ITAT Mumbai Quashes Rs. 9.85 Crore Section 68 Addition: Mere Suspicion Cannot Override Documentary Evidence

Introduction to the Dispute

In a significant judicial pronouncement, the Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) delivered a comprehensive ruling in the case of ITO Vs Supergold Properties Pvt. Ltd. on 19/10/2020. The Tribunal dismissed a batch of six appeals filed by the Revenue pertaining to the Assessment Year (AY) 2011-12. The primary appeal, registered as ITA No. 178/M/2020, revolved around a substantial addition of Rs. 9,85,00,000/- executed by the Assessing Officer (AO) under Section 68 of the Income-tax Act, 1961.

The core controversy centered on whether the assessee had received unexplained cash credits from alleged shell entities or if the transaction was a genuine joint venture contribution. The Tribunal’s decision in the lead matter was applied mutatis mutandis to the connected appeals (ITA Nos. 177, 179, 180, 1233, and 1234/M/2020).

Factual Background of the Case

Initial Filing and Reassessment Notice

The assessee originally submitted its return of income for AY 2011-12 on 22.09.2011, declaring a total income of Rs. 48,790/-. This return was initially processed under Section 143(1) of the Income-tax Act, 1961.

Subsequently, the AO received specific intelligence from the Directorate of Income Tax (Investigation), Unit 2(1), Kolkata. The investigation wing's report alleged that the assessee had been the beneficiary of Rs. 9,85,00,000/- routed through Minaxi Suppliers Pvt. Ltd., which was characterized as a non-existent shell company. Prompted by this information, the AO initiated reassessment proceedings by issuing a notice under Section 148 on 29.03.2018. In response, the assessee filed a fresh return on 26.04.2018, reiterating the originally declared income of Rs. 48,790/-.

The Assessing Officer's Allegations

During the assessment proceedings, the AO scrutinized the transaction heavily. According to the investigation report relied upon by the AO, the funds were allegedly generated through a complex layering process. The modus operandi purportedly involved cash deposits in primary bank accounts (Layer 1) maintained with ICICI Bank and other institutions, which were immediately transferred via RTGS/NEFT to secondary accounts (Layer 2).

These secondary entities included companies like Maxworth Vinimay Pvt. Ltd., Dolphin Vintrade Pvt. Ltd., GPM Portfolio Management Pvt. Ltd., Impression Suppliers Pvt. Ltd., Avon Vanijya Pvt. Ltd., and Ratnakar Vincom Pvt. Ltd. The funds were then allegedly funneled into Minaxi Suppliers Pvt. Ltd., which ultimately transferred Rs. 9,85,00,000/- to the assessee. The AO concluded that the assessee was routing its own unaccounted wealth back into its books as a joint venture contribution. Consequently, the AO finalized the assessment under Section 143(3) read with Section 147, adding the entire sum under Section 68.