Kartik Clothing & Fabrics Pvt. Ltd. Vs DCIT (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, adjudicated an appeal filed by Kartik Clothing & Fabrics Pvt. Ltd. for the Assessment Year (A.Y.) 2018-19, challenging the addition of ₹1,16,32,855/- made by the Assessing Officer (AO) and sustained by the Commissioner of Income Tax (Appeals) (CIT(A)) under Section 69A of the Income-tax Act, 1961. The assessee, a company engaged in denim cloth trading, had initially filed a return declaring an income of ₹35,97,610/-.
The case was reopened after the AO received information from the Investigation Wing, following a search conducted on one Mr. Sanjay Govindram Agarwal (Sanjay Tibrewal), who was allegedly providing accommodation entries through various entities, including Ganpati Textiles, Hanuman Fabrics, and Narayan & Company. The assessee was identified as a beneficiary, having allegedly received accommodation entries totaling ₹1,16,32,855/- in the guise of sales transactions with these entities. During the assessment proceedings, the assessee maintained that the transactions were genuine sales, supported by ledger extracts. However, the AO, relying primarily on Mr. Tibrewal’s admission of running an accommodation entry business, bank transaction patterns, and the assessee’s alleged failure to provide corroborating evidence like sales invoices and transport receipts, treated the entire amount as unexplained money under Section 69A and added it to the total income. The AO also rejected the assessee’s request for cross-examination of Mr. Tibrewal, stating the right was not absolute. The CIT(A) later upheld both the validity of the reopening and the addition made under Section 69A, agreeing that the assessee failed to prove the genuineness and creditworthiness of the parties and that the denial of cross-examination was justified.
