DEEPANSHI GARG,AGRA vs. INCOME TAX OFFICER-1(1)(1), AGRA

The assessee has raised the following grounds of appeal:-

The assessee is an individual deriving income from partnership firm business under the name and style M/s. Mobile World and MCX Trading Activities in her name. The return of income for AY 2019-20 was filed by the assessee on 20.07.2019 declaring total income of Rs. 10,63,460/-. The case of the assessee was sought to be reopened u/s 147 of the Act based on the information received from DDIT(Investigation), Unit-1, Agra alleging that credits aggregating to Rs. 3,04,44,000/- in her bank account represented accommodation entries. Notice u/s 148 of the Act stood issued to the assessee on 12.04.2023. In response to the said notice, the assessee filed her return on 11.05.2023 declaring the same income as was originally filed.

The assessee had 4 bank accounts as under:-

The ld AO noted that in SBI A/c 37451008627, there were total deposit during the year of Rs. 2,22,24,534. The assessee furnished all the requisite details before the ld AO and also submitted that she being a student, her father started commodity trading business in her name. The ld AO noted that assessee was in receipt of certain sums from her after Mr. Umesh Garg. Mr. Umesh Garg had received a sum of Rs. 95 lakhs from M/s. Oasis Tradewings Pvt. Ltd which was considered shell or bogus company by the ld AO. Accordingly, the ld AO concluded absolutely without any basis that the unaccounted income of the assessee has been routed through shell company to her father’s account and thereafter transferred to her account. Thus, the entire credits in the bank account Page | 3 amounting to Rs. 2,22,24,534/- was sought to be treated as unexplained credit u/s 68 read with Section 115BBE of the Act in the hands of the assessee.

The assessee responded that she has shown income from partnership firm M/s. Mobile World of Rs. 75,251/- apart from showing business income from MCX Trading (silver) of Rs. 11,37,131/- on the turnover of Rs. 12,12,121/- which works out to 93.81% of turnover. The ld AO observed that the total turnover from MCX trading business was Rs. 2,21,22,408/-. The net profit @94% thereon work out to Rs. 1,96,55,670/- which was added as undisclosed business income in the hands of the assessee and assessment was completed accordingly. This action of the ld AO was upheld by the ld CIT(A).

At the outset, the assessee had given explanation together with supporting documents about the total credits of the bank account as under:-

A sum of Rs. 48,157.96 has been explained by the assessee to represent the refund of online shopping, ticket booking and college fees. The assessee had sought to explain that there was certain online payments which were made reflected in the very same bank account and part of the said sums were refunded by direct online credit in the bank account. The break-up of the same was duly given by the assessee and hence, there is no scope for treating the same as unexplained cash credit.

In respect of loan of Rs. 1.4 crores received from MKG Enterprises wherein, the assessee’s father Mr. Umesh Garg is the proprietor, the assessee had furnished the confirmation, ITR, balance sheet and bank statements of the lender which are enclosed in pages 70 to 91 of the paper book.

In respect of loan of Rs. 4 lakhs received from Mr. Vikash Garg who is the uncle of the assessee, the assessee had furnished confirmation, ITR and bank statements of the lender which are enclosed in pages 92 to 97 of the paper book.

In respect of the loan of Rs. 4 lakhs received from DK Enterprises wherein, the proprietor is Uma Garg (mother of the assessee), the assessee has furnished confirmation, ITR and bank statement of the lender which are enclosed in pages 98 to 103 of the paper book.

All these receipts were through regular banking channels from the disclosed bank account of the assessee as well as the lenders. Further, we find that the ld AO after the receipt of the aforesaid documents had not chosen to make further enquiries either u/s 133(6) of the Act or issuing summons u/s 131 of the Act to the lenders. When the ld AO chose to not to make further enquiries, then he has no other choice but to accept the documentary evidences filed by the assessee to be sacrosanct. The assessee from her side had duly proved the identity, creditworthiness of the lenders and genuineness of the transactions thereby proving all the 3 ingredients of Section 68 of the Act.

Hence, we hold that there cannot be any addition on account of unexplained credit u/s 68 of the Act in the hands of the assessee for the total credits of Rs. 2,22,24,535/-. Further, we find that the ld CIT(A) while sustaining the addition u/s 68 of the Act had proceeded on the premise that bank credits bare the characteristic of accommodation entries routed through multi layered banking channels as allegedly revealed in departmental investigation in similar cases. It is pertinent to note that the said bank credits include bank interest of Rs. 3,215 and income tax refund of Rs. 31,450 among others which by any stretch of imagination cannot be construed as accommodation entries. Further, the amounts received by father of the assessee from Oasis Tradewings Pvt. Ltd which was found to be suspicious due to credentials of the said company, has got absolutely nothing to do with assessee herein as the assessee had not received any monies from the said alleged tainted entity. Hence, assessee cannot be made anyway responsible for explaining the credentials of the said alleged tainted entity. The ld AO further placed on record a copy of the order of the ld NFAC in the case of Vikash Garg for AY 2019-20 in appeal No. ITBA/NFAC/S/250/2025-26/1087994431(1) dated 27.03.2026 wherein that person had also received monies from Oasis Tradewings Pvt. Ltd in the sum of Rs. 1 crore and ld NFAC had deleted the addition made u/s 68 of the Act on identical grounds of the assessee herein.

In view of the aforesaid observations, we hold that all the credits in the bank account stand properly explained by the assessee. The loan transactions received by the assessee by any stretch of imagination cannot be construed as business income and applying net profit thereon. Hence, adoption of net profit @94% on the loan transactions by the lower authorities are hereby deleted. Further, since all the credits in the bank account are properly explained there cannot be any addition u/s 68 of the Act. Accordingly, the grounds raised by the assessee on merits are hereby allowed.

Since, the relief is granted to the assessee on merits, the adjudication of other legal grounds and additional grounds become academic in nature and they are left open.

In the result, the appeal of the assessee is partly allowed.