SAMEER MUTREJA,GURGAON vs. JCIT (OSD), NEW DELHI

On perusal of the assessment order framed in the hands of Shri Sameer Mutreja, we find that the primarily allegation for the search encapsulated at to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja para-5 of the assessment order of the Assessment Year 2014-15 is that M/s Hero Motorcorp Limited (HMCL) has claimed travel and stay expenses of its Chairman and Managing Director (CMD) and Chief Executive Officer (CEO) Shri Pawan Munjal as business expenditure in the form of event management and brand promotion expenditure by using companies namely, M/s Salt Experience & Management Pvt. Ltd. (M/s SEMPL, hereinafter referred as ‘SALT’) and other such companies including third party vendors, which were controlled by Shri Sachin Mutreja, his brother Shri Sameer Mutreja and Shri Hemant Dahiya (MD of M/s SALT). According to the revenue, SALT and its linked entities charged approximately 7% as commission income on the value of transaction or invoice generated against M/s HMCL, under the head brand and event promotion expenses. The allegation referred to in the show cause notice issued by the Learned AO was that nine entities were used by Mutreja Brothers to facilitate personal expenses of Shri Pawan Munjal in garb of event management expenses shown to have incurred for M/s HMCL. However, the Learned AO on the basis of evidences in the form of statements, etc. from the various directors, employees of the various companies, concluded that the companies namely M/s Dream Business Solutions Private Limited (hereinafter referred as ‘Dream’) and M/s Fast Conversion Marketing Solutions Private Limited (hereinafter referred as ‘Fast’) used to enter false bills in their accounts, withdraw cash and part of that cash would be handed over to Shri Sachin Mutreja and Shri Sameer Mutreja and Hemant Dahiya for their personal enrichment and, therefore, the money handed over to them ought to be taxable u/s 69A of the Act.

We first take up Ground Nos. 1, 2, 3, 4, 6, 13, 14 & 15 for AY 2014-15, being grounds challenging the addition under section 69A of the Act on account Page | 4 to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja of cash withdrawals made by the companies M/s Dream and M/s Fast and purportedly handed over to Mutreja Brothers and Hemant Dahiya.

Ground No. 6 raised for the AY 2014-15 specifically deals with the challenge in respect of the additions made u/s 69A of the Act. It is stated that the assessee was not found to be the owner of the undisclosed cash; the source of the alleged cash withdrawals stood explained as per the Learned AO's own findings, the funds originated from M/s HMCL and were routed through M/s SALT to M/s Fast and M/s Dream and hence, once the source of the cash is explained, Section 69A of the Act cannot be invoked. The Learned AO has merely relied upon the uncorroborated and contradictory statement made by the employees of M/s SALT, M/s Dream & M/s Fast in the absence of any incriminating evidence of proof of ownership or any possession of cash.

The Ground No. 2 challenges the addition on the ground on the fact that no incriminating material or evidence or undisclosed asset was found during the course of search and without any incriminating evidence, no addition to income can be made.

The Ground No. 3 challenges the addition so made alleging that the principles of natural justice have not been followed; and the third-party statement cannot be relied upon without giving the meaningful opportunity to the assessee.

Ground No. 13 states that though the basis of the search and investigation was that Mr. Pawan Munjal of Hero Group was using the entities M/s SALT, M/s Dream and M/s Fast for funding his personal expenses and the entire activity to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja was also for his benefit as stated by the Learned AO in the assessment order, yet the additions have been made in the hands of the assessee herein while giving a clean chit to Mr. Pawan Munjal.

The assessee vide Ground No. 14 contended that the cash withdrawn by M/s Dream and M/s Fast was used to book expenses on account of advertisement and publicity in its books and the same must have been claimed as business expenditure before the Income-tax Department. How can the cash used towards business expenditure be taxed in the hands of the assessee when it has already been booked as expenditure in the books of the said companies.

The assessee vide Ground No. 15 contended that the Learned AO has sought to tax the assessee on the ground that he is a beneficial owner/de-facto owner of M/s SALT, M/s Dream and M/s Fast and, therefore, the cash withdrawn by the said companies from their bank account and allegedly handed over to Shri Sameer Mutreja must be taxed in his hands. The proceedings under the Prohibition of Benami Property Transactions Act, 1988 were initiated against Shri Herbert Mohan Spratt & Mutreja Brothers and it was held by the Learned Adjudicating Authority that both Shri Sameer Mutreja & Shri Sachin Mutreja are not beneficial owners and Shri Herbert Mohan Spratt is the true owner of M/s SALT since he had invested in the said company towards its share capital. Hence the basis of addition by the Learned AO that assessee is the beneficial owner of M/s SALT is totally misconceived and contrary to the facts and law.

The assessee has filed Synopsis for the A.Y. 2014-15 which reads as under:-

GROUND NUMBER 13 & 13.1: ASSESSMENT BASED ON SEARCH PROCEEDINGS PERTAINING TO THE HERO GROUP AND SHRI PAWAN MUNJAL, WITHOUT ANY INCRIMINATING MATERIAL IMPLICATING THE APPELLANT. 7.1. It is respectfully submitted that the assessment framed against the Appellant is fundamentally misconceived, as the addition has been made entirely on the basis of statements and material gathered during the search and investigation on the Hero Group and Shri Pawan Munjal. No incriminating material, evidence, or document was found during the search that pertains to or implicates the Appellant in any manner. 7.2. The Ld. AO himself, at para 5 of the assessment order, categorically records that M/s HMCL has claimed travel & stay expenses of its CMD and CEO Sh. Pawan Munjal as business expenditure in the form of event management and brand promotion expenditure by using companies namely, SALT and its group companies including third party vendors, which were controlled by Sh. Sachin Mutreja, his brother Sh. Sameer Mutreja and Sh. Hemant Dahiya (MD of M/s SALT). This admission by the Ld. AO negates the very basis of taxing the alleged cash in the hands of the Appellant. 7.3. The Ld. AO also at para 2 of the show cause notice dated 12.02.2024 alleges that the above 9 entities were used by Mutreja brothers to create a web of transactions to facilitate personal expenses of Sh. Pawan Munjal in garb of event management expenses shown to have incurred for Hero MotoCorp Ltd. Thus, the Department’s own narrative attributes the alleged benefit entirely to Pawan Munjal, not the Appellant. 7.4. However, despite these explicit findings, no addition whatsoever seems to have been made in the hands of Shri Pawan Munjal. Instead, the Appellant who neither participated in, nor benefited from, the alleged arrangement has been arbitrarily fastened with tax liability without any supporting material. 7.5. The end client HMCL is an established brand. It gave contracts to SALT after due diligence and market research. The entire theme of the assessment order is contrary to normal human logic. 7.6. This selective approach of the Revenue, whereby the alleged beneficiary is left untouched while an unrelated person is assessed, is perverse, arbitrary, and contrary to law. It amounts to treating the Appellant as a convenient scapegoat in the absence of any legally admissible evidence linking him to the alleged transactions. 7.7. When the Ld. AO believes that the alleged cash withdrawals were for the personal use and benefit of Sh. Pawan Munjal, no addition can be sustained in the hands of the Appellant, who has neither been shown to receive, possess, or utilise the alleged cash. 7.8. Accordingly, the assessment framed on the Appellant on the basis of material, findings, and allegations pertaining exclusively to Hero Group and Shri Pawan Munjal is illegal, arbitrary, and liable to be deleted.

GROUND NUMBER 14, 14.1 AND 14.2: ILLEGAL PRESUMPTION OF CASH BENEFIT TO THE APPELLANT WITHOUT DISALLOWANCE OF EXPENDITURE IN THE HANDS OF THE COMPANIES ACTUALLY CLAIMING IT. 8.1. It is respectfully submitted that the assessment order and the appellate order are completely silent on the status of assessments in the cases of SALT, DREAM and FAST. The Revenue has neither disclosed whether Page | 14 to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja the expenditure claimed by these companies alleged to be bogus has been disallowed in their respective assessments, nor produced any order demonstrating that such alleged bogus expenditure has been taxed in their hands. 8.2. The entire basis of the addition in the present case is the allegation that SALT, DREAM and FAST booked bogus expenditure for the benefit of third parties. If this is the Department’s stand, then the first and foremost requirement is that the Revenue must show whether those expenditures have been disallowed in the hands of the respective companies. In absence of such disallowance, the allegation of bogus expenditure remains unsupported and uncorroborated. 8.3. Without prejudice to the foregoing submissions, even if the Department’s contention that the expenses incurred by Hero Group were non-genuine is accepted arguendo, the correct course in law would have been to disallow such expenditure in the hands of Hero Group or the concerned entities, namely, SALT, FAST, and DREAM. 8.4. There exists no legal presumption that disallowance of expenses automatically results in a taxable event in the hands of a third person. There is no statutory provision which permits the Department to presume that the “cash component” said to have arisen from an alleged bogus expenditure must be taxed in the hands of a third person, who neither claimed the expenditure nor was found in possession of any cash. Such a presumption is contrary to the scheme of the Act, which requires the disallowance of expenditure in the hands of the entity claiming it, and actual receipt or ownership of money before any addition can be made under Section 69A. 8.5. Without prejudice, even if the Revenue’s theory of bogus expenditure is accepted arguendo, the only permissible course in law would be the disallowance of such expenditure in the hands of the companies that claimed it. The addition cannot be shifted to the Appellant merely on the basis of uncorroborated statements or assumptions, especially when no cash was found, no receipt was proved, and no nexus was established with the Appellant. 8.6. Accordingly, in absence of any disallowance in the hands of the companies or any evidence of receipt in the hands of the Appellant, the addition under Section 69A is wholly unsustainable and liable to be deleted in toto.

The Learned AR drew our attention to the assessment order for the AY 2014-15 and focused on the statement of various officials of M/s SALT, M/s Dream and M/s Fast who, according to the Learned AO, have deposed against the assessee, stating inter alia that cash withdrawn from the bank accounts of M/s Dream and M/s Fast used to be handed over to the assessee and his brother for their own use and enrichment.

The assessee, at the very inception, contended that the companies, namely M/s SALT, M/s Dream, and M/s Fast, have no connection with him in terms of ownership, shareholding, or directorship. It was explained that these entities are managed and controlled by separate individuals who are entirely unrelated to the assessee and operate independently. A flow chart/diagram was presented and discussed during the proceeding which is reproduced as under:-

The Learned AR stated that assessee used to render consultancy services to M/s Dream and M/s Fast, for which he was remunerated through banking channels, and such remuneration was duly disclosed and offered to tax in his personal return of income.

As far as the statements of the functionaries of M/s SALT, M/s Dream and M/s Fast were concerned, the Learned AR contended that they were false, contradictory, illegal and an attempt to hide their criminal conduct of withdrawing cash from the bank accounts of the companies, putting false bills in the company and siphoning of the funds for their own benefit. The assessee took us through the statement of Mr. Herbert Mohan Spratt, as relied upon by the Learned AO, who held 70% shareholding in SALT and was a director of the company. He claimed that he was merely a dummy shareholder and had not even paid any consideration for such shareholding. He further stated that he had been approached by the father of the Mutreja Brothers and Mr. Hemant Dahiya to become a director of SALT. According to the assessee, this statement is false and untrue. The Department itself had started benami proceedings against Mr. Herbert Mohan Spratt seeking to hold him as a benamidar of M/s SALT and Mutreja Brothers as the beneficial owners of the said company. The Learned Adjudicating Authority (PBPTA, New Delhi), vide its order dated 27.03.2025 (enclosed at page 215-271 of PBK II) held Mr. Herbert Mohan Spratt to be the real owner of SALT and shareholder/director of the company and the assessee to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja contended that based on this finding alone, the allegation of Mr. Herbert Mohan Spratt that he was the benamidar is false and incorrect.

Mr. Pawan Munjal in his statement stated that as far as his knowledge goes, SALT was run by Shri Sachin Mutreja and Shri Sameer Mutreja. The statement of Shri Amit Saxena, General Manager (Finance) - SALT, was relied upon by the Learned AO wherein he stated that the assessee and Shri Hemant Dahiya offered him to join SALT. Reference was made to the statement of the auditor of M/ SALT Shri S. Nayyar wherein he had requested the assessee to make payment of his fee for the various companies namely M/s SALT, M/s Scapes Reality, M/s Scoop, etc. Shri Nayyar further stated that Mutreja Brothers were taking financial decisions for M/s SALT. The Learned AO further placed reliance on the statement of the assessee that he received no consultancy fee from M/s SALT and he was rendering services to M/s Fast and M/s Dream who were vendors to M/s SALT.

The Learned AO placed reliance on the statement of Mr. Hemant Dahiya who explained how M/s SALT would raise invoice on HMCL with pre-decided mark up of 7% and how M/s Dream and M/s Fast would render services to M/s SALT and the process of billing. Reliance was placed on the statements of Mr. Gaurav Karna, Director of M/s Dream and Mr. Kumar Rajesh Raman, Director of M/s Fast and consultant of M/s SALT. Both stated that the cash withdrawn was shown as fake expenses in the books and was actually handed over to Mutreja Brothers, Mr. Hemant Dahiya and Mr. Abhishek Mehta through a person named Anwar. Mr. Kumar Rajesh Raman further stated, in response to Question No. 54 at pages 20 and 34 of the assessment order, that Anwar would directly deliver to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja the cash payments at the homes of the Mutreja Brothers, Hemant Dahiya and Mr. Abhishek Mehta. He further stated that cash so withdrawn was distributed in the ratio of 35% to Sameer Mutreja, 35% to Sachin Mutreja, 25% to Hemant Dahiya and 5% to Abhishek Mehta. The Learned AR stated that there is a contradiction in the statement by Mr. Anwar in as much as Mr Anwar in his statement to the Department at pages 21 and 35 of the assessment order contended that he used to collect cash from Bank after getting bearer cheques of M/s Dream and M/s Fast which were signed by Smt. Supriya Verma, Shri Gaurav Karna, and Shri Kumar Samar. He further stated that he worked as per the instructions of Mr. Amit Saxena and Mr. Kumar Rajesh Raman and the cash collected from Nisit Gupta was subsequently handed over to Mr. Raman. This is stated by Mr. Anwar at page 21 & 35 of the assessment order. According to the Learned AR, there is a major contradiction in the statement as Mr. Kumar Rajesh Raman claimed that Anwar, being on the payroll of M/s SALT, directly delivered cash to the alleged recipients i.e. Sameer Mutreja, Sachin Mutreja, Hemant Dahiya, Abhishek Mehta at their homes. On the contrary, Mr Anwar admits that he was acting under the instructions of Mr. Amit Saxena and the cash was collected from Nisit Gupta and handed over to Mr. Raman. Needless to add that Mr. Nisit Gupta’s statement has not been taken. Mr. Anwar in his statement to the Department at pages 21 and 35 of the assessment order stated that he maintained a red-coloured diary of the ‘Lotus’ brand in which he recorded the said transactions. However, the said diary was neither found during the course of search nor handed over by Mr. Anwar to the Department, and the same has not been relied upon by the Learned AO.

According to the Learned AR, the entire narrative is a concocted story devised to falsely implicate the assessee and the apparent contradictions in the statements clearly expose the falsity of the allegations of the Learned AO.

The Learned AR contended that there is no incriminating material found which is even remotely suggestive of any undisclosed income. It was submitted that the Learned AO has merely relied upon the self-serving and contradictory statements of Mr. Herbert Mohan Spratt, Mr. Kumar Rajesh Raman, Mr. Anwar, Mr. Gaurav Karna, Mr. Amit Saxena and Mr. S. Nayyar. The Learned AR referred to para 6.5 of the assessment order placing strong reliance on the letters filed by M/s Dream and M/s Fast in response to the query raised in respect of the cash withdrawals made by the said companies. The said letters have been reproduced by the Learned AO at pages 25 to 28 of the assessment order. The crux of the letters by M/s Dream and M/s Fast is that the cash withdrawn by them was utilized for booking expenses in the nature of business promotion, including payments to promoters and supervisors, as well as expenses towards canter hire, diesel, food and beverages, local conveyance, banner printing, gift items, etc. According to the said letters, the entire cash withdrawals were utilized for business promotion purposes; the same were in accordance with law, and were allowable in the hands of the respective companies. For the sake of convenience, the relevant portion of the letter is reproduced as under:-

The Learned AR contended that once M/s Dream and M/s Fast, vide their respective letters, have categorically stated that the entire cash withdrawn by them was utilized as business expenditure of the said companies, it is inconceivable as to how the very same withdrawals for expenses can be alleged to have been handed over to the Mutreja Brothers for their personal benefit and enrichment. Hence, the entire narrative put forth by the Learned AO is a figment of imagination, contradictory and clearly points to the fact that the assessee is being falsely implicated by the persons in control of M/s SALT, M/s Dream and M/s Fast.

Before the Learned CITA, the assessee reiterated the aforesaid contentions. However, the same were summarily rejected and the action of the to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja Learned AO was upheld by the Learned CITA for all the years under consideration.

With regard to the ground relating to cross-examination of third parties whose statements were relied upon against the assessee, the Learned CITA opined that cross-examination is not mandatory in every case.

On merits, the Learned CITA, while accepting that the Mutreja Brothers were neither shareholders nor directors, proceeded to examine the concept of Significant Beneficial Ownership and upheld the Learned AO’s conclusion that, under the guise of consultancy and brand promotion expenses, cash withdrawn by the companies was handed over to the Mutreja Brothers on the basis of statements given by various individuals. It was further concluded that Mutreja Brothers were the real owners of M/s SALT, M/s Dream, and M/s Fast, and that the Learned AO found that they exercised clear influence and control over M/s SALT.

On the issue of invocation of section 69A of the Act in respect of these transactions, the Learned AR contended that the same cannot be legally invoked in the facts and circumstances of the instant case. There is no documentary evidence whatsoever to suggest that any cash withdrawn from M/s Dream and M/s Fast was handed over to the Mutreja Brothers. The entire allegation rests solely upon the false and contradictory statements of Mr. Herbert Mohan Spratt, Mr. Kumar Rajesh Raman, Mr. Anwar, Mr. Gaurav Karna, Mr. Amit Saxena, Mr. S. Nayyar, and Mr. Pawan Munjal. Hence the requirement of section 69A of the Act being that the assessee must be found to be the owner of money is not fulfilled as there is no evidence of the same. Page | 24

It was further submitted that ‘ownership’ connotes possession and control over the money to the exclusion of others, coupled with the ability to deal with and utilize the same at one’s discretion. In this case, the money belonged to the companies from where it was withdrawn and had been booked as expenditure by them in their accounts. How then the assessee can be held to be the owner of the money which has been expensed by the companies. The Learned AR vehemently relied upon the judgement of the Hon'ble Supreme Court in the case of D. N. Singh vs CIT reported in 454 ITR 595 (SC) for the proposition that ownership means total ownership to the exclusion of the rest of the world. As an analogy, a thief cannot be the owner and section 69A of the Act would not apply. The Learned AR also placed reliance on the following decisions in support of his proposition that Section 69A of the Act would apply if actual money is found to be in the possession and not merely by way of untested statements of third parties:-

The Learned AR further pointed out that Section 69A of the Act would come into operation only when the source of the money is not found or the explanation about the source is not to the satisfaction of the Assessing Officer. Section 69A of the Act is a deeming provision which taxes money, bullion, to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja jewellery, or other valuable articles only if its source is not established. In this case, the source is clearly established as per the Learned AO’s own findings i.e. being cash withdrawal from the bank account owned by M/s Dream and M/s Fast and therefore, if the source of cash is established, Section 69A of the Act cannot be pressed into service.

The assessee contended that Mr. Herbert Mohan Spratt was held to be the owner of M/s SALT under the Benami Property Transactions Act, 1988 and, therefore, Mutreja Brothers cannot be held to be the beneficial owner of M/s SALT since the findings given under the Benami Property Transactions Act, 1988 would be binding on the Income Tax Department. He argued that even if it is construed as a persuasive value, still the factual findings given by Benami Property Transactions Act, 1988 cannot be ignored at once.

The Learned AR further contended that the cross examinations of all the persons who deposed against the Mutreja Brothers were asked for on many occasions before the Learned AO as well as before the Learned CITA and the same were not allowed. He relied upon the judgements of the Hon'ble Supreme Court in the case of M/s Andaman Timber Industries v. CCE reported in 281 CTR 241 wherein it was held that third party statement cannot be used in the absence of cross examination, being provided.

Per Contra, the Learned DR vehemently opposed the contentions of the Learned AR and strongly supported the order of the Learned CITA stating inter alia that the statements given by Mr. Herbert Mohan Spratt, Mr. Kumar Rajesh Raman, Mr Anwar, Mr. Gaurav Karna. Mr. Amit Saxena, Mr. S. Nayyar, Mr. Hemant Dahiya and Mr. Pawan Munjal were conclusive in nature and that the Page | 26 to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja intimate association of the Mutreja Brothers with M/s Dream, M/s Fast and M/s SALT stood established beyond doubt. The Learned DR vehemently submitted that the Mutreja Brothers were the architects of this entire game plan and hence the entire addition made under section 69A of the Act deserves to be upheld.

Having gone through the orders and supporting documents, it is evident that, apart from the statements of the functionaries of M/s SALT, M/s Dream and M/s Fast, there is no incriminating evidence demonstrating any transmission of cash withdrawn by these entities to the Mutreja Brothers. The revenue’s initial allegation was that M/s HMCL through M/s SALT and other group companies was funding certain personal expenses of Mr. Pawan Munjal of the Hero Group; however, the ultimate conclusion drawn by the Learned AO was that a portion of the cash so withdrawn by the said entities had found its way to the Mutreja Brothers and was, therefore, liable to be taxed under Section 69A of the Act in their hands. As rightly pointed out by the Learned AR, we find that there are many contradictions in the statement of Shri. Kumar Rajesh Raman, Shri. Herbert Mohan Spratt, Shri. Anwar and many others. Shri. Herbert Mohan Spratt claimed that he was only the benami of Mutreja brothers and the company M/s SALT belongs to Mutreja brothers. But the Learned Adjudicating Authority vide their order dated 27.03.2025 under the Benami Property Transaction Act, 1988 have clearly held Mr. Herbert Mohan Spratt is not the benamidar of M/s SALT and Mutreja brothers are not the beneficial owners. It would not be out of place to reproduce the relevant portion of the decision of Learned Adjudicating Authority which is as under:-

We find that the statement of Mr. Kumar Rajesh Raman is contradictory in as much as he claimed that Mr. Anwar, an employee of M/s SALT would hand over the cash to Mutreja Brothers whereas Mr. Anwar stated that he would hand over the cash to Raman. Besides, Mr. Kumar Rajesh Raman is the director in the company and would withdraw cash belonging to M/s Dream & M/s Fast and book the entire cash as expense in the books of the said companies. Having booked expenditure for the cash withdrawals made in the books of the company, it cannot be simply alleged at the same breath that the expenses were bogus and instead the cash were handed over to Mutreja Brothers. Further we find that in the assessment order at pages 25 to 28, M/s Dream and M/s Fast addressed letters to the Learned AO stating that the entire cash withdrawn had been utilized and claimed as business expenditure of the respective companies. We are unable to comprehend ourselves to accept to the proposition of the Learned DR that when such expenditure has been incurred by the companies and duly Page | 28 to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja reflected in their audited Profit and Loss Accounts and Balance Sheets placed before us, how can it be alleged that the very same expenses, which stand booked, were not genuine, and that the cash representing those expenses was instead handed over to the Mutreja Brothers. This argument of the revenue does not draw support from the audited balance sheets of M/s Dream and M/s Fast. If that were so, it would imply that the audited financial statements of the said companies are false and concocted, which has never been the case of the revenue. Thus, there exists a clear contradiction: on one hand, the directors of M/s Dream and M/s Fast stated that the cash withdrawn from the bank accounts was handed over to the Mutreja Brothers; on the other hand, by way of letters addressed to the Learned AO, they categorically stated that the entire cash withdrawn was duly booked as business expenditure of the companies. Hence, on this ground alone, the addition made by the Learned AO for various assessment years deserves to be deleted.

We find that the assessee has made repeated requests for cross examination of the third parties who deposed against him. They have not been allowed and Learned CITA has summarily rejected the assessee’s requests which is totally against the principles of natural justice. Cross examination of third party statements is mandatory and in the absence of the same they cannot be put to use. Besides, there is no corroborative evidence that is found to substantiate the third-party statements. It is settled law that third party statements in the absence of any proof of corroborative evidence to substantiate the same, have no evidentiary value. Reliance in this regard is placed on the following decisions of Hon’ble Jurisdictional Delhi High Court:-

Now let us get into the applicability of provisions of section 69A of the Act per se. The mandatory requirement under Section 69A of the Act is that the assessee must be found to be the owner of the money, which has not been established. No evidence of cash with the Mutreja Brothers has been found during the search. Besides, the source of the cash is withdrawal out of bank accounts of M/s Dream and M/s Fast. Where the source of cash is established, addition in respect of unexplained money u/s 69A of the Act cannot be made. Hence we are in agreement with the arguments advanced by the Learned AR in this regard.

In view of the aforesaid factual findings and the inapplicability of section 69A of the Act, the addition of Rs. 2,08,03,272 for AY 2014-15 made under section 69A of the Act is deleted. The grounds raised by the assessee in this regard are hereby allowed.

Since the facts and circumstances and the grounds raised by the assessee for AYs 2015-16 to 2020-21 are identical, except with variance in figures, the findings given by us hereinabove for AY 2014-15 shall apply mutatis mutandis to those assessment years as well qua this issue of addition under section 69A of the Act on account of cash withdrawals made by third party companies being allegedly paid to Mutreja Brothers.

The assessee vide Ground Nos. 6 to 6.2. for AY 2014-15 had challenged the addition of Rs 9,75,000 being 50% of the expenses incurred by M/s Fast on Mutreja Brothers in respect of purchase of foreign currency from M/s Pheroze Framroze & Company Ltd on account of summer trip taken by them. Hence according to M/s Fast, this is purely personal expenses of Mutreja Brothers and therefore to be added in their hands under section 69A of the Act.

We have heard the rival submissions and perused the materials available on record. At the outset, we hold that the applicability of provisions of section 69A of the Act itself should be tested as to whether the same could be made applicable to the impugned transaction. We find Section 69A of the Act applies only in cases where the assessee is found to be the owner of money, bullion, jewellery, or other valuable articles not recorded in the books of account. In the present case, the foreign currency expenditure was duly incurred and recorded in the regular books of account of M/s Fast. The source of such expenditure was the disclosed bank account of M/s Fast, forming part of its audited financial statements. Once the transactions are duly recorded in the books and the source is traceable to the disclosed bank account of M/s Fast, the essential preconditions for invoking Section 69A of the Act cease to exist. The findings given by us hereinabove on the applicability of provisions of section 69A of the Act shall apply with equal force for these grounds also. Further we find that the purchase of foreign currency expense has been incurred by M/s Fast and they had claimed the same as revenue expenditure in their hands. If it is found to be personal expenses of Mutreja Brothers, then the said expenditure should be considered for disallowance in the hands of M/s Fast and no addition could be made in the hands of the assessee herein for the same as there is no agreement Page | 31 to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja between the company and Mutreja Brothers for providing any benefit in cash or any kind other than consultancy fees. It is not in dispute that the consultancy fees received by the assessee had been duly offered to tax in his returns. Further we find that there is nothing to show that there was any obligation of the company to provide for foreign expenses of the Mutreja Brothers and, there is nothing to suggest that expense has not been allowed in the hands of the company. Hence, the addition being 50% of Rs. 19,50,000/- i.e. Rs. 9,75,000/- in the hands of Sameer Mutreja, assessee herein is hereby deleted.

Ground Nos. 6 & 6.2 for AY 2017-18 challenges a sum of Rs. 1,17,88,154/- being legal expenses incurred by M/s Dream relating to arbitration case against M/s WPP in Singapore.

We have heard the rival submissions and perused the materials available on record. We find that according to the revenue, this legal expense has nothing to do with M/s Dream and is for personal expenditure of Mutreja Brothers and, therefore to be treated as unexplained money under section 69A of the Act in the hands of the assessee. It is not in dispute that the said legal expenses had been claimed as deduction in the books of account of M/s Dream and the same is sourced out of its disclosed bank account. Further it was submitted by the Learned AR that there is no agreement between the company and Mutreja Brothers which enjoins the company to incur this expenditure on behalf of Mutreja Brothers. The Learned AR submitted that this is an expense incurred at the direction of M/s SALT for the survival of its own business operation since any adverse decision in the arbitration proceeding between M/s WPP in Singapore and the assessee could have adversely affected the business to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja of M/s SALT. The Learned AR drew our attention to the submissions dated 18-3- 2024 made by the assessee before the Learned AO enclosed in Page 302 of the Paper Book 1. We are convinced that the impugned amount pertains to expenditure incurred and duly recorded in the regular books of account of M/s Dream, the source whereof is the disclosed bank account of M/s Dream. Once the source stands established and traceable to the books of account, the foundational requirement for invoking Section 69A of the Act ceases to exist. Further, the expenditure in question does not represent money, bullion, jewellery, or other valuable articles or things as contemplated under Section 69A of the Act. Accordingly, Section 69A of the Act is held to be inapplicable to the present case and the addition made in this regard in the hands of the assessee is hereby deleted.

Since the facts and circumstances and the grounds raised by the assessee in this regard for AYs 2018-19 and 2019-20 are identical with AY 2017-18, except with variance in figures, the findings given by us hereinabove for AY 2017-18 shall apply mutatis mutandis to these assessment years as well.

Ground No. 6.3. raised by the assessee challenges the addition of Rs. 23,14,375/- made in respect of AY 2017-18 under section 69A of the Act on account of cash generated through bogus purchase and purportedly handed over to Mutreja Brothers for their personal use and enrichment.

We have heard the rival submissions and perused the materials available on record. We find that in the assessment order, it has been alleged that M/s SALT, M/s Scoop and M/s Dream were engaged in making bogus purchases from certain shell entities, namely M/s Creative Mind Media Pvt. Ltd., M/s Impulse Page | 33 to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja Business Convergence Pvt. Ltd., and M/s Optim Ad-Media Pvt. Ltd. It is further alleged that these entities declared a meagre income of approximately 1% and withdrew cash corresponding to the payments received from M/s SALT, M/s Scoop and M/s Dream against such purchases. The said cash, according to the Learned AO, was thereafter handed over to the Mutreja Brothers, Hemant Dahiya and Abhishek Mehta. According to the Inspector’s report, the address all of the three companies namely M/s Creative Mind Media Pvt. Ltd., M/s Impulse Business Convergence Pvt. Ltd. and M/s Optim Ad-Media Pvt. Ltd were incorrect and the persons living there had no knowledge about these companies. The directors of the company Shri Mahendra Pal (Director of M/s Impulse Business Convergence Pvt. Ltd.) and Shri Rakesh Kumar (Director of M/s Creative Mind Media Pvt. Ltd.) conceded that the said companies were bogus and would only raise bogus sales invoices on M/s SALT, M/s Dream and M/s Scoop and would withdraw cash and hand over the same to Mutreja Brothers. According to Mr. Kumar Rajesh Raman, a total amount of Rs. 17,81,47,900/- (Rs. 6,21,33,000/-, Rs. 5,52,68,500/- and Rs. 6,07,46,400/-) was booked for various years from the shell entities, namely M/s Creative Mind Media Pvt. Ltd., M/s Impulse Business Convergence Pvt. Ltd. and M/s Optim Ad-Media Pvt. Ltd., and the cash generated was distributed in the ratio of 35% to Sameer Mutreja, 35% to Sachin Mutreja, 25% to Hemant Dahiya and 5% to Abhishek Mehta. The Learned AR submitted that no incriminating material whatsoever was found during the course of search to establish that any cash was handed over to the Mutreja Brothers or to any other person as alleged. It was further clarified that Mr. Kumar Rajesh Raman, Mr. Mahender Pal and Mr. Rakesh Kumar were, in fact, defrauding the company, and their actions cannot be attributed to the Mutreja to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja Brothers herein. The Learned AR categorically submitted that the Mutreja Brothers had no association with the said companies in any capacity, whether as shareholders or directors, and therefore, the allegation of cash being generated for personal use and enrichment of the company or its officials and attributing the assessee to be the beneficiary of those cash is wholly baseless and devoid of any supporting evidence. The cross examination sought was not allowed and that the statement given by Mr. Kumar Rajesh Raman and Mr. Mahender Pal were self-serving in nature. The Learned AR submitted that as per the Learned AO, Mr. Rakesh Kumar and Mr. Mahender Pal are admittedly the director in M/s Impulse Business Convergence Pvt. Ltd. and M/s Creative Mind Media Pvt. Ltd respectively. No relationship in terms of shareholding or directorship has been shown in respect of these companies’ vis-a-vis Mutreja Brothers. In fact, there is no linkage of the Mutreja Brothers, Mr. Hemant Dahiya and Mr. Abhishek Mehta with the said three companies as per the assessment order or any other document. Hence the findings given hereinabove by us for AY 2014-15 with regard to the ownership of cash in the hands of the assessee within the meaning of section 69A of the Act shall apply for this issue also raised for the AY 2017-18. Hence we hold that the application of provisions of section 69A of the Act in the hands of the assessee is totally flawed and the addition made thereon is hereby deleted in the hands of the assessee in the sum of Rs 23,14,375 for AY 2017-18.

Since the facts and circumstances in AYs 2018-19 and 2019-20 are identical and the additions on account of cash generated through bogus purchase and purportedly handed over to Mutreja Brothers therein have been made on the same set of allegations and material, our findings recorded to 5104/Del/2025 Sameer Mutreja to 4957/Del/2025 Sachin Mutreja hereinabove for AY 2017-18 shall apply mutatis mutandis to AYs 2018-19 and 2019-20 also qua this issue, except with variance in figures.

In view of our decision given hereinabove for other grounds supra, the Ground Nos. 5, 7,8,9,10,11, 12 & 16 raised by the assessee for AY 2014-15 are left open. Similar grounds raised for AYs 2015-16 to 2020-21 are also left open.

All the grounds adjudicated hereinabove for Shri Sameer Mutreja shall apply mutatis mutandis for his brother Shri Sachin Mutreja also.

In the result, all the appeals of the assessee are allowed.