NEW T.C. & SONS,LUDHIANA vs. INCOME TAX OFFICER, LUDHIANA

ITA 1622/CHANDI/2025Status: DisposedITAT Chandigarh01 October 20268 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the addition made on account of alleged unaccounted purchases, based solely on ledger entries extracted from the SAP-based JSK server found at third-party premises, is legally unsustainable. The Tribunal found that these documents could not be treated as incriminating material against the assessee unless corroborated with cogent evidence. The onus was on the AO to establish a nexus between the ledger entries and the assessee, which was not done. The Tribunal noted that the documents lacked details and were inadequate to fasten liability. Citing its own decision in Kuldeep Rai vs. DCIT and other similar judgments, the Tribunal reiterated that additions founded solely upon third-party seized material and statements, without independent corroborative evidence linking the assessee to the alleged unaccounted transactions, are unsustainable. In the present case, the addition rested solely on third-party seized material without any corroborative evidence connecting it to the assessee's actual undisclosed purchases. Therefore, the impugned addition was deleted for both assessment years. The appeals were partly allowed.

What were the facts?

The assessee, M/s New T.C.& Sons, a partnership firm dealing in hosiery items, is in appeal for Assessment Years (AY) 2022-23 and 2023-24 against orders of the CIT(A). The Assessing Officer (AO) initiated scrutiny based on a search operation on M/s JM Jain, LLP, which revealed a parallel server, 'JSK', used for recording unaccounted transactions, including commission and interest income. The AO extracted the assessee's ledger from this server, which indicated transactions of Rs. 576.35 Lacs. Applying a 15% Gross Profit (GP) rate, the AO made an addition of Rs. 86.45 Lacs for AY 2022-23. For AY 2023-24, an addition of Rs. 29.48 Lacs was made on similar grounds. The CIT(A) confirmed these additions. The appeals were heard together.

What were the issues?

1. Whether the addition made on account of alleged unaccounted purchases, based solely on ledger entries found in a third-party's seized server (JSK), is sustainable in law, considering the absence of corroborative evidence linking the assessee to these transactions? (Question of law and fact, concerning Section 145(3) and general principles of evidence). Assessee's contentions: The addition is purely presumptive. The assessee's regular books of accounts, purchase, sales, stock, and GST records are complete and uncontroverted. The AO did not reject the books under Section 145(3). The addition lacks corroborative evidence or independent verification, as mere suspicion cannot substitute proof. Third-party statements were not confronted, while the assessee provided confirmations, bank statements, invoices, e-way bills, and consignment notes. Reliance was placed on various Tribunal decisions favouring the assessee. Revenue's contentions: The Ld. Sr. DR supported the findings of the Ld. AO.

Which sections of the Income-tax Act were involved?

Section 145(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, CHANDIGARH

Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM & HON’BLE SHRI RAJESH DAMODARLAL SHARMA, JM

For Respondent: Dr. Ranjit Kaur, Addl. CIT – Sr. DR
Pronounced: 01.10.2026

Heard together (2 matters)

ITA No.1621/CHANDI/2025
ITA No.1622/CHANDI/2025

Read from the judgment's own cause title. This page is filed under one of them.

RAJESH DAMODARLAL SHARMA (Judicial Member)

1.

Aforesaid two appeals have been filed by the assessee for Assessment Years (AY) 2022-23 and 2023-24 against separate orders of Ld. Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 02.09.2025 and 04.09.2025 respectively. Since facts in both the ITA 1621 & 1622/CHD/2025 2 appeals are similar, the appeals were heard together

The order continues below.

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