ASSISTANT COMMISSIONER OF INCOME TAX, FARIDABAD vs. M/S AL-HAMD AGRO FOOD PRODUCTS PRIVATE LIMITED, ALIGARH

per the seized material, there were evidence found not only direct

expenses i.e. purchase, but also indirect expenses such as salary and

other expenses, which can be corroborated from the assessment order.

Therefore, the Ld. CIT(A) should have applied the net profit rate only.

Ltd Vs. Commissioner of Income Tax [2012] 26 taxmann.com 244, the

Hon'ble High Court held as under:-

“14. In the present case, the AO and, to a certain extent, the CIT (A) appear to have proceeded inter alia, to disallow heads of expenditure towards commission payments, sundry expenses (termed „R‟) and green box expenses. As far as the "green box" expenses are concerned, the assessee had relied on the books relied on by the revenue to assess the income, to urge that these constituted expenses entitled to deduction. The AO held these expenses to be excessive. The assessee argues that once the revenue seeks to draw a presumption, by relying on Section 132 (4A) of the Act that presumption has to be given full effect. In other words,

18 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

if the correctness of the contents of books and other materials is to be presumed, such a deemed state of affairs would have to be assumed in respect of all entries in the books, and not merely the entries of income (or receipts). 15. Section 132 (4A) reads as follows: "(4A) Where any books of account, other documents, money, bullion, jewellery or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed- (i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person; (ii) that the contents of such books of account and other documents are true; and (iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting ITA-1620 & 1622/2010 Page 12 of, any particular person, are in that person' s handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested." As to the nature of the presumption, the Kerala High Court, in Income Tax Officer, B-Ward, Ernakulam v. T. Abdul Majeed, [1988] 169 ITR 440, held as follows: - "It is true that section 132(4A) of the Act enables the court to presume the truth of the contents of such books. However, it is a presumption which can be rebutted. Moreover, the presumption envisaged therein is only a factual presumption. It is in the discretion of the court, depending upon other factors, to decide whether the presumption must be drawn. The expression used in the sub-section is "may be presumed" as is used in section 114 of the Evidence Act, 1872. It is not a mandate that whenever the books of account are seized, the court shall necessarily draw the presumption, irrespective of any other factors which may dissuade the court from doing so." 16. In P.R. Metrani v. Commissioner of Income Tax, Bangalore (2007) 1 SCC 789 the Supreme Court elaborated upon the nature of presumption

19 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

under Section 132 (4A) and the scheme of the provision, in the following words: "Sub-section (4A) was inserted by Taxation Law (Amendment) Act, 1975 with effect from 1.10.1075 to permit a presumption to be raised in the circumstances mentioned therein. Before the insertion of sub-section (4A) the onus of proving that the books of account, other documents, money bullion, jewellery etc. found in possession or control of a person in the course of a search belonged to that person was on the Income Tax Department. Sub-section (4A) enables an assessing authority to raise a rebuttable presumption that such books of account, ITA-1620 & 1622/2010 Page 13 money, bullion etc. belonged to such person; that the contents of such books of account and other documents are true, and, that the signatures and every other part of such books of account and other documents are signed by such person or are in the handwriting of that particular person. Raising of such presumption has been enacted by the Legislature to enable the assessing authority to make a provisional adjudication within the time frame prescribed under Section 132. Otherwise it may not be possible to do so. The object of introduction of Section 132 is to prevent the evasion of tax, i.e., to unearth the hidden or undisclosed income or property and bring it to assessment. It is not merely an information of undisclosed income but also to seize money, bullion etc. representing the undisclosed income and to retain them for the purposes of realization of taxes, penalties etc. Search and seizure is a serious invasion in the privacy of the person. Section 132 which is a complete code by itself provides that the money, bullion or the books of account etc. should not be retained unnecessarily and that the provisional assessment made under Section 132 for the purpose of retention of the books is passed within a specified time in accordance with law. It provides that the books of account, money and bullion which are not required are not retained unnecessarily thereby causing harassment to the person concerned. In order to see that the assessment order is framed within the time frame provided under Section 132, legislature provided for a rebuttable presumption to be raised against the person from whose possession and control the books of account, money, bullions etc. are seized so that the order can be passed within the time frame provided under Section 132. A presumption is an inference of fact drawn from other known or proved facts. It is a rule of law under which courts are authorized to draw a particular inference from a particular fact. It is of three types, (i) "may presume", (ii) "shall presume"

20 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

and (iii) "conclusive proof". "May presume" leaves it to the discretion of the Court to make the presumption according to the circumstances of the case. "Shall presume" leaves no option with the Court not to make the presumption. The Court is bound to take the fact as proved until evidence is given to disprove it. ITA-1620 & 1622/2010 Page 14 In this sense such presumption is also rebuttable. "Conclusive proof" gives an artificial probative effect by the law to certain facts. No evidence is allowed to be produced with a view to combating that effect. In this sense, this is irrebuttable presumption. The words in sub-section (4) are "may be presumed". The presumption under sub-section (4A) therefore, is a rebuttable presumption. The finding recorded by the High Court in the impugned judgment that the presumption under sub-section (4A) is a irrebuttable presumption in so far as it relates to the passing of an order under sub-section (5) of Section 132 and rebuttable presumption for the purpose of framing a regular assessment is not correct. There is nothing either in Section 132 or any other provisions of the Act which could warrant such an inference or finding. Presumption under sub-section (4A) would not be available for the purpose of framing a regular assessment. There is nothing either in Section 132 or any other provision of the Act to indicate that the presumption provided under Section 132 which is a self contained code for search and seizure and retention of books etc. can be raised for the purposes of framing of the regular assessment as well." If the revenue was of the opinion that the expenses claimed towards "green boxes" was inadmissible or was excessive, or not genuine, in order to reject the entries in the books of account and other documents of the assessee, seized during the search, it ought to have relied on other materials. Having once drawn the presumption that the contents of the documents (of the assessee) taken into possession during the search were true, the revenue could not have, consistently with that presumption, proceeded to require the assessee to produce materials in support of the expenditure entries. Such an inconsistent approach in respect of the contents of the same book appears to have been founded only on suspicion that they were not genuine. However, suspicion ITA-1620 & 1622/2010 Page 15 cannot replace proof. Moreover, the full effect of the presumption should be given effect to, whenever the statute directs a particular non- existent state of affairs to be assumed. (Ref State of Bombay v. Pandurang Vinayak, AIR 1953 SC 244; Karnataka State Road Transport v B.A. Jayaram & Ors, AIR 1984 SC 790). In these circumstances, the effect of the presumption

21 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

(which bade the revenue, when it chose to invoke it, to presume that the "contents of such books of account and other documents are true..". Therefore, in the absence of any materials, in the form of documents, the revenue could not have denied the benefit of any expenses which would otherwise have inured to the assessee, as an allowable deduction under Section 37 (1).”

Kumar, 2003 (4) TMI-76 Madhya Pradesh High Court wherein it was held

as under: -

“We are in respectful agreement with the aforesaid opinion inasmuch as the total sale cannot be regarded as the profit of the assessee. The net profit rate has to be adopted and once a net profit rate is adopted, it cannot be said that there is perversity of approach. Whether the rate is low or high, it would depend upon the facts of each case. In the present case net profit rate of five per cent. has been applied. We do not think it appropriate that the same requires to be enhanced. We are also inclined to think that it is high. In any case, it cannot be said that there has been perversity of approach”. 20. In the case of Commissioner of Income Tax Vs. President Industries

1999 (4)TMI 8-Gujarat High Court wherein it was held as under: -

“3. Having perused the assessment order made by the AO, the order made by the CIT(A) and the Tribunal, we are satisfied that the Tribunal was justified in rejecting the application under s. 256(1). It cannot be a matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realisation of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost

22 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

in acquiring goods which have been sold have been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether entire sum of undisclosed sale proceeds can be treated income of the relevant assessment year answers by itself in negative. The record goes to show that there is no finding nor any material has been referred about the suppression of investment in acquiring the goods which have been found subject of undisclosed sales. 4. We are, therefore, of the opinion that no question of law which requires to be referred to this Court arise out of Tribunal's appellate order. The order of Tribunal under s. 256(1) is not erroneous in reaching such conclusion”.

Commissioner of Income Tax 2000 (1) TMI 146-ITAT Delhi, wherein it

was held as under: -

“The Tribunal found as an admitted fact that unaccounted sales totalling Rs. 4,22,14,428 existed for the relevant block period. The Assessing Officer applied a gross profit (g.p.) rate of 7% on those sales, relying on admissions recorded during search and postsearch enquiries. The assessee, after receiving copies of seized documents and statements, sought deduction of revenue expenses (seed cleaning, warehousing, packing etc.) shown in the seized annexures. The Tribunal majority held that admissions are substantive but not conclusive and that, where seized material itself demonstrates deductible expenses relating to the unaccounted sales, those expenses must be considered. On the material before it the Tribunal concluded that allowing the claimed adjustment of expenses recorded in the seized papers reduced the appropriate net profit rate to 1.5%, a rate consistent with the assessee's historical net profit disclosure. The AO was therefore directed to recompute the net profit on the unaccounted sales on the basis of 1.5%.”

23 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

in the above judicial precedents, we deem it fit to apply the NP rate of

4%, accordingly, we sustain the partial addition. Thus, Ground No. 6 of

the Assessee’s Appeal is partly allowed.

and sustained the addition by applying NP rate of 4%, the Ground of

appeal No. 1 to 3 of the Revenue has become in-fructuous. Accordingly,

Ground No. 1 to 3 of the Assessee are dismissed.

made by the A.O. of Rs. 43,96,660/- on account of entry fees received in

cash. The Ld. A.O. while making the addition on account of entry fees,

held as under:-

“Entry Fee-During the course of search action conducted, it was found that cast was being genermed through entry fee which was charged per vehicle at the entrance of the se company. Further, statement of Sh. Haji Zaheer, Promotor of AL. Hand Group was also recorded on outh wherein he admitted that there are various suppliers who supply naw material (animals) to the factories. These animals are sent in vehicles and these vehicles carrying animals enter the main gate of Al Dus Food Processing Pt. Ltd. and Al HamdAgro Food Products Pvt. Ltd. There are employees of Al Hamd Group who are available at main gate of factories and provides gate pass to the driver of vehicles. Also, from the drivers of these vehicles entering at factories Rs. 300/- per bigger truck and Rs. 150/-to 200/- per smaller truck in cash are collected by these employees present at gate of factories. Further, Sh. Haji

24 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

Mohammad Zaheer was asked to provide record of these receipts for entry fee, provide name of employees who receive these entry fee and state whether these receipts from entry fee are recorded in books of account of Al Hamd Group. For which assessee submitted that Sh. Salman, Sh. Shahrukh and Sh. Prempal etc. employees of Al Hamd Group are assigned the work of collecting entry fee. Staement of these persons were also recorded on oath wherein they have confirm that they collect the payment of Rs.150 to Rs.200 per vehicle as entry fee. Mohd. Shahrukh also admitted that his duty is to load vehicles with the skins/hides of Buffaloes. For loading each vehicle, he receives Rs.300/- to Rs.500/- per size of vehicle. He further stated that an amount of Rs. 1600/- is also charged in cash from the driver of vehicle which are loaded with skins and hides. It was also admitted by him that such amount collected is handed over to Hazi Zaheer, promoter of this group on weekly basis. It was further noted from perusal of financials of the assessee company that such amount has not been recorded in the books of accounts of the assessee. Further, incrimination material found and seized in this regard as well as excerpts of the statement of the aforesaid persons including Hazi Zaheer was confronted to the assessee vide this office notice u/s 142(1) dated 17.12.2024(supra). During the year under consideration the assessee received an amount of Rs. 48,08,205/-as entry fee which were not recorded in the books of account. Calculation of the said amount is already given the relevant para of notice u/s 142(1) dated 17.12.2024. Therefore, vide this office notices u/s 142(1), the assessee was asked to submit complete day wise ledger account of entry fees collected by the company for each AYrs separately. The assessee was also asked to show whether said income has been declared for taxation for the year under consideration. In response, it was submitted by the assessee that nominal amount was collected from the vehicles at the factory gate which caries the cattle and on Friday this amount was used as donation or distribution Bhandara and to the poor and needies. Accordingly, the assessee company was show caused vide this office show cause noticedated 20.03.2025 as to why amount of Rs. 48,08,205/- collected as entry fee should not be taxed as income from other sources during the year under consideration. In response, the assessee submitted that the amount was

25 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

collected from the vehicles at the factory gate which carries the cattle and the amount so-collected was used as donation or distributing Bhandara, to the poor and needy people on Friday. Therefore, you are requested not to take any adverse inference in my case. Reply furnished by the assessee company on this issue was duly considered but not found force. As, it has been duly established and demonstrated with documentary evidence that the assessee collected entry fee as well as loading charges from the various customers during the year under consideration. Even this fact was admitted by Hazi Zaheer who is promoter the assessee group of company. Further, the assesse also accepted about the receipt of entry fee from various vehicles. It is also seen from the financials of the assessee company that the assessee company did not account for the aforesaid receipts and thus, the same was not disclosed for taxation. It is also an undisputed fact that the said receipt is income of the assessee company chargeable tax. Considering the above as well as factum of this issue suppoted with documentary evidence as well as statement given on oath, entire entry fee as well as loading charges to the tune of Rs. 48,08,205/- is held as income from other sources and addition to this extent is hereby made to the total Income of the assessee.”

CIT(A). It is the case of the Assessee that the said addition made by the

A.O. is erroneousand contended that even as per the allegation of the

A.O., the entry fees from some trucks were received by the Director in his

individual capacity and the same was utilized for donation on every

Friday. The same was not the income of the Assessee in any manner.

The Ld. Assessee's Representative further submitted that the addition

26 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

made by the A.O. is highly excessive and the same is based on

extrapolation. Considering that fact the AO has extrapolated the figures

of 3 to 4 months to the whole year and also considering the overall facts

and circumstances, we sustain the addition to the extent of 25% of the

amount added by the A.O. Accordingly, the Ground No. 7 of the Assessee

is partly allowed.

ITA No. 7195/Del/2025 to ITA No. 7197/Del/2025 (Assessee’s Appeals) and ITA No. 115/Del/2026,239/Del/2026, and ITA No. 240/Del/2026 (Revenue’s Appeal) for Assessment Year 2021-22 to 2023-24. 26. The Ld. Counsel for the Assessee submitted that the Assessee

wishes not to press legal issues raised in Assessee’s Ground No. 1 to 4

for Assessment Year 2021-22, 2022-23 and Ground No. 1 & 2 for

Assessment Year 2023-24 of the Assessee’s Appeals. Accordingly, the

submission made by the Assessee's Representative is taken on record

and the Ground No. 1 to 4 for Assessment Year 2021-22 and 2022-23

and Ground No. 1 & 2 for Assessment Year 2023-24 of the Assessee’s

Appeals are dismissed as not pressed.

Ground No. 4 of Assessment Year 2023-24 of the Assessee are regarding

addition made by A.O. on ground of gross profit @ 11.70% applied on

27 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

certain purchases. The A.O. has estimated GP on certain purchases

which have been confirmed by Ld. CIT(A).

Appeal for Assessment Year 2020-21 by relying on the ratio laid down by

the Co-ordinate Bench of the Mumbai Tribunal in the case of M/s

Everest Food Products (supra) and we deleted the ad-hoc addition made

by the A.O. by applying the GP rate of 11.70% which has been confirmed

by the Ld. CIT(A). Since, facts being identical, the decision of the Bench

for the Assessment Year 2020-21 would apply mutatis mutandis to the

facts of the present Appeal. Accordingly, Ground No. 5 of the Assessee

for Assessment Year 2021-22 and 2022-23 and Ground No. 4 of the

Assessee for Assessment Year 2023-24 are allowed.

Revenue for Assessment Year 2021-22 and 2022-23 and Ground No. 5 of

the Assessee’s Appeal for Assessment Year 2023-24 and Ground No. 2 to

6 of the Revenue are regarding the addition made on account of

unaccounted sale. The Ld. A.O. made addition of alleged unaccounted

sale, wherein the Ld. CIT(A) held that the entire sales cannot be added

and thereby applied estimated GP rate 16%, both the Assessee and the

Revenue are challenged the order of the Ld. CIT(A).

28 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

Appeal for Assessment Year 2020-21, wherein the Bench has applied the

NP rate of 4%, accordingly, we sustain the partial addition. Facts being

identical, the aforesaid decision of the Tribunal would apply mutatis

mutandis to the facts of the present case also. Accordingly, Ground No. 6

of the Assessee for Assessment Year 2021-22 and 2022-23and Ground

No. 5 of the Assessee’s Appeal for Assessment Year 2023-24 are partly

allowed.

Assessment Year 2021-22, 2022-23 and Ground No. 5 for Assessment

Year 2023-24 of the Assessee’s Appeal and sustained the addition by

applying NP rate of 4%, the Ground No. 1 to 5 of the Revenue’s appeal for

Assessment Year 2021-22, 2022-23and Ground No. 2 to 6 for

Assessment Year 2023-24 are dismissed.

23 and Ground No. 6 of Assessment Year 2023-24 are pertaining to the

addition made on account of alleged entry fees.

Appeal for Assessment Year 2020-21, wherein the Bench considering

that fact that the AO has extrapolated the figures of 3 to 4 months to the

29 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

whole year and also considering the overall facts and circumstances,

sustained the addition to the extent of 25% of the amount added by the

A.O.

apply mutatis mutandis to the facts of the present case also. Accordingly,

the Ground No. 7 of the Assessee for Assessment Year 2021-22, 2022-23

and Ground No. 6 of the Assessee for Assessment Year 2023-24 are

partly allowed by sustaining the addition to the extent of 25% of the

amount added by the A.O.

and Ground No. 7of the Assessee for Assessment Year 2023-24 are

regarding addition made on account of unexplained expenditure u/s 69C

r.w. Section 115BBE of the Act. The Ld. A.O. held that the Assessee

company is paying fees for documentation clearance to various

embassies in respect of exports sales made by it. Ld. A.O. while making

the addition observed that the expenses are not recorded in the books of

account. The Ld. CIT(A) has confirmed the said addition. For the sake of

ready reference, the observation of the A.O. in the assessment order are

reproduced as under:-

30 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

““In the instant case, it is a matter of record/fact that the assessee company has made said expenditure in cash on account of legalization fee. Source of which was not explained by the assessee. Therefore, the said expenditure is nothing but as an unexplained expenditure within meaning of section 69C of the Act. Reliance is further placed on the judgment of Hon'ble High Court of Delhi in the case of Sushil Bansal v. Pr. CIT [2020] 115 taxmann.com 225 (Delhi) wherein it was held that With there being no credible explanation offered by the assessee for the payment made as capitation fee, the AO isjustified in adding it to the Assessee's income u/s 69C. SLP filed by the assessee was also dismissed by Hon'ble Supreme Court of India vide its order dated 06.01.2020. In the instant case as well, the assessee did not explain any source of the aforesaid payment. Thus, the ratio laid down by the aforesaid judgment is squarely applicable to the case at hand. As such, the impugned payment/expenditure to the tune of 47.29% of Rs. 16,71,384/-(22830*73.21 average value of 1 USD in FY 2021-22) i.e. Rs.7,90,398/- is held as unexplained expenditure u/s 69C of the Act and addition of the same is hereby made to the total income of the assessee. Tax is also being charged as per provisions of section 115BBE of the Act.”

by the A.O. is erroneous, however, submitted that even if net profit ratio

is applied on the alleged unaccounted sales, the same will be sufficient to

cover the source of the expenses. The learned AR for the assessee

further submitted that the addition made in earlier stood confirmed by

estimating the income of the assessee applying net profit ratio on the

alleged unaccounted purchases/sales. It is, therefore, requested that the

benefit of set off and telescoping of the said addition be allowed to the

unexplained expenditure incurred during the year under appeal.

31 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

orders of the Lower Authorities sought for dismissal of the Assessee’s

above Grounds of Appeal.

on record. Ld. A.O. while making the addition u/s 69C r.w. Section

115BBE of the Act, observed that the expenses of the Assessee were not

recorded in the books of account. It is observed in preceding assessment

year as well as in the years under appeal, we have confirmed the

additions by estimating the income of the assessee applying net profit

ratio on the alleged unaccounted purchases/sales. It is further observed

such income has not been utilized elsewhere nor any evidence was

brought on record by the revenue suggesting that such income was

applied by the assessee in acquisition of assets or making other

payments. Therefore, it could be safely presumed that the alleged

unexplained expenditures were incurred out of the income so available

with the assessee. Accordingly, the source of the said expenditure is from

the income sustained in earlier years, and thus the benefit of set-off and

telescoping out of such income is allowed to the assessee and separate

addition made on account of unexplained expenditure is here by deleted

by allowing the Ground No.8 of the Assessee in Assessment Year 2021-

32 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

22, 2022-23 and Ground No. 7of the Assessee in Assessment Year 2023-

24.

Appeal for Assessment Year 2023-24areregarding addition made on

account of alleged unexplained expenditure (purchases) u/s 69C r.w.

Section 115BBE of the Act. The Ld. A.O. made the addition in following

manners:-

““Unexplained expenditure, etc. 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year: Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.” 40. The above said addition made by the A.O. has been partly

confirmed by the Ld. CIT(A) for Assessment Year 2023-24 to the extent of

11.70% GP rate (Rs. 3,50,79,593/-) further 1% commission (Rs.

29,98,256/-) i.e. confirmed addition to the extent of Rs. 3,80,77,849/-.As

against the action of the Ld. CIT(A) in partly deleting the addition, the

Assessee and the Revenue have raised the above grounds.

33 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

Section 69C of the Act can only be invoked in the case where the

Assessee has incurred any expenditure and offer to explanation about

source of expenditure. The purchases are duly recorded in the books of

account and all the payments were made through banking channel.

Thus, relying on plethora of judicial precedents, sought for allowing

Ground No. 3 of the Assessee and sought for dismissal of Ground No. 1

of the Revenue’s Appeal pertaining to Assessee for Assessment Year

2023-24.

on record. The present case, the A.O. made the addition on account of

alleged unexplained purchases u/s 69C of the Act. The purchases were

duly recorded in the books of account and the payments have been made

through banking channel. It is well settled law that the provisions of

Section 69C of the Act can only be invoked in the case where the

Assessee has incurred any expenditure and offer to explanation about

source of expenditure.

Income Tax- Vs. M/s Radhika Creation 2010 (4) TMI held as under:-

34 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

“4. The case before us has two dimensions. The first being as to whether the Assessing Officer was right in treating the said sum of Rs 44,38,997/- as unexplained expenditure under Section 69C of the said Act. The second aspect is whether the said addition could legitimately have been made in the course of a block assessment. 5. Insofar as the first aspect of the matter is concerned, we find that Section 69C clearly stipulates that where, in any financial year, the assessee has incurred an expenditure and he offers no explanation about „the source of such expenditure or part thereof‟, or the explanation, if it is offered by him, is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. Thus, the focus of Section 69C is on the "source" of such expenditure and not on the authenticity of the expenditure itself. It is an admitted position that the expenditure was shown by the assessee in its regular books of accounts and it is because of this reason that the Income-tax Appellate Tribunal had observed:- "As the expenditure was accounted in the regular books, the source is obviously explained. The provisions of Section 69C are not applicable as there was no unaccounted expenditure." 6. What the Assessing officer attempted to do was to go into the authenticity of the expenditure and he returned a finding that the expenditure was not authenticated by vouchers and consequently, he added the said expenditure as unexplained expenditure under Section 69C. We are in agreement with the observations and findings of the Commissioner of Income-tax (Appeals) as well as that of the Income-tax Appellate Tribunal that this is not a case which falls under Section 69C. Clearly, Section 69C refers to the „source of the expenditure‟ and not to the expenditure itself. Consequently, the Assessing Officer was clearly wrong in treating the said expenditure as unexplained expenditure under Section 69C of the said Act and the lower appellate authorities were right in their conclusions in deleting the said addition.”

Jurisdictional High Court in the case of M/s Radhika Creation(supra), we

35 ITA Nos. 7194, 7195, 7196 & 7197/del/2025 8654, 115, 239 & 240/Del /2026 Al -hamd Agro Food Products Pvt. Ltd.

find merit in the contention of the Ld. Ld. Assessee's Representative,

accordingly, the Ground No. 3 of the Assessee is hereby allowed and the

addition sustained by the Ld. CIT(A) is hereby deleted.

for Assessment Year 2023-24 and deleted the addition, the Ground No. 1

of the Revenue’s Appeal for Assessment Year 2023-24 renders in-

fructuous, accordingly Ground No. 1 of the Revenue is dismissed.

7195/Del/2025, 7196/Del/2025 and 7197/Del/2025 are partly allowed

and Appeal of the Revenue in ITA Nos. 8654/Del/2025, 115/Del/2026,

239/Del/2026 and 240/Del/2026 are dismissed.

Order pronounced in the open court on 21st May, 2026

Sd/- Sd/- (MANISH AGARWAL) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 21.05.2026 Reshma Naheed, Sr.P.S