Loading judgment…
Facts
The assessee's case was reopened under Section 147 for AY 2018-19 based on information suggesting "under billing" purchases from Pragati Glass Pvt. Ltd. The Assessing Officer added ₹1,63,43,983 as unexplained investment under Section 69. The CIT(A) deleted this addition, observing that the assessee's books were not rejected, similar transactions in previous years were accepted, and purchases were duly recorded with corresponding sales and profit.
Held
The Tribunal upheld the CIT(A)'s decision, confirming that the Assessing Officer could not make an addition based solely on third-party information without rejecting the assessee's books of account, which showed duly recorded purchases, corresponding sales, claimed expenses, and disclosed profit. The Tribunal found no reason to interfere with the CIT(A)'s well-reasoned order deleting the addition.
Key Issues
Whether an addition for unexplained investment under Section 69 can be sustained based solely on third-party information of bogus transactions, without the Assessing Officer rejecting the assessee's books of account, which reflected the purchases, sales, and profits.
Sections Cited
250, 147, 144B, 148A(b), 69, 145(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH KOLKATA
(�नधा�रण वष� / Assessment Year: 2018-19) ITO, Ward-34(1), Kolkata Vs Gujarat Trading Co. P-40, India Exchange Place, Tea Board Kol-1. PAN No. : AANFG2035Q (अपीलाथ� /Appellant) .. (��यथ� / Respondent) �नधा�रती क� ओर से /Assessee by : Shri Miraj D Shah, AR राज�व क� ओर से /Revenue by : Shri Pankaj Pandey, JCIT, Sr. DR सुनवाई क� तार�ख / Date of Hearing : 09/09/2025 घोषणा क� तार�ख/Date of Pronouncement : 08/12/2025 आदेश / O R D E R
PER SONJOY SARMA, JM :
This appeal by the revenue arises against the order dated 24.12.2024 of the National Faceless Appeal Centre (hereinafter referred to as the ‘CIT(A)’) passed under section 250 of the Income- tax Act, 1961 (the ‘Act’).
Brief facts of the case are that the assessee filed its return of income for the assessment year 2018–19 declaring a total income of ₹6,50,120. The case was reopened under section 147 r.w.s. 144B based on information received from the ADIT (Investigation), Bharuch stating that Gujarat Trading Company was a principal buyer of products manufactured by Pragati Glass Pvt. Ltd., and that the assessee had undertaken purchases from Pragati Glass Pvt. Ltd. during F.Y. 2017–18 relevant to A.Y. 2018–19 under billing transaction. Based on this information, a notice under Gujarat Trading Co. section 148A(b) was issued. The assessee submitted objections. The Assessing Officer, however, was not satisfied and treated an amount of ₹1,63,43,983 as unexplained investment under section 69 of the Act, adding the same to the income of the assessee and determining total income at ₹1,69,94,103.
Against the order of Assessing Officer, the assessee preferred an appeal before the CIT(A). Where the Ld. CIT(A) allowed the appeal on the ground that no addition had been made by the Department on similar transactions for A.Ys. 2015–16, 2016–17 and 2017–18, though the assessee had entered into the same type of transactions with the same party and no discrepancy was pointed out by the Assessing Officer in the bills, vouchers or books of account maintained by the Assessee and when the assessee had duly recorded purchases and corresponding sales, claimed expenses on such goods, and reported net profit on the said purchases. Without rejecting the books of account, the AO could not make additions merely on the basis of third-party information. Accordingly, the addition of ₹1,63,43,983 was deleted.
Against the order of the Ld. CIT(A) the Revenue contended that the order of the CIT(A) is bad in law because the Investigation Wing reported that Pragati Glass Pvt. Ltd. was involved in bogus transactions, and therefore the purchases of the assessee were not genuine. It was argued that the CIT(A) erred in deleting the addition and the AO’s order should be restored.
On the other hand, the ld. AR supported the order of the CIT(A) reiterating that for earlier assessment years 2015–16, 2016–17 and 2017–18, the same transactions with the same party were examined, and no discrepancy was found. The AO did not point out any defect in the purchase bills, supporting documents, Gujarat Trading Co. or books of account submitted by assessee. Moreover, the assessee showed corresponding sales, claimed expenses, and offered net profit thereon and without rejection of books under section 145(3)of the Act, additions cannot be made merely on third-party investigation information. Therefore, the CIT(A) was justified in deleting the addition.
We have heard the rival submissions and perused the material available on record. It is undisputed that for A.Ys. 2015– 16, 2016–17 and 2017–18, the assessee had similar transactions with the same party. In those years, no discrepancy was found by the AO and for the current year also, the AO has not rejected the books of account and in the instant case the assessee recorded the purchases, corresponding sales, claimed expenses, and disclosed profit. When the books are not rejected, and the transaction results in accounted sales and profits, addition cannot be made merely on the basis of third-party investigation information, without pointing out any defect in the assessee’s records. Accordingly we find that the CIT(A) has correctly appreciated the facts and rightly deleted the addition. We find no reason to interfere with the well-reasoned order of the Ld. CIT(A). Accordingly, the appeal filed by the Revenue is hereby dismissed. Accordingly the order of the Ld. CIT(A) is upheld.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 08/12/2025.