Mumbai ITAT Deletes ₹1.62 Crore Addition U/s 69A as AO Relied Solely on Investigation Report Without Independent Inquiry

Bharat Surendra Pandya Vs DCIT (ITAT Mumbai)

Mumbai ITAT Deletes ₹1.62 Crore Addition U/s 69A as AO Relied Solely on Investigation Report Without Independent Inquiry

Summary: The Mumbai ITAT partly allowed the assessee’s appeal and directed deletion of the addition of ₹1,62,30,000 made under Section 69A of the Income-tax Act. The reassessment was reopened under Section 148 based on information from the Investigation Wing alleging commodity transactions resulting in escapement of income. The assessee consistently denied receiving ₹1,62,30,000, submitted bank statements showing only ₹10,95,619 as profit from commodity trading, and furnished affidavits before both the Assessing Officer and the CIT(A). The Tribunal observed that the Assessing Officer made the addition solely on the basis of the Investigation Wing’s report and the non-response to notices issued under Section 133(6), without conducting any independent inquiry despite the assessee’s denial and supporting bank records. It held that the assessee’s contentions were brushed aside without inquiry and, in the facts and circumstances of the case, the addition could not be sustained. Accordingly, the Tribunal directed deletion of the ₹1,62,30,000 addition under Section 69A, allowed Ground No. 1, left the remaining grounds open, and partly allowed the appeal.

The Mumbai ITAT partly allowed the assessee’s appeal by deleting an addition of ₹1.62 crore made u/s 69A, holding that the AO had merely relied on information received from the Investigation Wing without conducting any independent verification. The reassessment had been initiated on the allegation that the assessee had undertaken commodity transactions through a broker resulting in sale proceeds of ₹1.62 crore. However, the assessee consistently maintained that he had earned only ₹10.95 lakh from commodity trading, filed affidavits denying receipt of the alleged amount, and produced bank statements demonstrating that no such credits had ever been received.

The Tribunal observed that despite the assessee’s repeated denial and documentary evidence, the AO proceeded to tax the entire alleged sale consideration of ₹1.62 crore solely on the basis of the Investigation Wing’s report. The non-response to notices issued u/s 133(6) by the broker and the commodity exchange could not substitute an independent inquiry by the AO, particularly when the assessee had produced evidence contradicting the information relied upon by the Department. The Tribunal held that the assessee’s contentions and supporting bank statements were brushed aside without any meaningful investigation.

Holding that such an addition could not be sustained in the absence of any independent verification or evidence establishing that the assessee was the owner of the alleged money, the ITAT directed the AO to delete the addition of ₹1.62 crore made u/s 69A. Since the appeal was allowed on merits, the Tribunal left the other grounds, including the challenge to the validity of the reassessment, open without adjudication.

Cases Discussed:

• Bharat Surendra Pandya Vs DCIT (ITAT Mumbai)
• Arvind Sahdeo Gupta v/s. ITO, Writ Petition No. 4793 of 2021, dated 08.08.2023

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals), NFAC, Delhi (“Ld. CIT(A)”) dated 16.03.2026 for the Assessment Year 2012-13.

2. In this appeal, the Assessee has raised the following grounds of appeal:

“1) The Ld. CIT(A) is erred in not considering appellant’s original submissions filed along with original Affidavit stating that, the said amount of Rs.1,62,30,000/- was never received by the appellant, as against allegation of Ld. A.O. as well as Ld. CIT(A).

2) The Ld. CIT(A) is also erred in legally not disposing off the ground (Ground No.1) which was, the notice issued u/s 148 of the Act & subsequent assessment u/s 143 r.w.s 147 of the Act is without jurisdiction, bed in law & ought to be cancelled.

3) The reason for which the Reassessment was made u/s 143(3) r.w.s 147 was false and not related to the appellant, as original Affidavit was filed 7 S.148 notice was also objected by the appellant before start of proceeding u/s 147 of the Act.”

3. Ld. Counsel for the assessee, at the outset, submitted that the Assessing Officer, while completing the reassessment, made an addition of ₹1,62,30,000/-, even though the assessee had received only ₹10,95,619/- as profit on sale of commodities. Ld. Counsel for the assessee submitted that the assessee had repeatedly denied having received any sum of ₹1,62,30,000/-, and an affidavit was also furnished before the Ld. CIT(A) denying receipt of such sum. Ld. Counsel submitted that even the bank statements furnished by the assessee do not reflect the receipt of the said amount by the assessee. Ld. Counsel for the assessee submitted that the addition was made solely on the basis of the investigation report and in spite of the assessee denying receipt of such amount the Assessing Officer failed to conduct any inquiry.

4. Ld. Counsel for the assessee also made submissions as under:

“The addition of Rs.1,62,30,000/-u/s. 69A by the Ld. AO & subsequently upheld by Ld. CIT (A) should be deleted & the Reassessment should be quashed on the following facts & judicial standings:-

1. In response to the Reassessment notice u/s. 148, the Appellant had repeatedly denied having received any such amount of Rs.1,62,30,000/- on account of NMCE/any other entity. Vide pages 8,10,21 of our paper book categorically denying such charges. Also page no. 24 of the said paper book contains Affidavit by the Appellant denying having received any such amount in his ALL of the bank statements during the year under consideration, (All Bank statements attached, vide pages 26-27 of paper book) except a sum of Rs. 10,95,619/- which was received from R.K. Commodity on account of profit on sale of commodity which is credited to Profit & Loss A/c. of the Appellant vide page no. 17 of the paper book, as well as Pg.no. 22 of paper book, which is highlighted Bank statements reflecting amount of Rs.10,95,619/- (Rs. 5,00,000/- + Rs. 5,95,619/-).

2. Before the Ld. CIT(A) also, the Appellant repeatedly denied having receipt of any such amount Rs.1,62,30,000/- & AGAIN before the Ld. CIT(A) the Appellant had submitted an Affidavit vide page number 1-3 of the paper book which is also duly acknowledged by the CIT(A) – 5, on 09.12.2019.

3. Most importantly, the definition of Sec. 69A starts with “where in any financial year the assessee is found to be the owner of any money “

This clearly establishes that, the assesse must be the owner of money, which is not the case in Appellant’s matter. The Appellant repeatedly denied having received such money in his bank account by way of proof of attaching all of his bank statements & also by way of 2(Two) different Affidavits before Ld.AO as well as before CIT (A).

4. The Ld. AO has relied only upon investigation wing information & had not tried to conduct any independent inquiry INSPITE of the fact that, the Appellant vehemently & repeatedly denied such charges right from the beginning of issue of notice u/s. 148 of the Act.

5. Lastly & most importantly, we rely upon the judgement in case of Arvind Sahdeo Gupta v/s. ITO of Jurisdictional Bombay High Court w/p 4793 of 2021 dt. 08.08.2023, wherein it was held that, the reason for reopening the assessment were based on incorrect facts or conclusions, the notice for reopening can not be sustained. It further observed that the reasons to belief that income chargeable to tax as escaped assessment must be based on correct fact.

6. Thus, Your Honours are requested to kindly quash the reassessment & delete the notional addition made by the Ld. AO amounting to Rs.1,62,30,000/-u/s. 69A of the Act, without having set Aside the matter, as all such proofs & Affidavits were provided right from the beginning of the Assessment proceedings u/s. 148 of the Act, 1961.”

5. On the other hand, Ld. DR supported the orders of the authorities below.

6. We have heard the rival submissions, perused the orders of the authorities below and the material placed before us.

7. On perusal of the assessment order, it is observed that the Assessing Officer, based on the information received from the Deputy Director of Income Tax (Inv.), Unit-3(1), Kolkata through DCIT (HQ) to CCIT-1, Mumbai, issued notice u/s 148 of the Act to the Assessee for reopening the assessment on the ground that the assessee had undertaken transactions of buying and selling of commodities, resulting in escapement of income of ₹1,62,30,000/- for the assessment year 2012-13. In the course of the assessment proceedings, the reasons for reopening were furnished to the assessee, according to which the assessee had undertaken sales transactions of ₹1,62,30,000/- on the National Multi Commodity Exchange platform through broker RK Commodity against a purchase value of ₹5,35,000/-. The assessee was asked to furnish bank statements, contract notes, etc. The assessee stated before the Assessing Officer that he had earned only ₹10,95,619/-from trading in commodities and had not received any other sum as alleged in the reasons. However, the Assessing Officer, based on the information received from the Investigation Wing and also since the notices issued u/s 133(6) were not responded to by RK Commodity and the National Multi Commodity Exchange, concluded that the assessee had undertaken sales transactions of commodities to the extent of ₹1,62,30,000/- and brought to tax. Before the Ld. CIT(A), the assessee furnished an affidavit stating that he had never undertaken any such transaction and also placed the bank statements to prove that he had earned only ₹10,95,619/- and that no other transaction had taken place. However, the Ld. CIT(A) sustained the addition made by the Assessing Officer. We observe that the Assessing Officer made the addition of the entire purported sale consideration of ₹1,62,30,000/- solely on the basis of the report of the Investigation Wing without making any inquiry, especially when the assessee was denying having entered into any such transaction and had placed the bank statements before the Assessing Officer as well as the Ld. CIT(A), contending that no such transaction had ever taken place and that the only transaction undertaken by the assessee was the sale of commodities to the extent of ₹10,95,619/-. The contentions of the assessee were completely brushed aside without making any inquiry by the Assessing Officer, which cannot be appreciated. Therefore, in the facts and circumstances of the case, the addition made by the Assessing Officer cannot be sustained. Accordingly, we direct the Assessing Officer to delete the addition of ₹1,62,30,000/- made u/s 69A of the Act. Ground No. 1 of the grounds of appeal of the assessee is allowed. The other grounds are left open at this stage.

8. In the result, the appeal of the assessee is partly allowed as indicated above.

Order pronounced in the open court on 10/07/2026