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

Income Tax Appellate Tribunal, IN THE INCOME TAX APPELLATE TRIBUNAL

Before: SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI SATBEER SINGH GODARASATBEER SINGH GODARASATBEER SINGH GODARASATBEER SINGH GODARA & AND & AND SHRI NAVEEN CHANDRA SHRI NAVEEN CHANDRA SHRI NAVEEN CHANDRA SHRI NAVEEN CHANDRA, , ,

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

For Respondent: Ms. Monika Singh, CIT-DR.

Hearing: 24.02.2026Pronounced: 20.03.2026

ORDER
ORDER
ORDER

PER BENCH PER BENCH PER BENCH PER BENCH

These assessee’s and the Revenue’s seven cross-appeals each i.e.,
ITA
Nos.5515
to 5521/Del/2025
and ITA
Nos.7838
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.

Heard both the parties. Case files perused.

ITA-5515/Del/2025 & 13 others
2

We advert to the “lead” assessment year 2018-19 involving the assessee and the Revenue’s respective cross-appeals ITA No.5515/Del/2025 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.

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).

We have given our thoughtful consideration to the assessee and Revenue’s vehement submissions reiterating their respective stands. Learned Counsel representing assessee has filed its written synopsis, reading as under:-

“The assessee company is engaged in the business of trading of merchandise particularly in health and food supplements, nutraceutical products, household goods, personal wellness, personal grooming & hygiene and other consumer products. Search and seizure operation u/s 132

ITA-5515/Del/2025 & 13 others
3
of the Income Tax Act, 1961 (the ‘Act’) was carried out in the case of the assessee on 20.09.2023. The assessment for A.Y. 2018-19 to A.Y. 2024-25 were completed under the following heads:

i.
Addition/ disallowance of purchase expenses u/s 37
ii.
Addition on account of alleged sale of tickets of events
The above additions were primary made by the AO on the ground of some statements recorded at the time of search.
Against the addition made, the assessee went into appeal before CIT(A) who vide her appeal order held that additions cannot be made merely on the basis of statement.

In respect of additions made in respect of sale of tickets, the CIT(A) deleted the addition as there was no evidence to justify the addition.

In respect of addition/disallowance of purchase expenses, the Ld CIT(A) held that it is a settled law that addition cannot be made merely on the basis of confessional statement particularly when such statement has been retracted.
The CIT(A) has rightly held that mere confessional statements cannot be a ground for drawing upon adverse inference. The CIT(A) has deleted the additions in respect of the parties who have filed their response to the AO u/s 133(6) of the Act and who have filed their income tax returns alongwith documentary evidences. However, in respect of parties, which did not file response to notice under section 133(6) and/or who did not file the ITR, the CIT(A) confirmed the additions. The summary/chart of additions made by the AO and confirmed/deleted by CIT(A) is as under:-

ITA-5515/Del/2025 & 13 others
4

Addition made by AO on account of alleged ticket
Addition made by AO on account of alleged ticket
Addition made by AO on account of alleged ticket
Addition made by AO on account of alleged ticket sales deleted by sales deleted by sales deleted by sales deleted by CIT(A)
CIT(A)
CIT(A)
CIT(A)
With regard to the addition made by the AO under section 69A of the Act in respect of alleged sale of tickets, the CIT(A) has after due consideration of facts and law, deleted the addition as there was no evidence to justify the addition. There is no infirmity in the action of CIT(A) in deleting the additions.

Addition made by AO on account of purchases/expenses deleted by Addition made by AO on account of purchases/expenses deleted by Addition made by AO on account of purchases/expenses deleted by Addition made by AO on account of purchases/expenses deleted by CIT(A)
CIT(A)
CIT(A)
CIT(A)
In respect of addition/disallowance of purchase expenses, the Ld CIT(A) held that it is a settled law that addition cannot be made merely on the basis of confessional statement particularly when such statement has been retracted. The CIT(A) has rightly held that mere confessional statements cannot be a ground for drawing upon adverse inference.
The CIT(A) has deleted the additions in respect of the parties who have filed their response to the AO u/s 133(6) of the Act and who have filed their income tax returns alongwith documentary evidences. There is no infirmity in the action of CIT(A) in deleting the additions.

ITA-5515/Del/2025 & 13 others
5
Addition made by AO on account of purchases/expenses confirmed by Addition made by AO on account of purchases/expenses confirmed by Addition made by AO on account of purchases/expenses confirmed by Addition made by AO on account of purchases/expenses confirmed by CIT(A)
CIT(A)
CIT(A)
CIT(A)
The CIT(A) erred in confirming addition in respect of certain parties who did not file response to notice u/s 133(6) and who did not file their
ITRs. In this regard, it is humbly submitted merely because the parties/
supplier did not respond to the notice u/s 133(6) or did not file their
ITR, the same cannot be ground for drawing adverse inference in the case of the assessee. It is humbly submitted that it is not a case of receipt of any loan/ share capital/ gift or any other form of cash credit.
It is a case, where the assessee has incurred expenses during the ordinary course of business and made the payment through banking channel. Thus, there is no justification in making disallowance of purchases/ expenses. All the sales/ revenue of the company have been accepted. There cannot be a sale without corresponding purchases.
The books of accounts of the company have been accepted by the AO and have not been rejected.

Synopsis/sub Synopsis/sub Synopsis/sub Synopsis/submission on various contentions mission on various contentions mission on various contentions mission on various contentions
1. 1. 1. 1. It is a settled law that addition cannot be made merely on the basis of It is a settled law that addition cannot be made merely on the basis of It is a settled law that addition cannot be made merely on the basis of It is a settled law that addition cannot be made merely on the basis of statement particularly when it is established that the statement statement particularly when it is established that the statement statement particularly when it is established that the statement statement particularly when it is established that the statement recorded was wrong/containing factually incorrect facts. Moreover, the recorded was wrong/containing factually incorrect facts. Moreover, the recorded was wrong/containing factually incorrect facts. Moreover, the recorded was wrong/containing factually incorrect facts. Moreover, the statements were r statements were r statements were r statements were retracted.
etracted.
etracted.
etracted.
The Assessing Officer has made additions treating certain purchases as genuine. The disallowance is primarily based on:
 A statement recorded under Section 132(4) during search; and  An inference that payments made through banking channels were allegedly returned in cash.
The Assessee respectfully submits that:
 The statement was retracted before the Assessing Officer;
 The retraction was supported by documentary evidence;
 The addition is unsupported by corroborative material.

I . Retraction of State
I . Retraction of State
I . Retraction of State
I . Retraction of Statement ment ment ment – Legal Position
Legal Position
Legal Position
Legal Position
The statement recorded during search was retracted during assessment proceedings. Though the retraction was not immediate, the delay occurred due to continuous fear of revenue of adverse circumstances and thus impacting the business. All primary and basic documents and payments by banking channels are sufficient to establish the genuineness and also in view of:
The Hon’ble Delhi High Court in CIT v. Sunil Aggarwal (ITA 224/2003, dated 02.11.2015) held:
 A statement under Section 132(4) may have evidentiary value;

ITA-5515/Del/2025 & 13 others
6
 However, once retracted, it cannot be relied upon in isolation;
 The Assessing Officer must examine the explanation with reference to books of account;
 Addition based solely on a retracted statement without corroboration is not tenable.
The Court specifically observed that even where retraction is delayed, the AO is not absolved from examining the explanation with reference to audited books of records.
In the present case:

 The retraction is accompanied by ledger accounts,
 Stock records,
 GST invoices,
 Banking trail,
 TDS compliance,
 Vendor’s income tax disclosure.

Thus, this is not a bald denial but a substantiated rebuttal.

II. Complete Documentary Chain Establishing Genuineness
II. Complete Documentary Chain Establishing Genuineness
II. Complete Documentary Chain Establishing Genuineness
II. Complete Documentary Chain Establishing Genuineness
The Paper Book demonstrates a complete and verifiable commercial chain:
Purchase Order → Tax Invoice → e-Way Bill → GRN → Ledger Entry →
Banking Payment → TDS Deduction → ITR Disclosure.
The following records are placed on record:
 GST-compliant invoices;
 e-Way Bills evidencing physical movement of goods;
 Goods Receipt Notes confirming inward entries;
 Ledger accounts in audited books;
 Bank statements showing RTGS/NEFT payments;
 Form 16A evidencing deduction of tax under Section 194Q;
 Vendor’s Income Tax Return acknowledgements.
Books of account have not been rejected under Section 145. No stock discrepancy has been found. Sales are accepted. Gross profit ratio is consistent with past years.
Such a structured documentary trail is inconsistent with the theory of accommodation entries.

ITA-5515/Del/2025 & 13 others
7

III. Absence of Cash With III. Absence of Cash With III. Absence of Cash With III. Absence of Cash Withdrawal drawal drawal drawal – No Return of Consideration
No Return of Consideration
No Return of Consideration
No Return of Consideration
The Revenue’s case proceeds on the premise that payments made through banking channels were returned in cash.
However, the complete bank statements of M/s Devendra Enterprises are placed on record.
The banking record demonstrates:
 Receipt of funds through RTGS/NEFT;
 No substantial or corresponding cash withdrawals proximate to such credits;
 No one-to-one nexus between cheque credits and cash withdrawals;
 No structured withdrawal pattern indicative of accommodation entries.
If the allegation of cash return were correct, one would expect:
 Immediate and matching withdrawals;
 Large value cash withdrawals corresponding to cheque credits;
 Circular fund movement.
No such pattern exists.
There is:
 No seized cash;
 No identified recipient of alleged cash;
 No financial trail evidencing return of funds.
The banking record, contradicts the allegation of cash return.
In absence of a cash trail, the foundational premise of bogus expenditure collapses.

IV. Section 65B Compliance
IV. Section 65B Compliance
IV. Section 65B Compliance
IV. Section 65B Compliance – Electro
Electro
Electro
Electronic Evidence nic Evidence nic Evidence nic Evidence
•
No chain-of-custody documentation has been placed to establish reliability of alleged seized digital extracts relied upon by the Assessing Officer.

V. Comparative Position
V. Comparative Position
V. Comparative Position
V. Comparative Position – Sunil Aggarwal
Statement u/s 132(4)
Recorded and later retracted
Recorded and retracted before AO
Timing of Retraction
Not immediate
Delayed but supported by documentary evidence
Requirement
AO must examine books Books, ledgers, invoices,

ITA-5515/Del/2025 & 13 others
8
and corroborate stock records produced
Corroboration
Addition unsafe without independent material
No independent evidence of cash return
Books
Must be examined
Not rejected under Section 145
Resulting
Principle
Retraction shifts burden to Revenue
Revenue failed to discharge burden
The factual position here stands on stronger footing.

SUMMARY
SUMMARY
SUMMARY
SUMMARY
1. Retraction supported by documentary evidence;
2. Books of account not rejected;
3. Complete GST and stock trail established;
4. Payments through banking channels;
5. No corresponding cash withdrawals;
6. TDS deducted and deposited;
7. Vendor disclosed income in ITR;
8. No corroborative material produced by Revenue.
The addition is thus:
•
Based on inference;
•
Unsupported by objective evidence;
•
Contrary to settled law.

Judgment
Documentary
Requirements
Recognised
Position in Present
Case
Raj Kumar Daga v.
DCIT (Delhi ITAT)
Banking payments;
TDS deduction; Books not rejected; No contrary evidence
Payments through
RTGS/NEFT; TDS u/s 194Q deducted;
Books not rejected;
No disproving material
JHS Svendgaard
Laboratories v. DCIT
(Delhi ITAT)
GST-compliant invoices;
Documentary trail;
Purchaser not liable for supplier suspicion
GST invoices; e-Way
Bills; GRNs; Ledger entries; Full transaction trail

ITA-5515/Del/2025 & 13 others
9
ACIT v. Radiant
Shipping Ltd. (Mumbai
ITAT)
Authority must demonstrate falsity;
Mere suspicion insufficient
No falsification shown;
No stock discrepancy;
No forensic contradiction

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) (i) (i) Raj Kumar Daga, New Delhi vs DCIT Circle 30(1), New Delhi dated 16 January, 2026/ITA No. January, 2026/ITA No. January, 2026/ITA No. January, 2026/ITA No.301/Del/2024/ [Assessment Year: 2014 301/Del/2024/ [Assessment Year: 2014 301/Del/2024/ [Assessment Year: 2014 301/Del/2024/ [Assessment Year: 2014-15] 15] 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 ITA-5515/Del/2025 & 13 others 10 Rs.41,55,067/-. All the grounds of appeal raised by the assessee are therefore allowed.”

(ii)
(ii)
(ii)
(ii) M/S Jhs Svendgaard Laboratories vs DCIT Cc
M/S Jhs Svendgaard Laboratories vs DCIT Cc
M/S Jhs Svendgaard Laboratories vs DCIT Cc
M/S Jhs Svendgaard Laboratories vs DCIT Cc-31, New Delhi Dated
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
07.01.2026/ITA No. 3454/Del
07.01.2026/ITA No. 3454/Del/2025
/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/
The Ground No. 6 is against the Addition of Rs. 88,95,892/- made 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. ---
---
---
---”
25. Further, the said supplier, M/s Royal International, was a registered dealer under the GST law during the relevant period and the transactions were duly reported in the GST returns of both parties. The Appellant had also claimed input tax credit
(ITC) in respect of these purchases, which was duly reflected in its GST filings and has not been disputed or disallowed by the GST authorities. It is a settled principle that a bona fide buyer cannot be penalized for any procedural or classification difference arising from the supplier's end, particularly when the purchases are supported by valid documents, payment through banking channels and are otherwise genuine and verifiable. The Hon'ble Delhi Tribunal in Sushil Kumar v. ACIT
Sushil Kumar v. ACIT
Sushil Kumar v. ACIT
Sushil Kumar v. ACIT [2025] 176
[2025] 176
[2025] 176
[2025] 176
taxmann.com 957 (Del Trib.) taxmann.com 957 (Del Trib.) taxmann.com 957 (Del Trib.) taxmann.com 957 (Del Trib.) held that when purchases are supported by proper bills, banking payments, and duly reflected in GST returns with ITC claimed and allowed, such transactions cannot be disbelieved merely on suspicion. The Tribunal also observed that the fact that some suppliers were inactive on the GST portal or had not filed returns cannot be a ground for making additions in the hands of the purchaser, as there is no legal obligation on the buyer to ensure the supplier's tax compliance.
26. Similarly, the Hon'ble Allahabad High Court in M/s Kesarwani
Hon'ble Allahabad High Court in M/s Kesarwani
Hon'ble Allahabad High Court in M/s Kesarwani
Hon'ble Allahabad High Court in M/s Kesarwani
Traders v. Stat
Traders v. Stat
Traders v. Stat
Traders v. State of U.P. (Writ Tax No. 1235/2025, dated e of U.P. (Writ Tax No. 1235/2025, dated e of U.P. (Writ Tax No. 1235/2025, dated e of U.P. (Writ Tax No. 1235/2025, dated
18.08.2025
18.08.2025
18.08.2025
18.08.2025) held that when the movement of goods is supported by valid tax invoices, e-way bills, and transport documents, the transaction cannot be disbelieved merely because the supplier's
GST registration was later cancelled. The Court categorically held that where the buyer acts bona fide and maintains proper records, no adverse inference or denial of ITC is warranted.
27. The Hon'ble Gujarat High Court
The Hon'ble Gujarat High Court
The Hon'ble Gujarat High Court
The Hon'ble Gujarat High Court in CI
CI
CI
CIT v. Nangalia Fabrics (P
T v. Nangalia Fabrics (P
T v. Nangalia Fabrics (P
T v. Nangalia Fabrics (P.)
.)
.)
.)
Ltd. [2013] 40 taxmann.com 206 (Guj
Ltd. [2013] 40 taxmann.com 206 (Guj
Ltd. [2013] 40 taxmann.com 206 (Guj
Ltd. [2013] 40 taxmann.com 206 (Guj.) has also held that once purchases are supported by bills and bank payments, disallowance cannot be made merely because the supplier's status is questioned later. Similarly, the Mumbai Tribunal in Geolife Organics v. ACIT [2017] 58 ITR(T) 297 (Mum.)
Geolife Organics v. ACIT [2017] 58 ITR(T) 297 (Mum.)
Geolife Organics v. ACIT [2017] 58 ITR(T) 297 (Mum.)
Geolife Organics v. ACIT [2017] 58 ITR(T) 297 (Mum.) observed that where the purchases are backed by delivery and payment evidence and the consumption of goods is accepted, the same cannot be treated as bogus. Further, the Delhi Bench in ACIT v.
ACIT v.
ACIT v.
ACIT v.

ITA-5515/Del/2025 & 13 others
11
My Paper Merchants Pvt. Ltd. (ITA No. 226/Del/2024
My Paper Merchants Pvt. Ltd. (ITA No. 226/Del/2024
My Paper Merchants Pvt. Ltd. (ITA No. 226/Del/2024
My Paper Merchants Pvt. Ltd. (ITA No. 226/Del/2024, dated
, dated
, dated
, dated
20.08.2025
20.08.2025
20.08.2025
20.08.2025) reiterated that additions made on assumptions, 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)
(iii)
(iii)
(iii) Asstt. Commissione
Asstt. Commissione
Asstt. Commissione
Asstt. Commissioner of Income Tax Range r of Income Tax Range r of Income Tax Range 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
5(3) v/s M/s. Radiant
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
Shipping Ltd./ ITA no.1540/Mum. /2011/ (Assessment Year: 2001-02)
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
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
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 A Income Tax Vs Sunil A Income Tax Vs Sunil Aggarwal ggarwal ggarwal ggarwal. The facts of the case are identical 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

ITA-5515/Del/2025 & 13 others
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and decided the matter in favour of the assessee. Therefore, the retraction is in line with the decision of the Hon'ble High Court.
The relevant paras are reproduced below:
“ 5.----- It was further recorded by the AO that a statement of the Assessee was recorded during the course of search under Section 132(4) of the Act. In response to question No.11, the Assessee is stated to have made a categorical admission that the said sum of Rs.86 lakhs belonged to him; ---- that the seized cash amount of Rs.86 lakhs represented “my undisclosed income not recorded in the Books of Accounts”.

The Assessee retracted the above admission during the course of the assessment proceedings, but not immediately after making the said statement. He started providing information to the AO from 14th July 1997 onwards, i.e., around two weeks before the deadline for finalization of the assessment, i.e., 31st July 1997. In his retraction, the Assessee stated that the surrender was made under a mistaken belief and “without looking into books of account and without understanding law”. He further stated that he had been “compelled perturbed by events of search and wherein I had no opportunity either to consult my advocates, my staff or my books of accounts etc. The pressure of search was built so much that I had to make this surrender without having actual possession of the assets or unexplained investments or expenses incurred and hence there being no such income as undisclosed”. He claimed that the money seized already stood declared as out of known sources and the said surrender was meaningless. He did not admit that the surrender was voluntary. The Assessee also offered an explanation regarding the said cash amount that these were from the undisclosed sales of disclosed purchases which were verified from the records and the books of accounts.

In the assessment order, the AO, however, declined to accept In the assessment order, the AO, however, declined to accept In the assessment order, the AO, however, declined to accept In the assessment order, the AO, however, declined to accept the above explanation offered by the Asse the above explanation offered by the Asse the above explanation offered by the Asse the above explanation offered by the Assessee. He was of the ssee. He was of the ssee. He was of the ssee. He was of the view that the statement given by the Assessee voluntarily during view that the statement given by the Assessee voluntarily during view that the statement given by the Assessee voluntarily during view that the statement given by the Assessee voluntarily during the course of search under Section 132(4) of the Act had the course of search under Section 132(4) of the Act had the course of search under Section 132(4) of the Act had the course of search under Section 132(4) of the Act had evidentiary value and could be relied upon. evidentiary value and could be relied upon. evidentiary value and could be relied upon. evidentiary value and could be relied upon. -- XXX 9. In appeal filed before the ITAT, there was a concurrent view of the two Members comprising the Bench i.e. Mr. R.K. Gupta and Mr. R.S. Syal that the additions made in the sum of Rs.86 lakhs to the income of the Assessee should be deleted. ---. The AO had not doubted the sales and purchase figures or the fact of cash sales having been made. It was accordingly held that the addition of Rs.86 lakhs was not justified. XXX

ITA-5515/Del/2025 & 13 others
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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 statem retracted his statem retracted his statement belatedly did not relieve the AO from 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.

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16.Consequently, the Court is unable to find any legal infirmity in the conclusion reached by the ITAT that the addition of Rs.86
lakhs to the income of the Assessee was not justified. Question
(B) is answered in the affirmative, i.e., in favour of the Assessee and against the Revenue.
18. Mr. Singh has placed reliance on the decision of the Supreme
Court in ITO v. M Pirai Choodi (2011) 334 ITR 262(SC) to urge that denial of an opportunity to cross-examine by itself could not vitiate the assessment proceedings particularly when the Assessee had not raised a demand to that effect before the AO.
He submitted that in the present case, it was recorded by the AO himself that despite sufficient opportunities, the Assessee did not cooperate. It was also not recorded by the AO that the Assessee had asked for cross-examination of Mr. Sant Kumar
Sharma and that such opportunity was being denied by the AO.

19.

The Court finds that in the present case the basis for making the addition of Rs. 1,38,41,971 was the statement of Mr. Sant Kumar Sharma. He had furnished various details which were incriminating as far as the Assessee was concerned. It was incumbent on the AO, in those circumstances, to afford the Assessee an opportunity of cross-examination of Mr. Sant Kumar Sharma. The ITAT also noted that the Assessee could not be said to have not cooperated at all in the assessment proceedings. XXX. 21.-- Question (A) is also answered in the affirmative, i.e., in favour of the Assessee and against the Revenue.”

2 The CBDT vide instruction No. 286/2/2003 IT(Inv) CBDT vide instruction No. 286/2/2003 IT(Inv) CBDT vide instruction No. 286/2/2003 IT(Inv) CBDT vide instruction No. 286/2/2003 IT(Inv) has emphases that during search and seizure, there should be focus and concentration on collection of evidence of income and no attempt should be made to obtain confession as to the undisclosed income. Thus, CBDT has itself recognized the position that assessment of undisclosed income has been based upon evidence and not on statement. 1.3 In this regard, we would also like to refer to provisions of section 132(4) of the Act which are as under: - 4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents,

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money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.
From the perusal of aforesaid provisions, it is evident that examination on oath during search or seizure can be made only of any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing. In the present case of the appellant before your honour, as is evident from the statement recorded u/s 132(4) there is no reference to any books of account, documents, money, bullion, jewellery or other valuable article or thing that may have been found in possession of Sh. Dhananjay Shukla.
Accordingly, there is no basis for using such statement as evidence.
1.4 In CIT v. Shri Ramdas Motor Transport
CIT v. Shri Ramdas Motor Transport
CIT v. Shri Ramdas Motor Transport
CIT v. Shri Ramdas Motor Transport [1999] 238 ITR 177/102 Taxman
[1999] 238 ITR 177/102 Taxman
[1999] 238 ITR 177/102 Taxman
[1999] 238 ITR 177/102 Taxman
300
300
300
300, a Division Bench of Andhra Pradesh High Court, reading the 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 "A plain reading of sub "A plain reading of sub "A plain reading of sub-section (4) shows that the authorised section (4) shows that the authorised 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 art valuable art valuable articles or things, elicit information from such person 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 proceedin subsequent proceedin subsequent proceeding initiated against such per son under 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 ITA-5515/Del/2025 & 13 others
16
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 b
But, in this case, it is admitted b
But, in this case, it is admitted by the Revenue that on the 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 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 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 examining them by examining them by examining them by the authorised officer during the course of the authorised officer during the course of 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 sect assessee, recorded patently under sect assessee, recorded patently under sect assessee, recorded patently under section 132(4) of the Act, ion 132(4) of the Act, 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 in sub in sub in sub-section (4) is obviously based on the well section (4) is obviously based on the well section (4) is obviously based on the well section (4) is obviously based on the well-established established 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 there being any documentary proof shall not be used there being any documentary proof shall not be used there being any documentary proof shall not be used in in 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 juri ictional 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
Aggarwal [2016] 70
Aggarwal [2016] 70 taxmann.com taxmann.com taxmann.com taxmann.com 95 (Delhi)
95 (Delhi)
95 (Delhi)
95 (Delhi) held as under :-
20. 20. 20. 20. _ _ _ The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation.
21. 21. 21. 21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any ITA-5515/Del/2025 & 13 others
17
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 p
Parliament is to p
Parliament is to permit such examination only where the books 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 for the purposes of the investigation being relevant for the purposes of the investigation being relevant for the purposes of the investigation being relevant for the purposes of the investigation being undertaken undertaken undertaken undertaken. Now, if the provisions of Section 132(4) of the Act 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:

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i)
In the case of Pr. CI
Pr. CI
Pr. CI
Pr. CIT v. Anand Kumar Jain (HUF) 432 ITR 384 (Del)
T v. Anand Kumar Jain (HUF) 432 ITR 384 (Del)
T v. Anand Kumar Jain (HUF) 432 ITR 384 (Del)
T v. Anand Kumar Jain (HUF) 432 ITR 384 (Del) it 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 evidentiar search action. This statement certainly has the evidentiar search action. This statement certainly has the evidentiar search action. This statement certainly has the evidentiary y 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 fram operations, empower the AO to fram operations, empower the AO to frame the block assessment.
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.
9. In Commissioner of Income Tax v. Harjeev Aggarwal, 4
this Court had held as follows:
….
10. Now, coming to the aspect viz the invocation of section 153A on the basis of the statement recorded in search action against a third person. We may note that the AO has used this statement on oath recorded in the course of search conducted in the case of a third party (i.e., search of Pradeep Kumar Jindal) for making the additions in the hands of the assessee. As per the mandate of Section 153C, if this statement was to be construed as an incriminating material belonging to or pertaining to a person other than person searched (as referred to in Section 153A), then the only legal recourse available to the department was to proceed in terms of Section 153C of the ITA-5515/Del/2025 & 13 others
19
Act by handing over the same to the AO who has juri iction over such person. Here, the assessment has been framed under section 153A on the basis of alleged incriminating material (being the statement recorded under 132(4) of the Act). As noted above, the Assessee had no opportunity to cross-examine the said witness, but that apart, the mandatory procedure under section 153C has not been followed. On this count alone, we find no perversity in the view taken by the ITAT. Therefore, we do not find any substantial question of law that requires our consideration.

ii) In the case of Commissioner of Income
Commissioner of Income
Commissioner of Income
Commissioner of Income-tax v. Dilbagh Rai Arora. 263
tax v. Dilbagh Rai Arora. 263
tax v. Dilbagh Rai Arora. 263
tax v. Dilbagh Rai Arora. 263
Taxman 30 (All)
Taxman 30 (All)
Taxman 30 (All)
Taxman 30 (All) it was held as under: -
16. The addition can
The addition can
The addition can
The addition can only be made, if there is incriminating only be made, if there is incriminating only be made, if there is incriminating only be made, if there is incriminating material or the surrounding circumstances reveal that there material or the surrounding circumstances reveal that there material or the surrounding circumstances reveal that there material or the surrounding circumstances reveal that there is any material to justify the addition.
is any material to justify the addition.
is any material to justify the addition.
is any material to justify the addition.
17. The person making an admission is not always mindful of it and some time can get out of its binding purview. If the person can explain exclusive with supportive evidence/material or otherwise that the admission by him earlier is not correct or contain a wrong statement or that a true state of affairs is different from that represented therein and so the same should not be accepted upon forecasting tax liability which should rather be fixed on the basis of correct and true affairs as ascertained from the material on record.
18. The case law cited by the department in the case of Ravindra Kumar Verma (supra) wherein the search was conducted on 14.5.1998 at the business premises in Lucknow and various papers, books of account and cash were seized and later on by letter dated 5.4.2002 the assessee retracted the confessional statement and on that basis the Hon'ble Court came to the conclusion that after almost 4 years the retraction was made and further there was no allegation of coercion or any threat whereupon addition was made, which is afterthought.
19. Paragraph 29 of the judgment in M/S Vertex Chemical
Industries (Supra) is quoted herein below:—
"29. In our case, the aforesaid judgment has no application. The reason is that here is not a case of retraction by Assessee but during the course of assessment, documents produced by him have been examined threadbare and thereafter, reasons for addition have been given. This approach is evident from the fact

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that Assessing Officer has not mechanically made addition of Rs. 9 lacs which was disclosed in the statement under Section 132(4) of Act, 1961 but actual addition is only Rs.
8,12,360/- which shows due application of mind on the part of Assessing Officer, which has been affirmed by Tribunal."
20. In the above judgment the Hon'ble Court has come to 20. In the above judgment the Hon'ble Court has come to 20. In the above judgment the Hon'ble Court has come to 20. In the above judgment the Hon'ble Court has come to the. conclusion that the addition was not made merely on the. conclusion that the addition was not made merely on the. conclusion that the addition was not made merely on the. conclusion that the addition was not made merely on the statement made b the statement made b the statement made b the statement made but after looking into the explanation, ut after looking into the explanation, ut after looking into the explanation, ut after looking into the explanation, books of account and other material placed before him and books of account and other material placed before him and books of account and other material placed before him and books of account and other material placed before him and then made the certain addition. The case in hand, the then made the certain addition. The case in hand, the then made the certain addition. The case in hand, the then made the certain addition. The case in hand, the addition have only been made on the basis of statement addition have only been made on the basis of statement addition have only been made on the basis of statement addition have only been made on the basis of statement given on 6.10.2005. given on 6.10.2005. given on 6.10.2005. given on 6.10.2005. 21. Therefore, the case law relied upon by the Appellant is of no help. The case in hand the assessee-respondent has given documents, material and explained threadbare with regard to amount of Rs. 24 crores but the assessing authority has mechanically made the addition of Rs. 7
crores and added back the same amount only on the basis of statement having been made by the assessee which is not permitted.
22. There is no legal infirmity in the order passed by the Tribunal.

iii) 397 ITR 82 (Del) CIT v. Best Infrastructure (India) (P) Ltd.
iv) ITA No. 5585/D/2015 dated 19.3.2019 Smt. Shivali Mahajan v) 290 CTR 263 (Del) CIT v Harjeev Agarwal.
vi) ITA No. 3332/D/2017 dated 29.12.2017 /s Brahmaputra Finlease (P)
Ltd vii) CBDT in instruction no. F.No. 286/98/2013-IT (Inv.II)
1.7 Reliance in this regard is placed on the following decisions wherein it has been held that the assessing officer is duty bound to compute income of the assessee in accordance with law:
CIT vs. Mahalaxmi Sugar Mills Co. Ltd: 160 ITR 920
(SC)
National Thermal Power Limited v. CIT: 229 ITR 383
(SC)

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Assam Company (India) Ltd. vs. CIT: 256 ITR 423
(Gauhati)
Nathmal Bankatlal Parikh & Co. V. CIT: 122 ITR 168
(AP FB)
CIT V. Smt. Archana R. Dhanswatay: 136 ITR 355
(Bom)
Chokshi Metal Refinery Vs CIT: 107 ITR 63 (Guj.)
Circular No. 14 (XL-35), dated 11.4.1955
The aforesaid decisions, it will be kindly appreciated, make it amply clear that the purpose of the assessment is to correctly determine the taxable income of the assessee in accordance with the provisions of the Act.
(b) Admission relevant, but not conclusive-judicial precedents
It is also trite law that admission, if any, made by the assessee on an incorrect/ erroneous impression in the return or the books of accounts may be relevant, but is not conclusive and can be clarified/ withdrawn at a subsequent stage.
Reliance, in this regard, is placed on the following decisions wherein the Courts have consistently held that admission, per se, cannot be the foundation of assessment; admission may be an important piece of evidence but cannot be held to be conclusive.
- Pullangode Rubber Produce Co. Ltd. vs. State of Kerala: 91 ITR 18 (SC)
- The Supreme Court in Sri Krishna vs. Kurukshetra
University, AIR 1976 SC 376
- Abdul Qayume vs. CIT: 184 ITR 404 (All.)
- The Federal Bank Ltd. vs. The State of Kerala: AIR
1995 Kerala 62 @ 64 (Ker)

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Basant Singh V. Janki Singh: AIR 1967 SC 341 (SC)
Bharat General Reinsurance Co. Ltd.: 81 ITR 303 (Del)
Satinder Kumar (HUF) V. CIT: 106 ITR 64 (HP)
DCIT V. Sreeni Printers: 67 STC 279 (Ker.)
KrishanLal Shiv Chand Rai V. CIT: 88 ITR 293 (P&H)
Indo Java & Co. V. IAC: 30 ITD 161(SB)
Addition cannot be made simply on the basis of statement recorded during search, that too, in violation of CBDT Instruction
Reference in this regard may be made to provisions of section 132(4) of the Act, which reads as under:
"(4): The authorized officer may, during the course of the search or seizure. examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act,
1922 (11 of 1922), or under this Act.
Explanation for the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian
Income-tax Act, 1922 (11 of 1922), or under this Act."
(emphasis supplied)

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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 ITA-5515/Del/2025 & 13 others
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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

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PB), wherein it has emphasized upon the need to focus on gathering evidences during search/survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence.
"Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessee were coerced to admit undisclosed income during search/surveys conducted by the Department, It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence Such action defeat the very purpose of search/survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further such actions show the department as a whole and officers concerned in poor light.
I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during search/survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence
In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during search/survey/other proceedings under the IT. Act,
1961 and/or recording a disclosure of undisclosed

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income under undue pressure/coercion shall be viewed by the Board of adversely."
(emphasis supplied)
Addition based on statement u/s 132(4) is not sustainable - judicial precedents
In Kailashben Manharlal Chokshi vs. CTT: 328 ITR 411
(Guj)
CIT vs. Naresh Kumar Aggarwal: 369 ITR 171 (AP)
Chetnaben J. Shah vs. ITO: 288 CTR 579 (Guj)
CIT v Smt. Jaya Lakshmi Ammal: 390 ITR 189 (Mad)
Ratan Corporation: 197 CTR 536 (Guj.)
It has similarly been held in the following decisions:
Kishan Goel: 278 ITR 454 (All) Surinder Pal Verma V.
ACIT: 89 ITD 129 (Chd) (TM) Smt. Ranjnaben
Mansukhlal Shah V. ACIT: 83 TTJ 369 (Rajkot) Ashok
Manilal Thakkar vs. ACIT: 97 ITD 361 (Ahd.) Rajesh
Jain vs. DCIT: 100 TTJ 929 (Del) Catherine Thomas V.
DCIT: 111 ITD 132 (Cochin)
To the same effect are the decision in the following cases:
PCIT vs. PGF Ltd.: 457 ITR 607 (Delhi)

ITA-5515/Del/2025 & 13 others
27
Krishan Lal Shiv Chandra Rai vs. CIT: 88 ITR 293
(P&H)
CIT vs. M.P. Scrap Traders: 372 ITR 507 (Guj)
CIT vs. Ravindra Kumar Jain: 201 Taxman 95 (Jhar)
(Mag)
DCIT vs. Sanjeev J Aeren: ITA Nos.5596 &
5597/Del/2015 (order dated 30.10.2024) (Del. ITAT)
DCIT vs. Sh. Anil Sankhwal: ITA No. 1472/Del/2020
(order dated 24.10.2024) (Del. ITAT)
Rishi Grover vs. ACIT: 126 TTJ 527 (Ars.) (Refer pages 230 to 266 of caselaw PB)

2. 2. 2. Addition can not be made on the basis of statement of third parties Addition can not be made on the basis of statement of third parties Addition can not be made on the basis of statement of third parties Addition can not be made on the basis of statement of third parties recorded behind the back of the assessee and without and with recorded behind the back of the assessee and without and with recorded behind the back of the assessee and without and with recorded behind the back of the assessee and without and without out out out confronting the same to the assessee and not providing opportunity of confronting the same to the assessee and not providing opportunity of confronting the same to the assessee and not providing opportunity of confronting the same to the assessee and not providing opportunity of cross examination. cross examination. cross examination. cross examination.

With regard to the statements of various individuals namely Deepak
Deepak
Deepak
Deepak
Chaudhary, Virender Kumar, SP Gupta, Sajjan Kumar Aggarwal, Sanjay
Chaudhary, Virender Kumar, SP Gupta, Sajjan Kumar Aggarwal, Sanjay
Chaudhary, Virender Kumar, SP Gupta, Sajjan Kumar Aggarwal, Sanjay
Chaudhary, Virender Kumar, SP Gupta, Sajjan Kumar Aggarwal, Sanjay
Sharma, Ajay Sharma, Pradeep
Sharma, Ajay Sharma, Pradeep
Sharma, Ajay Sharma, Pradeep
Sharma, Ajay Sharma, Pradeep Garg & Vishal Garg, and certain parties
Garg & Vishal Garg, and certain parties
Garg & Vishal Garg, and certain parties
Garg & Vishal Garg, and certain parties it is humbly submitted that statement of various persons relied/referred by the AO were taken behind the back of the assesse and therefore no adverse inference could have been drawn without any opportunity for cross examination. Despite the specific objection of the appellant, no opportunity of cross examination was granted by the AO. Reliance is placed on the following judicial pronouncements:
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28
3. 3. 3. 3. Non service of notice/ summon to supplier cannot be a ground for Non service of notice/ summon to supplier cannot be a ground for Non service of notice/ summon to supplier cannot be a ground for Non service of notice/ summon to supplier cannot be a ground for making the addition making the addition making the addition making the addition
With regard to remarks made by the AO that summons issued to various purchase parties u/s 131(1A) returned unserved and inspector reports, it is submitted that no adverse inference is required to be drawn. Once the assessee has submitted the entire documentary trail in respect of parties to transaction during the ITA-5515/Del/2025 & 13 others
29
period under consideration, non-compliance of summons issued u/s 131 of the Act by such parties cannot be made a basis to make addition in the hands of assessee.
In this regard assessee places reliance on below mentioned judicial pronouncements:
“In this case, the assessee had given the 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 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 of the Revenue that the said creditors were income of the Revenue that the said creditors were income of the Revenue that the said creditors were income-tax tax tax tax assessees assessees assessees assessees. Their index numbers were in the file of the 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 in section 131 at the in section 131 at the in section 131 at the instance of the assessee, did not pursue stance of the assessee, did not pursue 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 alleged loans. There was no effort made alleged loans. There was no effort made alleged loans. There was no effort made to pursue the so to pursue the so 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 assessee could not do anything further assessee could not do anything further. In the premises, if 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 & So 297 ITR 441 (SC) Anish Ahmed & So 297 ITR 441 (SC) Anish Ahmed & Sons v. CIT 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 address or PAN identity
PAN identity
PAN identity
PAN identity of the creditor/subscriber are furnished of the creditor/subscriber are furnished of the creditor/subscriber are furnished of the creditor/subscriber are furnished to the Department 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 application forms application forms. it would constitute acceptable proof or 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 infere adverse infere adverse inference only because the creditor/subscriber fails 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 Offic thereto the learned Assessing Offic thereto the learned Assessing Offic thereto the learned Assessing Officer should not take such er should not take such er should not take such er should not take such ITA-5515/Del/2025 & 13 others
30
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.
against the assessee.
against the assessee. It was held that Assessing Officer is duty-bound to investigate the creditworthiness of the creditor/subscriber the genuineness of the transaction and the veracity of the repudiation.
repudiation.
repudiation.
repudiation. In the instant case 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 would constitute acceptable proof, acceptable same would constitute acceptable proof, acceptable same would constitute acceptable proof, acceptable same would constitute acceptable proof, acceptable explanation u/s 68 of the Act and in abs explanation u/s 68 of the Act and in abs explanation u/s 68 of the Act and in abs explanation u/s 68 of the Act and in absence of any other 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
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
&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 ITA No. 618 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 fr persons fr persons from whom the assessee has shown receipt of 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 ITA-5515/Del/2025 & 13 others
31
said transaction was ingenuine. It h said transaction was ingenuine. It h said transaction was ingenuine. It h said transaction was ingenuine. It has been held by the 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 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 Assessing Officer, then the department is free to proceed to re free to proceed to re 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 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]
ITA No. 2038/D/2009 ITO vs. M/s Emperor International Ltd.
ITA No. 2082/D/2011 dated 8.12.2014 ACIT v. Divine (India)
Infrastructure (P) Ltd v)
121 ITD 525 (Agra) Kalyan Memorial & Charitable Trust v.
ACIT vi)
47 DTR 225 (Del) ITO vs. Purvi Fabrics & Textures (P) Ltd.

4. 4. 4. No addition can be made on the basis of self serving report of inspector No addition can be made on the basis of self serving report of inspector No addition can be made on the basis of self serving report of inspector No addition can be made on the basis of self serving report of inspector of investigation wing particularly when the assessee was not confronted of investigation wing particularly when the assessee was not confronted of investigation wing particularly when the assessee was not confronted of investigation wing particularly when the assessee was not confronted

ITA-5515/Del/2025 & 13 others
32
with the inspector report and during the assessment proceedings replies with the inspector report and during the assessment proceedings replies with the inspector report and during the assessment proceedings replies with the inspector report and during the assessment proceedings replies were filed before the AO by most were filed before the AO by most were filed before the AO by most were filed before the AO by most of the parties.
of the parties.
of the parties.
of the parties.
It is further submitted that inspector report is a self-serving report and the same cannot be a ground to draw adverse inference against assessee, it is thus submitted that no addition can be made on the basis of inspector report as has been held in the following judgments:
347 ITR 347 (Cal) S.K. Bothra & Sons HUF vs. ITO iii)
145 ITD 377 (Mum) (Trib) DCIT vs. Diven Dembla iv)
215 Taxman 11 (Del) (Mag) CIT vs. Delhi Housing &
24 SOT 1(Del) Baid Credit & Portfolio (P) Ltd. vs. ITO vii)
325 ITR 588 (P&H) CIT vs. Lal Singh viii)
36 ITR(T) 161 (Delhi - Trib.) DCIT vs GDA Finvest& Trade
(P.) Ltd ix)
ITA No. 4594/Del/2013 dated 07.07.2016 DCIT vs Gomati
It was duly explained to the AO that transactions undertaken with the parties identified to be non-existent were in the ordinary course of business and the same were duly recorded in the books of accounts. It was also explained to the AO that it is the veracity of the financial transactions that matters and not the address of the supplier. The appellant company has duly provided the present address of all the parties identified to be non-existent to the AO during the course of assessment proceeding. The appellant company has also submitted the details of all the parties along with all ITA-5515/Del/2025 & 13 others
33
the supporting documents in the physical form before the AO.

5. 5. 5. Non furnishing of return by the supplier cannot be a ground for making Non furnishing of return by the supplier cannot be a ground for making Non furnishing of return by the supplier cannot be a ground for making Non furnishing of return by the supplier cannot be a ground for making addition in the case of the assessee addition in the case of the assessee addition in the case of the assessee addition in the case of the assessee

In the case of ACIT, CC
ACIT, CC
ACIT, CC
ACIT, CC-3(1) vs M/e Everest Food Products Pvt Ltd.
3(1) vs M/e Everest Food Products Pvt Ltd.
3(1) vs M/e Everest Food Products Pvt Ltd.
3(1) vs M/e Everest Food Products Pvt Ltd.
(Mumbai ITAT
(Mumbai ITAT
(Mumbai ITAT
(Mumbai ITAT), it has been held as under:
6. The Learned Departmental Representative (“Ld. DR” for short) for the Revenue contended that the assessee had not furnished complete details before the Ld. AO for substantiating that these are genuine purchase transactions made by the assessee company. Further, the Ld. DR stated that some of the companies, though having a huge turnover, have not audited its financials and have also not filed their returns of income.
Further, it is also contended that mere submission of ledger confirmation would not be held to be genuine transaction. The Ld. DR relied on the decision of the Hon’ble Bombay High Court in the case of Pr. CIT vs. M/s. Mohommad Haji Adam & Co.
Pr. CIT vs. M/s. Mohommad Haji Adam & Co.
Pr. CIT vs. M/s. Mohommad Haji Adam & Co.
Pr. CIT vs. M/s. Mohommad Haji Adam & Co.
(2019) 103 taxmann.com 459 (Bombay)
(2019) 103 taxmann.com 459 (Bombay)
(2019) 103 taxmann.com 459 (Bombay)
(2019) 103 taxmann.com 459 (Bombay) where GP addition on non genuine purchases was justified. The Ld. DR relied on the order of the Ld. AO.
7. The Authorized Representative (“Ld. AR” for short) for the assessee, on the other hand, controverted the said fact and stated that the assessee has substantiated its claim by sufficient documentary evidences along with the fact that it was evident from the income tax portal screenshot that out of four parties which were identified by the Ld. AO to be non-tax filers three have filed their returns of income. The Ld. AR further contended that the assessee has duly audited its financials which were also not disputed by the Ld. AO and also stated that most of the parties have also responded to the 133(6) notice and in spite of the same the Ld. AO has failed to make any independent inquiry on these alleged companies.
The Ld. AR relied on the order of the Ld. CIT(A).
8. We have heard the rival submissions and perused the materials available on record. The only issue that requires adjudication is “whether the Ld. CIT(A) has erred in deleting the “whether the Ld. CIT(A) has erred in deleting the “whether the Ld. CIT(A) has erred in deleting the “whether the Ld. CIT(A) has erred in deleting the addition of Rs.25,55,69,713/
ddition of Rs.25,55,69,713/
ddition of Rs.25,55,69,713/
ddition of Rs.25,55,69,713/- made by the Ld. AO towards made by the Ld. AO towards made by the Ld. AO towards made by the Ld. AO towards alleged non genuine purchases made by the assessee company alleged non genuine purchases made by the assessee company alleged non genuine purchases made by the assessee company alleged non genuine purchases made by the assessee company with four parties?”
with four parties?”
with four parties?”
with four parties?” It is observed that the Ld. AO has alleged that the assessee had entered into purchase transaction with the following parties who according to the Ld. AO has not filed

ITA-5515/Del/2025 & 13 others
34
the ITR for the impugned year A.Y. 2021-22, the details of which are tabulated hereunder:
Sr
No.
Name
PAN
1
Jayapaul Rajesh
AEZPR2846A
2
M R Gulmi
AALFM2187K
3
Madhukar Gorakhnath Devkar
AVUPD2403M
4
MRG Enterprises
ABNFM3466E
5
Varmora Plastech Private Limited
AAECV4247P

The Ld. AO has sought for the details pertaining to the ledger account, invoices, proof of transportation, delivery challans, proof of payments from the assessee with regard to the above mentioned parties and had also issued notices u/s 133(6) of the Act to the said parties. With regard to the first party namely Jayapaul Rajesh, the Ld. AO made an addition on the impugned purchases amounting to Rs.2,62,73,000/- on the ground that the assessee has not submitted the ledger confirmation of the party and with regard to second party namely Mr. Gulmi the Ld. AO observed that though GST return has been filed by this party regularly no audit financials and return of income has been filed inspite of huge turnover made by the said party. With regard to the third party namely Madhukar Gorakhnath Devkar and MRG Enterprises though the ledger confirmation was filed, the Ld. AO held the same to be bogus for the reason that even these said parties have not filed their returns of income though GST return was filed regularly by the said entities. The Ld. AO proceeded to make an addition/disallowance of Rs.25,55,69,713/- which is the GP @ 46% on the total alleged transaction of Rs.55,55,83,331/-. Per contra, the Ld. CIT(A) deleted the impugned addition/disallowance on the following observations which are cited herein under for ease of reference: 5.4.2 The appellant is a leading manufacture of masala and spices. The thrust of the addition done by the AO is the non-filing of income tax returns by the 4 suppliers. The submissions of the appellant with respect to each of the party is as under: (i) Jayapaul Rajesh - It has been submitted that the total purchases taken by the AO at Rs.2,50,01,21,905/- is incorrect as the actual purchase amount debited in the books of accounts is Rs.1,60,23,000/-. Further supporting documents in the form of Parties Ledger Account, Invoice

ITA-5515/Del/2025 & 13 others
35
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

ITA-5515/Del/2025 & 13 others
36
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

ITA-5515/Del/2025 & 13 others
37
46% profit to unverifiable purchases of Rs.55,55,86,331/- is deleted and the ground of appeal is allowed.”
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 ITA-5515/Del/2025 & 13 others
38
interference. Hence, we dismiss the grounds of appeal raised by the Revenue on the above observation.

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 Juri ictional Delhi High Court in the decision of PCIT PCIT PCIT PCIT-07, Delhi Versus M/S. Wel 07, Delhi Versus M/S. Wel 07, Delhi Versus M/S. Wel 07, Delhi Versus M/S. Wel Intertrade Pvt. Ltd Intertrade Pvt. Ltd Intertrade Pvt. Ltd Intertrade Pvt. Ltd. ITA 135/2023 . ITA 135/2023 . ITA 135/2023 . ITA 135/2023 it has held that creditor not 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. M/s. Fancy Fancy Fancy Fancy Wear Wear Wear Wear Versus Versus Versus Versus Income Income Income Income Tax Tax Tax Tax Officer Officer Officer Officer Ward Ward Ward Ward-24 24 24 24 (3)(1), (3)(1), (3)(1), (3)(1), NOW NOW NOW NOW-31 31 31 31 (1) (1) (1) (1) (4) (4) (4) (4) MUMBAI MUMBAI MUMBAI MUMBAI it was held as under: -

7. It appears that the only thing that has tilted the scale against it is returning back of notices, issued by the AO, u/s. 133(6)of the Act. But, this itself is not sufficient to hold that purchases made by it were bogus. In the case of Nikunj Exim Export, the Hon’ble Bombay High Court has held that non service of notice does not conclusively prove the non genuineness of a transacttion. By producing various documents the assessee had proved that balance of convenience was in its favour. The argument of the assessee that the ITA-5515/Del/2025 & 13 others 39 suppliers did not deposit VAT after collecting from it should have been investigated, if the AO wanted to make huge addition. In our opinion, the AO had completed the assessment without marshaling the facts properly and only on the basis of general information provided by the STD. The non filing of appeals against the orders of the FAA , wherein he had deleted 75% of the additions made by the AO, indicate that the department itself was not convinced about the approach adopted by the AO in making additions. Even the order of the FAA is not in accordance with the principles of natural justice, as stated earlier. 5. 8. For violation of principles of natural justice alone, the order can be held to be invalid. Here, we would like to rely upon the cases referred to by the AR before us- especially the case of Andaman Timbers(supra) and it reads as under: “…According to us, not allowing the assessee to cross examine the witness by the Adjudicating Authority though the statements of those witnesses were made the basis of impugned order is a serious flaw which makes the order nullity in as much as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross- examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However no such option was granted and the aforesaid plea is not even dealt by the Adjudicating Authority…. . ” 6. But, we will like to decide the issue on merits also. The AO or the FAA have not rejected the books of accounts of the assessee nor have doubted the purchases made by it. The recognised principles of accountancy and tax jurisprudence hold that no sales can take place without purchases. Thus, the case under appeal is not about non genuineness of purchases itself,

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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.

2 In the case Prabhat Gupta v. Prabhat Gupta v. Prabhat Gupta v. Prabhat Gupta v. ITO ITO ITO ITO – 2017(12) TMI 2017(12) TMI 2017(12) TMI 2017(12) TMI 1667 1667 1667 1667 – ITAT ITAT ITAT ITAT

ITA-5515/Del/2025 & 13 others
41
Mumbai
Mumbai
Mumbai
Mumbai, disallowance of purchase could not be made on the ground that notice u/s 133(6) issued to parties were not served or no replies were received.
6.3
In the case of M/s Diagnostics V. Commissioner of Income
M/s Diagnostics V. Commissioner of Income
M/s Diagnostics V. Commissioner of Income
M/s Diagnostics V. Commissioner of Income Tax,
Tax,
Tax,
Tax,
Kolkata
Kolkata
Kolkata
Kolkata – XX & Anr. 2011(3) TMI 15
XX & Anr. 2011(3) TMI 15
XX & Anr. 2011(3) TMI 15
XX & Anr. 2011(3) TMI 15 – Calcutta High Court
Calcutta High Court
Calcutta High Court
Calcutta High Court it was held as under: -
2. However, as regards the payments made to M/s. Selvas
Photographics are concerned amounting to Rs.
3,12,302/-, we find that those have been made by account payee cheques and those have been encashed through the bankers of M/s. Selvas Photographics. It appears that according to the appellant, at the time of assessment, the appellant had no business transaction with M/s. Selvas Photographics and consequently, the said party did not co-operate with the Assessing Officer.
However, the transaction having taken place through account payee cheques, we are unable to accept the contention of Mr. Agarwal, the learned advocate appearing for the Revenue that the transaction was a nonexistent one. If an assessee took care to purchase materials for his business by way of account payee cheques from a third party and subsequently, three years after the purchase, the said third party does not appear before the Assessing Officer pursuant to the notice or even has stopped business, the claim of the assessee on that account cannot be discarded as non- existent. In the case before us, the Revenue has not put forward any other ground, such as, it was not a genuine transaction for other reasons but has simply rejected the claim on the ground as if there was no such transaction.

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 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 27(1), Delhi 2023 (1) TMI 267 – ITAT Delhi ITAT Delhi ITAT Delhi ITAT Delhi it was held as under: - Shorn off the non Shorn off the non Shorn off the non Shorn off the non-compliance of summons served under compliance of summons served under compliance of summons served under compliance of summons served under Section 131 Section 131 Section 131 Section 131 - Assessee has filed formidable evidences to 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 ITA-5515/Del/2025 & 13 others 42 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 Non Non-compliance of summons compliance of summons compliance of summons compliance of summons - Admittedly, the 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]

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 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 38(1), New Delhi 2023 (1) TMI 267 38(1), New Delhi 2023 (1) TMI 267 – ITAT Delhi ITAT Delhi ITAT Delhi ITAT Delhi it was held as under: - 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.

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43
6.6
In the head note of decision by Hon’ble ITAT Mumbai in the case of Sonicwall Technology System India Pvt. Ltd.
Sonicwall Technology System India Pvt. Ltd.
Sonicwall Technology System India Pvt. Ltd.
Sonicwall Technology System India Pvt. Ltd. (Formerly Known
(Formerly Known
(Formerly Known
(Formerly Known as Dell Software India Pvt. Ltd.) Versus Asstt. Commissioner Of Income as Dell Software India Pvt. Ltd.) Versus Asstt. Commissioner Of Income as Dell Software India Pvt. Ltd.) Versus Asstt. Commissioner Of Income as Dell Software India Pvt. Ltd.) Versus Asstt. Commissioner Of Income
Tax Circle
Tax Circle
Tax Circle
Tax Circle–15 (1) (2), Mumbai
15 (1) (2), Mumbai
15 (1) (2), Mumbai
15 (1) (2), Mumbai it was held as under: -

Disallowance of marketing expenses incurred during the Disallowance of marketing expenses incurred during the Disallowance of marketing expenses incurred during the Disallowance of marketing expenses incurred during the year year year year - Disallowance of marketing expenditure u/s 37(1) by treating the same as non-genuine/non-business transaction/expenditure
-
HELD
THAT:-
In order to determine the genuineness of the payment made by the assessee AO issued notices under section 133(6) - only 2
parties namely, M/s EIH Ltd and The Lalit Golf and Spa
Resort failed to respond to the aforesaid notice. In order to substantiate the genuineness of the payment to these 2
entities, assessee furnished the bank account statement, which reflected the payment made to these parties, invoices raised by these entities to the assessee, details of tax deducted on payment made to these parties, PAN No.
and complete address.
It is no doubt true that payment through the bank channel is not conclusive proof of the transaction. At the same time, when the assessee has provided all the information available with it regarding the transaction, merely on the basis that the entity has not responded to notice issued u/s 133 (6) the transaction cannot be doubted and be treated as non-genuine, particularly when the same has been entered into with entities which are well-known Hotel chains in India.
It is also not the claim of the Revenue that these entities are not in existence or the documents furnished by the assessee are bogus. Thus we find no basis in upholding the addition by the AO merely on the basis that only 2 out of 17 parties failed to respond to the notice issued u/s 133(6) of the Act. We direct the AO to delete the addition.
Grounds raised in assessee’s appeal are allowed.

No justification for disallowance of purchase No justification for disallowance of purchase No justification for disallowance of purchase No justification for disallowance of purchases when the sales have been s when the sales have been s when the sales have been s when the sales have been accepted accepted accepted accepted

1 The Hon’ble Supreme Court of India in the case of Principal Principal Principal Principal Commissioner of Income Tax, Surat Commissioner of Income Tax, Surat Commissioner of Income Tax, Surat Commissioner of Income Tax, Surat-1 v. Tejua Rohit Kumar Kapadia, 1 v. Tejua Rohit Kumar Kapadia, 1 v. Tejua Rohit Kumar Kapadia, 1 v. Tejua Rohit Kumar Kapadia, dated 4th May 2018, [2018] 94 taxmann.com 325 (SC) dated 4th May 2018, [2018] 94 taxmann.com 325 (SC) dated 4th May 2018, [2018] 94 taxmann.com 325 (SC) dated 4th May 2018, [2018] 94 taxmann.com 325 (SC) has dismissed the special leave petition of department which has been filed against the order of High Court of Gujarat dated 18-09-2017 in ITA No. 691/2017. The High court of Gujarat has held that where purchases made by assessee were duly supported, subsequent sales were made

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and payments were made by account payee cheque and there was no evidence to show that amount was recycled back to assessee, assessing officer was not justified in treating said purchases as bogus under section 69C of the Act.
7.2 In the case of CIT v J.M.D. Computer & Communicat
CIT v J.M.D. Computer & Communicat
CIT v J.M.D. Computer & Communicat
CIT v J.M.D. Computer & Communication (P) Ltd. (Delhi ion (P) Ltd. (Delhi ion (P) Ltd. (Delhi ion (P) Ltd. (Delhi
High Court) order dt. 16.01.2009,
High Court) order dt. 16.01.2009,
High Court) order dt. 16.01.2009,
High Court) order dt. 16.01.2009, the addition was made by disallowance of purchases on the ground that department received information on the basis of a search carried out and on the basis of statement recorded that the assessee has made bogus purchases. The addition was made by A.O. by further observing that inquiries made by inspector deputed by A.O. revealed that :-

(i) the sales tax numbers quoted on the invoices of two out of the six suppliers investigated did not exist while the sales-taxes number of two other suppliers had been cancelled because they had ceased business; (ii) the telephone numbers of some of the suppliers quoted on the invoices were either non-existent or related to some other persons; (iii) the inquiries with the bankers of four of the six suppliers brought to light the fact that the bank accounts have been operated by one Sh. Ashok Kumar brother of Sh. T.R. Chadda or his employees.

On appeal, the CIT(A) deleted the disallowance made by A.O. and allowed assessee’s appeal.

On appeal to ITAT by revenue, the Hon’ble ITAT upheld the order of CIT(A) and dismissed the revenue’s appeal holding that _ _ __ _ _ _ _
(i) it is undisputed that the assessee was maintaining complete accounts including daily item-wise, stock register, purchase book, sales book, purchase bills and sales books;
(ii) the accounts of the assessee have been duly audited under the Income-tax Act as well as the Companies Act;
(iii) sales invoices of vendors were placed on record before the Assessing Officer. Insofar as purchases made by the assessee, were concerned they were entered in the item-wise stock register maintained by the assessee;
(iv) all payments for purchases have been made by cheques;
(v) a complete quantitative analysis between purchases made and corresponding sales were prepared and filed before the Assessing Officer. The quantitative analysis made has not been called into question by the Assessing Officer;

On further appeal / reference to High Court by revenue, the juri iction
High Court dismissed the revenue’s appeal. It is pertinent to point out
It is pertinent to point out
It is pertinent to point out
It is pertinent to point out that against the order of Hon’ble High Court the department filed SLP that against the order of Hon’ble High Court the department filed SLP that against the order of Hon’ble High Court the department filed SLP that against the order of Hon’ble High Court the department filed SLP

ITA-5515/Del/2025 & 13 others
45
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 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)
320 ITR 17 (St)
(SC).
(SC).
(SC).
(SC).

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) (Guj) (Guj) disallowance of purchases was made holding them to be bogus. 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. TR 78, (Bom) disallowance of purchases 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 INCOME-TAX OFFICER V. GHANSHYAM STEEL TRADERS 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.) [1999] 107 TAXMAN 126 (AHD.) [1999] 107 TAXMAN 126 (AHD.) disallowance of purchases was made 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 purch of accounts and stock registers but all such material purch of accounts and stock registers but all such material purchase was 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) (Bom) (Bom) disallowance of purchases was made. The Hon’ble ITAT deleted 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. BENCH - (2007) (2007) (2007) (2007) –addition under s. 69 was made on account of alleged bogus purchases. The A.O. received information from the Sales-tax Department that the purchases made by the assessee from two parties

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46
were bogus. Relying on the same, AO made addition under s. 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.
ITAT, JODHPUR ‘SMC’ BENCH
ITAT, JODHPUR ‘SMC’ BENCH
ITAT, JODHPUR ‘SMC’ BENCH
ITAT, JODHPUR ‘SMC’ BENCH - (2007)
(2007)
(2007)
(2007) - addition was made of alleged 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.

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, ITA no. 399/2017 dated 18.07.2018, Delhi, ITA no. 399/2017 dated 18.07.2018, Delhi, ITA no. 399/2017 dated 18.07.2018, Delhi, ITA no. 399/2017 dated 18.07.2018, ITAT Delhi held that purchases cannot be disallowed when the sales were accepted.

The books of accounts of th The books of accounts of th The books of accounts of th The books of accounts of the assessee are audited and have not been e assessee are audited and have not been e assessee are audited and have not been e assessee are audited and have not been rejected by the AO. The assessing officer has not pointed out any rejected by the AO. The assessing officer has not pointed out any rejected by the AO. The assessing officer has not pointed out any rejected by the AO. The assessing officer has not pointed out any discrepancy in the books of accounts discrepancy in the books of accounts discrepancy in the books of accounts discrepancy in the books of accounts There is another reason because of which the disallowance made by the AO is not sustainable. The books of accounts of the appellant assessee are duly audited. The assessing officer has not pointed out any discrepancy in the books of accounts. The assessing officer has not rejected the books of accounts. Accordingly, the disallowance/addition made by the AO is liable to be deleted.

•
The Hon’ble juri iction Delhi High Court in the case of CIT vs.
ITA-5515/Del/2025 & 13 others
47

•
The Hon’ble juri ictional Delhi High court in the case of CIT
CIT
CIT
CIT v v v v
Paradise
Paradise
Paradise
Paradise Holidays(2010) 325 ITR 13 (Delhi)
Holidays(2010) 325 ITR 13 (Delhi)
Holidays(2010) 325 ITR 13 (Delhi)
Holidays(2010) 325 ITR 13 (Delhi) held as under:-

The Assessing Officer has not pointed out any specific defect or discrepancy in the Account Books maintained by the assessee. Admittedly, the assessee had been maintaining regular Books of Accounts, which were duly audited by an independent Chartered Accountant. As noted by CIT(A), the financial results were fully supported by the assessee with vouchers and the Books of Account were complete and correct in all respects. The accounts which are regularly maintained in the course of business and are duly audited, free from any qualification by the auditors, should normally be taken as correct unless there are adequate reasons to indicate that they are incorrect or unreliable. The onus is upon the Revenue to show that either the Books of Accounts maintained by the assessee were incorrect or incomplete or method of accounting adopted by him was such that true profits of the assessee cannot be deduced therefrom.

•
The Hon'ble ITAT Delhi in the case of Bo
ACIT vide ITA No. 4980/Del./2004
vide ITA No. 4980/Del./2004
vide ITA No. 4980/Del./2004
vide ITA No. 4980/Del./2004 has held as under:

"It is well settled that without rejecting the books of accounts maintained by the assessee by pointing out specific material defects therein, the results declared by the assessee on the basis of such books regularly maintained cannot be disturbed and it is not permissible for the AO to make the trading addition merely because the GP rate shown by the assessee is lower than that of earlier years without complying with the requirements of the provisions of sec. 145".

In the case of the assessee before your honour, the facts are even stronger as there is not even allegation of assessing officer about fall in GP rate as compared to earlier years.
•
CIT Vs. Sunrise Tooling System (P.) Ltd. ITA no. 399/2013
ling System (P.) Ltd. ITA no. 399/2013
ling System (P.) Ltd. ITA no. 399/2013
ling System (P.) Ltd. ITA no. 399/2013
dated 22.01.2014,Delhi High Court dated 22.01.2014,Delhi High Court dated 22.01.2014,Delhi High Court dated 22.01.2014,Delhi High Court held as under:-

ITA-5515/Del/2025 & 13 others
48
“This court is of the opinion that the Income-tax Appellate
Tribunal cannot be faulted in its approach in rendering the findings of fact. Although the learned counsel for the Revenue endeavoured to submit that the Income-tax
Appellate Tribunal fell into error in overlooking and discounting the statement of D. K. Jain on the ground that it was retracted, the discussion quoted above would show that the Income tax Appellate Tribunal took note of the materials before the Assessing
Officer and the Commissioner of Income-tax (Appeals), which included the assessee's books of account as well as the sales tax records of Shree Laxmi Industrial Corporation. These established firmly and conclusively that the claim of the assessee that it had purchased goods from Shree Laxmi
Industrial Corporation were borne out. The Income
The Income
The Income
The Income-tax tax tax tax
Appellate Tribunal also noted
Appellate Tribunal also noted
Appellate Tribunal also noted
Appellate Tribunal also noted-and we agree with that and we agree with that and we agree with that and we agree with that approach entirely approach entirely approach entirely approach entirely-that the income that the income that the income that the income-tax authorities had n tax authorities had n tax authorities had n tax authorities had not ot ot ot even rejected the books of the assessee even while finding even rejected the books of the assessee even while finding even rejected the books of the assessee even while finding even rejected the books of the assessee even while finding the claim as genuine transaction to be the claim as genuine transaction to be the claim as genuine transaction to be the claim as genuine transaction to be bogus.
bogus.
bogus.
bogus.
3. Having regard to the conspectus of the circumstances, we are of the opinion that the impugned order does not disclose any error, warranting framing of substantial questions of law. The appeal is unmerited and is accordingly dismissed.”

9. 9. 9. Reliance by the AO on the seized pendrive is totally erroneous and Reliance by the AO on the seized pendrive is totally erroneous and Reliance by the AO on the seized pendrive is totally erroneous and Reliance by the AO on the seized pendrive is totally erroneous and out of context out of context out of context out of context With regard to the addition made by the AO on the basis of excel sheet titled “Bogus Expense Employee-wise” found in the Kingston pen drive/laptop seized from the head office of the appellant company, it is submitted that the addition made by the AO is erroneous and most arbitrary. There is nothing incriminating in the so-called excel sheet on the basis of which such a huge addition is made by the AO. The so-called excel sheet is nothing but dump digital data and it may contain various rough working/calculation and not the actual calculation.

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49
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
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
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 178
Vetrival Minerals and Ors v. ACIT reported in 437 ITR 178
Vetrival Minerals and Ors v. ACIT reported in 437 ITR 178has held 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:
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
Jain [2023] 147 taxmann.com 125
[2023] 147 taxmann.com 125
[2023] 147 taxmann.com 125
[2023] 147 taxmann.com 125
(Mum.
(Mum.
(Mum.
(Mum. – Trib.)
Trib.)
Trib.)
Trib.) [Certificate under section 65B(4) of the 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].

It is respectfully submitted that the appellant company has submitted complete documentary trails in respect of all the parties identified by the AO. Once the assessee has submitted the entire documentary trail in respect of parties to transaction during the period under ITA-5515/Del/2025 & 13 others
50
consideration, there leave no reason with the AO to make the addition based on presumption and assumption only.
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
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 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 transaction him. Once the transaction him. Once the transactions have been independently verified by the AO 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.
In view of the above, the addition made by the AO is erroneous and the same is liable to be deleted.
Your honour will appreciate the fact that the parties identified by the AO has duly complied with the notice served to them u/s 133(6) by the 133(6) by the 133(6) by the 133(6) by the AO during the course of assessment
AO during the course of assessment
AO during the course of assessment
AO during the course of assessment. The AO has done independent 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 him. Once the transactions have been independently verified by the AO and confirmed by the parties, there remain no basis for the addition made by the AO.
It is respectfully submitted that the appellant company has submitted complete documentary trails in respect of Bonus and other expenses
Bonus and other expenses
Bonus and other expenses
Bonus and other expenses identified identified identified identified by the AO. Once the assessee has submitted the entire documentary trail in respect of parties to transaction during the period under consideration, there leave no reason with the AO to make the addition based on presumption and assumption only.
Your good office will appreciate the fact that the parties identified by the AO has duly have filed there income tax returns also, the details of the same along with the proof of ITR filing have been duly submitted before the AO as well as CIT(A).
Further we would like to submit that there is no incriminating
Further we would like to submit that there is no incriminating
Further we would like to submit that there is no incriminating
Further we would like to submit that there is no incriminating documents found in their relation during the course of search documents found in their relation during the course of search documents found in their relation during the course of search documents found in their relation during the course of search proceedings, nor these parties wh proceedings, nor these parties wh proceedings, nor these parties wh proceedings, nor these parties where confronted to the Promoters of ere confronted to the Promoters of ere confronted to the Promoters of ere confronted to the Promoters of the company during the course search and post search proceedings.
the company during the course search and post search proceedings.
the company during the course search and post search proceedings.
the company during the course search and post search proceedings.
It is to be noted that the AO chose to rely upon the electronic evidence which is available in the form of Pen-drive and other electronic equipment’s, the contents contained therein, have to be certified in terms of Section 65B of the Indian Evidence Act whereas no such certification was done. Under the Indian Evidence Act, 1872, Section 65B prescribes a distinct framework that governs the admissibility of ITA-5515/Del/2025 & 13 others
51
electronic evidence. The data relied upon by IO is not as per certificate to be taken as per CBDT Manual.
The reliance is placed on the latest decision of Hon’ble ITAT DELHI in the case of Arit Garg,Delhi vs Dcit, Central Circle
Arit Garg,Delhi vs Dcit, Central Circle-31, Delhi pronounced on 14
31, Delhi pronounced on 14
31, Delhi pronounced on 14
31, Delhi pronounced on 14
January, 2026/
January, 2026/
January, 2026/
January, 2026/ ITA No.3144/Del/2025.”.

The Revenue, on the other hand, strongly supports the Assessing Officer’s action disallowing the assessee’s entire impugned purchases based on its authorized persons admissions made during the course of search.

We deem it appropriate at this stage to refer to learned CIT(A)’s detailed discussion partly upholding the impugned bogus purchases disallowance made by the Assessing Officer, reading as under:-

“5.3.3
I have considered the facts of the case. The Ground No.5 relates to various legal, procedural and factual aspects of the quantum addition made by the AO u/s 37 of the IT Act, 1961. Since all the issues raised by the appellant are inextricably intertwined, the same are being adjudicated together.

3.4 ADJUDICATION ON LEGAL GROUNDS RELATED TO RETRACTION OF STATEMENT ON OATH, RAISED BY THE APPELLANT

3.4.1 In the present case, the core evidences relied upon by the AO during assessment are the confessional Statements of following key persons of appellant company on oath u/s 132(4) of the IT Act, 1961 given between 20/09/2023 to 24/09/2023, wherein these persons had voluntarily admitted to have indulged in large scale tax evasion by way of unaccounted cash generation through bogus billing and inflation of expenses.

Mr. Kanwar Bir Singh, 2. Mr. Gautam Bali, 3. Mr. Deepak Sood, 4. Anurag Anthwal (GM, Accounts & Finance) & 5. Sunil Sharma (General Manager (Finance)

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5.3.4.2
However, it is noticed that these Statements stand retracted during assessment proceedings on 18/02/2025. The principal reasons cited for retraction were as under:

(a) That they were subjected to severe threat, and coercion from multiple Income tax authorities during search/post- search investigations, and were pressurized to admit to huge quantum of unaccounted cash generation through bogus billing and inflation of expenses. It is alleged that such confessional Statement of additional income was demanded from the appellants by the authorities before concluding the search.

(b) That the Statements were recorded under extreme duress for a prolonged period of 4 to 5 days at a stretch between 20/09/2023 till 24/09/2023 which was followed by threat of coercive departmental action in the case of appellant unless confession of substantial undisclosed income were made.

(c) That the Statements so extracted from them were devoid of merit since they are not supported by seized incriminating documentary evidences.

3.4.3 In this context, after a thorough examination of the Statements recorded on oath, the assessment order, and the written submissions of the appellant, I would like to highlight the following facts, which are crucial for determination of reliability of aforesaid Statements in the context of assessments made in the case of appellant company:

(a) It is significantly noteworthy that although the Statement was recorded between
20/09/2023
to 24/09/2023, the appellant retracted its Statements only on 18/02/2025, ie, more than 17 months of making these confessions before the IT department, which casts serious aspersions on credibility of the retraction so made.

(b) Further, the appellant has not put forth any substantive proof of threat/duress during the recording of Statement as is being alleged by the persons.

(c) At the same time, I am also seized of this undeniable that the Statements were recorded over a prolonged period of over 3-5 davs at a stretch, which inevitably

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53
placed the appellant to evident stress and mental duress. It is also undeniable that the surrounding circumstances as narrated by the appellants do indicate an element of adversarial circumstantial matrix under which Statements were recorded during 20th to 24th September, 2023. (d) It is also noticed that it is the admissions/confessions made by aforesaid persons in their Statements and the list of bogus entities extracted from these persons during the course recording their Statements, which constitute the principal ground relied upon by the AO for making the additions.

(e) It is critical to note that after the retraction, the AO has neither cross- examined key Promoters/employees of appellant group regarding veracity of reasons cited for retraction of their Statements on oath, which inevitably undermines the value of original statements in the eyes of law.

3.4.4 At this juncture, it is pertinent to examine the EXISTENT JURISPRUDENCE on the ISSUE OF RELIABILITY OF RETRACTED STATEMENTS RECORDED DURING SEARCH in the realm of factual matrix of the instant case.

3.4.5 EVIDENTIARY VALUE OF STATEMENT RECORDED U/S 132(4) OF IT ACT, 1961

3.4.6 The fundamental and prime objective of a "Search action" u/s 132 of the IT Act, 1961 is to collect evidences of tax evasion which otherwise could not have surfaced and brought to tax. It is in this context that the Section 132(4) of the IT Act, 1961 has been put in place by the legislature with a conscious intent to enable the 'authorized officer' to collect such evidences by recording statements during search. Section 132(4) of the IT Act, 1961 empowers the Authorized Officer, to examine and record a statement under oath of any person who is found to be in possession or control of any books of account, documents, money, bullion, jewelry or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Income-tax Act, 1961. Here, it is relevant to highlight that the statements u/s 132(4) are recorded by administering oath which is presumed to be carrying truth in view of the provisions of ITA-5515/Del/2025 & 13 others 54 section 181 and section 193 of the Indian Penal Code which provide for imprisonment if a false statement is given.

3.4.7 Therefore, there is a considerable importance of statements recorded u/s 132(4) during search and seizure operations, which is clear from the intent of Legislature as it thought fit to include a separate sub- section 132(4) for recording of statement during a search operation. In the context of ongoing discussion, I solicit guidance from the Division Bench of the Kerala High Court in CIT v. Hotel Meriva [2010] 195 Taxman 459/120111 332 ITR 537, which has considered the scope of a statement recorded under section 132(4) and found that such statement recorded by the officer as well as the documents seized would come within the purview of evidence under the Income-tax Act read with Section 3 of the Evidence Act. The necessary corollary is that such evidence should be admissible for the purpose of search assessments too. The Explanation to Section 132(4) of the Income-tax Act was also noticed by the Division Bench to further emphasize that the evidence so collected would be relevant in all purposes connected with any proceedings of the Income- tax Act.

3.4.8 Hence, it is an undeniable fact emergent from examination of jurisprudence on the subject that a statement recorded on oath carries a significant evidentiary value which may be used by the Assessing Officer during assessment proceedings as corroborative evidence along with documentary evidences material unearthed during search and seizure action.

3.4.9 VALIDITY OF RETRACTION OF STATEMENT RECORDED DURING SEARCH

3.4.10 However, at the same time, it is also pertinent to note here that invariably in every search and seizure action, statements u/s 132(4) are recorded multiples times and for prolonged period often extending to 3-4 days, till the search is concluded. It is also inevitable that the persons giving such statements during search proceeding remain under great mental pressure, nervousness, and stress. Many a times they also do not have the availability of relevant details, documents, and books of account at the time of giving such statements, in the absence of precise information, the statements made during the search proceeding are often vulnerable on the ground that same

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55
cannot be fully relied upon. There are many cases, like as in instant case wherein appellants later allege violation of human rights and complain of adopting pressure tactics being used by the department to extract admissions of undisclosed income. In this connection, I am seized of CBDT Instruction F. No. 286/2/2003-IT (Inv.), dated 10-3-
2003, AND, CBDT F.NO.286/98/2013-IT (INV.II)], DATED 18-
12-2014 which were issued with an intent to curb such erroneous practice of seeking involuntary/forced confession of undisclosed income search action. In this regard, although it is often argued by the Department that in the confessional statements during search, there is a mention that "there was no pressure and the statement was given voluntarily without any threat", the Courts have taken the view that such stereotype declarations at the conclusion of statement do not support the Revenue's contention. In this connection, I would like to make a reference to the Bombay Tribunal in Deepchand & Co. v.
Asstt. CIT 1995 51 TTJ 421, which has observed thus:

"The stereotyped mention it the end of the statement that whatever was stated was true and to the best of the knowledge and belief and the statement given was voluntary without any threat, force or undue influence, would not mean that they agreed for making additions
Putting certain expression at the end of the statement cannot be taken as true in view of the retraction.
Retraction can be made only after understanding the correct meaning and consequences of the statement.”

3.4.11 There could be cases also where the assessee on his own motion gives the disclosures of undisclosed income including its manner of earning without being prompted by the authorized officer. However, later, such assesses may realize, on deeper analysis and investigation that such a statement was given under a fallacy or under mistaken belief of facts or at times of nervousness, stress, and panic and thereby the statement so tendered does not reflect the true situation.

3.4.12 However, for any retraction to be successful in the eyes of law, the assessees must show as to how earlier recorded statements do not state the true facts or that there was coercion, inducement or threat while recording his earlier statements. Although law permits retraction of a statement, it lays down certain perquisites, without which the statement, though retracted, can be used as evidence

ITA-5515/Del/2025 & 13 others
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in any proceedings under the Act. Any statement recorded under section 132(4), statutorily deemed to have evidentiary value; cannot be retracted at the mere will of the party. Therefore, whenever an assessee pleads that the statement has been obtained forcefully/by coercion/undue influence without material/contrary to the material, then it needs to be supported by strong evidence.
Once a statement is recorded under section 132(4), such a statement can be used as strong evidence against the assessee in assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong. In the context I further solicit support and guidance from following decisions of Hon'ble Supreme Court and High Courts:

(a) The Hon'ble Supreme Court has considered the question of burden of proof in the decision reported in CIT v. Best & Co. (P.) Lid. AIR 1966 S.C. 1325 and specifically dealt with it in paragraph 6:

"6. At this stage the question of burden of proof raised at the Bar may be noted. In (1965) 57 ITR 400 (AIR 1966 SC
54), this court observed:

"…..it must in the first instance be observed that it is for the revenue to establish that a particular receipt is income liable to tax…..”

We may point out, as some argument was advanced on the question of burden of proof, that this Court did not lay down that the burden to establish that an income was taxable was on the Revenue was immutable in the sense that it never shifted to the assessee: The expression "in the first instance" clearly indicates that it did not say so.
When sufficient evidence, either direct or circumstantial, in respect of its contention was disclosed by the Revenue, adverse inference could be drawn against the assessee if he failed to put before the Department material which was in his exclusive possession. This process is described in the law of evidence as shifting of the onus in the course of a proceeding from one party to the other. There is no reason why the said doctrine is not applicable to income-tax proceedings. While the Income-tax authorities have to gather the relevant material to establish that the compensation given for the loss of agency was a taxable income, adverse inference could be drawn against the ITA-5515/Del/2025 & 13 others
57
assessee if he had suppressed documents and evidence, which were exclusively within his knowledge and keeping.”

(b) The Allahabad High Court in Dr. S.C. Gupta v. CIT
[2001] 248 ITR 782/118

Taxman 252, in para 7 of the report, held as under:-

“7. As regards the assessee's contention that the statement having been retracted the assessing officer should have independently come to a conclusion that there was additional income as sought to be assessed and that there was no material to support that there was such income, this contention in our view is not correct. As held by the Supreme Court in Pullan-gode Rubber Produce Co.
Ltd. v. State of Kerala. (1973) 91 ITR 18 (SC) an admission is an extremely important piece of evidence though it is not conclusive. Therefore, a statement made voluntarily by the assessee could form the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and in fact there was even seem to have been attempted to be discharged."

(c)- The Hon'ble Kerala High Court in case of CIT v. O.
Abdul Razak [2012] 20 taxmann.com 48/207 Taxman 193
(Mag.[20131 350 ITR 71 held that a self-serving retraction, without anything more cannot dispel statement made under oath under section 132(4). A statement made under oath deemed and permitted to be used in evidence, by express statutory provision, must be taken as true unless there is contra evidence to dispel such assumption.

3.4.13 In this context, it is also essential to take cognizance of the fact that various courts in the following cases have held that during the search the whole atmosphere is of utmost pressure and therefore there is very little scope for free and fair thinking on the part of a person searched. The courts have held that such a statement which has been recorded in late hours and for prolonged period cannot be free, fearless, and voluntary and an assessee can retract such a statement though after inducing valid evidences and substantiate so far as to how the factual position is in contrast as compared to the earlier statement so retracted.

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(1) In Kailashben Manharlal Chokshi v. CIT [2008] 174
Taxman 466/[2010] 328 ITR 411 the Hon'ble Gujarat High
Court held that if a statement is recorded during odd hours late in the night or after long search operation when assessee is fully tired and exhausted, retraction of such statement may be accepted by the courts after taking into account the entire gamut of facts and circumstances of the case. In para 22, the court as under:

"The glaring fact required to be noted in the instant case was that the statement of the assessee had been recorded under section 132(4) at mid night.
In normal circumstances, it is too much to give any credit to the statement recorded at such odd hours. The person may not be in a position to make any correct or conscious disclosure in a statement, if such statement is recorded at such odd hours. Moreover, that statement was retracted after two months. [Para 22]"

(II) The Hon'ble Delhi High Court in case of CIT v. Sunil
Aggarwal [2015] 64 taxmann.com 107/[2016] 237 Taxman
512/379 ITR 367 held that 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.

(III) In CIT v. Naresh Kumar Agarwal [2014] 369 ITR
171/[2015] 53 taxmann.com 306 (AP), the Hon'ble High
Court of Andhra Pradesh observed that "the circumstances under which a statement is recorded from an assessee, in the course of search and seizure, are not difficult to imagine. He is virtually put under pressure and is denied of access to external advice or opportunity to think independently. A battalion of officers, who hardly feel any limits on their power, pounce upon the assessee, as though he is a hardcore criminal. The nature of steps, taken during the course of search are sometimes frightening.
Locks are broken, seats of sofas are mercilessly cut and opened. Every possible item is forcibly dissected. Even the pillows are not spared and their acts are backed by the powers of an investigating officer under Section 94 of Cr.P.C by operation of sub-section (13) of Section 132 of the Act. The objective may be genuine, and the exercise may be legal. However, the freedom of a ITA-5515/Del/2025 & 13 others
59
citizen that transcends, even the Constitution cannot be treated as non-existent".

(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 ITA-5515/Del/2025 & 13 others
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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."

3.4.14 Therefore, an examination of entire gamut of judicial pronouncements on the issue re-enforces the existence of, jurisprudence, both in favor of "Revenue", as well as, that of "assessee", depending upon broad circumstantial matrix of respective cases.

3.4.15 Accordingly, in the light of legal matrix discussed in preceding paragraphs, and after considering the factual position of the instant case in its entirety, I am of the view that the Retracted Statements of aforesaid persons as has been relied upon by the AO in this case, have a limited evidentiary value unless further supported/corroborated by independent enquiry/investigations.

3.5 LEGAL PERSPECTIVE ON EVIDENTIARY VALUE OF STANDALONE STATEMENTS ON OATH u/s 132(4) OF THE IT ACT, 1961

3.5.1 The settled principle of law suggests that a confession of an accused would need corroboration with evidences to convict the accused. It is also a settled legal position that although an admission is an important piece of evidence, but it is not conclusive and it is open to the assessee to show that it is incorrect.

(a) At this stage. I solicit guidance from the verdict of Hon'ble Supreme Court of India in case of Pullangode
Rubber Produce Co. Ltd. v. State of Kerala 19731 91 ITR 18
wherein their Lordships while observing that admission is an extremely important piece of evidence, held that, it cannot be said to be conclusive and the maker can show that it was incorrect.

ITA-5515/Del/2025 & 13 others
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(b) The landmark verdict was followed by the Hon'ble Delhi
High Court of Delhi in case of S. Arjun Singh v. CWT [1989]
175 ITR 91. (c) Further reliance can also be placed on the judgement of the apex court in case of Nagubai Armul v. B Sharma Rao
AIR 1956 SC 100 wherein it was held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect.

(d) In yet another case of Sarwan Singh Rattan Singh v.
State of Punjab AIR 1957 SC 637, the Hon'ble Supreme
Court of India held that an admission is not conclusive as to the truth of the matters stated therein. It is only a piece of evidence, the weight to be attached to which must depend on the circumstances in which it is made. It can be shown to be erroneous or untrue.

(e) The position with respect to whether a statement recorded under Section 132(4) of the Act could be a standalone basis for making assessment was clarified by Hon'ble Delhi High Court in the case of Harjeev Aggarwal,
Delhi High Court, wherein, it was held that merely because an admission has been made by the assessee during the search operation, the same could not be used to make additions in the absence of any evidence to corroborate the same. The relevant paragraph of the said decision is extracted herein below:

"20. In our view, a plain reading of section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the Explanation to section 132(4) of the Act. However, such statements on a stand-alone basis without reference to any other material discovered during search and seizure operations would not empower the Assessing
Officer to make a block assessment merely because any admission was made by the assessee during search operation."

ITA-5515/Del/2025 & 13 others
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(f) Further, it is unequivocally and consistently stipulated by the Hon'ble Delhi High Court that the AO cannot solely rely on the statement recorded u/s 132(4) of the Act.
Hon'ble Delhi High Court in the case of PCIT Vs. Pavitra
Realcon Pvt. Ltd. cited (supra), has held as under:

"19. Undisputedly, during the period of search, no incriminating material appears to have been found.
However, the Revenue proceeded to issue notice under Section 143(2) of the Act on the pretext of the statements of the Directors of the respondent-assessee companies recorded under Section 132(4) of the Act and material seized from the search conducted on Jain group of companies. The assessment order was also passed under Section 143(3) read with Section 153C of the Act making additions under Section 68 of the Act.

20.

However, it is an undisputed fact that the statement recorded under Section 132(4) of the Act has better evidentiary value but it is also a settled position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content of the statements."

(g) In the case of Kailashben Manharlal Chokshi v. CIT-1, the Gujarat High Court held that the additions could not be made only based on admissions made by the assessee, in the absence of any corroborative material. The relevant paragraph no. 26 of the said decision has been reproduced herein below: -

"26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence, there is ITA-5515/Del/2025 & 13 others
63
no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of Rs. 6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has com mitted an error in ignoring the retraction made by the assessee."(emphasis supplied).

3.6 CONCLUSIONS SOUGHT TO BE DRAWN

3.6.1 Thus, on examination of factual and legal matrix of the case in its totality, I am of the firm view that while the retraction of Statements recorded on oath at a later stage of assessment by the appellant lacks credibility and cannot be treated as genuine retraction on the part of appellant, the evidentiary value of such retracted Statement on "standalone" basis is very restricted. Otherwise also, the Hon'ble Supreme Court of India, as well as, juri ictional High Court have consistently held in unequivocal terms that the "Statements on oath" need to be corroborated by concrete seized incriminating documentary evidences or corresponding independent enquiry/investigation.

3.7 ADJUDICATION ON FACTUAL GROUNDS RAISED BY THE APPELLANT

3.7.1 In this connection, the factual position as emanating from examination of material on record is sequentially recapitulated below for consideration:

3.7.2 The matter under consideration owes its genesis to the search on VESTIGE GROUP OF COMPANIES wherein it was reported that appellant had indulged in large scale tax evasion through the modus operandi of bogus billing of "purchases" claimed in P & L account, and inflation of expenses by way of bogus commission/bonus expenses debited in Profit and Loss account. An examination of records reveals that in this case, AO has made following additions in this case:

3.7.3 The AO has made the addition of Rs. 8,86,36,574/- by disallowing the expenses claimed by the appellant u/s 37 of the IT act, 1961. The breakup of disallowance of Rs. 8.86,36.574/- is as under: -

ITA-5515/Del/2025 & 13 others
64
Sr.No.
Reference to the document/statement/digital evidences relied upon by the AO
Amount
1. Summons issued to various purchase parties u/s 131(1A) of the Act which returned unserved as the parties didn’t exist at their registered address.
Rs.9,54,670
2. Digital evidence – An excel sheet titled “Bogus
Expense Employee-wise” found in the Kingston pen drive/laptop seized from the head office of the assessee company at A 89, Phase II, Okhla
Industrial Area, New Delhi-110020
Rs.2,15,21,815
3. List of bogus commission/Bonus submitted by Anurag Anthwal during post-search proceedings.
Rs.5,51,48,756
4. Bogus parties found in email communication
Rs.1,10,11,333
TOTAL
Rs.8,86,36,574

3.7.4 In the instant case, the principal data claimed to be relied upon by the AO in assessment order is the following information:

(i) Statements of following persons admitting large scale tax evasion by appellant company by way of bogus billing of purchase of packing material and inflation of expenses debited in P&L account through bogus commission/bonus/
marketing expenses etc.

Mr. Kanwar Bir Singh,
Mr. Gautam Bali,
Mr. Deepak Sood,
Anurag Anthwal (GM, Accounts & Finance) &
Sunil Sharma (General Manager (Finance)

(ii) Excel sheets, emails and pen drive data containing lists of alleged bogus parties extracted from above persons during the process of recording of their
Statements/search/post-search enquiries.

(iii) Statements of Auditor /other key employees taken during search/post search enquiries wherein these persons have admitted to involvement of appellant company in wide spread tax evasion through bogus billing of purchases and through bogus commission expenses.

ITA-5515/Del/2025 & 13 others
65

(a) Virender Kumar,
(b) Sh. Deepak Chaudhary,
(c) S P Gupta,
(d) Sajan Kumar Aggarwal,
(e) Sanjay Sharma,
(f) Ajay Kumar,
(g) Pradeep Garg &
(h) Vishal Garg

(iv) Statement of certain entities were recorded on oath u/s 131(1A) of the IT Act, 1961 during post-search enquiries, wherein these entities denied having any financial transactions with the appellant.

(v) Notices under section 131/133(6) issued to certain parties by Investigation Wing/assessing officer have returned unserved indicating dubious nature of these entities.

3.7.5 Considering the broad factual matrix of the case, it appears from seized records/Statements on oath /appraisal report/ assessment record that the appellant company has indeed been indulging in tax evasion through the modus operandi of "bogus billing of purchases" and inflation of expenses by claiming bogus commission/bonus/marketing/business promotion expenses. However, the actual magnitude of tax evasion can only be ascertained based on independent enquiry/investigation in respect of financial transactions of appellant with alleged bogus entities. I am of the view that mere Statements of few persons cannot be the ground for quantification of actual tax evasion and for addition thereof. In this connection, it is further noticed that the data so stated to be retrieved from various sources, be it Excel sheets extracted from desktops, Pen-drive data, or Email Data, have also been extracted by relying upon Statements of certain employees on oath, which has been relied upon by the AO. The data broadly comprises of names of various entities who allegedly have indulged in bogus billing/bogus expenses. I notice that no real documentary proof of indulgence of any these named entities in such malpractices have been retrieved during search. In fact, there is no incriminating documentary evidence retrieved from search which could suggest that the entities so alleged were bogus, non- existent, or mere entry-operator/bogus/paper entities. Therefore, at this ITA-5515/Del/2025 & 13 others 66 stage, it is incumbent to examine the outcome of independent enquiry and investigation undertaken by the AO in respect of alleged non-genuine parties, which is extremely crucial for determination of actual scale/magnitude of tax evasion through the entities so alleged.

3.7.6 Therefore, considering the above factual position, an examination of outcome of various enquiries/investigations/submissions on record viz a viz addition made by the AO leads to following findings:

Particulars
Outcome of Enquiry by WING/AO
Written submissions/Evidences filed by appellant
S.No.
Particulars
PAN
Amount in Rs.
FY 2017-18
(A)
Statement recorded
Nil
Nil
Total (A)
(B)
Address not found
1
Mamta
Gupta
ASYPG1937G
257,711
The address not found by Wing.
But compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS.
2
Aman
Aggarwal
HUF
AAOHA2630L
696,959
The address not found by Wing.
But compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
Total (B)
954670
(C) Excel Sheet 1
1
August
Financial
Services
AAACA6494R
450,000
Compliance made to notice u/s 133(6) with confirmed copy of ledger accounts and Sale invoices/vouchers/GST
Return
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, sale invoices and ITR of party.

ITA-5515/Del/2025 & 13 others
67
2
Garv
Enterprise
BGRPS5468Q
8,527,156
Compliance made to notice u/s 133(6) with confirmed copy of ledger accounts and Sale invoices/vouchers/GST
Return
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, sale invoices and ITR of party.
3
Star
Infra
Design
Pvt
Ltd
AAPCS1213F
12,544,659
Compliance made to notice u/s 133(6) with confirmed copy of ledger accounts and Sale invoices/vouchers/GST
Return
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, sale invoices and ITR of party.
76
Total (C)
21,521,815
(D) Excel Sheet 2
NIL
NIL
Total (D)
-
(E)
Remaining
Parties
1
Suresh
Kumar Goel
Huf
AAKHS8586H
746,132
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, sale invoices and ITR of party.
2
Alka
Aggarwal
AGEPA7718F
530,271
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
3
Priyanka
AOTPJ7363L
236,509
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
4
Preeti
Agarwal
ADRPA3039M
453,560
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.

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68
5
Payal
Agarwal
AKOPA1024G
341,872
No compliance made to notice u/s 133(6)
NA
6
Anshu Jain
AUPPJ3279F
396,162
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
7
Arvind
Kediyal
AMNPK7061L
477,225
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
8
Ashu
Aggarwal
BYNPA3977N
371,174
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
9
Karan Jain
BPNPJ0028N
1,011,316
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
10
Laxmi
Sharma
AXMPS3502J
530,254
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
11
Meenu
Gupta
AAUPG6353Q
689,324
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
12
Mohit Jain
BPNPJ0027D
1,010,510
No Compliance
13
Narain Dutt
AHFPG7432A
530,258
compliance made to notice u/s 133(6) with The appellant has filed complete name, address,

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69
confirmed copy of accounts and proof of TDS [Form 16A].
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
14
Ramesh
Chand
Gupta
AAGPG8894A
795,375
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
15
Sonam
Gupta
BRCPG5683B
717,364
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
16
Ritu Jain
AFPPJ3649L
954,451
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
17
Tanisha Jain
BDIPJ7818R
954,451
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
18
Shikha Jain
AHAPB0135A
265,125
compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A].
The appellant has filed complete name, address,
PAN, confirmed statement of accounts, proof of TDS,
Bank
Statement, and ITR of party.
Total (E)
11,011,333
(F) Bonus
1

Bonus A 55,148,756
No enquiry by Wing/AO/No adverse finding
No adverse incriminating material
The appellant has filed
•
Complete name, address,
•
PAN,

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on any specific party to whom bonus/commission payment made
•
Confirmed statement of accounts,
•
Proof of TDS,
•
Bank statement, and ITR of parties above
Rs.10
lakh transaction value
Total (F)
55,148,756
Grand Total (A to F)
88,636,574

3.7.7 In this connection, I have specifically verified whether these parties have filed ITRs during the year declaring the income in their respective ITRs, which is tabulated below:

Particulars
Whether ITR filed or not and RETURN OF INCOME
S.No.
Particulars
PAN
Amount in Rs.
FY 2017-18
Filed or not GTI
(A) Statement recorded
Nil
Nil
Total (A)
(B) Address not found
1
Mamta Gupta
ASYPG1937G
257,711
2
Aman
Aggarwal HUF
AAOHA2630L
696,959
Filed
1890418
Total (B)
954,670
(C) Excel Sheet
1
August
Financial
Services
AAACA6494R
450,000
Filed
859173
2
Garv
Enterprise
BGRPS5468Q
8,527,156
Filed
700651
3
Star
Infra
Design
Pvt.Ltd.
AAPCS1213F
12,544,659
Filed
5837756
Total (C)
21,521,815
(D) Excel Sheet 2
NIL
NIL
Total (D)
(E) Remaining Parties

ITA-5515/Del/2025 & 13 others
71
1
Suresh Kumar
Goel Huf
AKHS8586H
746,132
Filed
1064886
2
Alka Aggarwal
AGEPA7718F
530,271
Filed
543113
3
Priyanka
AOTPJ7363L
236,509
Filed
765467
4
Preeti
Agarwal
DRPA3039M
453,560
Filed
1479752
5
Payal Agarwal
KOPA1024G
341,872
6
Anshu Jain
AUPPJ3279F
396,162
Filed
1673453
7
Arvind
Kediyal
MNPK7061L
477,225
Filed
910423
8
Ashu
Aggarwal
BYNPA3977N
371,174
Filed
557454
9
Karan Jain
BPNPJ0028N
1,011,316
Filed
1017074
10
Laxmi
Sharma
AXMPS3502J
530,254
Filed
992393
11
Meenu Gupta
AUPG6353Q
689,324
Filed
1059325
12
Mohit Jain
BPNPJ0027D
1,010,510
13
Narain Dutt
AHFPG7432A
530,258
Filed
535384
14
Ramesh
Chand Gupta
AGPG8894A
795,375
Filed
1067680
15
Sonam Gupta
BRCPG5683B
717,364
Filed
796430
16
Ritu Jain
AFPPJ3649L
954,451
Filed
1823297
17
Tanisha Jain
BDIPJ7818R
954,451
Filed
1234324
18
Shikha Jalan
AHAPB0135A
265,125
Filed
490462
Total (E)
11,011,333
(F) Bonus
Bonus A 55,148,756
Total (F)
55,148,756
Grand Total (A to F)
88,636,574

3.7.8 Therefore, an analysis of factual position in the light of outcome of aforesaid enquiries leads to following conclusive findings:

(a)
In view of the above discussion, the appellant has thus failed to discharge the onus of establishing genuineness of transactions with the following entities:

Name
PAN
Amount
Remarks on verification by this office
Payal Agarwal
AKOPA1024G
Rs.3,41,872
•
No compliance made

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Mohit Jain
BPNPJ0027D
Rs.1,0,10,510
to notice u/s 133(6) by Parties.
•
No ITR filed by parties during the year.
•
No confirmation filed by appellant.
Rs.13,52,382/-

3.7.9 Thus, in view of the overall circumstantial matrix of the case, enquiries conducted by the AO u/s 133(6) of the IT Act, 1961 and Statements of key persons recorded on oath u/s 132(4) of the IT Act, 1961, the payments claimed to be made to above parties totaling Rs.13,52,382/- do not constitute genuine expenditure of the appellant u/s 37 of the IT Act, 1961. Therefore, addition to the extent of Rs.13,52,382/- stands CONFIRMED.

(b) However, for the remaining entities, the appellant has clearly discharged its onus of establishing the genuineness of expenses claimed by providing complete names, addresses, PAN, confirmed copy of accounts, proof of TDS
[Form 16A], sale invoices, and copies of ITRs of parties concerned before the AO during assessment proceedings.

(c) For the remaining entities, the enquiries made by AO himself under 133(6) of the IT Act, 1961 have further corroborated the identity and genuineness since all the remaining parties have confirmed the transactions along with copies of ledger and proof of TDS.

(d) For the remaining entities, there does not exist any specific adverse finding/information regarding non- genuineness of any of these entities. Further, there does not exist on record any adverse finding as to non- genuineness of services rendered for commission payments made to any of these parties by Investigation wing or AO.

(e) For the remaining entities, it is vital to note that all these parties have filed ITRs declaring the transactions in their ITR.

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(f) For the remaining entities, there does not exist any adverse incriminating documentary record seized during search in respect of alleged non genuineness of transactions.

(g) For the remaining entities, the addition seems to be hinged upon a slew of general statements of Promoters and employees regarding indulgence of appellant in tax evasion through bogus billing/bogus commission. But the Statements are nowhere supported by any real and specific evidence of indulgence of appellant or any of these remaining entities in dubious transactions. Further, the evidentiary value of Statements of promoters/employees in the present circumstantial matrix is very restricted since the statements now stand retracted. In this situation, I am once again seized of judgements of Hon'ble Delhi High
Statements and evidences derived from search/post-search enquiries is established by the AO. In this case, contrary to what was alleged in "Statements on oath," all these remaining entities are seen to be very much in existence, have confirmed the transactions, and duly filing ITRs wherein these payments stand disclosed.

(h) For the remaining entities, in the year under consideration, the addition is based on names of certain parties retrieved from digital data obtained from employees of appellant group, but this data/ Statements of pertinent employees relied upon by the department, have not been confronted to main Promoters of appellant company for rebuttal/ cross examination. The data on its own bears just a list of names. which cannot incriminate an appellant unless and until the department proves these names or transactions undertaken by them to be dubious through independent enquiries.

(i) I notice that AO has not rejected the books of appellant despite alleging such large-scale manipulation of books by bogus billing of purchases. In fact, AO has not recorded any such discrepancy in its stock, accounting procedure and books of accounts which could warrant rejection of books of accounts.

ITA-5515/Del/2025 & 13 others
74

3.7.10 It is also an undeniable fact that despite having undertaken the most stringent and intrusive of possible actions against the appellant through search under 132 of the IT Act, 1961, followed by extensive post-search enquiries and elaborate search assessment, the department has not succeeded in unearthing specific incriminating evidence regarding non genuineness of remaining parties. Thus, finally, for the remaining entities, in the face of overwhelming affirmative evidences establishing the genuineness of expenses claimed by the appellant, i.e, the parties whose credentials stand verified to be GENUINE by enquiries conducted by AO himself, the disallowance made is unsustainable under the law. Hence, finally addition to the extent of Rs. 13,52,382/- is CONFIRMED.”

It is thus clear that what all the learned CIT(A) has done is to delete the bogus disallowance involving those parties who had duly responded to Section 133(6) notice(s) and further filed their respective confirmations, income tax returns along with Form 16A, which has gone unrebutted from the Revenue side. We make it clear that there is no denial coming from the departmental side that neither the assessee’s corresponding sales have been treated as unexplained nor its books of account stand rejected in the assessment order in issue. We thus see merit in the assessee’s stand that learned CIT(A) has rightly deleted the impugned bogus purchases disallowance amounting to `8,72,84,192/- in its favour. The Revenue’s instant former ground fails in very terms therefore.

We next come to the assessee’s corresponding substantive ground seeking to delete the remaining bogus purchase disallowance of `13,52,382/- (supra). We deem it appropriate to reiterate here that the twin parties concerned namely, Smt. Payal Agarwal and Shri Mohit Jain had nowhere filed their responses to Section 133(6) notices nor their income tax returns or confirmations etc. could see light of the day. The fact also remains that the assessee business activity stands

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75
admitted all along. Nor there is any serious abnormality noticed in its books of account as well. We thus deem it appropriate in this backdrop and in the larger interest of justice that a lump sum disallowance at the rate of 5% of the impugned remaining bogus purchases would be just and proper with a rider that the same shall not be treated as a precedent. Necessary computation shall follow accordingly. The assessee’s instant appeal ITA No.5515/Del/2025 raising the very sole substantive ground stands partly accepted.

Learned CIT-DR, at this stage, refers to the Revenue’s latter substantive ground that the Assessing Officer had rightly made Section 69A addition of `40,18,132/- in the assessee’s hands which has been wrongly deleted in the CIT(A)’s detailed discussion. A perusal of the lower appellate discussion reveals that the assessee had duly proved the same as its receipts from ticket sales from public on various events. It had further filed all the relevant details in both the lower proceedings. We thus see no reason to interfere with the learned CIT(A)’s detailed discussion deleting the impugned addition. The Revenue’s instant “lead” appeal ITA No.7838/Del/2025 is dismissed in very terms.

10.

Same order to follow in the assessee’s and the Revenue’s remaining six cross-appeals each i.e., ITA Nos.5516 to 5521/Del/2025 and 7839 to 7844/Del/2025; respectively, since involving identical facts and grounds; as the case may be.

11.

No other ground or argument has been pressed before us.

12.

To sum up, these assessee’s seven appeals ITA Nos.5515 to 5521/Del/2025 are partly allowed and Revenue’s as well cross appeals

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76
ITA Nos.7838 to 7844/Del/2025 are dismissed in above terms. A copy of this common order be placed in the respective files.
Decision pronounced in the open Court on 20th March, 2026. (NAVEEN CHANDRA
(NAVEEN CHANDRA
(NAVEEN CHANDRA
ACCOUNTANT MEMBER
ACCOUNTANT MEMBER

JUDICIAL MEMBER
JUDICIAL MEMBER
JUDICIAL MEMBER
JUDICIAL MEMBER

VK.

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