Case Law Details
ACIT Vs Minda Capital Pvt. Ltd. (ITAT Delhi)
Returned Loan Amount Not Unexplained Credit; Section 68 Addition Deleted; Money Received Back From Debtor Is Refund, Not Bogus Credit; No Evidence of Garment Trading, Bogus Purchase Addition Deleted; Statement Without Supporting Evidence Can’t Justify Bogus Purchase Addition; Section 68 & Bogus Purchase Additions Fail for Lack of Evidence.
The appeal before the ITAT Delhi arose from an order passed under Section 147 read with Section 143(3) of the Income Tax Act, 1961 for Assessment Year 2011–12, wherein the Revenue challenged the deletion of additions by the Commissioner of Income Tax (Appeals).
The first issue concerned an addition of ₹20 lakh treated as unexplained cash credit under Section 68, along with alleged commission expenditure of ₹40,000 under Section 69C. The Assessing Officer (AO) relied on information from the Investigation Wing alleging that the assessee received accommodation entries through intermediary entities, with a cash trail showing receipt from Rasraj Enclave. Based solely on the credit entry, the AO treated the amount as unexplained income.
The assessee explained that the amount represented a refund of advances earlier given to Rasraj Enclave Maker Pvt. Ltd. and furnished supporting account details showing that ₹20 lakh was advanced on multiple dates and subsequently returned. The CIT(A), after examining the records, held that refund of loans or advances cannot be treated as unexplained cash credit under Section 68. It was noted that the original assessment had already been completed under Section 143(3) and the transaction was duly reflected. Accordingly, the CIT(A) deleted both the addition of ₹20 lakh and the related commission addition of ₹40,000.
The Tribunal upheld this finding, observing that the transaction was merely return of money by the debtor and supported by the capital account on record. It found no infirmity in the CIT(A)’s order and confirmed deletion of the addition.
The second issue related to deletion of an addition of ₹1.93 crore made on account of alleged bogus purchases and fabricated bills. The AO based this addition solely on a statement recorded under Section 132(4) from a director, suggesting that garment trading transactions were not genuine. However, the same statement also clarified that the company did not deal in garment trading and was engaged in automobile spare parts business.
The CIT(A) found that during the relevant assessment year, the assessee had not carried out any garment trading. Instead, it was engaged in export of auto parts, supported by documentary evidence such as ledger accounts, invoices, shipping bills, and foreign exchange realization certificates. It was also noted that similar additions were not made in other assessment years and that any disclosure regarding trading activities pertained to a different year. The CIT(A) concluded that the addition was made without material evidence and was not sustainable.
The Tribunal agreed with these findings, noting that the addition was based solely on a statement without corroborative evidence. It further observed that documentary records clearly established the assessee’s business activity as export of auto components. In the absence of any evidence of garment trading, the addition was held to be unsustainable.
Accordingly, both grounds raised by the Revenue were dismissed, and the appeal was rejected. The Tribunal upheld that additions under Section 68 cannot be made on mere assumptions when transactions are explained and supported by records, and that additions based solely on statements without supporting material are not tenable.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the Revenue is arising out of the order of learned CIT(A)-XXVI, New Delhi in appeal No.10325/18-19 vide order dated 24th July, 2019. Assessment was framed by the Assistant Commissioner of Income Tax, Central Circle-13, New Delhi for the assessment year 2011-12 under Section 147 read with Section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) vide order dated 17th December, 2018.
2. The first issue in this appeal of the Revenue is as regards the order of learned CIT(A) deleting the addition made by the Assessing Officer on account of unexplained investment of `20 lakhs and consequent brokerage charges of 2% at `40,000/-. For this, the Revenue has raised following ground No.1:-
“1. Whether the Ld.CIT(A) is correct in deleting the addition on account of unexplained investment and on account of brokerage charges @ 2% amounting to Rs.20,00,000/- and Rs.4,00,000/- respectively.”
3. We have heard rival contentions and perused the material placed before us. Brief facts are that assessment was completed in the case of Balram Vinimay (P) Ltd. under Section 143(3) read with Section 153C of the Act on 30th March, 2014, but subsequently, this company was amalgamated with the present assessee Minda Capital Pvt.Ltd. vide order of Hon’ble High Court dated 2nd July, 2013. Subsequently, information was received by ADIT, Investigation Wing 2(1), Kolkata that there is huge high value credit transactions in the banik account of Bhawani Enterprises and Ekdant Agency. As per ADIT report, these intermediate companies are paper and jamakharchi companies and assessee is also one of the beneficiaries that it had received an amount of `20 lakhs as per cash trail from Rasraj Enclave. As per report dated 24th March, 2018, the ADIT informed the Assessing Officer that assessee has received this amount as under:-
| Sr.No. | The name company /entity from where the funds were to the bank a/c of the beneficiary | Financial Year | Amount received as per cash trail in lakh |
| 1 | Rasraj Enclave 0015R24699050 | 2010-11 | 20 |
4. The Assessing Officer issued notice to the assessee under Section 142(1) and assessee vide its reply dated 29th October, 2018 stated that the sum of `20 lakhs is actually the amount returned by Rasraj Enclave Maker Pvt.Ltd. in the earlier year and for this, assessee submitted copy of account of Rasraj Enclave Maker Pvt.Ltd. It was contended that the said amount given to Rasraj Enclave in earlier year is refunded to the assessee and it is not cash credit. The Assessing Officer simplicitor held on the basis of the credit entry in this year i.e. assessment year 2011-12 relevant to financial year 2010-11 that the amount of `20 lakhs is received from Rasraj Enclave bank account No.015R24699050. He was not convinced and hence, he added this amount of `20 lakhs as unexplained under Section 68 of the Act. The Assessing Officer also added consequent commission of 2% on this entry under Section 69C of the Act amounting to `40,000/-. Aggrieved, assessee preferred appeal before the learned CIT(A).
5. Learned CIT(A), after going through the facts of the case and submissions of the assessee, deleted the addition by observing as under:-
“5. Ii. The addition of Rs.20,00,000/- have been made on account of accommodation entry received from Rasraj Enclave of Rs.20,00,000/-. However it has been submitted that no addition can be made on account o f accommodation entry as the amount received o f Rs.20,00,000/- from Rasraj Enclave Maker Pvt.Ltd. is the refund of amount. This amount was received on different dated from 28/04/10, 02/06/10, 05/06/10 and 22/06/2010 and returned on 17/07/2010 to Rasraj Enclave Maker Pvt.Ltd. These facts have also been brought to the notice of AO during assessment proceeding.
iii. I have gone through the submission and found that had appellant had given loans and advance o f Rs.20,00,000/- to Rasraj Enclave Maker Pvt.Ltd. which have been subsequently refunded by Rasraj Enclave Maker Pvt.Ltd. and the original assessment in the case of Balram Vinimay Pvt.Ltd. has been completed u/s 143(3) of the Income Tax Act in this case. The refund of loans and advances cannot be subjected to addition u/s 68 of the Income Tax Act. Hence, based on facts as discussed above, the addition of Rs.20,00,000/- on account o f accommodation entry and addition of Rs.40,000/- on account of assumed commission are directed to be deleted.”
Aggrieved, Revenue is in appeal before the Tribunal.
6. We noted that this amount of `20 lakhs is advance given to Rasraj Enclave Maker Pvt.Ltd. by the assessee on various dates i.e., 28.04.2010, 02.06.2010, 05.06.2010 and 22.06.2010, which was subsequently returned on 17.07.2010 to the assessee by Rasraj Enclave Maker Pvt.Ltd. This is simplicitor money returned by the debtor and nothing else. To prove this, the assessee has filed capital account before the Assessing Officer which is part of record. In view of the above facts, we find that learned CIT(A) has rightly deleted the addition and we confirm his order on this issue.
7. The next issue in this appeal of the Revenue is as regards the order of learned CIT(A) deleting the addition of `1,93,20,640/- on account of bogus purchases and fabricated bills of purchases and sales. For this, Revenue has raised following ground No.2:-
“2. Whether the Ld. CIT(A) is correct in deleting the addition amounting to Rs.1,93,20,641/- on account o f fabricated bills of purchases and sales and completely ignoring the fact that the same was admitted by Shri Ashok Minda, Director and Controlling person in his statement recorded under oath u/s 132(4) of the IT Act.”
8. We have heard rival contentions and gone through the facts and circumstances of the case. We noted that the addition made by the Assessing Officer is only on statement of Shri Ashok Minda, Director and the relevant statement is recorded in the assessment order. The relevant question and answer No.7 read as under:-
“Q.7 In your answer to Q.No.5 you have stated that all the business of M/s Minda Capital Ltd. are carried on from JMD regent square, Office No.519, MG Road, Gurgaon but during the course of survey at the same premise neither stock, nor bills, vouchers related to both either purchase or sale were found. In short there was activity suggesting trading of garments were visible. Please explain.
Ans. Yes I also agree that there were no evidence of any trading of garment at the above said premise as the company does not deal with trading of garment and this is merely transaction for the purposes of showing some profits in the company Minda Capital Ltd. so as to have sufficient running income to pay off the bank loan interests.”
9. From the above question and answer, the Director Shri Ashok Minda categorically denied that it does not deal with trading of garments, rather, it only does the business of spare parts of automobile. The Assessing Officer made addition only on one premise that the assessee has carried out trading in garments and made bogus purchases of trading in garments, Learned CIT(A) deleted the addition vide paragraph 5 (iv) and (v) as under:-
“5. (iv) The addition of Rs.1,93,20,640/- have been made on account of trading in garments on the basis o f statement of Ashok Minda recorded during the course o f search in which it has been stated in question no.2 o f statement that sale and purchase of trading of garments is not genuine. On the basis of statement of Shri Ashok Minda recorded on 20/12/2017 assessment have been reopened. However during A.Y. 2011-12 assessee has not carried out trading in garments and there was no sale and purchase in garments. In the year under appeal, the appellant was engaged in the export of auto parts and the realization from exports have been received in foreign exchange. The documentary evidence in respect of sale o f auto components (ledger accounts, invoice, export related documents like shipping bills, foreign exchange realization certificate etc were furnished to AO. In the original assessment completed u/s 143(3) sale and purchase were held to be genuine. It has been contended that the appellant had carried out this trade in AY 2017-18 and made the requisite disclosure. The AO has projected the same to AY 2011-12 without any material. This addition has not been made for any other AY from 11-12 onwards to AY 16-17. No material has been preferred to justify the addition on account of cloth trade. It is clear from the material placed on record that the appellant had made the discloser on 20.12.2017 in respect of extant period. It would not be justified to project it to the earlier period (only one year). Without any substantive finding in this regard. The addition is not tenable.
v. It has also been submitted that even if it is assumed that trading in auto parts is not genuine still no addition can be made as the appellant has shown profit o f Rs.1,03,47,207/- from export of auto parts if export of auto is considered as non genuine it will result in reduction of the appellant’s by Rs.1,03,47,207/-. The addition by the AO results in double addition as the appellant has suo motu declared profits on account, trading activity. The action by adding on cloth trading, absent any evidence thereof, is not tenable. Having gone through the submissions, is clear that the addition of Rs.1,93,20,640/-is factually incorrect and without any material evidence. This addition is directed to be deleted accordingly.”
10. After hearing rival contentions and going through the facts and circumstances of the case, we notice that the assessee is engaged in the export of auto parts and the realization from customers have been received in foreign exchange and documentary evidence also proves that the assessee is engaged in sale of auto components which is supported by ledger accounts, invoice, export related documents like shipping bills, foreign exchange realization certificate etc. There is no evidence on record that the assessee ever engaged in the trading of garments. In view of the above, we find no infirmity in the order of learned CIT(A) and accordingly, this issue of the Revenue’s appeal is dismissed.
11. In the result, the appeal of the Revenue is dismissed.
Decision pronounced in the open Court on 15th April, 2026.
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