ITO Vs Kala Eswaran Iyr (ITAT Mumbai)
The appeal before the ITAT Mumbai concerned whether an addition of ₹20,00,130 made under Section 69A read with Section 115BBE could be sustained solely on the basis of information from the Investigation Wing and a third-party statement recorded during search proceedings. The assessee, a practising anaesthetist, had filed a return declaring income of ₹48,87,520. Based on a search conducted under Section 132 in the case of an alleged accommodation entry provider, the Assessing Officer treated the assessee as a beneficiary and made the addition. The assessee denied any such transaction, filed an affidavit, and contended that no cross-examination opportunity was given. The CIT(A) deleted the addition, noting absence of independent evidence, lack of nexus with “Kala Enterprises,” and failure to establish receipt of unexplained money. The ITAT upheld the deletion, holding that mere third-party statements without corroboration, independent enquiry, or cross-examination cannot justify an addition under Section 69A. The Revenue’s appeal was dismissed.
Core Issue:
Whether the addition of ₹20,00,130/- made under Section 69A r.w.s. 115BBE solely on the basis of Investigation Wing information and a third-party statement recorded during search proceedings can be sustained.
Facts of the Case:
The assessee, an individual practising anaesthetist, filed a return declaring income of ₹48,87,520. The case was selected for complete scrutiny based on information from the Investigation Wing, Ahmedabad.
A search u/s 132 was conducted in the case of Shri Sanjay Govindram Aggarwal @ Sanjay Tiberwal (alleged accommodation entry provider). Based on Annexure-A and the statement recorded during the search, the AO treated the assessee as a beneficiary of accommodation entries. An addition of ₹20,00,130 was made u/s 69A and taxed u/s 115BBE.
Revenue’s Arguments:
Addition was based on credible information from the Investigation Wing. PAN mentioned in Annexure-A matched that of the assessee.
CIT(A) erred in observing that the counter-party name was different. CIT(A) failed to exercise co-terminus powers to verify whether “Kala Enterprises” was the proprietary concern of the assessee.
Assessee’s Arguments:
No transaction was ever entered into with the alleged entry operator.
Addition was based solely on a third-party statement recorded behind the assessee’s back.
No opportunity of cross-examination was provided.
Annexure-A mentioned “Kala Enterprises,” not the assessee. No evidence was produced:
