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Judgment
PER ANUBHAV SHARMA, JUDICIAL MEMBER:
This appeal preferred by the assessee against the order dated 15.10.2025 of Ld. National Faceless Appeal Centre (NFAC) Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in DIN & Order No: ITBA/NFAC/S/250/2025-26/1081766874(1) arising out of the assessment order dated 18.12.2017 u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) passed by ACIT, Circle 52(1) New Delhi, for AY: 2015-16.
Heard and perused the records. The assessee company is engaged in the business of Investment activities and had filed its original return of income for the year consideration declaring total income at Rs.84,661/-The assessee's case was reopened for assessment u/s 147 of the Act based on the information received from the ADIT (Inv.), Kolkata that the assessee is one of the beneficiaries of the accommodation entries.On the basis of investigation carried out by the ADIT(Inv.), Kolkata in the case of M/s. Sidhsilver Conclave Pvt. Ltd. and M/s. RegiusVinimay Pvt. Ltd, it was allegedly found that the unaccounted fund to the extent of Rs.75,40,740/- in the form of sales transactions have been received by assessee Company from M/s. Sidhsilver Conclave Pvt. Ltd. and M/s. Regius Vinimay Pvt. Ltd. during the relevant year. Since, the satisfactory explanation and evidences were not submitted, the AO treated the money as unexplained u/s 69A of the Act and added back to his total income as deemed income. Same is sustained by ld. CIT(A) for which assessee is in appeal.
The contention of ld. Counsel is that when purchaes is accepted sales cannot be doubted and in any case income of sales is reflected in books so section 69A of the Act cannot be invoked.
Ld. DR relied the findings of ld. Tax authorities below where primarily report of ADIT (Inv.), Unit-3(2), Kolkata, has been relied.
In this context we find ld. CIT(A) has culled out the case of ld. AO as follows;
“The appellant has taken plea that they have made sales to M/s. Sidhsilver Conclave Pvt. Ltd. and M/s. RegiusVinimay Pvt. Ltd and money under question is sale consideration.Regarding the appellant's contention that section 69A is not applicable in theircase, we first need to read the section 69A.
69A. [ Unexplained money, etc. [Inserted by Act 5 of 1964, Section 16 (w.e.f. 1.4.1964).]
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 ] / Substituted by Act 18 of 1992, Section 35, for Explanation 3 (w.e.f. 1.4.1993).J[Assessing Officer] | Substituted by Act 4 of 1988, Section 2, for " Income-tax Officer" (w.e.f. 1.4.1988).L 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.J [Inserted by Act 5 of 1964, Section 16 (w.e.f. 1.4.1964).]
5.In the instant case, the appellant company is in receipt of certain money and the explanation of the same is furnished in terms of sale consideration received from the concerned parties. The AO has reasons and credible information to disregard theexplanation given by the appellant company, therefore,I find no infirmity in the action of AO so far as addition off said money u/s 69A is concerned. The appellant's contention is not sustainable.
6.The further contention of the appellant is that theaddition of salesproceedings u/s 69A without considering the corresponding purchases and without rejections of the books are bad in law as well as on facts.
7.The appellant has claimed to have made sales of fabrics to the said parties and has submitted details of sale in terms of description of goods, copy of bills, ledger account entries and bank statement. On the other hand, the AO has brought on record that the case was referred to verification unit for verification of physical existence of the seller parties i.eRegiusVinimay Private Limited and Sidhsilver Conclave Private Limited and the designated Inspector in the process has found that the said parties are not traceable on the address given by the appellant company. It is also noted that the notices u/s 133(6) issued by the the ADIT (Inv.), Unit-3(2), Kolkata also remains un-complied by the said parties. Therefore, without the verification of these parties i.eRegiusVinimay Private Limited and Sidhsilver Conclave Private Limited, the claim of sale of the appellant company cannot be held genuine and the documents in terms of sale bill, ledger account which are in the control of the appellant, cannot be relied upon. It is noted that the verification of thesaid parties has failed at three stages i.e first at the ADIT (Inv.), Unit-3(2), Kolkata, second at AO level during assessment proceedings and third at verification unit level, therefore, the findings of the investigation of ADIT (Inv.), Unit-3(2), Kolkata remain good and serve as credible evidence.In view of the above discussion, contention of appellant raised through ground no 2 are not sustainable, hence this ground is dismissed.”
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9.In ground no. 4, the appellant has stated that the Ld. A.O. violated the principal of natural justice by not providing an opportunity to cross-examine the alleged third parties whose non response was relied upon to make the addition. 9.1 With regard right to cross examination, various judicial pronouncements, as stated under, have made it clear that the opportunity of cross examination is not mandatory.
(i)The right of cross examinations is not an absolute right. (Nath International Sales vs. UOI, AIR 1992 (Del) 295). The Hon'ble Supreme Court has also held that the right of hearing does not necessarily include, right of crossexamination. The right of cross examination must depend upon the circumstances of each case and also on the statute concerned (State of J&K vs. BakshiGulam Mohammad AIR 1967 SC 122). The question whether the assessee is entitled to cross examination is a question which may largely depends on the facts and circumstances of the case (ef. Shyamlal Biri Merchant vs. UOI (1993) 68 ELT 548, 551(All.) In the present case no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee, further the group has categorically admitted to providing of accommodation entries through various benami concerns.
(ii)The Hon'ble Rajasthan High Court in the case of Rameshwarlal Mali vs.CIT 256 ITR 536(Raj.) has held that "there is no provision for permitting the cross examination of the persons whose statements were recorded during survey.
(iii)In CIT v. Metal Products of India (1984) 150 ITR 714 (P&H), it was heldthat the AO may gather information in any manner he likes, behind the back of the assessee and utilize the same against the assessee, even if it does not, in all respects satisfy the requirements of the Indian Evidence Act. What is necessary is that he should have material upon which to base the assessment; "material" as distinguished from "evidence" which includes direct and circumstantial evidence.
In view of the above, ground no 4 is not sustainable, hence dismissed.
10.In ground no 5, the appellant has stated that the Ld AO did not disturb the purchase for which addition of sales has been made as unexplained money under section 69A of the Income Tax Act.
10.1As discussed in the earlier paragraphs that the claim of sale consideration made by the appellant has been disregarded by the AO for the reasons that the concerned parties remain untraceable therefore question of corresponding purchases does not arise. Ground no 5 stands dismissed.”
We find primarily for reasons that purchaser’s identity was found doubtful, the additions u/s 69A of the Act have been made and sustained. In this context we find that statutory scope of Section 69A of the Act requires that the asset or money must be unrecorded. If sales entries exist in the books, treating them as unexplained cash under 69A is not sustainable as same will lead to double addition. Once sales or business receipts are declared and accepted or profit is estimated on recorded turnover, the same amount cannot be taxed again as unexplained money. Ld. AO, has to discard burden of correctness of audited books and demonstrate absence of nexus between the sales receipts and the entries in audited or maintained books of account. Same when not demonstrated, the sales duly recorded in the books of account cannot lead to addition u/s 69A of the Act. As for this proposition we also rely decision in Lalchand Bhagat Ambica Ram Vs. CIT (1959) 37 ITR 288 (SC); Lakshmi Rice Mills Vs. CIT (1974) 97 ITR 258 (PAT); DCIT Vs. M/s Karthik Construction Co. ITA No. 2292/Mum/2016. Thus the findings of ld. CIT(A) cannot be sustained.
The grounds are sustained and appeal is allowed. The impugned additions are deleted.