Rs. 54.52 Lakh Unexplained Income from Sugar Sale: ITAT Directs Fresh Assessment of S.69 Income Tax Addition Amid Contradictory Claims [Read Order]

In a recent decision, the Income Tax Appellate Tribunal ( ITAT ) Bangalore directed a fresh assessment of a disputed addition of Rs. 54.52 lakh under Section 68 of the Income Tax Act 1961 ( ITA )  arising from unexplained income linked to sugar sales. The case involves the assessee/appellant, Ryatar Sahakari Sakkare Karkhane Niyamit, a cooperative society engaged in manufacturing sugar and co-generation of power, who challenged the addition made by the Assessing Officer ( AO ) for the assessment year 2016-17.

The dispute began when the Income Tax Department flagged suspicious transactions involving a certain Shri Doshi Amrutlal Talakchand, who was alleged to have made dubious transfers of Rs. 198.06 crores, including transactions linked to the appellant. Following a detailed inquiry, the AO issued a notice to the cooperative under Section 148 of ITA seeking an explanation for the suspicious credits. The assessee contended that it had sold sugar worth Rs. 33,19,760 to Shri Doshi Amrutlal Talakchand, backed by sales invoices, bank statements, gate passes, and excise documents. However, the AO noted a total receipt of Rs. 54,52,400 on six occasions, far exceeding the amount stated by the assessee.

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Further complicating matters, when the AO issued a notice under Section 133(6) of ITA to Rajkumar Amrutlal Doshi, the buyer, he denied any direct purchase of goods from the cooperative. Instead, he admitted that he had instructed the assessee to prepare bills in the names of third parties. This raised further suspicions, leading the AO to conclude that the entire sum of Rs. 54.52 lakh was undisclosed income and added the amount to the assessee’s income under Section 68 of the tax statute.

Challenging this addition, the assessee presented its case before the Commissioner of Income Tax (Appeals) [CIT(A)] at the National Faceless Appeal Centre (NFAC), Delhi, but the appeal was dismissed, and the addition was upheld.

The assessee then brought the matter before the ITAT Bangalore, arguing that the AO’s addition was unjustified, as it was based solely on the buyer's statement without any opportunity for cross-examination. The assessee further insisted that there was no unexplained money involved, and the documents submitted during the assessment proceedings, such as sales invoices and financial statements, had been ignored.

The Revenue, however, maintained that there was clear evidence of suspicious activity, pointing to the discrepancy between the assessee’s claimed transactions and the payments received. The buyer’s denial of any direct transaction further supported the AO’s decision to add the amount as unexplained income under Section 68.

After hearing both sides, the ITAT bench, led by Mr Laxmi Prasad Sahu, Accountant Member, and Mr Keshav Dubey, Judicial Member, found that the case required further examination. While acknowledging the material submitted by the assessee, including sales invoices and financial records, the Tribunal noted that the conflicting statements from both parties warranted a deeper investigation.

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The ITAT also rejected the assessee's claim of being denied a cross-examination, as there was no evidence that such a request had been made during the assessment process. However, given the discrepancies in the case and the lack of clarity on how the transactions were recorded, the Tribunal directed the Assessing Officer to conduct a de novo reassessment. The ITAT instructed the assessee to fully cooperate in the reassessment process and provide all necessary documents to substantiate its case.

In result, the ITAT  allowed the appeal partly, but only for statistical purposes, as the final outcome depends on the findings of the reassessment.

To Read the full text of the Order CLICK HERE

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