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Facts
The Revenue appealed against the CIT(A)'s deletion of an addition made by the Assessing Officer (AO). The AO had added Rs. 3,60,11,804/- as commission income (2% of alleged bogus sales of Rs. 180,05,90,205/-) on the ground that the assessee had shown false entries of purchases from non-existent entities.
Held
The Tribunal held that the statement recorded during a survey u/s 133A of the Act does not have evidentiary value to make an addition, especially when the assessee has produced documentary evidence supporting the purchases and payments made through banking channels. The Tribunal found that the AO had failed to point out defects in the submitted documents and had not appreciated the material on record properly.
Key Issues
Whether an addition can be made solely on the basis of a statement recorded during a survey u/s 133A without corroborative evidence, and whether documentary evidence produced by the assessee to support its purchases was properly appreciated.
Sections Cited
143(1)(a), 143(3), 133A, 131, 148, 68, 44AB, 132(4), 158BB
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Income Tax Appellate Tribunal, PUNE BENCH “A”, PUNE
Before: SHRI R. K. PANDA & Ms. ASTHA CHANDRA
The above 2 appeals filed by the Revenue are directed against the separate orders dated 05.03.2025 of the Ld. CIT(A) / NFAC, Delhi relating to assessment years 2018-19 and 2019-20 respectively. The assessee has filed the Cross Objections against the appeals filed by the Revenue. For the sake of convenience, both the appeals filed by the Revenue and the Cross Objections filed by the assessee were heard together and are being disposed of by this common order.
ITA No.1374/PUN/2025 (A.Y. 2018-19)
Facts of the case, in brief, are that the assessee is a limited company engaged in the business of manufacturing sugar mill machinery and special purpose machinery. It also undertakes turn-key sugar projects. It has facilities for precision heavy engineering, fabrication machining and assembly. It filed its return of income for the impugned assessment year on 16.10.2015 declaring total income of Rs.48,59,880/-. The return was processed u/s 143(1)(a) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) on 13.11.2019. Subsequently the case was selected for limited scrutiny through CASS for verification of ‘share premium’. The Assessing Officer passed an order u/s 143(3) of the Act on 05.01.2021 accepting the returned income.
Subsequently a survey u/s 133A of the Act was carried out at the business premises of M/s. Siasons Trade and Industry Pvt. Ltd. (STIPL) by the DDIT (Inv), Unit 5(1), Mumbai on 21.01.2021. During the course of survey it was found that STIPL is indulged in receiving accommodation entries in the form of bogus purchases and bogus sales which were admitted by Shri Siddharth C. Shah, director of STIPL in his sworn statement recorded on oath u/s 131 of the Act during the course of survey operation. He had admitted that STIPL had carried out only paper entry transactions without actual movement of goods / material being bogus purchases and bogus sales as circular trading for inflation of turnover. As per information it was found that the assessee is one of the beneficiaries who had indulged in such bogus transactions and received accommodation entries to the tune of Rs.5,05,31,847/- by way of purchases made from STIPL during the impugned assessment year.
Further, from credible information received from DGGI, Mumbai regarding GST bogus billing it was found that various entities were indulged in generating and selling tax invoices to various entities without physical supply of underlying goods / services for passing irregular input tax credit to other business entities and for doing this it has also availed and utilized input tax credit against fake invoices issued by others. Therefore, the transactions made by such entities were sham transactions and all the sales made by the entities are bogus sales and all the sale proceeds in the hands of recipients are actually bogus purchases in the hands of the invoice recipients by which profit of the recipients have been suppressed. The Assessing Officer, therefore, after recording reasons reopened the assessment and notice u/s 148 of the Act was issued on 31.03.2022. The assessee in response to the same filed its return on 27.04.2022 declaring total income of Rs.48,59,880/- after adjusting year-wise losses of Rs.1,94,50,981/-.
During the course of assessment proceedings the Assessing Officer noticed that the assessee had shown total sales of Rs.224,01,68,956/- and total purchases to the tune of Rs.195,05,94,568/-. From the various details furnished by the assessee he noted that the assessee was found to be involved in the transaction of bogus purchases with the following entities:
Mirage Multiventures Pvt. Ltd. Rs.64,32,91,958/- 2. Curzen Infraprojects Pvt. Ltd. Rs.46,15,10,400/- 3. Blue Sea Commodities Rs.60,38,26,000/- Total Rs.170,86,26,358/-
The Assessing Officer noted that the above companies are sham companies and made substantial number of bogus sale transactions to various entities. The assessee was one of the recipient of such bogus purchases. He, therefore, was of the opinion that the assessee had shown false entries of purchases made from non- existing entities and the assessee’s claim of sales out of such purchases is also bogus and the assessee would have earned only commission for providing such false entries in its books of account. He, therefore, added an amount of Rs.3,60,11,804/- being the commission @ 2% on such bogus sales amounting to Rs.1,80,05,90,205/- as unexplained credit u/s 68 of the Act.
Before the Ld. CIT(A) / NFAC the assessee submitted that the figure of Rs.1,80,05,90,205/- which forms the basis of the action of the Assessing Officer comprised of the following amounts:
Sr. No. Name of the Party Amount (in Rs.) 1 M/s. Siasons Trade and Industry Pvt. Ltd. (STIPL) 5,05,31,847/- 2 M/s. Forum Enterprises 4,14,30,000/- 3 Mirage Multiventures Pvt. Ltd. 64,32,91,958/- 4 Curzen Infraprojects Pvt. Ltd. 46,15,10,400/- 5 Blue Sea Commodities 60,38,26,000/- Total 180,05,90,205/-
8. He submitted that the assessee had not shown any transactions with M/s. Forum Enterprises during the year and the said fact was submitted before the Assessing Officer during the course of assessment proceedings vide reply dated 18.11.2022. So far as M/s. Curzen Infraprojects Pvt. Ltd. is concerned, it was submitted that the said company was formerly known as M/s Blue Sea Commodities Pvt. Ltd. in the books of the assessee company. All the transactions with the said party have duly been recorded in the name of M/s. Blue Sea Commodities Pvt Ltd in the books of the assessee. The assessee filed a copy of ledger account along with the bank statement evidencing the proof of payment. Similarly, the assessee also filed the ledger account of M/s. Siasons Trade and Industry Pvt Ltd and M/s. Mirage Multiventures Pvt Ltd along with the bank statements evidencing the proof of payment. It was further submitted that the assessee during the course of assessment proceedings had furnished the copies of invoices, e-way bills, goods received note and transportation bills of various concerns.
Based on the arguments advanced by the assessee, the Ld. CIT(A) / NFAC deleted the addition made by the Assessing Officer by observing as under:
Aggrieved with such order of the Ld. CIT(A) / NFAC, the Revenue is in appeal by raising the following grounds: 1. On the facts and circumstances of the case and in law, the ld. CIT(A) has erred in allowing the appeal of the assessee and deleting the addition made by the AO of Rs.3,60,11,804/- based on the documentary evidences furnished by the assessee, without appreciating that some of the evidences were never produced by the assessee before the AO during the assessment proceedings but produced for the first time before the ld. CIT(A) and therefore, the same would fall in the category of additional evidences within the meaning of Rule 46A of the IT Rules.
2. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in admitting the additional evidences furnished by the assessee without recording a clear finding as to the circumstances as detailed in sub-rule (1) of Rule 46A under which it merited admission as additional evidence, thereby violating the mandate contained in sub-rule (2) of Rule 46A.
3. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in admitting the additional evidences furnished by the assessee without giving the AO reasonable opportunity to examine the same and to furnish any evidence to rebut the same, thereby grossly disregarding the requirements as mandated in Rule 46A(3) of the IT Rules.
4. Without prejudice to the above, the ld. CIT(A), while allowing the appeal, has erred in accepting the contention of the assessee and disregarding the Assessing Officer's findings that several lorry receipts lacked bill numbers and GST charges, certain transportation bills reflected unrealistic charges significantly below prevailing market rates, and some bills were issued against vehicles with expired registration/insurance, indicating a systematic scheme by the assessee's group to create invoices, transport bills, and related records to portray paper transactions as genuine. Furthermore, the CIT(A) failed to accord due weight to the reliable findings of the Department's survey action, which substantiated the inauthenticity of the assessee's documents, thereby rendering the appellate order perverse and unsustainable.
5. The appellant craves leave to add to, amend, alter any of the above grounds of appeal.
The Ld. DR strongly opposed the order of the Ld. CIT(A) / NFAC in deleting the addition made by the Assessing Officer. He submitted that the assessee filed certain documents before the Ld. CIT(A) / NFAC which were never produced before the Assessing Officer, therefore, the Ld. CIT(A) / NFAC should have called for a remand report from the Assessing Officer by forwarding those additional evidences. However, the Ld. CIT(A) / NFAC in violation of the provisions of Rule 46A admitted those evidences and deleted the addition made by the Assessing Officer which is not justified. Further, the Ld. CIT(A) / NFAC also overlooked the findings of the Assessing Officer that several lorry receipts lacked bill numbers and GST charges. He submitted that certain transportation bills reflected unrealistic charges significantly below the prevailing market rates and some bills were issued against vehicles with expired registration/insurance, indicating a systematic scheme by the assessee's group to create invoices, transport bills, and related records to portray paper transactions as genuine. Further the Ld. CIT(A) / NFAC failed to accord due weight to the reliable findings of the Department's survey action which substantiated the inauthenticity of the assessee's documents. He accordingly submitted that the order of the Ld. CIT(A) / NFAC being a perverse one should be set aside and the order of the Assessing Officer be restored.
The Ld. Counsel for the assessee on the other hand heavily relied on the order of the Ld. CIT(A) / NFAC. He submitted that the assessee has filed all the documents before the Assessing Officer and no fresh evidence was filed before the Ld. CIT(A) / NFAC which can be treated as additional evidence. He submitted that the statement of Shri Siddharth C. Shah was recorded during the course of survey u/s 133A of the Act in his premises. The assessee has never been provided a copy of the said statement till today. Although the assessee has not asked for cross examination before the Assessing Officer, however, the assessee has asked for the same before the Ld. CIT(A) / NFAC. He submitted that Shri Siddharth C. Shah is not a related party and therefore, the authenticity of his statement recorded u/s 131 during the course of survey u/s 133A of the Act is doubtful and cannot be the basis for making addition in the hands of the assessee.
13. Referring to the decision of Hon’ble Madras High Court in the case of CIT vs. S.Khader Khan Son reported in (2008) 300 ITR 157 (Mad), the Ld. Counsel for the assessee submitted that the Hon’ble High Court in the said decision has held that section 133A of the Act does not empower any ITO to examine any person on oath. Therefore, the statement recorded under section 133A has no evidentiary value and any admission made during such statement cannot be made the basis of addition. He submitted that the SLP filed by the Revenue against the order of Hon’ble Madras High Court was dismissed by the Hon’ble Supreme Court as reported in (2013) 352 ITR 480 (SC).
Referring to the decision of Hon’ble Delhi High Court in the case of CIT vs. Dhingra Metal Works reported in (2010) 328 ITR 384 (Del), he submitted that the Hon’ble High Court in the said decision has held that for a statement to have evidentiary value, the survey officer should have been authorized to administer oath and to record sworn statement. While section 132(4) specifically authorizes an officer to examine a person on oath, section 133A does not permit the same. Moreover, the word ‘may’ used in section 133A(iii) clarifies beyond doubt that the material collected and the statement recorded during the survey are not conclusive piece of evidence by themselves.
Referring to the decision of Hon’ble Delhi High Court in the case of CIT vs. Sunrise Tooling System (P.) Ltd. reported in (2014) 361 ITR 206 (Del), he submitted that the Hon’ble High Court in the said decision has held that where the Assessing Officer made addition to assessee's income on the basis of statement recorded by director of company in course of survey to effect that the said amount represented non-existent transaction, since statement so made did not have any evidentiary value and moreover, the Assessing Officer had not even rejected assessee's books of account while treating transaction in question to be bogus, impugned addition deserved to be deleted.
16. Referring to the decision of the Jaipur Bench of the Tribunal in the case of Unique Art Age vs. ACIT reported in (2015) 152 ITD 600 (Jaipur-Trib.), he submitted that the Tribunal in the said decision has held that the statement recorded u/s 133A on oath during survey could not be relied as evidence.
Referring to the decision of Hon’ble Punjab & Haryana High Court in the case of PCIT vs. DSG Papers (P.) Ltd. Reported in (2024) 161 taxmann.com 586 (P&H), he submitted that the Hon’ble High Court in the said decision has held that where pursuant to a search conducted at business premises of assessee, department made additions on account of suppressed turnover through under-invoicing based on third-party statements, since said statements were recorded at back of assessee and without giving proper opportunity for cross-examination, the Tribunal has rightly deleted said addition. He also relied on the following decisions:
i) ACIT vs. Jewel Consumer Care (P.) Ltd. (2023) 157 taxmann.com 643 ii) DCIT vs. Premsons (2010) 130 TTJ 159 iii) D.S. Agencies & Associates vs. ACIT (2017) 82 taxmann.com 252 iv) ACIT vs. Nisha Jain (2025) 170 taxmann.com 550 v) Saaras Agro Industries vs. ACIT (2022) 143 taxmann.com 319 vi) PCIT vs. Ramelex (P.) Ltd. (2025) 179 taxmann.com 374 vii) CIT vs. Dharam Pal Prem Chand Ltd. (2008) 167 Taxman 168 (Del) viii) Prakash Chand Nahta vs. CIT (2008) 170 Taxman 520 (MP) Cannon Industries (P.) Ltd. Vs. DCIT (2015) 59 taxmann.com 65 ix)
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs.3,60,11,804/- u/s 68 of the Act being commission @ 2% of the bogus sales amounting to Rs.180,05,90,205/- on the ground that the assessee had shown false entries of purchases made from non-existing entities. Therefore, the assessee’s claim of sales out of such purchases is also bogus and the assessee would have earned only the commission for providing such false entries in its books of accounts. We find the Ld. CIT(A) / NFAC deleted the addition, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. DR that the Ld. CIT(A) / NFAC, without appreciating the factual findings given by the Assessing Officer that the purchases are bogus, has deleted the addition by accepting certain evidences which were not produced before the Assessing Officer. Thus, he has violated the provisions of Rule 46A and therefore, such order of the Ld. CIT(A) / NFAC being a perverse one should be reversed and that of the Assessing Officer be restored. It is the submission of the Ld. Counsel for the assessee that the assessee has produced all the details as asked for by the Assessing Officer and even his books of account have not been rejected. It is also his submission that the statement recorded during the course of survey u/s 133A of the Act has no evidentiary value. Further, such statement was never provided to the assessee till today and no cross examination was given by the Assessing Officer.
We find some force in the above arguments of the Ld. Counsel for the assessee. A perusal of the assessment order shows that the Assessing Officer reopened the assessment on the basis of findings by the survey team in the case of Shri Siddharth C. Shah according to which Shri Shah in his statement recorded during the course of survey u/s 133A has admitted to have indulged in receiving accommodation entries in the form of bogus purchases and bogus sales. He also had admitted that his company had carried out only paper entry transactions without actual movement of goods / material being bogus purchases and bogus sales as circular trading for inflation of turnover. However, it is an admitted fact that the assessee in the instant case is maintaining regular books of account which were duly audited and the Assessing Officer has not rejected such audited books of account and accepted the various items which conform part of Profit and Loss Account including the price of sales and various expenses and quantitative details.
No discrepancies have been found either by the auditors or the Assessing Officer in such quantitative details. The assessee has also produced various details before the Assessing Officer such as copies of invoices, e-way bills, goods received note and transportation bills of various concerns. All the payments have been made through proper banking channel. Under these circumstances, we have to see as to whether any addition can be made merely on the basis of statement recorded during the course of survey u/s 133A in the case of a third party that too, without providing the copy of the same to the assessee or without allowing cross examination.
We find the Hon’ble Madras High Court in the case of CIT vs. S.Khader Khan Son has held that section 133A of the Act does not empower any ITO to examine any person on oath. Therefore, the statement recorded u/s 131 during the course of survey u/s 133A of the Act has no evidentiary value and any admission made during such statement cannot be made the basis for addition. The relevant observations of Hon’ble High Court read as under: “7. From the foregoing discussion, the following principles can be culled out:- (i) An admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 18]; (ii) In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. Commissioner of Income-tax [(2003) 263 I.T.R. 101]; (iii) The expression "such other materials or information as are available with the Assessing Officer" contained in Section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under Section 133A, vide Commissioner of Income-tax v. G.K.Senniappan [(2006) 284 I.T.R. 220]; (iv) The material or infomration found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this Court in T.C.(A) No.2620 of 2006 (between Commissioner of Income-tax v. S.Ajit Kumar); (v) Finally, the word "may" used in Section 133A (3)(iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself.
For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated 10.3.2003, extracted above, for arriving at the conclusion that the materials collected and the statement obtained under Section 133A would not automatically bind upon the assessee, we do not see any reason to interfere with the order of the Tribunal. Accordingly, finding no substantial question of law arises for consideration, the tax case appeal stands dismissed.”
We find the SLP filed by the Revenue against the above roder of Hon’ble Madras High Court was dismissed by the Hon’ble Supreme Court as reported in (2013) 353 ITR 480 (SC).
We find Hon’ble Delhi High Court in the case of CIT vs. Dhingra Metal Works (supra) has held that though an admission made during survey is an extremely important piece of evidence, however, it cannot be said to be conclusive and it is open to the person who has made the admission to show that it is incorrect.
Further, the Hon’ble High Court has held that section 133A of the Act does not permit to examine a person on oath and the material collected and the statement recorded during the survey are not conclusive piece of evidence by themselves. The relevant observations of Hon’ble High Court read as under: “12. From the aforesaid, it is apparent that while Section 132(4) of the Act specifically authorizes an officer to examine a person on oath, Section 133A does not permit the same.
The Kerala High Court in Paul Mathews & Sons Vs. Commissioner of Income Tax, (2003) 263 ITR 101 (Kerala) and Madras High Court in CIT Vs. Kader Khan, (2008) 300 ITR 157 have also taken a similar view. The relevant portion of the Kerala High Court judgment in the case of Paul Mathews & Sons (supra) is reproduced hereinbelow :- "The provision also enables the income-tax authority to impound and retain in his custody for such period as he thinks fit any books of account or other documents inspected by him, provided the authority records his reasons for doing so and also shall not retain the books of account for a period not exceeding 15 days. Section 133A(3)(iii) enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. Section 133A, however, enables the income-tax authority only to record any statement of any person which may be useful, but does not authorize taking any sworn statement. On the other hand, we find that such a power to examine a person on oath is specifically conferred on the authorised officer only under section 132(4) of the Income-tax Act in the course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas section 133A does not empower any Income-tax Officer to examine any person on oath. Thus, in contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law. Therefore, there is much force in the argument of learned counsel for the appellant that the statement elicited during the survey operation has no evidentiary value and the Income-tax Officer was well aware of this."
14. Moreover, the word „may‟ used in Section 133A(3)(iii) of the Act clarifies beyond doubt that the material collected and the statement recorded during the survey is not a conclusive piece of evidence by itself.
15. In any event, it is settled law that though an admission is extremely important piece of evidence, it cannot be said to be conclusive and it is open to the person who has made the admission to show that it is incorrect.
Since in the present case, the respondent-assessee has been able to explain the discrepancy in the stock found during the course of survey by production of relevant record including the excise register of its associate company, namely, M/s. D.M.W.P. Ltd., we are of the opinion that the AO could not have made the aforesaid addition solely on the basis of the statement made on behalf of the respondent-assessee during the course of survey.
17. In view of the aforesaid, present appeal being bereft of merit, is dismissed.”
We find the Hon’ble Delhi High Court in the case of CIT vs. Sunrise Tooling System (P.) Ltd. has held that the statement recorded during the course of survey u/s 133A of the Act has no evidentiary value and therefore, the Tribunal was justified in deleting the addition made by the authorities below on the basis of survey statement.
We find the Jaipur Bench of the Tribunal in the case of Unique Art Age vs. ACIT (supra) has held that the statement recorded u/s 133A on oath during survey could not be relied as evidence.
The various other decisions relied on by the Ld. Counsel for the assessee, copies of which are placed in the paper book, also support his case to the proposition that section 133A of the Act does not empower any ITO to examine any person on oath and the statement recorded u/s 133A of the Act has no evidentiary value and therefore, any admission made during such statement, cannot be made the basis for any addition.
Since in the instant case the assessee has produced full details before the Assessing Officer as well as the Ld. CIT(A) / NFAC including the books of account which were audited, the quantitative details were given which have not been doubted by the Assessing Officer and the addition was made only on the basis of statement of Shri Siddharth C. Shah recorded during the course of survey u/s 133A of the Act in his premises, copy of which has never been supplied to the assessee nor any cross examination was granted, therefore, in view of the decisions cited (supra) and in view of the detailed reasoning given by the Ld. CIT(A) / NFAC, we do not find any infirmity in his order deleting the addition. Accordingly, we uphold the order of the Ld. CIT(A) / NFAC.
So far as the grounds raised by the Revenue regarding the violation of Rule 46A is concerned, the Ld. DR could not point out any evidence which was not produced before the Assessing Officer but produced before the Ld. CIT(A) / NFAC which he has admitted in violation of Rule 46A. We, therefore, do not find any infirmity in the order of the Ld. CIT(A) / NFAC deleting the addition made by the Assessing Officer u/s 68 of the Act by treating 2% as commission out of the sales. Accordingly, the order of the Ld. CIT(A) / NFAC is upheld and the grounds raised by the Revenue are dismissed.
After hearing both the sides, we find the grounds raised in . We have already decided the issue and dismissed the grounds raised in the Revenue in ITA No.1374/PUN/2025. Following similar reasonings, we dismiss the grounds raised by the Revenue in the instant appeal.
CO Nos.28 & 33/PUN/2025
The Ld. Counsel for the assessee did not press the grounds raised in both the COs for which the Ld. DR has no objection. Hence, we dismiss the COs filed by the assessee as ‘not pressed’.
In the result, both the appeals filed by the Revenue and both the COs filed by the assessee are dismissed.
Order pronounced in the open Court on 16th December, 2025.