Consistent Treatment for Loans, Recorded Cash Cannot be Taxed u/s 69A, and Double Disallowances Deleted

ISSUES

Section 68 (Loan): Whether an addition u/s 68 regarding a loan from a lender (‘H’) can be sustained when the Tribunal has already accepted the genuineness and creditworthiness of the same lender in a prior year (AY 2020-21).
Section 69A (Cash-in-Hand): Whether cash balances duly recorded in the books of account can be treated as “unexplained money” u/s 69A merely because the physical cash was not found during a search operation at the corporate office.
Double Addition: Whether the Assessing Officer (AO) can make disallowances for items (Interest on delayed TDS, CSR, Loss on assets) that the assessee has already voluntarily added back in their computation of income.

FACTS

Issue I (Loan): The AO made an addition of approx. Rs. 22.95 crores u/s 68 r.w.s. 115BBE, treating a loan from ‘H’ as unexplained cash credit. The assessee argued that in their own case for AY 2020-21, the Tribunal had already held that the burden of proof regarding genuineness and creditworthiness for loans from this specific lender was discharged.
Issue II (Cash Discrepancy): During a search u/s 132, the AO noted that while the books of account reflected a cash-in-hand of Rs. 87.25 lakhs (Group) / Rs. 79.38 lakhs (Assessee), no corresponding physical cash was found at the corporate office. The AO treated the book balance as unexplained money u/s 69A.
Issue III (Double Disallowance): The assessee had already added back expenses like Interest on delayed TDS, Loss on sale of fixed assets, and CSR expenditure in their computation of income. The AO, overlooking this, disallowed these amounts again in the assessment order.

HELD

On Issue I (Consistency): The authority noted that there was no change in the facts and circumstances regarding the loan from ‘H’ compared to AY 2020-21. Since the Tribunal had previously accepted the genuineness of the transaction and the lender’s creditworthiness, the principle of consistency applies. The addition u/s 68 was deleted.
On Issue II (Recorded Cash): Section 69A applies to money not recorded in the books of account. The AO himself admitted that the cash of Rs. 79.38 lakhs was duly recorded in the assessee’s books. Since the cash is recorded, its source is explained (as business income/receipts). The mere absence of physical cash during search does not make the recorded book balance “unexplained money” u/s 69A. The addition was deleted.
On Issue III (Double Addition): The CIT(A) verified that the actual disallowance was already made by the assessee in their computation. The AO’s action resulted in taxing the same amount twice. The deletion of this double addition was upheld.
Verdict: [In Favour of Assessee]

KEY TAKEAWAYS

Rule of Consistency: If a higher forum (Tribunal) has accepted a specific lender or transaction structure in a previous year, the AO cannot take a contrary view in subsequent years unless there is a material change in facts.
Section 69A vs. Books: Section 69A is typically used when excess cash is found (unrecorded). It cannot be easily used when less cash is found (missing cash) if the amount is already recorded in the books. If it’s in the books, the “source” is technically explained.
Check Computation vs. Assessment: AOs often mechanically disallow standard items (like CSR or penal interest) without checking if the taxpayer has already disallowed them in the “Computation of Income” sheet. This is a classic “mistake apparent from record.”

IN THE ITAT DELHI BENCH ‘D’

Timex Group India Ltd.

Additional Commissioner of Income-tax

Vikas Awasthy, Judicial Member
and Manish Agarwal, Accountant Member

IT Appeal Nos.7527 and 7599 (DELHI) of 2019
[Assessment years 2014-15]

NOVEMBER 28, 2025

Vikrant A. Maheshwari, Adv. for the Appellant. Vikram Singh Sharma, Sr. DR for the Respondent.

ORDER

Vikas Awasthy, Judicial Member.- These cross appeals by the assessee and the Revenue are directed against the order of Commissioner of Income Tax (Appeals)-44, New Delhi (hereinafter referred to as ‘the CIT(A)’) dated 24.06.2019, for AY 2014-15.

2. Shri Vikrant A Maheshwari, appearing on behalf of the assessee at the outset submitted that the grounds of appeal no. 5 to 10 are in respect of Advertisement Marketing and Sales Promotion Expenditure (AMP). The said issue is now covered by Advance Pricing Arrangement (APA), hence, ground no. 5 to 10 of appeal are withdrawn. He submitted that a letter dated 01.10.2024 to this effect has already been filed. He contended that the only issues that survive for adjudication are ground no. 11 to 13 of the appeal.

With regard to Department’s appeal he submitted that all the grounds of appeal are relating to Transfer Pricing issues that have been now settled in APA. The ld. DR endorsed the statement made by ld. Counsel for the assessee with respect to the issues raised in Department’s appeal.

3. Thus, in light of the above position explained by rival sides the grounds of appeal for our consideration in the appeal by the assessee are as under:-

“11. That on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in upholding the action of the AO in disallowing 50% of the expenses under the head miscellaneous expenses amounting to Rs.9,47,475/-.

12. That on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in directing the AO / TO to examine the alleged difference of rounding off and not appreciating that the difference in the turnover reported by the Appellant in the IT return and tax audit report is on account of rounding off, therefore, the Ld. CIT(A) has erred in not granting the relief to the Appellant in relation to the addition made by the AO in this regard amounting to INR 47,106-.

13. That on the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in directing the AO to examine the alleged default in deduction at source and in not granting relief to the Appellant with regard to the addition made by the AO under Section 40(a)(i) of the Act amounting to INR 50,088.”

3.1. The ld. Counsel submits that in ground no. 11 of appeal the assessee has assailed the findings of the CIT(A) in upholding ad-hoc disallowance of miscellaneous expenses to the extent of 50%. During assessment proceedings the assessee furnished details of Miscellaneous Expenses. Miscellaneous Expenditure is with respect to meeting and conferences. The Assessing Officer (AO) questioned increase in Miscellaneous Expenditure. The assessee explained that the increase in expenditure was on account of increase in the number of regional meetings with various dealers and distributors with a focus for increase in sales and growth of the company. Further, the expenditure was with regard to Annual General Meetings (AGM). The AO in an arbitrary manner only allowed 50% of expenses though, the expenses were duly supported by the bills. The CIT(A) upheld the same.

3.2. In respect to ground no. 12 he submitted that, the addition is with respect to mis-match in the sales turnover as reported in Audited Report and the ITR. The assessee explained the reason for mis-match, the AO without considering the same made addition of Rs.47,106/-.

3.3. With regard to ground of appeal no. 13, the ld. Counsel submits that the AO made disallowance u/s. 40(a)(i) of the Act alleging that the assessee has not deducted tax at source on sum of Rs.50,088/-. The assessee furnished party wise tabulation of the amounts paid but the AO refused to accept the same.

4. Per contra, Shri Vikram Singh Sharma representing the Department defended findings of the AO and the CIT(A) in respect of aforesaid additions and prayed for dismissing appeal of the assessee.

5. Both sides heard, orders of the authorities below examined. The ground of appeal no. 1 to 4 are general, hence, require to separate adjudication.

6. With regard to ground no. 5 to 10 of appeal, both the sides have unanimously stated that the issues have been settled under APA. The Tribunal vide zimni order dated 01.10.2024 has recorded this fact. The ld. Counsel for the assessee has prayed for withdrawing ground of appeal no. 5 to 10. In light of the statement made by ld. Counsel for the assesses at Bar, ground no. 5 to 10 are dismissed as withdrawn.

7. In ground of appeal no. 11, the assessee has assailed ad-hoc disallowance of miscellaneous expenditure to the extent of 50%. A perusal of the assessment order reveals that the AO has accepted the expenditure which is primarily in connection with meetings and conferences including AGM. The AO has merely questioned the increase in expenditure as compared of previous assessment year. The assessee was specifically asked to explain and justify expenditure of Rs.18,94,950/-. The assessee furnished bills to substantiate expenditure. In addition to the bills assessee also furnished copies of invoices, voucher and proof of payment in respect of the expenditure in relation to the AGM. Once, the assessee has furnished relevant documents to substantiate its claim, no ad-hoc disallowance of the expenditure is warranted. Thus, we find merit in the ground of appeal no. 11, the same is allowed.

8. The ground of appeal no. 12 is with regard to mis-match of sales turnover reported in Audit Report and the ITR. The contention of the assessee is that the difference of Rs.47,106/-is on account rounding up of figures in lakhs reported in the financial statements and the ITR. The actual figures were reported in the Audit Report without any rounding off. We find that the amount of addition is minuscule as compared to the sale turnover of the assessee. The sale turnover reported in the ITR is Rs.123,85,00,000/- whereas sales turnover as per tax Audit Report is Rs.123,55,52,894/-. There was total difference of Rs.2,47,106/-. The AO accepted the difference of Rs.2,00,000/- which was in respect of dealer signing fee reported under other operating revenue and made addition of the remaining amount of Rs.47,106/-. We find explanation of the assessee plausible, hence, addition of Rs.47,106/- is directed to be deleted. The assessee succeeds on ground no. 12.

8. In so far as disallowance u/s.40(a)(i) of the Act, we find that the assessee has furnished details of the parties to whom amounts were paid. It is contention of the assessee that there was error by the Tax Auditor in the tax audit report in wrongly mentioning the amount against the names of two entities. No material to substantiate the aforesaid argument is filed by the assessee nor any clarifications/rectifications from the Tax Auditor is furnished, hence, the disallowance u/s.40(a)(i) of the Act is upheld. Ground of appeal no. 13 is dismissed

9. In the result, appeal of the assessee is partly allowed.

10. The revenue in appeal has assailed the order of CIT(A) on transfer pricing issues including AMP expenditure only. Both the sides unanimously admitted that all Transfer Pricing issues in the impugned assessment year have been settled under APA. Thus, no dispute survives qua transfer pricing issues in the AY 201415. Consequently, appeal of the Revenue is dismissed.

11. To sum up, ITA No.7527/DEL/2019 (A.Y. 2014-15) is partly allowed and ITA No.7599 /DEL/2019 (A.Y. 2014-15) is dismissed.