ITAT Upholds Deletion of ₹11.73 Cr Unexplained Cash Credit Addition Citing AO's Reliance on Unverified STR Information [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) upheld the deletion of an addition of Rs. 11,73,52,801 made by the Assessing Officer (AO) as unexplained cash credits under Section 68 and held that the AO’s reliance on unverified Suspicious Transaction Report (STR) information lacked substantiation.

AGL Logistics Pvt. Ltd. (assessee), a company engaged in logistics, faced scrutiny for alleged high-value transactions with M/s. Trax Ent and M/s. Shipair Logistics Pvt. Ltd. The AO, based on STR information, alleged that the assessee had credits of Rs. 8,64,89,326 in its Axis Bank account and Rs. 3,01,12,025 in its IndusInd Bank account, totaling Rs. 11,66,01,351.

The AO treated these amounts as unexplained credits under Section 68, as the assessee and the banks did not furnish bank statements during the assessment proceedings. The AO completed the assessment, determining a total income of Rs. 11,73,52,801.

Aggrieved by the AO’s order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) called for a remand report from the AO and, after considering the assessee’s submissions, bank statements, and the AO’s remand report, deleted the addition.

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The CIT(A) noted that the bank statements provided during appellate proceedings showed no evidence of the alleged transactions, except for a single credit of Rs. 66,000 from M/s. Shipair Logistics Pvt. Ltd.

Aggrieved by the CIT(A)’s order, the Revenue appealed to the ITAT. The Revenue’s counsel argued that the AO rightly made the addition under Section 68 due to the assessee’s failure to substantiate the credits during the assessment.

The two-member bench comprising Challa Nagendra Prasad (Judicial Member) and Rifaur Rahman (Accountant Member) observed that the AO based the addition solely on STR information without further verification.

The Tribunal noted that the AO did not issue notices to M/s. Trax Ent or M/s. Shipair Logistics Pvt. Ltd. nor requested the banks to confirm the STR details. It examined the bank statements of Axis Bank and IndusInd Bank, finding no traces of the alleged high-value transactions.

The Tribunal further observed the AO’s remand report did not address the bank statements or the assessee’s submissions, and subsequent requests for a revised report went unanswered. It held that the AO’s addition was unsustainable due to the lack of independent verification of the STR information.

The bench also noted that the assessee’s bank statements and submissions during appellate proceedings sufficiently demonstrated the absence of the alleged transactions. It upheld the CIT(A)’s order and the deletion of the Rs. 11,73,52,801 addition was confirmed. The appeal of the Revenue was dismissed.

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