DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4(3), KOLKATA, KOLKATA vs. VIVEK GUPTA, KOLKATA

The Ld. CIT(A) in the appellate proceedings discussed in detailed the facts qua the said loans. The Ld. CIT(A) noted in para 6.2.2 that the AO has added these loans to the income of the assessee on the ground that the assessee failed to produce any details/documents in respect of the lending companies. The AO also noted that the source of funds of the lending companies were not substantiated by the assessee. The Ld. CIT(A) in para 6.2.3 noted that the AO failed to appreciate the fact that the statements as relied by the AO in the assessment proceedings was later retracted by the persons i.e. Shri Vishwanath Gupta and Shri Vivek Gup- ta (proprietor of M/s Vivek Gupta & Co.) on 28.11.2019 and 20.11.2019 respectively. The Ld. CIT(A) noted that no addition can be made on the basis of retracted statement and also that no addition can be made by re- lying upon the statement recorded during survey unless there is corrobo- rative material. The Ld. CIT(A) while deleting the addition relied on the decision of CIT Vs. Khader Khan Son (2013) 352 ITR 480 (SC), wherein it has been held that statement recorded u/s 133A of the Act has no eviden- tiary value and no admission made during such statement cannot be ba- sis of addition. Similarly, the Ld. CIT(A) relied on the decision of CIT, Del- hi Vs. Ms. Mayawati, 338 ITR 563, dated 03.08.2011, wherein the Hon’ble Delhi High Court has held that the capacity of any person can not be judged on the basis monthly or annually income but the term capacity is by very wide term. The Hon’ble court has held that the addition cannot be made on the ground that the assessee has no fixed assets, low turnover and or low expenses and no operational income. The Ld. CIT(A) also noted the fact that in para 6.2.13 that the assessee has repaid the loan in the next financial year with due payment of interest after deduction of TDS at source by relying on the decision of Hon’ble Calcutta High Court in the case of PCIT Vs. Alom Excursions Ltd., [ITAT/268/2024), wherein the CO No. 68/Kol/2025 Vivek Gupta High court has deleted the addition made u/s 68 of the Act by taking note of the fact of repayment of loan. Similarly, issue has been laid down by the various other decisions of the Hon’ble Calcutta High Court which was discussed by Ld. CIT(A) as well as the decision of Hon’ble Gujarat High Court in the case of Pr.CIT vs. Ambe Trade Corp (P) Ltd.,(2022) 145 tax- mann.com 27 (Guj).

CO No. 68/Kol/2025 Vivek Gupta 6. We also note that capacity of person cannot be judged on the basis of no fixed assets having low turnover and low operational income etc. and one should obtain 60-degree financial analysis before drawing ad- verse view against the assessee as has been held by Ld.CIT, Delhi Vs. Ms. Mayawati (supra) by Delhi High Court. Therefore, the Ld. CIT(A) has passed a reasonable and speaking order on this issue which we are in- clined to uphold by dismissing Ground Nos. 1 to 3 in the Revenue’s ap- peal.

CO No. 68/Kol/2025 Vivek Gupta in tally software. During the course of survey, Shri Nikhil Mishra, who was the Director of M/s One of the Global Entities and partner in other entities was found to be present there and his statement u/s 131 of the Act was recorded and he admitted that he was a dummy director of these two concerns and has carried out business as per the direction of Shri Vi- vek Gupta or Nabin Agarwal, CA of the Avima Group. The said statement of Shri Nikhil Mishra was confronted to Vivek Gupta to which he did not agree by stating that Shri Nikhil Mishra may not have understood the meaning of dummy director. Similarly, statement of Shri Nabin Agarwal was recorded and he was also asked to explain why the books of account of offshore entities were maintained at the office premises of Avima Group. He stated that he was maintaining the books of these entities at the instruction of Shri Vivek Gupta . Accordingly the AO treatd Mr Gupta as a person who was controlling offshore entities and was owner of the eight offshore entities. Finally, the AO on the basis of record maintained by in the tally account came to the conclusion that income of these off- shore entities was chargeable in the hands of the assessee. Finally, on the basis of materials/documents discovered during the course of survey and post-survey, statements of Shri Nikhil Mishra and Shri Nabin Agarwal and the proprietary concern of Vivek Gupta’s wife M/s Kolkata Bardana Company who is not having any cli- ents/party other than these 8 offshore entities, held that the assessee is the person deriving income through such entities and income is chargea- ble u/s 5(1) read with section 6(3) of the Act in the hands of the assessee only. Accordingly, Rs. 2,41,00,000/- was added u/s 69A of the Act as un- explained money.

“7.2.1. I have gone through the assessment order as well as the submission of the assessee. On examining the same, it is observed that during the course of survey operation under section 133A of the Act dated 04.11.2019 books of ac- counts and other details of eight offshore entities were found in the business promises of the assessee Vivek Gupta. In course of survey operation, Shri Nikh- il Mishra, Director of one concern under the name and style, M/s. Globex Commodities Pte. Ltd. based in Singapore and deposition of Siri Naveen Agarwal, CEO of Privi Exports Pvt. Ltd. was taken and he also admitted that Mr. Gupta is the main person of these 8 overseas companies and the appellant is the main controlling person of all these concerns. On the basis of this deposi- tions, the AO concluded that the appellant is the main person of these oversees concerns namely Globex Commodities Pte Ltd. and King Commodities oversees concerns and added sum of Rs.2,41,00,000/- u/s 69A r.w.s. 115BBE of the Act. 7.2.2. It is pertinent to mention that while forming the said opinion that the as- sessee Shri. Vivek Gupta is the owner of these overseas concerns the AO had observed several incongruities against the said offshore concerns that the books were maintained in the business premises of the assessee in tally. Fur- ther, there were other findings in the said survey which clearly indicates that 'Place of effective management (POEM)' of these aforesaid two off-shore con- cerns are in India. Additionally, the AO had also inferred that the entity M/s Calcutta Bardana Co., where the wife of the assessee Mrs. Pritu Gupta was theproprietor of the aforesaid entity, was providing accounting services to these said offshore entities. However, the Mrs. Gupta did not have any qualifi- cation of Chartered Accounting Further, the AO had also observed that the di- rectors of the said entities namely Mr. Nikhil Mishra and Mr. Naveen Agarwal had on oath given statement that they were dummy directors and just follows direction of the assessee. It is an admitted fact that they had retracted their statements later on. However, they had not given any satisfactory reply for their retraction of their statements. If they retracted the statement that the as- sessee is the sole owner and main operator of these offshore entities, it deems that they are the owners of these entities. If so, the status of such offshore en- tities becomes purely 'Resident of India. Hence, the contention of the assessee that these entities are not resident of India and having residential status of ei- ther Singapore or other respective countries is totally a concocted story The assessee had also contended that in their respective country they had paid their respective taxes. However, the assessee had remained silent on DTAA issue with these respective countries. Hence, the income of these entities is clearly taxable in India and specifically in the hands of the assessee as he is the sole operator of these entities. 7.2.3. It is imperative to mention that in course of survey proceedings conduct- ed at the appellants premises on 04.11.2019 books of accounts of 8 offshore entities namely Mohamed Cheik Ibrahim Cheik (Privi Commodities), Globex Commodities Pte Ltd, King Commodities Benin Sarl (King Commodities), Niha Enterprises (King Dakar), King Burkina, GebabisSarl (Bissau Venture), Peniel Integrated Commodities Resources Ltd (King Nigeria), Burhani Trading Co. LLC were found in Tally software. Thereafter, the reliance made by the AO upon the statement of one Sri Nikhil Mishra, director of Globex Commodities Pte Ltd.

CO No. 68/Kol/2025 Vivek Gupta and partner in King Commodities recorded in the course of survey to allege that Nikhil Mishra was a dummy director working on the instruction of the ap- pellant is proved to be true. 7.2.4. It is worth mentioning that the AO had also relied upon the DDIT (Inv) report to allege that the assessee was a common member in WhatsApp group labelled as "King - Cotonou wherein Nikhil Mishra, Naveen Agarwal and Vivek Gupta, appellant were the members. The assessee had contended that the AQ had not considered the explanation of the appellant wherein repeatedly ex- plained that he was member of the group for co-ordinating and accounting real time information in connection to Kings Commodities, Benin Sarl. He also ex- plained that the instructions mentioned in the group are to pay the parties re- lating to King Commodities after checking the outstanding balances. The ap- pellant has also explained that the Chats were mostly in respect of accounting transactions relating to King Commodities Benin Sarl and all these transac- tions were duly reflected in the books of Kind Commodities Benin Sari. The assessee had also explained the transactions are mostly debtors' collection, creditors payments reference to amounts in local currency Benin i.e. West Afri- can CFA, Franc. However, the assessee had not denied the fact that the trace of different transactions made with these entities through a WhatsApp Group- namely King-Cotonou' as mentioned at para no.9.2. & 9.2.1 of the asst order are the undisclosed income of the said offshore entitieswhich is liable to be charged in the hands of the assessee as the main operator and key person of the said entities. 7.2.5. Further, the assessee failed to prove that these transactions are not re- lated to him. There is no doubt that these transactions are business transac- tions in respect of the said offshore entities. Hence, it is decided to tax the el- ement of profit on the business transactions at 8% which comes to Rs. 19,28,000/- (Rs.2,41,00,000/- x 8% = Rs. 19,28,000/-). The AO is directed to delete the addition of Rs.2,21,72,000/- (Rs.2,41,00,000/- minus Rs. 19,28,000/- = Rs.2,21,72,000/-). Hence, the addition of Rs. 19,28,000/- is confirmed and the remaining addition of is deleted. Consequently, this ground of appeal raised by the assessee is partly allowed.”

12. After hearing the rival contentions and perusing the materials avail- able on record, we find that during the course of survey proceedings, the books of accounts of 8 offshore companies were found in the premises of the assessee in the tally software. Shri Nikhil Kumar Mishra, director of Globex Commodities Pte Ltd. was recorded u/s 131 of the Act. Similarly Shri Nabin Agarwal, CEO of Privi Exports Pvt Ltd. was recorded u/s 131 of the Act. We observe that in para 7.2.5 CIT(A) has himself concluded that these impugned transactions amounting to Rs. 2,41,00,000/- were business transactions of the said offshore entities. Therefore, having held so it not justified to estimate 8% of said amount as income of the as- sessee. We observe that the CIT(A) has placed too much reliance upon the CO No. 68/Kol/2025 Vivek Gupta statements of Nikhil Mishra, director of Globex Commodities Pte Ltd. and the statement of Sri Naveen Agarwal CEO of Privi Exports Pvt. Ltd. ob- tained in course of Survey proceedings. Only on the basis of these depositions, the AO and CIT(A) has held the assessee to be beneficial owner of such entities. We also note that the assessee when confronted with these statements never admitted that the offshore entities were con- trolled or managed by him either before the survey party or in course of assessment proceedings. Besides, no materials were brought on record to disprove the arguments and documents furnished by the assessee.

13. We note that thus, the lower authorities have failed to take note that both Nikhil Mishra and Naveen Agarwal had retracted their state- ments immediately after the recording of statements in course of survey on 13.11.2019. The authorities below have clearly ignored the fact that these offshore entities were assessed to tax in the respective country and have paid respective taxes in their countries. We also note that the appel- lant in his statement gave complete details of all such 8 entities which contained full named, registered office addresses, date of transactions, name of directors and shareholders etc. The appellant also explained that these entities were doing transactions of purchase and sales and based on these accounts maintained, they filed their Income Tax Return in re- spective countries. However, the AO has not brought any material on rec- ord to rebut the explanation of the appellant which is incorrect or unac- ceptable. No enquiry whatsoever was conducted by the AO. In para 9.4.2, the AO has relied upon the DDIT (Inv) report to allege that the assessee was a common member in WhatsApp group labelled as "King Cotonou" wherein Nikhil Mishra, Naveen Agarwal and Vivek Gupta theappellant were the members. The AO has not considered the explanation of the ap- pellant wherein he repeatedly explained that he was member of the group for co-ordinating and accounting details/information in connection to Kings Commodities, Benin Sarl. He also explained that the instructions

CO No. 68/Kol/2025 Vivek Gupta mentioned in the group are to pay the parties relating to King Commodi- ties after checking the outstanding balances. The appellant has also ex- plained that the Chats were mostly in respect of accounting transactions relating to King Commodities Benin Sarl and all these transactions were duly reflected in the books of Kind Commodities Benin Sarl. The appellant also explained the transactions are mostly debtors collection, creditors payments reference to amounts in local currency Benin i.e. West African CFA, Franc. However, the AO has ignored all the explanations complete- ly. We note that the lower authorities were guided by the fact that Calcut- ta Bardana Co. whose proprietor is Mrs. Pritu Gupta is not providing ac- counting sources to entities other than the 8 entities and she is also not a qualified CA to maintain the books of accounts. The assessee from the date of survey as well as in course of assessment proceedings and appel- late proceedings has been completely explaining that an Accounting Ser- vices agreement was entered into by M/s Calcutta Bardana Co and all the above-mentioned foreign entities on 1st July 2018 to maintain books of accounts of the foreign entities. The copies of accounting services agree- ments of Calcutta Bardana Co with the foreign entities are furnished be- fore the authorities below. In consideration of the services, the foreign en- tities agreed to pay charges to M/s Calcutta Bardana Co by way of fee of USD 500 maintenance fees from the respective entities. The copies of bank statements of Calcutta Bardana Co, highlighting the receipt of the aforesaid fees from the respective foreign entities were furnished before the authorities below.

CO No. 68/Kol/2025 Vivek Gupta Commodities, Benin Sarl. He also explained that the instructions men- tioned in the group were to pay the parties relating to King Commodities after checking the outstanding balances. The appellant has also explained that the Chats were mostly in respect of accounting transactions relating to King Commodities Benin Sarl and all these transactions were duly re- flected in the books of King Commodities Benin Sarl. The assessee had also explained the transactions were mostly debtors' collection, creditors payments reference to amounts in local currency Benin i.e. West African CFA, Franc. Ignoring these facts and without bringing any material on record and purely on the basis of suspicion, the AO and CIT(A) have con- cluded that place of business of these offshore concerns were in India and the assessee was the owner of said two concerns. In our considered opinion, the provisions of 69A of the Act are not applicable as section 69A deals with any money, bullion, jewellery or other valuable or sale which is not recorded in books of accounts and assessee is found to be owner of such money, bullion, jewelleries etc for which assessee has no explana- tion or explanation is not to the satisfaction of AO only then 69A can be invoked. In the instant case there is no doubt that the offshore entities are separate legal entities in the respective countries with separate owner. These entities are separately assessed to tax in their respective countries. The assessee has explained his association before the Survey team, at the assessment stage as well as before the CIT(A). In fact CIT(A) has also in para 7.2.5 accepted that these transactions were business transactions of offshore entities and consequently we are of view that no addition u/s 69A can be made in the hands of the assessee in respect of these transac- tions as has been held in umpteen number of cases that suspicion how- soever strong it maybe cannot take the place of evidence and therefore the addition cannot be made in the hands of assessee. Therefore we are inclined to set aside the order of Ld. CIT(A) on this issue and direct the AO to delete the entire addition. Consequently the revenue’s ground No. 6 & 7 are dismissed and cross objection ground No. 2 is allowed

CO No. 68/Kol/2025 Vivek Gupta 15. We are adjudicating the ground no. 1 of the cross objection which is against the re-opening of assessment and the same is left open to be de- cided later if the need arises for the same.

Order pronounced on 20.01.2026 Sd/- Sd/ (Rajesh Kumar) (Pradip Kumar Choubey) Accountant Member Judicial Member Dated: 20.01.2026 AK,Sr. P.S. Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR)