Trade Creditors Are NOT Cash Credits- Mumbai ITAT Deletes ₹16.44 Crore Addition U/s 68

ITO Vs NCCCL Kinjal Ktil Consortium (ITAT Mumbai)

The Mumbai ITAT held that outstanding trade liabilities arising from genuine business transactions cannot be treated as unexplained cash credits under Section 68, especially when the corresponding purchases, services and payments through banking channels are accepted by the Department. The Tribunal accordingly upheld deletion of addition of ₹16.44 crore made against a consortium executing large infrastructure projects for a Government corporation.

The assessee consortium, formed by reputed infrastructure companies including NCCCL and KTIL, had undertaken construction of flyovers, bus stands, commercial buildings, roads and allied infrastructure works. During scrutiny, the AO treated outstanding balances payable to consortium members amounting to ₹16.44 crore as unexplained cash credits u/s 68 on the ground that the assessee failed to satisfactorily establish identity, genuineness and creditworthiness during assessment proceedings.

Before the Tribunal, the assessee demonstrated that NCCCL and KTIL were not outside parties but consortium partners themselves, both being established public limited companies regularly assessed to tax. The outstanding balances represented material supply payables, technical consultancy charges and other trade liabilities arising during project execution. Payments were routed through banking channels, reflected in the books of both parties, supported by GST invoices, ledger accounts and returns of income.

The ITAT accepted the contention that Section 68 primarily deals with unexplained “cash credits” and not mere accounting liabilities arising out of accepted business transactions. The Tribunal observed that once the AO accepted the corresponding purchases and expenditure, he could not tax the other side of the same transaction as unexplained credit. Relying upon decisions including Manoj Agarwal (SB), Rajesh G. Jain, Attire Designers Pvt. Ltd. and Ritu Anurag Agarwal, the ITAT reiterated that trade creditors representing accepted purchases cannot ordinarily be added u/s 68.

On the separate disallowance of ₹1.37 crore towards “liaisoning expenses” paid to consortium member KTIL, the Tribunal noted that the payments were actually towards technical consultancy, supervision, procurement advisory, quality control and coordination with Government authorities in relation to the infrastructure project. The expenses were supported by notarised MOU, GST invoices, TDS deductions and ledger confirmations.

The AO had disallowed the expenditure mainly because the MOU was allegedly not registered and KTIL did not respond to notices. Rejecting this approach, the ITAT observed that business agreements are not required to be compulsorily registered merely because they regulate commercial dealings between parties. The Tribunal further remarked that when the AO himself accepted the GST component of the very same invoices, he could not selectively reject the remaining expenditure component.

The Revenue also alleged violation of Rule 46A on the ground that the CIT(A) relied upon additional evidence. However, the Tribunal held that the documents considered by the CIT(A) – such as ledger accounts, invoices, consortium agreements and GST records- were already part of the books and assessment records and therefore could not be treated as “additional evidence.” Accordingly, the ITAT dismissed the Revenue’s appeal in entirety.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

The present appeal has been filed by the Revenue and cross objection by the assessee challenging the impugned order dt. 05.08.2025 passed under section 250 of the Income Tax Act, 1961 (‘the Act’), by the Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year 2022-23.

Since all the issues involved in these appeals are common and identical and belongs to the same assessee, therefore, they have been clubbed, heard together and consolidated order is being passed. The grounds raised by the Revenue are as follows:

“Ground No. 1”

Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 16,44,63,532/- made by the Assessing Officer under section 68 r.w.s. 115BBE of the Income-tax Act, 1961 on account of unexplained cash credits, without appreciating that the assessee had failed to furnish any satisfactory explanation and necessary supporting evidences regarding the identity, creditworthiness, and genuineness of the sundry creditors during the course of assessment proceedings.

“Ground No. 2”

Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in admitting and relying upon additional evidences such as ledger accounts, GST invoices, RA bills, PFMS receipts and returns of income of consortium members, filed for the first time during appellate proceedings, without affording an opportunity to the Assessing Officer to examine and rebut such evidences, thereby violating the mandatory provisions of Rule 46A of the Income-tax Rules, 1962.

“Ground No. 3”

Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition of Rs. 1,37,56,657/- made by the Assessing Officer by disallowing liaisoning/technical consultancy charges paid to M/s Kalyan Toll Infrastructure Ltd., without appreciating that the assessee had failed to establish the genuineness of services rendered and business expediency of the expenditure before the Assessing Officer, and by relying solely on documents furnished for the first time at the appellate stage.

“Ground No. 4”

Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) failed to appreciate that the so-called Memorandum of Understanding (MOU) relied upon by the assessee was neither registered nor executed before any competent authority and did not carry legal sanctity; hence, the disallowance of such expenditure was rightly made by the Assessing Officer.

“Ground No. 5”

Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in law and on facts in holding that the assessee had conclusively established the identity, genuineness and creditworthiness of creditors/consortium members and the genuineness of liaisoning expenses, despite the fact that the statutory notices issued u/s 142(1) and 133(6) were not complied with by the assessee or the concerned consortium members during the assessment proceedings.

“Ground No. 6”

Whether on the facs and in the circumstances of the case and in law, the order of the Ld.CIT(A) is bad in law and against the principles of natural justice, since relief was granted to the assessee based on additional evidences which were not subjected to verification or cross-examination by the Assessing Officer

“Ground No. 7”

The appellant craves leave to add, alter, amend or withdraw any of the above grounds of appeal at the time of hearing.

2. As per the facts of the case, the assessee had filed its return of income for AY 2022-23 on 30-09-2022 declaring loss of Rs. 1,41,19,897/-. The return of income was taken up for scrutiny and the AO completed the assessment u/s 143(3) read with sec. 144B of the Act on 21-03-2024 by making following additions:

Addition made u/s 68 of the Act as Unexplained:-

3. On appeal the Ld. CIT(A) deleted both the above said additions and also directed the AO to take into account the loss returned by the assessee. Aggrieved by the said order of the Ld. CIT(A) the Revenue has filed the present appeal before us on the grounds mentioned herein above.

4. On the other hand the assessee had also contended before Ld. CIT(A) that no income is recognizable in this year, since the project is in the initial stage and the ICDS does not make is mandatory to recognize income during infancy stage of project. Since Ld CIT(A) rejected the same, therefore the assessee has also filed Cross objection challenging the said decision. The ground raised by the assessee are as follows:

1. On facts, in circumstances of the case and in law the NFAC erred in confirming assessment of total income at Rs. 17,82,20,189/- by Assessment Unit, Income Tax Department without considering the fact that since less than 25% of the value of the contract is complete, the question of recognizing any revenue does not arise, in view of Income Computation and Disclosure Standard ICDS-III applicable to Construction Contracts

2. The appellant craves leave to add, alter, modify or delete any of the above Grounds of Cross Objection

Firstly, we shall take ITA No. 6487/Mum/2025, A.Y 2022-23 as lead case and facts narrated therein.

5. Ground Nos.1 and 5 raised by the Revenue relates to challenging the deletion of the cash credit of Rs. 16,44,63,532/- made by the AO u/s. 68 of the Act.

6. We have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the order passed by the Revenue Authorities. From the records, we noticed that the Assessing Officer had made the addition in respect of two creditors as detailed below:-

7. In this regard, the Ld. AR submitted that both the above mentioned two creditors are consortium partners only, meaning that the credit balance appearing in the name of consortium partners have been assessed as unexplained cash credits by the AO. The consortium was formed to secure contract from SKDDCL, a Government Corporation for construction of various infrastructure projects, viz., flyover, foot over bridge, bus stand buildings including commercial buildings, multi-level car parking, road works and other allied works. The execution of above works involved different types of work in the field of civil engineering and each of the members of consortium had different skill set and expertise. Hence, it was considered imperative to joint together and form consortium in order to win the contract and execute the same.

8. Lets evaluate the nature of credits appearing in the name of NCCCL amounting to Rs.15,80,87,651/-, which is in the nature of trade liability. In our view, the provisions of Section 68 of the Act shall not be applicable to this type of trade liability. Before proceeding to explain the same, we may consider the following important points, which have been duly considered by Ld CIT(A):

(a) NCCCL is a consortium partner and not an outside creditor.

(b) NCCCL is a public limited company incorporated in 1946 and it is an iconic name in the field of construction of residential buildings, commercial complexes, hospitals, IT parks and townships for leading multinational and Indian companies.

(c) The NCCCL is regularly assessed to Income tax in PAN No. AAACN4052E and it has also filed its Income tax return for AY 2022- 23. The transactions entered by it with the assessee are in the nature of material supplies and the payments have been made by the assessee to NCCCL through banking channels. The corresponding entries are duly reflected in the books of accounts of NCCCL also.

(d) Hence, the identity, creditworthiness and genuineness of transactions were duly proved by the assessee herein. Hence, the question of invoking provisions of sec.68 of the Act for the amount of Rs. 15.80 crores appearing in the name of NCCCL does not arise at all. Hence, we contend that the Ld CIT(A) has rightly deleted the addition made by the AO u/s 68 of the Act

9. In the alternate it was argued that assessee had discharged the primary onus u/s 68 of the Act and it was also contended that the provisions of sec.68 itself are not applicable to this credit, since the credits found in the account of NCCCL are trade credits. The details of transactions entered by the assessee with NCCCL during the year under consideration are summarized below:-

10. We noticed that the AO has assessed the difference between closing and opening balances amounting to Rs 15.81 crores as unexplained cash credit u/s 68 of the Act.

As per the records, the NCCCL has supplied materials for the project to the tune of Rs.52.41 crores and hence the outstanding balance of Rs.22.22 crores represent only trade credits. There was one financial transaction of Rs.51.00 lakhs, i.e., the assessee had earlier given the same to NCCCL 31.12.2021, which has been received back on 15.02.2022. Thus, it was also not a case of availing cash credit by the assessee.

11. It is well settled proposition of law that the trade credits/liabilities cannot be categorized as Cash credits within the meaning of sec.68 of the Act. It can be noticed that the trade credits appearing in the account of NCCCL represent one leg of transaction, i.e., the account of NCCCL was credited with the value of material supplies, while another leg of transaction, being the expenditure debited with the corresponding amount has been accepted by the AO. When the AO has accepted one leg of same transaction in the form of debit transactions, he cannot make addition in respect of other leg of transaction representing credit transactions. This proposition of law was explained in the following case law:-

(a) Rajesh G Jain vs. ITO 2(2) Thane in ITA 1 50/Mum/2 022

(b) PCIT vs. Attire Designers Pvt. Ltd. (2022)115 CCH 43, 455 ITR 697 (Del)

(c) ACIT vs. Mithilesh Mishra (2016) 46 CCH 0144 Mumbai ITAT

12. In the case of Rajesh G Jain (supra), the co-ordinate bench has, by following the decision rendered by the Special bench of ITAT in the case of Manoj Agarwal vs. DCIT (2008) (113 ITD 377) (Delhi), has held that the trade credits cannot be added u/s 68 of the Act. The relevant observations made by the co-ordinate bench in the above said case are extracted below:

“14. We have considered the submissions of both sides and perused the material available on record. During the year under consideration, an amount of Rs. 66,74,029 was shown as sundry creditors in the balance sheet of the assessee. During the assessment proceedings, notices under section 133(6) of the Act were issued to the sundry creditors, however, there was no compliance from these parties. In support of its submission, the assessee provided the ledger extracts and submitted that the payments have been made through the banking channel. The assessee also furnished the sample bills of such parties evidencing the purchases made. However, in the absence of a response from these parties in compliance to notice issued under section 133(6) of the Act as well as the non-production of such parties by the assessee, the addition was made by treating the balance sundry creditors as unexplained.

From the perusal of the ledger account of these parties in the books of the assessee, we find that the assessee made the purchases during the year Page | 7 Shri Rajesh G. Jain ITA no.150/Mum./2022 and also made the payment. Accordingly, the balance outstanding was shown as sundry creditors in its balance sheet, which was added by the AO. Therefore, it cannot be disputed that the addition of outstanding trade creditors has been made under section 68 of the Act, as these parties did not respond to notices issued under section 133(6) of the Act and the assessee also could not furnish the confirmation from these parties. We find that the issue of whether unpaid trade creditors could be added under section 68 of the Act came up for consideration before a five-member Special Bench of the Tribunal in Manoj Agarwal v/s DCIT, [2008] 113 ITD 377 (Delhi), wherein it was observed as under:-

“178. The argument that section 68 is not applicable where an asset is sold and the sale proceeds are credited in the books of account cannot be accepted having regard to the settled legal position that it is always for the assessee to explain the nature and source of the sums credited in his books of account. The section does not recognize any distinction between amounts credited in the books as gifts or loans or pure receipts, on the one hand, and amounts credited as sale proceeds. In either case, when called upon, the assessee is bound to explain the nature and source of the amounts credited. There may be a few exceptions to this general rule. For example, in the case of credit purchases, the account of the supplier is credited with the amount payable. In such a case, where the purchase is allowed as expenditure, it may not be possible for the Assessing Officer to again call upon the assessee to prove the nature and source of the credit, for the reason that the purchase itself was allowed as expenditure only on being satisfied that it was a genuine purchase on credit. Implicitly, the nature and source of the amount credited has also to be taken as having been explained satisfactorily. Another possible argument can be that in such a case, the amount credited is not a cash credit in the sense that some monies have been received by the assessee, but the credit represents a mere liability payable by the assessee in future. Under accounting principles, a liability can only be brought into account by making a credit entry in the books of account in favour of the person to whom the money is payable. Thus, there is marked difference between a credit representing a liability payable by the assessee and a credit representing monies received from another person. It is because of this distinction, a liability for purchase which has been credited in the account of the supplier cannot be added under section 68 of the Act, more so when the purchase has been accepted as genuine and a deduction therefore has been allowed. In all other cases including the case of a credit representing the sale proceeds of an asset, the provisions of section 68 are applicable and it is for the assessee to prove satisfactorily the nature and source of the monies …..”

16. We find that in Smt. Madhu Solanki v/s ITO, ITA No. 974/Bang/2009, the coordinate bench of the Tribunal, vide order dated 09/08/2021, after considering the aforesaid decision held that the AO cannot make an addition of trade creditors under section 68 of the Act when the purchases made during the year and payments made during the year have been accepted. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as under:-

“15. Similar view has been expressed by Hon’ble Delhi High Court in the case of CIT vs. Ritu Anurag Agarwal reported in 2009 (7) TMI 1247 as under:-

“This finding of AO remained undisturbed before the CIT(A) as well and has been accepted by the ITAT. Proceeding on this basis, the ITAT observed that the soles, purchases as well as gross profits as disclosed by the assessee have been accepted by the Assessing Officer. Once this is accepted, we are of the opinion that the approach of the ITAT was correct inasmuch as the Assessing Officer did not consider this aspect while making additions of sundry creditors under Section 68 of the Income Tax Act. As there was no case for disallowance for corresponding purchase, no addition could be made under Section 68 inasmuch as it is not in dispute that the creditors outstanding related to purchases and the trading results were accepted by the AO. We are, therefore, of the opinion that no substantial question of law arises for consideration in this case. The appeal is accordingly dismissed.

16. The Ld D.R placed his reliance on the decision rendered by the Bangalore bench of ITAT in the case of Suresh Kumar T. Jain (supra), which was also confirmed by Hon’ble Karnataka High Court, vide its order dated 20-11-2018 passed in ITA No. 160 of 2010. The Ld D.R contended that the outstanding trade creditors could be added w/s 68 of the Act. We have gone through the above said decision and notice that the facts prevailing in that case were different. In the above said case, most of the creditors confirmed the outstanding balances as per their books of accounts, which were much lesser than the outstanding balances disclosed by the assessee before the High Court. Copies of confirmation letters received from the creditors were also furnished to the assessee, but he did not offer any explanation. Hence, it was considered to be a case of either payment outside books or cessation of liability. Under these set of facts, it was held that the addition made w/s 41(1) and 68 of the Act was justified.

17. In the present case, the facts are totally different. First of all, the outstanding balances related to the purchases made during the year under consideration and not brought forward balances. The AO did not get reply from both the trade creditors and hence he proceeded to assess the outstanding balances, while accepting the purchases made during the year & payments made during the year. The AO has made the addition w/s 68 of the Act and did not invoke provisions of sec. 41(1) of the Act. On the contrary, the assessee has shown that the payments have been made in the succeeding year through Page 9 Shri Rajesh G. Jain ITA no. 150/Mum./2022 banking channels. Accordingly, we are of the view that the Revenue could not rely upon the decision rendered in the case of Sureshkumar T Jain. Under these set of facts, we are of the view that the AO could not have made addition of trade creditors w/s 68 of the Act.

17. Therefore, respectfully following the aforesaid decisions, since in the present case the purchases made by the assessee and the payment made during the year have not been disputed by the AO in respect of the parties shown as sundry creditors, we are of the view that the addition in respect of the balance sundry creditors is not sustainable. Accordingly, the AO is directed to delete the same. As a result, ground no. 6 raised in assessee’s appeal is allowed.”

13. Identical view has been expressed by Hon’ble Delhi High Court in yet another case of ITO vs. Attire Designers P Ltd (supra), wherein the decision rendered by Hon’ble Delhi High Court in the case of Ritu Anurag Aggarwal (supra) was followed. Identical view has been expressed by co-ordinate bench of Mumbai in the case of Mithilesh Mishra (supra). Accordingly, it was contended that the addition of Rs.15.81 crores made by the AO u/s 68 of the Act was rightly deleted by Ld CIT(A). Apart from this AO had also disallowed the sum of Rs. 63,75,881/-, being the outstanding credit amount available in the account of another consortium member named KTIL. The transactions of the assessee with KTIL (its own consortium member) during the year under consideration are summarized below:-

It can be noticed that the closing balance of Rs.63.75 lakhs has been added by the AO as unexplained cash credit, even though it represents outstanding trade credit.

14. In the case of addition of outstanding balance in the account of NCCCL, the AO had not disallowed the corresponding expenses and hence it was contended, on the strength of judicial precedents, that the disallowance u/s 68 of the Act was not justified. However, in respect of this addition, the AO had disallowed liaison expenses to the tune of Rs. 1,37,56,657/-, as against the aggregate amount of Rs. 1,82,37,834/-. However, the Ld CIT(A) has deleted the disallowance holding that the identity, credit worthiness and genuineness of transactions with KTIL has been proved.

15. Therefore, assessee contends that the AO was not justified in adding the outstanding balance of Rs.63.75 lakhs u/s 68 of the Act for the following reasons:

(a) The amount of Rs.63.75 lakhs represents outstanding expenses only. As there is marked distinction between a Cash credit and Outstanding liability. The trade liability will not fall under the purview of sec. 68 of the Act. This has been explained by the five member Special Bench of ITAT in the case of Manoj Agarwal (113 ITD 377) as under:-

“ …..Another possible argument can be that in such a case, the amount credited is not a cash credit in the sense that some monies have been received by the assessee, but the credit represents a mere liability payable by the assessee in future. Under accounting principles, a liability can only be brought into account by making a credit entry in the books of account in favour of the person to whom the money is payable. Thus, there is marked difference between a credit representing a liability payable by the assessee and a credit representing monies received from another person. It is because of this distinction, a liability for purchase which has been credited in the account of the supplier cannot be added under section 68 of the Act, more so when the purchase has been accepted as genuine and a deduction therefore has been allowed.”.

16. As per records in the instant case, the amount of Rs.63.75 lakhs represents outstanding trade liability. Even though the AO had disallowed a part of liaison expenses paid to KTIL, the Ld CIT(A) has deleted the said disallowance. Thus these facts would show that the assessee had not received any money by way of cash credits from KTIL. In the absence of receipt of fresh funds (fresh cash credits), the invoking of provisions of sec.68 of the Act was not correct in law.

(b) Since the disallowance of liaison expenses to the tune of Rs.1.38 crores was deleted by Ld CIT(A), the addition u/s 68 of the Act is not justified in respect of outstanding liability as held in the cases of

(i) Rajesh G Jain vs. ITO 2(2) Thane in ITA 1 50/Mum/2 022

(ii) PCIT vs. Attire Designers Pvt. Ltd. (2022)115 CCH 43, 455 ITR 697 (Del)

(iii) ACIT vs. Mithilesh Mishra (2016) 46 CCH 0144 Mumbai ITAT

(c) As per records the KTIL is a public limited company incorporated in 2002. It specializes in execution of infrastructure projects like road projects, railway projects, bridges, ROB and flyover projects, water supply projects, commercial and residential complexes, sewage projects for the past 23 years.

(d) The arguments advanced in the preceding paragraphs in respect of addition of outstanding balance standing in the name of NCCCL will apply equally in respect of this addition also.

17. Therefore considering the entire facts of the case and keeping in view that no new facts or circumstances or documents have been placed on records by Ld. DR in order to controvert or rebut the lawful findings so recorded by the Ld. CIT(A), therefore, we see no reasons to interfere into or to deviate from the findings so recorded by Ld. CIT(A), hence we dismiss these grounds raised by the Revenue.

18. Ground No. 3 raised by the Revenue relates to challenging the order of ld. CIT(A) in deleting the disallowance made by the AO on account of Liaison expenses.

19. After having heard the counsel for both the parties and as we have noted earlier that, the assessee herein is a consortium consisting of three leading business houses. The tender floated by SKDDCL was bid jointly by all the three parties under the name of consortium and the contract was allotted to the consortium. The execution of work was divided between the three members. As per the facts submitted before us, the the KTIL was allotted following works in the contract:-

Though the payment made to KTIL was titled as “liaisoning expenses”, the said payment was towards various technical assessments as well as for liaisoning with the Government authorities for various business purposes.

20. From the records it shows that, the liaisoning charges have been paid as per the business agreement entered between the assessee and KTIL. The AO disallowed the expenditure for the reasons that the MOU was not registered or notarized and the KTIL did not respond to the notices issued by him. However, we noticed that KTIL is part of the consortium and the payments were made for technical services rendered by KTIL, even though the same has been titled as “liaisoning expenses” in the books of accounts. The Ld CIT(A) has examined the MOU, bills raised by KTIL (which includes collection of GST), ledger account copies in the books of the assessee and in the books of KTIL.

21. It was further submitted that the assessee has deducted TDS from the payments made to KTIL. It is also pertinent to note that the similar kind of expenditure incurred by the assessee in other years have not been questioned. The details of liaison charges paid to KTIL are summarised below:-

22. The assessing officer had disallowed the sum of Rs.1,37,56,657/- only, while he has allowed GST amount of Rs.27,82,042/ raised in the bills. When the assessing officer is accepting the GST portion of the bill, thus, he was not justified in disallowing the other portion of the bill, i.e. when the AO is accepting one leg of the bills, he is not justified in rejecting other leg of the bills. The Ld.CIT(A) has deleted the disallowance by duly considering all the relevant aspects. The operative portion of the order of Ld.CIT(A) is reproduced herein:-

“6.3.3 Further the AO has made addition stating that no satisfactory explanation was offered by the appellant and the same was added as unexplained in the hands of the appellant. In the present case, M/s KTIL is the project technical consultant and member of the consortium and is tasked with project execution. Further as per Notarised MOU dt 30-12-2020 M/s NCCCL (Nominated Contractor) on behalf of consortium had appointed M/s KTIL for Technical consultation in project execution and vide Annexure-1 had defined the Role and Scope of work of M/s KTIL to include Technical Drawing Review; Technical Expertise & Supervision; Procurement Advisory; Technical Eligibility; Quality Control and Manpower & Machinery Oversight. Further the appellant in evidence vide above para 6.3 and 6.3.1 has submitted the ledger account copy of M/s KTIL for the FY 2021-22 as recorded in its books of accounts, GST tax invoice copies raised by M/s KTIL for Liasoning Fees evidencing payment of GST and copies of ROIs filed by M/s KTIL (PAN AACCK1840M) for AY 2022-23 duly disclosing the receipts from the appellant consortium thereby conclusively establishing the necessary ingredients of genuineness of transaction. Therefore, the AO is not correct in making addition amounting to Rs. 1,37,56,657/- to the total income. Thus, the addition made by the Assessing Officer is deleted. Accordingly, the Ground No. 3 raised by the appellant is allowed.

23. Thus, considering the facts of the case, we noticed that the technical charges paid to KTIL under the title “liaison expenses” are expenses incurred wholly and exclusively for the purposes of business und assessee. The AO has also not denied the same.

24. Even otherwise no new facts or circumstances or documents have been placed on records by Ld. DR in order to controvert or rebut the lawful findings so recorded by the Ld. CIT(A), therefore, we see no reasons to interfere into or to deviate from the findings so recorded by Ld. CIT(A), hence we dismiss these grounds raised by the Revenue.

25. Ground Nos. 2, 4 and 6: All of these grounds are interrelated and interconnected and relates to challenging the order of ld. CIT(A) in admitting additional evidence filed by the assessee. Therefore, we have decided to adjudicate these grounds through the present consolidated order.

26. In this regard, we have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the order passed by the Revenue Authorities. From the records, we noticed that :

(a) The documents considered by Ld CIT(A) were copies of ledger account, copies of invoices, Consortium Agreements, correspondences between the assessee and SKDDCL, copies of ledger accounts from the books of NCCCL and KTIL, who are consortium members only. Thus, all these documents are part of books of accounts, which were considered by the AO. No new external documents was considered by Ld CIT(A). When the documents considered by Ld CIT(A) were part of books of accounts, they cannot be considered as additional evidences, as alleged by the Revenue.

(b) In respect of MOU entered between the assessee and KTIL for payment of technical and liaison fees, which was titled as “liaison expenses”, the AO has taken the view that the MOU was not either registered or notarized. In view of the above said observation made by the AO, the assessee has furnished a notarized copy of the MOU before Ld CIT(A). The notarized copy of a document already furnished to the AO cannot be considered as an additional evidence.

(c) The view expressed by the AO that MOU has not been registered is not in accordance with any law, as no law mandates registration of business agreements. The MOU is a business agreement entered between two business men. It is entered only to regulate the business dealing between two parties, i.e., the mode/ terms and conditions of entering into transactions between them. Thus, the MOU cannot be made as a public document through registration process as opined by the AO. On the contrary, if the said agreement is registered with registration authorities as opined by the AO and made public, then the the business secrecy shall be lost and it may cause heavy loss to the parties to the agreement.

27. Since the assessee had not furnished any new evidences before Ld CIT(A) and accordingly, there is no violation of Rule 46A of IT Rules. Further, the non-registration of MOU will not vitiate the business agreement entered by the assessee with KTIL. Accordingly, these grounds are raised by Revenue stands dismissed.

28. In the result appeal filed by the Revenue stands dismissed.

CO. No. 348/Mum/2025

29. Since we have already dismissed the appeal filed by the Revenue Since we have already dismissed the appeal filed by the Revenue, in view of our findings rendered in the above paragraphs, the CO filed by the assessee has become infructuous and, therefore, needs no separate adjudication.

Order pronounced in the open court on 22.05.2026