TaxTMI 
TaxTMI 
2026 (3) TMI 1400
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....here is hardly any dispute between the parties that the learned Assessing Officer had framed the assessment in question dated 3rd April, 2025 disallowing the assessee's entire purchases of Rs. 8,86,36,574/- under Section 37(1) of the Act thereby treating the same as bogus ones i.e., mere accommodation entries going by its authorized persons' statements recorded in the course of Section 132 search dated 20th September, 2023. We next notice that the learned Assessing Officer had further made Section 69A unexplained money addition of Rs. 40,18,132/- in its hands as well. And that the learned CIT(A) lower appeal discussion has partly upheld the former addition of the assessee's alleged bogus purchases to the extent of Rs. 13,52,382/-, thereby granting relief of Rs. 8,72,84,192/- and further deleted the above latter addition in entirety. It is in this factual backdrop that the assessee's endeavor herein is to delete the aforesaid remaining bogus purchase disallowance/addition of Rs. 13,52,382/- as well whereas the Revenue's twin substantive grounds seek to uphold the same in entirety along with Section 69A addition of Rs. 40,18,132/- hereinabove (supra). 4. We ....
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....s for events 4,018,132 - 4,018,132 2019-20 148 Disallowance of purchase expenses u/s 37(1) 182,208,986 38,122,658 144,086,328 Alleged cash receipts as unexplained money 69A on account of ticket sales for events 3,407,692 - 3,407,692 2020-21 148 Disallowance of purchase expenses u/s 37(1) 904,658,797 292,537,003 612,121,794 Alleged cash receipts as unexplained money 69A on account of ticket sales for events 7,143,596 - 7,143,596 2021-22 148 Disallowance of purchase expenses u/s 37(1) 382,721,429 96,867,648 285,853,781 Alleged cash receipts as unexplained money 69A on account of ticket sales for events 1,849,463 - 1,849,463 2022-23 148 Disallowance of purchase expenses u/s 37(1) 620,216,361 332,603,825 287,612,536 Alleged cash receipts as unexplained money 69A on account of ticket sales for events 7,391,133 - 7,391,133 2023-24 143(3) Disallowance of purchase expenses u/s 37(1) 311,295,940 11,827,256 299,468,684 Alleged cash receipts as unexplained money 69A on account of ticket sales for events 6,708,444 - 6,708,444 2024-25 ....
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.... AO and have not been rejected. Synopsis/submission on various contentions 1. It is a settled law that addition cannot be made merely on the basis of statement particularly when it is established that the statement recorded was wrong/containing factually incorrect facts. Moreover, the statements were retracted. The Assessing Officer has made additions treating certain purchases as genuine. The disallowance is primarily based on: * A statement recorded under Section 132(4) during search; and * An inference that payments made through banking channels were allegedly returned in cash. The Assessee respectfully submits that: * The statement was retracted before the Assessing Officer; * The retraction was supported by documentary evidence; * The addition is unsupported by corroborative material. I . Retraction of Statement - Legal Position The statement recorded during search was retracted during assessment proceedings. Though the retraction was not immediate, the delay occurred due to continuous fear of revenue of adverse circumstances and thus impacting the business. All primary and basic docum....
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....gh RTGS/NEFT; * No substantial or corresponding cash withdrawals proximate to such credits; * No one-to-one nexus between cheque credits and cash withdrawals; * No structured withdrawal pattern indicative of accommodation entries. If the allegation of cash return were correct, one would expect: * Immediate and matching withdrawals; * Large value cash withdrawals corresponding to cheque credits; * Circular fund movement. No such pattern exists. There is: * No seized cash; * No identified recipient of alleged cash; * No financial trail evidencing return of funds. The banking record, contradicts the allegation of cash return. In absence of a cash trail, the foundational premise of bogus expenditure collapses. IV. Section 65B Compliance - Electronic Evidence * No chain-of-custody documentation has been placed to establish reliability of alleged seized digital extracts relied upon by the Assessing Officer. V. Comparative Position - Sunil Aggarwal vs Present Case Issue Sunil Aggarwal (Delhi HC) Present Case Statement u/s 132(4) Recorded ....
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....he light of material placed upon record. Undisputedly, the assessee has not produced the parties who were recipients of the commission. The ld. AO however also not made any attempts to enforce their attendance through summons proceedings under section 131. It is undisputed facts on record that the payments were made utilizing banking channel with due TDS deductions. The learned Assessing Officer while concluding the non-genuineness of the commission expenses has proceeded to accept the book results and the books of accounts were not rejected. We find force in the argument that non-disclosure or inadequate disclosure of commission receipts in the hands of the recipients could not make the commission expenses per se as ingenuine. Similarly, booking of commission payment in the last month of the financial year would not make the commission expenses per se as ingenuine as it is routine business practice to book expenses at the end. We have further noted that the arguments of the ld. AO on pages 5 and 6 of his order extracted hereunder dwell more in the realm of conjectures and surmises and a case of human probability. "........XXX 9. We have noted that the ld. CIT(A) ....
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....nts, the transaction cannot be disbelieved merely because the supplier's GST registration was later cancelled. The Court categorically held that where the buyer acts bona fide and maintains proper records, no adverse inference or denial of ITC is warranted. 27. The Hon'ble Gujarat High Court in CIT v. Nangalia Fabrics (P.) Ltd. [2013] 40 taxmann.com 206 (Guj.) has also held that once purchases are supported by bills and bank payments, disallowance cannot be made merely because the supplier's status is questioned later. Similarly, the Mumbai Tribunal in Geolife Organics v. ACIT [2017] 58 ITR(T) 297 (Mum.) observed that where the purchases are backed by delivery and payment evidence and the consumption of goods is accepted, the same cannot be treated as bogus. Further, the Delhi Bench in ACIT v. My Paper Merchants Pvt. Ltd. (ITA No. 226/Del/2024, dated 20.08.2025) reiterated that additions made on assumptions, without verification or tangible material, are unsustainable. xxx 29. In view of the above discussions, we find merit in the Ground No. 6 of the Assessee, accordingly, we delete the selective disallowance of Rs. 88.95 lakh out of total pur....
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.... High Court. The relevant paras are reproduced below: "5.----- It was further recorded by the AO that a statement of the Assessee was recorded during the course of search under Section 132(4) of the Act. In response to question No.11, the Assessee is stated to have made a categorical admission that the said sum of Rs. 86 lakhs belonged to him; ---- that the seized cash amount of Rs. 86 lakhs represented "my undisclosed income not recorded in the Books of Accounts". 6. The Assessee retracted the above admission during the course of the assessment proceedings, but not immediately after making the said statement. He started providing information to the AO from 14th July 1997 onwards, i.e., around two weeks before the deadline for finalization of the assessment, i.e., 31st July 1997. In his retraction, the Assessee stated that the surrender was made under a mistaken belief and "without looking into books of account and without understanding law". He further stated that he had been "compelled perturbed by events of search and wherein I had no opportunity either to consult my advocates, my staff or my books of accounts etc. The pressure of search was built so much that ....
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.... noted by the ITAT, the Assessee sought to explain the said amount with reference to the entries in the books of accounts of the sales made during the year and the stock position. In other words, the AO did not find that the cash seized represented amounts not emanating from sales but some other source. The fact that the Assessee may have retracted his statement belatedly did not relieve the AO from examining the explanation offered by the Assessee with reference to the books of accounts produced before him. 14. Therefore, although the counsel for the Revenue may be right in his submission that a statement under Section 132(4) of the Act carries much greater weight than the statement made under Section 133A of the Act, a retracted statement under Section 132(4) of the Act would require some corroborative material for the AO to proceed to make additions on the basis of such statement. Of course, where the retraction is not for any convincing reason, or where it is not shown by the Assessee that he was under some coercion to make the statement in the first place, or where the retraction is not followed by the Assessee producing material to substantiate his defence, the AO mi....
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....ent of undisclosed income has been based upon evidence and not on statement. 1.3 In this regard, we would also like to refer to provisions of section 132(4) of the Act which are as under: - 4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. From the perusal of aforesaid provisions, it is evident that examination on oath during search or seizure can be made only of any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing. In the present case of the appellant before your honour, as is evident from the statement recorded u/s 132(4) there is no reference to any books of account, documents, money, bullion, jewellery or other valuable article or thing that may have been found in possession of Sh. ....
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....inding of the Tribunal was based on the above well settled principle." 1.5 With regard to issue of as to whether addition can be made only on the basis of statement recorded during search u/s 132(4) of the Income Tax Act, the jurisdictional Delhi High Court in the case of CIT v Harjeev Aggarwal [2016] 70 taxmann.com 95 (Delhi) held as under :- 20. _ _ _ The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation. 21. A plain reading of Section 132(4) of the Act indicates that the authorized officer is empow....
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....y other material discovered during search and seizure operations on appellant. In this regard appellant places reliance on below mentioned judgments: i) In the case of Pr. CIT v. Anand Kumar Jain (HUF) 432 ITR 384 (Del) it was held as under: - 8. Next, we find that, the assessment has been framed under section 153A, consequent to the search action. The scope and ambit of section 153A is well defined. This court, in CIT v. Kabul Chawla, 1 concerning the scope of assessment under Section 153A, has laid out and summarized the legal position after taking into account the earlier decisions of this court as well as the decisions of other High Courts and Tribunals. In the said case, it was held that the existence of incriminating material found during the course of the search is a sine qua non for making additions pursuant to a search and seizure operation. In the event no incriminating material is found during search, no addition could be made in respect of the assessments that had become final. Revenue's case is hinged on the statement of Mr. Jindal, which according to them is the incriminating material discovered during the search action. This statement certainly has ....
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....explain exclusive with supportive evidence/material or otherwise that the admission by him earlier is not correct or contain a wrong statement or that a true state of affairs is different from that represented therein and so the same should not be accepted upon forecasting tax liability which should rather be fixed on the basis of correct and true affairs as ascertained from the material on record. 18. The case law cited by the department in the case of Ravindra Kumar Verma (supra) wherein the search was conducted on 14.5.1998 at the business premises in Lucknow and various papers, books of account and cash were seized and later on by letter dated 5.4.2002 the assessee retracted the confessional statement and on that basis the Hon'ble Court came to the conclusion that after almost 4 years the retraction was made and further there was no allegation of coercion or any threat whereupon addition was made, which is afterthought. 19. Paragraph 29 of the judgment in M/S Vertex Chemical Industries (Supra) is quoted herein below:- "29. In our case, the aforesaid judgment has no application. The reason is that here is not a case of retraction by Assessee but du....
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....ke it amply clear that the purpose of the assessment is to correctly determine the taxable income of the assessee in accordance with the provisions of the Act. (b) Admission relevant, but not conclusive-judicial precedents It is also trite law that admission, if any, made by the assessee on an incorrect/ erroneous impression in the return or the books of accounts may be relevant, but is not conclusive and can be clarified/ withdrawn at a subsequent stage. Reliance, in this regard, is placed on the following decisions wherein the Courts have consistently held that admission, per se, cannot be the foundation of assessment; admission may be an important piece of evidence but cannot be held to be conclusive. - Pullangode Rubber Produce Co. Ltd. vs. State of Kerala: 91 ITR 18 (SC) - The Supreme Court in Sri Krishna vs. Kurukshetra University, AIR 1976 SC 376 - Abdul Qayume vs. CIT: 184 ITR 404 (All.) - The Federal Bank Ltd. vs. The State of Kerala: AIR 1995 Kerala 62 @ 64 (Ker) - Basant Singh V. Janki Singh: AIR 1967 SC 341 (SC) - Bharat General Reinsurance Co. Ltd.: 81 ITR 303 (Del) - Satinder Kumar (HUF) ....
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.... The aforesaid principle of law has also been recognized by the Central Board of Direct Taxes (CBDT) in its Instruction No. F no. 286/2/2003- IT (Inv) dated 10.03.2003 (Refer pages 162 to 163 of caselaw PB), wherein CBDT had warned the revenue officers not to obtain confession to the undisclosed income, rather concentrate on collection of evidence of income which lead to what has not been disclosed or is not likely to be disclosed before the Income- tax authorities. The relevant extracts of the said Instruction read as under: "Instances have come to the notice of the Board where assessee have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if, not based upon credible evidence, are later retracted by the concerned assessee while filing returns of income. In these circumstances, such confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to ....
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....vs. CTT: 328 ITR 411 (Guj) Stiree Ganesh Trading Company vs. CIT 257 CTR 159 (Jhar) CIT vs. Naresh Kumar Aggarwal: 369 ITR 171 (AP) CIT vs. Harjeev Aggarwal 241 Taxman 199 (Del) Chetnaben J. Shah vs. ITO: 288 CTR 579 (Guj) CIT v Smt. Jaya Lakshmi Ammal: 390 ITR 189 (Mad) PCIT vs. Best Infrastructure (India) Pvt. Ltd. 397 ITR 82 (Del) Ratan Corporation: 197 CTR 536 (Guj.) It has similarly been held in the following decisions: CIT vs. N. Swamy 241 IIR 363 (Mad) CIT vs. Radha Kishan Goel: 278 ITR 454 (All) Surinder Pal Verma V. ACIT: 89 ITD 129 (Chd) (TM) Smt. Ranjnaben Mansukhlal Shah V. ACIT: 83 TTJ 369 (Rajkot) Ashok Manilal Thakkar vs. ACIT: 97 ITD 361 (Ahd.) Rajesh Jain vs. DCIT: 100 TTJ 929 (Del) Catherine Thomas V. DCIT: 111 ITD 132 (Cochin) To the same effect are the decision in the following cases: * PCIT vs. PGF Ltd.: 457 ITR 607 (Delhi) * Krishan Lal Shiv Chandra Rai vs. CIT: 88 ITR 293 (P&H) * CIT vs. M.P. Scrap Traders: 372 ITR 507 (Guj) * CIT vs. Ravindra Kumar Jain: 201 Taxman 95 (Jhar) (Mag) ....
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....ng and factually incorrect. The assessee company has also submitted the details of all the parties along with all the supporting documents in the physical form before the AO. 3. Non service of notice/ summon to supplier cannot be a ground for making the addition With regard to remarks made by the AO that summons issued to various purchase parties u/s 131(1A) returned unserved and inspector reports, it is submitted that no adverse inference is required to be drawn. Once the assessee has submitted the entire documentary trail in respect of parties to transaction during the period under consideration, non-compliance of summons issued u/s 131 of the Act by such parties cannot be made a basis to make addition in the hands of assessee. In this regard assessee places reliance on below mentioned judicial pronouncements: i) 159 ITR 78 (SC) CIT vs. Orissa Corp. (P) Ltd. "In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index numbers were in the file of the Revenue. The Revenue, apart from issuing notices under secti....
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.... (Del) CIT v. Victor Electrodes Ltd. vi) 333 ITR 119 (Del) CIT v. Oasis Hospitalities (P) Ltd. vii) 354 ITR 282 (Del) Mod Creations (P) Ltd. v. ITO viii) 357 ITR 146 (Del) CIT v. Fair Finvest Ltd. PUNJAB & HARYANA HIGH COURT i) 325 ITR 25 (P&H) CIT vs. GP International Ltd "Regarding the addition of Rs. 15,00,000/- on account of unexplained share capital, it has been held that at the time of the original assessment, the assessee had supplied the list of the persons along with their addresses to whom the shares were sold. The said list contained ITA No. 618 of 2009 -4- information, such as name, address and number of shares allotted. The Assessing Officer had issued enquiry letter under Section 133(6) of the Act at random basis to 25 persons, out of whom some of the persons confirmed the genuineness of the transaction. However, some persons did not respond. In view of this fact, out of the total share capital of Rs. 54,28,500/-, the Assessing Officer made an addition of Rs. 15,00,000/- by treating the sources of share capital of those persons as unexplained. In our opinion, the CIT (A) as well as the ITAT have rightly deleted the....
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....s: i) 217 Taxman 82 (All) (Mag) CIT vs. J.S. Bindra ii) 347 ITR 347 (Cal) S.K. Bothra & Sons HUF vs. ITO iii) 145 ITD 377 (Mum) (Trib) DCIT vs. Diven Dembla iv) 215 Taxman 11 (Del) (Mag) CIT vs. Delhi Housing & Finance Corporation v) 141 TTJ 123 (Jodh) ITO vs. Shiv Shakti Build Home (P) Ltd. vi) 24 SOT 1(Del) Baid Credit & Portfolio (P) Ltd. vs. ITO vii) 325 ITR 588 (P&H) CIT vs. Lal Singh viii) 36 ITR(T) 161 (Delhi - Trib.) DCIT vs GDA Finvest & Trade (P.) Ltd ix) ITA No. 4594/Del/2013 dated 07.07.2016 DCIT vs Gomati Consultants Pvt. Ltd x) 3 ITR(T) 372 (Patna) Gyan Ganga Ltd. Vs DCIT xi) 330 ITR 603 (Delhi) CIT v. Winstral Petrochemicals (P.) Ltd It was duly explained to the AO that transactions undertaken with the parties identified to be non-existent were in the ordinary course of business and the same were duly recorded in the books of accounts. It was also explained to the AO that it is the veracity of the financial transactions that matters and not the address of the supplier. The appellant company has duly provided the present address of all the parties identified to ....
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....the Ld. AO has alleged that the assessee had entered into purchase transaction with the following parties who according to the Ld. AO has not filed the ITR for the impugned year A.Y. 2021-22, the details of which are tabulated hereunder: Sr No. Name PAN 1 Jayapaul Rajesh AEZPR2846A 2 M R Gulmi AALFM2187K 3 Madhukar Gorakhnath Devkar AVUPD2403M 4 MRG Enterprises ABNFM3466E 5 Varmora Plastech Private Limited AAECV4247P 9. The Ld. AO has sought for the details pertaining to the ledger account, invoices, proof of transportation, delivery challans, proof of payments from the assessee with regard to the above mentioned parties and had also issued notices u/s 133(6) of the Act to the said parties. With regard to the first party namely Jayapaul Rajesh, the Ld. AO made an addition on the impugned purchases amounting to Rs. 2,62,73,000/- on the ground that the assessee has not submitted the ledger confirmation of the party and with regard to second party namely Mr. Gulmi the Ld. AO observed that though GST return has been filed by this party regularly no audit financials and return of income has been filed inspite of huge turnove....
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....en made is not correct. The appellant has also submitted that the input tax credit claimed against these purchases already stand allowed proving that the supplier is regularly filing its GST returns. It has also been pointed out that the supplier has duly responded to the verification notice issued by the AO on 29.12.2022 via email. (iii) Madhukar Gorakhnath Devkar - It has been submitted that the AO has taken incorrect purchase amount of Rs. 30,73,524/- as against actual purchase of Rs. 32,27,200/-. Further supporting documents in the form of Ledger Account, Invoice copies & Goods Receipt Notes, E-way Bills & Transportation Receipts, weigh bridge receipt and Bank Statements highlighting payments have been filed. The appellant has also submitted Income Tax Portal screenshot confirming that Madhukar Gorakhnath Devkar is not a "Specified Person" under Sections 206AB & 206CCA implying that the supplier has duly filed the return of income for the AY 2021-22 and hence the very pretext on which the disallowance has been made is not correct. The appellant has also submitted that the input tax credit claimed against these purchases already stand allowed proving that the supplier i....
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....y filed their return of income. In view of the above reasons and also in view of the fact that the books of accounts of the appellant are duly audited and the auditor has not identified any specific case of misuse and violation of the conditions prescribed in Section 37(1) of the Act, the addition made by the AO cannot be sustained. Thus, the addition of Rs. 25,5569,713/- made by the AO by attributing 46% profit to unverifiable purchases of Rs. 55,55,86,331/- is deleted and the ground of appeal is allowed." 10. From the above observation, it is evident that the assessee has furnished various documentary evidences such as ledger account, invoice copies with goods receipt notes, Eway bills, transportation receipts and bank statement reflecting payments made regularly and also the ITR details of party No.1 for A.Y. 2018-19, 2019-20 & 2020-21. It is also an undisputed fact that these parties have been filing GST returns regularly showing substantial business transaction and also the finding of the Ld. CIT(A) that none of these parties are "specified persons" u/s 206AB & 206CCA, which substantiates that they have duly filed their return of income for the impugned year and disal....
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....3(6) and no replies were received, it cannot be a ground for drawing adverse inference against the appellant. It is not a case of receipt of loan/share capital/gift etc. It is a case of services obtained by the appellant during the ordinary course of its business. This is not the first year of claim of such expenses. The similar expenses were incurred in the earlier years and also in the subsequent years. Applicable TDS has been deducted on almost all the contract charges. Almost all the contract charges have been paid through proper banking channel. Reliance in this regard is placed upon decision of Jurisdictional Delhi High Court in the decision of PCIT-07, Delhi Versus M/S. Wel Intertrade Pvt. Ltd. ITA 135/2023 it has held that creditor not responding to the notice u/s 133(6) cannot be a ground /reason by the AO to make an addition 6.1 In the case of M/s. Fancy Wear Versus Income Tax Officer Ward-24 (3)(1), NOW-31 (1) (4) MUMBAI it was held as under: - 2. 7. It appears that the only thing that has tilted the scale against it is returning back of notices, issued by the AO, u/s. 133(6) of the Act. But, this itself is not sufficient to hold that purchases....
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....ld that no sales can take place without purchases. Thus, the case under appeal is not about non genuineness of purchases itself, but it is about non genuineness of suppliers. Whether provisions of section 69C of the Act can be applied in the matters where all the purchase and sales transactions part of regular books of accounts. Basic precondition for invoking the section 69C is that the expenditure incurred by the assessee should be out of books of accounts. Here, the payments to the suppliers, as stated earlier, have been made by cheques. So, it cannot be held that expenses were incurred by the assessee outside the books of accounts. Section 69C was introduced in to the statute with a specific purpose. A bare reading of the section makes it clear that if the assessee incurred any expenditure, but offered no explanation about the source of such expenditure or part thereof, or the explanation so offered is not satisfactory, such expenditure may be deemed to be the income of the assessee. The assessee has offered satisfactory explanation about the source of the expenditure in the case before us. In the case of Parekh Corporation UI Building (32 CCH 129) the Tribunal has discussed th....
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....sessing Officer pursuant to the notice or even has stopped business, the claim of the assessee on that account cannot be discarded as nonexistent. In the case before us, the Revenue has not put forward any other ground, such as, it was not a genuine transaction for other reasons but has simply rejected the claim on the ground as if there was no such transaction. 6.4 In the head note of decision by Hon'ble ITAT Delhi in the case of United Foods Pvt. Ltd. v. ACIT, Circle - 27(1), Delhi 2023 (1) TMI 267 - ITAT Delhi it was held as under: - Shorn off the non-compliance of summons served under Section 131 - Assessee has filed formidable evidences to identify the contractors as well as the factum of incurring job work expenses as demonstrated by the income tax returns of the service providers. TDS has been deducted on such expenses and reflected in the return of income of the contractors. The increase in turnover, addition of new line of business, i.e., processing of rice and substantial increase in the fixed asset are vital indicators of plausibility of the explanation offered by the assessee in this regard. In this factual matrix, in the absence of any culpable eviden....
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....-business transaction/expenditure - HELD THAT:- In order to determine the genuineness of the payment made by the assessee AO issued notices under section 133(6) - only 2 parties namely, M/s EIH Ltd and The Lalit Golf and Spa Resort failed to respond to the aforesaid notice. In order to substantiate the genuineness of the payment to these 2 entities, assessee furnished the bank account statement, which reflected the payment made to these parties, invoices raised by these entities to the assessee, details of tax deducted on payment made to these parties, PAN No. and complete address. It is no doubt true that payment through the bank channel is not conclusive proof of the transaction. At the same time, when the assessee has provided all the information available with it regarding the transaction, merely on the basis that the entity has not responded to notice issued u/s 133(6) the transaction cannot be doubted and be treated as non-genuine, particularly when the same has been entered into with entities which are well-known Hotel chains in India. It is also not the claim of the Revenue that these entities are not in existence or the documents furnished by the assessee....
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....accounts including daily item-wise, stock register, purchase book, sales book, purchase bills and sales books; (ii) the accounts of the assessee have been duly audited under the Income-tax Act as well as the Companies Act; (iii) sales invoices of vendors were placed on record before the Assessing Officer. Insofar as purchases made by the assessee, were concerned they were entered in the item-wise stock register maintained by the assessee; (iv) all payments for purchases have been made by cheques; (v) a complete quantitative analysis between purchases made and corresponding sales were prepared and filed before the Assessing Officer. The quantitative analysis made has not been called into question by the Assessing Officer; On further appeal / reference to High Court by revenue, the jurisdiction High Court dismissed the revenue's appeal. It is pertinent to point out that against the order of Hon'ble High Court the department filed SLP before the Hon'ble Supreme Court. The Hon'ble Supreme Court dismissed the SLP filed by revenue which is reported at 320 ITR 17 (St) (SC). 7.3 In the case of CIT v BHOLANATH POLYFAB (P) LTD (2013) 355 ....
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.... 7.7 In the case of INCOME TAX OFFICER VS. PERMANAND ITAT, JODHPUR BENCH - (2007) -addition under s. 69 was made on account of alleged bogus purchases. The A.O. received information from the Sales-tax Department that the purchases made by the assessee from two parties were bogus. Relying on the same, AO made addition under s. 69. The Hon'ble Tribunal held that the addition made by the A.O. was not justified. It was held that no addition can be made in the hands of the assessee merely on the basis of observations made by a third party-It was held that assessee has discharged the primary onus cast on him by showing the purchases in the books of accounts, payment by way of account payee cheques and producing the vouchers of sale of goods. Moreover, no opportunity was given to the assessee to confront the sellers. It was held that the addition was to be deleted. 7.8 In the case of JAGDAMBA TRADING COMPANY vs. INCOME TAX OFFICER ITAT, JODHPUR 'SMC' BENCH - (2007) - addition was made of alleged bogus purchases on the ground that the seller in his affidavit before the sale tax department has submitted that he has not made any sales. It was held that by the Hon'ble Tribunal t....
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....om any qualification by the auditors, should normally be taken as correct unless there are adequate reasons to indicate that they are incorrect or unreliable. The onus is upon the Revenue to show that either the Books of Accounts maintained by the assessee were incorrect or incomplete or method of accounting adopted by him was such that true profits of the assessee cannot be deduced therefrom. * The Hon'ble ITAT Delhi in the case of Bony Rubber Co. Pvt. Ltd. vs. ACIT vide ITA No. 4980/Del./2004 has held as under: "It is well settled that without rejecting the books of accounts maintained by the assessee by pointing out specific material defects therein, the results declared by the assessee on the basis of such books regularly maintained cannot be disturbed and it is not permissible for the AO to make the trading addition merely because the GP rate shown by the assessee is lower than that of earlier years without complying with the requirements of the provisions of sec. 145". In the case of the assessee before your honour, the facts are even stronger as there is not even allegation of assessing officer about fall in GP rate as compared to earlier years....
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....adras High Court in the case of M/s Vetrival Minerals and Ors v. ACIT reported in 437 ITR 178 has held that in absence of certificate u/s 65(B) of the Indian Evidence Act in respect of so-called electronic record i.e. copies of Excel Sheet, Excel work note book etc., - the document is inadmissible in the eye of law, Reliance is placed on the following judgements: i) (2014) 10 SCC 473 Anvar P.V. Vs P. K. Basheer ii) 2008 (1) ARBLR 317 (Bom) Ark Shipping Co. Ltd. vs Grt Shipmanagement Pvt. Ltd iii) W. P. 18013 (W) of 2012 (Kol). Abdul RahmanKunji vs. The State OF West Bengal iv) Civil Appeal Nos 20828-20826 of 2017 dated 14.7.2020 Arjun Pandit Rao v. Kailash Kushan Rao Gorantyal. v) 153 taxmann.com 591 (Visakhapatnam - Trib.) Polisetty Somasundaram vs DCIT vi) ACIT v. Anand Jaikumar Jain [2023] 147 taxmann.com 125 (Mum. - Trib.) [Certificate under section 65B(4) of the Indian Evidence Act, 1872 is a condition precedent to the admissibility of evidence by way of electronic record as section 65B(4) of the Indian Evidence Act, 1872 is a mandatory. In view of the same, it was submitted that the pen drive (an electronic record), being ....
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....nd in their relation during the course of search proceedings, nor these parties where confronted to the Promoters of the company during the course search and post search proceedings. It is to be noted that the AO chose to rely upon the electronic evidence which is available in the form of Pen-drive and other electronic equipment's, the contents contained therein, have to be certified in terms of Section 65B of the Indian Evidence Act whereas no such certification was done. Under the Indian Evidence Act, 1872, Section 65B prescribes a distinct framework that governs the admissibility of electronic evidence. The data relied upon by IO is not as per certificate to be taken as per CBDT Manual. The reliance is placed on the latest decision of Hon'ble ITAT DELHI in the case of Arit Garg,Delhi vs Dcit, Central Circle-31, Delhi pronounced on 14 January, 2026/ ITA No.3144/Del/2025.". 5. The Revenue, on the other hand, strongly supports the Assessing Officer's action disallowing the assessee's entire impugned purchases based on its authorized persons admissions made during the course of search. 6. We deem it appropriate at this stage to refer to learned CIT(A)'s detai....
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....llant, I would like to highlight the following facts, which are crucial for determination of reliability of aforesaid Statements in the context of assessments made in the case of appellant company: (a) It is significantly noteworthy that although the Statement was recorded between 20/09/2023 to 24/09/2023, the appellant retracted its Statements only on 18/02/2025, ie, more than 17 months of making these confessions before the IT department, which casts serious aspersions on credibility of the retraction so made. (b) Further, the appellant has not put forth any substantive proof of threat/duress during the recording of Statement as is being alleged by the persons. (c) At the same time, I am also seized of this undeniable that the Statements were recorded over a prolonged period of over 3-5 days at a stretch, which inevitably placed the appellant to evident stress and mental duress. It is also undeniable that the surrounding circumstances as narrated by the appellants do indicate an element of adversarial circumstantial matrix under which Statements were recorded during 20th to 24th September, 2023. (d) It is also noticed that it is the admissions/....
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....el Meriva [2010] 195 Taxman 459/120111 332 ITR 537, which has considered the scope of a statement recorded under section 132(4) and found that such statement recorded by the officer as well as the documents seized would come within the purview of evidence under the Income-tax Act read with Section 3 of the Evidence Act. The necessary corollary is that such evidence should be admissible for the purpose of search assessments too. The Explanation to Section 132(4) of the Income-tax Act was also noticed by the Division Bench to further emphasize that the evidence so collected would be relevant in all purposes connected with any proceedings of the Income tax Act. 5.3.4.8 Hence, it is an undeniable fact emergent from examination of jurisprudence on the subject that a statement recorded on oath carries a significant evidentiary value which may be used by the Assessing Officer during assessment proceedings as corroborative evidence along with documentary evidences material unearthed during search and seizure action. 5.3.4.9 VALIDITY OF RETRACTION OF STATEMENT RECORDED DURING SEARCH 5.3.4.10 However, at the same time, it is also pertinent to note here that invaria....
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....on deeper analysis and investigation that such a statement was given under a fallacy or under mistaken belief of facts or at times of nervousness, stress, and panic and thereby the statement so tendered does not reflect the true situation. 5.3.4.12 However, for any retraction to be successful in the eyes of law, the assessees must show as to how earlier recorded statements do not state the true facts or that there was coercion, inducement or threat while recording his earlier statements. Although law permits retraction of a statement, it lays down certain perquisites, without which the statement, though retracted, can be used as evidence in any proceedings under the Act. Any statement recorded under section 132(4), statutorily deemed to have evidentiary value; cannot be retracted at the mere will of the party. Therefore, whenever an assessee pleads that the statement has been obtained forcefully/by coercion/undue influence without material/contrary to the material, then it needs to be supported by strong evidence. Once a statement is recorded under section 132(4), such a statement can be used as strong evidence against the assessee in assessing the income, the burden lies ....
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....Produce Co. Ltd. v. State of Kerala. (1973) 91 ITR 18 (SC) an admission is an extremely important piece of evidence though it is not conclusive. Therefore, a statement made voluntarily by the assessee could form the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and in fact there was even seem to have been attempted to be discharged." (c) The Hon'ble Kerala High Court in case of CIT v. O. Abdul Razak [2012] 20 taxmann.com 48/207 Taxman 193 (Mag.[20131 350 ITR 71 held that a self-serving retraction, without anything more cannot dispel statement made under oath under section 132(4). A statement made under oath deemed and permitted to be used in evidence, by express statutory provision, must be taken as true unless there is contra evidence to dispel such assumption. 5.3.4.13 In this context, it is also essential to take cognizance of the fact that various courts in the following cases have held that during the search the whole atmosphere is of utmost pressure and therefore the....
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....s forcibly dissected. Even the pillows are not spared and their acts are backed by the powers of an investigating officer under Section 94 of Cr.P.C by operation of sub-section (13) of Section 132 of the Act. The objective may be genuine, and the exercise may be legal. However, the freedom of a citizen that transcends, even the Constitution cannot be treated as non-existent". (IV) in Dy. CIT v, Rajiv Kumar Gupta [IT Appeal No. 15 (Delhi) of 2013, dated 21-12- 20181, the Hon'ble Delhi IFAT has deleted the additions made based on statement u/s 132(4) of the act and held as under: - "7.2 We also note that following pleadings and evidences were made in this regard before 10 and Ld CIT(A) submitting that statement recorded allegedly during the course of search was not free and fair and therefore addition cannot be made on that basis. At page no. 79-83 of the Paper Book, it is noted that the search was completed at the locker of the assessee on 25-3-2009 and letter of retraction was made within 48 hours of such completion. It is also noted from page no. 57-58 of the Paper Book that no witnesses were present at the time of recording of statement which is evident from....
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....ing upon broad circumstantial matrix of respective cases. 5.3.4.15 Accordingly, in the light of legal matrix discussed in preceding paragraphs, and after considering the factual position of the instant case in its entirety, I am of the view that the Retracted Statements of aforesaid persons as has been relied upon by the AO in this case, have a limited evidentiary value unless further supported/corroborated by independent enquiry/investigations. 5.3.5 LEGAL PERSPECTIVE ON EVIDENTIARY VALUE OF STANDALONE STATEMENTS ON OATH u/s 132(4) OF THE IT ACT, 1961 5.3.5.1 The settled principle of law suggests that a confession of an accused would need corroboration with evidences to convict the accused. It is also a settled legal position that although an admission is an important piece of evidence, but it is not conclusive and it is open to the assessee to show that it is incorrect. (a) At this stage. I solicit guidance from the verdict of Hon'ble Supreme Court of India in case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala 19731 91 ITR 18 wherein their Lordships while observing that admission is an extremely important piece of evidence, held ....
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....essee during search operation." (f) Further, it is unequivocally and consistently stipulated by the Hon'ble Delhi High Court that the AO cannot solely rely on the statement recorded u/s 132(4) of the Act. Hon'ble Delhi High Court in the case of PCIT Vs. Pavitra Realcon Pvt. Ltd. cited (supra), has held as under: "19. Undisputedly, during the period of search, no incriminating material appears to have been found. However, the Revenue proceeded to issue notice under Section 143(2) of the Act on the pretext of the statements of the Directors of the respondent-assessee companies recorded under Section 132(4) of the Act and material seized from the search conducted on Jain group of companies. The assessment order was also passed under Section 143(3) read with Section 153C of the Act making additions under Section 68 of the Act. 20. However, it is an undisputed fact that the statement recorded under Section 132(4) of the Act has better evidentiary value but it is also a settled position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content of the statements." (g) I....
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....5.3.7.1 In this connection, the factual position as emanating from examination of material on record is sequentially recapitulated below for consideration: 5.3.7.2 The matter under consideration owes its genesis to the search on VESTIGE GROUP OF COMPANIES wherein it was reported that appellant had indulged in large scale tax evasion through the modus operandi of bogus billing of "purchases" claimed in P & L account, and inflation of expenses by way of bogus commission/bonus expenses debited in Profit and Loss account. An examination of records reveals that in this case, AO has made following additions in this case: 5.3.7.3 The AO has made the addition of Rs. 8,86,36,574/- by disallowing the expenses claimed by the appellant u/s 37 of the IT act, 1961. The breakup of disallowance of Rs. 8.86,36.574/- is as under: - Sr. No. Reference to the document/statement/digital evidences relied upon by the AO Amount 1. Summons issued to various purchase parties u/s 131(1A) of the Act which returned unserved as the parties didn't exist at their registered address. Rs. 9,54,670 2. Digital evidence - An excel sheet titled "Bogus Expense Employee-wise" ....
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.... commission/bonus/marketing/business promotion expenses. However, the actual magnitude of tax evasion can only be ascertained based on independent enquiry/investigation in respect of financial transactions of appellant with alleged bogus entities. I am of the view that mere Statements of few persons cannot be the ground for quantification of actual tax evasion and for addition thereof. In this connection, it is further noticed that the data so stated to be retrieved from various sources, be it Excel sheets extracted from desktops, Pen-drive data, or Email Data, have also been extracted by relying upon Statements of certain employees on oath, which has been relied upon by the AO. The data broadly comprises of names of various entities who allegedly have indulged in bogus billing/bogus expenses. I notice that no real documentary proof of indulgence of any these named entities in such malpractices have been retrieved during search. In fact, there is no incriminating documentary evidence retrieved from search which could suggest that the entities so alleged were bogus, non- existent, or mere entry-operator/bogus/paper entities. Therefore, at this stage, it is incumbent to examine the o....
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....s, sale invoices and ITR of party. 76 Total (C) 21,521,815 (D) Excel Sheet 2 NIL NIL - Total (D) - (E) Remaining Parties 1 Suresh Kumar Goel Huf AAKHS8586H 746,132 compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A]. The appellant has filed complete name, address, PAN, confirmed statement of accounts, sale invoices and ITR of party. 2 Alka Aggarwal AGEPA7718F 530,271 compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A]. The appellant has filed complete name, address, PAN, confirmed statement of accounts, proof of TDS, Bank Statement, and ITR of party. 3 Priyanka AOTPJ7363L 236,509 compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A]. The appellant has filed complete name, address, PAN, confirmed statement of accounts, proof of TDS, Bank Statement, and ITR of party. 4 Preeti Agarwal ADRPA3039M 453,560 compliance made to notice u/s 133(6)....
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.... 795,375 compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A]. The appellant has filed complete name, address, PAN, confirmed statement of accounts, proof of TDS, Bank Statement, and ITR of party. 15 Sonam Gupta BRCPG5683B 717,364 compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A]. The appellant has filed complete name, address, PAN, confirmed statement of accounts, proof of TDS, Bank Statement, and ITR of party. 16 Ritu Jain AFPPJ3649L 954,451 compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A]. The appellant has filed complete name, address, PAN, confirmed statement of accounts, proof of TDS, Bank Statement, and ITR of party. 17 Tanisha Jain BDIPJ7818R 954,451 compliance made to notice u/s 133(6) with confirmed copy of accounts and proof of TDS [Form 16A]. The appellant has filed complete name, address, PAN, confirmed statement of accounts, proof of TDS, Bank Statement, and ITR of party. 18 Shikha Jain AHAPB0135A 265,125 compliance made to notice u/s 133(6) with confirmed....
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.... 6 Anshu Jain AUPPJ3279F 396,162 Filed 1673453 7 Arvind Kediyal MNPK7061L 477,225 Filed 910423 8 Ashu Aggarwal BYNPA3977N 371,174 Filed 557454 9 Karan Jain BPNPJ0028N 1,011,316 Filed 1017074 10 Laxmi Sharma AXMPS3502J 530,254 Filed 992393 11 Meenu Gupta AUPG6353Q 689,324 Filed 1059325 12 Mohit Jain BPNPJ0027D 1,010,510 13 Narain Dutt AHFPG7432A 530,258 Filed 535384 14 Ramesh Chand Gupta AGPG8894A 795,375 Filed 1067680 15 Sonam Gupta BRCPG5683B 717,364 Filed 796430 16 Ritu Jain AFPPJ3649L 954,451 Filed 1823297 17 Tanisha Jain BDIPJ7818R 954,451 Filed 1234324 18 Shikha Jalan AHAPB0135A 265,125 Filed 490462 Total (E) 11,011,333 (F) Bonus Bonus A 55,148,756 Total (F) 55,148,756 Grand Total (A to F) 88,636,574 ....
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.... (g) For the remaining entities, the addition seems to be hinged upon a slew of general statements of Promoters and employees regarding indulgence of appellant in tax evasion through bogus billing/bogus commission. But the Statements are nowhere supported by any real and specific evidence of indulgence of appellant or any of these remaining entities in dubious transactions. Further, the evidentiary value of Statements of promoters/employees in the present circumstantial matrix is very restricted since the statements now stand retracted. In this situation, I am once again seized of judgements of Hon'ble Delhi High Court in the case of CIT Vs Harjeev Aggarwal (2016) 290 CTR 263 (Del.) and Pr. CIT Vs Best Infrastructure (India) Pvt. Ltd. (2017) 397 ITR 82 (Del.), which have settled the legal position that additions solely based on incriminating Statements are legally unsustainable unless further corroborated by supportive evidences, ie, live nexus between Statements and evidences derived from search/post-search enquiries is established by the AO. In this case, contrary to what was alleged in "Statements on oath," all these remaining entities are seen to be very much in existe....
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....(A) has rightly deleted the impugned bogus purchases disallowance amounting to Rs. 8,72,84,192/- in its favour. The Revenue's instant former ground fails in very terms therefore. 8. We next come to the assessee's corresponding substantive ground seeking to delete the remaining bogus purchase disallowance of Rs. 13,52,382/- (supra). We deem it appropriate to reiterate here that the twin parties concerned namely, Smt. Payal Agarwal and Shri Mohit Jain had nowhere filed their responses to Section 133(6) notices nor their income tax returns or confirmations etc. could see light of the day. The fact also remains that the assessee business activity stands admitted all along. Nor there is any serious abnormality noticed in its books of account as well. We thus deem it appropriate in this backdrop and in the larger interest of justice that a lump sum disallowance at the rate of 5% of the impugned remaining bogus purchases would be just and proper with a rider that the same shall not be treated as a precedent. Necessary computation shall follow accordingly. The assessee's instant appeal ITA No.5515/Del/2025 raising the very sole substantive ground stands partly accepted. 9. Learned CI....