Income Tax Appellate Tribunal - Pune
Deputy Commissioner Of Income Tax, ... vs Arihant Syncotex Mills Private ... on 30 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES "A", PUNE
BEFORE MS. ASTHA CHANDRA, JUDICIAL MEMBER &
SHRI DR DIPAK P. RIPOTE, ACCOUNTANT MEMBER
ITA Nos. 2540 & 2562/PUN/2025
Assessment Years: 2020-21 & 2019-20
Dy. CIT, Circle -1, Vs. Arihant Syncotex Mills
31 C/2, E, Aayakar Bhawan, Pvt Ltd.,
Indumati Road, Tarabai Park 5/585, B-1, Vivek
Kolhapur - 416003 House, Panchaganga
Housing Society, Date
Mala, Ichalkaranji -
416115
PAN: AAHCA8297P
Appellant Respondent
CO Nos. 14 & 15/PUN/2026
[Arising out of ITA Nos. 2562 & 2540/Pun/2025]
Assessment Years: 2019-20 & 2020-21
Arihant Syncotex Mills Pvt Vs. Dy. CIT, Circle -1,
Ltd., 31 C/2, E, Aayakar
5/585, B-1, Vivek House, Bhawan, Indumati
Panchaganga Housing Road, Tarabai Park
Society, Date Mala, Kolhapur - 416003
Ichalkaranji - 416115
PAN: AAHCA8297P
Appellant Respondent
Assessee by : Bhuvanesh Kankani, Adv
Revenue by : Shri Bharat Andhale,
Add. CIT (Vitural)
Date of hearing : 23.04.2026
Date of pronouncement : 30.04.2026
आदे श / ORDER
PER Dr. DIPAK P. RIPOTE, ACCOUNTANT MEMBER :
These are appeals filed by Revenue and cross objections by the assessee for AY 2019-20 and AY 2020-21 emanating from Order u/s 250 of the Income Tax Act 1961 for AY 2019-20 dated 4/8/2025 and AY 2020-21 dated 4/8/2025.
2ITA Nos. 2540 & 2562/Pun/2025, CO Nos. 14 & 15/Pun/2026.
2) We have heard both these appeals and CO together and are being decided by this common order.
3) We have heard both the parties and perused the records.
4) The Assessee is a company engaged in Textile Business. Assessee filed Return of Income for AY 2019-20 on 31/10/2019 declaring total income at Rs.2,71,78,440/-.
4.1) In this case the Assessing Officer, Assistant Commissioner of Income Tax Circle -1, Kolhapur ( here in called as AO) issued Notice u/s 148A(b) dated 08/03/2023 based on some information. Ld.AR has filed copy of the said Notice at page 1-4 of the Paper Book. Ld.AR submitted that the Notice has been issued based on incorrect information. Ld.AR submitted that the Assessee had filed reply in response to Notice u/s 148A(b) , however, the AO passed an order u/s 148A(d) and issued Notice u/s 148 based on factually incorrect wrong information. Ld.AR submitted that the Notice u/s 148 is bad in law. Ld.AR also pleaded that the Pr. Commissioner of Income Tax , who has approved the Order u/s 148A(d) and Notice u/s 148 has not applied his mind to the facts of the case.
4.2) In this case it is alleged in the Notice u/s 148A(b) that a Search u/s 132 of the Income Tax Act was conducted on 12/4/2019 in the case of Sanjay G Agrawal alias Sanjay Tibrewal who was providing accommodation entries through his concerns namely Narayan &co , Hanuman Fabrics. It was alleged in the Notice that Assessee had entered into Transaction with Narayan &co , and Hanuman Fabrics to the extent of Rs.49,51,556/- during FY 2018-19.
4.3) The Assessee filed reply on 3/4/2023 which has been reproduced by the AO in the order u/s 148A(d) of the Act. Assessee specifically submitted that Assessee had never entered into any transactions with the said entities. Assessee filed copy of Audited Accouns, Return of Income . Assessee also submitted before the AO that in the statement u/s 132 Mr.Sanjay Tibrewal had never mentioned anything about the Assessee. Assessee also asked for cross examination.
3ITA Nos. 2540 & 2562/Pun/2025, CO Nos. 14 & 15/Pun/2026.
4.4) However, the AO passed an order u/s 148A(d) dated 12/04/2023 with the approval of Pr. Commissioner of Income Tax -1 Pune. The AO merely mentioned that search was conducted in the case of Sanjay Tibrewal who had provided accommodation entries through Hanuman fabrics and Narayan &co. Assessee had filed elaborate reply along with Audited Accounts. The Assessee has specifically denied any transaction with Hanuman fabrics and Narayan & co. However, the AO without bringing on record any documentary evidence arrived at a conclusion that Income of Rs.49,51,556/- had escaped assessment. AO issued Notice u/s 148 dated 12/04/2023 for AY 2019-20.
4.5) It is noted that AO has given a chart in the Notice u/s 148A(b) and Order u/s 148A(d). It is not clear from these , whether the chart produced by the AO was copy of any seized document or impounded document ! The AO has not mentioned any thing about the basis of the said Chart. It was the duty of the AO to specify the source of the impugned chart, specially when the Assessee had denied having any transactions with those entities.
4.6) The AO started reassessment proceedings. During the same the Assessee denied any transaction. Assessee had again requested for cross examination of Sanjay Tibrewal and also asked for basis of the proposed additions. However, the AO added the amount of Rs.49,51,556/ as unexplained Expendituer u/s 69 C of the Act. Thus AO made addition on account of UNEXPALINED EXPENDITURE.
4.7) The Assessee filed appeal before the CIT(A) who following the ITAT Ahmedabad in the case of ACIT vs Omshiv Fabrics hub P Ltd restricted the addition to 0.3% of the Total Amount.
4.8) Aggrieved by the Order of CIT(A) u/s 250 of the Act, Revenue has filed appeal and assessee has filed CO.
5. Assessee had filed an elaborate reply before the CIT(A). The same has been reproduced by the CIT(A) in his order.
5.1 It has been submitted by the Assessee that the Assessee regularly sales Fabrics. During the year assessee had sold Fabrics to Kamal Textiles, Niraj Impex, Babulal Nirajkumar. Assessee claimed that Assessee has been selling Fabrics to these parties for many years.
4ITA Nos. 2540 & 2562/Pun/2025, CO Nos. 14 & 15/Pun/2026.
Assessee filed copies of Invoices, Complete Address of these entities, copies of ledger accounts disclosing sale and payment receipt. Assessee also filed its Bank Statement. Assessee submitted before CIT(A) that on studying entries in the Bank Account of the Assessee, assessee realised that the Babulala Nirajkumar, Kamal Textile, Niraj Impex who had purchased Fabrics from Assessee,while making payment to the assessee had deposited the Cheques issued by Hanuman Fabrics and Narayan &co. Assessee submitted that a bearer cheque can be given by one party to another and it is permissible. Assessee submitted that in Local business parlance it is called as Cheque Discounting. Assessee submitted before CIT(A) that Assessee was not aware about the impugned cheques being deposited by Babulala Nirajkumar, Kamal Textile, Niraj Impex in the bank account of the Assessee as Bank Account Details of the Assessee's Bank were mentioned on the Invoices and parties were directed to deposit the payments. Assessee produced evidence to prove that the impugned Sales have been reflected in the P&L a/c of the Assessee and there is no escapement of Income.
5.2 Before us, the Ld.AR repeated the submission made before CIT(A) and AO. Ld.AR took us through the sample invoices and submitted that the entire Sale is shown in the books. Ld AR specifically submitted that Assessee had not incurred any expenditure with those parties.
5.3 Ld.Departmental Representative has not doubted the documents filed. Ld.DR merely relied on the order of the AO.
5.4 It is not in dispute that the Assessee had never entered into any direct transaction with Hanuman fabrics and Narayan &co. Department has not brought on record any document to establish that assessee had entered into any transactions directly with Hanuman Fabrics, Naryan &Co or Sanjay Tibrewal. Mr. Sanjay Tibrewal has also not mentioned Assessee's name in the statement recorded u/s 132(4) of the Act. No document has been referred by the AO which was found during search which is directly related to the Assessee or which has name of the Assessee.
5.5 It is not the case of the department that Sale made by the Assessee to Babulala Nirajkumar, Kamal Textile, Niraj Impex was not reflected in the books of the Assessee. Assessee had shown these Sales in the books . In these facts and circumstances of the case, it is not the fault of the 5 ITA Nos. 2540 & 2562/Pun/2025, CO Nos. 14 & 15/Pun/2026.
Assessee that Cheques issued by Hanuman Fabrics , Narayan &co were deposited as payments towards purchases made by Babulala Nirajkumar, Kamal Textile, Niraj Impex in Assessee's bank account by Babulala Nirajkumar, Kamal Textile, Niraj Impex. Therefore, there is no merits in the additions made by the AO of Rs.49,51,556/- as Unexplained Expenditure. The so called cheques issued by the Hanuman Fabrics and Narayan &co were deposited in the Bank Account of the Assesssee and Assessee had shown the income. Thus, the entire case of the AO that Assessee had incurred unexplained expenditure is baseless and based on presumptions. Hence, we direct the AO to delete the impugned additions.
5.6 Accordingly, the Ground number 1 raised by the Assessee in CO 14/PUN/2026 is allowed.
Since we have allowed Ground Number 1 of the Assessee raised in CO 14/PUN/2026, the ground number 2 of the said CO becomes academic in nature and dismissed unadjudicated.
6. Department's Grounds of Appeal :
Ground number 1 is regarding merits of the additions of Rs.49,51,556/-. We in the above paragraphs have already held that there is no basis for the impugned addition of Rs.49,51,556/- as UNEXPLAINED EXPENDITURE u/s 69C of the Act. Ld.DR has not brought on record any document to prove that assessee had incurred any unexplained expenditure.
The entire emphasis of the department is on the chart produced in the Order u/s 148A(d) of the Act. The said Chart is reproduced here under :
Counter PAN Hanuman Fabrics
Narayan and
party Company
44910022001002704 098500210007331
Deposit Withdrawal Deposit Withdrawal
Arihant AAHCA8297P 0.00 10,81,038 0.00 38,70,518
Syncotex
Mill Pvt
6
ITA Nos. 2540 & 2562/Pun/2025,
CO Nos. 14 & 15/Pun/2026.
6.1 The AO has not mentioned in the order the source of the impugned chart. The Ld.DR could not explain the source of the impugned chart. The AO has not bothered to verify the Bank Statement of Hanuman Fabrics and Narayan &co. The AO has not established from the bank statements of Hanuman Fabrics and Narayan &co that assessee had incurred any expenditure and made some payments to these entities. Merely based on the chart the AO cannot establish the impugned addition of Rs.49,51,556/-
made u/s 69C of the Act. Therefore, the Revenue has miserably failed to prove it. Hence, for all the reasons discussed, the Ground Number 1 of the Revenue is dismissed.
6.2 Ground number 2: This is a vague ground ,where in Revenue has merely mentioned that Revenue has filed appeal against the ITAT Order in ACIT vs Omshiv fabric hub P Ltd. We specifically asked ld.DR how filling of Appeal against the particular order of ITAT precludes the CIT(A) from following it , unless operation of that Order has been stayed by Hon'ble High Court. No such fact has been brought on record by Revenue. Hence there is no merit in Ground number 2 of the Revenue. Accordingly, the Ground Number 2 raised by the revenue is dismissed.
6.3 Ground Number 3 is general in nature, no ground was added or altered by revenue. Hence Ground Number 3 raised by the Revenue is dismissed.
6.4 In the Result ITA NO 2562/PUN/2025 for AY 2019-20 filed by the revenue is dismissed.
ITA 2540/PUN/2025 AY 2020-21 and CO 15/PUN/26
7. The Ground Number 1 and 2 of the revenue in ITA 2540/PUN/2025 for AY 2020-21 are identical to Grounds raised by Revenue in ITA 2562/PUN/2025. Our decision in ITA 2562/PUN/2025 will apply mutatis mutandis to Ground Number 1nd 2 of ITA 2540/PUN/2025. Accordingly, the Ground Number 1 & 2 of ITA 2540/PUN/2025 are dismissed.
7.1 Ground number 3 &4 of Revenue are related to addition of Rs.3,98,49,926/- and Rs.33,36,535/-.
7.2 AO has observed that Assessee had made purchases of Rs. 79,69,98,537/- from Related parties. AO asked Assessee to prove it.
7ITA Nos. 2540 & 2562/Pun/2025, CO Nos. 14 & 15/Pun/2026.
Assessee filed copies of Ledger accounts, copies of Return of Income filed by them before the AO. The AO has mentioned it in the Assessment Order. Once the Assessee filed these details during Assessment Proceedings, the Assessee had fulfilled its onus. AO has merely stated that Assessee had not produced comparative invoices hence AO mentioned that to plug Revenue leakage AO made addition of 5% of the purchases. AO has not given any basis for the impugned addition. Once Assessee had fulfilled its onus by filling copies of Returns of those parties, Ledger account, onus shifted to AO to prove that the impugned payments were not at market rate. The AO has not brought on Record any comparative rate to prove that Assessee had paid excess to related parties.
7.3 Hon'ble Madras High Court in the case of CIT vs L.Parmeshwari [2017] 246 Taxman 126 (Madras)[15-02-2017] has held as under :
Quote, " 11. There is no prohibition that related parties cannot engage in business transactions. Such an interpretation would render the provisions of Section 40A (2) of the Act redundant. Section 40A(2) empowers the assessing officer to effect a disallowance of payments that are, 'in his opinion' excessive or unreasonable giving regard to fair market value of the goods, services or facilities for which the payment is made or the legitimate needs of the business or profession of the assessee or the benefit derived by him or accruing to him. Such 'opinion' has to be based on tangible material and not assumptions and suspicions.
12. The provisions of section 40A(2) are not automatic and can be called into play only if the assessing officer establishes that the expenditure incurred is, in fact, in excess of fair market value. This had not been done inthe present case." Unquote.
Similarly Hon'ble Gujarat High Court in the case of CIT vs Enviro Control Associated (P.) Ltd. [2014] 225 Taxman 56 (Gujarat) (Mag.)[27- 12-2013] held as under :
Quote, "12. We are in complete agreement with the reasoning and observations made by the learned CIT(A) confirmed by the learned ITAT. In absence of nay material before the Assessing Officer, such as comparative chart etc. to suggest that any excessive payment was made to M/s. Pollucon Engineers and the 10% ad hoc disallowance was made on the payment made under Section 8 ITA Nos. 2540 & 2562/Pun/2025, CO Nos. 14 & 15/Pun/2026.
40A(2)(b) of the Act to M/s. Pollucon Engineers solely on the ground that M/s. Pollucon Engineers to whom the payment was made, was run by the wife of the Director of the assessee company and therefore, there was an element of excessive claim, we are of the opinion that the Assessing Officer was not justified in adopting disallowance to the extent of 10% payment under Section40A(2)(b) of the Act . Under the circumstances, disallowance made by the Assessing Officer is rightly deleted by the learned CIT(A) confirmed by the learned ITAT.I" Unquote.
7.4 We have already mentioned above that AO has merely disallowed 5% without bringing on record any comparative rate. In these facts and circumstances of the case the addition made by AO is baseless.
Respectfully following the Hon'ble High Court we direct AO to delete the impugned addition.
7.5 Similarly, the AO has not brought on record that payment made for weaving to related parties were in excess of Market rate. The Assessee had fulfilled its onus by filling the details. Therefore, there is no merit in addition of Rs.33,36,535/-.
7.6 In the result the Ground number 3 and 4 raised by the revenue are dismissed.
8. Accordingly, for all the reasons ,Ground number 3 raised by Assessee in CO 15/PUN/26 is allowed.
9. In the Result the Revenue's appeal are dismissed and Assessee's CO on merit of additions are allowed in above terms.
Order pronounced on this 30th day of April, 2026.
Sd/- Sd/-
(ASTHA CHANDRA) (DIPAK P. RIPOTE)
JUDICIAL MEMBER ACCOUNTANT MEMBER
पुणे / Pune; िदनां क / Dated : 30 April, 2026.
KRK, Sr. PS
9
ITA Nos. 2540 & 2562/Pun/2025,
CO Nos. 14 & 15/Pun/2026.
आदे श की ितिलिप अ ेिषत / Copy of the Order forwarded to :
1. अपीलाथ / The Appellant.
2. थ / The Respondent.
3. The Pr. CIT concerned.
4. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, "SMC" बच, पुणे / DR, ITAT, "SMC" Bench, Pune.
5. गाड फ़ाइल / Guard File.
आदे शानु सार / BY ORDER, // True Copy // Assistant Registrar, आयकर अपीलीय अिधकरण, पुणे / ITAT, Pune.