Nawla Ispat Pvt. Ltd. Vs DCIT (ITAT Delhi)
A THIRD PARTY’S OPENING BALANCE CANNOT BECOME ASSESSEE’S CURRENT-YEAR INCOME -“DUMB DOCUMENT” ADDITION u/ss 68/69A DELETED
The Delhi ITAT “G” Bench has held that a solitary opening balance appearing in a trial balance seized from a third party cannot be treated as the assessee’s unexplained income without first establishing the date, nature, mode & actual year of the underlying transaction. Even if the entry is assumed to be correct, an opening balance as on 01.04.2018 cannot automatically be taxed in AY 2019-20. The addition of ₹2,57,115, initially made u/s 68 & subsequently sustained u/s 69A, was accordingly deleted.
Facts of the case
The assessee, Nawla Ispat Pvt. Ltd., was engaged in manufacturing M.S. Ingots & M.S. Runner Risers.
For AY 2019-20, the assessee filed its return on 27.09.2019 declaring nil income, though tax was paid under the MAT provisions.
A search & seizure operation u/s 132 was conducted on the premises of the World Window Group on 25.06.2018.
During the search, the Department allegedly found a parallel cash book & trial balance bearing the title “Overseas Commission 04-05”. The document reflected a credit balance of ₹2,57,115 in the name of the assessee.
Based solely upon this entry, the AO issued notice u/s 153C on 25.09.2023. In response, the assessee filed its return on 08.11.2023 once again declaring nil income.
The AO completed the assessment u/s 153C r.w.s. 143(3) on 26.03.2024 & treated the amount of ₹2,57,115 as the assessee’s unaccounted income.
Assessee denies any current transaction
The assessee explained that it had not entered into any transaction with the World Window Group after 31.03.2013, corresponding to FY 2012-13.
It was therefore unaware as to how or why the sum of ₹2,57,115 appeared against its name as an opening credit balance in the alleged parallel books of the searched group as on 01.04.2018.
To support its explanation, the assessee produced the ledger account of M/s World Window Impex Ltd. as appearing in its own books for FY 2012-13. That ledger demonstrated that certain transactions had taken place during the earlier year, but no financial transaction was undertaken thereafter.
The assessee argued that the seized document did not disclose the date on which the alleged transaction arose, its nature, whether it represented receipt or payment, the manner in which it was settled or even the assessment year to which it related.
No further document, narration, voucher, bank entry or other supporting material connecting the disputed balance with the assessee during FY 2018-19 was furnished.
From section 68 to section 69A
The AO made the addition u/s 68. The CIT(A), however, invoked the presumption relating to seized material & sustained the amount as unexplained money or investment u/s 69A, instead of section 68.
The assessee contended that neither provision could apply merely because its name appeared in a trial balance found from a third party.
For section 68 to apply, the disputed credit must ordinarily be found in the assessee’s own books maintained for the relevant year. Here, the entry was found in the alleged parallel books of another entity.
Similarly, section 69A required material to demonstrate that the assessee was the owner of unexplained money, bullion, jewellery or another valuable article. A third party’s ledger balance, without any evidence of ownership or movement of funds, could not satisfy that requirement.
Revenue’s contention
The Revenue argued that the disputed figure was not a casual scribbling on a loose sheet. It appeared in a formal trial balance discovered during a search & could not simply be ignored as a dumb document.
According to the Revenue, the entry carried a statutory presumption of correctness under the provisions governing seized documents. The CIT(A) was therefore justified in sustaining the addition u/s 69A even though the AO had originally invoked section 68.
The Revenue maintained that the change in the statutory provision did not invalidate the addition because the essential factual allegation remained the same.
ITAT’s decision
The Tribunal observed that, apart from the single entry in the seized trial balance, the Department had not produced any other evidence regarding the alleged transaction.
There was no information concerning its nature, actual date, mode of payment or receipt, underlying consideration or connection with FY 2018-19.
Even if the entry was accepted as a correct opening balance as on 01.04.2018, it did not follow that the amount represented income arising during the relevant year.
An opening balance necessarily originates from an earlier period. Before taxing it in AY 2019-20, the AO was required to ascertain when the alleged transaction had actually taken place & how it resulted in taxable income during the year under appeal.
The assessee had consistently maintained that it had no transaction with the searched group after 31.03.2013. The Department brought no material to controvert this explanation or establish any fresh transaction during FY 2018-19.
In the absence of relevant details regarding the date & nature of the alleged transaction, the ITAT held that there was no justification for making the addition in the assessee’s hands.
The addition was accordingly deleted & the assessee’s appeal was allowed.
Author’s comments
The decision applies the elementary principle that an opening balance is not current-year income. Even a genuine ledger entry can establish only the existence of a balance on a particular date; it does not establish when the underlying transaction occurred or whether it possessed the character of taxable income.
Further, the evidentiary presumption relating to seized documents cannot substitute proof against a third party. A document found from the searched person may presumptively belong to that person, but using its contents to tax another assessee still requires a credible nexus, identification of the transaction & determination of the correct year.
The shifting of the provision from section 68 to section 69A also exposed the weakness of the case. If the credit did not appear in the assessee’s books, section 68 became doubtful; if no money or valuable asset belonging to the assessee was found, section 69A was equally difficult to sustain.
The order contains numerical inconsistencies: ₹2,75,115 & ₹2,57,411 appear at certain places, whereas the correct disputed amount throughout the facts & grounds is ₹2,57,115.
A third party may write the assessee’s name in its books -but without a date, transaction or money trail, that ink cannot write taxable income into the assessee’s return.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, DELHI BENCH
This appeal by the assessee is directed against the order dated 16/09/2025 of the Ld. Commissioner of Income Tax, (Appeal)-3, ARTO Complex, 2nd floor, Sector-33, Noida, [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the Order dated 26.03.2024 passed under section 153C r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by Deputy Commissioner of Income Tax, Central Circle, Meerut, (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2019-20.
2. The Assessee has raised the following grounds of appeal:
“ 1. That the Ld. CIT(A) has erred in law and facts of the case in confirming the addition of Rs.2,57,115/-, only on the basis of the books of M/s World Window Impex Group, without considering the submissions made by the appellant in right perspective.
2. That the Ld. CIT(A) has erred in law and facts of the case in confirming the addition of Rs.2,57,115/- made by the Ld. A.O. u/s 68 of the Act, u/s 69A of the Act, as the same cannot be treated as unexplained credit or undisclosed investment in the hands of the appellant.
3. That the appellant respectfully craves leave to add alter omit or substitute any or all of the above grounds of appeal at any time before or at the time of hearing of appeal to enable your good self to decide the appeal in accordance with law.”
3. Brief facts are that the assessee is a private limited company engaged in the business of manufacturing of M.S. Ingots and M.S. Runner Risers. The assessee filed its ITR for the relevant year on 27.09.2019, declaring nil income and paid taxes under MAT. A search and seizure operation was carried out on the premises of M/s World Window Group on 25.06.2018, wherein some parallel cash book and trial balance was found titled as ‘Overseas Commission 04-05’ wherein a credit balance of Rs.2,57,115/-, was outstanding in the name of the assessee. On the basis of the said information, a notice u/s 153C of the Act, was issued to the assessee on 25.09.2023. In response to the said notice, the assessee filed its ITR declaring the earlier shown ‘Nil’ income on 08.11.2023. During the course of the assessment proceedings, the assessee submitted that it had not undertaken any transaction with M/s World Window Group, after 31.03.2013 i.e. after FY 2012-13 and is not aware as to how and why this amount of Rs. 2,57,115/- was outstanding to its credit in the alleged parallel books found during the course of search. The proceedings u/s 153C/143(3) of the Act, were completed vide order dated 26.03.2024 wherein the A.O. made addition of Rs.2,57,115/- holding that the same represented unaccounted income of the assessee.
3.1 Aggrieved, the assessee preferred an appeal before the CIT(A), who dismissed the same vide order dated 16.09.2025. Further aggrieved, the assessee is in appeal before the Tribunal.
4. Before us, Ld. AR has argued that the Ld. CIT(A) was not justified in confirming the addition of Rs. 2,75,115/- made by the AO u/s 68 of the Act, by invoking section 292C to hold that the amount represented the unexplained investment u/s 69A (instead of section 68) of the Act. The addition was made solely on the basis of some trial balance found during the search conducted on M/s World Window Group. The assessee had submitted before the AO that no transaction was undertaken with the searched group after 31.03.2013. A copy of M/s World Window Impex Ltd.’s ledger account for F.Y. 2012-13 in assessee’s books of account was also filed before the lower authorities as per which the assessee had made certain transactions during that year with the searched group. Thereafter, no financial transaction was undertaken by the assessee and it is not understood how an opening balance of Rs. 2,57,115/- as on 1.4.2018 had been shown against the assessee’s name in the trial balance. Further, from the seized documents, it is not clear as to in which year the impugned transaction had taken place. There is no other detail or document made available to the assessee and, therefore, assessee cannot be expected to explain the alleged transaction. Ld. AR has further argued that in the absence of details such as the date of transaction, manner/mode of receipt/ payment etc., the impugned amount cannot be treated as unexplained cash credit or investment merely on the basis of a dumb document found during the course of search conducted on a third party.
5. On the other hand, Ld. DR has strongly relied on the orders of the lower authorities and has contended that the impugned amount has been found recorded in the seized document which is a trial balance and not any random scribblings which could be disregarded as a dumb document. He has further justified the action of the CIT(A) in invoking the provision of section 292B to confirm the addition u/s 69A of the Act as unexplained investment instead of section 68 of the Act applied by the AO.
6. We have heard the rival submissions and perused the material available on record. We note that besides the sole entry in the seized document, there are no other details or documentary evidence regarding the nature and date of the alleged transaction undertaken by the assessee with the searched entity during the year under consideration.
6.1 We are of the considered view that the A.Y. 2019-20, being beyond the period of 6 years from A.Y. 2024-25 (the relevant year in which search was conducted) was, therefore, hit by the provisions of the first proviso to section 149(1) which states as under:
“Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021.”
Since the A.Y. 2019-20 is more than 6 years prior to A.Y. 2024-25, therefore, no notice could have been issued u/s 148 (or u/s 153A and 153C) of the Act.
6.3 We, accordingly, hold that the order of the Ld. CIT(A), in view of above factual and legal position was justified and, therefore, we find no reason to interfere with the same.
7. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 09.09.2026
