Issues: Whether refund of accumulated unutilised input tax credit is available under an inverted duty structure where the principal input and output attract the same tax rate but other inputs attract higher rates of tax.

Analysis: Section 54(3) does not distinguish between principal and ancillary inputs for determining whether credit has accumulated because the tax rate on inputs exceeds that on output supplies. The higher tax incidence on chemicals, packing materials and other inputs resulted in accumulated credit, notwithstanding that raw cotton yarn and combed cotton yarn attracted the same rate. The prescribed computation under Rule 89(5) applies where inputs bear different rates. The circular restricting refund by reference to the principal input could not override the statutory entitlement and had already been declared unconstitutional.

Conclusion: Refund of the accumulated unutilised input tax credit is available to the assessee and must be processed under Rule 89(5), with applicable statutory interest.

Issues: (i) Whether a reassessment can survive without issuance of notice under Section 143(2) of the Income-tax Act, 1961; (ii) Whether revision under Section 263 of the Income-tax Act, 1961 can be sustained where the underlying reassessment order is invalid.

Issue (i): Whether a reassessment can survive without issuance of notice under Section 143(2) of the Income-tax Act, 1961.

Analysis: The undisputed finding was that no notice under Section 143(2) was issued. Issuance of that notice is mandatory before completion of reassessment, and its omission is not a curable procedural irregularity. Participation in proceedings following notice for reassessment does not dispense with this statutory requirement.

Conclusion: The reassessment order was void and non-existent in law for want of notice under Section 143(2), in favour of the assessee.

Issue (ii): Whether revision under Section 263 of the Income-tax Act, 1961 can be sustained where the underlying reassessment order is invalid.

Analysis: A valid assessment order is the condition precedent to exercise of revisionary jurisdiction. Since the reassessment order was void, it could not furnish a legal foundation for a finding that it was erroneous and prejudicial to the interests of Revenue or for consequential revision proceedings.

Conclusion: The revision order could not be sustained because it was founded on a non-existent reassessment order, in favour of the assessee.

Final Conclusion: The invalidity of the reassessment deprived the revisionary proceedings of their jurisdictional foundation.

Ratio Decidendi: Failure to issue the mandatory notice under Section 143(2) renders a reassessment void, and a void assessment cannot validly be subjected to revision under Section 263.

Issues: Whether deduction for bad debts written off was allowable where the debts had been taken into account in computing income in earlier years, and whether section 36(2)(iv) could be invoked for Assessment Year 2023-24.

Analysis: The debts were written off in the books during the relevant previous year and had already been taken into account in computing income in preceding years; hence, the requirements of sections 36(1)(vii) and 36(2) stood fulfilled. The assessee was not required to establish actual irrecoverability once the statutory write-off requirement was met. Section 36(2)(iv) was a transitional provision confined to debts relating to Assessment Year 1988-89 or earlier and was inapplicable. The Revenue also produced no material to show that the carried-forward debtor balances were fictitious or non-genuine.

Conclusion: The bad-debt deduction was allowable; the disallowance was deleted in favour of the assessee.

Issues: (i) Appropriate customs tariff classification of the imported components used to manufacture automotive cameras; (ii) Eligibility of the image sensor, PMIC and video encoder IC for exemption under Sl. No. 24 of Notification No. 24/2005-Customs dated 01.03.2005; (iii) Eligibility of the AHD camera harness and front/back covers for concessional duty under Notification No. 45/2025-Customs dated 24.10.2025.

Issue (i): Appropriate customs tariff classification of the imported components used to manufacture automotive cameras.

Analysis: Classification was determined under Rule 1 of the General Rules for Interpretation, read with the relevant Section and Chapter Notes and HSN Explanatory Notes, according to each product's objective characteristics at import. The image sensor, PMIC and video encoder are monolithic integrated circuits of heading 8542; EEPROM is a memory of heading 8542; the crystal oscillator is an electrical apparatus having an individual function of heading 8543; the capacitors, resistors, diodes, inductors, ferrite beads and bare PCB fall under their respective specific Chapter 85 headings. The silicone waterproof ring is an article of plastic. The front and back covers, being specifically designed vehicle parts not more specifically covered elsewhere, satisfy the sole or principal use test for heading 8708. The camera harness is a wiring set of a kind used in vehicles and is specifically covered by tariff item 8544 30 00. The objective lens is a mounted objective lens for cameras under heading 9002.

Conclusion: The goods are classifiable as follows: image sensor, PMIC and video encoder IC under CTI 8542 39 00; EEPROM under CTI 8542 32 00; SMD crystal oscillator under CTI 8543 70 99; multilayer ceramic capacitor under CTI 8532 24 00; thick film chip resistors under CTI 8533 21 29; TVS diode and Schottky barrier diodes under CTI 8541 10 00; multilayer chip ferrite bead and inductor under CTI 8504 50 90; printed circuit board under CTI 8534 00 00; waterproof ring under CTI 3926 90 29; front and back covers under CTI 8708 99 00; camera harness under CTI 8544 30 00; and objective lens under CTI 9002 11 00. The classification issue is partly in favour of the assessee.

Issue (ii): Eligibility of the image sensor, PMIC and video encoder IC for exemption under Sl. No. 24 of Notification No. 24/2005-Customs dated 01.03.2005.

Analysis: Sl. No. 24 grants unconditional exemption to electronic integrated circuits falling under heading 8542. Since each of these goods is classifiable under heading 8542, no additional condition can be imposed for the exemption.

Conclusion: The image sensor, PMIC and video encoder IC are eligible for exemption under Sl. No. 24 of Notification No. 24/2005-Customs dated 01.03.2005. This issue is in favour of the assessee.

Issue (iii): Eligibility of the AHD camera harness and front/back covers for concessional duty under Notification No. 45/2025-Customs dated 24.10.2025.

Analysis: The camera harness is classifiable under CTI 8544 30 00, which is expressly excluded from the relevant concessional entry for heading 8544. The front and back covers are classifiable under CTI 8708 99 00, rather than CTI 8529 90 90 specified in Sl. No. 303. Neither product fulfils the tariff-classification requirement of the claimed entries.

Conclusion: The camera harness and the front/back covers are not eligible for the claimed benefit under Notification No. 45/2025-Customs dated 24.10.2025. This issue is against the assessee.

Final Conclusion: The ruling affirms item-wise classification based on the goods' inherent character and applicable tariff notes, grants the integrated-circuit exemption, and denies the claimed concessional treatment for the vehicle wiring harness and camera covers.

Ratio Decidendi: Where a product is specifically described by a tariff heading or subheading on its objective characteristics, that specific classification prevails; sole or principal vehicle use applies only where the goods are not more specifically covered elsewhere.

Issues: Whether separately itemised medicines charged at MRP to inpatients form part of exempt composite healthcare supply or amount to taxable supplies attracting liability for tax collected but not paid.

Analysis: A conflict between exempt composite healthcare services and the separate sale of taxable medicines was identified. The competing positions concerning separate MRP billing, actual collection of tax, and the applicability of the provision concerning tax collected but not paid require further consideration.

Outcome: The respondents were directed to file their opposition, the matter was listed for further hearing, and coercive action on the impugned order was restrained until the next hearing.

Issues: Whether Circular No. 35/2010-Cus. dated 17.09.2010, clarifying entitlement to 1% All Industry Rate customs duty drawback despite availment of CENVAT credit, operates retrospectively and invalidates recovery of drawback.

Analysis: The circular was declaratory and explanatory of the pre-existing drawback notifications; it neither created a new fiscal benefit nor enlarged their scope. It clarified that merchant exporters were entitled to the customs-duty component of AIR drawback notwithstanding CENVAT credit and was intended to resolve ambiguity in the existing scheme. Retrospective operation was necessary to give uniform effect to the benefit already available under the notifications.

Conclusion: Circular No. 35/2010-Cus. dated 17.09.2010 operates retrospectively, and recovery of the petitioner's duly allowed drawback was unsustainable.

Issues: (i) Whether Circular No. 35/2010-Cus. dated 17.09.2010, concerning 1% AIR customs duty drawback, operates retrospectively and entitles merchant exporters to drawback; (ii) Whether interest is payable on the refunded drawback amount.

Issue (i): Whether Circular No. 35/2010-Cus. dated 17.09.2010, concerning 1% AIR customs duty drawback, operates retrospectively and entitles merchant exporters to drawback.

Analysis: The governing Supreme Court decision establishes that the Circular is clarificatory and declaratory: it neither creates a new fiscal benefit nor substantively amends the earlier drawback notifications. It explains that merchant exporters remained eligible for the 1% AIR customs duty drawback despite availing CENVAT credit, and its retrospective operation gives effect to the pre-existing benefit. The respondents did not dispute that this determination governed the petitioners' entitlement.

Conclusion: The Circular operates retrospectively, and the petitioners are entitled to the claimed duty drawback; the contrary impugned action and order cannot stand. This issue is decided in favour of the assessee.

Issue (ii): Whether interest is payable on the refunded drawback amount.

Analysis: Since recovery of the drawback was found unsustainable and the petitioners succeeded in establishing their entitlement through the writ proceedings, interest on the refund was warranted in the interests of justice.

Conclusion: The petitioners are entitled to interest at 12% per annum from the filing of the writ petition until actual payment of the refunded amount. This issue is decided in favour of the assessee.

Final Conclusion: The petitioners' entitlement to the drawback benefit is restored with consequential monetary restitution, including interest.

Ratio Decidendi: A departmental circular that is clarificatory of the scope of an existing fiscal drawback benefit operates retrospectively where it merely resolves ambiguity and does not create a new right or impose a new burden.

Issues: Whether reassessment beyond four years could be initiated when the assessee had disclosed the capital-gains computation and the underlying sale transactions during the original scrutiny assessment.

Analysis: The capital gains, set-off of losses from sale of plant, machinery and furniture, balance-sheet disclosures, cash-flow particulars, valuation material and sale documents had been specifically examined in the scrutiny assessment. The reassessment reasons did not rely on any new or fresh tangible material discovered after completion of that assessment. Reopening beyond four years required escapement attributable to the assessee's failure to make a full and true disclosure of material facts, which was absent.

Conclusion: The reassessment notice was invalid as it was founded solely on a change of opinion; the issue was decided in favour of the assessee.

Issues: (i) Whether the declared value and consequent differential duty demand in respect of four identified Bills of Entry were sustainable; (ii) Whether the redemption fine and penalty imposed for those imports required modification; (iii) Whether differential duty, enhanced valuation and penalties concerning 273 provisionally assessed Bills of Entry could be sustained through a show-cause notice before finalisation of assessment.

Issue (i): Whether the declared value and consequent differential duty demand in respect of four identified Bills of Entry were sustainable.

Analysis: The recovered invoices, financial records and admission concerning declaration of lower values established undervaluation in respect of the identified imports. The enhanced values represented the actual value paid or payable and justified rejection of the declared transaction values.

Conclusion: The rejection of declared value, confiscability of the goods and differential duty demand of Rs. 6,60,025 for the four identified Bills of Entry were sustained, against the assessee.

Issue (ii): Whether the redemption fine and penalty imposed for those imports required modification.

Analysis: In the absence of a finding on market value and profit margin, redemption fine and penalty required objective calibration. Applying the established benchmark of 10% fine and 5% penalty on the enhanced value, the originally imposed amounts were excessive.

Conclusion: Redemption fine was reduced to Rs. 70,000 and penalty under Section 112(a) was reduced to Rs. 35,000, in favour of the assessee.

Issue (iii): Whether differential duty, enhanced valuation and penalties concerning 273 provisionally assessed Bills of Entry could be sustained through a show-cause notice before finalisation of assessment.

Analysis: The valuation of PVC profiles could not be based on the value of PVC flooring imported in a different period, particularly where prices of crude-oil-based raw materials fluctuate. Further, duty short-payment allegations and demand proceedings in respect of provisional assessments arise only after finalisation and adjustment of duty. A show-cause notice seeking finalisation under Section 18(2) could not be issued by an officer lacking authority to finalise the provisional assessments.

Conclusion: The enhanced valuation, differential duty, interest and penalties relating to the 273 provisionally assessed Bills of Entry were set aside, in favour of the assessee; the jurisdictional Assistant Commissioner was directed to finalise those assessments in accordance with law.

Final Conclusion: The liability for the four imports supported by direct evidence of undervaluation remains enforceable with reduced monetary sanctions, while the proposed consequences for the 273 provisional assessments cannot stand unless assessment is lawfully finalised.

Ratio Decidendi: A demand for short-paid customs duty in relation to provisional assessments cannot be sustained through a show-cause notice before lawful finalisation and adjustment of the provisional assessment by the competent proper officer.

Issues: Delay in giving effect to appellate orders for assessment years 2014-15 to 2016-17 and pendency of rectification and appellate proceedings for assessment year 2009-10.

Analysis: The appellate orders for assessment years 2014-15 to 2016-17 had remained unimplemented for almost a year. The appeal and rectification application concerning assessment year 2009-10 had also been pending for a substantial period.

Outcome: Directions issued to give effect to the appellate orders within three weeks and to decide the pending appeal for assessment year 2009-10 preferably within eight weeks; the petition was listed for further directions.

Issues: (i) Whether the assessee was entitled to the outstanding statutory interest on refund already accepted as correctly claimable in rectification proceedings; (ii) Whether interest or compensation was payable for delayed payment of that outstanding interest.

Issue (i): Whether the assessee was entitled to the outstanding statutory interest on refund already accepted as correctly claimable in rectification proceedings.

Analysis: The Revenue did not dispute that the assessee's claim regarding short computation of refund interest was correct and had been accepted in the rectification order. The non-payment resulted from a system failure, although the amount remained due.

Conclusion: The assessee was entitled to rectification and payment of the outstanding interest of Rs. 3,25,83,819 under Section 244A of the Income-tax Act, 1961.

Issue (ii): Whether interest or compensation was payable for delayed payment of that outstanding interest.

Analysis: The accepted interest remained unpaid for over four years, without any delay attributable to the assessee. A refund due from the Revenue, including its interest component, is a debt owed to the assessee; delayed payment warrants recompense for the Revenue's retention and use of the money. Such recompense is not impermissible merely because it may be described as interest on interest.

Conclusion: The assessee was entitled to interest or compensation at 6% per annum on Rs. 3,25,83,819 from 19 April 2022 until payment.

Final Conclusion: The Revenue must correct the computation, pay the accepted outstanding refund interest, and compensate the assessee for its delayed payment.

Ratio Decidendi: Where refund interest admittedly due under the statutory scheme remains unpaid without fault of the assessee, the Revenue must compensate the assessee for the period of wrongful retention, notwithstanding the absence of an express provision for interest on such unpaid interest.

Issues: Whether a refund determined for one assessment year could be adjusted against an earlier tax demand that stood stayed by an unchallenged interim stay order.

Analysis: The demand for the earlier assessment year was stayed upon specified deposits, and the stay order had attained finality. The jurisdictional assessing officer had also placed the stay order on the departmental portal before the refund adjustment was made. Adjustment of the refund against the stayed demand was therefore inconsistent with the subsisting stay order.

Conclusion: The refund adjustment was invalid and could not be sustained; the refunded amount was required to be restored with applicable interest in accordance with law.

Issues: Whether receipts from ground handling and engineering services rendered to other airlines in India are exempt under Article 8 of the India-UK Double Tax Avoidance Agreement as profits from operation of aircraft in international traffic or participation in a pool.

Analysis: Article 8 exempts profits from operation of aircraft in international traffic, extends that treatment to participation in pools, and includes activities directly connected with air transportation. The prior decisions concerning the assessee had conclusively found that rendering ground handling and engineering services to other airlines was an organised commercial activity, not a qualifying pool arrangement involving common resources and sharing of resultant profits. Such services to other airlines were also not directly connected with the assessee's own international air transportation within Article 8. The India-UK treaty differs materially from the India-Germany and India-Netherlands treaties considered in decisions involving other airlines; those decisions therefore did not assist the assessee. OECD commentary could not expand the treaty terms, particularly in view of India's reservation concerning ancillary activities.

Conclusion: Receipts from ground handling and engineering services provided to other airlines in India are taxable in India and are not entitled to exemption under Article 8 of the India-UK Double Tax Avoidance Agreement. The issue is decided against the assessee.

Issues: (i) Whether disallowance for non-deduction of tax at source was sustainable despite belated furnishing of Form No. 26A caused by portal technical glitches; (ii) whether notional interest on interest-free business advances could be assessed as income; (iii) whether an ICDS adjustment could be added merely because it was disclosed in an incorrect return column; (iv) whether an outstanding creditor balance could be added as unexplained credit solely because the creditor did not respond to a verification notice; and (v) whether the remaining current-year loss was eligible for carry-forward.

Issue (i): Whether disallowance for non-deduction of tax at source was sustainable despite belated furnishing of Form No. 26A caused by portal technical glitches.

Analysis: The payees had furnished accountant certificates confirming that the interest income was included in their returns and tax had been paid. The prescribed certificates were complete and available before the Assessing Officer. The delayed online filing was supported by evidence of an unresolved portal glitch and was not attributable to the assessee. The statutory conditions relieving the payer from default were therefore substantially complied with.

Conclusion: The disallowance under section 40(a)(ia) was unsustainable and was directed to be deleted, in favour of the assessee.

Issue (ii): Whether notional interest on interest-free business advances could be assessed as income.

Analysis: The advances were made under business agreements for land procurement, and the agreements neither stipulated interest nor gave the assessee a contractual right to receive it. The addition was not a disallowance of borrowing costs but an imputation of income. There was no evidence of interest having accrued or been received, and no applicable statutory provision authorised taxation of the imputed amount.

Conclusion: Notional interest on the interest-free business advances could not be taxed and the addition was directed to be deleted, in favour of the assessee.

Issue (iii): Whether an ICDS adjustment could be added merely because it was disclosed in an incorrect return column.

Analysis: The ICDS adjustment was entered in a column relating to stock-valuation deviation rather than the column for ICDS deviation. This was a clerical error with no effect on the computation of total income. Correcting the reporting entry would necessarily require a corresponding reduction, and the addition would otherwise duplicate the amount.

Conclusion: The ICDS adjustment could not be added on account of the reporting error and the addition was directed to be deleted, in favour of the assessee.

Issue (iv): Whether an outstanding creditor balance could be added as unexplained credit solely because the creditor did not respond to a verification notice.

Analysis: The assessee substantiated the liability through work order, invoices, work details, supplier identification particulars and payment evidence. The Revenue did not disallow the underlying advertisement expenditure. The verification report was not supplied to the assessee, while part of the balance was an opening balance and thus could not be treated as a credit arising during the relevant year. Mere non-response to a notice did not displace the evidence supporting the transaction.

Conclusion: The creditor balance was not liable to be treated as unexplained credit and the addition was directed to be deleted, in favour of the assessee.

Issue (v): Whether the remaining current-year loss was eligible for carry-forward.

Analysis: Consequent upon deletion of the substantive additions, the quantum of remaining current-year loss required verification.

Conclusion: The Assessing Officer was directed to verify the remaining current-year loss and allow its carry-forward in accordance with law, in favour of the assessee.

Final Conclusion: The assessed income requires recomputation after deletion of the disallowance and additions found unsustainable, with consequential determination of the loss eligible for carry-forward.

Outcome: The civil appeal was dismissed and the accompanying interlocutory application(s) were disposed of.

Issues: (i) Whether a suspended director who is also a personal guarantor has locus standi to challenge the CIRP orders; (ii) Whether dismissal of the belated application seeking re-valuation and nullification of CIRP was valid; (iii) Whether the alleged CIRP violations and conduct of the Resolution Professional warranted interference; (iv) Whether the valuation process warranted fresh valuation; (v) Whether the appellant was unlawfully denied an opportunity to submit a competing resolution plan; (vi) Whether approval of the resolution plan disclosed non-compliance with statutory requirements or grounds for appellate interference.

Issue (i): Whether a suspended director who is also a personal guarantor has locus standi to challenge the CIRP orders.

Analysis: Although management powers stand suspended on commencement of CIRP, a personal guarantor remains directly exposed to enforcement of the corporate debtor's financial debt. That direct financial stake renders the suspended director a person aggrieved for purposes of the appellate remedy.

Conclusion: The appellant had locus standi to maintain the appeals.

Issue (ii): Whether dismissal of the belated application seeking re-valuation and nullification of CIRP was valid.

Analysis: The appellant had notice of the CoC process, its meetings and consideration of resolution plans, but did not attend the relevant meetings or pursue timely objections. He sought to challenge the process only after the CoC had approved the plan, the plan-approval application had been heard and orders reserved. The statutory scheme requires objections to be raised promptly at the appropriate CIRP stage and does not permit a participant with knowledge of the process to unravel it at the final stage.

Conclusion: The dismissal of the belated application was valid and this challenge failed against the appellant.

Issue (iii): Whether the alleged CIRP violations and conduct of the Resolution Professional warranted interference.

Analysis: The allegation regarding non-supply of the seventh CoC minutes was found by the insolvency regulator to be a procedural lapse, not a material irregularity; that finding was not challenged. The appellant did not establish inflated claims, misconduct, denial of relevant participation rights, or other alleged violations through specific contemporaneous and cogent evidence. The appellant had not complied with relevant CIRP requirements and had remained absent from CoC meetings after the first meeting.

Conclusion: No material irregularity or established CIRP violation justified setting aside the resolution process or plan; this issue was decided against the appellant.

Issue (iv): Whether the valuation process warranted fresh valuation.

Analysis: The Resolution Professional appointed two registered valuers in accordance with the CIRP Regulations, and the CoC accepted their valuations. Earlier valuations obtained before CIRP were immaterial to the statutory valuation process. Valuation is expert-driven guidance for the CoC, whose commercial decision cannot be revisited merely because an erstwhile promoter asserts a higher value; the plan consideration was also above liquidation value.

Conclusion: Fresh valuation could not be directed, and the valuation challenge failed against the appellant.

Issue (v): Whether the appellant was unlawfully denied an opportunity to submit a competing resolution plan.

Analysis: The appellant neither submitted an expression of interest nor furnished a resolution plan within the prescribed CIRP process. An investor commitment letter or informal willingness to offer a higher amount is not a resolution plan and cannot replace compliance with statutory eligibility, form and timeline requirements.

Conclusion: The appellant was not unlawfully denied an opportunity to submit a competing resolution plan; this issue was decided against the appellant.

Issue (vi): Whether approval of the resolution plan disclosed non-compliance with statutory requirements or grounds for appellate interference.

Analysis: Appellate review of plan approval is confined to the grounds under the Code, including contravention of law, material irregularity, or non-compliant treatment of operational creditors. The appellant established no breach of the mandatory requirements for plan approval. Objections to adequacy of plan consideration and valuation concern the CoC's non-justiciable commercial wisdom. The approved plan had also been fully implemented.

Conclusion: The approved resolution plan complied with mandatory requirements, and no permissible ground for appellate interference was made out; this issue was decided against the appellant.

Final Conclusion: The CIRP process, valuation exercise and CoC-approved resolution plan remain legally effective, with no basis to reopen the completed resolution process.

Ratio Decidendi: A personal guarantor who is a suspended director may challenge CIRP orders, but appellate review cannot displace a CoC-approved resolution plan absent a proved statutory contravention or material irregularity; a valuation conducted by registered valuers under the CIRP framework and accepted by the CoC cannot be reopened on assertions of greater commercial value.

Issues: Whether penalty could be imposed without issuance of a show cause notice and an opportunity of hearing.

Analysis: Section 126(3) requires that no penalty be imposed without affording the person an opportunity of being heard. The undisputed absence of a show cause notice initiating penalty proceedings resulted in non-compliance with that requirement and breach of the principles of natural justice.

Conclusion: The penalty imposed upon the petitioner could not be sustained for want of a show cause notice and opportunity of hearing.

Issues: Whether the delay of 712 days in filing the appeal before the Tribunal ought to have been condoned.

Analysis: Condonation depends upon the acceptability of the explanation rather than the length of delay. Limitation rules are intended to prevent dilatory conduct, not to defeat a litigant's right to seek adjudication. The explanation that the appellate order had been received by the accounts manager and was not brought to the company's notice until recovery proceedings, supported by the director's affidavit, was bona fide and constituted sufficient cause. The Tribunal should have exercised its discretion liberally to advance substantial justice and afford an opportunity of hearing on merits.

Conclusion: The delay was required to be condoned; the substantial question of law is answered in favour of the assessee and against the Revenue.

Issues: (i) Whether disallowance of aggregate purchases as bogus expenditure was sustainable; (ii) Whether additions based on alleged closing-stock differences in seized Tally data were sustainable.

Issue (i): Whether disallowance of aggregate purchases as bogus expenditure was sustainable.

Analysis: Under Section 37 of the Income-tax Act, 1961, the assessee initially bears the burden to establish business expenditure; upon production of invoices, books, GST records, banking evidence and corresponding sales, the burden shifts to the Revenue to rebut that evidence with cogent material. No seized material, cash trail, accommodation-entry evidence, or material showing that the goods were obtained from undisclosed sources was identified. The Revenue accepted the sales, did not reject the books under Section 145(3), and did not establish that the suppliers or invoices were fictitious. Deficiencies in a supplier's records or failure to furnish the supplier's own procurement details could not, without independent evidence, establish that the assessee's purchases were sham. For AY 2021-22, however, the supporting evidence for purchases from RKG Earth Movers was weaker; since sales remained accepted and no evidence established that no goods were procured, complete disallowance would produce artificial profits. Only the embedded profit could therefore be estimated by applying the assessee's disclosed gross-profit rate.

Conclusion: Purchases for AYs 2018-19, 2019-20 and 2020-21, including purchases from RKG Earth Movers for AY 2020-21, were allowable; the findings are in favour of the assessee. For AY 2021-22, the disallowance was restricted to 20.38% of Rs. 1,06,84,717, with deletion of the balance; the finding is partly in favour of the assessee.

Issue (ii): Whether additions based on alleged closing-stock differences in seized Tally data were sustainable.

Analysis: Closing stock is a derived accounting figure and cannot be treated as an independent source of income without establishing defects in the underlying purchases, consumption, quantitative records or sales. The seized Tally data showed anomalous diesel and explosive stock exceeding recorded purchases, while no corresponding physical stock was found during search. The records and the search officer's own profit-suppression analysis supported the explanation that consumption entries had not been posted and purchases were incorrectly retained under stock-in-hand. Supplier ledgers, banking evidence, regular audited accounts and statutory records supported the purchases. The Revenue neither disproved this reconciliation nor established undisclosed inventory, fictitious purchases, or non-business use of the consumables. Section 37 could not be invoked without identifying expenditure not incurred wholly and exclusively for business.

Conclusion: The alleged closing-stock balances represented accounting misclassification and not actual undisclosed stock; deletion of the additions for AYs 2018-19 to 2020-21 was upheld in favour of the assessee.

Final Conclusion: The Revenue's challenges to deletion of bogus-purchase and closing-stock additions failed. The assessee obtained full relief for AY 2020-21 and substantial relief for AY 2021-22 through restriction of the surviving purchase addition to the estimated embedded profit.

Ratio Decidendi: Where accepted sales, regular books, invoices, statutory records and banking payments support purchases, a disallowance cannot rest on suspicion or incomplete supplier evidence without cogent material proving that the transactions are sham; where purchases remain unverifiable but sales are accepted, only the embedded profit may be assessed.