The Deputy Commissioner Of Income Tax (Central), Aaykar Bhawan,Central Revenue Building, Civil Lines, Raipur, Chhattisgarh v. M/S Abhishek Steel Industries Ltd., Mahamaya Tower, 3[Rd] & 4[Th] Floor, Infront Of Anupam Nagar, Near Varun Honda, G.e. Road, Raipur,Chhattisgarh

(Tax Case No.38/2022) Digitally 2025:CGHC:44606-DBsigned bySISTASISTASOMAYAJULUSOMAYAJULUDate:2025.09.0315:07:34signed bySISTASISTASOMAYAJULUSOMAYAJULUDate:2025.09.0315:07:34+0530HIGH COURT OF CHHATTISGARH AT BILASPUR 2025:CGHC:44606-DB NAFR TAXC No. 38 of 2022 {Arising out of order dated 25-10-2021 passed by the Income TaxAppellate Tribunal, Raipur Bench, Raipur in ITA No.255/RPR/2014} -(Assessment Year 201213) The Deputy Commissioner of Income Tax (Central), Aaykar Bhawan,Central Revenue Building, Civil Lines, Raipur, Chhattisgarh ... Appellant versus M/s Abhishek Steel Industries Ltd., Mahamaya Tower, 3[rd] & 4[th] Floor, Infront of Anupam Nagar, Near Varun Honda, G.E. Road, Raipur,Chhattisgarh ... Respondent For Appellant /: Mr. Amit Chaudhari, Senior Standing Counsel forRevenue the Income Tax Department and Mr. Ajay Kumrani,Advocate.Revenue the Income Tax Department and Mr. Ajay Kumrani,Advocate. For Respondent /: Mr. Sumit Nema, Senior Advocate with Mr. AnandAssesseeDadariya, Advocate.AssesseeDadariya, Advocate. -Division Bench: Hon'ble Shri Sanjay K. Agrawal and Hon'ble Shri Sanjay Kumar Jaiswal, JJ. Judgment on Board (02/09/2025) Sanjay K. Agrawal, J. 1. This appeal preferred under Section 260A of the Income Tax Act,1961 (for short, ‘the IT Act’) was admitted for hearing on 23-1-2023by formulating the following substantial questions of law: -1961 (for short, ‘the IT Act’) was admitted for hearing on 23-1-2023by formulating the following substantial questions of law: - “1.Whether on the facts and in law, the Income TaxAppellate Tribunal (ITAT) was justified in deleting additionof Rs. 3,80,00,000/- made by the Assessing Officer (AO) onaccount of unexplained cash credit under Section 68 of theAct of 1961? 2.Whether on the facts and in law, the ITAT was justifiedin deleting the addition of Rs. 6,29,85,300/- made by the AOon the ground that the assessee had suppressed its yield andhad indulged in unaccounted production and sales?” 2. The aforesaid questions of law arise on the following factualbackdrop: -backdrop: - 3. The respondent/assessee incorporated on 23-5-1988 is engaged inthe business of manufacture of re-rolled products such as heavysteel structural, joist and girder. A search and seizure operationunder Section 132 of the IT Act was conducted at the premises ofthe assessee on 21-6-2011, pursuant thereto, assessmentproceedings were carried out and assessment order was passed on27-3-2014 under Section 153A read with Section 143(3) of the ITAct for the assessment year 2012-13, wherein the Assessing Officermade addition on the following issues: - 1. Unexplained cash credit under Section 68 of the IT Act to thetune of ₹ 3,80,00,000/- on account of alleged failure of theassessee to offer satisfactory explanation on the nature andsource of share application money credited in its books ofaccounts.tune of ₹ 3,80,00,000/- on account of alleged failure of theassessee to offer satisfactory explanation on the nature andsource of share application money credited in its books ofaccounts. 2. On account of alleged unaccounted sales, by estimating aproduction yield of 89% in the assessee’s SMS Division.Relying on such estimated yield ratio, the Assessing Officerproduction yield of 89% in the assessee’s SMS Division.Relying on such estimated yield ratio, the Assessing Officer computed purported unaccounted production andcorresponding sales, thereby making substantial additionsacross multiple years. Specifically, for the assessment year2012-13, the Assessing Officer made an addition of ₹6,29,85,300/-. 2. On account of alleged unaccounted sales, by estimating aproduction yield of 89% in the assessee’s SMS Division.Relying on such estimated yield ratio, the Assessing Officerproduction yield of 89% in the assessee’s SMS Division.Relying on such estimated yield ratio, the Assessing Officer computed purported unaccounted production andcorresponding sales, thereby making substantial additionsacross multiple years. Specifically, for the assessment year2012-13, the Assessing Officer made an addition of ₹6,29,85,300/-. 4. Being aggrieved and dissatisfied with the order dated 27-3-2014passed by the AO, the assessee preferred appeal before theCommissioner of Income Tax (Appeals) and the CIT (Appeals) byorder dated 21-7-2014 allowed the appeal and set-aside theimpugned addition of alleged unexplained cash credit to the tune of₹ 3,80,00,000/- and unaccounted sales made by the AssessingOfficer to the tune of ₹ 6,29,85,300/- against which the Revenuepreferred appeal before the Income Tax Appellate Tribunal (ITAT)which was dismissed concurring with the finding of the CIT(Appeals) leading to filing of this appeal in which three substantialquestions of law have been framed which have been catalogued inthe opening paragraph of this judgment. passed by the AO, the assessee preferred appeal before theCommissioner of Income Tax (Appeals) and the CIT (Appeals) byorder dated 21-7-2014 allowed the appeal and set-aside theimpugned addition of alleged unexplained cash credit to the tune of₹ 3,80,00,000/- and unaccounted sales made by the AssessingOfficer to the tune of ₹ 6,29,85,300/- against which the Revenuepreferred appeal before the Income Tax Appellate Tribunal (ITAT)which was dismissed concurring with the finding of the CIT(Appeals) leading to filing of this appeal in which three substantialquestions of law have been framed which have been catalogued inthe opening paragraph of this judgment. 5. Mr. Ajay Kumrani, learned counsel appearing on behalf of theappellant herein/Revenue, would submit that both the authoritiesi.e. the CIT (Appeals) and the ITAT were absolutely unjustified insetting aside the order passed by the AO by recording a findingperverse to the record and therefore the appeal be allowed and theorders impugned be set-aside.appellant herein/Revenue, would submit that both the authoritiesi.e. the CIT (Appeals) and the ITAT were absolutely unjustified insetting aside the order passed by the AO by recording a findingperverse to the record and therefore the appeal be allowed and theorders impugned be set-aside. 6. Mr. Sumit Nema, learned Senior Counsel appearing on behalf ofthe respondent herein/assessee, would oppose the appeal andsupport the impugned orders passed by the CIT (Appeals) and theITAT.the respondent herein/assessee, would oppose the appeal andsupport the impugned orders passed by the CIT (Appeals) and theITAT. 7. We have heard learned counsel for the parties and considered theirrival submissions made herein-above and also went through therecord with utmost circumspection.rival submissions made herein-above and also went through therecord with utmost circumspection. Answer to Substantial Question of Law No.1 6. Mr. Sumit Nema, learned Senior Counsel appearing on behalf ofthe respondent herein/assessee, would oppose the appeal andsupport the impugned orders passed by the CIT (Appeals) and theITAT.the respondent herein/assessee, would oppose the appeal andsupport the impugned orders passed by the CIT (Appeals) and theITAT. 7. We have heard learned counsel for the parties and considered theirrival submissions made herein-above and also went through therecord with utmost circumspection.rival submissions made herein-above and also went through therecord with utmost circumspection. Answer to Substantial Question of Law No.1 8. The Assessing Officer made addition on the issues of unexplainedcash credit under Section 68 of the IT Act to the tune of ₹3,80,00,000/- on account of alleged failure of the assessee to offersatisfactory explanation on the nature and source of shareapplication money credited in its book of accounts and secondly, onaccount of alleged unaccounted sales, by estimating a productionyield of 89% in the assessee’s SMS Division relying on suchestimated yield, the Assessing Officer computed purportedunaccounted production and corresponding sales, thereby makingsubstantial additions across multiple years, specifically, for theassessment year 2012-13, the AO made an addition of ₹6,29,85,300/-, which the CIT (Appeals) deleted by holding that theassessee has discharged the onus under Section 68 of the IT Act byproducing comprehensive documentary evidence including ITRs,audit reports, bank statements, affidavits, Memorandum ofAssociation/Articles of Association, board minutes andcash credit under Section 68 of the IT Act to the tune of ₹3,80,00,000/- on account of alleged failure of the assessee to offersatisfactory explanation on the nature and source of shareapplication money credited in its book of accounts and secondly, onaccount of alleged unaccounted sales, by estimating a productionyield of 89% in the assessee’s SMS Division relying on suchestimated yield, the Assessing Officer computed purportedunaccounted production and corresponding sales, thereby makingsubstantial additions across multiple years, specifically, for theassessment year 2012-13, the AO made an addition of ₹6,29,85,300/-, which the CIT (Appeals) deleted by holding that theassessee has discharged the onus under Section 68 of the IT Act byproducing comprehensive documentary evidence including ITRs,audit reports, bank statements, affidavits, Memorandum ofAssociation/Articles of Association, board minutes and assessments of investors. The CIT (Appeals) further held that thereis no incriminating material linking share money to undisclosedincome and it was also held that the AO’s case was based onconjectures. The CIT (Appeals) upheld genuineness andcreditworthiness supported by scrutiny assessments of investorcompanies and also held that suspicion or returned notices werenot sufficient to reject bona fide transactions relying upon thedecision of the Supreme Court in the matter of Commissioner of -1Incometax v. Lovely Exports (P.) Ltd. in which it has beenheld that once identity and receipt are proved, source of funds withinvestor is not the onus of the assessee. The CIT (Appeals) furtherrelied upon the decision of the M.P. High Court in the matter of-Principal Commissioner of Incometax (1) Indore v. ChainHouse International (P.) Ltd.2 in which it has been held thatgenuineness once established precludes addition on shareapplication money at premium which has been upheld by theSupreme Court in the matter of Principal Commissioner ofIncome-tax v. Chain House International (P.) Ltd.3. -1Incometax v. Lovely Exports (P.) Ltd. in which it has beenheld that once identity and receipt are proved, source of funds withinvestor is not the onus of the assessee. The CIT (Appeals) furtherrelied upon the decision of the M.P. High Court in the matter of-Principal Commissioner of Incometax (1) Indore v. ChainHouse International (P.) Ltd.2 in which it has been held thatgenuineness once established precludes addition on shareapplication money at premium which has been upheld by theSupreme Court in the matter of Principal Commissioner ofIncome-tax v. Chain House International (P.) Ltd.3. 9. On appeal being preferred by the Revenue, the ITAT concurredwith the findings of the CIT (Appeals) and upheld the deletion ofadditions made by the AO and it was held by the ITAT that the AOhad failed to bring on record any independent incriminatingmaterial to establish a nexus between the impugned share capitalwith the findings of the CIT (Appeals) and upheld the deletion ofadditions made by the AO and it was held by the ITAT that the AOhad failed to bring on record any independent incriminatingmaterial to establish a nexus between the impugned share capital 1[2008] 216 CTR 195 (SC) 2[2019] 408 ITR 561 (MP) 3[2019] 262 Taxman 207 (SC) and the assessee’s undisclosed income. It was further held by theITAT that the assessee had produced sufficient documentaryevidence establishing the identity, creditworthiness andgenuineness of the investor entities. The ITAT also held that oncethe assessee has discharged the initial onus under Section 68 of theIT Act, the burden shifts upon the Revenue to disprove the same,which in the present case was not discharged, and observed asunder: - “19.3. Apart from the factual position on absence of anyincriminating material as noted by the CIT(A) reproduced inpreceding para, the CIT(A) has also analyzed and delineatedthe facts and circumstances in proper perspective whiledealing on merits of additions. The CIT(A) found thatprimary onus placed upon the assessee under s.68 of the Actwas satisfactorily discharged by the assessee. The CIT(A) hasexamined the factual matrix in relation to each and everysubscriber individually, as extracted in para 9 of this order,and found that the subscribers were duly assessed andpayments have come through banking channels. It wasfurther found that the tangible net worth of the subscriberscompany is sufficiently enough to meet the criteria ofcreditworthiness as understood in ordinary parlance. Thebank statements, audited financial statement andconfirmations were analyzed. The source of investment wasthus found to be explained satisfactorily in the facts of thecase. It was further noted that the credit for shareapplication money was accepted in the regular assessmentunder s.143(3) of the Act concerning A.Y. 2006-07 prior tosearch after making due enquiries. The subscriber co. namelyAntariksh Commerce Pvt. Ltd. and Escort Finvest Pvt. Ltd.were found to be group companies. The share applicationmoney Rs. 200 Lakhs received from Group co. namely DeviIron & Power Ltd. was refunded in A.Y. 2009-10 throughbanking channel. The assessments of the subscribercompanies carried out under S. 143(3) /S. 143(3) r.w.s. 147were noted. A pertinent observation was made that the sameAO in the case of other group concern (Mahamaya SteelIndustries Ltd.) accepted the creditworthiness of the investorcompany namely ‘Escorts Finvest Pvt. Ltd.’ for subscription in Pref. Share Capital. The CIT(A) essentially noted that asubstantial part of application money has been received fromgroup cos. and a part of it also stood eventually returned.The adverse inference drawn by the AO was found by theCIT(A) to be unsubstantiated and in the realm of suspicion,surmises and conjectures. On legal position, the CIT(A) hasreferred to large number of judicial pronouncements.Without reiterating the different facets analyzed by theCIT(A), We find complete force in his view. After detailedand objection scrutiny of factual & legal position, the CIT(A)set aside and reversed the additions carried out without anyiota of incriminating material to support the allegation ofaccommodation entries in the abated as well as unabatedsearch assessments. The order of the CIT(A) on merits is selfspeaking and does not need any reiteration. We completelyendorse the action of the CIT(A) action on merits withoutdemur. The objection of the Revenue is, in our view,unsubstantiated and dehors the tell-tale evidences and hencenot sustainable. We thus decline to interfere with the viewexpressed by the CIT(A). 24.5In essence, the facts in the instance are speaking foritself. We are fully convinced with the process of reasoningand the objective analysis by the CIT(A) and conclusionderived therefrom. We do not intend to repeat each and everyobservations. The action of CIT(A) is in consonance with thebinding precedents of Jurisdictional High Court. Hence, wesee no reason to depart from the rationale of the decision ofthe CIT(A) on reversal of additions under s.68 of the Actpertaining to A.Y. 2012-13 in question. We thus decline tointerfere.” 10. As such, the finding recorded by the CIT (Appeals) has been duly affirmed by the ITAT observing that the assessee has dischargedthe initial onus under Section 68 of the IT Act and the burdenshifted upon the Revenue to disprove the same, which has not beendischarged competently by the Revenue. Therefore, we find thatthe concurrent findings recorded by the two authorities that theRevenue has failed to discharge the burden is the correct finding offact based on evidence available on record, it is neither perverse (Tax Case No.38/2022) nor contrary to the record. Thus, we endorse the findings recordedby the CIT (Appeals) upheld by the ITAT on the issue with regardto unexplained cash credit under Section 68 of the IT Act.Accordingly, the first substantial question of law is answered infavour of the assessee and against the Revenue. Answer to Substantial Question of Law No.2 11. The second substantial question of law is with regard to theaddition of ₹ 6,29,85,300/- made by the AO for the assessmentyear 2012-13 on account of alleged unaccounted sales based onestimated production yield of 89% in the assessee’s SMS Division,which the AO has proceeded on the basis of conjectures andsurmises and which the CIT (Appeals) set-aside and the ITAT hasconcurred with the findings of the CIT (Appeals). addition of ₹ 6,29,85,300/- made by the AO for the assessmentyear 2012-13 on account of alleged unaccounted sales based onestimated production yield of 89% in the assessee’s SMS Division,which the AO has proceeded on the basis of conjectures andsurmises and which the CIT (Appeals) set-aside and the ITAT hasconcurred with the findings of the CIT (Appeals). 11. The second substantial question of law is with regard to theaddition of ₹ 6,29,85,300/- made by the AO for the assessmentyear 2012-13 on account of alleged unaccounted sales based onestimated production yield of 89% in the assessee’s SMS Division,which the AO has proceeded on the basis of conjectures andsurmises and which the CIT (Appeals) set-aside and the ITAT hasconcurred with the findings of the CIT (Appeals). addition of ₹ 6,29,85,300/- made by the AO for the assessmentyear 2012-13 on account of alleged unaccounted sales based onestimated production yield of 89% in the assessee’s SMS Division,which the AO has proceeded on the basis of conjectures andsurmises and which the CIT (Appeals) set-aside and the ITAT hasconcurred with the findings of the CIT (Appeals). 12. In this regard, the decision of the Supreme Court in the matter ofDhakeswari Cotton Mills Limited v. Commissioner ofIncome Tax, West Bengal4 may be noticed herein in which theirLordships of the Constitution Bench of the Supreme Court dealingwith the jurisdiction while making order under Section 23(3) of theIncome Tax Act, 1922 and also considering the scope of powerunder Section 23(3) and limits thereon, held that while making theassessment under sub-section (3) of Section 23 of the Act, theIncome Tax Officer is not entitled to make a pure guess and makean assessment without reference to any evidence or any material atall, and observed as under:- “9.As regards the second contention, we are in entireagreement with the learned Solicitor General when he saysthat the Income Tax Officer is not fettered by technical rulesof evidence and pleadings, and that he is entitled to act onmaterial which may not be accepted as evidence in a court oflaw, but there the agreement ends; because it is equally clearthat in making the assessment under sub-section (3) ofSection 23 of the Act, the Income Tax Officer is not entitled tomake a pure guess and make an assessment withoutreference to any evidence or any material at all. There mustbe something more than bare suspicion to support theassessment under Section 23(3). The rule of law on thissubject has, in our opinion, been fairly and rightly stated bythe Lahore High Court in Gurmukh Singh v. CIT[5].” 13. Reverting to the facts of the present case in light of the principles oflaw relating to Section 145(3) of the IT Act and also considering theprinciples of law laid down by their Lordships of the SupremeCourt in Dhakeswari Cotton Mills Limited(supra), it is quitevivid that the CIT(Appeals) and the ITAT, both, after objectivelyanalysing the factual situation, found complete absence of anyadverse material against the assessee which can support theallegation of the AO towards unaccounted production presumed onthe basis of alleged low yield declared by the assessee. Thus, incomplete absence of any adverse material, both the authoritieshave concurrently reached to the conclusion that the additionmade by the AO is baseless and without any evidence, therefore,the rejection of books of accounts is invalid and addition made bythe AO on account of alleged suppression of yield is based uponmere guess work. It was further held by the two authorities thatthe yield declared by the assessee is neither low nor the books 51944 SCC OnLine Lah 38 : (1944) 12 ITR 393 (Lah) Soma maintained by the assessee could be impeached by some tangibleevidence/material on record and therefore the ITAT has rightlyconfirmed the order of the CIT (Appeals) and proceeded to dismissthe appeal filed by the Revenue. In our considered opinion, theconcurrent finding recorded by the two authorities holding that theaddition made by the Assessing Officer for the assessment year2012-13 is baseless and without any evidence/material, is a pureand simple finding of fact based on the evidence available onrecord, which is neither perverse nor contrary to the record. 14. Similar view has been taken by this Court in the matter of The 51944 SCC OnLine Lah 38 : (1944) 12 ITR 393 (Lah) Soma maintained by the assessee could be impeached by some tangibleevidence/material on record and therefore the ITAT has rightlyconfirmed the order of the CIT (Appeals) and proceeded to dismissthe appeal filed by the Revenue. In our considered opinion, theconcurrent finding recorded by the two authorities holding that theaddition made by the Assessing Officer for the assessment year2012-13 is baseless and without any evidence/material, is a pureand simple finding of fact based on the evidence available onrecord, which is neither perverse nor contrary to the record. 14. Similar view has been taken by this Court in the matter of The Deputy Commissioner of Income Tax (Central) v. M/sAbhishek Steel Industries Ltd.6 between same parties, butrelated to different assessment year (Assessment Year 2011-12). Abhishek Steel Industries Ltd.6 between same parties, butrelated to different assessment year (Assessment Year 2011-12). 15. In that view of the matter, the second substantial question of law isalso answered in favour of the assessee and against the Revenue. also answered in favour of the assessee and against the Revenue. 16. In the result, the present tax appeal stands dismissed leaving theparties to bear their own cost(s).parties to bear their own cost(s). Sd/- Sd/- (Sanjay Kumar Jaiswal)JudgeJudge (Sanjay K. Agrawal) 6Tax Case No.30/2022, decided on 20-8-2025