Mumbai ITAT Deletes ₹1.36 Crore Addition u/s 69A – Customs Duty Collections by CHA Are Fiduciary Receipts, Not Taxable Income

Sai Dutta Clearing Agency Pvt. Ltd. Vs ITO (ITAT Mumbai)

Mumbai ITAT Deletes ₹1.36 Crore Addition u/s 69A – Customs Duty Collections by CHA Are Fiduciary Receipts, Not Taxable Income

Summary: The ITAT Mumbai deleted the addition of ₹1,36,25,280 made under Section 69A of the Income-tax Act, 1961, holding that amounts received by the assessee, a licensed Customs House Agent (CHA), represented fiduciary receipts collected from a client for payment of customs duty and other statutory charges rather than unexplained money. The Tribunal found that the assessee had consistently explained that it earned only agency commission of ₹80,000, which had been offered to tax, and supported its explanation with reconciliation statements, Customs Duty payment summaries, Bills of Entry, ICEGATE references and Customs Duty e-receipts showing receipt of funds from the client and corresponding remittance to the Customs Department. It observed that the Revenue had neither disputed the assessee’s status as a CHA nor controverted the authenticity of these documents or undertaken independent verification with the Customs Department or the importer. Holding that Section 69A requires ownership of unexplained money and that the impugned amounts were received and remitted in a representative and fiduciary capacity, the Tribunal deleted the addition. Since the appeal was allowed on merits, it did not adjudicate the legal grounds relating to reassessment, including the issue of notice under Section 143(2), and kept them open.

The Mumbai Bench of the ITAT deleted an addition of ₹1.36 crore made u/s 69A, holding that amounts received by a Customs House Agent (CHA) from its clients towards payment of customs duty & other statutory charges are mere fiduciary receipts & cannot be treated as unexplained money merely because they pass through the assessee’s bank account. The Tribunal observed that only the agency commission constitutes the real income of the CHA.

The assessee, a private limited company engaged in the business of Customs House Agent (CHA) services, originally filed its return declaring a business loss. Subsequently, based on information received from the Investigation Wing alleging suspicious financial transactions aggregating to ₹1.36 crore, the AO reopened the assessment & treated the entire receipts as unexplained money taxable u/s 69A r.w.s. 115BBE. The AO also denied the benefit of brought forward business losses & unabsorbed depreciation. The CIT(A) confirmed the addition.

Before the Tribunal, the assessee explained that it functioned merely as a licensed CHA, receiving funds from importers towards customs duty, port charges & other statutory levies, which were immediately remitted to the Customs Department. It submitted detailed reconciliation statements, Bills of Entry, ICEGATE references, Customs Duty e-receipts issued by SBI, invoice details & duty payment summaries, demonstrating that the impugned amounts represented reimbursements received from its client, M/s Sai Impex, & that it had earned only agency commission of ₹80,000, which had already been offered to tax.

Accepting the explanation, the Tribunal observed that the very nature of a CHA’s business requires it to receive statutory dues from clients in a representative capacity. Such amounts do not become the income of the CHA merely because they temporarily pass through its bank account. The Tribunal found that the documentary evidence clearly established a direct nexus between the amounts received from the client & the corresponding customs duty payments made to the Customs Department. Significantly, the Revenue had not disputed the genuineness of the Bills of Entry, ICEGATE references or Customs Duty e-receipts, nor had it conducted any independent verification from the Customs Department or the importer.

The Tribunal further held that the addition had been made solely on the basis of information received from the Investigation Wing, without any meaningful examination of the contemporaneous documentary evidence produced by the assessee. It reiterated that investigation inputs may justify reopening of assessment, but cannot by themselves justify an addition unless supported by evidence gathered during assessment proceedings. The Tribunal also observed that ownership of the money is a sine qua non for invoking section 69A, & where the receipts are merely fiduciary collections meant for onward payment to statutory authorities, the essential condition for invoking section 69A itself is absent.

Accordingly, the Tribunal held that the Revenue had failed to establish that the impugned receipts represented unexplained money belonging to the assessee. It deleted the addition of ₹1.36 crore, directed the AO to grant consequential relief including the benefit of brought forward losses & unabsorbed depreciation, & declined to adjudicate the legal grounds relating to the validity of reopening & non-issuance of notice u/s 143(2), having allowed the appeal on merits.

Author’s Comments:

This is an important decision recognising the real income principle in the case of intermediaries such as Customs House Agents. The Tribunal has rightly held that amounts collected in a fiduciary capacity for payment of statutory dues do not constitute the income of the recipient. Equally significant is the observation that information received from the Investigation Wing is only a starting point for enquiry. Once the assessee produces credible contemporaneous evidence, the Revenue must undertake independent verification before invoking the deeming provisions of section 69A. Mere suspicion, however strong, cannot replace evidence, particularly where official records such as Bills of Entry, ICEGATE references & Customs Duty e-receipts fully support the assessee’s explanation.

Cases Discussed

• Sai Dutta Clearing Agency Pvt. Ltd. Vs ITO (ITAT Mumbai)

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal has been preferred by the assessee against the order dated 30.12.2025 passed by the National Faceless Appeal Centre (NFAC), Delhi, arising out of the assessment framed under section 147 read with sections 144 and 144B of the Income-tax Act, 1961 (“the Act”) for the assessment year 2014-15. Through various grounds of appeal, the assessee has challenged the validity of reopening under section 147 on diverse legal grounds; has further assailed the assessment on the ground that no notice under section 143(2) was issued and served after the filing of return of income in response to notice issued under section 148; and, on merits, has challenged the addition of Rs.1,36,25,280/- made under section 69A of the Act as unexplained money, besides the consequential denial of the benefit of brought forward business losses and unabsorbed depreciation.

2. Briefly stated, the relevant facts are that the assessee is a private limited company engaged in the business of Customs House Agent (CHA) services and is admittedly holding a valid Customs House Agent licence issued by the Customs Department. For the year under consideration, the assessee filed its original return of income on 22.09.2014 declaring a business loss of Rs.97,64,470/-. The return was initially processed under section 143(1) of the Act and the case was thereafter subjected to scrutiny, culminating into an assessment under section 143(3). Subsequently, information was received by the Assessing Officer from the Investigation Wing, ITO (Investigation) (OSD)-4, Delhi, alleging that the assessee had received suspicious financial payments aggregating to Rs.1,36,25,280/- from bank accounts pertaining to Shri Abhishek Jain, M/s Anex Industries and M/s Sai Impex during the relevant previous year. Based upon the said information, reasons were recorded and, after obtaining approval from the competent authority, notice under section 148 was issued on 30.03.2021 for reopening the assessment.

3. Pursuant to the notice issued under section 148, the assessee participated in the reassessment proceedings. Initially, notice under section 142(1) dated 12.11.2021 was issued calling upon the assessee to furnish relevant details. Subsequently, after the proceedings were transferred to the National Faceless Assessment Centre, another notice under section 142(1) dated 14.03.2022 was issued requiring the assessee to explain the nature and source of the impugned transactions. In response, the assessee submitted that it was functioning as a Customs House Agent and its principal activity consisted of facilitating customs clearance of imported consignments on behalf of its clients. It was explained that the assessee earned only service charges or agency commission for such services and that various statutory payments such as customs duty, warehouse charges, BPT charges, transportation and other incidental expenses were first received from the clients and thereafter remitted to the Customs Department or other statutory authorities. It was specifically pointed out that the figures referred to in the notice did not tally with the assessee’s own accounts and, accordingly, the statement of account relating to M/s Sai Impex was also furnished before the Assessing Officer.

4. The Assessing Officer, however, was not satisfied with the explanation so furnished. According to him, the assessee had failed to produce satisfactory documentary evidence explaining the nature and source of the receipts aggregating to Rs.1,36,25,280/-. He observed that the investigation report revealed substantial credits in the bank accounts connected with Shri Abhishek Jain, M/s Anex Industries and M/s Sai Impex and, considering the meagre income disclosed by the assessee, such receipts remained unexplained. The Assessing Officer was of the opinion that despite adequate opportunities, the assessee had failed to establish the nature and source of the impugned receipts with cogent evidence. Consequently, treating the entire amount of Rs.1,36,25,280/-as unexplained money belonging to the assessee within the meaning of section 69A of the Act, he brought the same to tax under section 115BBE while framing the reassessment under section 147 read with sections 144 and 144B of the Act.

5. Aggrieved by the aforesaid addition, the assessee carried the matter before the ld. CIT(A). Before the first appellate authority, apart from challenging the legality of the reassessment proceedings, the assessee placed elaborate submissions explaining the true nature of its business. It was submitted that M/s Sai Impex was an importer and the assessee, being a licensed Customs House Agent, had undertaken customs clearance work on its behalf. It was specifically explained that the assessee had earned only agency commission of Rs.80,000/- from the said client, which admittedly stood disclosed in its return of income. It was further submitted that the amount of Rs.72,87,208/- credited in the assessee’s SBI account did not represent its income but merely consisted of funds received from M/s Sai Impex for payment of customs duty in respect of various consignments imported by the client. The assessee also furnished a detailed reconciliation showing the dates of receipt, corresponding dates of payment, debit entries and the customs bill of entry numbers. Along with the reconciliation, copies of Customs Duty e-receipts issued by the State Bank of India, ICEGATE references, import duty challans and invoice details were also filed to demonstrate that immediately upon receipt of the funds, corresponding customs duty payments had been made to the Customs Department on behalf of M/s Sai Impex. The assessee also asserted that it had no business dealings with M/s Anex Industries during the relevant period and requested the Department to furnish complete particulars of the alleged transactions relied upon in the assessment.

6. The ld. CIT(A), however, was not persuaded by the aforesaid explanation. According to him, although the assessee had produced certain Customs Duty e-receipts and a reconciliation statement, it had failed to produce complete books of account, bank statements, confirmations from the parties or other contemporaneous accounting records establishing that the receipts were merely pass-through reimbursements. He observed that the Customs Duty e-receipts merely established that certain payments had been made to the Customs Department but, according to him, they did not conclusively establish that the corresponding credits belonged to M/s Sai Impex or that the monies received by the assessee represented only reimbursements. He further held that, in respect of the remaining receipts allegedly received from Shri Abhishek Jain and M/s Anex Industries, the assessee had merely denied the transactions without furnishing any independent documentary evidence. Proceeding on the aforesaid reasoning, the ld. CIT(A) confirmed the entire addition of Rs.1,36,25,280/- under section 69A and also rejected the assessee’s claim regarding adjustment of brought forward losses.

7. The assessee is, therefore, in further appeal before us. The learned counsel for the assessee, reiterating the submissions made before the authorities below, invited our attention to the written replies filed during the assessment proceedings as well as before the ld. CIT(A.). He drew our specific attention to the detailed reconciliation statement, Customs Duty payment summaries, invoice registers, ICEGATE references and the SBI Customs Duty e-receipts placed in the paper book. It was submitted that these contemporaneous documents unmistakably demonstrate that the impugned receipts represented monies received by the assessee in its fiduciary capacity as a licensed Customs House Agent solely for the purpose of remitting customs duty on behalf of its client, M/s Sai Impex, and that the assessee had earned only agency commission of Rs.80,000/-, which already stood offered to tax. It was thus submitted that the authorities below had proceeded merely on the basis of investigation inputs without properly appreciating the documentary evidence produced by the assessee or undertaking any independent verification either from the Customs Department or from the concerned importer. The learned Departmental Representative, on the other hand, strongly relied upon the orders of the authorities below and submitted that the assessee had failed to satisfactorily discharge the onus cast upon it under section 69A of the Act.

8. We have carefully considered the rival submissions, perused the orders of the authorities below and the entire material placed before us, including the written submissions filed before the Assessing Officer as well as before the ld. CIT(A.), the detailed reconciliation statement, Customs Duty payment summaries, invoice registers, Bills of Entry, ICEGATE references and the Customs Duty e-receipts issued by the State Bank of India. Upon an overall appreciation of the factual matrix emerging from the record, we find that the controversy involved in the present appeal lies in a very narrow compass. The principal issue is whether the receipts aggregating to Rs.1,36,25,280/-, which have been treated by the Assessing Officer as unexplained money under section 69A of the Act, in fact represented monies belonging to the assessee or whether they merely constituted funds received by the assessee in its representative and fiduciary capacity as a licensed Customs House Agent for onward payment of customs duty and other statutory charges on behalf of its client. In our considered opinion, the authorities below have approached the issue by merely proceeding on the basis of the information received from the Investigation Wing without examining the true character of the transactions in the light of the nature of business carried on by the assessee and the contemporaneous documentary evidence placed on record.

9. It is an undisputed position that the assessee is a licensed Customs House Agent carrying on customs clearance activities for various importers. The very nature of the business of a Customs House Agent requires it to receive monies from its clients towards customs duty, port charges, warehouse charges and other statutory levies, which are thereafter deposited with the Customs Department or other statutory authorities while facilitating clearance of imported consignments. Such receipts cannot, by their very character, assume the nature of income in the hands of the Customs House Agent merely because they temporarily pass through its bank account. The real income of such an agent is only the commission or service charges earned for rendering professional services, whereas the statutory payments received from the clients constitute fiduciary receipts received for a specific purpose. In the present case, this fundamental aspect of the assessee’s business has neither been disputed by the Assessing Officer nor by the ld. CIT(A.). Rather, the assessee has consistently maintained throughout the assessment proceedings as well as the appellate proceedings that it had earned agency commission of merely Rs.80,000/-from M/s Sai Impex, which admittedly stood disclosed in the return of income, and that the remaining receipts represented reimbursement of customs duty and other statutory expenses incurred while clearing import consignments on behalf of its client.

10. We further find that the assessee has not merely rested its case on bald assertions but has substantiated its explanation by placing on record cogent and contemporaneous documentary evidence. The reconciliation statement furnished before the ld. CIT(A.) specifically correlates the dates of credits received from M/s Sai Impex with the corresponding customs duty payments made to the Customs Department. The records reveal that an amount of Rs.43,97,208/- was received from M/s Sai Impex and, almost contemporaneously, customs duty aggregating to Rs.43,97,208/- was deposited through authorised banking channels. Likewise, another receipt of Rs.28,90,000/- was followed by payment of customs duty of Rs.28,90,410/-through the Customs E-payment System. The Customs Duty e-receipts issued by the State Bank of India, copies whereof have been placed before us, clearly mention the name of the importer as M/s Sai Impex, the Customs House Code, ICEGATE Reference Number, Challan Identification Number, Bill of Entry particulars and the exact amount of customs duty deposited. These are official documents generated from the Customs E-payment System and, therefore, carry considerable evidentiary value. The corresponding invoice details and duty payment summaries also form part of the paper book. Thus, the documentary trail clearly establishes that the monies received by the assessee from M/s Sai Impex were not retained by it but stood substantially utilised towards discharge of customs duty liability of the importer.

11. In spite of the aforesaid documentary evidence, the authorities below have rejected the explanation mainly on the ground that the assessee did not produce complete books of account, confirmations or bank statements. In our considered opinion, such an approach overlooks the substance of the transactions. Once the assessee had produced contemporaneous statutory documents evidencing receipt of funds from its client and immediate payment thereof to the Customs Department through the authorised banking mechanism, the evidentiary burden shifted upon the Revenue to dislodge or controvert such evidence by making appropriate enquiries. Neither the Assessing Officer nor the ld. CIT(A.) has doubted the genuineness of the Customs Duty e-receipts, the ICEGATE references, the Bills of Entry or the payments reflected therein. No enquiry has been conducted either from the Customs Department or from M/s Sai Impex to demonstrate that the documents produced by the assessee were either fabricated or did not relate to the transactions under consideration. The authorities have simply brushed aside the explanation on the general premise that all books of account were not produced. Such an approach, in our view, cannot be sustained when primary documentary evidence generated by statutory authorities remains completely uncontroverted.

12. We also find considerable force in the contention of the learned counsel that the entire addition has been made solely on the basis of the information received from the Investigation Wing without any meaningful examination of the explanation furnished by the assessee. Information received from another wing of the Department may undoubtedly constitute a valid basis for initiating enquiry or even reopening the assessment; however, the addition ultimately made has to be founded upon evidence gathered during the course of assessment proceedings and not merely upon the information itself. Once the assessee furnishes a plausible explanation duly supported by contemporaneous documentary evidence, the Assessing Officer is duty bound to examine such explanation objectively and, wherever necessary, undertake independent verification before drawing an adverse inference. In the present case, no such exercise appears to have been undertaken. The assessment order does not demonstrate any attempt to verify the Customs Duty challans, Bills of Entry, ICEGATE references or the payments made through the authorised banking channels. The addition has thus been sustained more on suspicion arising out of investigation inputs than on any independent appreciation of the material brought on record during the assessment proceedings. Mere suspicion, however strong, cannot take the place of evidence while invoking the deeming provisions contained in section 69A of the Act.

13. There is yet another significant aspect which deserves to be noticed. Section 69A contemplates a situation where the assessee is found to be the owner of money, bullion, jewellery or other valuable article and either offers no explanation about the nature and source thereof or the explanation offered is found to be unsatisfactory. Thus, ownership of the money sought to be taxed is an essential precondition for invoking the said provision. In the facts of the present case, the contemporaneous documentary evidence overwhelmingly indicates that the impugned receipts, at least to the extent duly reconciled through the Customs Duty payment records, never assumed the character of monies owned by the assessee. They merely represented funds received for a specific statutory purpose and thereafter remitted to the Customs Department in the ordinary course of the assessee’s professional activities as a licensed Customs House Agent. Therefore, the very foundation for invoking section 69A, namely ownership of unexplained money by the assessee, becomes seriously doubtful. Once the explanation is supported by documentary evidence which remains uncontroverted, the deeming fiction contained in section 69A cannot be invoked merely because the funds temporarily passed through the assessee’s bank account.

14. At this stage, it would also be pertinent to note that the authorities below have proceeded on the premise that since the assessee could not produce every conceivable document, the explanation furnished by it automatically became unacceptable. In our considered opinion, such an approach is contrary to the settled principles governing appreciation of evidence in income-tax proceedings. An explanation cannot be discarded merely because some further enquiry was possible. The assessee had discharged the primary onus cast upon it by producing contemporaneous documentary evidence in the form of reconciliation statements, Customs Duty payment summaries, Bills of Entry, ICEGATE references and Customs Duty e-receipts generated through the authorised banking system. These documents clearly demonstrate the movement of funds from the client to the assessee and thereafter to the Customs Department. Once such primary evidence was brought on record, it was incumbent upon the Assessing Officer to carry the enquiry to its logical conclusion by making verification from the Customs authorities or from the importer, if he still entertained any doubt. Instead, the authorities below have proceeded merely on presumptions arising from the investigation report without making any endeavour to dislodge the evidentiary value of the documents produced by the assessee. Such an approach, in our view, cannot form the basis for sustaining an addition under a deeming provision like section 69A.

15. We also find that the impugned addition has been made by treating the gross receipts reflected in the bank account as unexplained money without appreciating the true character of those receipts. In the case of a Customs House Agent, the gross amount received from the client towards customs duty and other statutory levies cannot be equated with income merely because the same passes through the bank account of the agent. The real income of the assessee is confined only to the agency commission earned for rendering customs clearance services, which, in the present case, has consistently been stated to be Rs.80,000/- and has admittedly been offered to tax. The balance amount merely represented fiduciary receipts entrusted to the assessee for payment to the Customs Department. Taxing such reimbursements in the hands of the assessee would amount to completely ignoring the commercial realities of the business as well as the settled principle that what can be brought to tax is the real income of the assessee and not amounts received and held merely in a representative capacity. The authorities below have, unfortunately, overlooked this fundamental distinction while sustaining the addition.

16. Even otherwise, we find that except reproducing the information received from the Investigation Wing, neither the assessment order nor the appellate order contains any independent analysis establishing that the impugned amount of Rs.1,36,25,280/- represented unexplained money belonging to the assessee. No material has been brought on record to demonstrate that the assessee had either retained the amounts for its own benefit or had utilised them for any purpose other than the discharge of statutory liabilities on behalf of its client. Equally, there is no discussion in the assessment order as to why the documentary evidence furnished by the assessee deserved to be discarded except by making a general observation that the explanation was not satisfactory. Such a conclusion, unsupported by any objective analysis of the evidences placed on record, cannot be sustained. The findings of the authorities below, therefore, remain founded more on assumptions than on any cogent material capable of displacing the explanation supported by contemporaneous documents.

17. Having regard to the entirety of the facts and circumstances of the case, the nature of business carried on by the assessee as a licensed Customs House Agent, the contemporaneous documentary evidences placed before the authorities below, particularly the reconciliation statements, Bills of Entry, Customs Duty e-receipts, ICEGATE references and corresponding duty payment details, all of which have remained substantially uncontroverted by the Revenue, we are satisfied that the explanation furnished by the assessee is bona fide and duly supported by credible evidence. The Revenue has failed to bring any material on record to establish that the impugned receipts represented unexplained money owned by the assessee so as to justify invocation of section 69A of the Act. In such circumstances, the addition of Rs.1,36,25,280/- sustained by the ld. CIT(A.) cannot be upheld and is accordingly directed to be deleted.

18. Since we have deleted the impugned addition on merits after examining the entire factual matrix and the documentary evidence available on record, the legal grounds raised by the assessee challenging the validity of the reassessment proceedings, including the challenge relating to the issuance and service of notice under section 143(2), are rendered academic in the peculiar facts of the present case. We, therefore, refrain from adjudicating those legal issues and keep the same open to be considered in an appropriate case.

19. In the result, the appeal of the assessee is allowed. The Assessing Officer is directed to delete the addition of Rs.1,36,25,280/- made under section 69A of the Act and recompute the total income in accordance with law after allowing all consequential reliefs, including the benefit of brought forward losses and unabsorbed depreciation, if otherwise admissible in accordance with the provisions of the Act.

Order pronounced on 7^th July, 2026.