I N THE HI GH COURT FOR THE STATE OF TELANGANA AT HYDERABAD THE HONOURABLE SRI JUSTI CE P.SAM KOSHY AND THE HONOURABLE SRI JUSTI CE SUDDALA CHALAPATHI RAO I NCOME TAX TRI BUNAL APPEAL No.278 of 2010 DATE OF JUDGMENT: .12.2025 Between :

Mr. Sri Rajesh Rawtani.

…Appellant AND The Income Tax Officer, Ward 6(1), Hyderabad.

…Respondent JUDGMENT:

(per the Hon’ble Sri Justice P.Sam Koshy)

Heard Mr. Prudhviraj Mattepally, learned counsel appearing on behalf of Mr. K.Raji Reddy, learned counsel for the appellant / assessee; and Bokaro Sapna Reddy, learned Senior Standing Counsel for Income Tax Department appearing on behalf of the respondent / Revenue.

2. The instant appeal has been filed by the appellant / assessee under Section 260-A of the Income Tax Act, 1961 (for short ‘the Act’) assailing the order dated 18.12.2009, in I.T.A.No.719/Hyd/2008, passed by the Income Tax Appellate Tribunal, Hyderabad, Bench ‘A’ (for short the ‘ITAT’), for the assessment year 2004-05.

3. The question of law to be considered in the instant appeal is “whether the ITAT was correct in not following the contention of the appellant that the goods which remained unsold for the assessment years 2001-02 to 2003-04 from the purchase made from outside the books of accounts and when the same was assessed in the said three years and the same cannot be assessed again in the year 2004-05 which amounts to double taxation in the hands of the appellant, since the same were sold in subsequent assessment years?”

4. In the instant case, the Assessing Officer, the Commissioner of Income Tax (Appeals), as also the ITAT, have all decided the matter against the appellant.

5. The appellant herein carries on the business of footwear. For the assessment year 2004-05, the appellant submitted its returns on 27.08.2004 admitting an income of Rs.2,75,959/-. However, the Assessing Officer, subsequently on scrutiny found that the assessment made by the appellant was not proper, and thereafter, vide order dated 28.12.006 passed an assessment order raising demand of Rs.10,31,794/- which is inclusive of interest both under Section 234-B and 234-C of the Act. While passing the said assessment order, the Assessing Officer rejected the contention of the appellant to treat the creditors liability as unexplained income.

6. In the course of assessment, the Assessing Officer found that there were lot of differences in the trade liabilities. This according to the appellant were certain unrecorded purchases and the liabilities of which standing in the books of accounts of the creditors was not properly appreciated by the Assessing Officer while passing the assessment order on 28.12.2006.

7. It was contended by the learned counsel for the appellant that the returns have been filed on the estimated basis of 5% on the turnover under Section 44AF of the Act. According to the learned counsel for the appellant, the difference in the balance of creditors under Section 69 of the Act has to be treated as unexplained income.

8. According to the learned counsel for the appellant, this issue arose because of the stocks lying with the appellant and these stocks were those which were sold in the previous year, but could not be delivered within time and those were also shown as balance outstanding in the books of accounts on 31.03.2004.

9. Learned Senior Standing Counsel for Income Tax Department, opposing the appeal, referred to the findings arrived at by the three forums, all of whom have given a concurrent finding of fact. According to the learned Senior Standing Counsel, the appellant himself had in a correspondence made with the Department on 26.12.2004, contended that the said correspondence did not disclose any plausible explanation in respect of the so-called persons against whom outstanding credit is reflected in the books of accounts.

10. Learned Senior Standing Counsel for Income Tax Department referring to the order passed by the Assessing Officer at the first instance submitted that the said findings are findin