ACIT Vs Vrindavan Furnishing Pvt. Ltd. (ITAT Ahmedabad)
Sales Accepted, Section 68 Can’t Be Invoked on Receipts; Only Higher Profit Estimation Permissible – ITAT Ahmedabad
The Ahmedabad Bench of the ITAT, in ACIT, Central Circle-2(1) vs. Vrindavan Furnishing Pvt. Ltd. (ITA No.264/Ahd/2025, AY 2018-19, order dated 18-12-2025), dismissed the Revenue’s appeal and upheld the order of the CIT(A) deleting addition of ₹40.01 lakh u/s 68, made on the allegation of accommodation entries linked to entities controlled by Shri Sanjay Tibrewal.
The Tribunal noted that although the assessee had received payments from Ganpati Textiles and Hanuman Fabrics (entities associated with an alleged accommodation entry provider), the assessee consistently explained that such receipts represented sale proceeds of goods sold to third parties, with routing of payments through these entities. The AO accepted the sales, trading results, purchases and closing stock, but sought to tax the corresponding receipts as unexplained cash credits merely on suspicion.
ITAT held that once sales are accepted as genuine and recorded as income, the corresponding receipts cannot be taxed again u/s 68, in the absence of any evidence showing cash trail or proof that the assessee paid back cash against cheques. The Revenue failed to bring on record any clinching evidence to establish that the assessee had taken accommodation entries or that equivalent cash was exchanged.
At the same time, the Tribunal approved the pragmatic approach of the CIT(A) who, as a precautionary measure to plug possible leakage of revenue, estimated higher profit @5% (as against 1% shown) on the disputed sales of ₹40.01 lakh and restricted the addition to ₹2,00,055, instead of treating the entire receipts as unexplained cash credit.
Accordingly, the ITAT held that the addition u/s 68 was based on mere presumption, upheld the restricted profit addition, and dismissed the Revenue’s appeal in entirety
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
