SALASAR DIAM PRIVATE LIMITED,SURAT vs. INCOME TAX OFFICER 2(1)(3), SURAT, SURAT

ITA 1312/SRT/2025Status: DisposedITAT Surat01 October 2026AY 2010-118 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 45,00,000/- made by the AO under Section 68 and upheld by the CIT(A) was not sustainable and therefore deleted. The Tribunal reasoned that while the revenue's material indicated M/s Naman Sales was allegedly involved in accommodation entries, the notice to it remained unserved, and the concern was not found at its address, there was no material on record to establish a nexus between M/s Naman Sales' alleged activities and the impugned receipt. Crucially, no evidence was presented to show that the assessee had paid cash or routed its own unaccounted money through M/s Naman Sales. The Tribunal also found merit in the assessee's contention regarding double taxation. It noted that the assessee had provided contemporaneous documents (sales invoices, stock register, account confirmation) evidencing the underlying business transaction with M/s Naman Enterprises. The Tribunal concluded that the mere routing of payment through another concern, without establishing an independent source or a link to the assessee's own unaccounted money, could not by itself justify treating the receipt as unexplained credit under Section 68, especially when the corresponding sales income had already been recorded and assessed. The assessee succeeded in this appeal.

What were the facts?

The assessee, Salasar Diam Private Limited, filed its return for AY 2010-11 declaring an income of Rs. 46,470/-. The Assessing Officer (AO) reopened the assessment under Section 147 based on information from DDIT(Inv.), Mumbai, suggesting M/s Naman Sales was involved in providing cheque entries for cash. The AO found the assessee received Rs. 45,00,000/- from M/s Naman Sales. A notice under Section 133(6) to M/s Naman Sales remained unserved, and a departmental inspector reported the concern did not exist at the given address. The assessee explained the receipt as an advance against sales to M/s Naman Enterprises, received via RTGS, and stated it was unaware the payment originated from M/s Naman Sales. The AO treated the receipt as an accommodation entry and made an addition under Section 68. The CIT(A) upheld the addition. The assessee appealed to the ITAT.

What were the issues?

1. Whether the addition of Rs. 45,00,000/- made by the AO and upheld by the CIT(A) under Section 68 of the Income-tax Act, 1961, is justified, considering the assessee's explanation that the amount was received through RTGS as an advance against sales to M/s Naman Enterprises and the assessee was unaware of the remitter being M/s Naman Sales? Assessee's Contentions: - The receipt was through banking channels (RTGS) and related to sales made to M/s Naman Enterprises. - The assessee had accounted for the receipt in the account of M/s Naman Enterprises and recorded corresponding sales contemporaneously. - Sales invoices, stock register, and account confirmation from M/s Naman Enterprises corroborated the business transactions. - The assessee had not received any loan, deposit, or gift, nor entered into any accommodation-entry transaction. - Once sale proceeds were received via RTGS, the assessee was not expected to control or inquire into how the customer arranged payment. - The AO had not brought any specific material to establish that the receipt was the assessee's own unaccounted money introduced through M/s Naman Sales. - The information regarding M/s Naman Sales' alleged activities alone could not establish the receipt as an accommodation entry. - Without prejudice, treating the receipt as an unexplained credit would result in double addition as corresponding sales were already recorded and assessed. Revenue's Contentions: - Information from the Investigation Wing indicated M/s Naman Sales provided accommodation entries. - The notice under Section 133(6) to M/s Naman Sales remained unserved, and the inspector could not find the concern, casting doubt on the transaction's genuineness. - The assessee failed to satisfactorily explain why a different concern (M/s Naman Sales) made the payment when the claim was for sales to M/s Naman Enterprises. - The assessee's explanation did not satisfactorily explain the nature and source of the credit, justifying the AO's invocation of Section 68.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 133(6),Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: MS. SUCHITRA KAMBLE & SHRI B.M. BIYANI

For Appellant: Shri Himanshu Gandhi, CA
For Respondent: Shri Ashish Kumar, Sr. DR
Hearing: 07.07.2026Pronounced: 01.10.2026

Per B.M. Biyani, A.M.:

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). Salasar Diam Pri

The order continues below.

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