Income Tax Appellate Tribunal - Mumbai
Sood Paper And Allied Chemicals ,Mumbai vs Dcit, Circle 27(3), Mumbai on 27 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
"G" BENCH, MUMBAI
BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER)
&
SHRI JAGADISH (ACCOUNTANT MEMBER)
I.T.A. No. 733/Mum/2026
Assessment Year: 2015-16
Sood Paper and Allied Vs. Dy. CIT- 27(3), Navi
Chemicals Mumbai
Suite No. 1414, 14th Floor
Lodha Supremus
New Cuffe Parade
Wadala (East)
Mumbai - 400037
[PAN: AACFS2633P]
(Appellant) (Respondent)
Assessee by Shri Rajeev Waglay, A/R
Revenue by Shri Mahesh Parwani, Sr. DR
Date of Hearing 20.04.2026
Date of Pronouncement 27.04.2026
ORDER
Per Smt. Beena Pillai, JM:
The present appeal filed by the assessee arises out of the order dated 19/12/2025 passed by the NFAC, Delhi [hereinafter the "Ld.CIT(A)"] for A.Y. 2015-16 on the following grounds of appeal:-
"ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) NFAC ERRED IN :-
1. upholding the addition of Rs.62,40,000 allegedly on account of unaccounted sales.
2. not considering various submissions made by the Appellant.
3. not considering the fact that -
(a) the very basis for reopening the assessment and making addition of Rs. 62,40,000 (i.e. information received from the Office of Commissioner of C. Excise & CGST, Daman) was incorrect since the case initiated by the Excise Department was on account of alleged 2 I.T.A. No. 733/Mum/2026 'Undervaluation of sale price' and not on account of non accounting for sales'
(b) all the sales made to parties aggregating to Rs. 62,40,000 as mentioned in para 5 of the assessment order dated 28.9.2021 were duly accounted for by the Appellant in its books of account & evidence regarding this was duly tendered before the CIT (A).
(c) the case initiated by the excise dept. pertained to alleged Undervaluation' of 6 invoices with total quantity of 96000 Kg. of Sugam 103 and not 7 unaccounted invoices with total quantity of 1,12,000 Kg.of Sugam 103 as alleged by the Income tax department.
(d) there is a difference between 'Undervaluation of sale price' and clandestine removal' i.e. without accounting for the sales made. And hence, the Appellate order dated 19.12.2025 deserves to be set aside by holding that the sales of Rs.62,40,000 were duly accounted for by the Appellant in its books of accounts and the addition made in respect of the same should be deleted.
Your Appellant craves leave, to add, alter, modify or delete all or any of the grounds of the appeal."
2. Brief facts of the case are as under:-
The assessee is a partnership firm engaged in the manufacturing of resins, inter alia producing "Sugam 103". For A.Y. 2015-16, it filed its return of income on 30/09/2015 declaring income of Rs.1,31,370/-, and the assessment was originally completed on 29/08/2017 at Rs.5,68,130/-. Subsequently, a show cause notice dated 31/01/2018 was issued by the Central Excise authorities alleging undervaluation of sales of "Sugam 103" in respect of 6 invoices involving 96,000 kg. This allegation was upheld by the Joint Commissioner, Central GST & Central Excise, Daman, vide order dated 24/12/2018. Based on information received from the Central Excise Department, the assessment was reopened.
2.1. During reassessment proceedings, the Ld.AO treated the issue as one of unaccounted sales and made an addition of 3 I.T.A. No. 733/Mum/2026 Rs.62,40,000/- u/s.143(3) r.w.s.147 vide order dated 28/09/2021, alleging unaccounted sales of 1,12,000 kg of Sugam 103 across 7 invoices.
Aggrieved by the order of Ld.AO, the assessee preferred appeal before Ld.CIT(A).
3. Before Ld.CIT(A), the assessee challenged the validity of the reassessment proceedings u/s 147/148, contending that the same were baseless and initiated without proper application of mind. It was argued that the statement of the partner, recorded on 03/11/2017, which formed the basis of reopening, pertained to a different assessment year and was subsequently clarified/retracted by a later statement dated 05/01/2018. Hence, reliance on such statement for A.Y. 2015-16 was unjustified.
3.1. On merits, the assessee submitted that the allegation of unaccounted sales was incorrect and arose due to misinterpretation of Central Excise proceedings, which were only on account of "undervaluation" and not "unaccounted sales". It was contended that all sales were duly recorded in the books of account and complete details were furnished before the Ld.AO.
3.2. The assessee substantiated its claim by filing documentary evidences before the Ld.CIT(A), like:
(a) extract of audited P&L account showing total turnover of Rs. 42,17,76,585/-,
(b) copies of 6 invoices (except one),
(c) ledger accounts of concerned parties,
(d) bank statements evidencing receipt of sale consideration, and 4 I.T.A. No. 733/Mum/2026
(e) a CA certificate certifying that the sales covered by the said invoices formed part of the total turnover.
It was contended that addition of Rs.62,40,000/- was arbitrary and without any corroborative evidence. The assessee also raised a plea of violation of principles of natural justice.
3.3. The Ld. CIT(A) upheld validity of reopening by holding that the Ld.AO had sufficient tangible material in the form of information received from the Central Excise Department along with the partner's statement. It was observed that at the stage of reopening, only a prima facie belief is required.
3.4. On the evidentiary value of the partner's statement, the Ld.CIT(A) held that the admission made on 03/11/2017 carried significant weight. The subsequent retraction/clarification was considered vague and unsupported by documentary evidence and hence not acceptable.
3.3. On merits, the Ld. CIT(A) observed that Ld.AO identified specific transactions aggregating to Rs.62,40,000/- and the assessee failed to conclusively establish through books of account or reconciliation that the said transactions were duly recorded. In absence of convincing evidence, reliance on the investigation report and admission was held justified.
Aggrieved, the assessee has preferred the present appeal before the Tribunal.
4. The Ld.AR submitted that addition of Rs. 62,40,000/- was made by erroneously treating an issue of "undervaluation" as one of "unaccounted sales". It was contended that the proceedings before the Central Excise authorities were confined only to alleged 5 I.T.A. No. 733/Mum/2026 undervaluation in respect of certain invoices and did not involve any allegation of suppression of sales. All sales, it was emphasized, were duly recorded in the regular books of account and formed part of the total turnover of Rs.42,17,76,585/-.
4.2. The Ld.AR drew our attention to the documentary evidences placed on record, including the audited profit and loss account, copies of invoices, ledger accounts of the concerned parties, bank statements evidencing receipt of sale consideration, and the certificate issued by the Chartered Accountant certifying that the sales covered by the disputed invoices were duly accounted for in the books. It was thus submitted that the impugned addition had been made without due appreciation of the evidences on record and merely on the basis of an alleged admission, which, in the absence of corroborative material, cannot be regarded as conclusive.
4.3. It was further submitted that a clear distinction exists between "undervaluation of sales" and "unaccounted sales", and that, for the purposes of income-tax, only unaccounted sales can be brought to tax. Since the entire sales stood duly recorded, no addition was warranted. It was also contended that the alleged amount of Rs. 62,40,000/-, being only a small fraction of the total turnover, could not, by itself, justify any presumption of suppression of sales.
4.4. Per contra, the Ld.DR strongly relied on the orders of the authorities below and submitted that the addition was rightly made on the basis of credible information received from the Central 6 I.T.A. No. 733/Mum/2026 Excise Department. It was contended that the statement of the partner clearly admitted that certain invoices were not recorded in the books of account, and such admission carries significant evidentiary value. The Ld.DR submitted that the subsequent retraction was an afterthought and was not supported by any cogent evidence.
4.5. The Ld.DR submitted that Ld.AO identified specific transactions and quantified the unaccounted sales at Rs.62,40,000/-. The assessee failed to reconcile these transactions with its books of account or produce conclusive evidence to establish that the same were duly recorded. Therefore, the reliance placed by the Ld.AO on the investigation report and the partner's admission was justified.
We have perused the submissions advanced by both sides in light of records placed before u/s.
5. The addition of Rs. 62,40,000/- has been made by the Assessing Officer by treating the alleged "undervaluation" pointed out in the Central Excise proceedings as "unaccounted sales". In our considered view, such an approach is legally unsustainable. The material placed before us clearly demonstrates that the proceedings before the Central Excise authorities were confined to an issue of valuation in respect of certain invoices and did not culminate in any finding of suppression of production or clandestine removal. On the contrary, it is an admitted position that the Central Excise Department has exonerated the assessee in respect of the alleged undervaluation of Sugam 103. This factual 7 I.T.A. No. 733/Mum/2026 position materially weakens the very foundation on which the impugned addition has been made.
5.1. Further, the assessee placed on record documentary evidences, including audited financial statements, invoices, ledger accounts, and bank statements evidencing receipt of sale consideration. Importantly, certificate issued by the Chartered Accountant certifies that the sales covered by the disputed invoices were duly accounted for in the regular books. The Revenue has not brought on record any material to dislodge these evidences or to demonstrate that any part of the sales has escaped recording. It is a settled position that an addition cannot be sustained merely on the basis of an alleged admission, particularly when the same stands clarified/retracted and is not supported by any independent corroborative material.
5.2. We also find merit in the contention of the Ld. AR that there exists a fundamental distinction between "undervaluation of sales"
and "unaccounted sales". While the former may have implications under indirect tax laws, it does not ipso facto lead to the conclusion that sales are unrecorded for the purposes of income-tax. In the present case, when the entire turnover stands duly recorded in the books of account and no defect therein has been pointed out, there remains no basis to treat any portion thereof as unaccounted sales.
5.3. Having regard to the totality of facts and circumstances, including the exoneration by the Central Excise Department and the uncontroverted evidences placed on record, we hold that the 8 I.T.A. No. 733/Mum/2026 addition of Rs.62,40,000/- is unsustainable. The same is, accordingly, directed to be deleted.
Accordingly, the grounds raised by the assessee stands allowed.
In the result appeal filed by the assessee stands allowed.
Order pronounced in the open court on 27/04/2026 Sd/- Sd/-
(JAGADISH) (BEENA PILLAI)
Accountant Member Judicial Member
Mumbai
Dated: 27/04/2026
SC Sr. P.S.
Copy of the order forwarded to:
(1)The Appellant
(2) The Respondent
(3) The CIT
(4) The CIT (Appeals)
(5) The DR, I.T.A.T.
True Copy
By order
(Asstt. Registrar)
ITAT, Mumbai