Salasar Diam Private Limited Vs ITO (ITAT Surat)
Customer’s Payment, Another Firm’s Account: ₹45 Lakh Addition Cannot Rest on Suspicion
The controversy
Can a business receipt supported by sales invoices, stock records and the customer’s confirmation be treated as an unexplained credit merely because the payment came from another concern suspected of providing accommodation entries?
The Surat Tribunal answered this question in favour of the assessee. It deleted an addition of ₹45 lakh under section 68, finding that the Revenue had not established any connection between the alleged entry-providing activities of the remitter and the assessee’s particular receipt.
Suspicion about the person making the payment could not, by itself, displace documentary evidence of the underlying sale.
Investigation information led to reopening
Salasar Diam Private Limited filed its return for AY 2010–11 declaring total income of ₹46,470. The return was processed under section 143(1).
Subsequently, the Assessing Officer received information from the Investigation Wing, Mumbai, that M/s Naman Sales was operated and managed by Anil Kumar Jain and Pravin Kumar Jain and was engaged in providing cheque entries against cash.
The Assessing Officer found that the assessee had received ₹45 lakh from Naman Sales during the relevant year. On this basis, he reopened the assessment through a notice dated 30 March 2017.
During reassessment, a notice under section 133(6) issued to Naman Sales remained unserved. A departmental inspector also reported that the concern did not exist at the address provided.
These circumstances formed the foundation of the addition.
The receipt was explained as a sales advance
The assessee explained that the ₹45 lakh had been received through RTGS in its Axis Bank account as an advance against sales to M/s Naman Enterprises.
It maintained that it was unaware that the payment had originated from the account of Naman Sales. The receipt was accounted for in the customer’s account, and the corresponding sales were recorded in the books.
The Assessing Officer rejected the explanation and treated the receipt as an accommodation entry under section 68. The CIT(A) upheld the addition.
Before the Tribunal, the sole dispute concerned the sustainability of this ₹45 lakh addition.
The explanation went beyond a bank entry
The assessee furnished sales invoices raised on Naman Enterprises, the stock register for the relevant financial year and an account confirmation from the customer bearing its seal, signature and PAN.
Its representative submitted that the invoices and stock records corroborated actual business transactions. The payment was therefore explained by reference to both the banking channel and the commercial transaction underlying it.
The assessee further emphasised that it had received no loan, deposit or gift from either Naman Enterprises or Naman Sales.
It argued that, after receiving payment for its sales, it could not be expected to control how the customer arranged the funds. More importantly, no evidence showed that the assessee had paid cash to Naman Sales or introduced its own unaccounted money through that concern.
The Revenue relied on the remitter mismatch
The Department stressed that the actual remitter was Naman Sales, whereas the invoices and customer account related to Naman Enterprises.
According to the Revenue, this mismatch, coupled with the Investigation Wing’s information, the unserved notice and the inspector’s report, cast serious doubt on the transaction.
The Department therefore maintained that the assessee had failed to satisfactorily explain the nature and source of the credit.
The Tribunal, however, examined whether these circumstances established that the particular payment was an accommodation entry, rather than merely showing grounds for suspicion.
No nexus with an accommodation entry established
The Tribunal found the assessee’s explanation consistent and supported by contemporaneous business records.
It observed that the Assessing Officer’s material established, at best, the alleged accommodation-entry activities of Naman Sales and the unsuccessful attempts to verify that concern at its stated address.
No material linked those alleged activities with the assessee’s receipt. Nor was there evidence that the assessee had paid cash or routed its own unaccounted money through the remitter.
In these circumstances, payment for recorded sales through another concern could not, without corroborative material, establish an unexplained credit in the assessee’s hands.
The same business receipt could not be added again
The Tribunal also accepted the substance of the assessee’s alternative argument concerning double taxation.
Where the corresponding sales were recorded and the resultant income brought to tax, the same business receipt could not again be treated as unexplained merely because of the remitter’s identity.
For such an addition, the Revenue would first have to establish that the bank credit represented a source independent of the recorded business transaction.
No such independent source was established here. The Tribunal accordingly deleted the entire ₹45 lakh addition and allowed the appeal.
Author’s comments
The decision’s strength lies in the supporting commercial evidence. RTGS payment alone was not the answer; the invoices, stock register and customer confirmation explained what the payment represented.
Equally, the order does not exempt every third-party business payment from scrutiny. A discrepancy between the customer and remitter remains a matter requiring explanation. Here, however, the Revenue did not establish a cash trail, a fictitious sale or an independent unexplained source.
For practitioners, the case demonstrates the importance of connecting each disputed bank credit with the corresponding invoice, ledger and stock movement.
An alleged entry provider’s reputation may justify enquiry. An addition requires evidence connecting that allegation to the taxpayer’s transaction.
FULL TEXT OF THE ORDER OF ITAT SURAT
1. Feeling aggrieved by the order of first appeal dated 03.09.2025 passed by learned Commissioner of Income-Tax (Appeals)-NFAC, Delhi [“Ld. CIT(A)”], which in turn arises out of the assessment-order dated 11.12.2017 passed by learned ITO, Ward-(2)(1)(2), Surat [“Ld. AO”] u/s 143(3) r.w.s. 147 of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2010-11, the assessee has filed this appeal on the grounds as mentioned in Form No. 36 (Appeal Memo).
2. The background facts leading to present appeal are such that the assessee-company filed its return of income of AY 2010-11 declaring a total income of Rs. 46,470/- which was processed u/s 143(1). Subsequently, the Ld. AO received information from DDIT(Inv.), Mumbai indicating that the entity named “M/s Naman Sales” was operated and managed by Shri Anil Kumar Jain and Shri Pravin Kumar Jain and they were carrying on the business of giving cheque entries after taking cash. The Ld. AO further found that the assessee had received a sum of Rs. 45,00,000/- from M/s Naman Sales during the relevant year. Taking into account this, the Ld. AO re-opened assessee’s u/s 147 through a notice dated 30.03.2017. During proceeding, the AO issued notice u/s 133(6) to M/s Naman Sales which remained unserved. The AO also obtained a report through departmental inspector in which the inspector informed that the concern M/s Naman Sales did not exist at the given address. The AO show-caused assessee to which the assessee filed reply which is re-produced in Para 8 of assessment-order. The assessee submitted that a sum of Rs. 45,00,000/- was received through RTGS in Axis Bank on 06.01.2010 as advance against sale of goods to M/s Naman Enterprises. The assessee also submitted that the said receipt was through RTGS and the assessee was never aware that it was received from M/s Naman Sales. The Ld. AO considered asssessee’s submission but, however, the treated the receipt of Rs. 45,00,000/- as an accommodation entry and made addition u/s 68. Aggrieved, the assessee carried matter in first-appeal but did not get any success. Still aggrieved, the assessee has come in next appeal before us.
3. Presently, the sole grievance of assessee is the addition of Rs. 45,00,000/- made by Ld. AO and upheld by Ld. CIT(A).
4. Ld. AR for assessee carried us through various documents filed before us and invited our specific attention to followings:
(i) Page 30 of Paper-Book – Letter dated 22.11.2017 filed by assessee to Ld. AO intimating that the sum of Rs. 45,00,000/- was received through RTGS in Axis Bank on 06.10.2010 as advance against sale of goods to M/s Naman Enterprises and also that the assessee was never aware that the said receipt of RTGS was from M/s Naman Sales.
(ii) Pages 33 to 38 of Paper-Book – Copies of sales invoices raised by assessee to M/s Naman Enterprises.
(iii) Pages 39 to 41 of Paper-Book – Stock Register for the complete financial year 2009-10 relevant to AY 2010-11 under consideration wherein the items sold to M/s Naman Enterprises are recorded.
(iv) Letter dated 03.07.2026 – A/c Confirmation of the year 2009-10, duly sealed and signed by M/s Naman Enterprises and containing their PAN is filed.
5. Ld. AR submitted that the impugned receipt was through banking channel and related to the sales made by the assessee to M/s Naman Enterprises. The assessee had duly accounted for the receipt in the account of M/s Naman Enterprises and had contemporaneously recorded the corresponding sales in its books. The sales invoices and stock register corroborate the underlying business transactions and the account confirmation of M/s Naman Enterprises further supports the same. He submitted that the assessee had neither received any loan, deposit or gift from M/s Naman Enterprises or M/s Naman Sales nor had it entered into any accommodation-entry transaction. According to him, once the assessee had received the sale proceeds through RTGS, it was not expected to control or enquire into the manner in which its customer arranged payment of the sale consideration.
6. Ld. AR further submitted that the Ld. AO had not brought any specific material on record to establish that the impugned receipt represented the assessee’s own unaccounted money introduced through M/s Naman Sales. The information regarding the alleged activities of M/s Naman Sales, by itself, could not establish that the particular receipt of Rs. 45,00,000/- constituted an accommodation entry in the hands of the assessee. He accordingly submitted that the impugned addition u/s 68 was not justified. Without prejudice, he submitted that the corresponding sales had already been recorded and assessed, and therefore treating the same receipt again as an unexplained credit would result in double addition which should not be allowed.
7. Per contra, Ld. DR for revenue supported the orders of the lower authorities and made following submissions:
(i) That, the information received from the Investigation Wing specifically indicated that M/s Naman Sales was engaged in providing accommodation entries against receipt of cash from beneficiaries. The notice issued by the Ld. AO u/s 133(6) to M/s Naman Sales remained unserved and the departmental Inspector also reported that the said concern was not found at the given address. According to Ld. DR, these circumstances cast serious doubt on the genuineness of the impugned transaction.
(ii) That, although the assessee claims that the amount represented consideration/advance against sales to M/s Naman Enterprises, the actual remitter was M/s Naman Sales. The assessee had, therefore, failed to satisfactorily explain why a different concern had made the payment. He submitted that the assessee’s explanation did not satisfactorily explain the nature and source of the credit and, accordingly, the Ld. AO was justified in invoking section 68.
8. We have considered the rival submissions and carefully perused the orders of the lower authorities and the material placed on record. The core issue for our consideration is whether the receipt of Rs. 45,00,000/- credited through RTGS can be treated as an unexplained credit u/s 68 in the facts of present case?
9. The assessee’s explanation has been consistent that the amount was received through banking channel against its business transactions with M/s Naman Enterprises and that it was not aware that the payment had emanated from the account of M/s Naman Sales. In support, the assessee has produced sales invoices raised upon M/s Naman Enterprises, the relevant stock register and its account confirmation. Thus, the assessee has not merely explained the credit by reference to a banking transaction; it has also placed on record contemporaneous documents evidencing the underlying business transaction.
10. We find that the material relied upon by the Ld. AO establishes, at best, that M/s Naman Sales was allegedly involved in providing accommodation entries, that the notice issued u/s 133(6) remained unserved and that the Inspector did not find the concern at the given address. However, no material has been brought on record to establish any nexus between the alleged activities of M/s Naman Sales and the impugned receipt, or to show that the assessee had paid cash or routed its own unaccounted money through the said concern. It is also noteworthy that the assessee has not received any loan, deposit or gift from either M/s Naman Enterprises or M/s Naman Sales. Therefore, in absence of any corroborative material, the mere routing of the payment against sales made by assessee through another concern cannot, by itself, establish that the receipt represented unexplained money of the assessee.
11. We also find force in the assessee’s alternative contention regarding double taxation. If the corresponding sales to M/s Naman Enterprises have already been recorded in the books and the resultant income has been brought to tax, the same business receipt cannot again be treated as an unexplained credit merely because of the identity of the remitter, unless it is first established that the bank credit represents a source independent of the recorded business transaction. No such independent source has been established by the Revenue in the present case.
12. On an overall consideration of the material available on record, we hold that the addition of Rs. 45,00,000/- made by the Ld. AO u/s 68 and upheld by the Ld. CIT(A) is not sustainable. The same is, therefore, deleted. The assessee succeeds in this appeal.
13. In result, this appeal is allowed.
Order pronounced in open court on 01/10/2026
