ANUP KUMAR AGGARWAL,PANHCKULA vs. ACIT(CENTRAL) SHIMLA, SHIMLA

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH HYBRID HEARING BEFORE HON’BLE SHRI RAJPAL YADAV, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकरअपीलसं./ ITA No.1020/CHANDI/2025 (िनधा�रणवष� / Assessment Year: 2022-23) Sh. Anup Kumar Aggarwal ACIT (Central) बनाम/ Vs. House No.218,Sector-10 Shimla 171001 Panchkula – 134113 �थायीलेखासं./जीआइआरसं./PAN/GIR No. ADJPK-5842-L (अपीलाथ�/Appellant) : (��थ� / Respondent) अपीलाथ�कीओरसे/ Appellant by : Sh. Ajay Jain (CA) a/w Shri Lovesh Bansal (CA) – Ld. ARs ��थ�कीओरसे/Respondent by : Smt. Kusum Bansal (CIT) & Shri Rajat Kumar Kureel (CIT) – Ld. DRs Date of Final Hearing : 27-01-2026 Date of Pronouncement : 29-01-2026 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by assessee for Assessment Year (AY) 2022-23 arises out of an order of learned Commissioner of Income Tax (Appeals)-3, Gurgaon [CIT(A)] dated 31-07-2025 in the matter of an assessment framed by Ld. AO u/s 143(3) of the Act on 27-09-2024. The assessee is aggrieved by confirmation of addition of Rs.60.42

Lacs. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. Proceedings before lower authorities 2.1 The assessee-group was subjected to search by the department on 04-11-2022. The assessee acted as a proprietor of M/s HB Foods which is stated to be engaged in food and hospitality business. Subsequent to search action, the case was centralized vide order u/s 127 dated 28-07-2023. The assessee filed its return of income u/s 139(1) on 20-10-2022 for Rs.23.88 Lacs which was subjected to scrutiny proceedings vide notice u/s 143(2) dated 28-06-2023. 2.2 In the assessment order, Ld. AO made allegation of unaccounted sales on the ground that during search on the group, it was noted that various bills were not recorded in the regular books of accounts. Though majority of these bills pertained to AY 2023-24, Ld. AO applied similar analogy to this year and concluded that the assessee indulged in unaccounted sales and purchases during this year also. Relying on the statements recorded during search, the allegation of unaccounted sales for this year has been made by Ld. AO in the assessment order and Ld. AO computed that unaccounted sales as a percentage of total reported sales was 44.5% in AY 2023-24. Applying the same ratio and average GP rate of 22.62%, Ld. AO computed understated profit of Rs.60.42 Lacs despite the assertion of the assessee that no incriminating document was found for this year which suggests any sales outside regular books of accounts. In the absence of any incriminating material found during search, no allegation of unrecorded

sales could be made for this year. It was contended that extrapolation of figures was not permitted in search assessment proceedings without there being any evidence on record. However, rejecting assessee’s submissions, Ld. AO added amount of Rs.60.42 Lacs as business income u/s 28 and finalized the assessment. 2.3 During first appeal, the assessee vehemently opposed impugned addition as made on extrapolation by referring to various judicial decisions holding the field. However, Ld. CIT(A) upheld the stand of Ld. AO against which the assessee is in further appeal before us. Our findings and Adjudication 3. From the fact, it emerges that the assessee group was subjected to search on 04-11-2022 wherein some incriminating documents were found. The assessee acted as a proprietor of M/s HB Foods which is engaged in food business. Some unrecorded sales were allegedly found with respect to this entity for AY 2023-24 which is borne out of the observation of Ld. AO in the assessment order. However, no incriminating material, whatsoever, which indicates unrecorded sales for AY 2022-23, has been unearthed during search. The impugned addition has been made merely on extrapolation and on the presumption that similar unrecorded sales would have been made by the assessee for this year also. The action of Ld. AO is clearly without any evidence on record and the same merely proceeds on an assumption. It is trite law that in search action, addition could not be made by extrapolation and in the absence of any corroborative evidence supporting the same. The assessee has disclosed higher

sales of more than Rs.6 Crores in this year in comparison to sales of Rs.3.17 Crores in immediately preceding year. No defect has been pointed out in the regular books as maintained by the assessee. There is no evidence with Ld. AO to support such a theory of extrapolation. Pertinently, no such extrapolation has been done by Ld. AO for AYs 2020-21 & 2021-22 and even no such extrapolation has been done for the year of search i.e., from November, 2022 to March, 2023 which clearly reflect infirmity in Ld. AO’s conclusion. 4. The Ld. AR has also quoted the decision of jurisdictional High Court in the case of V.M. Spinning Mills vs. CIT (16 Taxmann.com 199) rejecting extrapolation of incriminating material. It was held therein that the addition was to be restricted only to the extent of evidence found during the course of search. The Hon’ble Delhi High Court in the case of Saksham Commodities (161 Taxmann.com 485) has drawn similar analogy. The Ld. AR has also referred to various other case laws of Tribunal which has followed aforesaid decisions and rejected extrapolation by lower authorities. 5. Finally, on the facts and circumstances of the case, the action of Ld. AO in making impugned addition by extrapolating the unrecorded sales could not be sustained in law. We order so. The other grounds as urged by Ld. AR have been rendered infructuous.

-Sd- -Sd- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated:29-01-2026 आदेश की �ितिलिप अ�ेिषत /Copy of the Order forwarded to : 1. अपीलाथ�/Appellant 2. ��थ�/Respondent 3. आयकरआयु�/CIT 4. िवभागीय�ितिनिध/DR 5. गाड�फाईल/GF ASSISTANT REGISTRAR

ITAT CHANDIGARH