Shweta Manish Jain Vs ITO (ITAT Ahmedabad)
A Tainted Buyer Does Not Automatically Make the Seller’s Sales Bogus
Ahmedabad ITAT Requires a Specific Link Before Invoking Section 68
In Shweta Manish Jain v. ITO, ITA No. 2123/Ahd/2025, concerning Assessment Year 2019-20, the Ahmedabad Tribunal examined whether receipts from a purchaser identified as an accommodation-entry provider could be treated as unexplained cash credits under section 68, despite being recorded as sales.
The disputed addition was ₹1,79,97,196, representing receipts from M/s Niyati Traders. The Tribunal held that general information concerning the purchaser could justify further examination, but could not, without a specific nexus with the assessee’s transactions, establish that her sales were bogus.
The Bench comprising Dr. B.R.R. Kumar, Vice-President, and Shri Rahul Chaudhary, Judicial Member, pronounced its order on 1 October 2026. It restored the matter to the Assessing Officer for fresh examination. The addition was not finally deleted on merits.
Business Receipts Treated as Accommodation Entries
The assessee carried on the wholesale and retail business of betel nut through her proprietorship concern, Mohit Supari Depot. She filed her return declaring total income of ₹35,50,090.
The assessment was reopened following information from the DDIT (Investigation), Bhavnagar, alleging that Niyati Traders provided accommodation entries through its Axis Bank account.
Based on this information, the Assessing Officer treated the entire receipts of ₹1,79,97,196 from that party as unexplained credits under section 68, characterising them as accommodation entries against bogus sales.
The assessee maintained that the transactions were genuine and supported by documentary evidence. Before the Commissioner (Appeals), she also referred to other cases involving the same purchaser, including Manish Jain (HUF) for the same assessment year and an NFAC order for Assessment Year 2018-19, where similar additions were stated to have been deleted.
The Commissioner (Appeals), however, held that she had not satisfactorily established genuineness or discharged the burden under section 68.
The Missing Link in the Revenue’s Case
The Tribunal focused on a crucial question: what material established that the amount received from Niyati Traders was not consideration for goods sold?
It noted the undisputed position that the assessee had recorded the sales in her regular books, received consideration from the purchaser, included the receipts in disclosed turnover, and offered the resultant profit to tax.
The remand report dated 4 August 2025 also recorded that the evidence furnished before the Commissioner (Appeals) was the same as that submitted during assessment.
Against this background, the Tribunal held that the Revenue needed cogent and tangible material showing that the recorded transaction was not a sale or that the receipt represented something other than sale consideration.
The Revenue had identified the receipt but had not demonstrated its alternative character. An allegation concerning the purchaser could not automatically supply the missing evidence against the seller.
Books and Banking Channels Are Not Conclusive Either
The Tribunal’s reasoning was balanced. It did not hold that recording a receipt as sales, receiving payment through banking channels, or reporting transactions in GST filings necessarily proves genuineness.
It expressly recognised that a specific admission by the purchaser that purchases from the assessee were accommodation entries would constitute relevant adverse material requiring examination.
In that situation, accounting for the receipts as sales and offering the resulting profit to tax would not settle the issue. The Revenue could examine the real nature of the transaction, supported by surrounding and contemporaneous evidence.
Thus, the order rejects both an automatic adverse inference from the purchaser’s reputation and an automatic acceptance of transactions merely because they appear in the seller’s books.
What Evidence Would Establish the Nexus?
The Tribunal explained that the purchaser’s statement needed to be linked with the specific transactions of Mohit Supari Depot.
Relevant material could include the purchaser specifically naming the assessee, admitting that purchases from her were accommodation entries, or stating that no goods were purchased. Evidence that money was returned, directly or indirectly, after deduction of commission, or that an arrangement existed between the parties, could also establish the connection.
The examination could extend to stock records, transportation documents, movement or non-movement of goods, corresponding purchase records, banking trails and return of funds.
These observations identified the factual inquiry required; they were not findings that such circumstances existed in this case.
Fresh Assessment Directed
The Tribunal found that the assessment record did not indicate an independent inquiry or verification into the assessee’s particular transactions with Niyati Traders.
It therefore set aside the Commissioner (Appeals)’ order and restored the matter to the Assessing Officer for fresh adjudication after examining the transaction-related evidence and granting an adequate opportunity of hearing.
The appeal was allowed for statistical purposes.
Author’s Comments
The decision highlights a recurring weakness in investigation-based additions: information about a counterparty must be connected to the taxpayer’s own transactions. Suspicion may trigger inquiry, but the inquiry must establish the facts supporting the addition.
Equally, the order offers no blanket protection for receipts described as sales. If specific admissions and corroborative evidence establish accommodation entries, the accounting description cannot determine the outcome.
The assessee secured a fresh examination because the necessary factual link had not been established. The ultimate result will depend on whether the records support genuine sales or reveal a different underlying transaction.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
This appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals) (hereinafter referred to as “Ld. CIT(A)”), National Faceless Appeal Centre (NFAC), Delhi vide order dated 10.10.2025, under section 250 of the Income-Tax Act, 1961 (hereinafter referred to as “the Act”) for the Assessment Year 2019-20.
2. The assessee has raised several grounds; however, the substantive grievance relates to confirmation of addition of Rs.1,79,97,196/- under section 68 of the Act in respect of receipts from M/s Niyati Traders, treated by the Assessing Officer as accommodation entries against bogus sales.
3. The relevant facts which are required for adjudication of the issue are that the assessee, an individual, carrying on wholesale and retail business of betel nut under the proprietorship concern “Mohit Supari Depot”, filed her return of income on 30.09.2019 declaring total income of Rs.35,50,090/-. On the basis of information received from DDIT (Investigation), Bhavnagar, that M/s Niyati Traders was providing accommodation entries through its Axis Bank account, the assessment was reopened. The Assessing Officer treated the entire receipts of Rs.1,79,97,196/- from M/s Niyati Traders as unexplained credits under section 68 of the Act.
4. Aggrieved by the order of the Assessing Officer, the assessee filed an appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee contended that the transactions were genuine and supported by documentary evidence. Reliance was also placed on cases involving the same party, including the case of Manish Jain (HUF) for the same assessment year and the order of NFAC for A.Y. 2018-19, wherein similar additions were stated to have been deleted. The Ld. CIT(A), however, confirmed the addition, observing that the assessee had failed to satisfactorily establish the genuineness of the transactions and had not discharged the burden cast upon her under section 68 of the Act.
5. Aggrieved by the order of the Ld. CIT(A), the assessee is now in appeal before the Tribunal.
6. We have heard the rival contentions and perused the material available on record. The addition has been made primarily on the basis of information received from the Investigation Wing alleging that M/s Niyati Traders was an accommodation entry provider. The Ld. CIT(A) categorically held that receipts were made through banking channels or reflected in GST filing does not, by itself, prove genuineness when the counter party has been found to be not genuine in the investigations carried out by the Revenue. The assessee, on the other hand, has furnished documentary evidence in support of the transactions. The Remand Report dated 04.08.2025 also records that the evidences furnished before the Ld. CIT(A) were the same as those submitted during the assessment proceedings. The moot question which arises for our consideration is as to what is the material basis for the Revenue to conclude that the amount received by the assessee from M/s Niyati Traders did not represent consideration against the sale of goods. The undisputed factual position is that the assessee, M/s Mohit Supari, recorded the sale of goods to M/s Niyati Traders in its regular books of account; the consideration was received from the said party; the receipt was duly accounted for as sales; such sales formed part of the disclosed turnover of the assessee; and the resultant profit was duly included in the income returned by the assessee and offered to tax.
7. In such circumstances, the burden lies upon the Revenue to demonstrate, on the basis of cogent and tangible material, that the transaction recorded as a sale was not in fact a sale or that the money received from M/s Niyati Traders represented something other than the sale consideration. Merely proceeding on the premise that M/s Niyati Traders did not actually receive the goods cannot, by itself, establish that the corresponding receipt in the hands of the assessee was unexplained or represented undisclosed income. The Revenue has identified the receipt, but has not demonstrated the alternative character of that receipt.
8. On the contrary, the assessee has consistently explained the receipt as sale consideration, recorded the same as sales in its books, included it in its turnover and offered the resultant profit to tax. Thus, unless the Revenue brings material on record to establish that the sale entry is fictitious and that the amount received represented an independent or unexplained receipt, the mere denial or inability of the purchaser to establish actual receipt of goods cannot, without more, convert an accounted business receipt into unexplained income of the assessee.
9. In our considered opinion, Revenue’s approach is that it proceeds from an allegation concerning the purchaser to an adverse conclusion against the seller without establishing the intervening facts. The question is not merely whether M/s Niyati Traders received the goods, but whether there is material to establish that the amount paid by M/s Niyati Traders and received by the assessee was not sale consideration. In the absence of such material, the conclusion drawn by the Revenue remains based on inference without an evidentiary foundation. The Revenue has to link the purchaser’s statement with the specific transactions of M/s Mohit Supari—for example, by showing that,
- Niyati Traders specifically named Mohit Supari;
- the purchases from Mohit Supari were admitted to be accommodation entries;
- no goods were actually purchased;
- the amount paid to Mohit Supari was returned, directly or indirectly, after deduction of commission;
- there was some arrangement between the assessee and Niyati Traders;
- or other contemporaneous material corroborates the purchaser’s statement.
10. If the purchaser has specifically admitted that the purchases shown from the assessee were merely accommodation entries, that statement would undoubtedly constitute relevant adverse material requiring examination. In such an eventuality, the fact that the assessee recorded the receipts as sales and offered the resultant profit to tax cannot, by itself, conclude the matter, as the Revenue looked into real nature of the transaction. The Revenue is required to examine whether the statement is corroborated by surrounding and contemporaneous material, such as the movement or non-movement of goods, stock records, transportation documents, corresponding purchase records, banking trail, return of funds or any other material demonstrating that the consideration received by the assessee was not, in substance, consideration for genuine sale of goods.
11. Thus, the fact that M/s Niyati Traders was engaged in accommodation-entry operations may constitute a circumstance warranting deeper examination, but it cannot, in the absence of a specific nexus between such activity and the transactions of the assessee, by itself establish that the sales recorded by the assessee were bogus. Conversely, where the purchaser has specifically admitted that the transactions with the assessee were accommodation entries and such statement is supported by independent corroborative material, the mere recording of the receipts as sales and offering of the resultant profit to tax would not, by itself, establish the genuineness of the underlying transactions.
12. We find that the assessment record does not indicate any independent inquiry or verification by the Assessing Officer with regard to the specific transactions undertaken by the assessee with M/s Niyati Traders. In our considered view, the genuineness of the assessee’s transactions requires examination on the basis of the entire evidence and cannot be determined solely on the basis of general information regarding the counter-party. Accordingly, the order of the Ld. CIT(A) is set aside and the matter is restored to the file of the Assessing Officer for fresh adjudication in accordance with law, after examining the evidence relating to the impugned transactions. Adequate opportunity of being heard shall be afforded to the assessee.
13. In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 01.10.2026.
