Sai Dutta Clearing Agency Pvt. Ltd. Vs ITO (ITAT Mumbai)
Mumbai ITAT Deletes ₹1.36 Crore Addition u/s 69A – Customs Duty Collections by CHA Are Fiduciary Receipts, Not Taxable Income
The ITAT Mumbai deleted the addition of ₹1,36,25,280 made under Section 69A of the Income-tax Act, 1961, holding that amounts received by the assessee, a licensed Customs House Agent (CHA), represented fiduciary receipts collected from a client for payment of customs duty and other statutory charges rather than unexplained money. The Tribunal found that the assessee had consistently explained that it earned only agency commission of ₹80,000, which had been offered to tax, and supported its explanation with reconciliation statements, Customs Duty payment summaries, Bills of Entry, ICEGATE references and Customs Duty e-receipts showing receipt of funds from the client and corresponding remittance to the Customs Department. It observed that the Revenue had neither disputed the assessee’s status as a CHA nor controverted the authenticity of these documents or undertaken independent verification with the Customs Department or the importer. Holding that Section 69A requires ownership of unexplained money and that the impugned amounts were received and remitted in a representative and fiduciary capacity, the Tribunal deleted the addition. Since the appeal was allowed on merits, it did not adjudicate the legal grounds relating to reassessment, including the issue of notice under Section 143(2), and kept them open.
The Mumbai Bench of the ITAT deleted an addition of ₹1.36 crore made u/s 69A, holding that amounts received by a Customs House Agent (CHA) from its clients towards payment of customs duty & other statutory charges are mere fiduciary receipts & cannot be treated as unexplained money merely because they pass through the assessee’s bank account. The Tribunal observed that only the agency commission constitutes the real income of the CHA.
The assessee, a private limited company engaged in the business of Customs House Agent (CHA) services, originally filed its return declaring a business loss. Subsequently, based on information received from the Investigation Wing alleging suspicious financial transactions aggregating to ₹1.36 crore, the AO reopened the assessment & treated the entire receipts as unexplained money taxable u/s 69A r.w.s. 115BBE. The AO also denied the benefit of brought forward business losses & unabsorbed depreciation. The CIT(A) confirmed the addition.
Before the Tribunal, the assessee explained that it functioned merely as a licensed CHA, receiving funds from importers towards customs duty, port charges & other statutory levies, which were immediately remitted to the Customs Department. It submitted detailed reconciliation statements, Bills of Entry, ICEGATE references, Customs Duty e-receipts issued by SBI, invoice details & duty payment summaries, demonstrating that the impugned amounts represented reimbursements received from its client, M/s Sai Impex, & that it had earned only agency commission of ₹80,000, which had already been offered to tax.
Accepting the explanation, the Tribunal observed that the very nature of a CHA’s business requires it to receive statutory dues from clients in a representative capacity. Such amounts do not become the income of the CHA merely because they temporarily pass through its bank account. The Tribunal found that the documentary evidence clearly established a direct nexus between the amounts received from the client & the corresponding customs duty payments made to the Customs Department. Significantly, the Revenue had not disputed the genuineness of the Bills of Entry, ICEGATE references or Customs Duty e-receipts, nor had it conducted any independent verification from the Customs Department or the importer.
The Tribunal further held that the addition had been made solely on the basis of information received from the Investigation Wing, without any meaningful examination of the contemporaneous documentary evidence produced by the assessee. It reiterated that investigation inputs may justify reopening of assessment, but cannot by themselves justify an addition unless supported by evidence gathered during assessment proceedings. The Tribunal also observed that ownership of the money is a sine qua non for invoking section 69A, & where the receipts are merely fiduciary collections meant for onward payment to statutory authorities, the essential condition for invoking section 69A itself is absent.
Accordingly, the Tribunal held that the Revenue had failed to establish that the impugned receipts represented unexplained money belonging to the assessee. It deleted the addition of ₹1.36 crore, directed the AO to grant consequential relief including the benefit of brought forward losses & unabsorbed depreciation, & declined to adjudicate the legal grounds relating to the validity of reopening & non-issuance of notice u/s 143(2), having allowed the appeal on merits.
Author’s Comments:
This is an important decision recognising the real income principle in the case of intermediaries such as Customs House Agents. The Tribunal has rightly held that amounts collected in a fiduciary capacity for payment of statutory dues do not constitute the income of the recipient. Equally significant is the observation that information received from the Investigation Wing is only a starting point for enquiry. Once the assessee produces credible contemporaneous evidence, the Revenue must undertake independent verification before invoking the deeming provisions of section 69A. Mere suspicion, however strong, cannot replace evidence, particularly where official records such as Bills of Entry, ICEGATE references & Customs Duty e-receipts fully support the assessee’s explanation.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal has been preferred by the assessee against the order dated 30.12.2025 passed by the National Faceless Appeal Centre (NFAC), Delhi, arising out of the assessment framed under section 147 read with sections 144 and 144B of the Income-tax Act, 1961 (“the Act”) for the assessment year 2014-15. Through various grounds of appeal, the assessee has challenged the validity of reopening under section 147 on diverse legal grounds; has further assailed the assessment on the ground that no notice under section 143(2) was issued and served after the filing of return of income in response to notice issued under section 148; and, on merits, has challenged the addition of Rs.1,36,25,280/- made under section 69A of the Act as unexplained money, besides the consequential denial of the benefit of brought forward business losses and unabsorbed depreciation.
