2025 (11) TMI 1932

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...., 1961 (hereinafter referred to as the "Act"). 2. Brief facts of the case are that the assessee is engaged in the business of wholesale and retail trading of garments. The assessee filed the return of income on 15.10.2022, declaring a total income of Rs. 6,70,907/-. The case was selected for scrutiny under the Computer Aided Scrutiny Selection (CASS) system. Accordingly, notices under sections 143(2) and 142(1) of the Act were issued and duly served upon the assessee. The assessee complied with the notices and submitted the details and evidences as called for by the Assessing Officer (AO) from time to time. During the course of assessment proceedings, the AO referred to a search operation conducted under section 132 of the Act on 28.05.2....

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....the addition purely on the basis of third-party documents seized from M/s J.M. Jain LLP, without providing any opportunity to the assessee to cross-examine the said party or verify the authenticity of such material. The assessee further contended that the AO had not rejected the books of account under section 145(3) of the Act. Therefore, the estimated addition of 8% on alleged purchases was contrary to law. The Ld. CIT(A), however, confirmed the addition, observing that the AO had relied on material found during search, and that the assessee could not produce any credible evidence to prove that the transactions mentioned in the seized documents were unrelated to it. 4. The assessee is in further appeal before this Tribunal challenging t....

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.... account by recording dissatisfaction as to their correctness or completeness. The Ld. counsel also placed reliance on the Hon'ble Bombay High Court judgment in ACIT v. Ms. Lata Mangeshkar [1974] 97 ITR 696 (Bom), wherein it was held that third party statements or documents cannot form the sole basis for addition in absence of any corroborative evidence linking the assessee. Suspicion, however strong, cannot substitute proof. The assessee had submitted purchase invoices, party-wise confirmations, and ledger extracts of regular suppliers, which were not controverted by the AO. Therefore, the addition was based on conjectures and deserves to be deleted. 5. The learned DR supported the orders of the AO and the Ld. CIT(A), submitting tha....

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....records. Further, as rightly contended, the AO did not invoke section 145(3) to reject the books of account. The Hon'ble Delhi High Court in PCIT v. Forum Sales Pvt. Ltd. (supra) has clearly held that estimation of income is permissible only after rejection of books of account on valid grounds. In the absence of such rejection, the AO's estimation of 8% on alleged unaccounted purchases is legally unsustainable. We also note that the alleged seized ledger has not been authenticated or proved to belong to the assessee. Section 292C of the Act creates a rebuttable presumption of ownership only when documents are found in possession of the assessee or its authorized agent. In the present case, the documents were found in the possession of a thi....