INCOME TAX OFFICER-1, AMBIKAPUR, AMBIKAPUR vs. ATUL KUMAR AGRAWAL, AMBIKAPUR

आदेश / O R D E R Per Avdhesh Kumar Mishra, AM: This appeal for Assessment Year (‘AY’) 2022-23 filed by the Revenue is directed against the order dated 03.11.2025 of Commissioner of Income Tax (Appeals), [‘CIT(A)’], National Faceless Appeal Centre (NFAC), Delhi, passed under section 250 of the Income Tax Act, 1961 (‘Act’). 2. The Revenue has raised following grounds: “Ground 1. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.23,25,000/-, made by the AO on account of unexplained money u/s 69A of the Income- tax Act, 1961, ignoring the findings and material evidences recorded in the assessment order.

ITA No.12/RPR/2026 ITO-1, Ambikapur vs. Atul Kumar Agrawal Ground 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs.1,15,47,186/- made by the AO under section 69A of the Income-tax Act, 1961, by holding that the addition was arbitrary and unsupported by evidence, without appreciating that the AO had made the addition on the basis of specific and credible information received from the DDIT(Investigation) indicating involvement of the assessee in undisclosed accommodation entry transactions. Ground 3. Whether on the facts and circumstances of the case and in law, the Id. CIT(A) was justified in deleting the addition of Rs.1,15,471/-, made by the AO on account of unexplained expenditure u/s 69C of the Income-tax Act, 1961, ignoring the findings and material evidences recorded in the assessment order. Ground 4. The order of the Id. CIT(A) is erroneous both in law and on facts. Ground 5. Any other ground which may be adducted at the time of hearing.”

ITA No.12/RPR/2026 ITO-1, Ambikapur vs. Atul Kumar Agrawal clothes and also partner in a partnership firm. During the A.Y. 2022-23, I have received income from the both of these firms(individual and partnership firm) and interest from saving account. There was stock worth Rs.25,04,400/- as on 31th March 2021. These stocks were sold during the year 2021-22 and the amount received from sale of these stock was deposited in bank account of the firm. However, on perusal of the ITR filed by the assessee, in part A trading account of ITR, sale was shown as nil and assessee has not provided any voucher of sale to substantiate his response. In absence of any documentary evidence and proper submission/explanation from the assessee, the assessing officer is left with no other option but to assess the case of the assessee u/s 143(3) r.w.s. 144B of the Income Tax Act, 1961 as per the facts and information available on record. Since source of cash deposit is unexplained, the whole cash deposit would be treated as unexplained income u/s.69A. Therefore, addition of Rs.23,25,000/- is made to the income of the assessee under the head unexplained money u/s 69A of the I.T. Act for the A.Y. 2022- 23. The penalty proceedings u/s 271AAC of the IT Act is initiated separately.” [Emphasis supplied] 3.1. The Ld. AO also show-caused the assessee to explain the genuineness of deposit of Rs.1,15,47,186/-; however, the assessee did not respond to the said query, therefore, the Ld. AO observing as under, taxed the same under section 69A of the Act: “Unexplained Money: As per the information received from DDIT (Inv.), assessee has made undisclosed transaction accommodation entry amounting to Rs1,15,47,186/-. A show cause notice was issued to explain the factual position with evidence. Assessee has been asked to explain nature and source of said deposits. The assessee has not responded to the show cause notice. In absence of any documentary evidence and proper submission/explanation from the assessee, the assessing officer is left with no other option but to assess the case of the assessee u/s 143(3) r.ws 144B of the Income Tax Act, 1961 as per the facts and information available on record. Since source of undisclosed transaction accommodation entry of Rs1,15,47,186/- is unexplained, the whole undisclosed transaction would be treated as unexplained income u/s.69A.

ITA No.12/RPR/2026 ITO-1, Ambikapur vs. Atul Kumar Agrawal Therefore, addition of Rs1,15,47,186/- is made to the income of the assessee under the head unexplained money u/s 69A of the I.T. Act for the AY 2022- 23.” [Emphasis supplied] 3.2. Since the Ld. AO, held the above-mentioned deposits of Rs.1,15,47,186/- as non-genuine. The Ld. AO, therefore, inferred that the assessee had taken accommodation entry in this regard after paying commission of Rs.1,15,471/- @ 1% of Rs.1,15,47,186/-. Thus, he taxed the said commission expenditure under section 69C of the Act.

3.3 Aggrieved, the assessee filed appeal before the Ld. CIT(A), who allowed the appeal as under: “4.3 Ground of Appeal No. 3, 4, 5 & 6: In these grounds, appellant has challenged the action of AO in making the addition of Rs.23,25,000/- on account of cash sales deposits in the bank account without considering the plea of the Appellant that corresponding income on such sales was inadvertently declared under the Head Income from Other Sources. & adding the entire cash of Rs.23,25,000 represented by sale of garments without realizing that only the profit margin on such sales was the income of the Appellant. The appellant is an individual taxpayer. The Appellant is engaged in the business of purchase and sales of readymade clothes and also partner in a partnership firm. During the year the Appellant earned income from sale and purchase of read made clothes and also income from his partnership firm besides interest on savings bank account and admit that due to clerical error business income is wrongly shown as income from other sources amounting Rs.1,75,400 which needs to be shown as business income u/s 44AD with sale of Rs.21,88,571.44 and net profit of Rs.1,75,001 and balance cash deposit is from past cash in hand as established by the appellant in his submission. However, as per AO while on perusal of the ITR filed by the assessee, in Part-A trading account of ITR, sale was shown as nil as under section 44AD, it was not mandatory to maintain books of accounts and submit profit and loss and balance sheet. Therefore, addition of Rs.23,50,000 u/s 69A made by the AO is deleted. The Grounds of appeal Nos.3 to 6 of the Appellant are allowed. 4.4 Ground of Appeal No. 7,8 & 9: In these grounds of appeal, appellant has challenged the action of AO in arbitrarily making addition of Rs.1,15,47,186

ITA No.12/RPR/2026 ITO-1, Ambikapur vs. Atul Kumar Agrawal under section.69A alleging some unspecific undisclosed transaction as accommodation entry and treating the same to be unexplained income u/s 69A of the Act. The AO has made a huge addition only for the reason that the information received from DDIT(Inv.) as there is no corroborative evidence and cross examination allowed to the Appellant. Even in the assessment order AO failed to indicate the nature of information/transaction and how appellant is related to such transaction. AO also has not mentioned what are the evidences gathered by the department for substantiating the evidence. This appears to be summary addition without head and tail of the transaction which is not justified as per law. Various judicial pronouncements have already settled this issue. In the case of PCIT(Central), Mumbai vs. Nitin Cylinders Ltd [2024] 159 taxmann.com 649 (Bombay), Hon'ble High court held that where Assessing Officer made an addition on account of bogus purchases solely on a statement made by only one party recorded under section 131 without adducing evidence of other necessary parties, Tribunal was justified in deleting impugned addition. Similarly in the case of Nageshwar Enterprise vs Commissioner of Income-tax [2020] 122 taxmann.com 41 (Guj.). Hon'ble High court of Gujarat held that addition in the hands of the assessee firm for unaccounted investment and purchases merely on the basis of confessional statement of assessee firm's partner before DRI without any other corroborative evidences being brought on record, said addition does not sustain. Therefore, additions made by AO under Section 69A without any corroborative and without indicating nature of transaction and parties involved in the assessment order could not be sustained. The addition made by AO is nothing but Dumb Addition without concrete details and evidence about the transaction time and nature and further AO had not brought any tangible evidence to establish the alleged transaction. Hence the addition of Rs.1,15,47,186/- u/s 69A made by AO is deleted. This ground of appeal of the Appellant No. 7 to 9 are allowed. 4.5 Ground of Appeal No. 10: In these grounds, the Appellant challenged the action of AO in arbitrarily making addition of Rs.1,15,471/- under section 69C of the Act presuming that the Appellant might have paid one percent commission on the alleged undisclosed transaction of Rs.1,15,47,186/-. As AO presumed that the Appellant has paid 1% commission of undisclosed transaction amounting to Rs.1,15,47,186 which comes to Rs.1,15,471/- as unexplained expenditure u/s 69C of the IT Act. Since the Undisclosed transaction is not proved as held in the previous grounds supra, therefore this addition u/s 69C is also deleted and this ground of appeal no.10 of the Appellant is also allowed.”

ITA No.12/RPR/2026 ITO-1, Ambikapur vs. Atul Kumar Agrawal 4. At the outset, Shri Piyush Tripathi, Ld. Sr. DR, placing emphasis on the orders of the ld. AO, submitted that the assessee had not made any compliance as far as the issue of addition of Rs.1,15,47,186/- is concerned. Further, the assessee had not brought any material on the record of the Ld. CIT(A) to contradict the finding of the Ld. AO. The assessee had used non-compliance during the assessment proceedings as tactical tool to evade investigations. Since the assessee had not brought any material on the record to demonstrate that he had called for the details of transaction of Rs.1,15,47,186/- from Ld. AO and had requested for cross- examination. Therefore, the finding of the Ld. CIT(A) in this regard was not justified, submitted by the Ld. Sr. DR. The assessee had not brought any material to demonstrate that the said transaction of Rs.1,15,47,186/- was genuine. Vide impugned order, the Ld. CIT(A), pointing certain shortcomings in the assessment order, deleted the addition of Rs.1,15,47,186/-. He did not go to the merit of the addition of Rs.1,15,47,186/-. Thus, Ld. CIT(A) had not viewed the assessee’s tactical non-compliance used to avoid investigations adversely, which was the basis of the addition of Rs.1,15,47,186/-. Thus, the assessee’s tactical non-compliance used to avoid investigations was allowed to succeed by the Ld. CIT(A) over technicalities and shortcomings in the assessment order, contended by Ld. Sr. DR.

ITA No.12/RPR/2026 ITO-1, Ambikapur vs. Atul Kumar Agrawal parties, a certificate from a registered value, payments proof via banking channels (cheques) for actual steel procurement and building construction. The Hon’ble Bombay High Court ruled that an addition or denial of expenditure capitalization cannot be sustained based solely on a third-party or uncorroborated statement, especially when the AO failed to conduct independent inquiries, summon relevant parties, or adduce supplementary corroborative evidence. However, it was not so in the present case. In the case of Nageshwar Enterprises [2020] 122 taxmann.com 41, the Hon’ble Gujrat High Court held that the uncorroborated confessional statement recorded by the Directorate of Revenue Intelligence cannot form the sole basis for an income tax addition. However, it was not so in the present case.

ITA No.12/RPR/2026 ITO-1, Ambikapur vs. Atul Kumar Agrawal 7. With respect to addition of Rs.23,25,000/-, the Ld. Sr. DR submitted that the assessee had not demonstrated with the help of the opening stock shown in the ITR of the subsequent year to establish that the actual sales as claimed by him had taken place out of opening stock of the relevant year particularly when no sale had been disclosed in the ITR of the relevant year. The assessee, when cornered, claimed that the income disclosed under the head “Income from Other Sources” was nothing but the business income derived from sale of clothes, garments, etc. of Rs.21,88,571/-. The Ld. Sr. DR submitted that the impugned order was not well reasoned and had not specifically contradicted the finding of the assessment order. The Ld. Sr. DR further submitted that the assessee had not admitted having done any trading in his ITR, though on specific query, he admitted that he had sold stock of his proprietary concern and used the same to make cash deposits in his bank account. However, no third-party evidence was filed during the course of assessment proceedings. During the course of appellate proceedings before the Ld. CIT(A), the assessee did not file any other evidence what had not been filed before Ld. AO. The self-serving uncorroborated submission of the assessee should not be accepted as gospel truth. However, the Ld. CTI(A) accepted the version of the assessee and allowed the relief. In view of the above submissions/contentions, the Ld. Sr. DR prayed for setting aside the impugned order on this issue and remitting the matter back to the file of the Ld. AO.

ITA No.12/RPR/2026 ITO-1, Ambikapur vs. Atul Kumar Agrawal respectively. Hence, the assessee was not in position to respond to. Hence, the said additions were uncalled for. He prayed of the consequential relief. However, on our specific query, he did not submit copies of all correspondences taken place in this regard between Ld. AO and assessee and vice versa. With respect to the addition of Rs.23,25,000/-, the Ld. AR submitted that the said sum was sourced from sales of Rs.21,88,571/- and opening cash in hand of Rs.1,36,429/-. Further, he submitted that net profit from the above-mentioned sale of clothes, garments, etc. was disclosed as income under the head of “Income from Other Sources” rather than the income under the head “Business & Profession”. He further contended that Ld. AO had not pointed out any discrepancy in the submission of the assessee, therefore, the relief provided by Ld. CIT(A) was justified. In view of the above submissions/contentions, he prayed for dismissal of the appeal.

ITA No.12/RPR/2026 ITO-1, Ambikapur vs. Atul Kumar Agrawal incriminating material to the assessee to respond. We find merit in the submissions/contentions/submissions of the Ld. Sr. DR that the Ld. CIT(A) allowed the assessee’s tactical non-compliance used to avoid investigations to succeed over technicalities and shortcomings in the assessment order. We are therefore, of the considered view that tactical non-compliance should not be used as tool and an advantage to get relief in tax matter in appeal. Further, the assessee has not brought any material on the record to demonstrate that he has sought the information, copies of incriminating material from the Ld. AO to respond to the statutory notices and show-cause notices and also requested to cross-examine any person, which were not acceded to. We have perused the case laws relied upon by the Ld. CIT(A) and find that those are distinguishable on facts and therefore, are not applicable in the present case. Since the genuineness of the sum of Rs.1,15,47.186/- has neither been examined at all by the Ld. AO nor the assessee filed any explanation to the same before Ld. AO; therefore, we are not satisfied with the finding of Ld. CIT(A) on this score. We, therefore, set aside the finding of the Ld. CIT(A) deleting the addition of Rs,1,15,47,186/- and Rs.1,15,471/- made under section 69A and 69C of the Act respectively and remit these matters back to the file of Ld. AO.

ITA No.12/RPR/2026 ITO-1, Ambikapur vs. Atul Kumar Agrawal natural justice, remit this matter back to the file of Ld. AO after setting aside the finding of the Ld. CIT(A) in this regard.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (AVDHESH KUMAR MISHRA) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER रायपुर / Raipur; िदनांक Dated 06/10/2026 HKS, PS आदेशकी �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. 2. ��थ�/ The Respondent 3. The Pr. CIT, Raipur (C.G.) 4. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur गाड� फाईल / Guard file. 5.

आदेशानुसार/ BY ORDER, Hem Kumari Digitally signed by Hem Kumari Shrivastava, Shrivastava, PS, ITAT, //True copy// PS, ITAT, Raipur Date: 2026.10.08 Raipur (Private Secretary) 11:53:33 +05'30' आयकर अपीलीय अिधकरण, रायपुर / ITAT, Raipur