DCIT Vs Mahendra Gining and Pressing Mills (ITAT Jaipur)
Recorded Sales Cannot Be Added under Section 69A on General Entry-Provider Statement Alone: ITAT
The Jaipur Bench of the Income Tax Appellate Tribunal (ITAT) has upheld deletion of a Rs. 12,55,000 addition under section 69A, holding that a general admission by an alleged accommodation-entry provider could not establish that a particular sale was fictitious without a demonstrated connection and consideration of supporting evidence.
The assessee had furnished sale invoices, transport and weighment receipts, a C-Form, ledger account and banking records. The Tribunal found that the Assessing Officer neither effectively disproved these documents nor established the alleged entry provider’s relationship with the purchaser. The Revenue’s appeal was dismissed on merits, while the reassessment-validity grounds were left open.
Background of the Alleged Accommodation Entry
The Assessing Officer received information from the Investigation Wing concerning Vipin Garg and entities allegedly controlled by him.
In a statement recorded under section 131 on December 16, 2016, Garg admitted providing accommodation entries without actual purchase and sale of goods. He also declared Rs. 2 crore as unaccounted commission income under the Pradhan Mantri Garib Kalyan Yojana.
Based on this information, the officer believed that the assessee had received Rs. 12,55,000 through RTGS from Shree Ram Trading Company without a genuine sale.
A notice under section 148 was issued on March 28, 2019.
Assessee Produced Evidence of Mustard Oil Sale
During reassessment, the assessee explained that the receipt represented proceeds from mustard oil supplied to Shree Ram Trading Company through Krishna Brokers.
The sale was recorded in its books. Supporting material included the buyer’s ledger account, sale invoice, transport receipt from Kisan Goods Transport Company, weighment receipts, C-Form and bank statement.
An affidavit from partner Tikkam Chand Jain was also furnished.
The assessee requested verification from the broker, transporter and weighment operator, who could assist in establishing the transaction and movement of goods.
Before the Tribunal, it further submitted that it maintained day-to-day stock records and had total annual sales of approximately Rs. 28.46 crore.
Assessing Officer Relied on Statement and Non-Response
The Assessing Officer relied principally on the Investigation Wing information and Garg’s statement.
The inquiry did not obtain a response, and correspondence addressed to Garg was returned with a postal remark indicating that no person resided at the address.
The officer treated the receipt as an accommodation entry and added Rs. 12,55,000 as unexplained money under section 69A.
The CIT(A) deleted the addition, finding that the documentary evidence had not been controverted. It also held the reopening invalid.
The Revenue challenged both conclusions before the Tribunal.
General Admission Required Transaction-Specific Corroboration
The Tribunal accepted that the Investigation Wing information and statement were relevant material warranting verification.
However, an alleged entry provider’s general admission did not conclusively establish that every transaction with a concern associated with him was non-genuine.
The officer had to demonstrate a nexus with the particular transaction and examine the assessee’s supporting material.
Here, the Tribunal found that the documents establishing the recorded sale had not been adequately rebutted. The general allegation therefore could not substitute for evidence concerning this specific receipt.
Inquiry Did Not Establish Link with Purchaser
The Tribunal identified a material deficiency in the investigation: the section 133(6) notice was issued to Vipin Garg, rather than Shree Ram Trading Company, the entity with which the assessee transacted.
The officer had not established whether Garg was a proprietor, partner or director of that concern.
Consequently, the purchaser itself had not been effectively investigated, and the alleged controlling relationship remained unsupported.
The Tribunal also noted that the complete statement was not supplied to the assessee and cross-examination was not provided, despite reliance on that statement as a material basis for the adverse conclusion.
Section 69A Requirements Were Not Established
The Tribunal observed that section 69A concerns money or specified valuables not recorded in the assessee’s books, where the nature and source are not satisfactorily explained.
In this case, the receipt came through banking channels and was recorded as sale proceeds.
Book entry and banking payment did not automatically resolve genuineness. However, without evidence establishing that the transaction was fictitious or that the receipt represented unexplained money, the entire consideration could not be added merely on a third-party statement.
The Tribunal found no independent material establishing those statutory requirements.
Supporting Decisions and Final Outcome
The Tribunal referred to Goyal Vegoils Ltd. Vs DCIT, involving materially similar facts concerning the same alleged entry provider and purchaser.
It also relied on other authorities addressing recorded sales, corroboration and fair opportunity to meet adverse material, including CIT Vs Odeon Builders Pvt. Ltd.
Finding no infirmity in deletion of the addition, the Tribunal dismissed the Revenue’s appeal.
Since the appeal failed on merits, it did not adjudicate the reopening-validity grounds. The relief therefore rests on the unsupported addition, rather than a Tribunal determination that the reassessment itself was invalid.
Cases Discussed
- Goyal Vegoils Ltd. Vs DCIT; ITA No. 243/JP/2024; 27/08/2024
- DCIT Vs M/s GRG Oil Mill; (2020) 186 DTR (Trib.) 225 (Jodhpur)
- DCIT Vs Subhash Chand Gupta; ITA No. 1548/Del/2022; 25/05/2023
- ACIT Vs Chandra Surana; (2023) 223 DTR 49 (Jaipur)
- ACIT Vs Inlay Marketing Pvt. Ltd.; (2015) 113 DTR 121 (Delhi)
- CIT Vs Pink City Developers; 99 taxmann.com 422 (Rajasthan)
- CIT Vs Odeon Builders (P.) Ltd.; Civil Appeal Nos. 9604–9605 of 2018; 21/08/2019
FULL TEXT OF THE ORDER OF ITAT JAIPUR
This appeal by the Revenue is directed against order dated 20.03.2026, passed by the Ld. Addl./Joint Commissioner of Income Tax, Coimbatore (hereinafter referred to as “Ld. CIT(A)”) for assessment year 2012-13, raising following grounds:-
1. Whether on the facts and circumstances of the case and in law, the Ld. Addl./Joint CIT (A) has erred in holding that the proceedings initiated under section 147/148 of the Income Tax Act, 1961 were invalid, despite the fact that the Assessing Officer had tangible material in the form of information received from the Investigation Wing along with the statement recorded under section 131 of the Act establishing that the assessee had obtained accommodation entries from concerns run and controlled by Shri Vipin Garg.
2. Whether on the facts and circumstances of the case and in law, the Ld. Addl./Joint CIT (A) has erred in holding that the Assessing Officer had acted on borrowed satisfaction, ignoring the fact that the Assessing Officer had independently examined the information received, verified the return of income and bank transactions of the assessee and thereafter formed a bona fide reason to believe that income chargeable to tax had escaped assessment.
3. Whether on the facts and circumstances of the case and in law, the Ld. Addl./Joint CIT (A) has erred in deleting the addition of Rs.12,55,000/- made under section 69A of the Income Tax Act, 1961 on account of unexplained money received through accommodation entries from M/s Shree Ram Trading Company (one of concerns run and controlled by Sh. Vipin Garg), despite the incriminating material gathered by the Investigation Wing and the acceptance made by Shri Vipin Garg regarding providing bogus accommodation entries without actual business transactions
4. Whether on the facts and circumstances of the case and in law, the Ld. Addl./Joint CIT (A) has erred in accepting the documentary evidences furnished by the assessee at face value without appreciating that mere furnishing of sale bills, transport receipts, C- Forms and ledger accounts does not conclusively establish genuineness of the transactions when the counterparty itself was found to be a paper concern engaged in providing accommodation entries.
5. Whether on the facts and circumstances of the case and in law, the Ld. Addl./Joint CIT (A) has erred in holding that the Assessing Officer failed to bring corroborative evidence on record, ignoring that the information received from the Investigation Wing, statement recorded under section 131 of the Act and the non compliance to notice issued under section 133(6) collectively established that the impugned transaction was not genuine.
6. Whether on the facts and circumstances of the case and in law, the Ld. Addl./Joint CIT (A) has erred in deleting the addition amounting to Rs. 12,55,000/- made by the AO under section 69A of the Act, merely on the ground that the transactions were recorded as sales in the books of account, without appreciating that in cases involving bogus accommodation entries, transactions are generally routed through regular banking channels and reflected in the books in the guise of genuine sales/purchases so as to give colour of legitimacy to non-genuine transactions, and that the genuineness of the impugned transaction and actual movement of goods remained unsubstantiated in the present case
7. That the appellant craves to add, amend, alter, DLEETE OR 7 modify any OR all the above grounds of appeal before OR at the time of hearing
2. The principal dispute concerns the deletion of an addition of ₹12,55,000 made by the Assessing Officer under section 69A of the Income-tax Act, 1961 (“the Act”), treating the amount received by the assessee from M/s Shree Ram Trading Company as unexplained money arising from an alleged accommodation entry. The Revenue has also challenged the learned CIT(A)’s decision holding the reassessment proceedings under sections 147 and 148 of the Act to be invalid.
3. Briefly stated, the Assessing Officer received information from the Investigation Wing regarding alleged accommodation entries provided by Shri Vipin Garg and concerns stated to be controlled by him. In his statement recorded under section 131 of the Act on 16.12.2016, Shri Vipin Garg had admitted to providing accommodation entries without actual transactions of purchase and sale of goods. He had also declared unaccounted income of ₹2 crore as commission from such activities under the Pradhan Mantri Garib Kalyan Yojana. On the basis of the information received, the Assessing Officer formed the belief that the assessee had obtained an accommodation entry of ₹12,55,000 through RTGS from M/s Shree Ram Trading Company during the financial year 2011-12 without any genuine sale of goods. Accordingly, notice under section 148 of the Act was issued on 28.03.2019.
4. During the reassessment proceedings, the assessee explained that the amount represented sale proceeds of mustard oil supplied to M/s Shree Ram Trading Company through M/s Krishna Brokers and that the sale had been duly recorded in its books of account. In support, the assessee furnished the ledger account of the buyer, sale invoice, transport receipt issued by Kisan Goods Transport Company, weighment receipts, C-Form, bank statement evidencing receipt of the consideration and an affidavit of its partner, Shri Tikkam Chand Jain. The assessee also requested the Assessing Officer to make enquiries from the broker, transporter and weighment operator.
5. The Assessing Officer, however, observed that the notice issued under section 133(6) of the Act had not elicited a response and that the letter addressed to Shri Vipin Garg had been returned with the postal remark that no person resided at the given address. Relying principally on the statement of Shri Vipin Garg and the information received from the Investigation Wing, the Assessing Officer treated the receipt of ₹12,55,000 as an accommodation entry and added the amount under section 69A of the Act.
6. On appeal, the learned CIT(A) held the reassessment proceedings to be invalid, observing that the Assessing Officer had not adequately demonstrated how the amount already recorded as sales in the assessee’s books constituted income escaping assessment. On the merits, the learned CIT(A) found that the assessee had furnished documentary evidence in support of the transaction, including sale and transport documents, weighment receipts, the C-Form and the bank statement. The learned CIT(A) further observed that the Assessing Officer had relied on the third- party statement without adequately establishing the connection between Shri Vipin Garg and the impugned transaction, providing the complete statement to the assessee or affording an opportunity for cross-examination. Since the books of account had not been rejected and no material had been brought on record to controvert the documentary evidence, the learned CIT(A) deleted the addition.
7. Before us, the learned Departmental Representative supported the assessment order and submitted that the statement of Shri Vipin Garg, the information received from the Investigation Wing and the failure of the notice issued under section 133(6) to elicit a response established that the transaction was not genuine. It was contended that the documents furnished by the assessee could not, by themselves, establish the genuineness of the transaction when the counterparty had been identified as an alleged entry provider.
8. The learned counsel for the assessee, on the other hand, submitted that the assessee had effected total sales of approximately ₹28.46 crore during the relevant year and that the impugned sale of mustard oil, amounting to ₹12,56,641 as reflected in the assessee’s submissions, was duly recorded in its books. The consideration had been received through banking channels. The assessee maintained day-to-day stock records and had furnished the sale invoice, transport receipt, weighment receipts, C-Form and bank statement. It was further submitted that the Assessing Officer neither conducted effective enquiries with the broker, transporter and weighment operator, as requested, nor provided the complete statement of Shri Vipin Garg or an opportunity to cross-examine him. The books of account were also not rejected. The learned counsel relied upon Goyal Vegoils Ltd. v. DCIT, ITA No. 243/JP/2024, order dated 27.08.2024; DCIT v. M/s GRG Oil Mill (2020) 186 DTR (Trib.) 225 (Jodhpur); DCIT v. Subhash Chand Gupta, ITA No. 1548/Del/2022, order dated 25.05.2023; ACIT v. Chandra Surana (2023) 223 DTR 49 (Jaipur); and ACIT v. Inlay Marketing Pvt. Ltd. (2015) 113 DTR 121 (Delhi), in support of the proposition that sales duly recorded in the books cannot be treated as unexplained income merely on the basis of third-party information, without reliable corroborative material.
9. We have heard the rival submissions and perused the material available on record. The issue for consideration is whether, in the facts of the present case, the amount representing the impugned sale, already recorded in the assessee’s books of account, could be added in its entirety under section 69A of the Act merely on the basis of information received from the Investigation Wing and the statement of Shri Vipin Garg.
10. The material on record shows that the assessee furnished documentary evidence in support of the impugned transaction, including the sale invoice, transport receipt, weighment receipts, C- Form, bank statement and the relevant ledger account. The assessee also furnished an affidavit of its partner explaining the transaction and requested verification from the broker and other persons connected with the movement of goods. The learned CIT(A) found that the sale was recorded in the books of account and that the Assessing Officer had not brought any cogent corroborative material on record to establish that the transaction was fictitious. These findings have to be considered in the context of the evidence available and the reasons recorded by the Assessing Officer for treating the transaction as an accommodation entry.
11. The statement of Shri Vipin Garg and the information received from the Investigation Wing were relevant material warranting verification. However, the general admission of an alleged entry provider that he had facilitated accommodation entries does not, without a demonstrated nexus to the particular transaction and consideration of the assessee’s supporting evidence, conclusively establish that every transaction with a concern allegedly associated with him was non-genuine. In the present case, the Assessing Officer relied upon the statement and the non-response to the notice issued under section 133(6), but did not adequately controvert the documentary evidence furnished by the assessee. It is to be noted that notice u/s 133(6) was issued to Vipin garg and not to the entity namely Shree Ram Trading Company with whom the assessee transacted. The enquiry process has not been conducted on the entity to whom the assessee sold the goods. The Ld.AO has not even brought in record how Shri Vipin Garg was related to the concern M/s Shree Ram Trading Co., whether Vipin Garg was the partner or proprietor or director of that concern. Further, the complete statement of Vipin Garg relied upon was not furnished to the assessee, nor was an opportunity of cross- examination provided, despite the statement forming a material basis for the adverse conclusion.
12. We also find merit in the assessee’s contention that the impugned amount was recorded as sales in its books of account. Section 69A applies where an assessee is found to be the owner of money, bullion, jewellary or other valuable article not recorded in the books of account, if any, maintained by the assessee, and the assessee offers no satisfactory explanation regarding its nature and source. In the present case, the amount in question was received through banking channels and recorded as sale proceeds in the books. In the absence of evidence establishing that the transaction was fictitious and that the amount represented unexplained money within the meaning of section 69A, the entire sale consideration could not be added under that provision merely by relying on the third-party statement.
13. The above approach is consistent with the principle considered in CIT v. Pink City Developers [99 taxmann.com 422 (Rajasthan)], wherein the Hon’ble Rajasthan High Court upheld the Tribunal’s decision in the context of the statutory requirements for rejecting books of account. The coordinate Bench in Goyal Vegoils Ltd. v. DCIT (supra), on materially similar facts involving the same alleged entry provider and M/s Shree Ram Trading Company, also held that where the assessee had furnished documentary evidence of sales and the Assessing Officer had not controverted that evidence, a separate addition of the sale consideration could not be sustained merely on the basis of the third-party statement. The decisions in DCIT v. M/s GRG Oil Mill (supra), CIT v. Subhash Chand Gupta (supra), ACIT v. Chandra Surana (supra) and ACIT v. Inlay Marketing Pvt. Ltd. (supra) likewise support the proposition that recorded sales cannot be treated as unexplained income without reliable material establishing their non-genuineness. The principle concerning the evidentiary value of third-party material and the need for a fair opportunity to meet adverse evidence is also reflected in the decision of the Hon’ble Supreme Court in CIT v. Odeon Builders (P.) Ltd., Civil Appeal Nos. 9604–9605 of 2018, order dated 21.08.2019.
14. In the circumstances, we find no infirmity in the conclusion of the learned CIT(A) that the addition of ₹12,55,000 under section 69A was not sustainable. The Revenue has not demonstrated that the documentary evidence furnished by the assessee was effectively disproved or that any independent material established the impugned receipt as unexplained money. We, accordingly, uphold the deletion of the addition.
15. Since the Revenue’s appeal fails on the merits of the addition, adjudication of the grounds challenging the validity of the reassessment proceedings would not affect the outcome of the appeal. Those grounds are, therefore, left open and are not adjudicated upon.
16. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 23.10.2026
