M/S DESIGN WORKSHOP (INDIA) PRIVATE LIMITED,DELHI vs. DCIT, CENTRAL CIRCLE-20, DELHI

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ITA 6239/DEL/2025Status: DisposedITAT Delhi05 August 2026AY 2020-2113 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the seized documents, described as 'dumb documents', lacked corroborative evidence to establish actual sales outside the books. The Tribunal found that retractions of statements by employees and directors, along with the absence of other supporting evidence like excess stock or unexplained investments, weakened the additions made by the lower authorities.

What were the facts?

During a search operation, the Income Tax Department seized loose papers and digital documents allegedly indicating sales outside the company's regular books. The Assessing Officer estimated undisclosed income by applying a profit rate to this alleged unaccounted turnover for multiple assessment years.

What were the issues?

Whether additions to income can be sustained solely on the basis of loose documents and uncorroborated digital evidence without independent verification or corroborative material, especially when statements recorded during search have been retracted.

Which sections of the Income-tax Act were involved?

Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, DELHI

Before: SHRI ANUBHAV SHARMA

For Appellant: Adv. Sh. Shailesh Gupta, CA
For Respondent: Ms. Rakhi Vimal, CIT, DR
Hearing: 29.06.2026Pronounced: 05.08.2026

PER ANUBHAV SHARMA, JM:

These appeals preferred by the Assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-27, New Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in

P a g e | 2 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23) appeals filed before him against the orders of the ld. Assessing Officer

(hereinafter referred to as the Ld. AO, for short) passed u/s 147 of the

Income-tax Act, 1961 (hereafter referred to as ‘the Act’). Further details of

the orders of the lower authorities are as under: -

ITA No. & Ld. FAA who passed Appeal No. & Date of AO who passed the AY the appellate order order of the Ld. FAA assessment order & Date of order 6237/D/25 CIT(A)-27 DIN & Order No : DCIT, CC- 20 2018-19 New Delhi ITBA/APL/M/250/2025 New Delhi -26/1076977970(1) Dated 31.05.2023 Dated: 12.06.2025 6238/D/25 CIT(A)-27 DIN & Order No : DCIT, CC- 20 2019-20 New Delhi ITBA/APL/M/250/2025 New Delhi -26/1076978329(1) Dated 31.05.2023 Dated: 12.06.2025 6239/D/25 CIT(A)-27 DIN & Order No : DCIT, CC- 20 2020-21 New Delhi ITBA/APL/M/250/2025 New Delhi -26/1076978752(1) Dated 31.05.2023 Dated: 12.06.2025 6240/D/25 CIT(A)-27 DIN & Order No : DCIT, CC- 20 2021-22 New Delhi ITBA/APL/M/250/2025 New Delhi -26/1076979535(1) Dated 28.03.2023 Dated: 12.06.2025 6241/D/25 CIT(A)-27 DIN & Order No : DCIT, CC- 20 2022-23 New Delhi ITBA/APL/M/250/2025 New Delhi -26/1076979739(1) Dated 19.06.2023 Dated: 12.06.2025

2.

Heard and perused the records. The present appeals arise from a

common search on ALE group of cases conducted on 09.02.2022 at the

business premises of the Appellant, Design Workshops Private Limited, a

company engaged in the business of purchase and sales of premium

P a g e | 3 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23) furniture. Simultaneous search and seizure operations were also carried out at the premises of several furniture dealers in Delhi on the same date by the Income-tax Department. Allegedly, during the course of the search, certain alleged loose papers and digital documents in computer and mobile phones of directors were found and seized and based principally upon these documents, the Learned Assessing Officer alleged that the Appellant had effected certain sales outside the regular books of account. The ld. Assessing Officer proceeded to estimate undisclosed income by applying the gross profit rate to the alleged unaccounted turnover with regards to all the aforesaid assessment years.

3.

In appeal, while the learned Commissioner of Income-tax (Appeals) granted partial relief by directing that only the net profit rate be applied instead of the gross profit rate, the learned Commissioner (Appeals) nevertheless sustained the addition on the assumption that the seized documents conclusively established undisclosed sales.

4.

Accordingly the assessee is in appeal and the same were heard together where in ld. Sr. Counsel has broadly referred to the alleged incriminating material available in the assessment order itself and submitted that same do not paint any picture of conclusive transaction. The ld. Sr. Counsel has submitted that the approach adopted by both the authorities

P a g e | 4 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23) below proceeds on a fundamentally erroneous legal premise. The issue before now before is not whether gross profit or net profit should be applied, but whether the seized documents, in the absence of any corroborative evidence, establish any alleged sale outside books of accounts. The ld. Sr. Counsel submits that none of the documents relied by learned AO/ CIT (A) suggest any actual sales made outside books of accounts rather said documents were mere loose/ dumb documents not corroborated at all by learned AO and CIT (A) both. Thus as per ld. Sr. Counsel the controversy is whether additions can be sustained merely on the basis of loose papers allegedly recording certain sales when:

a. no excess stock was found during search; b. no unexplained investment in purchases has been established; c. no buyer has been examined; d. no transporter has been examined; e. no delivery of goods outside books has been established; f. no corresponding unrecorded cash has been found; g. no evidence exists regarding receipt of unrecorded sale consideration;

5.

The ld. Sr. Counsel submits that in the absence of the above essential ingredients, the seized documents remain merely pieces of information and dumb documents incapable of giving rise to taxable income. Reliance is

P a g e | 5 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23) placed on the following case laws on the proposition that "no addition can be made on mere hypothetical considerations and, on the basis of dumb document without any corroboration":

 39 ITD 183 (Del) Ashwani Kumar vs. ITO  19 TTJ 546 (Gauhati) Kularanjan Pathak vs. ITO  79 TTJ 1 (Jodh) JRC Bhandari Vs. ACIT  (1998) 3 SCC 410 CBI vs. V C. Shukla  70 TTJ (Ahd) 122 Prarthana Construction (P) Ltd. Vs. DCIT  84 ITR 222(Punj) Chiranji Lal Steel & Rolling Mills vs. CIT  88 TTJ (Chd) 394 Punjab Traders vs. ITO  69 ITD 336 Jaya Shetty vs. ACIT  97 ITR 696 (Bom) ACIT vs. Miss Lata Mangeshkar  41 ITD449 (Cal) ACIT vs. Shri RadheyShyam Poddar  82 ITD 85 (Mum) ™ S. P. Goyal Vs. DCIT

6.

Further, it is submitted by ld. Sr. Counsel that both Learned AO and CIT (A) have failed to appreciate the fact that all the employees and directors on whose statements reliance was placed, had retracted their statements before the Investigation Wing which were never rebutted neither investigated further by learned AO and attention was drawn to pages 392 to

P a g e | 6 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23) 401,403 to 410, 411 to 415, 485 to 486 and 487 to 488 of the paper book for AY 2019-20, to establish the same factually. He further submits that employee of assessee company Ms. Poonam Kemini had also stated on an affidavit that she was forced to write in hand on the said documents as "cash received", whereas, she filed retraction along with affidavit before investigation wing stating that she was forced by Search Officials to write "cash received" on the alleged excel sheets and further, even the excel sheet was also got prepared on the very same day of search i.e. 10.02.2022 which proves that the Search Officials prepared or implanted the aforesaid excel sheets and out attention was drawn to pages 505 to 508 of the paper book of AY 2020-21.

7.

Reliance was placed by ld. Sr. Counsel on the judgment of Hon'ble Supreme Court in the case of CIT vs Jindal Steel & Power Ltd. reported in 460 ITR 162 on the proposition that "Where sufficient evidences were produced by assessee in order to rebut the alleged seized documents and also retracted the statements so recorded, then assessing officer cannot make addition solely on the basis of statements recorded during search operation which was retracted within a reasonable period".

8.

Ld. Sr. Counsel also submitted that the aforesaid issue is covered in the case of assessee by the orders of co-ordinate bench in the case of Adrem

P a g e | 7 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23) India (P) Ltd. vs DCIT in ITA No. 5233 to 5245//Del/2025 and in the case of Essentia Designs Pvt. Ltd. vs DCIT in ITA No. 5145/Del/2025, wherein, the same assessing officer with regards to same date of search and after centralization of cases had made similar additions which were deleted by co-ordinate bench.

9.

Ld. DR has however relied the impugned order and the findings.

10.

We have considered the submission and gone through the material before us. We find that actually there is lack of corroboration of alleged transactions as allegedly stand incorporated in the said incriminating material. The ld. AO has relied the loose paper, and construed that same depict the sales with corresponding receipt of money and leading to taxable business profits. However, same has been matter of inferences, which lacked chain of events supported by evidences. The onus on ld. AO was to establishes that the alleged entries contained in the seized papers represent genuine business transactions actually completed during the relevant assessment years and yes the burden of establishing undisclosed income continues to remain upon the Revenue notwithstanding the fact that the assessment arises pursuant to a search. There is no irrebuttable presumption that every document found represents taxable income. The statutory presumption attached to seized material is rebuttable, only once the same

P a g e | 8 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23) reflects a transaction in entirety. Where alleged incriminating is not self contained or speaking and ld. AO relies on same by way of reasoned inferences, then such inferences should be independently, sustainable under law, so that they can be examined on scales of probability, at stage of appellate authority too. Ld. AO should demonstrate, to some extent ownership of the document, that how under ordinary course of business or impugned transaction the said documents were maintained and the content was consciously recorded by reference to identifiable parties, their status and obligations under law. The document should reflect some nexus between the entries and taxable income.

11.

Here in the case before us the seized material relied upon by the Revenue consists merely of loose sheets/ digital documents which are not books of account maintained in the ordinary course of business. Loose papers may contain, if they have estimates, projections, quotations, proposed transactions, cancelled transactions, rough calculations, internal production notes, costing sheets, negotiations, planning documents, incomplete business proposals, then merely by interpolation of figures, inferences and suspicion, un ccorroborated by independent verification or evidence, cannot be made basis for a conclusive finding, of income derived and not reported or concealed.

P a g e | 9 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23) 12. We find from the paper book, that assessee had given exhaustive explanation as to how these evidences cannot be made basis of any additions of alleged income, which have not been rebutted by any of the lower authorities. We find that some documents and chats have been exhaustively relied. However, the material aspect that comes forthwith from the submission and material on record is that excel sheet document has been heavily relied by ld. AO and said to be prepared by an employee of assessee company, Ms. Poonam Kemini, and what she has alleged is that she was forced to write in hand on the said documents as " cash received", whereas, she filed retraction along with affidavit before investigation wing stating that she was forced by Search Officials to write "cash received" on the alleged excel sheets and infact this documents, electronic footprints in property of the file show that the excel sheet was also got prepared on the very same day of search i.e. 10.02.2022 which substantiates her claim that the Search Officials prepared the aforesaid excel sheets.

13.

We then find that all the documents as relied in the AYs involved, are of the nature which indicate that there is no mention of any cash received on the said document. The documents are claimed to be estimates prepared by sales boys/ girls and there is no mention of any cash received on the said documents. Learned AO has presumed receipt of cash without conducting

P a g e | 10 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23) any enquiry or investigation from the name of parties mentioned in these documents, even though complete details of the said party were on record of learned AO. Author of the said document was never examined neither any question was put to the assessee during the course of search nor any cash was found during the course of search. Ld. Sr. Counsel has made a pertinent contention that Inter State Sales were made to aforesaid party and that too E Way Bills with GST and there were no cash sales made to the said party since the goods are subject to frequent checks on State borders and sales cannot be made outside books with regards to interstate sales. Learned AO failed to appreciate the fact that though in AY 2018-19 document was not confronted to any employee with regards to the impugned assessment year, however, for subsequent assessment years with regards to similar documents all the employees and directors had retracted their statements before the Investigation Wing which were never rebutted neither investigated further by learned AO. In these circumstances, the Whatsapp messages in isolation cannot amount to conclusive evidence, as assessee claims that said were the discussions with parties and so cannot be held to be actual sales and when exact details with regards to sales made were provided to learned AO and even then no enquiry or investigation whatsoever was made by learned AO to establish as to whether any cash

P a g e | 11 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23) sales were made by assessee or not. Learned AO failed to appreciate the fact that all the employees and directors had retracted their statements before the Investigation Wing which were never rebutted neither investigated further by learned AO. Thus it seems that ld. AO purely on suspicion and surmises made estimated additions on the basis of seized documents. Rather it appears that ld. AO merely relied the observations drawn by the Search Team/ Investigation wing. We thus find substance in contention that if undisclosed sales of the magnitude alleged had actually taken place, the Department would ordinarily have discovered some evidences or traces of transaction of excess stock, shortage of recorded stock, unaccounted raw material, unaccounted finished goods, parallel invoices, transport receipts, e-way bills, delivery challans, confirmations from customers, statements of purchasers, statements of transporters, unexplained cash, unexplained bank deposits, unaccounted purchases. Remarkably, none of these has been brought on record. The complete absence of corroborative evidence indicating or suggesting possibility of out of book sales only helps the assessee as Presumption under section 132(4A) is limited and cannot by itself justify assessment additions without supporting and corroborating evidences. Reliance is placed on decision in CIT vs Ved Prakash Choudhry of Hon’ble Delhi High Court, reported in 305 ITR 245 and on Umacharan

P a g e | 12 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23) Shaw & Bros. v. CIT 37 ITR 271 (SC), the decision which lays down basic proposition that suspicion, however strong, cannot take the place of legal evidence. Further the proposition laid in Common Cause v. Union of India 394 ITR 220 (SC) that entries in loose sheets/diaries by themselves are not evidence unless supported by corroborative material, also helps the case of assessee.

14.

We are thus inclined to hold that evidences relied lacked probative value and their veracity seems impeachable, on submission of assessee, thus on scales of probability, the assessee deserves to be benefitted. Accordingly additions deserve to be deleted. Accordingly the appeals are allowed.

Order pronounced in the open court on 05.08.2026

Sd/- Sd/- (Amitabh Shukla) (Anubhav Sharma) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated 05.08.2026 Rohit, Sr. PS

P a g e | 13 ITA Nos. 6237 to 6241/Del/2025 M/s Design Workshop (India) Pvt. Ltd. (AY: 2018-19 to 2022-23)

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