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

ITA 5517/DEL/2025Status: DisposedITAT Delhi20 March 2026AY 2020-2176 pages

AI SummaryPartly Allowed

Facts

The Assessing Officer disallowed purchases of ₹8,86,36,574/- treating them as bogus entries based on statements recorded during a search and also made an addition of ₹40,18,132/- under Section 69A as unexplained money. The CIT(A) partly upheld the disallowance to the extent of ₹13,52,382/- and deleted the Section 69A addition entirely.

Held

The Tribunal held that additions cannot be made solely on the basis of retracted statements, especially when the assessee provides documentary evidence. For suppliers who did not respond to notices or file returns, a lump-sum disallowance of 5% of the remaining disputed purchases was deemed appropriate as a just and proper measure.

Key Issues

Validity of additions based on retracted statements and the impact of suppliers' non-compliance with notices on purchase disallowances.

Sections Cited

147, 143(3), 37, 69A, 132(4), 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH F : NEW DELHI

Before: SHRI SATBEER SINGH GODARA & SHRI NAVEEN CHANDRA

For Appellant: Shri Amit Goel, Shri Pranav Yadav, Advocates

For Respondent: Ms. Monika Singh, CIT-DR

Hearing: 24.02.2026Pronounced: 20.03.2026

PER BENCH PER BENCH PER BENCH PER BENCH These assessee’s and the Revenue’s seven cross-appeals each i.e., to 5521/Del/2025 and to 7844/Del/2025 for assessment years 2018-19 to 2024-25, arise against the CIT(A)-24, New Delhi orders; all dated 1st September, 2025, in proceedings under Section 147 read with Section 143(3) of the Income- tax Act, 1961 (hereinafter referred to as ‘the Act’), as the case may be, respectively.

2. Heard both the parties. Case files perused.

2 ITA-5515/Del/2025 & 13 others

3. We advert to the “lead” assessment year 2018-19 involving the assessee and the Revenue’s respective cross-appeals and 7838/Del/2025. There is hardly any dispute between the parties that the learned Assessing Officer had framed the assessment in question dated 3rd April, 2025 disallowing the assessee’s entire purchases of `8,86,36,574/- under Section 37(1) of the Act thereby treating the same as bogus ones i.e., mere accommodation entries going by its authorized persons’ statements recorded in the course of Section 132 search dated 20th September, 2023. We next notice that the learned Assessing Officer had further made Section 69A unexplained money addition of `40,18,132/- in its hands as well. And that the learned CIT(A) lower appeal discussion has partly upheld the former addition of the assessee’s alleged bogus purchases to the extent of `13,52,382/-, thereby granting relief of `8,72,84,192/- and further deleted the above latter addition in entirety.

1. It is in this factual backdrop that the assessee’s endeavor herein is to delete the aforesaid remaining bogus purchase disallowance/addition of `13,52,382/- as well whereas the Revenue’s twin substantive grounds seek to uphold the same in entirety along with Section 69A addition of `40,18,132/- hereinabove (supra).

9 ITA-5515/Del/2025 & 13 others ACIT v. Radiant Authority must No falsification shown; Shipping Ltd. (Mumbai demonstrate falsity; No stock discrepancy; ITAT) Mere suspicion No forensic insufficient contradiction 1.1 1.1 1.1 1.1 The reliance is placed on the following case laws: The reliance is placed on the following case laws: The reliance is placed on the following case laws: The reliance is placed on the following case laws: (i) (i) Raj Kumar Daga, New Delhi vs DCIT Circle 30(1), New Delhi dated 16 (i) (i) Raj Kumar Daga, New Delhi vs DCIT Circle 30(1), New Delhi dated 16 Raj Kumar Daga, New Delhi vs DCIT Circle 30(1), New Delhi dated 16 Raj Kumar Daga, New Delhi vs DCIT Circle 30(1), New Delhi dated 16 January, 2026/ITA No.301/Del/2024/ [Assessment Year: 2014 January, 2026/ITA No. 301/Del/2024/ [Assessment Year: 2014-15] 15] January, 2026/ITA No. January, 2026/ITA No. 301/Del/2024/ [Assessment Year: 2014 301/Del/2024/ [Assessment Year: 2014 15] 15] “ 4. 4.1. The ld. AO disallowed the commission expense of Rs.41,55,067l- on the ground that assessee failed to discharge the burden of proving that the commission was paid to genuine person. Aggrieved by the order of the AO, the assessee filed appeal before the ld. CIT(A). xxx 8. We have heard the rival submission in the light of material placed upon record. Undisputedly, the assessee has not produced the parties who were recipients of the commission. The ld. AO however also not made any attempts to enforce their attendance through summons proceedings under section 131. It is undisputed facts on record that the payments were made utilizing banking channel with due TDS deductions. The learned Assessing Officer while concluding the non-genuineness of the commission expenses has proceeded to accept the book results and the books of accounts were not rejected. We find force in the argument that non-disclosure or inadequate disclosure of commission receipts in the hands of the recipients could not make the commission expenses per se as ingenuine. Similarly, booking of commission payment in the last month of the financial year would not make the commission expenses per se as ingenuine as it is routine business practice to book expenses at the end. We have further noted that the arguments of the ld. AO on pages 5 and 6 of his order extracted hereunder dwell more in the realm of conjectures and surmises and a case of human probability. "........XXX 9. We have noted that the ld. CIT(A) has confirmed the addition by placing full reliance upon the above hypothetical presumption drawn by the ld. AO. Conjectures and surmises have no place in judicial orders unless the same are supported by cogent and demonstrative evidence. Accordingly, we are of the considered view that the order of ld. AO and of the ld. CIT(A) is not based upon correct understanding and interpretation of the facts of the case. We therefore set-aside the order of lower authorities and direct the ld. AO to delete the impugned addition of 10 ITA-5515/Del/2025 & 13 others Rs.41,55,067/-. All the grounds of appeal raised by the assessee are therefore allowed.” (ii) M/S Jhs Svendgaard Laboratories vs DCIT Cc (ii) (ii) (ii) M/S Jhs Svendgaard Laboratories vs DCIT Cc M/S Jhs Svendgaard Laboratories vs DCIT Cc-31, New Delhi Dated M/S Jhs Svendgaard Laboratories vs DCIT Cc 31, New Delhi Dated 31, New Delhi Dated 31, New Delhi Dated 07.01.2026/ITA No. 3454/Del 07.01.2026/ITA No. 3454/Del/2025 07.01.2026/ITA No. 3454/Del 07.01.2026/ITA No. 3454/Del /2025 /2025 /2025 “The Ground No. 6 is against the Addition of Rs. 88,95,892/ The Ground No. 6 is against the Addition of Rs. 88,95,892/ The Ground No. 6 is against the Addition of Rs. 88,95,892/- made The Ground No. 6 is against the Addition of Rs. 88,95,892/ made made made by the A.O. on account of bogus purchases from M/s Royal by the A.O. on account of bogus purchases from M/s Royal by the A.O. on account of bogus purchases from M/s Royal by the A.O. on account of bogus purchases from M/s Royal International. International. --- International. International. --- ---” ---

11 ITA-5515/Del/2025 & 13 others My Paper Merchants Pvt. Ltd. (ITA No. 226/Del/2024 My Paper Merchants Pvt. Ltd. (ITA No. 226/Del/2024, dated My Paper Merchants Pvt. Ltd. (ITA No. 226/Del/2024 My Paper Merchants Pvt. Ltd. (ITA No. 226/Del/2024 , dated , dated , dated 20.08.2025 20.08.2025) reiterated that additions made on assumptions, 20.08.2025 20.08.2025 without verification or tangible material, are unsustainable. xxx 29. In view of the above discussions, we find merit in the Ground No. 6 of the Assessee, accordingly, we delete the selective disallowance of Rs. 88.95 lakh out of total purchases of Rs. 5.73 crore made by the A.O. and allow the Ground No. 6 of the Assessee.” (iii) Asstt. Commissione (iii) (iii) (iii) Asstt. Commissione Asstt. Commissioner of Income Tax Range Asstt. Commissione r of Income Tax Range r of Income Tax Range-5(3) v/s M/s. Radiant r of Income Tax Range 5(3) v/s M/s. Radiant 5(3) v/s M/s. Radiant 5(3) v/s M/s. Radiant Shipping Ltd./ ITA no.1540/Mum. /2011/ (Assessment Year: 2001-02) Shipping Ltd./ ITA no.1540/Mum. /2011/ (Assessment Year: 2001 Shipping Ltd./ ITA no.1540/Mum. /2011/ (Assessment Year: 2001 Shipping Ltd./ ITA no.1540/Mum. /2011/ (Assessment Year: 2001 02) 02) 02) dated 27.05.2016 dated 27.05.2016 dated 27.05.2016 dated 27.05.2016 “ 23. We have considered the submissions of the parties and perused the material available on record. Undisputedly, the assessee is in shipping business. The Department has also accepted this fact. Therefore, it is quite natural that the assessee must be requiring the assistant and the service of certain agents for the purpose of its business and paying commission / brokerage to them. It is seen from the facts on record that before the Departmental Authorities assessee did produce the copies of audited Profit & Loss account and Balance Sheet as well as copies of the invoices to demonstrate that the payments made were towards services rendered by the parties in relation to assessee's shipping business. However, it is the view of the Departmental Authorities that these documents do not conclusively establish the fact that the payments made towards certain services rendered by those parties and what is the nature of service rendered by them. In our view, if the nature of service provided by the concerned parties is not discernible from the invoices raised by the parties, then the Departmental Authorities should have clearly expressed the nature of proof the assessee is required to place on record to establish the allowability of expenditure..--.” We also rely on the judgment of Hon’ble Delhi High Court ITA We also rely on the judgment of Hon’ble Delhi High Court We also rely on the judgment of Hon’ble Delhi High Court We also rely on the judgment of Hon’ble Delhi High Court ITA ITA ITA 224/2003 dated 02.11.2025 in the case of The Commissioner Of 224/2003 dated 02.11.2025 in the case of The Commissioner Of 224/2003 dated 02.11.2025 in the case of The Commissioner Of 224/2003 dated 02.11.2025 in the case of The Commissioner Of Income Tax Vs Sunil A Income Tax Vs Sunil Aggarwal Income Tax Vs Sunil A Income Tax Vs Sunil A ggarwal ggarwal. The facts of the case are identical ggarwal with those facts reported in CIT vs. SUNIL AGGARWAL. In the case of Sunil Agarwal, the Assessing Officer retracted from the statement and stated that the amount is recorded in the books of account. Similar is the position in our case. All the payments have been made by cheque and are recorded in the books of account. The reasoning given by the initiating officer in provisional attachment order dated 30th July 2025 is same as taken by the revenue in the case of Sunil Aggarwal, but the Hon'ble High Court did not accept the contention of the revenue

12. It was submitted by Mr. Raghvendra Singh, learned counsel for the Revenue, that the ITAT failed to appreciate that the evidentiary value of the statement on oath recorded by the Assessee under Section 132(4) of the Act carries more weight than a statement made during a survey under Section 133A. ---- He further submitted that the Assessee had not chosen to retract his statement till ten months after the date of the search and therefore the retraction itself was not genuine. According to him, the said retraction did not dilute the evidentiary value of the categorical admission made by the Assessee in his statement under Section 132(4) of the Act. He submitted that the addition of Rs.86 lakhs solely on the basis of the said retracted statement as, therefore, permissible. -- 13. The narration of facts hereinabove shows that the Assessee did not simply retract the statement made by him during the course of surrender. He also offered an explanation for the sum of Rs.86 lakhs found in the hands of his employee, Mr. Gopal Singh. --- In the present case, as noted by the ITAT, the Assessee sought to explain the said amount with reference to the entries in the books of accounts of the sales made during the year and the stock position. In other words, the AO did not find that the cash seized represented amounts not emanating from sales but some other source. The fact that the Assessee may have The fact that the Assessee may have The fact that the Assessee may have The fact that the Assessee may have retracted his statem retracted his statement belatedly did not relieve the AO from retracted his statem retracted his statem ent belatedly did not relieve the AO from ent belatedly did not relieve the AO from ent belatedly did not relieve the AO from examining the explanation offered by the Assessee with reference examining the explanation offered by the Assessee with reference examining the explanation offered by the Assessee with reference examining the explanation offered by the Assessee with reference to the books of accounts produced before him. to the books of accounts produced before him. to the books of accounts produced before him. to the books of accounts produced before him. 14. Therefore, although the counsel for the Revenue may be right in his submission that a statement under Section 132(4) of the Act carries much greater weight than the statement made under Section 133A of the Act, a retracted statement under Section 132(4) of the Act would require some corroborative material for the AO to proceed to make additions on the basis of such statement. Of course, where the retraction is not for any convincing reason, or where it is not shown by the Assessee that he was under some coercion to make the statement in the first place, or where the retraction is not followed by the Assessee producing material to substantiate his defence, the AO might be justified in make additions on the basis of the retracted statement. 15.In the present case, the Assessee had an explanation for not retracting the statement earlier. He also furnished an explanation for the cash that was found in the hands of his employee and this was verifiable from the books of accounts. In the circumstances, it was unsafe for the AO to proceed to make additions solely on the basis of the statement made under Section 132(4) of the Act, which was subsequently retracted.

1.4 In CIT v. Shri Ramdas Motor Transport CIT v. Shri Ramdas Motor Transport CIT v. Shri Ramdas Motor Transport [1999] 238 ITR 177/102 Taxman CIT v. Shri Ramdas Motor Transport [1999] 238 ITR 177/102 Taxman [1999] 238 ITR 177/102 Taxman [1999] 238 ITR 177/102 Taxman 300 300, a Division Bench of Andhra Pradesh High Court, reading the 300 300 provision of Section 132(4) of the Act in the context of discovering undisclosed income, explained that in cases where no unaccounted documents or incriminating material is found, the powers under Section 132(4) of the Act cannot be invoked. The relevant passage from the aforesaid judgment is quoted below: — "A plain reading of sub-section (4) shows that the authorised "A plain reading of sub section (4) shows that the authorised "A plain reading of sub "A plain reading of sub section (4) shows that the authorised section (4) shows that the authorised officer during the course of raid is empowered to examine any officer during the course of raid is empowered to examine any officer during the course of raid is empowered to examine any officer during the course of raid is empowered to examine any person if he is found to be in possession or control of any person if he is found to be in possession or control of any person if he is found to be in possession or control of any person if he is found to be in possession or control of any undisclosed books of account, documents, money or other undisclosed books of account, documents, money or other undisclosed books of account, documents, money or other undisclosed books of account, documents, money or other valuable art valuable articles or things, elicit information from such person valuable art valuable art icles or things, elicit information from such person icles or things, elicit information from such person icles or things, elicit information from such person with regard to such account books or money which are in his with regard to such account books or money which are in his with regard to such account books or money which are in his with regard to such account books or money which are in his possession and can record a statement to that effect. Under possession and can record a statement to that effect. Under possession and can record a statement to that effect. Under possession and can record a statement to that effect. Under this provision, such statements can be used in evidence in any this provision, such statements can be used in evidence in any this provision, such statements can be used in evidence in any this provision, such statements can be used in evidence in any subsequent proceedin subsequent proceeding initiated against such per son under subsequent proceedin subsequent proceedin g initiated against such per son under g initiated against such per son under g initiated against such per son under the Act. Thus, the question of examining any person by the the Act. Thus, the question of examining any person by the the Act. Thus, the question of examining any person by the the Act. Thus, the question of examining any person by the 16 ITA-5515/Del/2025 & 13 others authorised officer arises only when he found such person to be authorised officer arises only when he found such person to be authorised officer arises only when he found such person to be authorised officer arises only when he found such person to be in possession of any undisclosed money or books of account. in possession of any undisclosed money or books of account. in possession of any undisclosed money or books of account. in possession of any undisclosed money or books of account. But, in this case, it is admitted b But, in this case, it is admitted by the Revenue that on the But, in this case, it is admitted b But, in this case, it is admitted b y the Revenue that on the y the Revenue that on the y the Revenue that on the dates of search, the Department was not able to find any dates of search, the Department was not able to find any dates of search, the Department was not able to find any dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other unaccounted money, unaccounted bullion nor any other unaccounted money, unaccounted bullion nor any other unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents valuable articles or things, nor any unaccounted documents valuable articles or things, nor any unaccounted documents valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of nor any such incriminating material either from the premises nor any such incriminating material either from the premises nor any such incriminating material either from the premises of of of the company or from the residential houses of the managing the company or from the residential houses of the managing the company or from the residential houses of the managing the company or from the residential houses of the managing director and other directors. In such a case, when the director and other directors. In such a case, when the director and other directors. In such a case, when the director and other directors. In such a case, when the managing director or any other persons were found to be not in managing director or any other persons were found to be not in managing director or any other persons were found to be not in managing director or any other persons were found to be not in possession of any incriminating material, the question of possession of any incriminating material, the question of possession of any incriminating material, the question of possession of any incriminating material, the question of examining them by the authorised officer during the course of examining them by the authorised officer during the course of examining them by examining them by the authorised officer during the course of the authorised officer during the course of search and recording any statement from them by invoking the search and recording any statement from them by invoking the search and recording any statement from them by invoking the search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. powers under section 132(4) of the Act, does not arise. powers under section 132(4) of the Act, does not arise. powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the Therefore, the statement of the managing director of the Therefore, the statement of the managing director of the Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, assessee, recorded patently under sect ion 132(4) of the Act, assessee, recorded patently under sect assessee, recorded patently under sect ion 132(4) of the Act, ion 132(4) of the Act, does not have any evidentiary value. This provision embedded does not have any evidentiary value. This provision embedded does not have any evidentiary value. This provision embedded does not have any evidentiary value. This provision embedded in sub-section (4) is obviously based on the well in sub section (4) is obviously based on the well-established established in sub in sub section (4) is obviously based on the well section (4) is obviously based on the well established established rule of evidence that mere confessional statement without rule of evidence that mere confessional statement without rule of evidence that mere confessional statement without rule of evidence that mere confessional statement without there being any documentary proof shall not be used in there being any documentary proof shall not be used in there being any documentary proof shall not be used there being any documentary proof shall not be used in in evidence against the person who made such statement. The evidence against the person who made such statement. The evidence against the person who made such statement. The evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled finding of the Tribunal was based on the above well settled finding of the Tribunal was based on the above well settled finding of the Tribunal was based on the above well settled principle." principle." principle." principle." 1.5 With regard to issue of as to whether addition can be made only on the basis of statement recorded during search u/s 132(4) of the Income Tax Act, the jurisdictional Delhi High Court in the case of CIT v Harjeev CIT v Harjeev CIT v Harjeev CIT v Harjeev Aggarwal [2016] 70 Aggarwal [2016] 70 taxmann.com Aggarwal [2016] 70 Aggarwal [2016] 70 taxmann.com taxmann.com 95 (Delhi) taxmann.com 95 (Delhi) 95 (Delhi) held as under :- 95 (Delhi)

21.

A plain reading of Section 132 (4) of the Act indicates that 21. 21. the authorized officer is empowered to examine on oath any 17 ITA-5515/Del/2025 & 13 others person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be However, as stated earlier, a statement on oath can only be However, as stated earlier, a statement on oath can only be However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of recorded of a person who is found in possession of books of recorded of a person who is found in possession of books of recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the accounts, documents, assets, etc. Plainly, the intention of the accounts, documents, assets, etc. Plainly, the intention of the accounts, documents, assets, etc. Plainly, the intention of the Parliament is to p Parliament is to permit such examination only where the books Parliament is to p Parliament is to p ermit such examination only where the books ermit such examination only where the books ermit such examination only where the books of accounts, documents and assets possessed by a person are of accounts, documents and assets possessed by a person are of accounts, documents and assets possessed by a person are of accounts, documents and assets possessed by a person are relevant relevant for for the the purposes purposes of of the the investigation investigation being being relevant relevant for for the the purposes purposes of of the the investigation investigation being being undertaken. Now, if the provisions of Section 132(4) of the Act undertaken undertaken undertaken are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the . In other words, there must be a nexus between the . In other words, there must be a nexus between the . In other words, there must be a nexus between the statement recorded and the evidence/material found during statement recorded and the evidence/material found during statement recorded and the evidence/material found during statement recorded and the evidence/material found during search in order to for an assessment to be based on the search in order to for an assessment to be based on the search in order to for an assessment to be based on the search in order to for an assessment to be based on the statement recorded. statement recorded. statement recorded. statement recorded. 1.6 Further, it is submitted that even otherwise no adverse inference can be drawn on the basis of statements recorded unless supported by any corroborative evidence. It is submitted that ‘Statement by itself does not constitute incriminating material found as a result of search on appellant’, statement cannot be made a basis of addition on a ‘standalone basis’, without reference to any other material discovered during search and seizure operations on appellant. In this regard appellant places reliance on below mentioned judgments:

18 ITA-5515/Del/2025 & 13 others i) In the case of Pr. CI Pr. CI Pr. CIT v. Anand Kumar Jain (HUF) 432 ITR 384 (Del) Pr. CI T v. Anand Kumar Jain (HUF) 432 ITR 384 (Del) T v. Anand Kumar Jain (HUF) 432 ITR 384 (Del) it T v. Anand Kumar Jain (HUF) 432 ITR 384 (Del) was held as under: - 8. Next, we find that, the assessment has been framed under section 153A, consequent to the search action. The scope and ambit of section 153A is well defined. This court, in CIT v. Kabul Chawla, 1 concerning the scope of assessment under Section 153A, has laid out and summarized the legal position after taking into account the earlier decisions of this court as well as the decisions of other High Courts and Tribunals. In the said case, it was held that the existence of incriminating material found during the course of the search is a sine qua non for making additions pursuant to a search and seizure operation. In the event no incriminating material is found during search, no addition could be made in respect of the assessments that had become final. Revenue’s case is Revenue’s case is Revenue’s case is Revenue’s case is hinged on the statement of Mr. Jindal, which according to hinged on the statement of Mr. Jindal, which according to hinged on the statement of Mr. Jindal, which according to hinged on the statement of Mr. Jindal, which according to them is the incriminating material discovered during the them is the incriminating material discovered during the them is the incriminating material discovered during the them is the incriminating material discovered during the search action. This statement certainly has the evidentiary search action. This statement certainly has the evidentiar y search action. This statement certainly has the evidentiar search action. This statement certainly has the evidentiar y y value and relevance as contemplated under the explanation value and relevance as contemplated under the explanation value and relevance as contemplated under the explanation value and relevance as contemplated under the explanation to section 132(4) of the Act. However, this statement to section 132(4) of the Act. However, this statement to section 132(4) of the Act. However, this statement to section 132(4) of the Act. However, this statement cannot, on a standalone basis, without reference to any cannot, on a standalone basis, without reference to any cannot, on a standalone basis, without reference to any cannot, on a standalone basis, without reference to any other material discovered during search and seizure other material discovered during search and seizure other material discovered during search and seizure other material discovered during search and seizure operations, empower the AO to fram operations, empower the AO to frame the block assessment. operations, empower the AO to fram operations, empower the AO to fram e the block assessment. e the block assessment. e the block assessment. This court in Principal Commissioner of Income Tax, Delhi v. Best Infrastructure (India) P. Ltd., 2 has inter-alia held that: “38. Fifthly, statements recorded under Section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal.

On perusal of the above, it may be noted that statement under section 132(4) of the Act can be recorded only if the person is found in possession of books of account, documents, assets, etc. Thus, plainly, the intention of the Legislature is to permit such examination only where the books of account, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. It may be clarified that Explanation to section 132(4) of the Act also permits recording of statement with reference to books of account, documents, assets, etc., found during search and also any in respect of any other matter. The primary condition, however, is that the statement recorded must relate to evidence/material found during the course of search. The aforesaid provisions, in our respectful submission, makes it abundantly clear that general statement, though under section 132(4) of the Act, without any reference to any material found during the course of search could not be the sole basis for making any addition. The aforesaid principle of law has also been recognized by the Central Board of Direct Taxes (CBDT) in its Instruction No. F no. 286/2/2003- IT (Inv) dated 10.03.2003 (Refer pages 162 to 163 of caselaw PB), wherein CBDT had warned the revenue officers not to obtain confession to the undisclosed income, rather concentrate on collection of evidence of 24 ITA-5515/Del/2025 & 13 others income which lead to what has not been disclosed or is not likely to be disclosed before the Income- tax authorities. The relevant extracts of the said Instruction read as under: "Instances have come to the notice of the Board where assessee have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if, not based upon credible evidence, are later retracted by the concerned assessee while filing returns of income. In these circumstances, such confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely Further, in respect of pending assessment proceedings also. Assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders." (emphasis supplied) The aforesaid instruction was again reiterated by the CBDT in Instruction no. F. No. 286/98/2013-IT (Inv. II) dated 18.12.2014 (Refer pages 164 to 165 of caselaw

“In this case, the assessee had given the In this case, the assessee had given the In this case, the assessee had given the names and In this case, the assessee had given the names and names and names and addresses of the alleged creditors. It was in the knowledge addresses of the alleged creditors. It was in the knowledge addresses of the alleged creditors. It was in the knowledge addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax of the Revenue that the said creditors were income tax of the Revenue that the said creditors were income of the Revenue that the said creditors were income tax tax assessees. Their index numbers were in the file of the assessees assessees assessees Revenue. The Revenue, apart from issuing notices under Revenue, apart from issuing notices under Revenue, apart from issuing notices under Revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue section 131 at the in stance of the assessee, did not pursue section 131 at the in section 131 at the in stance of the assessee, did not pursue stance of the assessee, did not pursue the matter further. The Revenue did not examine the source the matter further. The Revenue did not examine the source the matter further. The Revenue did not examine the source the matter further. The Revenue did not examine the source of income of the said alleged creditors to find out whether of income of the said alleged creditors to find out whether of income of the said alleged creditors to find out whether of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the they were creditworthy or were such who could advance the they were creditworthy or were such who could advance the they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so alleged loans. There was no effort made to pursue the so- alleged loans. There was no effort made alleged loans. There was no effort made to pursue the so to pursue the so called alleged creditors. In those circumstances, the called alleged creditors. In those circumstances, the called alleged creditors. In those circumstances, the called alleged creditors. In those circumstances, the assessee could not do anything further assessee could not do anything further. In the premises, if assessee could not do anything further assessee could not do anything further the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him, then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises.” [Emphasis supplied] ii) 297 ITR 441 (SC) Anish Ahmed & So 297 ITR 441 (SC) Anish Ahmed & Sons v. CIT 297 ITR 441 (SC) Anish Ahmed & So 297 ITR 441 (SC) Anish Ahmed & So ns v. CIT ns v. CIT ns v. CIT DELHI HIGH COURT DELHI HIGH COURT DELHI HIGH COURT DELHI HIGH COURT i) 299 ITR 268 (Delhi) CIT v Divine Leasing and Finance (P) Ltd. 299 ITR 268 (Delhi) CIT v Divine Leasing and Finance (P) Ltd. 299 ITR 268 (Delhi) CIT v Divine Leasing and Finance (P) Ltd. 299 ITR 268 (Delhi) CIT v Divine Leasing and Finance (P) Ltd. “It was specifically observed in the context of share capital u/s 68 that if relevant details of the address address address or PAN identity address PAN identity PAN identity PAN identity of the creditor/subscriber are furnished of the creditor/subscriber are furnished to the Department of the creditor/subscriber are furnished of the creditor/subscriber are furnished to the Department to the Department to the Department alongwith copies of the shareholders register, share alongwith copies of the shareholders register, share alongwith copies of the shareholders register, share alongwith copies of the shareholders register, share application forms application forms. it would constitute acceptable proof or application forms application forms acceptable explanation by the assessee. It was also held It was also held It was also held It was also held that Department would not be justified in drawing an that Department would not be justified in drawing an that Department would not be justified in drawing an that Department would not be justified in drawing an adverse infere adverse inference only because the creditor/subscriber fails adverse infere adverse infere nce only because the creditor/subscriber fails nce only because the creditor/subscriber fails nce only because the creditor/subscriber fails or neglects to respond to its notices and the onus would not or neglects to respond to its notices and the onus would not or neglects to respond to its notices and the onus would not or neglects to respond to its notices and the onus would not stand discharged only if the creditor/subscriber denies or stand discharged only if the creditor/subscriber denies or stand discharged only if the creditor/subscriber denies or stand discharged only if the creditor/subscriber denies or repudiates the transaction set up by the assessee and repudiates the transaction set up by the assessee and repudiates the transaction set up by the assessee and repudiates the transaction set up by the assessee and thereto the learned Assessing Officer should not take such thereto the learned Assessing Offic er should not take such thereto the learned Assessing Offic thereto the learned Assessing Offic er should not take such er should not take such 30 ITA-5515/Del/2025 & 13 others repudiation at face value and construe it, without more, repudiation at face value and construe it, without more, repudiation at face value and construe it, without more, repudiation at face value and construe it, without more, against the assessee. against the assessee. It was held that Assessing Officer is against the assessee. against the assessee. duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation. repudiation. repudiation. In the instant case repudiation. assessee has furnished complete details of the shareholder assessee has furnished complete details of the shareholder assessee has furnished complete details of the shareholder assessee has furnished complete details of the shareholder alongwith bank statements, confirmation and therefore alongwith bank statements, confirmation and therefore alongwith bank statements, confirmation and therefore alongwith bank statements, confirmation and therefore same same same same would would would would constitute constitute constitute constitute acceptable acceptable acceptable acceptable proof, proof, proof, proof, acceptable acceptable acceptable acceptable explanation u/s 68 of the Act and in abs explanation u/s 68 of the Act and in absence of any other explanation u/s 68 of the Act and in abs explanation u/s 68 of the Act and in abs ence of any other ence of any other ence of any other contrary evidence no adverse inference can be drawn.” contrary evidence no adverse inference can be drawn.” contrary evidence no adverse inference can be drawn.” contrary evidence no adverse inference can be drawn.” ii) 267 ITR 433 (Del) CIT v. Makhni Tyagi (P) Ltd. iii) 299 ITR 268 (Del) CIT v Divine Leasing and Finance (P) Ltd. iv) 307 ITR 334 (Del) CIT v. Value Capital Services (P) Ltd. v) 329 ITR 271 (Del) CIT v. Victor Electrodes Ltd. vi) 333 ITR 119 (Del) CIT v. Oasis Hospitalities (P) Ltd. vii) 354 ITR 282 (Del) Mod Creations (P) Ltd. v. ITO viii) 357 ITR 146 (Del) CIT v. Fair Finvest Ltd.

PUNJAB & HARYANA HIGH COURT PUNJAB & HARYANA HIGH COURT PUNJAB & HARYANA HIGH COURT PUNJAB & HARYANA HIGH COURT i) 325 ITR 25 (P 325 ITR 25 (P&H) CIT vs. GP International Ltd 325 ITR 25 (P 325 ITR 25 (P &H) CIT vs. GP International Ltd &H) CIT vs. GP International Ltd &H) CIT vs. GP International Ltd “Regarding the addition of Rs. 15,00,000/- on account of unexplained share capital, it has been held that at the time of the original assessment, the assessee had supplied the list of the persons along with their addresses to whom the shares were sold. The said list contained of 2009 -4- information, such as name, address and number of shares allotted. The Assessing Officer had issued enquiry letter under Section 133 (6) of the Act at random basis to 25 persons, out of whom some of the persons confirmed the genuineness of the transaction. However, some persons did not respond. In view of this fact, out of the total share capital of Rs. 54,28,500/-, the Assessing Officer made an addition of Rs. 15,00,000/- by treating the sources of share capital of those persons as unexplained. In our opinion, the CIT (A) as well as the ITAT have rightly In our opinion, the CIT (A) as well as the ITAT have rightly In our opinion, the CIT (A) as well as the ITAT have rightly In our opinion, the CIT (A) as well as the ITAT have rightly deleted the aforesaid addition, because in the instant case, deleted the aforesaid addition, because in the instant case, deleted the aforesaid addition, because in the instant case, deleted the aforesaid addition, because in the instant case, the Assessing Officer is not doubting the identity of the the Assessing Officer is not doubting the identity of the the Assessing Officer is not doubting the identity of the the Assessing Officer is not doubting the identity of the persons fr persons from whom the assessee has shown receipt of persons fr persons fr om whom the assessee has shown receipt of om whom the assessee has shown receipt of om whom the assessee has shown receipt of application money. Merely because some of the persons did application money. Merely because some of the persons did application money. Merely because some of the persons did application money. Merely because some of the persons did not respond to the notice issued by the Assessing Officer not respond to the notice issued by the Assessing Officer not respond to the notice issued by the Assessing Officer not respond to the notice issued by the Assessing Officer under Section 133 (6) of the Act, it cannot be taken that the under Section 133 (6) of the Act, it cannot be taken that the under Section 133 (6) of the Act, it cannot be taken that the under Section 133 (6) of the Act, it cannot be taken that the 31 ITA-5515/Del/2025 & 13 others said transaction was ingenuine. It h said transaction was ingenuine. It has been held by the said transaction was ingenuine. It h said transaction was ingenuine. It h as been held by the as been held by the as been held by the Hon'ble Supreme Court in Commissioner of Income Tax v. Hon'ble Supreme Court in Commissioner of Income Tax v. Hon'ble Supreme Court in Commissioner of Income Tax v. Hon'ble Supreme Court in Commissioner of Income Tax v. Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC) that if the Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC) that if the Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC) that if the Lovely Exports (P) Ltd. (2008) 216 CTR 195 (SC) that if the share application money is received by the assessee share application money is received by the assessee share application money is received by the assessee share application money is received by the assessee company from alleged bogus shareholders, whose names company from alleged bogus shareholders, whose names company from alleged bogus shareholders, whose names company from alleged bogus shareholders, whose names are given to the are given to the Assessing Officer, then the department is are given to the are given to the Assessing Officer, then the department is Assessing Officer, then the department is Assessing Officer, then the department is free to proceed to re free to proceed to re-open their individual assessments in free to proceed to re free to proceed to re open their individual assessments in open their individual assessments in open their individual assessments in accordance with law. But the said amount cannot be taken accordance with law. But the said amount cannot be taken accordance with law. But the said amount cannot be taken accordance with law. But the said amount cannot be taken as unexplained income in the hands of the assessee as unexplained income in the hands of the assessee.” as unexplained income in the hands of the assessee as unexplained income in the hands of the assessee [Emphasis supplied] BOMBAY HIGH COURT BOMBAY HIGH COURT BOMBAY HIGH COURT BOMBAY HIGH COURT i) 333 ITR 100 (Bom) CIT vs. Creative World Telefilms Ltd. ii) 90 ITR 396 (Bom) CIT v. U.M. Shah iii) 397 ITR 136 (Bom) CIT v. Orchid Industries (P) Ltd. GUJARAT HIGH COURT GUJARAT HIGH COURT GUJARAT HIGH COURT GUJARAT HIGH COURT i) 256 ITR 360 (Guj) DCIT v. Rohini Builders RAJASTHAN HIGH COURT RAJASTHAN HIGH COURT RAJASTHAN HIGH COURT RAJASTHAN HIGH COURT i) 217 CTR 354 (Raj) Kanhaialal Jangid v. ACIT MADRAS HIGH COURT MADRAS HIGH COURT MADRAS HIGH COURT MADRAS HIGH COURT i) 294 ITR 663 (Mad) CIT v. Gobi Textiles Ltd. INCOME TAX APPELLATE TRIBUNAL INCOME TAX APPELLATE TRIBUNAL INCOME TAX APPELLATE TRIBUNAL INCOME TAX APPELLATE TRIBUNAL i) of 2004 dated 18.02.2006 (Kar) Madhuri Investments Pvt. Ltd. vs. Asst. CIT ii)

35 ITA-5515/Del/2025 & 13 others copies with Goods Receipt Notes, E-way Bills, Transportation Receipts and Bank Statements highlighting payments have been submitted. Further the supplier has been regular in tax compliance and has filed its ITR for AY 2018-19, AY 2019-20 & AY 2020-21. It has also been submitted that input tax credit in respect of these purchases have already been allowed which proves that the supplier is regular in filing its GST returns. Copy of GST-R 2A showing the same has also been filed by the appellant. (ii) M R Gulmi - It has been submitted that the AO has taken incorrect purchase amount of Rs.46,97,31,180/- as against actual purchase of Rs.40,18,72,196/-. Further supporting documents in the form of Ledger Account, Invoice copies & Goods Receipt Notes, E-way Bills & Transportation Receipts, Quality Testing Reports, Cold Storage, Weighment Bridge Proof and Bank Statements highlighting payments have been filed. The appellant has also submitted Income Tax Portal screenshot confirming that M R Gulmi is not a "Specified Person" under Sections 206AB & 206CCA implying that the supplier has duly filed the return of income for the AY 2021-22 and hence the very pretext on which the disallowance has been made is not correct. The appellant has also submitted that the input tax credit claimed against these purchases already stand allowed proving that the supplier is regularly filing its GST returns. It has also been pointed out that the supplier has duly responded to the verification notice issued by the AO on 29.12.2022 via email. (iii) Madhukar Gorakhnath Devkar - It has been submitted that the AO has taken incorrect purchase amount of Rs.30,73,524/- as against actual purchase of Rs.32,27,200 /-. Further supporting documents in the form of Ledger Account, Invoice copies & Goods Receipt Notes, E-way Bills & Transportation Receipts, weigh bridge receipt and Bank Statements highlighting payments have been filed. The appellant has also submitted Income Tax Portal screenshot confirming that Madhukar Gorakhnath Devkar is not a "Specified Person" under Sections 206AB & 206CCA implying that the supplier has duly filed the return of income for the AY 2021-22 and hence the very pretext on which the disallowance has been made is not correct. The appellant has also submitted that the input tax credit claimed against these purchases already stand allowed proving that the supplier is regularly filing its GST returns. (iv) MRG Enterprises - It has been submitted that the AO has taken incorrect purchase amount of Rs.5,77,59,722/- as against actual purchase of Rs.5,98,41,579/-. Further

36 ITA-5515/Del/2025 & 13 others supporting documents in the form of Ledger Account, Invoice copies & Goods Receipt Notes, E-way Bills & Transportation Receipts and Bank Statements highlighting payments have been filed. The appellant has also submitted Income Tax Portal screenshot confirming that MRG Enterprises is not a "Specified Person" under Sections 206AB & 206CCA implying that the supplier has duly filed the return of income for the AY 2021-22 and hence the very pretext on which the disallowance has been made is not correct. The appellant has also submitted that the input tax credit claimed against these purchases already stand allowed proving that the supplier is regularly filing its GST returns. 5.4.3 While non filing of income tax return by a supplier is a reason to further investigate the transaction, this reason alone is not sufficient to disallow the expenses and treat the same as non genuine. The appellant in the instant case has filed ample documentary evidence to not only support the purchase but also to justify its transportation and delivery. The factual matrix is that the expenses being disallowed are purchase of raw material which is quintessential and proportionate to the manufacturing output being shown by the appellant, wherein it is not correct to accept the manufacture and corresponding sale of the finished product but doubt the input raw material. The AO has proceeded to examine the tax behaviour of the persons from whom these purchases have been made and has made this addition since they have not been regular in filing of return of income. In my view, with respect to expenses debited in the profit & loss account that are routine business expenses such as purchase and otherwise satisfy the conditions laid down in Section 37(1) of the Act, the onus of the appellant is limited and does not extend to ensuring that the parties to whom the appellant is making these payments are tax compliant. It is also to be noted that none of these parties are admitted or identified accommodation entry providers. Further the appellant has demonstrated by way of income tax portal screen shot that out of the 4 parties identified by the AO as non-filer, 3 have actually filed their return of income. In view of the above reasons and also in view of the fact that the books of accounts of the appellant are duly audited and the auditor has not identified any specific case of misuse and violation of the conditions prescribed in Section 37(1) of the Act, the addition made by the AO cannot be sustained. Thus, the addition of Rs.25,5569,713/- made by the AO by attributing

10. From the above observation, it is evident that the assessee has furnished various documentary evidences such as ledger account, invoice copies with goods receipt notes, Eway bills, transportation receipts and bank statement reflecting payments made regularly and also the ITR details of party No.1 for A.Y. 2018-19, 2019-20 & 2020-21. It is also an undisputed fact that these parties have been filing GST returns regularly showing substantial business transaction and also the finding of the Ld. CIT(A) that none of these parties are “specified persons” u/s 206AB & 206CCA, which substantiates that they have duly filed their return of income for the impugned year and disallowance of expenses towards purchases cannot be made merely on the ground that these parties have not filed their return of income, is not justifiable in our view. Further, it is also observed that the Ld. AO has not given a finding on the veracity of the documentary evidences furnished by the assessee nor has she stated that these parties are alleged to be accommodation entry providers engaged in providing bogus purchase bills which is the modus operandi of a regular accommodation entry provider. Pertinently, we also find no observation as to whether any enquiry was conducted in these companies as to their existence or whether or not there is any business transaction carried out by these companies has not been examined by the Ld. AO. The purported bogus purchases are said to have been backed by bills and vouchers along with the books of accounts of the assessee duly audited where the said transactions have been recorded, corroborates the fact that the assessee has proved the transaction to be genuine. There is no iota of doubt that the Ld. AO has failed to establish that the parties through whom the assessee has purchased are accommodation entry providers neither by any documentary evidences nor by circumstantial evidences where the Ld. AO has not faulted with the supporting documents filed by the assessee to substantiate its case and we also reiterate the fact that no inquiry was carried out by the Revenue to justify the disallowance of 46% of the purchases by holding the same to be bogus. It is also a settled proposition of law that the Revenue while disallowing bogus purchases would necessarily have to ignore the corresponding sales recorded against the alleged parties, which has not been done so in the present case in hand. In the absence of these findings, we do not find any justification in upholding the addition/disallowance made by the Ld. AO and thereby holding that there is no infirmity in the order of the Ld. CIT(A) in deleting the addition/disallowance made in the hands of the assessee and the same warrants no 38 ITA-5515/Del/2025 & 13 others interference. Hence, we dismiss the grounds of appeal raised by the Revenue on the above observation.

6. Noncompliance to the notices issued u/s 133(6) by the AO cannot be a Noncompliance to the notices issued u/s 133(6) by the AO cannot be a Noncompliance to the notices issued u/s 133(6) by the AO cannot be a Noncompliance to the notices issued u/s 133(6) by the AO cannot be a ground for drawing adverse inference against the appellant. ground for drawing adverse inference against the appellant. ground for drawing adverse inference against the appellant. ground for drawing adverse inference against the appellant. Without prejudice to above, it is submitted that even if the AO had issued notices u/s 133(6) and no replies were received, it cannot be a ground for drawing adverse inference against the appellant. It is not a case of receipt of loan/share capital/gift etc. It is a case of services obtained by the appellant during the ordinary course of its business. This is not the first year of claim of such expenses. The similar expenses were incurred in the earlier years and also in the subsequent years. Applicable TDS has been deducted on almost all the contract charges. Almost all the contract charges have been paid through proper banking channel. Reliance in this regard is placed upon decision of Jurisdictional Delhi High Court in the decision of PCIT PCIT-07, Delhi Versus M/S. Wel 07, Delhi Versus M/S. Wel PCIT PCIT 07, Delhi Versus M/S. Wel 07, Delhi Versus M/S. Wel Intertrade Pvt. Ltd Intertrade Pvt. Ltd. ITA 135/2023 Intertrade Pvt. Ltd Intertrade Pvt. Ltd . ITA 135/2023 . ITA 135/2023 it has held that creditor not . ITA 135/2023 responding to the notice u/s 133(6) cannot be a ground /reason by the AO to make an addition 6.1 In the case of M/s. M/s. M/s. Fancy M/s. Fancy Fancy Wear Fancy Wear Wear Versus Wear Versus Versus Income Versus Income Income Tax Income Tax Tax Officer Tax Officer Officer Ward Officer Ward Ward-24 Ward 24 24 24 (3)(1), (3)(1), NOW (3)(1), (3)(1), NOW NOW-31 NOW 31 31 (1) 31 (1) (1) (4) (1) (4) (4) MUMBAI (4) MUMBAI MUMBAI it was held as under: - MUMBAI 2.

40 ITA-5515/Del/2025 & 13 others but it is about non genuineness of suppliers. Whether provisions of section 69C of the Act can be applied in the matters where all the purchase and sales transactions part of regular books of accounts. Basic precondition for invoking the section 69C is that the expenditure incurred by the assessee should be out of books of accounts. Here, the payments to the suppliers, as stated earlier, have been made by cheques. So, it cannot be held that expenses were incurred by the assessee outside the books of accounts. Section 69C was introduced in to the statute with a specific purpose. A bare reading of the section makes it clear that if the assessee incurred any expenditure, but offered no explanation about the source of such expenditure or part thereof, or the explanation so offered is not satisfactory, such expenditure may be deemed to be the income of the assessee. The assessee has offered satisfactory explanation about the source of the expenditure in the case before us. In the case of Parekh Corporation UI Building(32 CCH 129)the Tribunal has discussed the applicability of provisions of section 69C of the Act and has held as under: “…. In so far as the application of 69C is concerned, we find that the same cannot be attracted because section 69C applies here in any financial year and assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, of by the assessee is not satisfactory. It is then that the amount covered by such expenditure or part thereof is deemed as income of the assessee for such financial year. The bedrock for making an addition under section 69C is that there must have been some expenditure incurred by the assessee, the source of which is not disclosed. If our such expenditure is recorded in the books of accounts, there cannot be any reason to invoke the provisions of section 69C of the Act. In that view of the matter is it is held that provisions of section 69C were strongly restore by the AO for making this addition. ” In light of the above, we find that no addition could have been made u/s. 69 C of the Act.

6.4 In the head note of decision by Hon’ble ITAT Delhi in the case of United Foods Pvt. Ltd. v. ACIT, Circle United Foods Pvt. Ltd. v. ACIT, Circle United Foods Pvt. Ltd. v. ACIT, Circle – 27(1), Delhi 2023 (1) TMI 267 United Foods Pvt. Ltd. v. ACIT, Circle 27(1), Delhi 2023 (1) TMI 267 27(1), Delhi 2023 (1) TMI 267 27(1), Delhi 2023 (1) TMI 267 – ITAT Delhi ITAT Delhi ITAT Delhi it was held as under: - ITAT Delhi Shorn off the non Shorn off the non-compliance of summons served under Shorn off the non Shorn off the non compliance of summons served under compliance of summons served under compliance of summons served under Section 131 Section 131 - Assessee has filed formidable evidences to Section 131 Section 131 identify the contractors as well as the factum of incurring job work expenses as demonstrated by the income tax returns of the service providers. TDS has been deducted on 42 ITA-5515/Del/2025 & 13 others such expenses and reflected in the return of income of the contractors. The increase in turnover, addition of new line of business, i.e., processing of rice and substantial increase in the fixed asset are vital indicators of plausibility of the explanation offered by the assessee in this regard. In this factual matrix, in the absence of any culpable evidence in possession of revenue, the job work expenses deserves to allowed, on a standalone basis, as incurred in the ordinary course of business. Non Non-compliance of summons Non Non compliance of summons compliance of summons - Admittedly, the summons compliance of summons under Section 131 were duly served on the contractors but had remained unresponded. In this backdrop, the observations in S. Hastimal vs. CIT [1962 (12) TMI 60 - MADRAS HIGH COURT] are worth noting wherein an impetus was given on the difficulty on the part of any assessee to explain a transaction after a decade. Similar view has been recently expressed by the Hon’ble Supreme Court in CITI Bank case [2022 (8) TMI 1107 - SUPREME COURT] 6.5 In the head note of decision by Hon’ble ITAT Delhi in the case of Phool Singh v. ACIT, Circle Phool Singh v. ACIT, Circle – 38(1), New Delhi 2023 (1) TMI 267 38(1), New Delhi 2023 (1) TMI 267 – Phool Singh v. ACIT, Circle Phool Singh v. ACIT, Circle 38(1), New Delhi 2023 (1) TMI 267 38(1), New Delhi 2023 (1) TMI 267 ITAT Delhi ITAT Delhi it was held as under: - ITAT Delhi ITAT Delhi Addition on account of purchases made from Suresh HYP Enterprises - 133(6) enquiry letter sent to that party came back un served because of incorrect address - Held that:- As during the course of assessment proceedings, the AO has verified the books of accounts, bills, vouchers, master rolls, bed sheet and logbooks and on such verification, no defect in the books of the assessee was pointed out. The Assessing Officer made the whole addition by pointing out certain lacunas in the bank account of the suppliers of the assessee, which cannot be permitted. Merely because 133(6) notices issued to the party returned un-served though it was the same address, which was supplied by supplier while filing its income tax return, no fault can be put on the shoulder of assessee. Further, the ld CIT(A) confirmed the finding of the ld Assessing Officer without giving any reason but merely reiterating the findings of the Assessing Officer. In view of this the addition made by the ld Assessing Officer of ₹ 2657303/- from Suresh HYP Enterprises cannot be sustained and hence, deleted. In the result ground of the appeal of the assessee is allowed.

45 ITA-5515/Del/2025 & 13 others before the Hon’ble Supreme Court. The Hon’ble Supreme Court before the Hon’ble Supreme Court. The Hon’ble Supreme Court before the Hon’ble Supreme Court. The Hon’ble Supreme Court before the Hon’ble Supreme Court. The Hon’ble Supreme Court dismissed the SLP filed by revenue which is reported at dismissed the SLP filed by revenue which is reported at 320 ITR 17 (St) dismissed the SLP filed by revenue which is reported at dismissed the SLP filed by revenue which is reported at 320 ITR 17 (St) 320 ITR 17 (St) 320 ITR 17 (St) (SC). (SC). (SC). (SC). 7.3 In the case of CIT v BHOLANATH POLYFAB (P) LTD (2013) 355 ITR 290 CIT v BHOLANATH POLYFAB (P) LTD (2013) 355 ITR 290 CIT v BHOLANATH POLYFAB (P) LTD (2013) 355 ITR 290 CIT v BHOLANATH POLYFAB (P) LTD (2013) 355 ITR 290 (Guj) (Guj) disallowance of purchases was made holding them to be bogus. (Guj) (Guj) The Hon’ble ITAT deleted the addition. The Hon’ble High Court uphold the order of ITAT deleting the addition made holding that since the since the since the since the impugned purchases have been sold and sales having been accepted, impugned purchases have been sold and sales having been accepted, impugned purchases have been sold and sales having been accepted, impugned purchases have been sold and sales having been accepted, there was no rationale for disallowing the purchases. there was no rationale for disallowing the purchases. there was no rationale for disallowing the purchases. there was no rationale for disallowing the purchases. 7.4 In the case of NIKUNJ EXIMP ENTERPRISES PVT LTD. vs. COMMISSIONER NIKUNJ EXIMP ENTERPRISES PVT LTD. vs. COMMISSIONER NIKUNJ EXIMP ENTERPRISES PVT LTD. vs. COMMISSIONER NIKUNJ EXIMP ENTERPRISES PVT LTD. vs. COMMISSIONER OF INCOME TAX, OF INCOME TAX, (2012) 346 I OF INCOME TAX, OF INCOME TAX, (2012) 346 I (2012) 346 ITR 78, (Bom) (2012) 346 I TR 78, (Bom) TR 78, (Bom) disallowance of purchases TR 78, (Bom) were made on the ground that in response to the notice issued by the A.O., the supplier parties did not appear and that in some cases the parties denied having business transactions with the assessee. It was held by the Hon’ble High Court that assessee having been copy of account of suppliers, copies of bank statement showing entries of payment through Account Payee cheques to the suppliers, copies of invoices for purchases and details with regard to opening stock, purchases, sales and closing stock and no fault with regard to it being found & the books of accounts not being rejected & the sales not being doubted – the purchases cannot be treated as bogus & be disallowed merely because the suppliers have not appeared before the Assessing Officer or the CIT(A) on the basis of suspicion & merely on the basis of parties categorically being denying in having business dealings with the assessee company, one cannot conclude that the purchases were not made by the assessee, when there are material on record to prove otherwise. 7.5 In the case of INCOME INCOME INCOME-TAX OFFICER V. GHANSHYAM STEEL TRADERS INCOME TAX OFFICER V. GHANSHYAM STEEL TRADERS TAX OFFICER V. GHANSHYAM STEEL TRADERS TAX OFFICER V. GHANSHYAM STEEL TRADERS [1999] 107 TAXMAN 126 (AHD.) [1999] 107 TAXMAN 126 (AHD.) disallowance of purchases was made [1999] 107 TAXMAN 126 (AHD.) [1999] 107 TAXMAN 126 (AHD.) on the basis of statement of seller in which he denied having made any sales to the assessee. The CIT(A) as well as ITAT deleted the addition made by A.O. holding that disallowance of purchases could not be disallowance of purchases could not be disallowance of purchases could not be disallowance of purchases could not be upheld because purchases were not only supported by entries in books upheld because purchases were not only supported by entries in books upheld because purchases were not only supported by entries in books upheld because purchases were not only supported by entries in books of accounts and stock registers but all such material purch of accounts and stock registers but all such material purchase was of accounts and stock registers but all such material purch of accounts and stock registers but all such material purch ase was ase was ase was represented by corresponding sales or those items were lying in the represented by corresponding sales or those items were lying in the represented by corresponding sales or those items were lying in the represented by corresponding sales or those items were lying in the closing stock closing stock. closing stock closing stock 7.6 In the case of BALAJI TEXTILES INDUSTRIES (P) LTD.[1994] 49 ITD 177 BALAJI TEXTILES INDUSTRIES (P) LTD.[1994] 49 ITD 177 BALAJI TEXTILES INDUSTRIES (P) LTD.[1994] 49 ITD 177 BALAJI TEXTILES INDUSTRIES (P) LTD.[1994] 49 ITD 177 (Bom) (Bom) disallowance of purchases was made. The Hon’ble ITAT deleted (Bom) (Bom) the disallowance of purchases holding that no sales were likely to be no sales were likely to be no sales were likely to be no sales were likely to be effected if there were no purchases. A sale can be made only the goods effected if there were no purchases. A sale can be made only the goods effected if there were no purchases. A sale can be made only the goods effected if there were no purchases. A sale can be made only the goods are available with the seller. are available with the seller. are available with the seller. are available with the seller. 7.7 In the case of INCOME TAX OFFICER VS. PERMANAND ITAT, JODHPUR INCOME TAX OFFICER VS. PERMANAND ITAT, JODHPUR INCOME TAX OFFICER VS. PERMANAND ITAT, JODHPUR INCOME TAX OFFICER VS. PERMANAND ITAT, JODHPUR BENCH BENCH - (2007) BENCH BENCH (2007) (2007) –addition under s. 69 was made on account of alleged (2007) bogus purchases. The A.O. received information from the Sales-tax Department that the purchases made by the assessee from two parties

69.

The Hon’ble Tribunal held that the addition made by the A.O. was not justified. It was held that no addition can be made in the hands of the assessee merely on the basis of observations made by a third party—It was held that assessee has discharged the primary onus cast on him by showing the purchases in the books of accounts, payment by way of account payee cheques and producing the vouchers of sale of goods. Moreover, no opportunity was given to the assessee to confront the sellers. It was held that the addition was to be deleted. 7.8 In the case of JAGDAMBA TRADING COMPANY vs. INCOME TAX OFFICER JAGDAMBA TRADING COMPANY vs. INCOME TAX OFFICER JAGDAMBA TRADING COMPANY vs. INCOME TAX OFFICER JAGDAMBA TRADING COMPANY vs. INCOME TAX OFFICER ITAT, JODHPUR ‘SMC’ BENCH - (2007) ITAT, JODHPUR ‘SMC’ BENCH (2007) - addition was made of alleged ITAT, JODHPUR ‘SMC’ BENCH ITAT, JODHPUR ‘SMC’ BENCH (2007) (2007) bogus purchases on the ground that the seller in his affidavit before the sale tax department has submitted that he has not made any sales. It was held that by the Hon’ble Tribunal that as regards the averment of the seller in his affidavit submitted in sales-tax proceedings that he has not made any sales during the relevant year, same cannot be relied upon, particularly when no opportunity of cross- examination was given to the assessee—Said affidavit having been filed during the sales-tax proceedings of the seller, it hardly has any evidentiary value against the assessee in the income-tax proceedings Therefore, the purchases in question cannot be held to be bogus. 7.9 In the case of Smt. Sudha Loyalka v. Income Tax Officer, Ward 35 (2), New Smt. Sudha Loyalka v. Income Tax Officer, Ward 35 (2), New Smt. Sudha Loyalka v. Income Tax Officer, Ward 35 (2), New Smt. Sudha Loyalka v. Income Tax Officer, Ward 35 (2), New Delhi, dated 18.07.2018, Delhi, dated 18.07.2018, ITAT Delhi held that purchases Delhi, dated 18.07.2018, Delhi, dated 18.07.2018, cannot be disallowed when the sales were accepted.

49 ITA-5515/Del/2025 & 13 others It is also submitted that in absence of certificate u/s 65(B) of the Indian Evidence Act in respect of so-called electronic record i.e. copies of excel sheet, excel work note book etc. the document is inadmissible in the eye of law. The assessee seeks to place reliance on the judgment of Hon’ble Madras Hon’ble Madras Hon’ble Madras High Court in the case of M/s Hon’ble Madras High Court in the case of M/s High Court in the case of M/s High Court in the case of M/s Vetrival Minerals and Ors v. ACIT reported in 437 ITR 178 Vetrival Minerals and Ors v. ACIT reported in 437 ITR 178has held Vetrival Minerals and Ors v. ACIT reported in 437 ITR 178 Vetrival Minerals and Ors v. ACIT reported in 437 ITR 178 that in absence of certificate u/s 65(B) of the Indian Evidence Act in respect of so-called electronic record i.e. copies of Excel Sheet, Excel work note book etc., - the document is inadmissible in the eye of law, Reliance is placed on the following judgements: i) (2014) 10 SCC 473 Anvar P.V. Vs P. K. Basheer ii) 2008 (1) ARBLR 317 (Bom) Ark Shipping Co. Ltd. vs Grt Shipmanagement Pvt. Ltd iii) W. P. 18013 (W) of 2012 (Kol). Abdul RahmanKunji vs. The State OF West Bengal iv) Civil Appeal Nos 20828-20826 of 2017 dated 14.7.2020 Arjun Pandit Rao v. Kailash Kushan Rao Gorantyal. v) 153 taxmann.com 591 (Visakhapatnam - Trib.) Polisetty Somasundaram vs DCIT vi) ACIT ACIT v. ACIT ACIT v. v. Anand Jaikumar v. Anand Jaikumar Anand Jaikumar Jain Anand Jaikumar Jain Jain [2023] 147 taxmann.com 125 Jain [2023] 147 taxmann.com 125 [2023] 147 taxmann.com 125 [2023] 147 taxmann.com 125 (Mum. (Mum. – Trib.) (Mum. (Mum. Trib.) Trib.) [Certificate under section 65B(4) of the Trib.) Indian Evidence Act, 1872 is a condition precedent to the admissibility of evidence by way of electronic record as section 65B(4) of the Indian Evidence Act, 1872 is a mandatory. In view of the same, it was submitted that the pen drive (an electronic record), being relied upon by the department, is not admissible as evidence as certificate under section 65B(4) has not been produced – Para 24].

Your honour will appreciate the fact that the parties identified by the Your honour will appreciate the fact that the parties identified by the Your honour will appreciate the fact that the parties identified by the Your honour will appreciate the fact that the parties identified by the AO has duly complied with the notice served AO has duly complied with the notice served to them u/s 133(6) by the AO has duly complied with the notice served AO has duly complied with the notice served to them u/s 133(6) by the to them u/s 133(6) by the to them u/s 133(6) by the AO during the course of assessment. The AO has done independent AO during the course of assessment. The AO has done independent AO during the course of assessment. The AO has done independent AO during the course of assessment. The AO has done independent verification on his part and nothing adverse was observed/stated by the verification on his part and nothing adverse was observed/stated by the verification on his part and nothing adverse was observed/stated by the verification on his part and nothing adverse was observed/stated by the AO in the assessment order in respect of notice issued u/s 133(6) by AO in the assessment order in respect of notice issued u/s 133(6) by AO in the assessment order in respect of notice issued u/s 133(6) by AO in the assessment order in respect of notice issued u/s 133(6) by him. Once the transaction him. Once the transactions have been independently verified by the AO him. Once the transaction him. Once the transaction s have been independently verified by the AO s have been independently verified by the AO s have been independently verified by the AO and confirmed by the parties, there remain no basis for the addition and confirmed by the parties, there remain no basis for the addition and confirmed by the parties, there remain no basis for the addition and confirmed by the parties, there remain no basis for the addition made by the AO. made by the AO. made by the AO. made by the AO.

(IV) in Dy. CIT v, Rajiv Kumar Gupta [IT Appeal No. 15 (Delhi) of 2013, dated 21-12- 20181, the Hon'ble Delhi IFAT has deleted the additions made based on statement u/s 132(4) of the act and held as under: - "7.2 We also note that following pleadings and evidences were made in this regard before 10 and Ld CIT(A) submitting that statement recorded allegedly during the course of search was not free and fair and therefore addition cannot be made on that basis. At page no. 79-83 of the Paper Book, it is noted that the search was completed at the locker of the assessee on 25-3-2009 and letter of retraction was made within 48 hours of such completion. It is also noted from page no. 57-58 of the Paper Book that no witnesses were present at the time of recording of statement which is evident from statements itself that there is no mention of any witness or any signatures of witnesses on statements. Also AO has also not provided the names of person present at the time when the statements have been recorded. Thus the above facts demonstrates that no witness were present at the time of such record. At Page No. 84-87 of the Paper Book there is copy of retraction letter dated 27-3-2009 filed before ADIT (Inv.) along with affidavit of Smt. Sushmita Gupta and Shri Rajiv Kumar Gupta elucidating that statements were made under force, coercion and duress. She has further clarified that the same were made under mental tension and utter confusion: At page No. 89-90 of the Paper there is a copy of letter dated 20-4-2009 filed by the assessee to Ld. ADIT (Inv.) explaining that surrender made in statements recorded during search was product of coercion, duress, threat and mental tension and thus, the same was retracted by the assessee. At page no. PB 312- 316 of the Paper Book there is a copy of letter dated 29-10- 2010 filed before the Ld. ACIT stating that amount surrendered by the assessee along with her husband has been retracted vide letter dated 27-3-2009. It was further emphasized that surrendered amount was illegal, without any basis and was under mental tension, duress, coercion, treat and undue influence. At page no. 370-383 (PB 373) of the Paper Book is the copy of submission filed before the Ld. CIT(A) reiterating that surrender made by assessee and her husband was not voluntary and was under undue pressure from the search officials with assurance to 60 ITA-5515/Del/2025 & 13 others conclude search. However, the assessee explained the source of each and every asset/loose paper found during the course of search and submitted before AO and Ld. CITVA) that as to why additions cannot be made in respect of such assets/loose documents. The AO made an abrupt addition of Rs. 1,50,00,000/- which was affirmed by Ld. CITA) as against amount of Rs. 15,58,632/- offered by the assessee suo-moto before the Ld CITA). We also note that the case laws cited by the Ld CIT(DR) are not exactly on the same facts and circumstances of the present case, hence, does not support the case of the Revenue."