INCOME TAX OFFICER, KISHANGARH vs. ARUN AGARWAL, KISHANGARH

Ld. DR has referred to the assessment order wherein Ld. Assessing Officer dealt with reply furnished by the assessee to the notices issued to the assessee, and while rejecting the claim put forth by the assessee, made variations in respect of non-genuine purchases. The contention is that Ld. CIT(A), NFAC fell in error in allowing the appeal and setting aside the assessment order simply by observing that Assessing Officer had not verified the purchases, if any, made by the assessee.

“3.7 In this regard the seizure made by the Investigation Wing of the department has been made after thoroughly investigating all the related and relevant documents in the case of Baba Group. Furthermore, the findings of the Investigation Wing are reached after a comprehensive and cogent analysis of all the material seized/found during the course of investigation. Further, During the search and seizure action carried out in the case of Baba Group a statement u/s. 132(4) dated 10.02.2022 of Shri Anup Goyal recorded at the residence of Shree Gopal Goyal, Manju Devi Goyal, Abhishek Goyal, Preet Goyal, Anud Goyal, Aakanksha Goyal located at E-4-5-6, opposite Maya bazar, Laxmi Narayan Vihar. Madanganj Kishangarh.

3.8 Furthermore, the department is of the view that the statement of Shri. Anup Goyal of M/s Baba Group recorded under section 132(4) of the Income tax Act, ITO vs. Arun Agarwal 1961 cannot be discarded merely on the ground that the documents in question did not signed by the assessee. The contents of the statement of Shri Anup Goyal cannot be denied or discarded since the same has been recorded by the department on oath, Further, it is pertinent to note here that the department fined no substance in the contentions raised in the detailed reply filed by the assessee dated 27/02/2024 to controvert the said statement of Anup Goyal recorded u/s 132(4) of the Act.

3.9 Assessee's reply filed on 27/02/2024 on ITBA module is taken in to consideration, filed by the assessee to the department on ITBA portal. It is also perused and taken in to consideration all the relevant contentions relevant materials produced by the assessee. At the outset the depart is of the view that, the contentions as raised by the assessee in his reply filed on 27/02/2024 does not inspire any confidence and all the averments made by the assessee are not accepted hereby. Further, it is pertinent to note here that the department find no substance in the contentions raised in the detailed reply filed by the assessee.

3.10 Therefore, the department refute the claim made in the reply submitted to the department. During the search operation as well as post search investigation, the relevant facts are found in the case of assessee (supra), whereby it is ascertained that assessee had entered into transactions of inflated the purchases of raw material, and return of cash by these parties to Baba group, and the same were found by the Investigation Wing during the search operation.

3.11 The department after taking in to consideration the relevant excerpts of the judgments cited and relied upon in the detailed reply filed by the assessee dated 27/02/2024 has reached a conclusion that the said judgments cannot be relied upon in the present assessment in so far as the document in question is considered. The assessee in his detailed reply dated 27/02/2024 has relied upon a judgment of Hon'ble Supreme Court in the case of Common cause v. U.O.I.(2017) 77 taxmann.com 245 in which the court has held that "Entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act. It is only where the entries are in the books of account regularly kept. depending on the nature of occupation, that those are admissible,"

"The meaning of account book would be spiral note book/pad but not loose sheets;"

ITO vs. Arun Agarwal 3.12 A bare perusal of the above mentioned observations made by the Hon'ble Supreme Court of India suggest that, only the loose papers and sheets are irrelevant and inadmissible u/s 34 of the Indian Evidence Act, 1872. However, the disputed documents in question are not loose papers or sheets but is a 'Small Note Book', and henceforth, the disputed documents would come within the purview and meaning of "Account books". Therefore, the said disputed documents will be relevant and admissible u/s 34 of the Indian Evidence Act, 1872.

3.13 Consequently, the transactions made by the assessee in form of inflating purchases of raw materials and return cash amounting to Rs. 1,22,42,606/- with Sh. Anup Goyal promoter of Baba Group, remain unaccounted/unexplained. Consequently, the transaction undertaken with the above concerns amounting to Rs. 1,22,42,606/- are cannot be treated as genuine. It is therefore non genuine purchases made by the assessee remained unaccounted/unexplained. Therefore, addition of Rs. 1,22,42,606/-is made in view of the provision of section 69C of the Income tax Act, 1961 and taxed as per the provisions of section 115BBE of the Act.

“I have perused the materials available on record and gone through the assessment order, a search & seizure action was carried out on 10.02.2022 in the cases of "Baba Group". Various premises were covered either in search action u/s 132 and/or in survey action u/s 133A of the act. The search and survey proceedings conducted on Baba group unearthed certain incriminating evidences in the assessment order, the Assessing Officer has noted that during the course of search, the seizure made by the Investigation Wing of the department has been made after thoroughly investigating all the related and relevant documents in the case of Baba Group. Furthermore, the findings of the Investigation Wing are reached after a comprehensive and cogent analysis of all the material seized/found during the course of investigation. Further, During the search and seizure action carried out in the case of Baba Group a statement u/s. 132(4) dated 10.02.2022 of Shri Anup Goyal recorded at the residence of Shree Gopal Goyal, Manju Devi Goyal, Abhishek Goyal, Preeti Goyal, AnupGoyal, Aakanksha Goyal located at E-4-5-6, opposite Maya bazar, Laxmi Narayan Vihar,

I have considered the submissions of the appellant and the reasons given by the assessing officer. Based on the reasoning given in the assessment order. I can only say that the AO has not given any cogent reasoning for making the addition of alleged unexplained expenditure u/s 69C of the Act. The AO ought to have verified the purchases of the appellant as to whether the appellant had made purchases from M/s Baba Group. If the appellant had made such purchases from M/s Babab Group, the AO ought to have called upon the appellant to explain as to why such purchases should not be treated as unexplained one in the light of the seized documents referred to in the assessment order. No such enquiry was conducted by the AO. Under section 69C any expenditure incurred for which no source is available, then such expenditure would be considered as unexplained expenditure. The AO has not brought on record any evidence to show as to whether the appellant had shown purchases from the above company in the books of accounts or not. If the same is shown in the books of accounts, then the source for such purchases should be considered to have been explained and such expenditure recorded in the books of accounts cannot be considered as unexplained expenditure u/s 69C of the Act. If the same is not shown in the books of accounts, then the purchases by the appellant outside the books of accounts should be proved with some evidence for source. In the appellant's case, the addition under section 69C was made with insufficient grounds and the same cannot stand in the eyes of law

After considering the above facts and the decisions as relied upon by the appellant, I therefore delete the addition of Rs.1,22,42,606/- made under section 69C of the Act. As a result, the ground raised by the assessee is allowed.”

So, the allegation was that Baba Group indulged in purchase of raw material from persons like assessee. In this way, it was stated to be a case of transactions of “sale” of raw material etc., by the assessee to Baba Group. In other words, it was not a case with allegation of purchase of any raw material etc. by the assessee from Baba Group.

No purchases were made by the assessee. Actually, the Assessee had made sale transactions. attracted provisions of section 69C of the Act alleging that it was a case of transactions made by the assessee in the form of inflating purchases of raw material and return of cash with representative of Baba Group, which remained unexplained. That is why, Learned CIT(A) was also justified in observing that any expenditure incurred, for which no source is available, would be termed as unexplained expenditure.

The Assessing Officer did not discuss the entries made in the account books and the relevant documents, so that the Appellate Authority could find out as to what had weighed with the Assessing Officer to arrive at a particular conclusion. The substance in the contentions raised in the reply dated 27.2.2024 and that said contentions did not inspire any confidence, and further that all the averments, made by the assessee, were not accepted.

In nut shell, it can safely be said that not even a single aspect of the claim of the assessee is found to have been discussed by the Assessing Officer, for rejecting his claim.

Discussion and reasons are the soul of an order. No discussion or reason go to show non application of mind by the concerned authority. That is why, Learned CIT(A) observed that the Assessing Officer ought to have verified if any purchases were made by the assessee from Baba Group, but no such enquiry was conducted.

The Assessing Officer was initially on the aspect of “ cash transaction” and applicability of section 68 of the Act. But, surprisingly, the Assessing Officer applied provisions of section 69C of the Act, even though, from the very beginning the department was aware of the nature of allegation on search and seizure action on Baba Group.There is no explanation from the side of the Department even in this regard.

Conclusion

Order pronounced in the open court on 20/02/2025.

Sd/- Sd/- ¼xxu xks;y ½ ¼ujsUnz dqekj½ (GAGAN GOYAL) (NARINDER KUMAR) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 20/02/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Income Tax Officer, Kishangarh izR;FkhZ@ The Respondent- Arun Agarwal, Kishangarh 2. vk;dj vk;qDr@ The ld CIT 3. 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZ QkbZy@ Guard File (ITA No. 1113/JP/2024) vkns'kkuqlkj@ By order,

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