VESTIGE MARKETING PVT LTD,DELHI vs. DCIT, CENTRAL CIRCLE-05, DELHI

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"clean_text": "IN THE INCOME TAX APPELLATE TRIBUNAL\nDELHI BENCH 'F' : NEW DELHI\nBEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND\nSHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER\nITA Nos.5515 to 5521/Del/2025 along with ITA Nos.7838 to\n7844/Del/2025\nAssessment Years: 2018-19 to 2024-25\nM/s Vestige Marketing\nPvt.Ltd.,\nA-89, Okhla Industrial Area,\nOkhla Phase-II, Techkhand,\nSouth East Delhi,\nDelhi - 110 020.\nPAN : AABCV8616R.\n(Appellant)\nVs.\nDeputy Commissioner of\nIncome Tax,\nCentral Circle-05,\nDelhi.\n(Respondent/Cross-Appellant)\nAssessee by\nShri Amit Goel and\nShri Pranav Yadav, Advocates.\nRevenue by\nMs. Monika Singh, CIT-DR.\nDate of hearing\n24.02.2026\nDate of pronouncement\n20.03.2026\nORDER\nPER BENCH\nThese assessee's and the Revenue's seven cross-appeals each\ni.e., ITA Nos.5515 to 5521/Del/2025 and ITA Nos.7838 to\n7844/Del/2025 for assessment years 2018-19 to 2024-25, arise against\nthe CIT(A)-24, New Delhi orders; all dated 1st September, 2025, in\nproceedings under Section 147 read with Section 143(3) of the Income-\ntax Act, 1961 (hereinafter referred to as 'the Act'), as the case may be,\nrespectively.\n2.\nHeard both the parties. Case files perused.\n3.\nWe advert to the “lead” assessment year 2018-19 involving the\nassessee and the Revenue's respective cross-appeals ITA\nNo.5515/Del/2025 and 7838/Del/2025. There is hardly any dispute\nbetween the parties that the learned Assessing Officer had framed the\nassessment in question dated 3rd April, 2025 disallowing the assessee's\nentire purchases of ₹8,86,36,574/- under Section 37(1) of the Act\nthereby treating the same as bogus ones i.e., mere accommodation\nentries going by its authorized persons' statements recorded in the\ncourse of Section 132 search dated 20th September, 2023. We next\nnotice that the learned Assessing Officer had further made Section 69A\nunexplained money addition of ₹40,18,132/- in its hands as well. And\nthat the learned CIT(A) lower appeal discussion has partly upheld the\nformer addition of the assessee's alleged bogus purchases to the\nextent of ₹13,52,382/-, thereby granting relief of ₹8,72,84,192/- and\nfurther deleted the above latter addition in entirety.\nIt is in this factual backdrop that the assessee's endeavor herein\nis to delete the aforesaid remaining bogus purchase\ndisallowance/addition of ₹13,52,382/- as well whereas the Revenue's\ntwin substantive grounds seek to uphold the same in entirety along\nwith Section 69A addition of ₹40,18,132/- hereinabove (supra).\n4.\nWe have given our thoughtful consideration to the assessee and\nRevenue's vehement submissions reiterating their respective stands.\nLearned Counsel representing assessee has filed its written synopsis,\nreading as under:-\n“The assessee company is engaged in the business of\ntrading of merchandise particularly in health and food\nsupplements, nutraceutical products, household goods,\npersonal wellness, personal grooming & hygiene and other\nconsumer products. Search and seizure operation u/s 132\nof the Income Tax Act, 1961 (the 'Act') was carried out in\nthe case of the assessee on 20.09.2023. The assessment\nfor A.Y. 2018-19 to A.Y. 2024-25 were completed under the\nfollowing heads:\ni.\nAddition/ disallowance of purchase expenses u/s 37\nAddition on account of alleged sale of tickets of events\nii.\nThe above additions were primary made by the AO on the\nground of some statements recorded at the time of search.\nAgainst the addition made, the assessee went into appeal\nbefore CIT(A) who vide her appeal order held that additions\ncannot be made merely on the basis of statement.\nIn respect of additions made in respect of sale of tickets,\nthe CIT(A) deleted the addition as there was no evidence to\njustify the addition.\nIn respect of addition/disallowance of purchase expenses,\nthe Ld CIT(A) held that it is a settled law that addition\ncannot be made merely on the basis of confessional\nstatement particularly when such statement has been\nretracted. The CIT(A) has rightly held that mere\nconfessional statements cannot be a ground for drawing\nupon adverse inference. The CIT(A) has deleted the\nadditions in respect of the parties who have filed their\nresponse to the AO u/s 133(6) of the Act and who have\nfiled their income tax returns alongwith documentary\nevidences. However, in respect of parties, which did not file\nresponse to notice under section 133(6) and/or who did not\nfile the ITR, the CIT(A) confirmed the additions. The\nsummary/chart of additions made by the AO and\nconfirmed/deleted by CIT(A) is as under:-\nΑ.Υ. Assessment\nunder\nsection\nIssue\nAdditions made\nby AO\nAdditions confirmed\nby CIT(A)\nAdditions deleted\nby CIT(A)\n2018-19\n148\nDisallowance of purchases expenses u/s 37(1)\nAlleged cash receipts as unexplained money\n69A on account of ticket sales for events\n88,636,574\n4,018,132\n1,352,382\n87,284,192\n4,018,132\n2019-20\n148\nDisallowance of purchase expesnes u/s 37(1)\nAlleged cash receipts as unexplained money\n69A on account of ticket sales for events\n182,208,986\n3,407,692\n38,122,658\n144,086,328\n3,407,692\n2020-21\n148\nDisallowance of purchase expenses u/s 37(1)\nAlleged cash receipts as unexplained money\n69A on account of ticket sales for events\n904,658,797\n7,143,596\n292,537,003\n612,121,794\n7,143,596\n2021-22\n148\nDisallowance of purchase expenses u/s 37(1)\nAlleged cash receipts as unexplained money\n69A on account of ticket sales for events\n382,721,429\n1,849,463\n96,867,648\n285,853,781\n1,849,463\n2022-23\n148\nDisallowance of purchase expenses u/s 37(1)\nAlleged cash receipts as unexplained money\n69A on account of ticket sales for events\n620,216,361\n7,391,133\n332,603,825\n287,612,536\n7,391,133\n2023-24\n143(3)\nDisallowance of purchase expenses u/s 37(1)\nAlleged cash receipts as unexplained money\n69A on account of ticket sales for events\n311,295,940\n6,708,444\n11,827,256\n299,468,684\n6,708,444\n2024-25\n143(3)\nDisallowance of purchase expenses u/s 37(1)\nAlleged cash recei pts as unexplained money\n69A on account of ticket sales for events\n256,427,765\n1,265,838\n22,142,885\n234,284,880\n1,265,838\nTotal\n2,681,887,752\n794,101,275\n1,982,496,493\nAddition made by AO on account of alleged ticket sales deleted by\nCIT(A)\nWith regard to the addition made by the AO under section 69A of the\nAct in respect of alleged sale of tickets, the CIT(A) has after due\nconsideration of facts and law, deleted the addition as there was no\nevidence to justify the addition. There is no infirmity in the action of\nCIT(A) in deleting the additions.\nAddition made by AO on account of purchases/expenses deleted by\nCIT(A)\nIn respect of addition/disallowance of purchase expenses, the Ld CIT(A)\nheld that it is a settled law that addition cannot be made merely on the\nbasis of confessional statement particularly when such statement has\nbeen retracted. The CIT(A) has rightly held that mere confessional\nstatements cannot be a ground for drawing upon adverse inference.\nThe CIT(A) has deleted the additions in respect of the parties who have\nfiled their response to the AO u/s 133(6) of the Act and who have\nfiled their income tax returns alongwith documentary evidences. There is no\ninfirmity in the action of CIT(A) in deleting the additions.\nAddition made by AO on account of purchases/expenses confirmed by\nCIT(A)\nThe CIT(A) erred in confirming addition in respect of certain parties\nwho did not file response to notice u/s 133(6) and who did not file their\nITRs. In this regard, it is humbly submitted merely because the parties/\nsupplier did not respond to the notice u/s 133(6) or did not file their\nITR, the same cannot be ground for drawing adverse inference in the\ncase of the assessee. It is humbly submitted that it is not a case of\nreceipt of any loan/ share capital/ gift or any other form of cash credit.\nIt is a case, where the assessee has incurred expenses during the\nordinary course of business and made the payment through banking\nchannel. Thus, there is no justification in making disallowance of\npurchases/ expenses. All the sales/ revenue of the company have been\naccepted. There cannot be a sale without corresponding purchases.\nThe books of accounts of the company have been accepted by the AO\nand have not been rejected.\nSynopsis/submission on various contentions\n1. It is a settled law that addition cannot be made merely on the basis of\nstatement particularly when it is established that the statement\nrecorded was wrong/containing factually incorrect facts. Moreover, the\nstatements were retracted.\nThe Assessing Officer has made additions treating certain purchases as\nbogus. The disallowance is primarily based on:\n➤ A statement recorded under Section 132(4) during search; and\n➤ An inference that payments made through banking channels\nwere allegedly returned in cash.\nThe Assessee respectfully submits that:\n➤ The statement was retracted before the Assessing Officer;\n➤ The retraction was supported by documentary evidence;\n➤ The addition is unsupported by corroborative material.\nI. Retraction of Statement – Legal Position\nThe statement recorded during search was retracted during\nassessment proceedings. Though the retraction was not immediate,\nthe delay occurred due to continuous fear of revenue of adverse\ncircumstances and thus impacting the business. All primary and basic\ndocuments and payments by banking channels are sufficient to\nestablish the genuineness and also in view of:\nThe Hon'ble Delhi High Court in CIT v. Sunil Aggarwal (ITA 224/2003,\ndated 02.11.2015) held:\n➤ A statement under Section 132(4) may have evidentiary value;\nHowever, once retracted, it cannot be relied upon in isolation;\nThe Assessing Officer must examine the explanation with\nreference to books of account;\nAddition based solely on a retracted statement without\ncorroboration is not tenable.\nThe Court specifically observed that even where retraction is delayed,\nthe AO is not absolved from examining the explanation with reference\nto audited books of records.\nIn the present case:\n➤ The retraction is accompanied by ledger accounts,\nStock records,\nGST invoices,\nBanking trail,\nTDS compliance,\nVendor's income tax disclosure.\nThus, this is not a bald denial but a substantiated rebuttal.\nII. Complete Documentary Chain Establishing Genuineness\nThe Paper Book demonstrates a complete and verifiable commercial\nchain:\nPurchase Order → Tax Invoice → e-Way Bill → GRN → Ledger Entry →\nBanking Payment → TDS Deduction → ITR Disclosure.\nThe following records are placed on record:\n➤ GST-compliant invoices;\ne-Way Bills evidencing physical movement of goods;\nGoods Receipt Notes confirming inward entries;\nLedger accounts in audited books;\nBank statements showing RTGS/NEFT payments;\n➤ Form 16A evidencing deduction of tax under Section 194Q;\n➤ Vendor's Income Tax Return acknowledgements.\nBooks of account have not been rejected under Section 145. No stock\ndiscrepancy has been found. Sales are accepted. Gross profit ratio is\nconsistent with past years.\nSuch a structured documentary trail is inconsistent with the theory of\naccommodation entries.\nIII. Absence of Cash Withdrawal – No Return of Consideration\nThe Revenue's case proceeds on the premise that payments made\nthrough banking channels were returned in cash.\nHowever, the complete bank statements of M/s Devendra Enterprises\nare placed on record.\nThe banking record demonstrates:\n➤ Receipt of funds through RTGS/NEFT;\nNo substantial or corresponding cash withdrawals proximate to\nsuch credits;\nNo one-to-one nexus between cheque credits and cash\nwithdrawals;\nNo structured withdrawal pattern indicative of accommodation\nentries.\nIf the allegation of cash return were correct, one would expect:\n➤ Immediate and matching withdrawals;\n➤ Large value cash withdrawals corresponding to cheque credits;\nCircular fund movement.\nNo such pattern exists.\nThere is:\n➤ No seized cash;\n➤ No identified recipient of alleged cash;\nNo financial trail evidencing return of funds.\nThe banking record, contradicts the allegation of cash return.\nIn absence of a cash trail, the foundational premise of bogus\nexpenditure collapses.\nIV. Section 65B Compliance – Electronic Evidence\n•\nNo chain-of-custody documentation has been placed to establish\nreliability of alleged seized digital extracts relied upon by the\nAssessing Officer.\nV. Comparative Position – Sunil Aggarwal vs Present Case\nIssue\nSunil Aggarwal (Delhi HC)\nPresent Case\nStatement u/s\n132(4)\nRecorded and later\nretracted\nRecorded and retracted\nbefore AO\nTiming of\nRetraction\nNot immediate\nDelayed but supported by\ndocumentary evidence\nRequirement\nAO must examine books\nBooks, ledgers, invoices,\nCorroboration\nAddition unsafe without\nindependent material\nstock records produced\nNo independent evidence\nof cash return\nBooks\nMust be examined\nNot rejected under Section\n145\nResulting\nPrinciple\nto Revenue\nRetraction shifts burden\nRevenue failed to\ndischarge burden\nThe factual position here stands on stronger footing.\nSUMMARY\n1. Retraction supported by documentary evidence;\n2. Books of account not rejected;\n3. Complete GST and stock trail established;\n4. Payments through banking channels;\n5. No corresponding cash withdrawals;\n6. TDS deducted and deposited;\n7. Vendor disclosed income in ITR;\n8. No corroborative material produced by Revenue.\nThe addition is thus:\n•\nBased on inference;\n•\nUnsupported by objective evidence;\n•\nContrary to settled law.\nJudgment\nDocumentary\nRequirements\nRecognised\nPosition in Present\nCase\nRaj Kumar Daga v.\nDCIT (Delhi ITAT)\nBanking payments;\nTDS deduction; Books\nnot rejected; No\ncontrary evidence\nPayments through\nRTGS/NEFT; TDS u/s\n194Q deducted;\nBooks not rejected;\nNo disproving\nmaterial\nJHS Svendgaard\nLaboratories v. DCIT\n(Delhi ITAT)\nGST-compliant\ninvoices;\nDocumentary trail;\nPurchaser not liable\nfor supplier suspicion\nGST invoices; e-Way\nBills; GRNs; Ledger\nentries; Full\ntransaction trail\nACIT v. Radiant\nShipping Ltd. (Mumbai\nITAT)\nAuthority must\ndemonstrate falsity;\nMere suspicion\ninsufficient\nNo falsification shown;\nNo stock discrepancy;\nNo forensic\ncontradiction\nThe reliance is placed on the following case laws:\n(i) Raj Kumar Daga, New Delhi vs DCIT Circle 30(1), New Delhi dated 16\nJanuary, 2026/ITA No.301/Del/2024/ [Assessment Year: 2014-15]\n\"4.\n4.1. The Id. AO disallowed the commission expense of\nRs.41,55,067/- on the ground that assessee failed to discharge\nthe burden of proving that the commission was paid to genuine\nperson. Aggrieved by the order of the AO, the assessee filed\nappeal before the Id. CIT(A).\nXXX\n8. We have heard the rival submission in the light of material\nplaced upon record. Undisputedly, the assessee has not\nproduced the parties who were recipients of the commission. The\nId. AO however also not made any attempts to enforce their\nattendance through summons proceedings under section 131. It\nis undisputed facts on record that the payments were made\nutilizing banking channel with due TDS deductions. The learned\nAssessing Officer while concluding the non-genuineness of the\ncommission expenses has proceeded to accept the book results\nand the books of accounts were not rejected. We find force in the\nargument that non-disclosure or inadequate disclosure of\ncommission receipts in the hands of the recipients could not\nmake the commission expenses per se as ingenuine. Similarly,\nbooking of commission payment in the last month of the\nfinancial year would not make the commission expenses per se\nas ingenuine as it is routine business practice to book expenses\nat the end. We have further noted that the arguments of the Id.\nAO on pages 5 and 6 of his order extracted hereunder dwell\nmore in the realm of conjectures and surmises and a case of\nhuman probability.\n\"........XXX\n9. We have noted that the Id. CIT(A) has confirmed the addition\nby placing full reliance upon the above hypothetical presumption\ndrawn by the Id. AO. Conjectures and surmises have no place in\njudicial orders unless the same are supported by cogent and\ndemonstrative evidence. Accordingly, we are of the considered\nview that the order of Id. AO and of the Id. CIT(A) is not based\nupon correct understanding and interpretation of the facts of the\ncase. We therefore set-aside the order of lower authorities and\ndirect the Id. AO to delete the impugned addition of\nRs.41,55,067/-. All the grounds of appeal raised by the assessee\nare therefore allowed.\"\n(ii) M/S Jhs Svendgaard Laboratories vs DCIT Cc-31, New Delhi Dated\n07.01.2026/ITA No. 3454/Del/2025\n\"The Ground No. 6 is against the Addition of Rs. 88,95,892/- made\nby the A.O. on account of bogus purchases from M/s Royal\nInternational. ---\"\n25. Further, the said supplier, M/s Royal International, was a\nregistered dealer under the GST law during the relevant period\nand the transactions were duly reported in the GST returns of\nboth parties. The Appellant had also claimed input tax credit\n(ITC) in respect of these purchases, which was duly reflected in\nits GST filings and has not been disputed or disallowed by the\nGST authorities. It is a settled principle that a bona fide buyer\ncannot be penalized for any procedural or classification\ndifference arising from the supplier's end, particularly when the\npurchases are supported by valid documents, payment through\nbanking channels and are otherwise genuine and verifiable. The\nHon'ble Delhi Tribunal in Sushil Kumar v. ACIT [2025] 176\ntaxmann.com 957 (Del Trib.) held that when purchases are\nsupported by proper bills, banking payments, and duly reflected\nin GST returns with ITC claimed and allowed, such transactions\ncannot be disbelieved merely on suspicion. The Tribunal also\nobserved that the fact that some suppliers were inactive on the\nGST portal or had not filed returns cannot be a ground for\nmaking additions in the hands of the purchaser, as there is no\nlegal obligation on the buyer to ensure the supplier's tax\ncompliance.\n26. Similarly, the Hon'ble Allahabad High Court in M/s Kesarwani\nTraders v. State of U.P. (Writ Tax No. 1235/2025, dated\n18.08.2025) held that when the movement of goods is supported\nby valid tax invoices, e-way bills, and transport documents, the\ntransaction cannot be disbelieved merely because the supplier's\nGST registration was later cancelled. The Court categorically held\nthat where the buyer acts bona fide and maintains proper\nrecords, no adverse inference or denial of ITC is warranted.\n27. The Hon'ble Gujarat High Court in CIT v. Nangalia Fabrics (P.)\nLtd. [2013] 40 taxmann.com 206 (Guj.) has also held that once\npurchases are supported by bills and bank payments,\ndisallowance cannot be made merely because the supplier's\nstatus is questioned later. Similarly, the Mumbai Tribunal in\nGeolife Organics v. ACIT [2017] 58 ITR(T) 297 (Mum.) observed\nthat where the purchases are backed by delivery and payment\nevidence and the consumption of goods is accepted, the same\ncannot be treated as bogus. Further, the Delhi Bench in ACIT v.\nMy Paper Merchants Pvt. Ltd. (ITA No. 226/Del/2024, dated\n20.08.2025) reiterated that additions made on assumptions,\nwithout verification or tangible material, are unsustainable.\nXXX\n29. In view of the above discussions, we find merit in the Ground\nNo. 6 of the Assessee, accordingly, we delete the selective\ndisallowance of Rs. 88.95 lakh out of total purchases of Rs. 5.73\ncrore made by the A.O. and allow the Ground No. 6 of the\nAssessee.\n(iii) Asstt. Commissioner of Income Tax Range-5(3) v/s M/s. Radiant\nShipping Ltd./ ITA no.1540/Mum. /2011/ (Assessment Year: 2001-02)\ndated 27.05.2016\n\" 23. We have considered the submissions of the parties and\nperused the material available on record. Undisputedly, the\nassessee is in shipping business. The Department has also\naccepted this fact. Therefore, it is quite natural that the assessee\nmust be requiring the assistant and the service of certain agents\nfor the purpose of its business and paying commission /\nbrokerage to them. It is seen from the facts on record that\nbefore the Departmental Authorities assessee did produce the\ncopies of audited Profit & Loss account and Balance Sheet as\nwell as copies of the invoices to demonstrate that the payments\nmade were towards services rendered by the parties in relation\nto assessee's shipping business. However, it is the view of the\nDepartmental Authorities that these documents do not\nconclusively establish the fact that the payments made towards\ncertain services rendered by those parties and what is the nature\nof service provided by them. In our view, if the nature of service\nprovided by the concerned parties is not discernible from the\ninvoices raised by the parties, then the Departmental Authorities\nshould have clearly expressed the nature of proof the assessee\nis required to place on record to establish the allowability of\nexpenditure.--.”\nWe also rely on the judgment of Hon'ble Delhi High Court_ITA\n224/2003 dated 02.11.2025 in the case of The Commissioner Of\nIncome Tax Vs Sunil Aggarwal. The facts of the case are identical\nwith those facts reported in CIT vs. SUNIL AGGARWAL. In the\ncase of Sunil Agarwal, the Assessing Officer retracted from the\nstatement and stated that the amount is recorded in the books\nof account. Similar is the position in our case. All the payments\nhave been made by cheque and are recorded in the books of\naccount. The reasoning given by the initiating officer in\nprovisional attachment order dated 30th July 2025 is same as\ntaken by the revenue in the case of Sunil Aggarwal, but the\nHon'ble High Court did not accept the contention of the revenue\nand decided the matter in favour of the assessee. Therefore, the\nretraction is in line with the decision of the Hon'ble High Court.\nThe relevant paras are reproduced below:\n“ 5.----- It was further recorded by the AO that a statement of the\nAssessee was recorded during the course of search under\nSection 132(4) of the Act. In response to question No.11, the\nAssessee is stated to have made a categorical admission that\nthe said sum of Rs.86 lakhs belonged to him; -- that the seized\ncash amount of Rs.86 lakhs represented “my undisclosed income\nnot recorded in the Books of Accounts”.\n6. The Assessee retracted the above admission during the\ncourse of the assessment proceedings, but not immediately after\nmaking the said statement. He started providing information to\nthe AO from 14th July 1997 onwards, i.e., around two weeks\nbefore the deadline for finalization of the assessment, i.e., 31st\nJuly 1997. In his retraction, the Assessee stated that the\nsurrender was made under a mistaken belief and “without\nlooking into books of account and without understanding law”.\nHe further stated that he had been “compelled perturbed by\nevents of search and wherein I had no opportunity either to\nconsult my advocates, my staff or my books of accounts etc. The\npressure of search was built so much that I had to make this\nsurrender without having actual possession of the assets or\nunexplained investments or expenses incurred and hence there\nbeing no such income as undisclosed”. He claimed that the\nmoney seized already stood declared as out of known sources\nand the said surrender was meaningless. He did not admit that\nthe surrender was voluntary. The Assessee also offered an\nexplanation regarding the said cash amount that these were\nfrom the undisclosed sales of disclosed purchases which were\nverified from the records and the books of accounts.\n7. In the assessment order, the AO, however, declined to accept\nthe above explanation offered by the Assessee. He was of the\nview that the statement given by the Assessee voluntarily during\nthe course of search under Section 132(4) of the Act had\nevidentiary value and could be relied upon.\nXXX\n9. In appeal filed before the ITAT, there was a concurrent view of\nthe two Members comprising the Bench i.e. Mr. R.K. Gupta and\nMr. R.S. Syal that the additions made in the sum of Rs.86 lakhs\nto the income of the Assessee should be deleted. The AO had\nnot doubted the sales and purchase figures or the fact of cash\nsales having been made. It was accordingly held that the\naddition of Rs.86 lakhs was not justified.\nXXX\n12. It was submitted by Mr. Raghvendra Singh, learned counsel\nfor the Revenue, that the ITAT failed to appreciate that the\nevidentiary value of the statement on oath recorded by the\nAssessee under Section 132(4) of the Act carries more weight\nthan a statement made during a survey under Section 133A.\nHe further submitted that the Assessee had not chosen to retract\nhis statement till ten months after the date of the search and\ntherefore the retraction itself was not genuine. According to him,\nthe said retraction did not dilute the evidentiary value of the\ncategorical admission made by the Assessee in his statement\nunder Section 132(4) of the Act. He submitted that the addition\nof Rs.86 lakhs solely on the basis of the said retracted statement\nas, therefore, permissible.\n13. The narration of facts hereinabove shows that the Assessee\ndid not simply retract the statement made by him during the\ncourse of surrender. He also offered an explanation for the sum\nof Rs.86 lakhs found in the hands of his employee, Mr. Gopal\nSingh. In the present case, as noted by the ITAT, the Assessee\nsought to explain the said amount with reference to the entries\nin the books of accounts of the sales made during the year and\nthe stock position. In other words, the AO did not find that the\ncash seized represented amounts not emanating from sales but\nsome other source. The fact that the Assessee may have\nretracted his statement belatedly did not relieve the AO from\nexamining the explanation offered by the Assessee with reference\nto the books of accounts produced before him.\n14. Therefore, although the counsel for the Revenue may be\nright in his submission that a statement under Section 132(4) of\nthe Act carries much greater weight than the statement made\nunder Section 133A of the Act, a retracted statement under\nSection 132(4) of the Act would require some corroborative\nmaterial for the AO to proceed to make additions on the basis of\nsuch statement. Of course, where the retraction is not for any\nconvincing reason, or where it is not shown by the Assessee that\nhe was under some coercion to make the statement in the first\nplace, or where the retraction is not followed by the Assessee\nproducing material to substantiate his defence, the AO might be\njustified in make additions on the basis of the retracted\nstatement.\n15.In the present case, the Assessee had an explanation for not\nretracting the statement earlier. He also furnished an\nexplanation for the cash that was found in the hands of his\nemployee and this was verifiable from the books of accounts. In\nthe circumstances, it was unsafe for the AO to proceed to make\nadditions solely on the basis of the statement made under\nSection 132(4) of the Act, which was subsequently retracted.\n16.Consequently, the Court is unable to find any legal infirmity in\nthe conclusion reached by the ITAT that the addition of Rs.86\nlakhs to the income of the Assessee was not justified. Question\n(B) is answered in the affirmative, i.e., in favour of the Assessee\nand against the Revenue.\n18. Mr. Singh has placed reliance on the decision of the Supreme\nCourt in ITO v. M Pirai Choodi (2011) 334 ITR 262(SC) to urge\nthat denial of an opportunity to cross-examine by itself could not\nvitiate the assessment proceedings particularly when the\nAssessee had not raised a demand to that effect before the AO.\nHe submitted that in the present case, it was recorded by the AO\nhimself that despite sufficient opportunities, the Assessee did\nnot cooperate. It was also not recorded by the AO that the\nAssessee had asked for cross-examination of Mr. Sant Kumar\nSharma and that such opportunity was being denied by the AO.\n19. The Court finds that in the present case the basis for making\nthe addition of Rs. 1,38,41,971 was the statement of Mr. Sant\nKumar Sharma. He had furnished various details which were\nincriminating as far as the Assessee was concerned. It was\nincumbent on the AO, in those circumstances, to afford the\nAssessee an opportunity of cross-examination of Mr. Sant\nKumar Sharma. The ITAT also noted that the Assessee could not be said\nto have not cooperated at all in the assessment proceedings.\nXXX.\n21.-- Question (A) is also answered in the affirmative, i.e., in\nfavour of the Assessee and against the Revenue.”\n1.2 The CBDT vide instruction No. 286/2/2003 IT(Inv) has emphases that\nduring search and seizure, there should be focus and concentration on\ncollection of evidence of income and no attempt should be made to\nobtain confession as to the undisclosed income. Thus, CBDT has itself\nrecognized the position that assessment of undisclosed income has\nbeen based upon evidence and not on statement.\n1.3 In this regard, we would also like to refer to provisions of section\n132(4) of the Act which are as under: -\n4) The authorised officer may, during the course of the search\nor seizure, examine on oath any person who is found to be in\npossession or control of any books of account, documents,\nmoney, bullion, jewellery or other valuable article or thing\nand any statement made by such person during such\nexamination may thereafter be used in evidence in any\nproceeding under the Indian Income-tax Act, 1922 (11 of\n1922), or under this Act.\nFrom the perusal of aforesaid provisions, it is evident that\nexamination on oath during search or seizure can be made only of\nany person who is found to be in possession or control of any\nbooks of account, documents, money, bullion, jewellery or other\nvaluable article or thing. In the present case of the appellant\nbefore your honour, as is evident from the statement recorded u/s\n132(4) there is no reference to any books of account, documents,\nmoney, bullion, jewellery or other valuable article or thing that\nmay have been found in possession of Sh. Dhananjay Shukla.\nAccordingly, there is no basis for using such statement as\nevidence.\n1.4 In CIT v. Shri Ramdas Motor Transport [1999] 238 ITR 177/102 Taxman\n300, a Division Bench of Andhra Pradesh High Court, reading the\nprovision of Section 132(4) of the Act in the context of discovering\nundisclosed income, explained that in cases where no unaccounted\ndocuments or incriminating material is found, the powers under\nSection 132(4) of the Act cannot be invoked. The relevant passage\nfrom the aforesaid judgment is quoted below:\n\"A plain reading of sub-section (4) shows that the authorised\nofficer during the course of raid is empowered to examine any\nperson if he is found to be in possession or control of any\nundisclosed books of account, documents, money or other\nvaluable articles or things, elicit information from such person\nwith regard to such account books or money which are in his\npossession and can record a statement to that effect. Under\nthis provision, such statements can be used in evidence in any\nsubsequent proceeding initiated against such per son under\nthe Act. Thus, the question of examining any person by the\nauthorised officer arises only when he found such person to be\nin possession of any undisclosed money or books of account.\nBut, in this case, it is admitted by the Revenue that on the\ndates of search, the Department was not able to find any\nunaccounted money, unaccounted bullion nor any other\nvaluable articles or things, nor any unaccounted documents\nnor any such incriminating material either from the premises of\nthe company or from the residential houses of the managing\ndirector and other directors. In such a case, when the\nmanaging director or any other persons were found to be not in\npossession of any incriminating material, the question of\nexamining them by the authorised officer during the course of\nsearch and recording any statement from them by invoking the\npowers under section 132(4) of the Act, does not arise.\nTherefore, the statement of the managing director of the\nassessee, recorded patently under section 132(4) of the Act,\ndoes not have any evidentiary value. This provision embedded\nin sub-section (4) is obviously based on the well-established\nrule of evidence that mere confessional statement without\nthere being any documentary proof shall not be used in\nevidence against the person who made such statement. The\nfinding of the Tribunal was based on the above well settled\nprinciple.\"\n1.5 With regard to issue of as to whether addition can be made only on the\nbasis of statement recorded during search u/s 132(4) of the Income\nTax Act, the juri ictional Delhi High Court in the case of CIT v Harjeev\nAggarwal [2016] 70 taxmann.com 95 (Delhi) held as under :-\n20.\nThe words \"evidence found as a result of search\" would\nnot take within its sweep statements recorded during search\nand seizure operations. However, the statements recorded\nwould certainly constitute information and if such information\nis relatable to the evidence or material found during search,\nthe same could certainly be used in evidence in any\nproceedings under the Act as expressly mandated by virtue of\nthe explanation to Section 132(4) of the Act. However, such\nstatements on a standalone basis without reference to any\nother material discovered during search and seizure\noperations would not empower the AO to make a block\nassessment merely because any admission was made by the\nAssessee during search operation.\n21. A plain reading of Section 132 (4) of the Act indicates that\nthe authorized officer is empowered to examine on oath any\nperson who is found in possession or control of any books of\naccounts, documents, money, bullion, jewellery or any other\nvaluable article or thing. The explanation to Section 132 (4),\nwhich was inserted by the Direct Tax Laws (Amendment) Act,\n1987 w.e.f. 1st April, 1989, further clarifies that a person may\nbe examined not only in respect of the books of accounts or\nother documents found as a result of search but also in\nrespect of all matters relevant for the purposes of any\ninvestigation connected with any proceeding under the Act.\nHowever, as stated earlier, a statement on oath can only be\nrecorded of a person who is found in possession of books of\naccounts, documents, assets, etc. Plainly, the intention of the\nParliament is to permit such examination only where the books\nof accounts, documents and assets possessed by a person are\nrelevant for the purposes of the investigation being\nundertaken. Now, if the provisions of Section 132(4) of the Act\nare read in the context of Section 158BB(1) read with Section\n158B(b) of the Act, it is at once clear that a statement\nrecorded under Section 132(4) of the Act can be used in\nevidence for making a block assessment only if the said\nstatement is made in the context of other evidence or\nmaterial discovered during the search. A statement of a\nperson, which is not relatable to any incriminating document\nor material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income\nof an assessee has to be computed on the basis of evidence\nand material found during search. The statement recorded\nunder Section 132(4) of the Act may also be used for making\nthe assessment, but only to the extent it is relatable to the\nincriminating evidence/material unearthed or found during\nsearch. In other words, there must be a nexus between the\nstatement recorded and the evidence/material found during\nsearch in order to for an assessment to be based on the\nstatement recorded.\n1.6 Further, it is submitted that even otherwise no adverse inference can\nbe drawn on the basis of statements recorded unless supported by any\ncorroborative evidence. It is submitted that ‘Statement by itself does\nnot constitute incriminating material found as a result of search on\nappellant', statement cannot be made a basis of addition on a\n'standalone basis', without reference to any other material discovered\nduring search and seizure operations on appellant. In this regard\nappellant places reliance on below mentioned judgments:\ni) In the case of Pr. CIT v. Anand Kumar Jain (HUF) 432 ITR 384 (Del) it\nwas held as under: -\n8. Next, we find that, the assessment has been framed\nunder section 153A, consequent to the search action. The\nscope and ambit of section 153A is well defined. This court,\nin CIT v. Kabul Chawla, concerning the scope of\nassessment under Section 153A, has laid out and\nsummarized the legal position after taking into account the\nearlier decisions of this court as well as the decisions of\nother High Courts and Tribunals. In the said case, it was\nheld that the existence of incriminating material found\nduring the course of the search is a sine qua non for\nmaking additions pursuant to a search and seizure\noperation. In the event no incriminating material is found\nduring search, no addition could be made in respect of the\nassessments that had become final. Revenue's case is\nhinged on the statement of Mr. Jindal, which according to\nthem is the incriminating material discovered during the\nsearch action. This statement certainly has the evidentiary\nvalue and relevance as contemplated under the explanation\nto section 132(4) of the Act. However, this statement\ncannot, on a standalone basis, without reference to any\nother material discovered during search and seizure\noperations, empower the AO to frame the block assessment.\nThis court in Principal Commissioner of Income Tax, Delhi\nv. Best Infrastructure (India) P. Ltd., has inter-alia held\nthat:\n\"38. Fifthly, statements recorded under Section 132(4) of\nthe Act do not by themselves constitute incriminating\nmaterial as has been explained by this Court in Harjeev\nAggarwal.\n9. In Commissioner of Income Tax v. Harjeev Aggarwal, 4\nthis Court had held as follows:\n10. Now, coming to the aspect viz the invocation of section\n153A on the basis of the statement recorded in search\naction against a third person. We may note that the AO\nhas used this statement on oath recorded in the course of\nsearch conducted in the case of a third party (i.e., search\nof Pradeep Kumar Jindal) for making the additions in the\nhands of the assessee. As per the mandate of Section\n153C, if this statement was to be construed as an\nincriminating material belonging to or pertaining to a\nperson other than person searched (as referred to in\nSection 153A), then the only legal recourse available to the\ndepartment was to proceed in terms of Section 153C of the\nAct by handing over the same to the AO who has\njuri iction over such person. Here, the assessment has\nbeen framed under section 153A on the basis of alleged\nincriminating material (being the statement recorded\nunder 132(4) of the Act). As noted above, the Assessee\nhad no opportunity to cross-examine the said witness, but\nthat apart, the mandatory procedure under section 153C\nhas not been followed. On this count alone, we find no\nperversity in the view taken by the ITAT. Therefore, we do\nnot find any substantial question of law that requires our\nconsideration.\nii) In the case of Commissioner of Income-tax v. Dilbagh Rai Arora. 263\nTaxman 30 (All) it was held as under:-\n16. The addition can only be made, if there is incriminating\nmaterial or the surrounding circumstances reveal that there\nis any material to justify the addition.\n17. The person making an admission is not always mindful\nof it and some time can get out of its binding purview. If\nthe person can explain exclusive with supportive\nevidence/material or otherwise that the admission by him\nearlier is not correct or contain a wrong statement or that a\ntrue state of affairs is different from that represented\ntherein and so the same should not be accepted upon\nforecasting tax liability which should rather be fixed on the\nbasis of correct and true affairs as ascertained from the\nmaterial on record.\n18. The case law cited by the department in the case of\nRavindra Kumar Verma (supra) wherein the search was\nconducted on 14.5.1998 at the business premises in\nLucknow and various papers, books of account and cash\nwere seized and later on by letter dated 5.4.2002 the\nassessee retracted the confessional statement and on that\nbasis the Hon'ble Court came to the conclusion that after\nalmost 4 years the retraction was made and further there\nwas no allegation of coercion or any threat whereupon\naddition was made, which is afterthought.\n19. Paragraph 29 of the judgment in M/S Vertex Chemical\nIndustries (Supra) is quoted herein below:—\n\"29. In our case, the aforesaid judgment has no\napplication. The reason is that here is not a case of\nretraction by Assessee but during the course of\nassessment, documents produced by him have been\nexamined threadbare and thereafter, reasons for addition\nhave been given. This approach is evident from the fact\nthat Assessing Officer has not mechanically made addition\nof Rs. 9 lacs which was disclosed in the statement under\nSection 132(4) of Act, 1961 but actual addition is only Rs.\n8,12,360/- which shows due application of mind on the part\nof Assessing Officer, which has been affirmed by Tribunal.\"\n20. In the above judgment the Hon'ble Court has come to\nthe. conclusion that the addition was not made merely on\nthe statement made but after looking into the explanation,\nbooks of account and other material placed before him and\nthen made the certain addition. The case in hand, the\naddition have only been made on the basis of statement\ngiven on 6.10.2005.\n21. Therefore, the case law relied upon by the Appellant is\nof no help. The case in hand the assessee-respondent has\ngiven documents, material and explained threadbare with\nregard to amount of Rs. 24 crores but the assessing\nauthority has mechanically made the addition of Rs. 7\ncrores and added back the same amount only on the basis\nof statement having been made by the assessee which is\nnot permitted.\n22. There is no legal infirmity in the order passed by the\nTribunal.\niii) 397 ITR 82 (Del) CIT v. Best Infrastructure (India) (P) Ltd.\niv) ITA No. 5585/D/2015 dated 19.3.2019 Smt. Shivali Mahajan\nv) 290 CTR 263 (Del) CIT v Harjeev Agarwal.\nvi) ITA No. 3332/D/2017 dated 29.12.2017 /s Brahmaputra Finlease (P)\nLtd\nvii) CBDT in instruction no. F.No. 286/98/2013-IT (Inv.II)\n1.7 Reliance in this regard is placed on the following decisions wherein it\nhas been held that the assessing officer is duty bound to compute\nincome of the assessee in accordance with law:\nCIT vs. Mahalaxmi Sugar Mills Co. Ltd: 160 ITR 920\n(SC)\nNational Thermal Power Limited v. CIT: 229 ITR 383\n(SC)\nAssam Company (India) Ltd. vs. CIT: 256 ITR 423\n(Gauhati)\nNathmal Bankatlal Parikh & Co. V. CIT: 122 ITR 168\n(AP FB)\nCIT V. Smt. Archana R. Dhanswatay: 136 ITR 355\n(Bom)\nChokshi Metal Refinery Vs CIT: 107 ITR 63 (Guj.)\nCircular No. 14 (XL-35), dated 11.4.1955\nThe aforesaid decisions, it will be kindly appreciated, make it amply\nclear that the purpose of the assessment is to correctly determine the\ntaxable income of the assessee in accordance with the provisions of\nthe Act.\n(b) Admission relevant, but not conclusive-judicial precedents\nIt is also trite law that admission, if any, made by the assessee on an\nincorrect/ erroneous impression in the return or the books of accounts\nmay be relevant, but is not conclusive and can be clarified/ withdrawn\nat a subsequent stage.\nReliance, in this regard, is placed on the following decisions wherein\nthe Courts have consistently held that admission, per se, cannot be the\nfoundation of assessment; admission may be an important piece of\nevidence but cannot be held to be conclusive.\n- Pullangode Rubber Produce Co. Ltd. vs. State of\nKerala: 91 ITR 18 (SC)\n- The Supreme Court in Sri Krishna vs. Kurukshetra\nUniversity, AIR 1976 SC 376\n- Abdul Qayume vs. CIT: 184 ITR 404 (All.)\n- The Federal Bank Ltd. vs. The State of Kerala: AIR\n1995 Kerala 62 @ 64 (Ker)\nBasant Singh V. Janki Singh: AIR 1967 SC 341 (SC)\nBharat General Reinsurance Co. Ltd.: 81 ITR 303 (Del)\nSatinder Kumar (HUF) V. CIT: 106 ITR 64 (HP)\nDCIT V. Sreeni Printers: 67 STC 279 (Ker.)\nKrishanLal Shiv Chand Rai V. CIT: 88 ITR 293 (P&H)\nIndo Java & Co. V. IAC: 30 ITD 161(SB)\nAddition cannot be made simply on the basis of statement\nrecorded during search, that too, in violation of CBDT Instruction\nReference in this regard may be made to provisions of section\n132(4) of the Act, which reads as under: -\n\"(4): The authorized officer may, during the course of\nthe search or seizure. examine on oath any person\nwho is found to be in possession or control of any\nbooks of account, documents, money, bullion,\njewellery or other valuable article or thing and any\nstatement made by such person during such\nexamination may thereafter be used in evidence in\nany proceeding under the Indian Income-tax Act,\n1922 (11 of 1922), or under this Act.\nExplanation for the removal of doubts, it is hereby\ndeclared that the examination of any person under\nthis sub-section may be not merely in respect of any\nbooks of account, other documents or assets found as\na result of the search, but also in respect of all\nmatters relevant for the purposes of any investigation\nconnected with any proceeding under the Indian\nIncome-tax Act, 1922 (11 of 1922), or under this Act.\"\n(emphasis supplied)\nOn perusal of the above, it may be noted that\nstatement under section 132(4) of the Act can be\nrecorded only if the person is found in possession of\nbooks of account, documents, assets, etc. Thus,\nplainly, the intention of the Legislature is to permit\nsuch examination only where the books of account,\ndocuments and assets possessed by a person are\nrelevant for the purposes of the investigation being\nundertaken.\nIt may be clarified that Explanation to section 132(4)\nof the Act also permits recording of statement with\nreference to books of account, documents, assets,\netc., found during search and also any in respect of\nany other matter.\nThe primary condition, however, is that the statement\nrecorded must relate to evidence/material found\nduring the course of search.\nThe aforesaid provisions, in our respectful submission,\nmakes it abundantly clear that general statement,\nthough under section 132(4) of the Act, without any\nreference to any material found during the course of\nsearch could not be the sole basis for making any\naddition.\nThe aforesaid principle of law has also been\nrecognized by the Central Board of Direct Taxes\n(CBDT) in its Instruction No. F no. 286/2/2003- IT (Inv)\ndated 10.03.2003 (Refer pages 162 to 163 of caselaw\nPB), wherein CBDT had warned the revenue officers\nnot to obtain confession to the undisclosed income,\nrather concentrate on collection of evidence of\nincome which lead to what has not been disclosed or\nis not likely to be disclosed before the Income- tax\nauthorities. The relevant extracts of the said\nInstruction read as under:\n\"Instances have come to the notice of the Board\nwhere assessee have claimed that they have been\nforced to confess the undisclosed income during the\ncourse of the search & seizure and survey operations.\nSuch confessions, if, not based upon credible\nevidence, are later retracted by the concerned\nassessee while filing returns of income. In these\ncircumstances, such confessions during the course of\nsearch & seizure and survey operations do not serve\nany useful purpose. It is, therefore, advised that there\nshould be focus and concentration on collection of\nevidence of income which leads to information on\nwhat has not been disclosed or is not likely to be\ndisclosed before the Income-tax Department.\nSimilarly, while recording statement during the course\nof search & seizure and survey operations no attempt\nshould be made to obtain confession as to the\nundisclosed income. Any action on the contrary shall\nbe viewed adversely Further, in respect of pending\nassessment proceedings also. Assessing officers\nshould rely upon the evidences/materials gathered\nduring the course of search/survey operations or\nthereafter while framing the relevant assessment\norders.\"\n(emphasis supplied)\nThe aforesaid instruction was again reiterated by the\nCBDT in Instruction no. F. No. 286/98/2013-IT (Inv. II)\ndated 18.12.2014 (Refer pages 164 to 165 of caselaw\nPB), wherein it has emphasized upon the need to\nfocus on gathering evidences during search/survey\nand to strictly avoid obtaining admission of\nundisclosed income under coercion/undue influence.\n\"Instances/complaints of undue influence/coercion\nhave come to notice of the CBDT that some assessee\nwere coerced to admit undisclosed income during\nsearch/surveys conducted by the Department, It is\nalso seen that many such admissions are retracted in\nthe subsequent proceedings since the same are not\nbacked by credible evidence Such action defeat the\nvery purpose of search/survey operations as they fail\nto bring the undisclosed income to tax in a\nsustainable manner leave alone levy of penalty or\nlaunching of prosecution. Further such actions show\nthe department as a whole and officers concerned in\npoor light.\nI am further directed to invite your attention to the\nInstructions/Guidelines issued by CBDT from time to\ntime, as referred above, through which the Board has\nemphasized upon the need to focus on gathering\nevidences during search/survey and to strictly avoid\nobtaining admission of undisclosed income under\ncoercion/undue influence\nIn view of the above, while reiterating the aforesaid\nguidelines of the Board, I am directed to convey that\nany instance of undue influence/coercion in the\nrecording of the statement during\nsearch/survey/other proceedings under the IT. Act,\n1961 and/or recording a disclosure of undisclosed\nincome under undue pressure/coercion shall be\nviewed by the Board of adversely.\"\n(emphasis supplied)\nAddition based on statement u/s 132(4) is not sustainable - judicial\nprecedents\nIn Kailashben Manharlal Chokshi vs. CTT: 328 ITR 411\n(Guj)\nStiree Ganesh Trading Company vs. CIT 257 CTR 159\n(Jhar)\nCIT vs. Naresh Kumar Aggarwal: 369 ITR 171 (AP)\nCIT vs. Harjeev Aggarwal 241 Taxman 199 (Del)\nChetnaben J. Shah vs. ITO: 288 CTR 579 (Guj)\nCIT v Smt. Jaya Lakshmi Ammal: 390 ITR 189 (Mad)\nPCIT vs. Best Infrastructure (India) Pvt. Ltd. 397 ITR\n82 (Del)\nRatan Corporation: 197 CTR 536 (Guj.)\nIt has similarly been held in the following decisions:\nCIT vs. N. Swamy 241 IIR 363 (Mad) CIT vs. Radha\nKishan Goel: 278 ITR 454 (All) Surinder Pal Verma V.\nACIT: 89 ITD 129 (Chd) (TM) Smt. Ranjnaben\nMansukhlal Shah V. ACIT: 83 TTJ 369 (Rajkot) Ashok\nManilal Thakkar vs. ACIT: 97 ITD 361 (Ahd.) Rajesh\nJain vs. DCIT: 100 TTJ 929 (Del) Catherine Thomas V.\nDCIT: 111 ITD 132 (Cochin)\nTo the same effect are the decision in the following\ncases:\nPCIT vs. PGF Ltd.: 457 ITR 607 (Delhi)\nKrishan Lal Shiv Chandra Rai vs. CIT: 88 ITR 293\n(P&H)\nCIT vs. M.P. Scrap Traders: 372 ITR 507 (Guj)\nCIT vs. Ravindra Kumar Jain: 201 Taxman 95 (Jhar)\n(Mag)\nDCIT vs. Sanjeev J Aeren: ITA Nos.5596 &\n5597/Del/2015 (order dated 30.10.2024) (Del. ITAT)\nDCIT vs. Sh. Anil Sankhwal: ITA No. 1472/Del/2020\n(order dated 24.10.2024) (Del. ITAT)\nRishi Grover vs. ACIT: 126 TTJ 527 (Ars.) (Refer\npages 230 to 266 of caselaw PB)\n2. Addition can not be made on the basis of statement of third parties\nrecorded behind the back of the assessee and without and without\nconfronting the same to the assessee and not providing opportunity of\ncross examination.\nWith regard to the statements of various individuals namely Deepak\nChaudhary, Virender Kumar, SP Gupta, Sajjan Kumar Aggarwal, Sanjay\nSharma, Ajay Sharma, Pradeep Garg & Vishal Garg, and certain parties\nit is humbly submitted that statement of various persons\nrelied/referred by the AO were taken behind the back of the assesse\nand therefore no adverse inference could have been drawn without\nany opportunity for cross examination. Despite the specific objection of\nthe appellant, no opportunity of cross examination was granted by the\nAO. Reliance is placed on the following judicial pronouncements:\ni) 303 ITR 95 (Del) CIT vs. Pradeep Kumar Gupta\nii) 456 ITR 84 (Del) Pr. CIT vs. Prabhu Dayal Aggarwal\niii) 418 ITR 315 (SC) CIT v. Odeon Builders (P) Ltd.\niv)\n62 taxmann.com 3 (SC) Andaman Timber Industries vs.\nCCE\nv)\n125 ITR 713 (SC) Kishnichand Chellaram vs. CIT\nvi)\n288 ITR 345 (Del.) CIT vs. SMC Share Broker Limited\nvii)\n293 ITR 43 (Del) CIT vs. S.M. Aggarwal\n2.1 It was explained to the AO that transactions undertaken with these\nparties were duly recorded in the books of accounts of the\nappellant company, however, these parties while recording the\nstatement has denied having any transaction with the appellant\ncompany which itself triggers that the statement recorded are\nfactually incorrect and therefore shall not be relied upon. No\naddition can be made merely on presumption and surmises,\nespecially on the basis of statements of third parties. No material\nother than the statement recorded have been found during the\ncourse of search action which may suggest to AO that the\nappellant company has booked bogus expenses from these\nparties. The AO has acted upon conjecture and surmises and made\nthe addition by relying upon the statements of some of the\nproprietors which was itself wrong and factually incorrect. The\nassessee company has also submitted the details of all the parties\nalong with all the supporting documents in the physical form\nbefore the AO.\n3. Non service of notice/ summon to supplier cannot be a ground for\nmaking the addition\nWith regard to remarks made by the AO that summons issued to\nvarious purchase parties u/s 131(1A) returned unserved and\ninspector reports, it is submitted that no adverse inference is\nrequired to be drawn. Once the assessee has submitted the entire\ndocumentary trail in respect of parties to transaction during the\nperiod under consideration, non-compliance of summons issued\nu/s 131 of the Act by such parties cannot be made a basis to make\naddition in the hands of assessee.\nIn this regard assessee places reliance on below mentioned judicial\npronouncements:\ni)\n159 ITR 78 (SC) CIT vs. Orissa Corp. (P) Ltd.\n\"In this case, the assessee had given the names and\naddresses of the alleged creditors. It was in the knowledge\nof the Revenue that the said creditors were income-tax\nassessees. Their index numbers were in the file of the\nRevenue. The Revenue, apart from issuing notices under\nsection 131 at the instance of the assessee, did not pursue\nthe matter further. The Revenue did not examine the source\nof income of the said alleged creditors to find out whether\nthey were creditworthy or were such who could advance the\nalleged loans. There was no effort made to pursue the so-\ncalled alleged creditors. In those circumstances, the\nassessee could not do anything further. In the premises, if\nthe Tribunal came to the conclusion that the assessee has\ndischarged the burden that lay on him, then it could not be\nsaid that such a conclusion was unreasonable or perverse\nor based on no evidence. If the conclusion is based on\nsome evidence on which a conclusion could be arrived at,\nno question of law as such arises.” [Emphasis supplied]\nii) 297 ITR 441 (SC) Anish Ahmed & Sons v. CIT\nDELHI HIGH COURT\ni) 299 ITR 268 (Delhi) CIT v Divine Leasing and Finance (P) Ltd.\n\"It was specifically observed in the context of share capital\nu/s 68 that if relevant details of the address or PAN identity\nof the creditor/subscriber are furnished to the Department\nalongwith copies of the shareholders register, share\napplication forms. it would constitute acceptable proof or\nacceptable explanation by the assessee. It was also held\nthat Department would not be justified in drawing an\nadverse inference only because the creditor/subscriber fails\nor neglects to respond to its notices and the onus would not\nstand discharged only if the creditor/subscriber denies or\nrepudiates the transaction set up by the assessee and\nthereto the learned Assessing Officer should not take such\nrepudiation at face value and construe it, without more,\nagainst the assessee. It was held that Assessing Officer is\nduty-bound to investigate the creditworthiness of the\ncreditor/subscriber the genuineness of the transaction and\nthe veracity of the repudiation. In the instant case\nassessee has furnished complete details of the shareholder\nalongwith bank statements, confirmation and therefore\nsame would constitute acceptable proof, acceptable\nexplanation u/s 68 of the Act and in absence of any other\ncontrary evidence no adverse inference can be drawn.\"\nii) 267 ITR 433 (Del) CIT v. Makhni Tyagi (P) Ltd.\niii) 299 ITR 268 (Del) CIT v Divine Leasing and Finance (P) Ltd.\niv) 307 ITR 334 (Del) CIT v. Value Capital Services (P) Ltd.\nv) 329 ITR 271 (Del) CIT v. Victor Electrodes Ltd.\nvi) 333 ITR 119 (Del) CIT v. Oasis Hospitalities (P) Ltd.\nvii)\nviii)\n354 ITR 282 (Del) Mod Creations (P) Ltd. v. ITO\n357 ITR 146 (Del) CIT v. Fair Finvest Ltd.\nPUNJAB & HARYANA HIGH COURT\ni)\n325 ITR 25 (P&H) CIT vs. GP International Ltd\n\"Regarding the addition of Rs. 15,00,000/- on account of\nunexplained share capital, it has been held that at the time\nof the original assessment, the assessee had supplied the\nlist of the persons along with their addresses to whom the\nshares were sold. The said list contained ITA No. 618 of\n2009 -4- information, such as name, address and number\nof shares allotted. The Assessing Officer had issued enquiry\nletter under Section 133 (6) of the Act at random basis to\n25 persons, out of whom some of the persons confirmed\nthe genuineness of the transaction. However, some\npersons did not respond. In view of this fact, out of the\ntotal share capital of Rs. 54,28,500/-, the Assessing Officer\nmade an addition of Rs. 15,00,000/- by treating the\nsources of share capital of those persons as unexplained.\nIn our opinion, the CIT (A) as well as the ITAT have rightly\ndeleted the aforesaid addition, because in the instant case,\nthe Assessing Officer is not doubting the identity of the\npersons from whom the assessee has shown receipt of\napplication money. Merely because some of the persons did\nnot respond to the notice issued by the Assessing Officer\nunder Section 133 (6) of the Act, it cannot be taken that the\nsaid transaction was ingenuine. It has been held by the\nHon'ble Supreme Court in Commissioner of Income Tax v.\nLovely Exports (P) Ltd. (2008) 216 CTR 195 (SC) that if the\nshare application money is received by the assessee\ncompany from alleged bogus shareholders, whose names\nare given to the Assessing Officer, then the department is\nfree to proceed to re-open their individual assessments in\naccordance with law. But the said amount cannot be taken\nas unexplained income in the hands of the assessee.\"\n[Emphasis supplied]\nBOMBAY HIGH COURT\ni) 333 ITR 100 (Bom) CIT vs. Creative World Telefilms Ltd.\nii) 90 ITR 396 (Bom) CIT v. U.M. Shah\niii) 397 ITR 136 (Bom) CIT v. Orchid Industries (P) Ltd.\nGUJARAT HIGH COURT\ni) 256 ITR 360 (Guj) DCIT v. Rohini Builders\nRAJASTHAN HIGH COURT\ni) 217 CTR 354 (Raj) Kanhaialal Jangid v. ACIT\nMADRAS HIGH COURT\ni) 294 ITR 663 (Mad) CIT v. Gobi Textiles Ltd.\nINCOME TAX APPELLATE TRIBUNAL\ni)\nii)\niii)\niv)\nv)\nvi)\nITA No. 110 of 2004 dated 18.02.2006 (Kar) Madhuri\nInvestments Pvt. Ltd. vs. Asst. CIT\nITA No. 2038/D/2009 ITO vs. M/s Emperor International Ltd.\n284 ITR 1 (Jodh) TM Uma Polymers P Ltd. vs. DCIT\nITA No. 2082/D/2011 dated 8.12.2014 ACIT v. Divine (India)\nInfrastructure (P) Ltd\n121 ITD 525 (Agra) Kalyan Memorial & Charitable Trust v.\nACIT\n47 DTR 225 (Del) ITO vs. Purvi Fabrics & Textures (P) Ltd.\n4. No addition can be made on the basis of self serving report of inspector\nof investigation wing particularly when the assessee was not confronted\nwith the inspector report and during the assessment proceedings replies\nwere filed before the AO by most of the parties.\nIt is further submitted that inspector report is a self-serving report and\nthe same cannot be a ground to draw adverse inference against\nassessee, it is thus submitted that no addition can be made on the\nbasis of inspector report as has been held in the following judgments:\ni)\n217 Taxman 82 (All) (Mag) CIT vs. J.S. Bindra\nii)\n347 ITR 347 (Cal) S.K. Bothra & Sons HUF vs. ITO\niii)\n145 ITD 377 (Mum) (Trib) DCIT vs. Diven Dembla\niv)\n215 Taxman 11 (Del) (Mag) CIT vs. Delhi Housing &\nFinance Corporation\nv)\n141 TTJ 123 (Jodh) ITO vs. Shiv Shakti Build Home (P) Ltd.\nvi)\n24 SOT 1(Del) Baid Credit & Portfolio (P) Ltd. vs. ITO\nvii)\n325 ITR 588 (P&H) CIT vs. Lal Singh\nviii)\n36 ITR(T) 161 (Delhi - Trib.) DCIT vs GDA Finvest& Trade\n(P.) Ltd\nix)\nx)\nxi)\nITA No. 4594/Del/2013 dated 07.07.2016 DCIT vs Gomati\nConsultants Pvt. Ltd\n3 ITR(T) 372 (Patna) Gyan Ganga Ltd. Vs DCIT\n330 ITR 603 (Delhi) CIT v. Winstral Petrochemicals (P.) Ltd\nIt was duly explained to the AO that transactions undertaken\nwith the parties identified to be non-existent were in the\nordinary course of business and the same were duly\nrecorded in the books of accounts. It was also explained to\nthe AO that it is the veracity of the financial transactions that\nmatters and not the address of the supplier. The appellant\ncompany has duly provided the present address of all the\nparties identified to be non-existent to the AO during the\ncourse of assessment proceeding. The appellant company\nhas also submitted the details of all the parties along with all\nthe supporting documents in the physical form before the\nAO.\n5. Non furnishing of return by the supplier cannot be a ground for making\naddition in the case of the assessee\nIn the case of ACIT, CC-3(1) vs M/e Everest Food Products Pvt Ltd.\n(Mumbai ITAT), it has been held as under:\n6. The Learned Departmental Representative (“Ld. DR” for\nshort) for the Revenue contended that the assessee had not\nfurnished complete details before the Ld. AO for substantiating\nthat these are genuine purchase transactions made by the\nassessee company. Further, the Ld. DR stated that some of the\ncompanies, though having a huge turnover, have not audited\nits financials and have also not filed their returns of income.\nFurther, it is also contended that mere submission of ledger\nconfirmation would not be held to be genuine transaction. The\nLd. DR relied on the decision of the Hon'ble Bombay High Court\nin the case of Pr. CIT vs. M/s. Mohommad Haji Adam & Co.\n(2019) 103 taxmann.com 459 (Bombay) where GP addition on\nnon genuine purchases was justified. The Ld. DR relied on the\norder of the Ld. AO.\n7. The Authorized Representative (“Ld. AR” for short) for the\nassessee, on the other hand, controverted the said fact and\nstated that the assessee has substantiated its claim by\nsufficient documentary evidences along with the fact that it\nwas evident from the income tax portal screenshot that out of\nfour parties which were identified by the Ld. AO to be non-tax\nfilers three have filed their returns of income. The Ld. AR\nfurther contended that the assessee has duly audited its\nfinancials which were also not disputed by the Ld. AO and also\nstated that most of the parties have also responded to the\n133(6) notice and in spite of the same the Ld. AO has failed to\nmake any independent inquiry on these alleged companies.\nThe Ld. AR relied on the order of the Ld. CIT(A).\n8. We have heard the rival submissions and perused the\nmaterials available on record. The only issue that requires\nadjudication is “whether the Ld. CIT(A) has erred in deleting the\naddition of Rs.25,55,69,713/- made by the Ld. AO towards\nalleged non genuine purchases made by the assessee company\nwith four parties?” It is observed that the Ld. AO has alleged\nthat the assessee had entered into purchase transaction with\nthe following parties who according to the Ld. AO has not filed\nthe ITR for the impugned year A.Y. 2021-22, the details of\nwhich are tabulated hereunder:\nSr\nNo.\nName\nPAN\n1\nJayapaul Rajesh\nAEZPR2846A\n2\nMR Gulmi\nAALFM2187K\n3\nMadhukar Gorakhnath Devkar\nAVUPD2403M\n4\nMRG Enterprises\nABNFM3466E\n5\nVarmora Plastech Private Limited AAECV4247P\n9. The Ld. AO has sought for the details pertaining to the ledger\naccount, invoices, proof of transportation, delivery challans,\nproof of payments from the assessee with regard to the above\nmentioned parties and had also issued notices u/s 133(6) of the\nAct to the said parties. With regard to the first party namely\nJayapaul Rajesh, the Ld. AO made an addition on the impugned\npurchases amounting to Rs.2,62,73,000/- on the ground that\nthe assessee has not submitted the ledger confirmation of the\nparty and with regard to second party namely Mr. Gulmi the Ld.\nAO observed that though GST return has been filed by this\nparty regularly no audit financials and return of income has\nbeen filed inspite of huge turnover made by the said party.\nWith regard to the third party namely Madhukar Gorakhnath\nDevkar and MRG Enterprises though the ledger confirmation\nwas filed, the Ld. AO held the same to be bogus for the reason\nthat even these said parties have not filed their returns of\nincome though GST return was filed regularly by the said\nentities. The Ld. AO proceeded to make an\naddition/disallowance of Rs.25,55,69,713/- which is the GP @\n46% on the total alleged transaction of Rs.55,55,83,331/-. Per\ncontra, the Ld. CIT(A) deleted the impugned\naddition/disallowance on the following observations which are\ncited herein under for ease of reference:\n5.4.2 The appellant is a leading manufacture of masala and\nspices. The thrust of the addition done by the AO is the\nnon-filing of income tax returns by the 4 suppliers. The\nsubmissions of the appellant with respect to each of the\nparty is as under:\n(i) Jayapaul Rajesh It has been submitted that the total\npurchases taken by the AO at Rs.2,50,01,21,905/- is\nincorrect as the actual purchase amount debited in the\nbooks of accounts is Rs.1,60,23,000/-. Further supporting\ndocuments in the form of Parties Ledger Account, Invoice\ncopies with Goods Receipt Notes, E-way Bills,\nTransportation Receipts and Bank Statements highlighting\npayments have been submitted. Further the supplier has\nbeen regular in tax compliance and has filed its ITR for AY\n2018-19, AY 2019-20 & AY 2020-21. It has also been\nsubmitted that input tax credit in respect of these\npurchases have already been allowed which proves that the\nsupplier is regular in filing its GST returns. Copy of GST-R\n2A showing the same has also been filed by the appellant.\n(ii) M R Gulmi - It has been submitted that the AO has taken\nincorrect purchase amount of Rs.46,97,31,180/- as against\nactual purchase of Rs.40,18,72,196/-. Further supporting\ndocuments in the form of Ledger Account, Invoice copies &\nGoods Receipt Notes, E-way Bills & Transportation Receipts,\nQuality Testing Reports, Cold Storage, Weighment Bridge\nProof and Bank Statements highlighting payments have\nbeen filed. The appellant has also submitted Income Tax\nPortal screenshot confirming that M R Gulmi is not a\n"Specified Person" under Sections 206AB & 206CCA\nimplying that the supplier has duly filed the return of\nincome for the AY 2021-22 and hence the very pretext on\nwhich the disallowance has been made is not correct. The\nappellant has also submitted that the input tax credit\nclaimed against these purchases already stand allowed\nproving that the supplier is regularly filing its GST returns. It\nhas also been pointed out that the supplier has duly\nresponded to the verification notice issued by the AO on\n29.12.2022 via email.\n(iii) Madhukar Gorakhnath Devkar - It has been submitted that\nthe AO has taken incorrect purchase amount of\nRs.30,73,524/- as against actual purchase of Rs.32,27,200\n/-. Further supporting documents in the form of Ledger\nAccount, Invoice copies & Goods Receipt Notes, E-way Bills\n& Transportation Receipts, weigh bridge receipt and Bank\nStatements highlighting payments have been filed. The\nappellant has also submitted Income Tax Portal screenshot\nconfirming that Madhukar Gorakhnath Devkar is not a\n"Specified Person" under Sections 206AB & 206CCA\nimplying that the supplier has duly filed the return of\nincome for the AY 2021-22 and hence the very pretext on\nwhich the disallowance has been made is not correct. The\nappellant has also submitted that the input tax credit\nclaimed against these purchases already stand allowed\nproving that the supplier is regularly filing its GST returns.\n(iv) MRG Enterprises - It has been submitted that the AO has\ntaken incorrect purchase amount of Rs.5,77,59,722/- as\nagainst actual purchase of Rs.5,98,41,579/-. Further\nsupporting documents in the form of Ledger Account,\nInvoice copies & Goods Receipt Notes, E-way Bills &\nTransportation Receipts and Bank Statements highlighting\npayments have been filed. The appellant has also\nsubmitted Income Tax Portal screenshot confirming that\nMRG Enterprises is not a "Specified Person" under Sections\n206AB & 206CCA implying that the supplier has duly filed\nthe return of income for the AY 2021-22 and hence the very\npretext on which the disallowance has been made is not\ncorrect. The appellant has also submitted that the input tax\ncredit claimed against these purchases already stand\nallowed proving that the supplier is regularly filing its GST\nreturns.\n5.4.3 While non filing of income tax return by a supplier is a\nreason to further investigate the transaction, this reason\nalone is not sufficient to disallow the expenses and treat\nthe same as non genuine. The appellant in the instant case\nhas filed ample documentary evidence to not only support\nthe purchase but also to justify its transportation and\ndelivery. The factual matrix is that the expenses being\ndisallowed are purchase of raw material which is\nquintessential and proportionate to the manufacturing\noutput being shown by the appellant, wherein it is not\ncorrect to accept the manufacture and corresponding sale\nof the finished product but doubt the input raw material.\nThe AO has proceeded to examine the tax behaviour of the\npersons from whom these purchases have been made and\nhas made this addition since they have not been regular in\nfiling of return of income. In my view, with respect to\nexpenses debited in the profit & loss account that are\nroutine business expenses such as purchase and otherwise\nsatisfy the conditions laid down in Section 37(1) of the Act,\nthe onus of the appellant is limited and does not extend to\nensuring that the parties to whom the appellant is making\nthese payments are tax compliant. It is also to be noted\nthat none of these parties are admitted or identified\naccommodation entry providers. Further the appellant has\ndemonstrated by way of income tax portal screen shot that\nout of the 4 parties identified by the AO as non-filer, 3 have\nactually filed their return of income. In view of the above\nreasons and also in view of the fact that the books of\naccounts of the appellant are duly audited and the auditor\nhas not identified any specific case of misuse and violation\nof the conditions prescribed in Section 37(1) of the Act, the\naddition made by the AO cannot be sustained. Thus, the\naddition of Rs.25,5569,713/- made by the AO by attributing\n46% profit to unverifiable purchases of Rs.55,55,86,331/- is\ndeleted and the ground of appeal is allowed.\"\n10. From the above observation, it is evident that the assessee\nhas furnished various documentary evidences such as ledger\naccount, invoice copies with goods receipt notes, Eway bills,\ntransportation receipts and bank statement reflecting\npayments made regularly and also the ITR details of party No.1\nfor A.Y. 2018-19, 2019-20 & 2020-21. It is also an undisputed\nfact that these parties have been filing GST returns regularly\nshowing substantial business transaction and also the finding\nof the Ld. CIT(A) that none of these parties are \"specified\npersons\" u/s 206AB & 206CCA, which substantiates that they\nhave duly filed their return of income for the impugned year\nand disallowance of expenses towards purchases cannot be\nmade merely on the ground that these parties have not filed\ntheir return of income, is not justifiable in our view. Further, it\nis also observed that the Ld. AO has not given a finding on the\nveracity of the documentary evidences furnished by the\nassessee nor has she stated that these parties are alleged to\nbe accommodation entry providers engaged in providing bogus\npurchase bills which is the modus operandi of a regular\naccommodation entry provider. Pertinently, we also find no\nobservation as to whether any enquiry was conducted in these\ncompanies as to their existence or whether or not there is any\nbusiness transaction carried out by these companies has not\nbeen examined by the Ld. AO. The purported bogus purchases\nare said to have been backed by bills and vouchers along with\nthe books of accounts of the assessee duly audited where the\nsaid transactions have been recorded, corroborates the fact\nthat the assessee has proved the transaction to be genuine.\nThere is no iota of doubt that the Ld. AO has failed to establish\nthat the parties through whom the assessee has purchased are\naccommodation entry providers neither by any documentary\nevidences nor by circumstantial evidences where the Ld. AO\nhas not faulted with the supporting documents filed by the\nassessee to substantiate its case and we also reiterate the fact\nthat no inquiry was carried out by the Revenue to justify the\ndisallowance of 46% of the purchases by holding the same to\nbogus. It is also a settled proposition of law that the\nRevenue while disallowing bogus purchases would necessarily\nhave to ignore the corresponding sales recorded against the\nalleged parties, which has not been done so in the present case\nin hand. In the absence of these findings, we do not find any\njustification in upholding the addition/disallowance made by the\nLd. AO and thereby holding that there is no infirmity in the\norder of the Ld. CIT(A) in deleting the addition/disallowance\nmade in the hands of the assessee and the same warrants no\ninterference. Hence, we dismiss the grounds of appeal raised\nby the Revenue on the above observation.\n6. Noncompliance to the notices issued u/s 133(6) by the AO cannot be a\nground for drawing adverse inference against the appellant.\nWithout prejudice to above, it is submitted that even if the AO had\nissued notices u/s 133(6) and no replies were received, it cannot be\na ground for drawing adverse inference against the appellant. It is\nnot a case of receipt of loan/share capital/gift etc. It is a case of\nservices obtained by the appellant during the ordinary course of its\nbusiness. This is not the first year of claim of such expenses. The\nsimilar expenses were incurred in the earlier years and also in the\nsubsequent years. Applicable TDS has been deducted on almost all\nthe contract charges. Almost all the contract charges have been paid\nthrough proper banking channel.\nReliance in this regard is placed upon decision of Juri ictional Delhi\nHigh Court in the decision of PCIT-07, Delhi Versus M/S. Wel\nIntertrade Pvt. Ltd. ITA 135/2023 it has held that creditor not\nresponding to the notice u/s 133(6) cannot be a ground /reason by\nthe AO to make an addition\n6.1 In the case of M/s. Fancy Wear Versus Income Tax Officer Ward-24\n(3)(1), NOW-31 (1) (4) MUMBAI it was held as under: -\n2. 7. It appears that the only thing that has tilted the\nscale against it is returning back of notices, issued by\nthe AO, u/s. 133(6)of the Act. But, this itself is not\nsufficient to hold that purchases made by it were bogus.\nIn the case of Nikunj Exim Export, the Hon'ble Bombay\nHigh Court has held that non service of notice does not\nconclusively prove the non genuineness of a\ntransacttion. By producing various documents the\nassessee had proved that balance of convenience was\nin its favour. The argument of the assessee that the\nsuppliers did not deposit VAT after collecting from it\nshould have been investigated, if the AO wanted to\nmake huge addition. In our opinion, the AO had\ncompleted the assessment without marshaling the facts\nproperly and only on the basis of general information\nprovided by the STD. The non filing of appeals against\nthe orders of the FAA, wherein he had deleted 75% of\nthe additions made by the AO, indicate that the\ndepartment itself was not convinced about the\napproach adopted by the AO in making additions. Even\nthe order of the FAA is not in accordance with the\nprinciples of natural justice, as stated earlier.\n5.8. For violation of principles of natural justice alone,\nthe order can be held to be invalid. Here, we would like\nto rely upon the cases referred to by the AR before us-\nespecially the case of Andaman Timbers(supra) and it\nreads as under:\n“...According to us, not allowing the assessee to cross\nexamine the witness by the Adjudicating Authority\nthough the statements of those witnesses were made\nthe basis of impugned order is a serious flaw which\nmakes the order nullity in as much as it amounted to\nviolation of principles of natural justice because of\nwhich the assessee was adversely affected. It is to be\nborne in mind that the order of Commissioner was\nbased upon the statements given by the aforesaid two\nwitnesses. Even when the assessee disputed the\ncorrectness of the statements and wanted to cross-\nexamine, the Adjudicating Authority did not grant this\nopportunity to the assessee. It would be pertinent to\nnote that in the impugned order passed by the\nAdjudicating Authority he has specifically mentioned\nthat such an opportunity was sought by the assessee.\nHowever no such option was\ngranted and the aforesaid plea is not even dealt by the\nAdjudicating Authority....\n"6. But, we will like to decide the issue on merits also.\nThe AO or the FAA have not rejected the books of\naccounts of the assessee nor have doubted the\npurchases made by it. The recognised principles of\naccountancy and tax jurisprudence hold that no sales\ncan take place without purchases. Thus, the case under\nappeal is not about non genuineness of purchases itself,\nbut it is about non genuineness of suppliers. Whether\nprovisions of section 69C of the Act can be applied in\nthe matters where all the purchase and sales\ntransactions part of regular books of accounts. Basic\nprecondition for invoking the section 69C is that the\nexpenditure incurred by the assessee should be out of\nbooks of accounts. Here, the payments to the suppliers,\nas stated earlier, have been made by cheques. So, it\ncannot be held that expenses were incurred by the\nassessee outside the books of accounts. Section 69C\nwas introduced in to the statute with a specific purpose.\nA bare reading of the section makes it clear that if the\nassessee incurred any expenditure, but offered no\nexplanation about the source of such expenditure or\npart thereof, or the explanation so offered is not\nsatisfactory, such expenditure may be deemed to be\nthe income of the assessee. The assessee has offered\nsatisfactory explanation about the source of the\nexpenditure in the case before us. In the case of Parekh\nCorporation UI Building(32 CCH 129)the Tribunal has\ndiscussed the applicability of provisions of section 69C\nof the Act and has held as under:\n“.... In so far as the application of 69C is concerned, we\nfind that the same cannot be attracted because section\n69C applies here in any financial year and assessee has\nincurred any expenditure and he offers no explanation\nabout the source of such expenditure or part thereof, or\nthe explanation, if any, of by the assessee is not\nsatisfactory. It is then that the amount covered by such\nexpenditure or part thereof is deemed as income of the\nassessee for such financial year. The bedrock for\nmaking an addition under section 69C is that there\nmust have been some expenditure incurred by the\nassessee, the source of which is not disclosed. If our\nsuch expenditure is recorded in the books of accounts,\nthere cannot be any reason to invoke the provisions of\nsection 69C of the Act. In that view of the matter is it is\nheld that provisions of section 69C were strongly\nrestore by the AO for making this addition.\n\"In light of the above, we find that no addition could\nhave been made u/s. 69 C of the Act.\nIn the case Prabhat Gupta v. ITO – 2017(12) TMI 1667 – ITAT\n6.3\nMumbai, disallowance of purchase could not be made on the ground\nthat notice u/s 133(6) issued to parties were not served or no replies\nwere received.\nIn the case of M/s Diagnostics V. Commissioner of Income Tax,\nKolkata – XX & Anr. 2011(3) ТМІ 15 – Calcutta High Court it was held as\nunder: -\n2. However, as regards the payments made to M/s. Selvas\nPhotographics are concerned amounting to Rs.\n3,12,302/-, we find that those have been made by\naccount payee cheques and those have been encashed\nthrough the bankers of M/s. Selvas Photographics. It\nappears that according to the appellant, at the time of\nassessment, the appellant had no business transaction\nwith M/s. Selvas Photographics and consequently, the\nsaid party did not co-operate with the Assessing Officer.\nHowever, the transaction having taken place through\naccount payee cheques, we are unable to accept the\ncontention of Mr. Agarwal, the learned advocate\nappearing for the Revenue that the transaction was a\nnonexistent one. If an assessee took care to purchase\nmaterials for his business by way of account payee\ncheques from a third party and subsequently, three\nyears after the purchase, the said third party does not\nappear before the Assessing Officer pursuant to the\nnotice or even has stopped business, the claim of the\nassessee on that account cannot be discarded as non-\nexistent. In the case before us, the Revenue has not put\nforward any other ground, such as, it was not a genuine\ntransaction for other reasons but has simply rejected the\nclaim on the ground as if there was no such transaction.\n6.4\nIn the head note of decision by Hon'ble ITAT Delhi in the case\nof United Foods Pvt. Ltd. v. ACIT, Circle – 27(1), Delhi 2023 (1) TMI 267\n- ITAT Delhi it was held as under: -\nShorn off the non-compliance of summons served under\nSection 131 - Assessee has filed formidable evidences to\nidentify the contractors as well as the factum of incurring\njob work expenses as demonstrated by the income tax\nreturns of the service providers. TDS has been deducted on\nsuch expenses and reflected in the return of income of the\ncontractors. The increase in turnover, addition of new line\nof business, i.e., processing of rice and substantial increase\nin the fixed asset are vital indicators of plausibility of the\nexplanation offered by the assessee in this regard. In this\nfactual matrix, in the absence of any culpable evidence in\npossession of revenue, the job work expenses deserves to\nallowed, on a standalone basis, as incurred in the ordinary\ncourse of business.\nNon-compliance of summons - Admittedly, the summons\nunder Section 131 were duly served on the contractors but\nhad remained unresponded. In this backdrop, the\nobservations in S. Hastimal vs. CIT [1962 (12) TMI 60 -\nMADRAS HIGH COURT] are worth noting wherein an\nimpetus was given on the difficulty on the part of any\nassessee to explain a transaction after a decade. Similar\nview has been recently expressed by the Hon'ble Supreme\nCourt in CITI Bank case [2022 (8) TMI 1107 - SUPREME\nCOURT]\nIn the head note of decision by Hon'ble ITAT Delhi in the case\nof Phool Singh v. ACIT, Circle – 38(1), New Delhi 2023 (1) TMI 267\nITAT Delhi it was held as under:\nAddition on account of purchases made from Suresh HYP\nEnterprises - 133(6) enquiry letter sent to that party came\nback un served because of incorrect address - Held that:-\nAs during the course of assessment proceedings, the AO\nhas verified the books of accounts, bills, vouchers, master\nrolls, bed sheet and logbooks and on such verification, no\ndefect in the books of the assessee was pointed out. The\nAssessing Officer made the whole addition by pointing out\ncertain lacunas in the bank account of the suppliers of the\nassessee, which cannot be permitted. Merely because\n133(6) notices issued to the party returned un-served\nthough it was the same address, which was supplied by\nsupplier while filing its income tax return, no fault can be\nput on the shoulder of assessee. Further, the Id CIT(A)\nconfirmed the finding of the Id Assessing Officer without\ngiving any reason but merely reiterating the findings of the\nAssessing Officer. In view of this the addition made by the\nId Assessing Officer of ₹ 2657303/- from Suresh HYP\nEnterprises cannot be sustained and hence, deleted. In the\nresult ground of the appeal of the assessee is allowed.\n6.6\nIn the head note of decision by Hon'ble ITAT Mumbai in the\ncase of Sonicwall Technology System India Pvt. Ltd. (Formerly Known\nas Dell Software India Pvt. Ltd.) Versus Asstt. Commissioner Of Income\nTax Circle-15 (1) (2), Mumbai it was held as under:\nDisallowance of marketing expenses incurred during the\nyear - Disallowance of marketing expenditure u/s 37(1) by\ntreating the same as non-genuine/non-business\ntransaction/expenditure HELD THAT:- In order to\ndetermine the genuineness of the payment made by the\nassessee AO issued notices under section 133(6) - only 2\nparties namely, M/s EIH Ltd and The Lalit Golf and Spa\nResort failed to respond to the aforesaid notice. In order to\nsubstantiate the genuineness of the payment to these 2\nentities, assessee furnished the bank account statement,\nwhich reflected the payment made to these parties,\ninvoices raised by these entities to the assessee, details of\ntax deducted on payment made to these parties, PAN No.\nand complete address.\nIt is no doubt true that payment through the bank channel\nis not conclusive proof of the transaction. At the same\ntime, when the assessee has provided all the information\navailable with it regarding the transaction, merely on the\nbasis that the entity has not responded to notice issued u/s\n133 (6) the transaction cannot be doubted and be treated\nas non-genuine, particularly when the same has been\nentered into with entities which are well-known Hotel\nchains in India.\nIt is also not the claim of the Revenue that these entities\nare not in existence or the documents furnished by the\nassessee are bogus. Thus we find no basis in upholding the\naddition by the AO merely on the basis that only 2 out of\n17 parties failed to respond to the notice issued u/s 133(6)\nof the Act. We direct the AO to delete the addition.\nGrounds raised in assessee's appeal are allowed.\n7. No justification for disallowance of purchases when the sales have been\naccepted\n7.1 The Hon'ble Supreme Court of India in the case of Principal\nCommissioner of Income Tax, Surat-1 v. Tejua Rohit Kumar Kapadia,\ndated 4th May 2018, [2018] 94 taxmann.com 325 (SC) has dismissed\nthe special leave petition of department which has been filed against\nthe order of High Court of Gujarat dated 18-09-2017 in ITA No.\n691/2017. The High court of Gujarat has held that where purchases\nmade by assessee were duly supported, subsequent sales were made\nand payments were made by account payee cheque and there was\nno evidence to show that amount was recycled back to assessee,\nassessing officer was not justified in treating said purchases as bogus\nunder section 69C of the Act.\n7.2 In the case of CIT v J.M.D. Computer & Communication (P) Ltd. (Delhi\nHigh Court) order dt. 16.01.2009, the addition was made by\ndisallowance of purchases on the ground that department received\ninformation on the basis of a search carried out and on the basis of\nstatement recorded that the assessee has made bogus purchases. The\naddition was made by A.O. by further observing that inquiries made by\ninspector deputed by A.O. revealed that :-\n(i) the sales tax numbers quoted on the invoices of two out of\nthe six suppliers investigated did not exist while the sales-taxes\nnumber of two other suppliers had been cancelled because they\nhad ceased business; (ii) the telephone numbers of some of the\nsuppliers quoted on the invoices were either non-existent or\nrelated to some other persons; (iii) the inquiries with the bankers\nof four of the six suppliers brought to light the fact that the bank\naccounts have been operated by one Sh. Ashok Kumar brother of\nSh. T.R. Chadda or his employees.\nOn appeal, the CIT(A) deleted the disallowance made by A.O. and\nallowed assessee's appeal.\nOn appeal to ITAT by revenue, the Hon'ble ITAT upheld the\norder of CIT(A) and dismissed the revenue's appeal holding that\n(i) it is undisputed that the assessee was maintaining complete\naccounts including daily item-wise, stock register, purchase\nbook, sales book, purchase bills and sales books;\n(ii) the accounts of the assessee have been duly audited under\nthe Income-tax Act as well as the Companies Act;\n(iii) sales invoices of vendors were placed on record before the\nAssessing Officer. Insofar as purchases made by the assessee,\nwere concerned they were entered in the item-wise stock\nregister maintained by the assessee;\n(iv) all payments for purchases have been made by cheques;\n(v) a complete quantitative analysis between purchases made\nand corresponding sales were prepared and filed before the\nAssessing Officer. The quantitative analysis made has not been\ncalled into question by the Assessing Officer;\nOn further appeal / reference to High Court by revenue, the juri iction\nHigh Court dismissed the revenue's appeal. It is pertinent to point out\nthat against the order of Hon'ble High Court the department filed SLP\nbefore the Hon'ble Supreme Court. The Hon'ble Supreme Court\ndismissed the SLP filed by revenue which is reported at 320 ITR 17 (St)\n(SC).\n7.3 In the case of CIT v BHOLANATH POLYFAB (P) LTD (2013) 355 ITR 290\n(Guj) disallowance of purchases was made holding them to be bogus.\nThe Hon'ble ITAT deleted the addition. The Hon'ble High Court uphold\nthe order of ITAT deleting the addition made holding that since the\nimpugned purchases have been sold and sales having been accepted,\nthere was no rationale for disallowing the purchases.\n7.4 In the case of NIKUNJ EXIMP ENTERPRISES PVT LTD. vs. COMMISSIONER\nOF INCOME TAX, (2012) 346 ITR 78, (Bom) disallowance of purchases\nwere made on the ground that in response to the notice issued by the\nA.O., the supplier parties did not appear and that in some cases the\nparties denied having business transactions with the assessee. It was\nheld by the Hon'ble High Court that assessee having been copy of\naccount of suppliers, copies of bank statement showing entries of\npayment through Account Payee cheques to the suppliers, copies of\ninvoices for purchases and details with regard to opening stock,\npurchases, sales and closing stock and no fault with regard to it being\nfound & the books of accounts not being rejected & the sales not being\ndoubted - the purchases cannot be treated as bogus & be disallowed\nmerely because the suppliers have not appeared before the Assessing\nOfficer or the CIT(A) on the basis of suspicion & merely on the basis of\nparties categorically being denying in having business dealings with\nthe assessee company, one cannot conclude that the purchases were\nnot made by the assessee, when there are material on record to prove\notherwise.\n7.5 In the case of INCOME-TAX OFFICER V. GHANSHYAM STEEL TRADERS\n[1999] 107 TAXMAN 126 (AHD.) disallowance of purchases was made\non the basis of statement of seller in which he denied having made any\nsales to the assessee. The CIT(A) as well as ITAT deleted the addition\nmade by A.O. holding that disallowance of purchases could not be\nupheld because purchases were not only supported by entries in books\nof accounts and stock registers but all such material purchase was\nrepresented by corresponding sales or those items were lying in the\nclosing stock.\n7.6 In the case of BALAJI TEXTILES INDUSTRIES (P) LTD.[1994] 49 ITD 177\n(Bom) disallowance of purchases was made. The Hon'ble ITAT deleted\nthe disallowance of purchases holding that no sales were likely to be\neffected if there were no purchases. A sale can be made only the goods\nare available with the seller.\n7.7 In the case of INCOME TAX OFFICER VS. PERMANAND ITAT, JODHPUR\nBENCH - (2007) –addition under s. 69 was made on account of alleged\nbogus purchases. The A.O. received information from the Sales-tax\nDepartment that the purchases made by the assessee from two parties\nwere bogus. Relying on the same, AO made addition under s. 69. The\nHon'ble Tribunal held that the addition made by the A.O. was not\njustified. It was held that no addition can be made in the hands of the\nassessee merely on the basis of observations made by a third party-It\nwas held that assessee has discharged the primary onus cast on him\nby showing the purchases in the books of accounts, payment by way of\naccount payee cheques and producing the vouchers of sale of goods.\nMoreover, no opportunity was given to the assessee to confront the\nsellers. It was held that the addition was to be deleted.\n7.8 In the case of JAGDAMBA TRADING COMPANY vs. INCOME TAX OFFICER\nITAT, JODHPUR ‘SMC' BENCH - (2007) - addition was made of alleged\nbogus purchases on the ground that the seller in his affidavit before\nthe sale tax department has submitted that he has not made any\nsales. It was held that by the Hon'ble Tribunal that as regards the\naverment of the seller in his affidavit submitted in sales-tax\nproceedings that he has not made any sales during the relevant year,\nsame cannot be relied upon, particularly when no opportunity of cross-\nexamination was given to the assessee-Said affidavit having been\nfiled during the sales-tax proceedings of the seller, it hardly has any\nevidentiary value against the assessee in the income-tax proceedings\nTherefore, the purchases in question cannot be held to be bogus.\n7.9 In the case of Smt. Sudha Loyalka v. Income Tax Officer, Ward 35 (2), New\nDelhi, ITA no. 399/2017 dated 18.07.2018, ITAT Delhi held that purchases\ncannot be disallowed when the sales were accepted.\n8. The books of accounts of the assessee are audited and have not been\nrejected by the AO. The assessing officer has not pointed out any\ndiscrepancy in the books of accounts\n•\nThere is another reason because of which the disallowance made by\nthe AO is not sustainable. The books of accounts of the appellant\nassessee are duly audited. The assessing officer has not pointed out\nany discrepancy in the books of accounts. The assessing officer has\nnot rejected the books of accounts. Accordingly, the\ndisallowance/addition made by the AO is liable to be deleted.\nThe Hon'ble juri iction Delhi High Court in the case of CIT vs.\nPoonam Rani (2010) 5 Taxmann.com 76 has held that in the absence\nof any material pointing towards falsehood of accounts books,\naddition of gross profit and rejection of books of accounts cannot be\nmade.\nIn the case of the assessee before your honour, the facts are even\nstronger as the assessing officer has not even rejected the books of\naccounts of the assessee.\n•\nThe Hon'ble juri ictional Delhi High court in the case of CIT v\nParadise Holidays(2010) 325 ITR 13 (Delhi) held as under:-\n5. The Assessing Officer has not pointed out any specific\ndefect or discrepancy in the Account Books maintained by\nthe assessee. Admittedly, the assessee had been\nmaintaining regular Books of Accounts, which were duly\naudited by an independent\nChartered Accountant. As noted by CIT(A), the financial\nresults were fully supported by the assessee with vouchers\nand the Books of Account were complete and correct in all\nrespects. The accounts which are regularly maintained in\nthe course of business and are duly audited, free from any\nqualification by the auditors, should normally be taken as\ncorrect unless there are adequate reasons to indicate that\nthey are incorrect or unreliable. The onus is upon the\nRevenue to show that either the Books of Accounts\nmaintained by the assessee were incorrect or incomplete or\nmethod of accounting adopted by him was such that true\nprofits of the assessee cannot be deduced therefrom.\n•\nThe Hon'ble ITAT Delhi in the case of Bony Rubber Co. Pvt. Ltd. vs. ACIT\nvide ITA No. 4980/Del./2004 has held as under:\n\"It is well settled that without rejecting the books of\naccounts maintained by the assessee by pointing out\nspecific material defects therein, the results declared\nby the assessee on the basis of such books regularly\nmaintained cannot be disturbed and it is not\npermissible for the AO to make the trading addition\nmerely because the GP rate shown by the assessee is\nlower than that of earlier years without complying with\nthe requirements of the provisions of sec. 145\".\nIn the case of the assessee before your honour, the facts are even\nstronger as there is not even allegation of assessing officer about fall\nin GP rate as compared to earlier years.\nIn the case of CIT Vs. Sunrise Tooling System (P.) Ltd. ITA no. 399/2013\ndated 22.01.2014,Delhi High Court held as under:-\n“This court is of the opinion that the Income-tax Appellate\nTribunal cannot be faulted in its approach in rendering\nthe findings of fact. Although the learned counsel for the\nRevenue endeavoured to submit that the Income-tax\nAppellate Tribunal fell into error in overlooking and\ndiscounting the statement of D. K. Jain on the ground that\nit was retracted, the discussion quoted above would show\nthat the Income tax Appellate Tribunal took note of the\nmaterials before the Assessing Officer and the\nCommissioner of Income-tax (Appeals), which included\nthe assessee's books of account as well as the sales tax\nrecords of Shree Laxmi Industrial Corporation. These\nestablished firmly and conclusively that the claim of the\nassessee that it had purchased goods from Shree Laxmi\nIndustrial Corporation were borne out. The Income-tax\nAppellate Tribunal also noted-and we agree with that\napproach entirely-that the income-tax authorities had not\neven rejected the books of the assessee even while finding\nthe claim as genuine transaction to be bogus.\n3.\nHaving regard to the conspectus of the\ncircumstances, we are of the opinion that the impugned\norder does not disclose any error, warranting framing of\nsubstantial questions of law. The appeal is unmerited and\nis accordingly dismissed.”\n9. Reliance by the AO on the seized pendrive is totally erroneous and\nout of context\nWith regard to the addition made by the AO on the basis of excel\nsheet titled \"Bogus Expense Employee-wise” found in the Kingston\npen drive/laptop seized from the head office of the appellant\ncompany, it is submitted that the addition made by the AO is\nerroneous and most arbitrary. There is nothing incriminating in the\nso-called excel sheet on the basis of which such a huge addition is\nmade by the AO. The so-called excel sheet is nothing but dump\ndigital data and it may contain various rough working/calculation\nand not the actual calculation.\nIt is also submitted that in absence of certificate u/s 65(B) of the\nIndian Evidence Act in respect of so-called electronic record i.e.\ncopies of excel sheet, excel work note book etc. the document is\ninadmissible in the eye of law. The assessee seeks to place reliance\non the judgment of Hon'ble Madras High Court in the case of M/s\nVetrival Minerals and Ors v. ACIT reported in 437 ITR 178has held\nthat in absence of certificate u/s 65(B) of the Indian Evidence Act in\nrespect of so-called electronic record i.e. copies of Excel Sheet,\nExcel work note book etc., - the document is inadmissible in the eye\nof law. Reliance is placed on the following judgements:\ni)\n(2014) 10 SCC 473 Anvar P.V. Vs P. K. Basheer\nii)\n2008 (1) ARBLR 317 (Bom) Ark Shipping Co. Ltd. vs Grt\nShipmanagement Pvt. Ltd\niii)\nW. P. 18013 (W) of 2012 (Kol). Abdul RahmanKunji vs. The\nState OF West Bengal\niv)\nCivil Appeal Nos 20828-20826 of 2017 dated 14.7.2020\nArjun Pandit Rao v. Kailash Kushan Rao Gorantyal.\nv)\n153 taxmann.com 591 (Visakhapatnam - Trib.) Polisetty\nSomasundaram vs DCIT\nvi)\nACIT v. Anand Jaikumar Jain [2023] 147 taxmann.com 125\n(Mum. Trib.) [Certificate under section 65B(4) of the\nIndian Evidence Act, 1872 is a condition precedent to the\nadmissibility of evidence by way of electronic record as\nsection 65B(4) of the Indian Evidence Act, 1872 is a\nmandatory. In view of the same, it was submitted that the\npen drive (an electronic record), being relied upon by the\ndepartment, is not admissible as evidence as certificate\nunder section 65B(4) has not been produced – Para 24].\nIt is respectfully submitted that the appellant company has submitted\ncomplete documentary trails in respect of all the parties identified by\nthe AO. Once the assessee has submitted the entire documentary trail\nin respect of parties to transaction during the period under\nconsideration, there leave no reason with the AO to make the addition\nbased on presumption and assumption only.\nYour honour will appreciate the fact that the parties identified by the\nAO has duly complied with the notice served to them u/s 133(6) by the\nAO during the course of assessment. The AO has done independent\nverification on his part and nothing adverse was observed/stated by the\nAO in the assessment order in respect of notice issued u/s 133(6) by\nhim. Once the transactions have been independently verified by the AO\nand confirmed by the parties, there remain no basis for the addition\nmade by the AO.\nIn view of the above, the addition made by the AO is erroneous and\nthe same is liable to be deleted.\nYour honour will appreciate the fact that the parties identified by the\nAO has duly complied with the notice served to them u/s 133(6) by the\nAO during the course of assessment. The AO has done independent\nverification on his part and nothing adverse was observed/stated by\nthe AO in the assessment order in respect of notice issued u/s 133(6)\nby him. Once the transactions have been independently verified by\nthe AO and confirmed by the parties, there remain no basis for the\naddition made by the AO.\nIt is respectfully submitted that the appellant company has submitted\ncomplete documentary trails in respect of Bonus and other expenses\nidentified by the AO. Once the assessee has submitted the entire\ndocumentary trail in respect of parties to transaction during the period\nunder consideration, there leave no reason with the AO to make the\naddition based on presumption and assumption only.\nYour good office will appreciate the fact that the parties identified by\nthe AO has duly have filed there income tax returns also, the details of\nthe same along with the proof of ITR filing have been duly submitted\nbefore the AO as well as CIT(A).\nFurther we would like to submit that there is no incriminating\ndocuments found in their relation during the course of search\nproceedings, nor these parties where confronted to the Promoters of\nthe company during the course search and post search proceedings.\nIt is to be noted that the AO chose to rely upon the electronic evidence\nwhich is available in the form of Pen-drive and other electronic\nequipment's, the contents contained therein, have to be certified in\nterms of Section 65B of the Indian Evidence Act whereas no such\ncertification was done. Under the Indian Evidence Act, 1872, Section\n65B prescribes a distinct framework that governs the admissibility of\nelectronic evidence. The data relied upon by IO is not as per certificate\nto be taken as per CBDT Manual.\nThe reliance is placed on the latest decision of Hon'ble ITAT DELHI in\nthe case of\nArit Garg, Delhi vs Dcit, Central Circle-31, Delhi pronounced on 14\nJanuary, 2026/ ITA No.3144/Del/2025.\"\n5. The Revenue, on the other hand, strongly supports the Assessing\nOfficer's action disallowing the assessee's entire impugned purchases\nbased on its authorized persons admissions made during the course of\nsearch.\n6. We deem it appropriate at this stage to refer to learned CIT(A)'s\ndetailed discussion partly upholding the impugned bogus purchases\ndisallowance made by the Assessing Officer, reading as under:-\n\"5.3.3 I have considered the facts of the case. The\nGround No.5 relates to various legal, procedural and\nfactual aspects of the quantum addition made by the AO\nu/s 37 of the IT Act, 1961. Since all the issues raised by\nthe appellant are inextricably intertwined, the same are\nbeing adjudicated together.\n5.3.4 ADJUDICATION ON LEGAL GROUNDS RELATED\nTO RETRACTION OF STATEMENT ON OATH, RAISED BY THE\nAPPELLANT\n5.3.4.1 In the present case, the core evidences relied\nupon by the AO during assessment are the confessional\nStatements of following key persons of appellant company\non oath u/s 132(4) of the IT Act, 1961 given between\n20/09/2023 to 24/09/2023, wherein these persons had\nvoluntarily admitted to have indulged in large scale tax\nevasion by way of unaccounted cash generation through\nbogus billing and inflation of expenses.\n1. Mr. Kanwar Bir Singh,\n2. Mr. Gautam Bali,\n3. Mr. Deepak Sood,\n4. Anurag Anthwal (GM, Accounts & Finance) &\n5. Sunil Sharma (General Manager (Finance)\n5.3.4.2 However, it is noticed that these Statements\nstand retracted during assessment proceedings on\n18/02/2025. The principal reasons cited for retraction were\nas under:\n(a) That they were subjected to severe threat, and coercion\nfrom multiple Income tax authorities during search/post-\nsearch investigations, and were pressurized to admit to\nhuge quantum of unaccounted cash generation through\nbogus billing and inflation of expenses. It is alleged that\nsuch confessional Statement of additional income was\ndemanded from the appellants by the authorities before\nconcluding the search.\n(b) That the Statements were recorded under extreme\nduress for a prolonged period of 4 to 5 days at a stretch\nbetween 20/09/2023 till 24/09/2023 which was followed by\nthreat of coercive departmental action in the case of\nappellant unless confession of substantial undisclosed\nincome were made.\n(c) That the Statements so extracted from them were\ndevoid of merit since they are not supported by seized\nincriminating documentary evidences.\n5.3.4.3\nIn this context, after a thorough examination\nof the Statements recorded on oath, the assessment order,\nand the written submissions of the appellant, I would like\nto highlight the following facts, which are crucial for\ndetermination of reliability of aforesaid Statements in the\ncontext of assessments made in the case of appellant\ncompany:\n(a) It is significantly noteworthy that although the\nStatement was recorded between 20/09/2023 to\n24/09/2023, the appellant retracted its Statements only on\n18/02/2025, ie, more than 17 months of making these\nconfessions before the IT department, which casts serious\naspersions on credibility of the retraction so made.\n(b) Further, the appellant has not put forth any substantive\nproof of threat/duress during the recording of Statement as\nis being alleged by the persons.\n(c) At the same time, I am also seized of this undeniable\nthat the Statements were recorded over a prolonged\nperiod of over 3-5 davs at a stretch, which inevitably\nplaced the appellant to evident stress and mental duress. It\nis also undeniable that the surrounding circumstances as\nnarrated by the appellants do indicate an element of\nadversarial circumstantial matrix under which Statements\nwere recorded during 20th to 24th September, 2023.\n(d) It is also noticed that it is the admissions/confessions\nmade by aforesaid persons in their Statements and the list\nof bogus entities extracted from these persons during the\ncourse recording their Statements, which constitute the\nprincipal ground relied upon by the AO for making the\nadditions.\n(e) It is critical to note that after the retraction, the AO has\nneither cross- examined key Promoters/employees of\nappellant group regarding veracity of reasons cited for\nretraction of their Statements on oath, which inevitably\nundermines the value of original statements in the eyes of\nlaw.\n5.3.4.4 At this juncture, it is pertinent to examine the\nEXISTENT JURISPRUDENCE on the ISSUE OF RELIABILITY OF\nRETRACTED STATEMENTS RECORDED DURING SEARCH in\nthe realm of factual matrix of the instant case.\n5.3.4.5 EVIDENTIARY VALUE OF STATEMENT\nRECORDED U/S 132(4) OF IT ACT, 1961\n5.3.4.6 The fundamental and prime objective of a\n\"Search action\" u/s 132 of the IT Act, 1961 is to collect\nevidences of tax evasion which otherwise could not have\nsurfaced and brought to tax. It is in this context that the\nSection 132(4) of the IT Act, 1961 has been put in place by\nthe legislature with a conscious intent to enable the\n'authorized officer' to collect such evidences by recording\nstatements during search. Section 132(4) of the IT Act,\n1961 empowers the Authorized Officer, to examine and\nrecord a statement under oath of any person who is found\nto be in possession or control of any books of account,\ndocuments, money, bullion, jewelry or other valuable\narticle or thing and any statement made by such person\nduring such examination may thereafter be used in\nevidence in any proceeding under the Income-tax Act,\n1961. Here, it is relevant to highlight that the statements\nu/s 132(4) are recorded by administering oath which is\npresumed to be carrying truth in view of the provisions of\nsection 181 and section 193 of the Indian Penal Code which\nprovide for imprisonment if a false statement is given.\n5.3.4.7 Therefore, there is a considerable importance\nof statements recorded u/s 132(4) during search and\nseizure operations, which is clear from the intent of\nLegislature as it thought fit to include a separate sub-\nsection 132(4) for recording of statement during a search\noperation. In the context of ongoing discussion, I solicit\nguidance from the Division Bench of the Kerala High Court\nin CIT v. Hotel Meriva [2010] 195 Taxman 459/120111 332\nITR 537, which has considered the scope of a statement\nrecorded under section 132(4) and found that such\nstatement recorded by the officer as well as the documents\nseized would come within the purview of evidence under\nthe Income-tax Act read with Section 3 of the Evidence Act.\nThe necessary corollary is that such evidence should be\nadmissible for the purpose of search assessments too. The\nExplanation to Section 132(4) of the Income-tax Act was\nalso noticed by the Division Bench to further emphasize\nthat the evidence so collected would be relevant in all\npurposes connected with any proceedings of the Income-\ntax Act.\n5.3.4.8 Hence, it is an undeniable fact emergent from\nexamination of jurisprudence on the subject that a\nstatement recorded on oath carries a significant\nevidentiary value which may be used by the Assessing\nOfficer during assessment proceedings as corroborative\nevidence along with documentary evidences material\nunearthed during search and seizure action.\n5.3.4.9 VALIDITY OF RETRACTION OF STATEMENT\nRECORDED DURING SEARCH\n5.3.4.10 However, at the same time, it is also pertinent\nto note here that invariably in every search and seizure\naction, statements u/s 132(4) are recorded multiples times\nand for prolonged period often extending to 3-4 days, till\nthe search is concluded. It is also inevitable that the\npersons giving such statements during search proceeding\nremain under great mental pressure, nervousness, and\nstress. Many a times they also do not have the availability\nof relevant details, documents, and books of account at the\ntime of giving such statements, in the absence of precise\ninformation, the statements made during the search\nproceeding are often vulnerable on the ground that same\ncannot be fully relied upon. There are many cases, like as\nin instant case wherein appellants later allege violation of\nhuman rights and complain of adopting pressure tactics\nbeing used by the department to extract admissions of\nundisclosed income. In this connection, I am seized of\nCBDT Instruction F. No. 286/2/2003-IT (Inv.), dated 10-3-\n2003, AND, CBDT F.NO.286/98/2013-IT (INV.II)], DATED 18-\n12-2014 which were issued with an intent to curb such\nerroneous practice of seeking involuntary/forced\nconfession of undisclosed income search action. In this\nregard, although it is often argued by the Department that\nin the confessional statements during search, there is a\nmention that \"there was no pressure and the statement\nwas given voluntarily without any threat\", the Courts have\ntaken the view that such stereotype declarations at the\nconclusion of statement do not support the Revenue's\ncontention. In this connection, I would like to make a\nreference to the Bombay Tribunal in Deepchand & Co. v.\nAsstt. CIT 1995 51 TTJ 421, which has observed thus:\n\"The stereotyped mention it the end of the statement that\nwhatever was stated was true and to the best of the\nknowledge and belief and the statement given was\nvoluntary without any threat, force or undue influence,\nwould not mean that they agreed for making additions\nPutting certain expression at the end of the statement\ncannot be taken as true in view of the retraction.\nRetraction can be made only after understanding the\ncorrect meaning and consequences of the statement.”\n5.3.4.11 There could be cases also where the assessee\non his own motion gives the disclosures of undisclosed\nincome including its manner of earning without being\nprompted by the authorized officer. However, later, such\nassesses may realize, on deeper analysis and investigation\nthat such a statement was given under a fallacy or under\nmistaken belief of facts or at times of nervousness, stress,\nand panic and thereby the statement so tendered does not\nreflect the true situation.\n5.3.4.12 However, for any retraction to be successful in\nthe eyes of law, the assessees must show as to how earlier\nrecorded statements do not state the true facts or that\nthere was coercion, inducement or threat while recording\nhis earlier statements. Although law permits retraction of a\nstatement, it lays down certain perquisites, without which\nthe statement, though retracted, can be used as evidence\nin any proceedings under the Act. Any statement recorded\nunder section 132(4), statutorily deemed to have\nevidentiary value; cannot be retracted at the mere will of\nthe party. Therefore, whenever an assessee pleads that\nthe statement has been obtained forcefully/by\ncoercion/undue influence without material/contrary to the\nmaterial, then it needs to be supported by strong evidence.\nOnce a statement is recorded under section 132(4), such a\nstatement can be used as strong evidence against the\nassessee in assessing the income, the burden lies on the\nassessee to establish that the admission made in the\nstatements are incorrect/wrong. In the context I further\nsolicit support and guidance from following decisions of\nHon'ble Supreme Court and High Courts:\n(a) The Hon'ble Supreme Court has considered the\nquestion of burden of proof in the decision reported in CIT\nv. Best & Co. (P.) Lid. AIR 1966 S.C. 1325 and specifically\ndealt with it in paragraph 6:\n\"6. At this stage the question of burden of proof raised at\nthe Bar may be noted. In (1965) 57 ITR 400 (AIR 1966 SC\n54), this court observed:\n\".....it must in the first instance be observed that it is for\nthe revenue to establish that a particular receipt is income\nliable to tax.....\"\nWe may point out, as some argument was advanced on the\nquestion of burden of proof, that this Court did not lay\ndown that the burden to establish that an income was\ntaxable was on the Revenue was immutable in the sense\nthat it never shifted to the assessee: The expression \"in\nthe first instance\" clearly indicates that it did not say so.\nWhen sufficient evidence, either direct or circumstantial, in\nrespect of its contention was disclosed by the Revenue,\nadverse inference could be drawn against the assessee if\nhe failed to put before the Department material which was\nin his exclusive possession. This process is described in the\nlaw of evidence as shifting of the onus in the course of a\nproceeding from one party to the other. There is no reason\nwhy the said doctrine is not applicable to income-tax\nproceedings. While the Income-tax authorities have to\ngather the relevant material to establish that the\ncompensation given for the loss of agency was a taxable\nincome, adverse inference could be drawn against the\nassessee if he had suppressed documents and evidence,\nwhich were exclusively within his knowledge and keeping.\"\n(b) The Allahabad High Court in Dr. S.C. Gupta v. CIT\n[2001] 248 ITR 782/118\nTaxman 252, in para 7 of the report, held as under:-\n\"7. As regards the assessee's contention that the\nstatement having been retracted the assessing officer\nshould have independently come to a conclusion that there\nwas additional income as sought to be assessed and that\nthere was no material to support that there was such\nincome, this contention in our view is not correct. As held\nby the Supreme Court in Pullan-gode Rubber Produce Co.\nLtd. v. State of Kerala. (1973) 91 ITR 18 (SC) an admission\nis an extremely important piece of evidence though it is\nnot conclusive. Therefore, a statement made voluntarily\nby the assessee could form the basis of assessment. The\nmere fact that the assessee retracted the statement could\nnot make the statement unacceptable. The burden lay on\nthe assessee to establish that the admission made in the\nstatement at the time of survey was wrong and in fact\nthere was even seem to have been attempted to be\ndischarged.\"\n(c)- The Hon'ble Kerala High Court in case of CIT v. O.\nAbdul Razak [2012] 20 taxmann.com 48/207 Taxman 193\n(Mag.[20131 350 ITR 71 held that a self-serving retraction,\nwithout anything more cannot dispel statement made\nunder oath under section 132(4). A statement made under\noath deemed and permitted to be used in evidence, by\nexpress statutory provision, must be taken as true unless\nthere is contra evidence to dispel such assumption.\n5.3.4.13 In this context, it is also essential to take\ncognizance of the fact that various courts in the following\ncases have held that during the search the whole\natmosphere is of utmost pressure and therefore there is\nvery little scope for free and fair thinking on the part of a\nperson searched. The courts have held that such a\nstatement which has been recorded in late hours and for\nprolonged period cannot be free, fearless, and voluntary\nand an assessee can retract such a statement though after\ninducing valid evidences and substantiate so far as to how\nthe factual position is in contrast as compared to the\nearlier statement so retracted.\n(1) In Kailashben Manharlal Chokshi v. CIT [2008] 174\nTaxman 466/[2010] 328 ITR 411 the Hon'ble Gujarat High\nCourt held that if a statement is recorded during odd hours\nlate in the night or after long search operation when\nassessee is fully tired and exhausted, retraction of such\nstatement may be accepted by the courts after taking into\naccount the entire gamut of facts and circumstances of the\ncase. In para 22, the court as under:\n\"The glaring fact required to be noted in the instant case\nwas that the statement of the assessee had been recorded\nunder section 132(4) at mid night. In normal\ncircumstances, it is too much to give any credit to the\nstatement recorded at such odd hours. The person may not\nbe in a position to make any correct or conscious\ndisclosure in a statement, if such statement is recorded at\nsuch odd hours. Moreover, that statement was retracted\nafter two months. [Para 22]\"\n(II) The Hon'ble Delhi High Court in case of CIT v. Sunil\nAggarwal [2015] 64 taxmann.com 107/[2016] 237 Taxman\n512/379 ITR 367 held that a retracted statement under\nsection 132(4) of the Act would require some corroborative\nmaterial for the AO to proceed to make additions on the\nbasis of such statement.\n(III) In CIT v. Naresh Kumar Agarwal [2014] 369 ITR\n171/[2015] 53 taxmann.com 306 (AP), the Hon'ble High\nCourt of Andhra Pradesh observed that\n\"the circumstances under which a statement is recorded\nfrom an assessee, in the course of search and seizure, are\nnot difficult to imagine. He is virtually put under pressure\nand is denied of access to external advice or opportunity to\nthink independently. A battalion of officers, who hardly feel\nany limits on their power, pounce upon the assessee, as\nthough he is a hardcore criminal. The nature of steps,\ntaken during the course of search are sometimes\nfrightening. Locks are broken, seats of sofas are\nmercilessly cut and opened. Every possible item is forcibly\ndissected. Even the pillows are not spared and their acts\nare backed by the powers of an investigating officer under\nSection 94 of Cr.P.C by operation of sub-section (13) of\nSection 132 of the Act. The objective may be genuine, and\nthe exercise may be legal. However, the freedom of a\ncitizen that transcends, even the Constitution cannot be\ntreated as non-existent\".\n(IV) in Dy. CIT v, Rajiv Kumar Gupta [IT Appeal No. 15\n(Delhi) of 2013, dated 21-12-20181, the Hon'ble Delhi IFAT\nhas deleted the additions made based on statement u/s\n132(4) of the act and held as under: -\n\"7.2 We also note that following pleadings and evidences\nwere made in this regard before 10 and Ld CIT(A)\nsubmitting that statement recorded allegedly during the\ncourse of search was not free and fair and therefore\naddition cannot be made on that basis. At page no. 79-83\nof the Paper Book, it is noted that the search was\ncompleted at the locker of the assessee on 25-3-2009 and\nletter of retraction was made within 48 hours of such\ncompletion. It is also noted from page no. 57-58 of the\nPaper Book that no witnesses were present at the time of\nrecording of statement which is evident from statements\nitself that there is no mention of any witness or any\nsignatures of witnesses on statements. Also AO has also\nnot provided the names of person present at the time\nwhen the statements have been recorded. Thus the above\nfacts demonstrates that no witness were present at the\ntime of such record. At Page No. 84-87 of the Paper Book\nthere is copy of retraction letter dated 27-3-2009 filed\nbefore ADIT (Inv.) along with affidavit of Smt. Sushmita\nGupta and Shri Rajiv Kumar Gupta elucidating that\nstatements were made under force, coercion and duress.\nShe has further clarified that the same were made under\nmental tension and utter confusion: At page No. 89-90 of\nthe Paper there is a copy of letter dated 20-4-2009 filed by\nthe assessee to Ld. ADIT (Inv.) explaining that surrender\nmade in statements recorded during search was product of\ncoercion, duress, threat and mental tension and thus, the\nsame was retracted by the assessee. At page no. PB 312-\n316 of the Paper Book there is a copy of letter dated 29-10-\n2010 filed before the Ld. ACIT stating that amount\nsurrendered by the assessee along with her husband has\nbeen retracted vide letter dated 27-3-2009. It was further\nemphasized that surrendered amount was illegal, without\nany basis and was under mental tension, duress, coercion,\ntreat and undue influence. At page no. 370-383 (PB 373) of\nthe Paper Book is the copy of submission filed before the\nLd. CIT(A) reiterating that surrender made by assessee and\nher husband was not voluntary and was under undue\npressure from the search officials with assurance to\nconclude search. However, the assessee explained the\nsource of each and every asset/loose paper found during\nthe course of search and submitted before AO and Ld.\nCITVA) that as to why additions cannot be made in respect\nof such assets/loose documents. The AO made an abrupt\naddition of Rs. 1,50,00,000/- which was affirmed by Ld.\nCITA) as against amount of Rs. 15,58,632/- offered by the\nassessee suo-moto before the Ld CITA). We also note that\nthe case laws cited by the Ld CIT(DR) are not exactly on\nthe same facts and circumstances of the present case,\nhence, does not support the case of the Revenue.\"\n5.3.4.14 Therefore, an examination of entire gamut of\njudicial pronouncements on the issue re-enforces the\nexistence of, jurisprudence, both in favor of \"Revenue\", as\nwell as, that of \"assessee\", depending upon broad\ncircumstantial matrix of respective cases.\n5.3.4.15 Accordingly, in the light of legal matrix discussed\nin preceding paragraphs, and after considering the factual\nposition of the instant case in its entirety, I am of the view\nthat the Retracted Statements of aforesaid persons as has\nbeen relied upon by the AO in this case, have a limited\nevidentiary value unless further supported/corroborated by\nindependent enquiry/investigations.\n5.3.5 LEGAL PERSPECTIVE ON EVIDENTIARY VALUE OF\nSTANDALONE STATEMENTS ON OATH u/s 132(4) OF THE IT\nACT, 1961\n5.3.5.1 The settled principle of law suggests that a\nconfession of an accused would need corroboration with\nevidences to convict the accused. It is also a settled legal\nposition that although an admission is an important piece\nof evidence, but it is not conclusive and it is open to the\nassessee to show that it is incorrect.\n(a) At this stage. I solicit guidance from the verdict of\nHon'ble Supreme Court of India in case of Pullangode\nRubber Produce Co. Ltd. v. State of Kerala 19731 91 ITR 18\nwherein their Lordships while observing that admission is\nan extremely important piece of evidence, held that, it\ncannot be said to be conclusive and the maker can show\nthat it was incorrect.\n(b) The landmark verdict was followed by the Hon'ble Delhi\nHigh Court of Delhi in case of S. Arjun Singh v. CWT [1989]\n175 ITR 91.\n(c) Further reliance can also be placed on the judgement of\nthe apex court in case of Nagubai Armul v. B Sharma Rao\nAIR 1956 SC 100 wherein it was held that an admission is\nan extremely important piece of evidence but it cannot be\nsaid that it is conclusive. It is open to the assessee who\nmade the admission to show that it is incorrect.\n(d) In yet another case of Sarwan Singh Rattan Singh v.\nState of Punjab AIR 1957 SC 637, the Hon'ble Supreme\nCourt of India held that an admission is not conclusive as\nto the truth of the matters stated therein. It is only a piece\nof evidence, the weight to be attached to which must\ndepend on the circumstances in which it is made. It can be\nshown to be erroneous or untrue.\n(e) The position with respect to whether a statement\nrecorded under Section 132(4) of the Act could be a\nstandalone basis for making assessment was clarified by\nHon'ble Delhi High Court in the case of Harjeev Aggarwal,\nDelhi High Court, wherein, it was held that merely because\nan admission has been made by the assessee during the\nsearch operation, the same could not be used to make\nadditions in the absence of any evidence to corroborate\nthe same. The relevant paragraph of the said decision is\nextracted herein below:\n\"20. In our view, a plain reading of section 158BB(1) of the\nAct does not contemplate computing of undisclosed\nincome solely on the basis of a statement recorded during\nthe search. The words \"evidence found as a result of\nsearch\" would not take within its sweep statements\nrecorded during search and seizure operations. However,\nthe statements recorded would certainly constitute\ninformation and if such information is relatable to the\nevidence or material found during search, the same could\ncertainly be used in evidence in any proceedings under the\nAct as expressly mandated by virtue of the Explanation to\nsection 132(4) of the Act. However, such statements on a\nstand-alone basis without reference to any other material\ndiscovered during search and seizure operations would not\nempower the Assessing Officer to make a block\nassessment merely because any admission was made by the\nassessee during search operation.\"\n(f) Further, it is unequivocally and consistently stipulated\nby the Hon'ble Delhi High Court that the AO cannot solely\nrely on the statement recorded u/s 132(4) of the Act.\nHon'ble Delhi High Court in the case of PCIT Vs. Pavitra\nRealcon Pvt. Ltd. cited (supra), has held as under:\n\"19. Undisputedly, during the period of search, no\nincriminating material appears to have been found.\nHowever, the Revenue proceeded to issue notice under\nSection 143(2) of the Act on the pretext of the statements\nof the Directors of the respondent-assessee companies\nrecorded under Section 132(4) of the Act and material\nseized from the search conducted on Jain group of\ncompanies. The assessment order was also passed under\nSection 143(3) read with Section 153C of the Act making\nadditions under Section 68 of the Act.\n20. However, it is an undisputed fact that the statement\nrecorded under Section 132(4) of the Act has better\nevidentiary value but it is also a settled position of law that\naddition cannot be sustained merely on the basis of the\nstatement. There has to be some material corroborating\nthe content of the statements.\"\n(g) In the case of Kailashben Manharlal Chokshi v. CIT-1,\nthe Gujarat High Court held that the additions could not be\nmade only based on admissions made by the assessee, in\nthe absence of any corroborative material. The relevant\nparagraph no. 26 of the said decision has been reproduced\nherein below: -\n\"26. In view of what has been stated hereinabove we are of\nthe view that this explanation seems to be more\nconvincing, has not been considered by the authorities\nbelow and additions were made and/or confirmed merely\non the basis of statement recorded under section 132(4) of\nthe Act. Despite the fact that the said statement was later\non retracted no evidence has been led by the Revenue. We\nare, therefore, of the view that merely on the basis of\nadmission the assessee could not have been subjected to\nsuch additions unless and until, some corroborative\nevidence is found in support of such admission. We are\nalso of the view that from the statement recorded at such\nodd hours cannot be considered to be a voluntary\nstatement, if it is subsequently retracted and necessary\nevidence is led contrary to such admission. Hence, there is\nno reason not to disbelieve the retraction made by the\nAssessing Officer and explanation duly supported by the\nevidence. We are, therefore, of the view that the Tribunal\nwas not justified in making addition of Rs. 6 lakhs on the\nbasis of statement recorded by the Assessing Officer under\nsection 132(4) of the Act. The Tribunal has com mitted an\nerror in ignoring the retraction made by the\nassessee.\"(emphasis supplied).\n5.3.6 CONCLUSIONS SOUGHT TO BE DRAWN\n5.3.6.1 Thus, on examination of factual and legal matrix of\nthe case in its totality, I am of the firm view that while the\nretraction of Statements recorded on oath at a later stage\nof assessment by the appellant lacks credibility and cannot\nbe treated as genuine retraction on the part of appellant,\nthe evidentiary value of such retracted Statement on\n\"standalone\" basis is very restricted. Otherwise also, the\nHon'ble Supreme Court of India, as well as, juri ictional\nHigh Court have consistently held in unequivocal terms\nthat the \"Statements on oath\" need to be corroborated by\nconcrete seized incriminating documentary evidences or\ncorresponding independent enquiry/investigation.\n5.3.7 ADJUDICATION ON FACTUAL GROUNDS RAISED BY\nTHE APPELLANT\n5.3.7.1 In this connection, the factual position as\nemanating from examination of material on record is\nsequentially recapitulated below for consideration:\n5.3.7.2 The matter under consideration owes its genesis to\nthe search on VESTIGE GROUP OF COMPANIES wherein it\nwas reported that appellant had indulged in large scale tax\nevasion through the modus operandi of bogus billing of\n\"purchases\" claimed in P & L account, and inflation of\nexpenses by way of bogus commission/bonus expenses\ndebited in Profit and Loss account. An examination of\nrecords reveals that in this case, AO has made following\nadditions in this case:\n5.3.7.3 The AO has made the addition of Rs. 8,86,36,574/-\nby disallowing the expenses claimed by the appellant u/s\n37 of the IT act, 1961. The breakup of disallowance of Rs.\n8.86,36.574/- is as under: -\nSr.No.\nReference to the document/statement/digital\nevidences relied upon by the AO\nAmount\n1.\nSummons issued to various purchase parties u/s\n131(1A) of the Act which returned unserved as\nthe parties didn't exist at their registered\naddress.\nRs.9,54,670\n2.\nDigital evidence - An excel sheet titled \"Bogus\nExpense Employee-wise” found in the Kingston\npen drive/laptop seized from the head office of\nthe assessee company at A 89, Phase II, Okhla\nIndustrial Area, New Delhi-110020\nRs.2,15,21,815\n3.\nList of bogus commission/Bonus submitted by\nAnurag Anthwal during post-search proceedings.\nRs.5,51,48,756\n4.\nBogus parties found in email communication\nRs.1,10,11,333\nTOTAL Rs.8,86,36,574\n5.3.7.4\nIn the instant case, the principal data claimed\nto be relied upon by the AO in assessment order is the\nfollowing information:\n(i) Statements of following persons admitting large scale\ntax evasion by appellant company by way of bogus billing\nof purchase of packing material and inflation of expenses\ndebited in P&L account through bogus commission/bonus/\nmarketing expenses etc.\nMr. Kanwar Bir Singh,\nMr. Gautam Bali,\nMr. Deepak Sood,\nAnurag Anthwal (GM, Accounts & Finance) &\nSunil Sharma (General Manager (Finance)\n(ii) Excel sheets, emails and pen drive data containing lists\nof alleged bogus parties extracted from above persons\nduring the process of recording of\nStatements/search/post-search enquiries.\ntheir\n(iii) Statements of Auditor /other key employees taken\nduring search/post search enquiries wherein these persons\nhave admitted to involvement of appellant company in\nwide spread tax evasion through bogus billing of purchases\nand through bogus commission expenses.\n(a) Virender Kumar,\n(b) Sh. Deepak Chaudhary,\n(c) S P Gupta,\n(d) Sajan Kumar Aggarwal,\n(e) Sanjay Sharma,\n(f) Ajay Kumar,\n(g) Pradeep Garg &\n(h) Vishal Garg\n(iv) Statement of certain entities were recorded on oath u/s\n131(1A) of the IT Act, 1961 during post-search enquiries,\nwherein these entities denied having any financial\ntransactions with the appellant.\n(v) Notices under section 131/133(6) issued to certain\nparties by Investigation Wing/assessing officer have\nreturned unserved indicating dubious nature of these\nentities.\n5.3.7.5 Considering the broad factual matrix of the case, it\nappears from seized records/Statements on oath /appraisal\nreport/ assessment record that the appellant company has\nindeed been indulging in tax evasion through the modus\noperandi of \"bogus billing of purchases\" and inflation of\nexpenses claiming bogus\nby\ncommission/bonus/marketing/business\npromotion\nexpenses. However, the actual magnitude of tax evasion\ncan only be ascertained based on independent\nenquiry/investigation in respect of financial transactions of\nappellant with alleged bogus entities. I am of the view that\nmere Statements of few persons cannot be the ground for\nquantification of actual tax evasion and for addition\nthereof. In this connection, it is further noticed that the\ndata so stated to be retrieved from various sources, be it\nExcel sheets extracted from desktops, Pen-drive data, or\nEmail Data, have also been extracted by relying upon\nStatements of certain employees on oath, which has been\nrelied upon by the AO. The data broadly comprises of\nnames of various entities who allegedly have indulged in\nbogus billing/bogus expenses. I notice that no real\ndocumentary proof of indulgence of any these named\nentities in such malpractices have been retrieved during\nsearch. In fact, there is no incriminating documentary\nevidence retrieved from search which could suggest that\nthe entities so alleged were bogus, non- existent, or mere\nentry-operator/bogus/paper entities. Therefore, at this\nstage, it is incumbent to examine the outcome of\nindependent enquiry and investigation undertaken by the\nAO in respect of alleged non-genuine parties, which is\nextremely crucial for determination of actual\nscale/magnitude of tax evasion through the entities so\nalleged.\n5.3.7.6 Therefore, considering the above factual\nposition, an examination of outcome of various\nenquiries/investigations/submissions on record viz a viz\naddition made by the AO leads to following findings:\nParticulars\nOutcome of Enquiry by\nWING/AO\nWritten\nsubmissions/Evidences\nfiled by appellant\nS.No.\nParticulars\nPAN\nAmount in\nRs.\nFY 2017-18\n(A)\nStatement\nNil\nrecorded\nTotal (A)\nNil\n(B) Address not\nfound\n1\nMamta\nGupta\nASYPG1937G\n257,711\nThe address not found\nby Wing.\nBut compliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN, confirmed\nstatement of accounts,\nproof of TDS.\n2\nAman\nAggarwal\nHUF\nAAOHA2630L\n696,959\nThe address not found\nby Wing.\nBut compliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\nTotal (B)\n954670\n(C) Excel Sheet\n1\nAugust\nFinancial\nServices\nAAACA6494R\n450,000\nCompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\nledger accounts and\nSale\ninvoices/vouchers/GST\nReturn\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nsale invoices and ITR of\nparty.\n2\nGarv\nEnterprise\nBGRPS5468Q\n8,527,156\nCompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\nledger accounts and\nSale\ninvoices/vouchers/GST\nReturn\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nsale invoices and ITR of\nparty.\n3\nStar Infra\nDesign Pvt\nLtd\nAAPCS1213F\n12,544,659\nCompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\nledger accounts and\nSale\ninvoices/vouchers/GST\nReturn\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nsale invoices and ITR of\nparty.\n76\nTotal (C)\n21,521,815\n(D) Excel Sheet 2\nNIL\nNIL\nTotal (D)\n(E) Remaining\nParties\n1\nSuresh\nKumar Goel\nHuf\nAAKHS8586H\n746,132\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nsale invoices and ITR of\nparty.\n2\nAlka Aggarwal\nAGEPA7718F\n530,271\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n3\nPriyanka\nAOTPJ7363L\n236,509\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n4\nPreeti\nAgarwal\nADRPA3039M\n453,560\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n5\nPayal Agarwal\nAKOPA1024G\n341,872\nNo compliance made to\nnotice u/s 133(6)\nNA\n6\nAnshu Jain\nAUPPJ3279F\n396,162\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n7\nArvind\nKediyal\nMNPK7061L\n477,225\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n8\nAshu\nAggarwal\nΒΥΝΡΑ3977N\n371,174\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n9\nKaran Jain\nBPNPJ0028N\n1,011,316\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n10\nLaxmi\nSharma\nAXMPS3502J\n530,254\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n11\nMeenu\nGupta\nAUPG6353Q\n689,324\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n12\nMohit Jain\nBPNPJ0027D\n1,010,510\nNo Compliance\n13\nNarain Dutt\nAHFPG7432A\n530,258\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n14\nRamesh\nChand Gupta\nAGPG8894A\n795,375\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n15\nSonam\nGupta\nBRCPG5683B\n717,364\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n16\nRitu Jain\nAFPPJ3649L\n954,451\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n17\nTanisha Jain\nBDIPJ7818R\n954,451\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\n18\nShikha Jalan\nAHAPB0135A\n265,125\ncompliance made to\nnotice u/s 133(6) with\nconfirmed copy of\naccounts and proof of\nTDS [Form 16A].\nThe appellant has filed\ncomplete name, address,\nPAN,\nconfirmed\nstatement of accounts,\nproof of TDS, Bank\nStatement, and ITR of\nparty.\nTotal (E)\n11,011,333\n(F) Bonus\n1\nBonus A\n55,148,756\nNo enquiry by\nWing/AO/No\nfinding\nadverse\nincriminating material\nThe appellant has filed\nComplete name,\naddress,\nPAN,\nConfirmed\nstatement\nof\naccounts,\nProof of TDS,\nBank statement,\nand ITR of\nparties above\nRs.10\nlakh\ntransaction\nvalue\nTotal (F)\n55,148,756\nGrand Total (A to F)\n88,636,574\n5.3.7.7 In this connection, I have specifically verified\nwhether these parties have filed ITRs during the year\ndeclaring the income in their respective ITRs, which is\ntabulated below:\nParticulars\nWhether ITR filed or not and RETURN OF\nINCOME\nS.No.\nParticulars\nPAN\nAmount in Rs.\nFY 2017-18\nFiled or not\nGTI\n(A) Statement recorded\nNil\nNil\nTotal (A)\n(B) Address not found\n1\nMamta Gupta\nASYPG1937G\n257,711\nFiled\n1890418\n2\nAman\nAggarwal HUF\nAAOHA2630L\n696,959\nFiled\nTotal (B)\n954,670\n(C) Excel Sheet\n1\nAugust\nFinancial\nServices\nAAACA6494R\n450,000\nFiled\n859173\n2\nGarv\nEnterprise\nBGRPS5468Q\n8,527,156\nFiled\n700651\n3\nStar\nInfra\nDesign\nPvt.Ltd.\nAAPCS1213F\n12,544,659\nFiled\n5837756\nTotal (C)\n21,521,815\n(D) Excel Sheet 2\nNIL\nNIL\nTotal (D)\n(E) Remaining Parties\n1\nSuresh Kumar\nGoel Huf\nAKHS8586H\n746,132\nFiled\n1064886\n2\nAlka Aggarwal\nAGEPA7718F\n530,271\nFiled\n543113\n3\nPriyanka\nAOTPJ7363L\n236,509\nFiled\n765467\n4\nPreeti\nAgarwal\nDRPA3039M\n453,560\nFiled\n1479752\n5\nPayal Agarwal\nKOPA1024G\n341,872\n6\nAnshu Jain\nAUPPJ3279F\n396,162\nFiled\n1673453\n7\nArvind\nKediyal\nMNPK7061L\n477,225\nFiled\n910423\n8\nAshu\nAggarwal\nΒΥΝΡΑ3977N\n371,174\nFiled\n557454\n9\nKaran Jain\nBPNPJ0028N\n1,011,316\nFiled\n1017074\n10\nLaxmi\nSharma\nAXMPS3502J\n530,254\nFiled\n992393\n11\nMeenu Gupta\nAUPG6353Q\n689,324\nFiled\n1059325\n12\nMohit Jain\nBPNPJ0027D\n1,010,510\n13\nNarain Dutt\nAHFPG7432A\n530,258\nFiled\n535384\n14\nRamesh\nChand Gupta\nAGPG8894A\n795,375\nFiled\n1067680\n15\nSonam Gupta\nBRCPG5683B\n717,364\nFiled\n796430\n16\nRitu Jain\nAFPPJ3649L\n954,451\nFiled\n1823297\n17\nTanisha Jain\nBDIPJ7818R\n954,451\nFiled\n1234324\n18\nShikha Jalan\nAHAPB0135A\n265,125\nFiled\n490462\nTotal (E)\n11,011,333\n(F) Bonus\nBonus A\n55,148,756\nTotal (F)\n55,148,756\nGrand Total (A to F)\n88,636,574\n5.3.7.8 Therefore, an analysis of factual position in the\nlight of outcome of aforesaid enquiries leads to following\nconclusive findings:\n(a) In view of the above discussion, the appellant has\nthus failed to discharge the onus of establishing\ngenuineness of transactions with the following entities:\nName\nPAN\nAmount\nRemarks on verification by\nthis office\nPayal Agarwal\nΑΚΟΡΑ1024G\nRs.3,41,872\nNo compliance made\nMohit Jain\nBPNPJ0027D\nRs.1,0,10,510\nto notice u/s 133(6)\nby Parties.\nNo ITR filed by\nparties during the\nyear.\nNo confirmation filed\nby appellant.\nRs.13,52,382/-\n5.3.7.9 Thus, in view of the overall circumstantial\nmatrix of the case, enquiries conducted by the AO u/s\n133(6) of the IT Act, 1961 and Statements of key persons\nrecorded on oath u/s 132(4) of the IT Act, 1961, the\npayments claimed to be made to above parties totaling\nRs.13,52,382/- do not constitute genuine expenditure of\nthe appellant u/s 37 of the IT Act, 1961. Therefore, addition\nto the extent of Rs.13,52,382/- stands CONFIRMED.\n(b) However, for the remaining entities, the appellant has\nclearly discharged its onus of establishing the genuineness\nof expenses claimed by providing complete names,\naddresses, PAN, confirmed copy of accounts, proof of TDS\n[Form 16A], sale invoices, and copies of ITRs of parties\nconcerned before the AO during assessment proceedings.\n(c) For the remaining entities, the enquiries made by AO\nhimself under 133(6) of the IT Act, 1961 have further\ncorroborated the identity and genuineness since all the\nremaining parties have confirmed the transactions along\nwith copies of ledger and proof of TDS.\n(d) For the remaining entities, there does not exist any\nspecific adverse finding/information regarding non-\ngenuineness of any of these entities. Further, there does\nnot exist on record any adverse finding as to non-\ngenuineness of services rendered for commission\npayments made to any of these parties by Investigation\nwing or AO.\n(e) For the remaining entities, it is vital to note that all\nthese parties have filed ITRs declaring the transactions in\ntheir ITR.\n(f) For the remaining entities, there does not exist any\nadverse incriminating documentary record seized during\nsearch in respect of alleged non genuineness of\ntransactions.\n(g) For the remaining entities, the addition seems to be\nhinged upon a slew of general statements of Promoters\nand employees regarding indulgence of appellant in tax\nevaison through bogus billing/bogus commission. But the\nStatements are nowhere supported by any real and\nspecific evidence of indulgence of appellant or any of these\nremaining entities in dubious transactions. Further, the\nevidentiary value of Statements of promoters/employees in\nthe present circumstantial matrix is very restricted since\nthe statements now stand retracted. In this situation, I am\nonce again seized of judgements of Hon'ble Delhi High\nCourt in the case of CIT Vs Harjeev Aggarwal (2016) 290\nCTR 263 (Del.) and Pr. CIT Vs Best Infrastructure (India)\nPvt. Ltd. (2017) 397 ITR 82 (Del.), which have settled the\nlegal position that additions solely based on incriminating\nStatements are legally unsustainable unless further\ncorroborated by supportive evidences, ie, live nexus\nbetween Statements and evidences derived from\nsearch/post-search enquiries is established by the AO. In\nthis case, contrary to what was alleged in \"Statements on\noath,\" all these remaining entities are seen to be very\nmuch in existence, have confirmed the transactions, and\nduly filing ITRs wherein these payments stand disclosed.\n(h) For the remaining entities, in the year under\nconsideration, the addition is based on names of certain\nparties retrieved from digital data obtained from\nemployees of appellant group, but this data/ Statements of\npertinent employees relied upon by the department, have\nnot been confronted to main Promoters of appellant\ncompany for rebuttal/ cross examination. The data on its\nown bears just a list of names. which cannot incriminate an\nappellant unless and until the department proves these\nnames or transactions undertaken by them to be dubious\nthrough independent enquiries.\n(i) I notice that AO has not rejected the books of appellant\ndespite alleging such large-scale manipulation of books by\nbogus billing of purchases. In fact, AO has not recorded any\nsuch discrepancy in its stock, accounting procedure and\nbooks of accounts which could warrant rejection of books\nof accounts.\n5.3.7.10 It is also an undeniable fact that despite having\nundertaken the most stringent and intrusive of possible\nactions against the appellant through search under 132 of\nthe IT Act, 1961, followed by extensive post-search\nenquiries and elaborate search assessment, the\ndepartment has not succeeded in unearthing specific\nincriminating evidence regarding non genuineness of\nremaining parties. Thus, finally, for the remaining entities,\nin the face of overwhelming affirmative evidences\nestablishing the genuineness of expenses claimed by the\nappellant, i.e, the parties whose credentials stand verified\nto be GENUINE by enquiries conducted by AO himself, the\ndisallowance made is unsustainable under the law. Hence,\nfinally addition to the extent of Rs. 13,52,382/- is\nCONFIRMED.\"\n7. It is thus clear that what all the learned CIT(A) has done is to\ndelete the bogus disallowance involving those parties who had duly\nresponded to Section 133(6) notice(s) and further filed their respective\nconfirmations, income tax returns along with Form 16A, which has\ngone unrebutted from the Revenue side. We make it clear that there\nis no denial coming from the departmental side that neither the\nassessee's corresponding sales have been treated as unexplained nor\nits books of account stand rejected in the assessment order in issue.\nWe thus see merit in the assessee's stand that learned CIT(A) has\nrightly deleted the impugned bogus purchases disallowance amounting\nto ₹8,72,84,192/- in its favour. The Revenue's instant former ground\nfails in very terms therefore.\n8. We next come to the assessee's corresponding substantive\nground seeking to delete the remaining bogus purchase disallowance\nof ₹13,52,382/- (supra). We deem it appropriate to reiterate here that\nthe twin parties concerned namely, Smt. Payal Agarwal and Shri Mohit\nJain had nowhere filed their responses to Section 133(6) notices nor\ntheir income tax returns or confirmations etc. could see light of the\nday. The fact also remains that the assessee business activity stands\nadmitted all along. Nor there is any serious abnormality noticed in its\nbooks of account as well. We thus deem it appropriate in this backdrop\nand in the larger interest of justice that a lump sum disallowance at\nthe rate of 5% of the impugned remaining bogus purchases would be\njust and proper with a rider that the same shall not be treated as a\nprecedent. Necessary computation shall follow accordingly.\nThe\nassessee's instant appeal ITA No.5515/Del/2025 raising the very sole\nsubstantive ground stands partly accepted.\n9.\nLearned CIT-DR, at this stage, refers to the Revenue's latter\nsubstantive ground that the Assessing Officer had rightly made Section\n69A addition of ₹40,18,132/- in the assessee's hands which has been\nwrongly deleted in the CIT(A)'s detailed discussion. A perusal of the\nlower appellate discussion reveals that the assessee had duly proved\nthe same as its receipts from ticket sales from public on various\nevents. It had further filed all the relevant details in both the lower\nproceedings. We thus see no reason to interfere with the learned\nCIT(A)'s detailed discussion deleting the impugned addition. The\nRevenue's instant “lead” appeal ITA No.7838/Del/2025 is dismissed in\nvery terms.\n10. Same order to follow in the assessee's and the Revenue's\nremaining six cross-appeals each i.e., ITA Nos.5516 to 5521/Del/2025\nand 7839 to 7844/Del/2025; respectively, since involving identical facts\nand grounds; as the case may be.\n11. No other ground or argument has been pressed before us.\n12. To sum up, these assessee's seven appeals ITA Nos.5515 to\n5521/Del/2025 are partly allowed and Revenue's as well cross appeals\nITA Nos.7838 to 7844/Del/2025 are dismissed in above terms. A copy\nof this common order be placed in the respective files.\nDecision pronounced in the open Court on 20th March, 2026.\n \n(NAVEEN CHANDRA)\nACCOUNTANT MEMBER\n \n(SATBEER SINGH GODARA)\nJUDICIAL MEMBER\nVK.\n