DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, LUDHIANA, LUDHIANA vs. OM SONS MARKETING PRIVATE LIMITED, QUILA CHOWK

5. That the appellant craves leave to add or amend any grounds of appeal

before the appeal is finally heard or disposed off. 1.3 The assessee has filed additional grounds of appeal on 18-06-2025 which read as under: -

1. That the Ld. AO has erred in law and on facts in framing the assessment u/s 143(3) of the Income Tax, 1961 without fulfilling the mandatory conditions prescribed under section 148 read with Explanation 2 to clause (iv) thereof, particularly by failing to record a valid and proper satisfaction note prior to initiating proceedings based on documents allegedly seized from another premises – such recording being a sine qua non for using such material against the assessee – rendering the assessment order bad in law and liable to be quashed.

2. That the Ld. AO has further erred in relying on documents seized during a search conducted on another person by making additions in the hands of the assessee without obtaining the prior approval of the Principal Commissioner of Income Tax (PCIT) thereby rendering the assessment illegal, void ab initio and without jurisdiction.

3. That the assessment framed u/s 143(3) is bad in law, as it pertains to a year immediately preceding search year where the mandatory approval as prescribed under section 148B of the Income Tax Act, 1961 has not been followed. That in the absence of 4 compliance with the provisions of section 148B read with CBDT issued the manual of office procedure in February 2003, the assessment is vitiated and liable to be annulled.

5. That the Ld. AO has relied upon the material found from the residential premises of Shri Prem Singh as seized from first floor, opp. Jain Old Talwandi Road, Zira, Firozepur and the adverse view has been drawn by the AO leading to various addition on the basis of material seized from third party premises is void ab initio and without recording any satisfaction by the AO concerned.

5 would be required. In the absence of such a satisfaction, entire assessment proceedings would be bad-in-law. The Ld. AR filed written submissions in support of his arguments. Reliance has been placed on various decision of this Tribunal in support of legal grounds. The Ld. CIT- DR also advanced arguments and controverted the legal grounds assailing assumption of jurisdiction of Ld. AO. For the same, Ld. CIT-DR placed on record Board Circular mandating compulsory selection of cases for scrutiny in search matters. The Ld. CIT-DR contended that Ld. AO was duty bound to frame the assessment u/s 143(3). The Ld. CIT-DR also contended that the search on assessee-group cover all important persons including ex-employees of the assessee. The purpose of search action would be to collect information. The Ld. CIT-DR also supported the assessment order on merits. Having heard rival submissions, oral as well as written and upon perusal of case records including various judicial decisions as cited before us, our adjudication would be as under. Assessment Proceedings 2.1 The assessee being resident corporate assessee is stated to be belonging to Oasis group which was subjected to search action u/s 132 of Income Tax Act, 1961 by the department on 18-05-2023. The assessee is stated to be engaged in manufacturing and trading of liquor and allied products. The basic raw material for the assessee is Rice Nakku and distillery of the assessee is grain-based industry. Simultaneous searches were also carried out at the residential premises of assessee’s ex-employee i.e., Shri Prem Singh wherein certain digital data in the shape of Tally Data, Hard disk and loose papers were found and seized and a separate Panchnama was drawn for Shri Prem Singh.

6 The statement of Shri Prem Singh was also recorded u/s 132(4) during search. As per assessee’s version, no business was being carried out at its factory premises after July, 2022 due to agitation by the farmers raising environmental concerns. The staff of the assessee was stated to have taken various items / papers / data from assessee’s premises without the knowledge of the assessee after the closure of factory premises. The said digital data as well as loose papers coupled with the recorded statements were analyzed and ultimately relied upon by Ld. AO to make various additions in the hands of the assessee. The Ld. AO also referred to the statement of Shri Prem Singh to make all these additions. Post-search investigation, another employee Shri Rajinder Singh was called by the investigation team and his statement was also recorded which has been used to corroborate the findings in the assessment order. The data from his mobile phone was extracted. His statement and data so extracted has been used by Ld. AO to support the impugned additions. 2.2 The assessee had already filed its return of income for this year on 31-10-2022 declaring income of Rs.207.35 Lacs. Pursuant to search action, the case was picked up for compulsory scrutiny in terms of CBDT guidelines F.N.225/66/2023/ITA-II dated 24-05-2023 and a scrutiny notice u/s 143(2) was issued by Ld. AO on 31-05-2023 which was followed by notices u/s 142(1) wherein the assessee was required to file various submissions and explanations. It transpired that the assessee was running a distillery at Zira District of Ferozepur, Punjab. By analyzing the tally data as well as cash vouchers found during search on Shri Prem Singh, it was alleged by Ld. AO that the assessee made bogus

7 purchases from various suppliers. The data also indicated cash expenses / cash receipts not recorded in the regular books of the assessee. The Ld. AO referred to statements recorded from ex-employees of the assessee to reach the said conclusion. The various additions as made by Ld. AO were as under. Addition of alleged bogus purchases 2.3 The first addition as made by Ld. AO was on account of profit element in alleged bogus purchases of Rice Husk and Rice Nakku from several parties for which the payments were made through banking channels. These parties include M/s Krishna Agro, M/s Shri Sai Baba Foods, M/s Bharat Trading Co. etc. It was noted that though the payment to these suppliers was made through RTGS, however, cash was allegedly received back from these parties against RTGS so made by the assessee. Such evidences of cash receipt were found from mobile of Shri Rajinder Singh who acted as GM (procurement). The modus operandi was that the assessee would book purchase of raw material like Rice Nakku and Rice Husk which is required for manufacturing of liquor and corresponding payment would be made through banking channels. In return, these suppliers would charge certain commission for these entries and pay back the assessee in cash. Such conversations of cash receipt were found from whatsapp Chat as extracted from the mobile phone of Shri Rajinder Singh. By analyzing these chats, Ld. AO cited instances of cash receipts of Rs.6.60 Crores from various suppliers of the assessee. To support the same, Ld. AO analyzed the cash vouchers as found from the premises of Shri Prem Singh. As per these vouchers, the aggregate receipts and payments for supplies aggregated to Rs.103.97 Crores. On 8 these observations, Ld. AO alleged that the assessee booked bogus purchases which were paid through bank and subsequently, cash was received against the same by paying commission to the parties. These cash receipts were recorded by Shri Prem Singh. The Ld. AO referred to various instances to support this allegation and also referred to the statement of Shri Rajinder Singh, in this regard. 2.4 In response to show-cause notice, the assessee, vide its reply dated 21-03-2024, refuted the allegations of Ld. AO and brought on record various instances to demonstrate that Tally data as referred to by Ld. AO was incomplete, unauthentic and no reliance could be placed on the same. The assessee refuted the allegation of Ld. AO by contending as under: - “Regarding Rs.27,62,51,258/- and cash vouchers mentioned in Sr No.1.7,1.8 and Annexure-E, it is payment made for ‘Rice Nakku’ and ‘Rice Husk’ purchased, which can be duly verified from our ERP software as explained under point no.1. There are two types of vouchers found at premises pink vouchers & white voucher. Upon analyzing the vouchers, it was found that the persons who prepared the vouchers have entered the bank payments on both sides of cash book i.e., the payments made through cheques / RTGS / NEFT were entered on credit side of the cashbook and to ensure double entry, a similar contra / receipt entry was posted on debit site through pink voucher. This is in line with the old system of preparing a ‘combined cashbook’. The bank transactions are recorded on both sides of the cashbook, although, it does not affect the cash balance, the same is verifiable from the C-5 (location code) seized material. All the transactions so far identified by us are duly recorded in our regular books of accounts and done through banking transactions. Therefore, the question of treating these genuine bank entries as alleged ‘bogus purchases raw materials’ is factually incorrect. These are payments towards broken ‘Rice Nakku’ and ‘Rice Husk’ purchases made through banking channels. We are attaching sample invoices and weigh slips which are being produced for your kind consideration. As stated earlier, the person who has entered the transactions in this tally has prepared the same on old basis under which bank transactions are entered on both sides debit and credit side of combined cash / bank book, whereas in our regular books of accounts, these transactions are entered correctly. As such, these are not cash transactions but regular banking transactions for purchase of raw material, for which, complete documents are available. Thus, no addition of Rs.26,44,57,209/- is called for. Following documents are attached for your reference: i. ledger of suppliers mentioned above is attached ii. Sample purchase invoice, Weightment slips are attached iii. Bank statement extract containing payments mentioned in Annexure

9 a) Further, Sr No. 1.9 and 1.10, your good self has drawn a total presumption about the adjustment of cash against the purchase of ‘Rice Nakku’ and ‘Rice Husk’ to the tune of Rs.103.79 Crores without any evidence just on presumption and on the basis of certain unreliable data in the said tally data of the earlier years. In the tally data, purchase of ‘Rice Nakku’ and ‘Rice Husk’ is booked to the tune of Rs.110.54 Crores and alleged receipts against that are Rs.103.79 Crores. Against above contention we are discussing some facts based on financials of the year under consideration. ‘Rice Nakku’ is procured in A.Y. 2022- 23 amounting to Rs.154,53,58,572/- and the ‘Rice Husk’ procured in A.Y. 2022-23 amounting to Rs.31,41,41,016/-. On consumption of Rice Nakku, finished product ENA / Ethanol has been manufactured to the tune of 6,45,28,925 PL, converted to Bulk Litres. it comes to 3,73,27,267 Bulk Liters (including redistillation) and its sales amounts to Rs.1,71,10,17,504/- and Sales for PML / IMFL amounts to Rs.70,09,22,215/- duly recorded in the books of accounts for year under consideration. b) W.r.t. alleged contentions of such high amount of bogus purchases i.e., Rs.103,79,51,710/-, it may be submitted that out of total purchase of Rice Nakku Rs.154,53,58,572/- and Rice Husk Rs.31,41,41,016/-, it is not possible & feasible at all to produce such high quantity of ENA / Ethanol. Further, TDS u/s 194Q is duly deducted, while making the payment through RTGS. Our Ethanol sale is done exclusively to government concern OMCs (Oil marketing companies) like BPCL, HPCL and IOCL which is taxable item under GST attracting 5% tax rate and to prove the sale of ENA / Ethanol Sales ledgers and sample purchase orders & GST returns of OMCs are attached herewith for your kind consideration. Further, there are purchases of Rice Nakku from Food Corporation of India, a Central Govt. undertaking from whom purchases have been made in the financial year 2021-22 to the tune of Rs.42.86 Crores and in tally data, such purchases are reflected at only Rs.2.10 Crores and which proves that ‘Tally data’ is unreliable and cannot be relied upon” ......

The assessee also demonstrated various instances to controvert the allegation of Ld. AO and finally stated that tally data was incomplete, unauthenticated and therefore, no reliance could be placed on such data. In support of its contentions that the purchases were genuine, the assessee furnished ledger extracts of the suppliers, copy of purchase bills, vouchers, e-way bills and transportation receipts. The evidences of payment through banking channels were also furnished. The assessee also provided inward register maintained at its registered premises with date, name of supplier, GST number, taxable value, GST, weigh bridge receipt indicating inward time when the goods were taken in factory, signature of transporters, vehicle numbers, confirmation from sellers of 10 goods etc. On these facts, pleadings were made that the purchases were genuine and duly substantiated by documents and therefore, the same could not be held to be bogus purchases. 2.5 However, the above contentions could not find favour with Ld. AO. The contentions of the assessee were rejected. Finally, in the light of seized material from Shri Prem Singh and their respective statements, Ld. AO rejected the plea of the assessee to accept the purchases as genuine purchases. The Ld. AO also referred to the statement of Shri Pawan Bansal (Chief Administrative Officer of the assessee) to support its allegation. The alleged bogus purchases were thus quantified at Rs.103.79 Crores. 2.6 In the background of these facts, Ld. AO alleged that the assessee had made purchases to reduce taxable profits and only bills were obtained from bill providers. The payments were made but equivalent amount, after reducing commission, was received back by the assessee. In the regular books, the assessee reflected purchases of Rs.181.38 Crores out of which inflated purchased were held to the extent of Rs.103.79 Crores which translated into 57.2% of total purchases. Therefore, the benefit of estimation-based profit embedded in the purchase cost was to be given to the assessee. Finally, Ld. AO estimated this profit @12% on alleged bogus purchases of Rs.103.79 Crores and made addition of Rs.12.45 Crores. Addition of Unexplained Expenditure u/s 69C 2.7 The tally data indicated that the assessee generated cash receipts form sale of by-products, scrap sales etc. which aggregated to Rs.922.26 Lacs. Against these receipts, the assessee made payment of Rs.940.75 11 Lacs which was held to be unexplained expenditure and added to the income of the assessee u/s 69C. The Ld. AO referred to the statement of Shri Prem Singh while arriving at aforesaid conclusion of unexplained expenditure. Addition on Account of Gross Profit 2.8 On the basis of seized Trial Balance, Ld. AO alleged that the assessee made out-of-books sales of Rs.43.9 Crores. The Ld. AO applied GP Rate of 24.68% on the same and made an addition of Rs.10.84 Crores in the hands of the assessee. Other Additions / disallowances 2.9 The Ld. AO added back late deposit penalty of Rs.2,546/- as well as CSR expenditure for Rs.5,31,386/- and made aggregate disallowance of Rs.5,33,932/-. The Ld. AO also disallowed late payment of employees contribution to PF / ESI u/s u/s 36(1)(va) for Rs.9,81,006/-. 2.10 The various additions as made by Ld. AO while framing the assessment could be summarized as under: - No. Nature of Addition Amt. (Rs. in Lacs) 1. Estimated Profit of 12% against Rs.1245.54 Lacs alleged bogus purchases 2. Addition of unexplained Rs.940.75 Lacs Expenditure u/s 69C 3. Addition of Gross Profit on out of Rs.1084.62 Lacs books sales 4. Disallowance u/s 37 Rs.5.33 Lacs 5. Disallowance u/s 36(1)(va) Rs.9.81 Lacs Aggrieved as aforesaid, the assessee assailed the assessment so framed in first appeal.

12 Appellate Proceedings 3.1 The assessee assailed the assessment on legal grounds as well as on merits by way of elaborate written submissions which have already been extracted in the impugned order. It was stated that the assessee had a distillery located at Zira, District Ferozepur. The assessee- company was engaged in manufacturing of Grain based ENA, Ethanol and Country Liquor. The unit was carrying on the said manufacturing activity since 2007 and during the initial years, only ENA and Country Liquor was being produced and the manufacturing of Ethanol was started subsequently by linking to the old plant in the year 2021. Subsequently, entirely a new plant was commissioned for manufacturing of Ethanol in the month of February, 2022. However, the entire unit had to be closed down due to farmers’ agitation and subsequently, the Government of Punjab ordered for closure of the plant in whole in December, 2022. 3.2 The assessee further pointed out that it was maintaining day-to-day stock register and all the production was being carried out under the strict supervision of State Excise Officials who were stationed at the manufacturing unit of the assessee day and night. The manufacturing as well as sales was carried out under the supervision of the State Excise officials. The sales were carried out only on the basis of permit issued by State Excise Department which would be forwarded to Excise Officials sitting at the factory premises and only the manufactured liquor and Ethanol would be dispatched to the parties concerned. The assessee further stated that it was maintaining all the purchase records viz. purchase invoices, lorry receipts, weighment receipts in respect of purchase of Rice Nakku. When the grain reached the factory, the same 13 would be recorded in the Grain Procurement Register which would be authenticated by Excise Officials. The register would record day-to-day opening balance of the grain, grain purchased during the year, consumption and day-to-day closing stock of the grain. The Ld. AO did not doubt anything or pointed out any defects in respect of the same. The complete detail of delivery vehicles, quantity, weightment of grain was maintained. The copies of purchase invoices were furnished along with inward grain receipts along with sample copies of the Lab Report for testing of the Rice Nakku. The confirmed copies of accounts of the suppliers were also furnished. The books of the assessee were duly audited as required under law. 3.3 It was further contended that when the search happened at the main business premises, the unit had since been closed in July, 2022 due to agitation by the farmers. The manufacturing unit was closed and at the time of search, the factory was locked and none of the employee was present at the time of search. No manufacturing activity was happening at the premises. The ex-employees of the assessee took records to their residences without the knowledge of the management and therefore, no reliance could be placed on this material. The main raw material for the assessee was Rice Nakku for which the assessee duly maintained Grain Procurement Register on day-to-day basis. The said register would be authenticated by Excise Officials who were present at the factory premises and the purchase of Rice Nakku would be recorded therein. The copy of this register was duly furnished by the assessee along with sample copies of invoices which contained the requisite details viz. transport receipt, vehicle number, quantity of Rice Nakku, 14 Weightment slips at the factory premises on arrival of the vehicles. Besides this, the assessee furnished day-to-day production record which would be duly authenticated by Excise Officials. These records recorded day-to-day production and dispatch of the finished products by the assessee. Thus, the assessee assailed the allegation of alleged bogus purchases as made by Ld. AO on the basis of incomplete and un- authenticated data. 3.4 On further merits, the assessee pointed out that Ld. AO referred to Whatsapp Chat of ex-employee Shri Rajinder Singh. The same was used along with Tally data which was recovered form the residential premises of Shri Prem Singh at Zira, Punjab. The Ld. AO relied upon certain data for FYs 2013-14 to 2016-17 to reach such a conclusion. The Ld. AO merely assumed that during this year, the assessee made alleged bogus purchases of Rs.103.79 Crores. However, no incriminating material was found for this year which would corroborate the receipt of cash from suppliers by the assessee. There was no evidence of payment being received back by the assessee. Thus, Ld. AO only assumed that since in the past, such practice was there and therefore, he had assumed such facts during this year also. Reference was made to the decision of Hon’ble Apex Court in the case of Dhakeshwari Cotton Mills Ltd. (26 ITR 775) holding the Ld. AO was not entitled to make guess work. In the case of Umacharan Shaw & Bros. (37 ITR 271), it was held that suspicion could not take the place of proof. The said decision was applied by Hon’ble Punjab & Haryana High Court in the case of Anupam Kapoor (166 Taxman 178). The impugned addition was merely on conjecture and surmises and without any findings of fact against the 15 assessee. In the case of Omay Salay Mohammed Sait (37 ITR 151), it was held that additions on the basis of conjectures, suspicion and surmises would not be sustainable. In the case of Lalchand Bhagat Ambica Ram (37 ITR 288), it was held by Hon’ble Apex Court that assessment could not be based in the background of the suspicion and in the absence of any evidence supporting the same. By taking support of these decisions, the assessee opposed extrapolation by Ld. AO based on Tally Data where bank entries were recorded on both sides of the cash book without any increase of any cash-in-hand in the tally cash book. It was further stated that Ld. AO erred by relying upon Tally Data of the earlier years and got misled by double column cash / bank book as was being maintained in the earlier years and wrongly concluded that the assessee was receiving cash against regular purchases. In fact, all the payments to the suppliers were made through banking channels. The assessee opposed reliance on the statement of Shri Rajinder Singh and asserted that no such addition could be made merely on the basis of statements alone as held in various judicial decisions. The assessee also asserted that no opportunity of cross-examination was ever provided to the assessee and therefore, no authenticity could be placed on such statement. On the issue of estimation of 12% against these purchases, the assessee opposed the same on the ground that Ld. AO did not reject the books of accounts u/s 145(3). The assessee thus vehemently assailed impugned estimated addition on alleged bogus purchases. 3.5 It was similarly assailed by the assessee that the addition of Rs.940.75 Lacs was made by considering Tally Data which was found during search on ex-employee Shri Prem Singh. It was pointed out that 16 the assessee’s unit was closed since July, 2022 and the search happened almost after 10 months of closure of unit. All the employees had to be terminated upon closure and no such data was received by search team from directors or existing employees of the assessee. Under these circumstances, the authenticity of Tally Data could not be ascertained. Similar arguments were advanced on estimated addition of gross profit of Rs.1084.62 Lacs. The Ld. CIT(A), after due consideration of assessment record as well as assessee’s detailed submissions, rendered its adjudication from para-5 onwards of the impugned order. 3.6 On the issue of addition of alleged bogus purchases, it was observed by Ld. CIT(A) that Ld. AO did not made addition of entire bogus purchases but only added profit element embedded therein. During proceedings, the assessee furnished all the documents which related to the payments of Rs.103.79 Crores of all the parties and all the payments were through banking channels only. The Tally Data include substantial purchases made from FCI (a Govt. Agency) and there could not be any bogus purchases from a Government Organization. The contention that there would be equal amount of debit and credit in double entry system had merits and such entries could not be the basis for treating the purchases as bogus. There was no evidence with respect to the amount of Rs.103.79 Crores entirely being bogus. The total purchases of the assessee were much more than this amount. Further, the Tally Data was incomplete. However, the evidence with respect to cash received back for Rs.6.60 Crores was found from the mobile phone of Shri Rajinder Singh. Therefore, this amount was to be treated as bogus purchases on which Ld. CIT(A) applied GP rate of 24.68% and deleted the remaining 17 addition. The impugned addition, was thus, sustained to the extent of Rs.162.88 Lacs. Aggrieved as aforesaid, the assessee as well as revenue is in further appeal before us. 3.7 On the issue of addition of unexplained expenditure for Rs.940.75 Lacs, it was observed by Ld. CIT(A) that there was a seized document indicating cash expenditure. The assessee was unable to explain how these transactions were accounted for in its books of accounts. Therefore, this addition was confirmed against which the assessee is in further appeal before us. 3.8 On the issue of addition of Gross Profit for Rs.1084.62 Lacs, it was observed by Ld. CIT(A) that this addition was made on the basis of a Trial Balance found and on the basis of documents which reflected cash sales. However, the assessee contended that it was a rough Trial Balance and the authenticity of the same could not be established, Further, the assessee made much more sales as mentioned in the said Trial Balance. In the seized Trial Balance, the figure of the sales was mentioned on debit side and as per accounting treatment, the sales are never shown in the debit column. It was a fact that the Trial Balance reflected Sales of Rs.38.32 Crores on debit side whereas the assessee reflected sales of more than Rs.290 Crores during this year. On examination of Trial Balance, no such figures matched with the books of the assessee company. Also, there was no such figure of sales of any of the party as mentioned in Tally Data. Therefore, this document was only a dumb document which could not be the basis of impugned addition. Accordingly, this addition was deleted against which the revenue is in further appeal before us.

18 Our findings and Adjudication 4. From the facts, it emerges that the assessee-entity was engaged in manufacturing of grain-based ENA, Ethanol and Country Liquor. The manufacturing of Ethanol was started during 2021 and a new plant was commissioned for manufacturing of Ethanol in the month of February, 2022 but the unit was closed down to farmers’ agitation and finally the government ordered for the closure of the whole plant in December, 2022. The assessee-group was subjected to search action on 18-05- 2023 when the plant had already been closed down. Pertinently, no documents or incriminating material has been found from business premises of the assessee. However, an ex-employee of the assessee Shri Prem Singh was subjected to an independent search by the department on the same date wherein certain loose sheets, Tally data etc. has been found which form the whole basis of impugned assessment on the assessee. A separate Panchnama has been drawn with respect to search on Shri Prem Singh. Going by this material as well as statement of Shri Prem Singh, Ld. AO made allegation of bogus purchases by the assessee. Post search, another ex-employee Shri Rajinder Singh was called by the investigation team and his statement was also recorded which has been used to corroborate the findings in the assessment order. The data extracted from his mobile phone has also been used by Ld. AO to support the impugned additions.

33 10. We further find that the above decision has subsequently been followed and a similar view has been taken by another co-ordinate bench in Jamna Dass Nikkamal Jain Saraf Private Ltd. (ITA No.403/Chd/2025 & ors.). Faced with similar facts / situation, the bench observed that the impugned AY being one of the three preceding years would fall under Explanation 2(iv) to Sec.148. The Explanation provide that if a search is initiated then the AO shall be deemed to have information suggesting escapement of income for the three AYs immediately preceding the AY relevant to the previous year in which the search is initiated. Therefore, the only permissible statutory course was to issue notice u/s 148 and obtain prior approval u/s 148B before passing assessment order. Since the AO completed the assessment u/s 143(3) without issuing the notice u/s 148 the assessment proceedings so initiated could not be validly continued and completed after a search u/s 132 has been conducted in the case of an assessee without following the required procedure of Sec.148, Explanation-2. Though the provisions of Sec. 143 provide the general framework for regular assessment, the provisions of Sec. 147 & 148 (post-2021 regime) deal with reassessment based on information suggesting escapement of income including that unearthed during a search. A plain reading of Sec.143(2) would show that such a notice could be issued only when a return of income was furnished u/s 139 or in response to notice u/s 142(1). It empowers the AO to scrutinize that return if he considers that income has been understated or tax was underpaid. However, when a search u/s 132 takes place and materials are found indicating possible escapement of income, the statute envisages a different route for carrying out assessment or 34 reassessment u/s 147 r.w.s. 148 which is special mechanism for bringing to tax the income discovered in consequence of a search. Although Sec.148 (inserted w.e.f. 01.04.2021) does not begin with a non-obstante clause similar to the erstwhile section 153A, its context and Explanation-2 makes it clear that where a search is initiated, the jurisdiction thereafter must flow through this special channel, subject to prior satisfaction and approval of the Principal Commissioner or Commissioner. The legislative intent is to ensure that when a search is carried out, the assessment is framed under the specific provisions meant for such cases and not under the general provision of Sec.143(3). This position finds substantial support from the ratio of various decisions of Hon'ble High Court and Hon'ble Supreme Court unanimously holding that once a search was conducted and proceedings were triggered u/s 153A, the AO could not continue parallel proceedings u/s 143(3) or u/s 147 for the same AY since the entire assessment for that year stands merged in the search assessment. The Courts emphasized that the existence of a special procedure for assessment consequent to a search is a complete code in itself and therefore, ordinary assessments abate and could not co-exist with the search-based assessment. Therefore, AO must act u/s 148 (which now performs the role formerly assigned to Sec. 153A) rather than continuing with a pending Sec.143(3) proceeding. The legislative intent was to prevent multiplicity of proceedings and ensure that only one comprehensive order is passed, factoring in both the pre-search and post search materials. This rationale is further reinforced by the well-settled principle of generalia specialibus non derogant i.e., the special provision overrides the general provisions of the Act. Therefore, the special 35 provisions of Sec.148 must prevail over general provisions of Sec.143. Allowing the AO to continue and conclude proceedings u/s 143(3) after a search would defeat this legislative scheme and render the safeguards, such as prior approval of the specified authority, redundant. The bench also observed that the statutory approval was sought by Ld. AO on 31- 03-2024 and the same was granted by Addl. CIT on the same date on which the draft assessment order was forwarded by AO. The revenue could not demonstrate that the voluminous seized material was actually forwarded to the approving authority, nor was it shown that the Ld. Addl. CIT made any independent examination thereof. It was difficult to comprehend that a meaningful consideration of such voluminous material in a single day had taken place. The grant of approval was not an empty formality as it would have the trapping of a quasi-judicial function by the competent authority. The approval authority is bound to apply its mind, which reflects the application of its mind and the documents submitted to it. The record shows that there was a tiring hurry for granting the approval without looking into the contents of the underlying documents and placing on record the replies, if any, received in the office and the queries raised by the Addl. CIT. The bench then referred to the decision of Tribunal in the case of AB Alcobev Pvt. Ltd. (ITA Nos. 356/Chd/2024 & ors.) and the decision in Pushpanjali Construction Pvt. Ltd. (ITA No.1001/Del/2025) wherein it was held that approval granted in a mechanical manner without application of mind renders the assessment order invalid. Once the statutory approval suffers from non-application of mind, the consequential assessment cannot survive in the eyes of law. On these facts, the assessment order was held to be without jurisdiction 36 and the assessment order was held to be passed without taking the approval from the competent authority as envisaged under the Act. The approval was mechanical one and was not in accordance with law. Finally, the assessment order was quashed on legal grounds. We find that the above said legal propositions squarely apply to the facts of the present case before us.

37 12. Finally, considering the entirety of facts and circumstances of the case, we would hold that the assessment ought to have been framed under special provisions of Sec.148. To undertake the same, approval of specified authority as envisaged u/s 148B was required to be taken which is not shown to have been taken. Further, the approval of appropriate authority stood vitiated for application of mind. The procedure as required under the provisions of Sec.148 is not shown to have been fulfilled in the present case. The approval as sought by Ld. AO of the order u/s 143(3) is non-est / bad in law and the granting of the approval of the order u/s 143(3) by the Addl. CIT is null and void and thus, assessment as framed u/s 143(3) vide order dated 26-03-2024 deserves to be quashed on various legal grounds. We order so. Since the assessment order has been quashed on legal grounds, delving into the merits of the case has been rendered mere academic in nature. However, for the sake of completeness we deal with the merits of the additions also which has been raised in these cross-appeals.

by the revenue stand dismissed.

14. The addition of unexplained expenditure u/s 69C for Rs.940.75 Lacs has similarly based on incomplete and unreliable Tally data and the statement of Shri Prem Singh only. All these evidences are merely third- party evidences which could not be relied upon to make the impugned addition in the hands of the assessee. The assessee’s unit was closed since July, 2022 and the possibility of data being tampered with could not be ruled out. In the absence of any independent corroboration of the data as relied upon by Ld. AO, no such addition could be made in the hands of the assessee. The assessee has not been afforded any opportunity of cross-examination of Shri Prem Singh which violates guiding principles as laid down by Hon’ble Apex Court in the case of Andaman Timber Industries vs. CCE (281 CTR 0241) holding that not allowing assessee to cross-examine witnesses by adjudicating authority though statements 41 of those witnesses were made as basis of impugned order, amount to serious flaw which make impugned order nullity as it amounts to violation of principles of natural justice. In the present case, we find that such an opportunity of cross-examination has never been provided by Ld. AO to the assessee which would make the impugned addition nullity. Hence, on the given facts, this addition could not be sustained in law. We order so. The corresponding grounds of appeal stand allowed.

15. The addition of Rs.10.84 Crores, being gross-profit on alleged out- of-books sales has been deleted by Ld. CIT(A) on the observation that the same was based on rough Trial Balance, the authenticity of which could not be established. The assessee reflected much higher sales than reflected in this Trial Balance. This Trial Balance could not be relied upon since the sales figures were reflected in debit column which is never the case. The reflected sales of Rs.290 Crores were much more than sales figures of Rs.38.32 Crores as mentioned on the debit side. No other figures of Trial Balance matched with the regular books of the assessee. The was no figure of sale of any of the party as mentioned in Tally data. In our considered opinion, the document has rightly been held to be dumb document only which could not be relied upon to make the impugned addition in the hands of the assessee. The adjudication of Ld. CIT(A) thus finds our concurrence. The corresponding grounds as raised by the revenue stand dismissed. The assessee succeeds on merits. The revenue’s appeal, stand dismissed accordingly.

16. The assessee’s appeal stand allowed whereas the revenue’s appeal stand dismissed.

42 Cross Appeals of M/s Om Sons Marketing Pvt. Ltd.

18. In the assessment order, going by mobile extracts of Shri Rajinder Singh, Ld. AO made disallowance u/s 37 for Rs.730 Lacs and also made another addition u/s 69C for Rs.125.48 Lacs. The assessee had filed regular return of income u/s 139(1) on 31-10-2022 at Rs.28.35 Crores. In the case of this assessee, Ld. AO made full disallowance of alleged bogus purchases u/s 37(1) for Rs.730 Lacs on the ground that these purchases constitute only 2.8% of total purchases. The Ld. AO also made addition of alleged unaccounted cash payments for Rs.125.48 Lacs on similar facts. The same was based on mobile data of Shri Ravinder Nath who happen to be an employee of M/s Vijeta Beverages Ltd. and M/s Calex Papers Pvt Ltd. The Ld. CIT(A) estimated addition of 30.28% on alleged bogus purchases for Rs.730 Lacs and also confirmed addition of Rs.125.48 Lacs. The same has led to cross-appeals before us.

19. The assessee has raised similar legal grounds in its appeals. It was an admitted fact that the facts of these legal grounds were pari-materia the same. This being so, we would hold that the assessment ought to have been framed under special provisions of Sec.148. To undertake the 43 same, approval of specified authority as envisaged u/s 148B was required to be taken which is not shown to have been taken. Further, the approval of appropriate authority stood vitiated for application of mind. The procedure as required under the provisions of Sec.148 is not shown to have been fulfilled in the present case. The approval as sought by Ld. AO of the order u/s 143(3) is non-est / bad in law and the granting of the approval of the order u/s 143(3) by the Addl. CIT is null and void and thus, impugned assessment as framed u/s 143(3) deserves to be quashed on various legal grounds. We order so. The assessee succeeds in its corresponding grounds of appeal

20. On merits also, we find that the assessee has furnished plethora of documents in support of its purchase transactions. The Ld. AO has merely relied upon third-party evidences without making any independent enquiries on the same. The allegation of bogus purchases lack corroboration. Therefore, the addition of alleged bogus purchases stand deleted in toto. The addition of Rs.125.48 Lacs as sustained in the impugned order is merely on extract of mobile data of Shri Ravinder Nath who happens to be employee of other entities. While making this addition, Ld. AO has referred to the statement of ex-employee Shri Prem Singh. In earlier appeals, we have already held that such an addition which is merely based on third-party evidence could not be sustained. Similar analogy would apply here. This addition stands deleted. The assessee succeeds on merits. The appeal of the assessee stand allowed whereas the revenue’s appeal stand dismissed accordingly.

& 49/Chandi/2025 stand allowed whereas & 193/Chandi/2025 stand dismissed. Order pronounced on 13th January, 2026.