the time or extended time allowed to the assessee as per the Show Cause Notice and the period during which the proceedings under section 148 of the Act, were stayed by an order or injunction of the Court shall be excluded. Since the entire period taken by the assessee for filing writ petition before the Hon’ble High Court of Telangana and subsequent order passed by the A.O. under section 148A(d) of the Act, and issuance of notice under section 148, dated 31.03.2023 is covered under sixth proviso to section 149(1)(b) of the Act, and thus, the arguments of the Ld. counsel for the assessee that the assessment has been reopened beyond three years from the end of the relevant assessment year and consequently, the approval should have been taken from the Principal Chief Commissioner of Income Tax is devoid of merit and cannot be accepted. Since the A.O. has issued notice within three years from the end of the relevant assessment year, he has rightly taken sanction from the Principal CIT (Central), Visakhapatnam, which is in accordance with the Act. Therefore, he submitted that the legal ground taken by the assessee should be rejected.

29. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered the relevant provisions of section 148A, 149 and 151 of the Income Tax Act, 1961, in light of certain judicial precedents cited by the Ld. counsel for the assessee in support of her arguments. The assessee has challenged the validity of the notice issued under section 148, dated 31.03.2023 in light of sanction obtained under section 151 of the Act, from the Principal CIT (Central), Visakhapatnam, and claimed that sanction obtained from the Principal CIT (Central), Visakhapatnam is invalid and consequently notice issued under section 148 of the Act, dated 31.03.2023 is null and void and liable to be quashed.

30. The provisions of section 148A deal with issuance of notice under section 148 of the Act, for reopening of the assessment. The provisions of section 149 of the Act, deal with time limit for issuance of notice under section 148 of the Act. Similarly, provisions of section 151 of the Act, deal with prior sanction from the specified authority for issuance of notice under section 148A(d) and 148 of the Act. As per section 151 of the Act, specified authority for the purpose of section 148 and 148A shall be Principal CIT or Principal Director, if three years or less than three years have elapsed from the end of the relevant assessment year. Further, in case if more than three years have elapsed from the end of the relevant assessment year, then the specified authority for the purpose of section 148 and 148A of the Act, shall be Principal Chief Commissioner or Principal Director General.

31. In the present case, notice under section 148A(b) of the Act was issued on 14.03.2022 after obtaining approval from the specified authority i.e., Pr. CIT (Central), Visakhapatnam, under section 151 of the Act. In response to notice under section 148A(b) of the Act, the assessee contested the issue vide letter dated 25.03.2022. The A.O. had passed the order under section 148A(d), on 29.03.2022 and a notice under section 148 of the Act, was issued on 31.03.2022. If we consider the first notice issued under section 148, dated 31.03.2022, then the above notice has been issued within three years from the end of the relevant assessment year and thus, the specified authority for sanction under section 151 of the Act, is Principal Commissioner of Income Tax or Principal Director of Income Tax. However, fact remains that the assessee has challenged the order passed under section 148A(d) and consequent notice issued under section 148 of the Act, dated 31.03.2022 before the Hon’ble High Court of Telangana and the Hon’ble High Court in W.P. No. 12693 of 2022 dated 26.12.2022 has set aside the order passed under section 148A(d) of the Act, dated 31.03.2022 with a direction to the A.O. to furnish the relevant material which prompted to initiate the reassessment proceedings to the petitioner within two weeks from the date of receipt of the order. The A.O., in pursuance to the directions of the Hon’ble High Court of Telangana, has furnished the impounded material to the assessee on 10.01.2023 through email only. Further, as per the request of the assessee, again impounded material and relevant documents have been sent to the assessee on 23.02.2023. However, there is no response from the assessee. Therefore, the A.O. issued one more notice on 07.03.2023 and called upon the assessee to furnish the details as per the directions of the Hon’ble High Court of Telangana. Since the assessee has not filed any details, once again the A.O. has passed order under section 148A(d), on 31.03.2023 and issued notice under section 148 on 31.03.2023. The Ld. counsel for the assessee contended that notice issued under section 148, dated 31.03.2023, in pursuance to the order passed under section 148A(d), dated 31.03.2023, is beyond three years from the end of the relevant assessment year and consequently, the specified authority for the purpose of issuance of notice under section 148 and 148A of the Act, is Principal Chief Commissioner of Income Tax, but not Principal CIT (Central), Visakhapatnam.

32. We do not find any merit in the arguments of the Ld. counsel for the assessee that the notice issued under section 148 of the Act, dated 31.03.2023 is a fresh notice and issued beyond three years from the end of the relevant assessment year and consequently, approval under section 151 of the Act, should have been taken from the Principal Chief Commissioner of Income Tax, for the simple reason that the subsequent order passed by the A.O. under section 148A(d) of the Act, is not an order passed by the A.O. in pursuance of a fresh notice issued under section 148A(b) of the Act. Further, the A.O. has passed order under section 148A(d) of the Act, as per the directions of the Hon’ble High Court after providing the impounded material to the assessee for its compliance and therefore, in our considered view, the subsequent order passed by the A.O. under section 148A(d) of the Act, is only in continuation to the notice issued under section 148A(b) of the Act, and not on the basis of fresh reassessment proceedings initiated under section 148A of the Act. Further, in the present case, the A.O. has issued notice under section 148A(b) of the Act, followed by order under section 148A(d) and issued notice under section 148 of the Act, before 31.03.2022 and therefore, in our considered view, the assessment has been reopened within three years from the end of the relevant assessment year and thus, for the purpose of section 151 of the Act, the specified authority for sanction is Principal Commissioner of Income Tax, but not Principal Chief Commissioner of Income Tax, as claimed by the assessee. Further, once the original proceedings have been validly initiated within three years from the end of the relevant assessment year, then subsequent extension of time due to the reasons of the assessee or due to any proceedings before the Court shall be excluded for the purpose of computation of limitation in view of sixth proviso to section 149(1)(b) of the Act and therefore, if we consider the time taken by the A.O. from the date of filing of Writ Petition by the assessee before the Hon’ble High Court of Telangana and the final notice issued by the A.O. under Section 148, dated 31.03.2023, then the above period shall be excluded and if we exclude the above period, then the notice issued by the A.O. under section 148 of the Act, is within three years from the end of the relevant assessment year and therefore, in our considered view, the A.O. has rightly taken approval as prescribed under section 151 of the Act, from the Principal CIT (Central), Visakhapatnam. Insofar as the various case laws relied upon, including the decision of Hon’ble High Court of Telangana in the case of Deloitte Consulting India (P.) Limited Vs. Assessment Unit, Income Tax Department, NFAC, Delhi (supra) and in the case of Vikram Kapahi (supra), in our considered view, the facts of the above cases are entirely different from the facts of the present case and therefore, the same are rejected.

33. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that, the A.O. had issued notice under section 148 of the Act, dated 31.03.2022, which is less than three years from the end of the relevant assessment year, and thus, the approval taken by the A.O. from the Principal CIT (Central), Visakhapatnam is in accordance with section 151 of the Act. The subsequent proceedings before the Hon’ble High Court and further the order passed by the A.O. under section 148A(d), dated 31.03.2023 is fully covered under sixth proviso to section 149 of the Act, and the same is required to be excluded for the purpose of limitation. Therefore, in our considered view, the arguments of the Ld. counsel for the assessee that the notice issued under section 148 of the Act, dated 31.03.2023 is beyond three years from the end of the relevant assessment year and consequently approval should have been taken from the Principal Chief Commissioner of Income Tax is contrary to the facts available on record and thus, cannot be accepted. Thus, we reject the legal ground taken by the assessee.

34. The next issue that came up for our consideration from ground nos. 3 to 5 of the assessee’s appeal is addition towards sundry creditors appearing in the balance sheet of Rs. 10,00,52,104/-under section 68 as unexplained cash credits.

35. We find that, an identical issue has been considered by us in assessee’s own case in ITA No.1950/Hyd/2025 for A.Y. 2016-17. But for the figures, the facts and issues involved in this appeal are identical with the facts and issues for AY 2016-17. The reasons given by us in the preceding paragraphs 14 and 15 shall mutatis mutandis apply to this appeal as well. Therefore, for similar reasons, set aside the order of Ld. CIT(A) on this issue and restore the issue back to the file of A.O. The A.O. is directed to verify the claim of assessee and decide the issue in line with our findings given in the A.Y. 2016-17.

36. In the result, the appeal filed by the assessee for A.Y. 2018-19 is partly allowed for statical purposes.

ITA No.1953/Hyd/2025 for A.Y. 2019-20

37. The first issue that came up for our consideration from ground nos. 2 and 3 of assessee’s appeal for A.Y. 2019-20 is addition made based on alleged discrepancies in sundry debtors as per loose sheets found during the course of survey and further estimation of 8% profit on such addition by the Ld. CIT(A).

38. During the survey conducted in the case of assessee under section 133A of the Income Tax Act, 1961 on 18.03.2019, certain loose sheets were found which contains details of sundry debtors totaling to Rs. 28.32 crore under the name of Kamakshi Aqua Feeds, proprietary concern of the assessee. In this regard, a statement was recorded from the assessee, who stated that the said amount was reflected in the loose sheets containing entries pertaining to Kamakshi Aqua Feeds as well as other entities pertaining to the group concerns, including Kamakshi International. Further, when discrepancies were brought to the notice of the assessee, the assessee come forward to offer additional income of Rs.75,00,000/-for A.Y. 2019-20 towards possible discrepancies in sundry debtors as per the list of debtors found during the course of survey and the books of accounts maintained by M/s. Kamakshi Aqua Feeds and M/s. Kamakshi International.

39. During the course of assessment proceedings, the A.O. called upon the assessee to reconcile the sundry debtors noted in loose sheets of Rs. 28.32 crore with the books of accounts of M/s. Kamakshi Aqua Feeds and M/s. Kamakshi International. In response, the assessee has filed reconciliation and stated that sundry debtors as per audited books of Kamakshi International was at Rs. 5.13 crore and further sundry debtors as per the audited books of accounts of Kamakshi Aqua Feeds was at Rs. 11.77 crore. The A.O., after considering the above submissions, arrived at a difference amount of Rs. 16.55 crores which was treated as unexplained investment in the hands of the assessee. Further, in case of Kamakshi International, which is the sister concern of the assessee, the very same issue relating to unexplained sundry debtors was examined by the A.O. and arrived at a difference amount of Rs. 11.42 crore. Thus, the A.O. made addition of Rs. 16.55 crore towards difference in sundry debtors when compared to books of accounts and loose sheets found during the course of survey as unexplained investment.

40. Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A) and challenged the additions made by the A.O. towards difference in sundry debtors and argued that the additions made by the A.O. on the basis of loose sheets cannot be sustained because loose sheets found during the course of survey and the authenticity and veracity of the loose sheets cannot be established. The assessee further contended that the amount arrived by the A.O. as alleged discrepancy between the notings in the loose sheets vis-à-vis books of accounts of the assessee was rightly arrived in the order passed in the case of Kamakshi International at Rs. 11.42 crores as against Rs. 16.55 crore in completing the assessment of the assessee.

41. The Ld. CIT(A), after considering the submissions of the assessee, rejected the arguments challenging the addition made on the basis of loose sheets. In the statement recorded during the course of survey, the assessee admitted that sundry debtors pertains to group concern and further the assessee has reconciled the above entries appearing in the loose sheets vis-à-vis books of accounts and arrived at sundry debtors as on 31.03.2018 at Rs. 5.13 crore in the books of accounts of Kamakshi International and further Rs. 11.77 crore in the books of accounts of Kamakshi Aqua Feeds. Once the assessee itself has attempted reconciliation with reference to books of accounts and identified sundry debtors appearing in the loose sheets, the argument of the assessee that the documents are meaningless and “dumb document” and additions cannot be made based on such “dumb document”, is devoid of merit. Therefore, the Ld. CIT(A) rejected the arguments of the assessee.

42. Insofar as the addition made by the A.O. towards unexplained investment under Section 69 of the Act for Rs. 16.55 crore, the Ld. CIT(A), by taking into account the total debtors appearing in the loose sheets for Rs.28.32 crores and total sundry debtors appearing in the books of accounts of both the concerns, has arrived at a difference of Rs.11.42 crore, which is the same amount of difference arrived by the A.O. in the hands of Kamakshi International, accepted the reconciliation statement filed by the assessee and quantified the difference amount of Rs.11.42 crore. Further, by taking into account the business of the assessee and the fact that the sundry debtors are arising out of sales, has treated the difference amount of Rs. 11.42 crore as sales turnover of the assessee and estimated 8% profit on the said turnover.

43. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

44. The Ld. counsel for the assessee submitted that the Ld. CIT(A) erred in sustaining the addition made by the A.O. on the basis of loose sheets found during the course of survey, even though loose sheets are “dumb documents” without any nature of transactions and the amount of sundry debtors pertaining to the business of the assessee. The Ld. counsel for the assessee further submitted that, the list of debtors pertains to all the group concerns and the individuals. The assessee has reconciled the above entries with reference to assessee’s books of accounts. However, the unreconciled amount neither pertains to the business of the assessee nor the sundry debtors as claimed by the A.O. and the document is non­speaking one and the addition made by the A.O. is only on the basis of admission of undisclosed income during the course of survey and it is a fact that admission alone is not sufficient to make additions without there being any further evidences as held by various Hon’ble Courts, including the decision of Hon’ble Supreme Court in the case of CBI Vs. V.C. Shukla reported in (1998) com 2155 (SC). The assessee has also relied on the following decisions:

1. Nagarjuna Construction Co. Ltd. Vs. DCIT reported in (2012) 23 com 239 (Hyderabad – Trib.).

2. ACIT Vs. Navaratna Estates in ITA No. 618/Viz/2018 (Visakhapatnam – Trib.).

3. Mohammed Ibrahim Mohideen Vs. ACIT reported in (2024) 168 com 385 (Bangalore – Trib.).

4. Chandamma Vs. ITO reported in (2015) 61 com 77 (Patna – Trib.).

45. The Ld. CIT-DR, on the other hand, supporting the order of Ld. CIT(A) submitted that, the arguments of the Ld. counsel for the assessee that list of debtors found during the course of survey is a ‘dumb document’, cannot be accepted going by the findings recorded by the Ld. CIT(A), where the Ld. CIT(A) stated that the assessee himself has reconciled the list to the assessee’s books of accounts of Kamakshi International and Kamakshi Aqua Feeds. Once a document is identified by the assessee, including the entries contained thereon, then for the remaining unreconciled entries, it cannot be said that the document is a dumb document. Further, as per the reconciliation statement filed by the assessee, there is a difference in sundry debtors as per the loose sheets found during the course of survey, for which the assessee did not offer any explanation. The Ld. CIT(A), after considering the relevant facts, has rightly treated the unreconciled amount of sundry debtors as business turnover of the assessee and estimated 8% of net profit. The Ld. counsel for the assessee could not controvert the findings of the Ld. CIT(A) and therefore, they submitted that the order of the Ld. CIT(A) should be upheld.

46. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that during the course of survey, certain loose sheets were found which contains list of sundry debtors of the assessee group as a whole, including sundry debtors of Kamakshi Aqua Feeds and Kamakshi International. The total of sundry debtors as per loose sheets found at the time of survey was at Rs. 28.32 crore and the same has been reconciled by the assessee with reference to audited books of accounts of Kamakshi Aqua Feeds and Kamakshi International. The assessee has identified total sundry debtors as per audited books of Kamakshi International at Rs. 5.13 crore. Similarly, the assessee has identified sundry debtors as per the audited books of accounts of Kamakshi Aqua Feeds at Rs. 11.77 crore. In other words, out of the total sundry debtors of Rs. 28.32 crore as per loose sheets, the assessee has identified sundry debtors as per audited books of accounts of both the concerns aggregating to Rs. 16.90 crore and the balance amount of Rs. 11.42 crore could not be reconciled. Once the assessee has identified the documents found during the course of survey with reference to its books of accounts and also reconciled the entries contained therein in the audited books of accounts, in our considered view, the arguments of the Ld. counsel for the assessee that loose sheets found during the course of survey are dumb documents without any narration as to the nature of the transactions, is devoid of merit and cannot be accepted. Going by the facts available on record, it is very clear that the loose sheets found during the course of survey being the list of sundry debtors is the list of debtors maintained for the assessee group for its business transactions for all entities and the same has been reconciled with reference to the audited books of accounts. Therefore, once certain entries in the loose sheets are matched with audited books of accounts, then remaining unreconciled entries in the loose sheets should be treated as unexplained transactions of the assessee. Therefore, in our considered view, there is no error in the reasons given by the Ld. CIT(A) to arrive at difference amount of sundry debtors at Rs. 11.42 crore. Thus, we are inclined to uphold the findings of the Ld. CIT(A).

47. Coming back to the estimation of net profit at 8% on the difference amount of Rs. 11.42 crore. The A.O. made addition of Rs. 16.55 crore on the ground that it is unexplained investment of the assessee. The Ld. CIT(A) treated the difference amount of sundry debtors as business turnover of the assessee and estimated 8% net profit. In our considered view, the reasons given by the Ld. CIT(A) to treat the difference amount of sundry debtors as business receipts of the assessee is in accordance with law, going by the nature of entries contained in the loose sheets, because the assessee is in the business of aqua feed and carries on the business through multiple concerns. The assessee has maintained books of accounts of Kamakshi Aqua Feeds as a proprietary concern and also Kamakshi International, a partnership firm. The assessee reconciled the entries in the list to the audited books of accounts wherever possible, however could not explain the remaining entries appearing in the list of sundry debtors. Since the entire sundry debtors are arising out of business turnover, in our considered view, the difference amount of sundry debtors should be treated as business turnover and on this turnover, only profit element embedded in the turnover should be taxed.

48. The Ld. CIT(A), after considering the relevant submissions, has rightly treated the difference amount of Rs. 11.42 crore as sales turnover and estimated 8% profit. The assessee could not controvert the findings of the Ld. CIT(A) except stating that the additions made on the basis of loose sheets cannot be accepted. Since we have already rejected the explanation of the assessee on the aspect of loose sheets, in our considered view, there is no error in the order of the Ld. CIT(A) to estimate 8% net profit on the differential amount of sundry debtors. Insofar as the various case laws relied upon by the Ld. counsel for the assessee, including the decision of Hon’ble Supreme Court in the case of CBI Vs. V.C. Shukla (supra), in our considered view, the observations of the Courts or Tribunal cannot be considered in isolation of facts of the case and going by the facts of the present case, there is clear evidence in the form of entries linked to books of accounts and thus, the unreconciled entries in the list of sundry debtors should be brought to tax and accordingly, in our considered view, the case laws relied upon by the Ld. counsel for the assessee are not applicable to the facts of the present case.

Therefore, we reject all the case laws relied upon by the Ld. counsel for the assessee.

49. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that, there is no error in the reasons given by the Ld. CIT(A) to determine the income from business by estimating 8% net profit on the difference amount of sundry debtors as per the list of debtors found during the course of survey and audited books of accounts of both the concerns. Thus, we are inclined to uphold the findings of the Ld. CIT(A) and dismiss ground nos.2 and 3 raised by the assessee.

50. In the result, the appeal of the assessee is partly allowed for statistical purposes.

ITA No.1956/Hyd/2025 for A.Y. 2019-20 (M/s. Kamakshi International)

51. The only issue that came up for our consideration from ground nos.2 and 3 of assessee’s appeal is addition towards additional income admitted during the course of survey on ad hoc basis and not offered in the return of income for Rs.25,00,000/-.

52. During the course of survey, a list of sundry debtors was found which contains sundry debtors balance of Kamakshi Aqua Feeds and Kamakshi International. A statement was recorded from the partner of Kamakshi Group with reference to list of sundry debtors found during the course of survey, where the assessee reconciled the list of debtors with the books of accounts of both the concerns and finally offered additional income of Rs. 75,00,000/- in the case of Shri Audhinarayana Reddy Papireddy for AY 2019-20. “The A.O. made addition of Rs. 25,00,000/- in the hands of the assessee out of the additional income of Rs. 75,00,000/- admitted during the course of survey but not offered in the return of income on the ground that the unreconciled amount of sundry debtors appearing in the list of sundry debtors found during the course of survey pertains to both the concerns, i.e., Kamakshi Aqua Feeds and Kamakshi International.

53. The Ld. counsel for the assessee submitted that the assessee reconciled the list of sundry debtors with reference to books of accounts of Kamakshi Aqua Feeds and Kamakshi International. The entire amount of unreconciled sundry debtors of Rs. 11.42 crore has been treated as business turnover of Kamakshi Aqua Feeds, proprietary concern of Shri Audhinarayana Reddy Papireddy and 8% profit has been estimated. Since the same has been taxed in the hands of Kamakshi Aqua Feeds, further addition in the hands of the assessee on the basis of admission alone cannot be sustained. Therefore, they submitted that the addition made by the A.O. should be deleted.

54. The Ld. CIT-DR, on the other hand, supporting the order of the Ld. CIT(A), submitted that the Ld. CIT(A) deleted the additions made by the A.O. towards income admitted during the course of survey in respect of discrepancies in sundry debtors in the hands of Shri Audhinarayana Reddy Papireddy, because a separate addition has been sustained on estimation of profit on unreconciled entries. In the case of the assessee, there is no addition in respect of unreconciled entries of sundry debtors. Therefore, the admission of additional income offered by the assessee during the course of survey with reference to discrepancy in the sundry debtors should be separately taxed. The Ld. CIT(A), after considering the relevant facts, has rightly sustained the addition made by the A.O. Therefore, he submitted that the addition made by the A.O. should be upheld.

55. We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that Shri Audhinarayana Reddy has admitted additional income of Rs. 75,00,000/- in respect of discrepancies in sundry debtors as per the list of debtors found during the course of survey. Audhinarayana Reddy has admitted additional income of Rs. 75,00,000/- in his individual capacity for A.Y. 2019-20 in respect of discrepancies in sundry debtors, however, not admitted the said additional income in the return of income filed for the year under consideration. The A.O. made addition towards unreconciled amount of sundry debtors of Rs.16.90 crore and also made separate addition in respect of part of the additional income offered by the assessee, amounting to Rs. 25,00,000/-, out of Rs. 75,00,000/- admitted during the course of survey. In other words, the A.O. made addition towards the amount of unreconciled sundry debtors and also made addition towards additional income offered by the assessee during the course of survey. The additional income offered by the assessee at Rs. 75,00,000/-, out of which Rs. 25,00,000/- has been added by the A.O., is in respect of discrepancies in sundry debtors as per the list of debtors found during the course of survey and audited books of accounts. Since the A.O. has made addition towards total amount of unreconciled sundry debtors as per the list of sundry debtors and the Ld. CIT(A) has accepted the amount quantified by the A.O. and estimated net profit at 8%, in our considered view, the additional income offered by the assessee towards discrepancies in sundry debtors cannot be separately added because the A.O. has already taxed the net profit element embedded in unreconciled amount of sundry debtors of Rs. 11.42 crores in the hands of Shri Audhinarayana Reddy Papireddy.

56. Since the A.O. has taxed the entire amount of unreconciled sundry debtors and the additional income of Rs. 75,00,000/- offered by the assessee, out of which Rs. 25,00,000/- has been added by the A.O., also pertains to discrepancies in sundry debtors, in our considered view, the separate additions made by the A.O. and sustained by the Ld. CIT(A) cannot be upheld. Furthermore, the Ld. CIT(A) himself has deleted the additions made by the A.O. for Rs. 50,00,000/- in the case of Shri Audhinarayana Reddy Papireddy for AY 2019-20 upon sustaining additions made towards estimation of net profit on difference in sundry debtors. Since the entire difference amount of sundry debtors has been considered in the hands of Shri Audhinarayana Reddy Papireddy, in our considered view, nothing can be taxed again in the hands of the assessee on this issue. The Ld. CIT(A), without considering the relevant facts, simply sustained the addition made by the A.O. Thus, we set aside the order of the Ld. CIT(A) and direct the A.O. to delete the addition of Rs.25,00,000/-made towards additional income admitted during the course of survey.

57. In the result, the appeal filed by the assessee (Kamakshi International) for AY 2019-20 is allowed for statical purposes.

58. In the combined result, the appeals filed by the assessee, Shri Audinarayana Reddy Papireddy, for A.Ys. 2016–17 and 2017-18 are allowed for statistical purposes, for A.Ys. 2018–19 and 2019–20 are partly allowed for statistical purposes and the appeal filed by the assessee, M/s. Kamakshi International, for A.Y. 2019–20 is allowed.

Order pronounced in the Open Court on 29th April, 2026.