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Facts
The Revenue appealed against the CIT(A)'s order deleting an addition of ₹4,88,00,000/- made by the AO on account of unexplained money. The assessee had invested this amount through the National Spot Exchange Ltd. (NSEL) platform.
Held
The tribunal held that the addition made by the AO was not in accordance with law. The transactions were recorded in the assessee's books of account, making Section 69A of the Act inapplicable. The AO also wrongly focused on the non-recovery of investments due to NSEL termination rather than the source of investment.
Key Issues
Whether the addition of unexplained money under Section 69A of the Act is justified when the transactions are recorded in the books of account and routed through banking channels.
Sections Cited
69A, 148, 148A, 143(3)
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Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 04.02.2025 for the AY 2014-15.
At the outset, we observe from the appeal folder that there is a delay of 36 days in filing the appeal by the department and in support of this a condonation petition has been filed explaining the delay. It was stated in the condonation petition that the delay has occurred due to obtaining the administrative approvals from the competent authorities, which took quite a long time and accordingly, the delay may be condoned. The ld. AR, on the other hand, did not oppose the
The only issue raised by the Revenue in the various grounds of appeal is against the order of ld. CIT (A) deleting the addition of ₹4,88,00,000/- as made by the ld. AO on account of unexplained money u/s 69A of the Act.
3.1. The facts in brief are that the assessee filed the return of income on 29.11.2014, declaring the total income of ₹28,60,680/-. Thereafter, the ld. AO received information from the investigation wing that assessee is a beneficiary of suspicious transactions carried on National Spot Exchange Ltd. (NSEL) platform. It was informed that the platform of National Spot Exchange Ltd. (NSEL) was misused and exploited by brokers and traders to launder huge sum of black money. Accordingly, the ld. AO issued notice u/s 148 of the Act on 08.04.2021, on the basis of the credible information on record. Thereafter, in view of the decision of Ashish Agarwal (444 ITR 1), the notice u/s 148A(b) of the Act was issued to the assessee and thereafter, the order u/s 148A(d) of the Act was passed and finally, the notice u/s 148 of the act was issued on 27.07.2022. During the course of assessment proceedings, the ld. AO called for the information/ details from the assessee, which were partly filed. Finally, the ld. AO treated the total investment of ₹4,88,00,000/- reported by NSEL out of which ₹1,50,000/- was invested during the current financial year and balance was carried forward from earlier years . The ld. AO noted that the assessee executed the transactions through PCS commodities Pvt. Ltd. on NSEL platform. Finally, the ld. AO treated the said amount invested as unexplained money u/s 69A of the Act and added to the income of the assessee.
“GROUND NO.-(iii):This ground of the Appellant is directly linked with the merits of the case, wherein it was urged that addition of Rs. 4,88,00,000/- made by the ld. Assessing Officer by wrongly treating outstanding receivables as investments made during the year without source, that too as an unexplained money u/s 69A of the Act, despite recording the said transactions in books of account, and thus addition is improper and Bad-in-Law. Before arriving at the conclusion, it is pertinent to reproduce the provisions of Sec. 69A of the Act, which is the basis for making the impugned addition: Where in any financial year the 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 the 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 the assessee for such financial year.” As could be noticed from the aforementioned extract provisions of Sec. 69A of the Act comes into play only w.r.t. transactions not recorded in the books of account i.e, where an Assessee is found to be the owner of any money which is not found recorded in the books of accountwhereas, in the instant case, the Appellant company claims that the impugnedtransactions were recorded in Books of Account and all the transactions were executed through NSEL. This aspect was not disputed by Assessing Officer in which event there is no scope for invoking provisions of Sec. 69A of the Act and on this count alone the addition made by the Assessing Officer deserves to be cancelled and I direct accordingly. Even otherwise the Assessing Officer appears to have been under impression that the expression ‘CAS PRES CHQ’ refers to cash transaction whereas this parlance is used by the banks to indicate that cheques deposited for clearance through banks. In otherwords all the transactions were routed through banking channel. The case of the Appellant company was that investments were made in the preceding financial year and the same were utilised by redeeming the maturity amount and thus there is sufficient source for making the investments. The explanation of the Appellant was not refuted by the Assessing Officer and it appears that explanations were not taken into consideration by the Assessing Officer; on the contrary the Assessing Officer appears to have laid much stress on the fact that trade on NSEL platform was terminated and therefore the investments to the extent of amount recoverable through NSEL platform needs to be treated as unexplained income u/s 69A of the Act. This highlights that more than the source of the investments, the focus is with reference to the amount not received by the Appellant- company on account of termination of trade at NSEL.Infact the Appellant - company clarified that several investors were affected because of certain irregularities committed by various traders which resulted in termination of activities carried on through NSEL and proceedings were initiated by NSEL in various
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 15.12.2025.