HITKARI HITECH PRIVATE LIMITED,GUJARAT vs. ACIT CIRCLE 2(1)(1), MUMBAI

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ITA 3281/MUM/2026Status: DisposedITAT Mumbai02 September 2026AY 2020-218 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the conditions for invoking Section 69A were not met as the assessee was not found to be the owner of any unexplained money. The addition based on third-party documents and statements without cross-examination was deemed legally unsustainable.

What were the facts?

The assessee's income tax return was nil for AY 2020-21. Following a search on a buyer (BSL), information was received alleging over-invoicing by vendors, including the assessee, with cash kickbacks. The Assessing Officer initiated reassessment proceedings under Section 147 based on third-party seized documents and statements.

What were the issues?

Whether an addition under Section 69A can be sustained solely on the basis of third-party documents and statements alleging over-invoicing, without establishing ownership of unexplained money by the assessee and without providing an opportunity for cross-examination.

Which sections of the Income-tax Act were involved?

Section 147,Section 69A,Section 132(4),Section 145(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “E” BENCH, MUMBAI

Before: SHRI AMIT SHUKLA & SHRI GIRISH AGRAWAL

Hearing: 17.06.2026Pronounced: 02.09.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH, MUMBAI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 3281/MUM/2026 Assessment Year: 2020-21 Hitkari Hitech Private vs ACIT Circle 2(1)(1), Limited Mumbai Block 414 Nayakpur Road Jalisana Village Mandal, Ahmedabad, Gujarat 382120 (PAN: AAACH5946F) Appellant Respondent Present for: Assessee : Shri Ashok Taparia, CA Revenue : Smt. Sujatha Iyyanger, Sr. DR Date of Hearing : 17.06.2026 Date of Pronouncement : 02.09.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by assessee is against the order of the Ld. CIT (A), National Faceless Appeal Centre (NFAC), Delhi, Order No. ITBA/NFAC/S/250/2025-26/1085063543(1) dated 22.01.2026 passed against the assessment order by Assistant Commissioner of Income Tax, Circle 2(1)(1), Mumbai, u/s. 147 read with section 69A of the Income-tax Act, 1961 (‘the Act’) dated 18.03.2025for Assessment Year 2020-21.

ITA No. 3281/Mum/2026 Hitkari Hitech Pvt Ltd. AY 2020-21 2. Assessee has raised the following grounds: 1. Order Bad in Law The learned CIT(A) erred in confirming the addition of Rs. 5,07,073 u/s 69A of Income tax Act made by the Assessing Officer by assuming the entries found in the loose papers and diaries at the premises of one of the buyers of assessee during search operation and statement of various key Persons and other officers of the buyer recorded on oath and also alleging the involvement of assessee in over invoicing and payment of commission in cash to CMD of the buyers for the inflated invoice value @ a percentage appeared noted in such loose paper and diaries against a general name “HITECH”, without properly appreciating the facts and circumstances of the case and the legal position. The order passed is arbitrary and bad in law. 2. Addition Based on Third-Party Documents The learned CIT(A) erred in confirming the addition merely on the basis of certain diaries, excel sheets and digital records found during search proceedings conducted in the case of a third party, without any independent corroborative evidence linking the said entries to the appellant 3. Failure to Establish Nexus The learned CIT(A) failed to appreciate that the mere mention of the name “HITECH” in the seized material does not establish that the entries relate to the appellant company. No evidence other than noting of loose diaries found at a premises not belonging to assessee and statement recorded, was found in the records of assessee which could prove that the cash money has been paid to CMD of the buyers searched. The assumption of the Ld. AO is baseless. 4. Reliance on Statement Without Cross-Examination The learned CIT(A) erred in confirming the addition based on the statement recorded on oath of the company official during search proceedings without granting the appellant an opportunity to cross-examine the person whose statement was relied upon. 5. Violation of Principles of Natural Justice The learned CIT(A) failed to appreciate that reliance on third-party material and statements without allowing cross-examination constitutes violation of the principles of natural justice. 6. Addition Based on Suspicion The learned CIT(A) erred in confirming the addition which was made purely on suspicion, conjectures and surmises without any supporting evidence.

ITA No. 3281/Mum/2026 Hitkari Hitech Pvt Ltd. AY 2020-21 3. Brief facts of the case are that assessee is engaged in supplying automotive NVH and interior components. It filed its return of income on 02.02.2021, reporting total income as Nil and claiming losses to be carried forward at Rs. 1,37,14,972/-. A search and survey operation under section 132/133A of the Act was conducted on 19.05.2023 in the cases of Bharat Seats Limited (BSL), Sharda Motors Industries Limited (SMIL), and others. Information was received by ld. Assessing Officer from Jt. CIT, Central Circle-16, Delhi vide letter dated 14.03.2024 stating that during the search on BSL group, certain loose papers, diaries, and digital data/excel files were seized. Statements of key officials including Shri Sanjeev Kumar (CFO, BSL) and Shri Rohit Relan (CMD, BSL) were recorded under section 132(4). It was alleged that BSL group was indulged in profit suppression by mechanism of over-invoicing purchases in the range of 1% to 5% from various vendors and getting back the difference in cash.

3.1. Based on a seized excel/diary entry, mentioning "Hitech" / "Hitkari Hitech Fibres P Ltd", an invoice amount of Rs. 1,69,02,441/- was identified with an alleged over-invoicing rate of 3%, translating to an inflated invoice/kickback amount of Rs. 5,07,073/-. Reopening proceedings were initiated under Section 147 by issuance of notice under Section 148 dated 28.03.2024.

3.2. In response, assessee submitted that its audited books reflect total sales to BSL at Rs. 1,48,43,249/- (excluding GST) and that it never engaged in over-invoicing or cash kickbacks. Assessee objected to reliance placed on unverified third-party loose papers and requested cross- examination. However, ld. Assessing Officer rejected the assessee's contentions and passed the impugned assessment order adding Rs. 3

ITA No. 3281/Mum/2026 Hitkari Hitech Pvt Ltd. AY 2020-21 5,07,073/- as unexplained money under Section 69A. Aggrieved, assessee went in appeal before the ld. CIT(A), who sustained the addition. Aggrieved, assessee is in appeal before the Tribunal.

4.

Ld. Counsel for the assessee contended that the primary statutory requirements for invoking Section 69A are completely absent. Section 69A requires that assessee must be found to be the owner of any money, bullion, jewellery or other valuable article which is not recorded in the books of account. In the instant case, no search was conducted on the assessee, no cash or asset was found or recovered from the assessee and no money trail or bank channel movement was established. The entire basis of the addition is third-party material seized from the premises of BSL. Third-party loose papers and uncorroborated digital entries have weak evidentiary value and cannot be treated as "speaking documents" against the assessee. The charge levelled by the Revenue is that the customer (BSL) inflated purchases and received back cash. Even on facts, an allegation of "over-invoicing" by a supplier cannot automatically lead to a deeming addition under Section 69A in the hands of the supplier without proving receipt/ownership of unexplained money.

4.1. The figure of Rs. 1,69,02,441/- mentioned in the assessment order does not match the actual basic sales made to BSL during the year, which stood at Rs. 1,48,43,249.72 as per audited books and GST returns. No opportunity to cross-examine the deponents (CFO and CMD of BSL) was provided to the assessee, which violates the principles of natural justice as settled in Andaman Timber Industries v. CCE [Civil Appeal No. 4288 of 2006].

ITA No. 3281/Mum/2026 Hitkari Hitech Pvt Ltd. AY 2020-21 4.2. On the other hand, the ld. Sr. DR strongly relied upon the orders of ld. Assessing Officer and ld. CIT(A). Referring to the order of ld. CIT(A), ld. Sr. DR submitted that the seized diaries/excel sheets contained specific entries against "Hitech" / "Hitkari". The CMD and CFO of BSL explicitly admitted under Section 132(4) the modus operandi of over-invoicing and receiving cash back @ 1-5%. He contended that under section 132(4A) r.w.s. 292C, there is a presumption regarding the truthfulness of contents of seized documents, and assessee failed to discharge its burden to rebut the same. Therefore, ld. CIT(A) rightly confirmed the addition under Section 69A.

5.

We have carefully considered the rival contentions, perused the material available on record and analyzed the orders of the authorities below. The fundamental question that arises for our consideration is whether an addition can be sustained under Section 69A on the basis of alleged over-invoicing notes recovered during a search on a third party. To appreciate the legal matrix, it is imperative to examine the statutory mandate of Section 69A of the Act, which reads as under: "69A. Unexplained money, etc.—Where in any financial year assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of assessee for such financial year."

5.1. A plain reading of Section 69A reveals that its application is conditioned upon the fulfillment of specific cumulative prerequisites that assessee must be found to be the owner of any money, bullion, jewellery,

ITA No. 3281/Mum/2026 Hitkari Hitech Pvt Ltd. AY 2020-21 or other valuable article. Such asset/money is not recorded in the books of account maintained by the assessee.

5.2. In the present case, it is an undisputed fact that no search or survey was conducted at the premises of assessee company. No cash, money, bullion, or valuable article was found in the physical possession or constructive ownership of the assessee. Revenue has neither recovered any unexplained cash from assessee nor established any bank trail/cash movement linking assessee with the alleged cash kickbacks. Section 69A is a deeming provision creating a legal fiction and, therefore, must be strictly construed. A deeming fiction under Section 69A cannot be triggered on hypothetical assumptions, surmises, or third-party paper entries without establishing the essential ingredient of actual ownership of unexplained money/asset in the hands of the assessee.

5.3. Furthermore, Revenue's charge itself is self-contradictory regarding the applicability of section 69A. The allegation arising from the search on BSL is that assessee over-invoiced its sales and returned a portion of the invoice value (3%) in cash back to the CMD/promoters of BSL. If assessee had allegedly passed on cash back to BSL/its promoters out of billed funds, the money resides with BSL/its CMD and not with the assessee. By no stretch of imagination can an allegation of over-invoicing sales and returning cash to a customer translate into an addition under Section 69A as "unexplained money owned by the assessee".

6.

It is also a well-settled proposition of law that loose sheets, rough diaries and digital excel entries recovered from third-party premises do not constitute conclusive evidence against an assessee in the absence of 6

ITA No. 3281/Mum/2026 Hitkari Hitech Pvt Ltd. AY 2020-21 independent corroborative evidence. Hon'ble Supreme Court in the case of CBI vs. V.C. Shukla [1998] 3 SCC 410 held that entries in third-party documents/scribblings cannot form the sole basis of making additions unless backed by tangible corroborative material proving actual flow of unaccounted funds. Here, ld. Assessing Officer failed to conduct any independent inquiry or verify the assessee's production, stock, or regular books of accounts, which stand fully audited and un-rejected under section 145(3).

6.1. Additionally, the statements recorded under Section 132(4) of key officials of BSL (third party) were relied upon without extending an opportunity of cross-examination to assessee despite specific requests.

7.

In view of the above factual matrix and legal position, we hold that the primary conditions for invoking section 69A are not satisfied in the instant case. Addition of Rs. 5,07,073/- made by the ld. Assessing Officer under section 69A and confirmed by the Ld. CIT(A) is legally unsustainable and is deleted. Accordingly, grounds raised by the assessee are allowed.

6.

In the result, appeal filed by the assessee is allowed.

Order pronounced in the open court on 02nd September, 2026.

Sd/- Sd/- Amit Shukla Girish Agrawal Judicial Member Accountant Member

Dated: 02nd September, 2026 MP, Sr. PS 7

ITA No. 3281/Mum/2026 Hitkari Hitech Pvt Ltd. AY 2020-21 Copy to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT BY ORDER, (Dy./Asstt.Registrar) ITAT, Mumbai

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