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Judgment
PER VIKAS AWASTHY, JUDICIAL MEMBER:
This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-27, New Delhi [in short ‘the CIT(A)’] dated 31.01.2026, for Assessment Year 2020-21.
The solitary ground pressed by the assessee is Ground No. 6, assailing addition of Rs.40,500/- u/s 69C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
Narrating facts of the case, Shri Hardeep Singh Chawla, appearing on behalf of the assessee submits, that the assessee is engaged in the business of trading of luxury watches. The case of the assessee was reopened u/s.147 of the Act and notice u/s 148 of the Act was issued to the assessee on 29.03.2024. In response to the said notice, the assessee filed return declaring loss of Rs.47,65,306/-. During the period relevant to the assessment year under appeal, the assessee had sold a watch amounting to Rs.13,50,000/- to M/s. Guru Kirpa Trading Company. In reassessment proceedings, the Assessing Officer (AO) held the transaction between the assessee and M/s. Gurukirpa Trading Company as bogus and made addition of Rs.1,35,000/- u/s 69A/115BBE of the Act (i.e.@10% of the value of transaction). The AO further made addition of Rs.40,500/- u/s 69C of the Act on presumptions that the assessee would have paid commission @3% of transaction value for obtaining accommodation entry. Aggrieved by the assessment order dated 25.03.2025 passed u/s 147 r.w.s. 143(3) of the Act, the assessee filed appeal before the CIT(A).
The First Appellate Authority after examining various documentary evidences furnished by assessee viz. sales invoices, RTGS details, GST compliances, etc. deleted the addition u/s 69A of the Act. However, the CIT(A) sustained the addition of Rs.40,500/- u/s 69C of the Act. The ld. Counsel submits that once the addition u/s 69A has been deleted, the consequential addition u/s 69C cannot be sustained. He thus prayed for deleting the said addition.
Per contra, Shri Manoj Kumar, representing the Department vehemently defending the impugned order prayed for dismissing of appeal of the assessee. He submitted that a search action u/s.132 of the Act was conducted on Johnson Watch & Kapoor Watch group. M/s. Gurukripa Trading Co. is part of said group. Shri Pramod Sahu in his statement admitted that accommodation entries were provide to various beneficiaries through dummy entries controlled by him. Therefore, assessment in the case of assessee was re-opened.
Both sides heard, orders of the authorities below examined. The CIT(A) has accepted the transaction entered into by the assessee with M/s. Guru Kirpa Trading Company as genuine and has thus deleted the addition of Rs.1,35,000/- u/s 69A of the Act. Once the addition u/s 69A has been deleted, the consequential addition u/s 69C of the Act amounting to Rs.40,500/- is unsustainable. Accordingly, the addition of Rs.40,500/- is directed to be deleted. The assessee succeeds on Ground No. 6 of appeal.
The assessee in Ground Nos. 2 to 5 of appeal has assailed the validity of reassessment proceedings. The ld. Counsel for the assessee made a statement at Bar that he is not pressing the legal grounds raised in Ground Nos. 2 to 5. In light of the statement made by the ld. Counsel for the assessee, Ground Nos. 2 to 5 of appeal are dismissed as not pressed.
In Ground No. 8 of appeal, the assessee has assailed initiation of penalty proceedings u/s 271AAC and 271DA of the Act. Challenge to Penalty proceedings are a separate cause of action, therefore, cannot be challenged in quantum appeal. Hence, Ground No. 8 is dismissed.
In the result, appeal of the assessee is partly allowed.