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Facts
The assessee declared commission income from lottery tickets, later changed to tuition fees. The Assessing Officer made an addition of Rs. 1.80 crores under Section 69A of the Act, suspecting accommodation entries related to imports and foreign remittances facilitated by Shri Sanjay Garg.
Held
The Tribunal held that the addition made solely on the statement of Shri Sanjay Garg, without corroborative evidence, was unsustainable. The assessee was viewed as a pass-through beneficiary earning commission income without independent business activity, thus the remittance amount could not be added to her income.
Key Issues
Whether an addition under Section 69A can be made solely on the basis of a third-party statement without corroborative evidence and whether the principles of natural justice were violated by not allowing cross-examination.
Sections Cited
69A, 143(2), 142(1), 132
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES A: NEW DELHI.
Before: SHRI SATBEER SINGH GODARA & SHRI S. RIFAUR RAHMAN
PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER :
The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT (A)”, for short] dated 19.05.2025 for the Assessment Year 2022-23.
Brief facts of the case are, assessee filed its return of income on 12/10/2022 declaring an income of Rs.4,06,410/- The case was selected for scrutiny through CASS. Accordingly notices u/s 143(2) and 142(1) were issued and served on the assessee. In compliance assessee furnished written submission from time to time. The Assessing Officer observed that the case of assessee was selected for scrutiny to verify the genuineness of the transactions uploaded through VRU, identity of parties related with transaction and whether the assessee has shown correct income in the ITR.
After considering the submissions the Assessing Officer observed that assessee has declared commission income, in order to verify the same assessee was asked to submit documentary evidence. In reply assessee submitted that assessee has earned the commission income on sale of lottery tickets amounting to Rs.4,05,000/-. Further assessee was asked to furnish the documentary evidence regarding sale of tickets and percentage on commission. However, assessee had filed submission that the assessee has earned income from other sources by earning tuition fees and miscellaneous incomes. The receipt of Rs.4,05,000/- is not from the sale of lottery tickets.
Further he observed that assessee could not substantiate the above said income from tuition to nursery to 3rd class students. Further assessee was asked to substantiate the information available with the department based on the statement made by Sh. Sanjay Garg. In response assessee has submitted that assessee has not imported the goods, nor she has any license to import, hence contention that cash was paid to Sh. Sanjay Garg is not maintainable, department has solely relied upon the statement made by Sh. Sanjay Garg and no other evidences are available with the department.
After considering the submissions of the assessee, the Assessing Officer rejected the same and observed that assessee is not an importer of goods and does not have registration from the relevant authorities. Hence the contention that cash was given to Mr. Sanjay Garg for import of goods cannot be correct. However, he observed that a perusal of the information shown that Sh. Sanjay Garg facilitated cheap imports in lieu of cash, which remained undisclosed in the books of the persons who used his services. The entire modus operandi will be no use to a person who is registered as an importer with the relevant authorities. The modus operandi adopted by Sh. Sanjay Garg was perfectly suited to the needs of such persons who were unregistered and were in need of cheap imported goods for selling at windfall gains.
Further he observed that assessee has declared in her ITR showing total income of Rs.4,06,410/-. During the assessment proceedings, assessee has declared the source of income as receipt of commission on sale of lottery tickets. When it was asked to substantiate the same with relevant documentary evidences, the assessee changed her statement and declared the same was earned by imparting tuitions. With the above observation the Assessing Officer was of the view that as per information available with the department, assessee has made fictitious purchase amounting to Rs.1.80crores with Sh. Sanjay Garg who was associated with Sh. Manoj Gupta. Apart from above, assessee had also cash receipt of Rs.1,80,00,000/- for sending foreign remittance. In search and seizure action u/s 132 of the Act was carried out in the case of Sri. Aditya Kumar Jha and others on 10-10-2021 who was engaged in operating numerous domestic entities through which huge amount of foreign outward remittance were made. Mr. Aditya Kumar Jha used to receive the RTGS entries from Sh. Manoj Kumar Gupta to route the funds and finally remitting the same to foreign entities managed and controlled by Mr. Manoj Kumar Gupta. The parties who were sending RTGS were bogus entities which were also controlled and managed by Manoj Gupta. In the statement, it has been stated that Sh. Sanjay Garg knows Sh. Manoj Gupta and he had bought mobile covers from China and given cash to Sh. Manoj Gupta which was further sent to China through some person. The Assessing Officer observed that the modus operandi, it has been stated that various customers in Karol Bagh, Delhi purchases under invoices goods from China to save imports/customs duty. No books of accounts were maintained for this work, everything was done on paper and which was destroyed on the same day.
By relying on the above statements, the Assessing Officer came to the conclusion that assessee is one of the beneficiaries with above such accommodation entries and imported the goods from China. Further he observed that the assessee has declared commission income for which assessee herself is not sure of the sources of income declared by her in the return of income filed for the impugned assessment year. Based on the above observations he proceeded to make the addition of Rs.1,80,00,000/- u/s. 69A of the Act.
Aggrieved with the above order, assessee preferred an appeal before NFAC, Delhi and filed a detailed submissions which is reproduced at page 5 to 22 of the impugned order. After considering the detailed submissions and grounds of appeal
Ld. CIT(A) has dismissed the issues raised by the assessee like no cross-examination opportunity was granted to the assessee and also on merits. He sustained the additions made by the Assessing Officer.
9. Aggrieved with the above order assessee is in appeal before us raising following grounds of appeal:-
1. That on the facts and in circumstances of the case, the learned Assessing Officer as well as learned CIT(A) grossly erred in acting illegally on facts as well as in law, in assuming, presuming, on conjectures and surmises, in holding and making an addition of 1.1 That on the facts and circumstances of the case and in law the learned Assessing Officer has erred in making addition of INR 1,80,00,000 as unexplained money under section 69A of the Act without providing and confronting all the statement and documents relied upon and without considering submissions of the Appellant wherein all documentary evidences has been submitted showing that no import transactions was done by her and hence no question of any cash payment to Shri Sanjay Garg arises.
1.2 That the impugned addition is wholly unjustified, and inferences so drawn are baseless, without evidence, without material and contrary to the material on record and are whimsical.
1.3 That the learned Assessing Officer grossly erred in relying upon the vague, unrelated statement of one Shri Sanjay Garg which is unsupported by any other material or corroborative evidence, which was at the back of the Appellant, the learned CIT(A) also grossly erred in following the same without any application of mind and without providing a right to cross-examine the person who so stated adversely at the back of the Appellant.
1.4. That it is categorically stated before the learned Assessing Officer as well as the learned CIT(A) that user of material behind the back of the assessee is unjustified, is illegal, is bad in law, is in violation of principles of natural justice and such statement deserves to be excluded for non- consideration but both the learned authorities grossly erred in placing mechanical reliance on the statement, its user is in utter violation of principles of natural justice. 1.5. That specific challenge was before the learned CIT(A) in the detailed Submissions and arguments and reliance was placed on several rulings of Hon'ble Supreme Court and various Courts, the learned CIT(A) grossly erred in not even referring the same, in ignoring the same and in scuttling out the valid objection.
That it was specifically requested that Appellant should be permitted to cross-examine the person on whose statement both the learned authorities are totally mum and silent on the very valid objection though it is supported by innumerable authorities of the Courts, user of such material is in violation of principles of natural justice and such material ought to have been ignored and deserves to be ignored.
1.7 That the Appellant have not paid the alleged amount of INR 1,80,00,000 made to Shri Sanjay Garg for foreign remittance to foreign suppliers for import of goods, therefore the addition is unauthorized, illegal, invalid, bad in law and misuse of provisions of law and deserves deletion
2. The learned Assessing Officer while drafting the computation sheet has not given the deduction of INR 10,000 to the Appellant under section 80TTA.
3. The above grounds of appeal are mutually exclusive and without prejudice to each other. The Appellant craves leave to add, amend, vary, omit or substitute, withdraw any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.
10. At the time of hearing, Ld. AR of the assessee basically stressed the issues that Assessing Officer has made the addition u/s. 69A of the Act without providing and confronting all the statements and documents relied upon and without considering the submissions of the assessee wherein it was submitted that no import transactions was done by her and hence no question of any cash payment to Sanjay Garg arises.
11. The Assessing Officer made the addition merely on the basis of statement made by Sh. Sanjay Garg which is unsupported by any other material or corroborative evidences. He basically denied any transaction with Sh.
Sanjay Garg for foreign remittance to foreign suppliers for import of goods and finally he submitted that Assessing Officer has not granted deduction u/s 80TTA of the Act.
On the other hand, Ld. DR relied on the findings of lower authorities and submitted that the transactions made by the assessee is of accommodation entries and assessee has not submitted any evidence relating to commission earned by her. The circumstantial evidence shows that assessee is one of the beneficiaries in the whole import transactions.
Considered the rival submissions and material placed on record, we observed that the assessee has declared commission of Rs.4,05,000/- as income from other sources but failed to substantiate the nature of commissioned income or any other income earned by the assessee during the year. The assessment was selected through CASS to verify the genuineness of transaction uploaded through VRU, identity of parties related to transaction and whether assessee has declared proper income.
From the information supplied by the assessee, we observed that assessee has not declared any business income, perhaps declared only commission income. Based on the search and seizure operations conducted in the case of Sh. Sanjay Garg and the department had information from the statement recorded from Sanjay Garg who had provided the fictitious details of imports and based on the information provided by him relating to the transactions with Sh. Manoj Gupta. As per the statement and the information provided by them the investigation wing found that assessee is one of the beneficiary.
After considering the detailed submissions and material available on record, we observed that the Assessing Officer has proceeded to make the addition based on information available with the department and on the basis of statement recorded by Mr. Sanjay Garg and further assessee could not substantiate the income declared by her in the return of income.
In our considered view, the Assessing Officer cannot proceed to make addition solely on the basis of statement recorded from Sh. Sanjay Garg. The allegation of the Investigation Wing that Sanjay Garg had carried on imports from China by adopting the method of under value invoices and the different amount was settled through Mr. Manoj Gupta without recording the above said transaction in any of the books of accounts maintained by the beneficiaries, after considering the modus operandi operated by Sanjay Garg and Manoj Gupta.
In our considered view, the Assessing Officer has not substantiated the allegation made against the assessee except the statement of Mr. Sanjay Garg other than that Assessing Officer has not made proper investigation to bring on record corroborative evidences. The Assessing Officer could not bring on record how assessee has not declared any imports nor declared any income from business. As per the statement of Mr. Sanjay Garg the beneficiaries are importing the goods from China and indulged in underdeclaration of the imports value to reduce the customs duty. In this case we observed that assessee has not imported any goods during the year nor had any export import license. That being the case there is no evidence on record to show that assessee is the beneficiaries of the declaring undervalue of imports 18. In our considered view assessee may have involved in remitting the amounts from Manoj Gupta, Manoj Gupta has utilized the services of the assessee to remit the amount without their being any imports. From the return of income filed by the assessee and other relevant information available on record, we are of the view that assessee is only a pass through beneficiary who has earned the commission income without doing any activity. That is the reason assessee could not explain the basis of earning the above said income. There is no corroborative evidences to prove that assessee is actually imported the goods and part of the modus operandi operated by Mr. Sanjay Garg and Mr. Manoj Kumar Gupta. Therefore, merely because assessee is one of the facilitator for Mr. Manoj Gupta the whole transaction of remittance could not be added in the hands of the assessee. In our view, there is no corroborative evidence against the assessee except flip-flop of changing the statement relating to commission income earned by her cannot be used against the assessee. Since assessee has already declared the unexplained commission income in her return of income no other income can be brought on record and, therefore, we are inclined to delete the addition made by the Assessing Officer for the simple reason that assessee has no independent source of business income nor it is brought on record that assessee is actually carried on any kinds of business. Mere suspicion without corroborating evidences on record, AO cannot proceed to make addition merely relying upon the statement of third party.
In the result appeal filed by the assessee is allowed. Order pronounced in the open court on this day of 6th February, 20. 2026.