TaxTMI 
TaxTMI 
2026 (7) TMI 1091
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....s for the A.Y. 2018-19, 2019-20 and 2020-21 were framed u/s. 147 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), whereas the assessment for the Assessment Year 2021-22 was completed u/s. 143(3) of the Act. 3. Since the issues arising for consideration in all the five appeals are substantially identical, emanating from the same search and seizure proceedings, involving common facts, identical evidentiary material and common reasoning by both the lower authorities, the appeals were clubbed, heard together and are being disposed of by this consolidated order. At the time of hearing, both the learned Departmental Representative and the learned Authorized Representative fairly submitted that the issues involved in these appeals are common in nature and arise out of the same search proceedings. Accordingly, with the consent of both the parties, the appeals were heard analogously. In the interest of judicial consistency, to avoid repetition of facts and duplication of discussion, and for the sake of convenience and brevity, we deem it appropriate to dispose of all the five appeals by way of this common and consolidated order. However, wherever the facts or grounds o....
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....urther observed, on verification of the stock summary and the ledger accounts of M/s. Nayara Energy Limited, M/s. Essar Oil Limited and M/s. Indian Oil Corporation Limited contained in the seized Tally data pertaining to AY(s) 2019-20 and 2020-21, that the diesel purchases recorded therein had not been claimed as expenditure in the seized Tally data. Accordingly, while computing the alleged suppressed profits, the said purchases were also treated as allowable expenditure. 9. On the basis of the aforesaid exercise, the Authorized Officer worked out the alleged suppressed profit of the assessee for AY 2018-19 to 2021-22 at Rs. 132,95,51,661/- during the course of the search. The AO, while framing the assessment, reproduced the workings prepared by the Authorized Officer at the time of search, as extracted at page 3 of the assessment order for A.Y. 2018- 19, which are reproduced hereunder: Salem Mines & Aggregates Net profit Suppression Analysis FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 Net profit as per Tally 37,21,93,285 58,67,83,442 59,03,93,522 15,35,35,895 Adjustments: ....
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....ted purchases and sales. However, insofar as the quantum of the alleged suppression of profits worked out by the search team was concerned, he did not admit or confirm the said computation. On the contrary, he requested that a period of one week be granted to enable him to verify the relevant books of account and supporting documents so as to ascertain the correct quantum, if any, of such alleged suppression. 11. During the course of the post-search proceedings before the Joint Director of Income Tax (Investigation) (OSD), Unit-2(4), Chennai (hereinafter referred to as "the JDIT(Inv)"), the assessee, vide its reply dated 07.04.2022, furnished a detailed reconciliation of the profits reflected in the seized Tally data vis-à-vis the profits disclosed in the returns of income filed for the assessment years under consideration. The assessee explained that the seized Tally data represented an incomplete set of books wherein several heads of expenditure had not been transferred to the Profit & Loss Account. Consequently, the profits reflected in the seized Tally data stood artificially inflated and did not represent the true financial results of the business. 12. In support ....
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.... 25,00,000 Asset Write Off 2,99,99,993 Cash Exp (Inc Salary, Bonuses) 63,79,405 1,10,00,663 Expenses Disallowed (Donation, Gits, Deposits) -69,80,158 Insurance Exp 5,08,476 Total 34,83,40,428 57,24,34,266 57,76,49,774 14,35,42,566 In Tally 37,21,93,285 58,67,83,441 59,03,93,521 15,35,35,894 Actual Filed ITR 2,38,86,231 1,43,49,174 1,27,43,472 29,75,955 Difference -33,374 1 275 70,17,373 13. From the aforesaid reconciliation, the assessee demonstrated that there was no suppression of profits for the AY(s) 2018-19, 2019-20 and 2020-21. In so far as the A.Y. 2021-22 is concerned, the reconciliation disclosed a difference of Rs. 70,17,373/ -. Against the said difference, the assessee had already offered an additional income of Rs. 1,00,00,000/- by filing a revised return of income on 31.03.2022, thereby covering the entire difference arising out of the reconciliation. 14. It is further noticed from page 5 of the assessment order for the A.Y. 2018- 19 that the reconcil....
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....993 Cash Exp (Inc Salary, Bonuses] 63,79,405 1,10,00,663 Expenses Disallowed Donation, Gits, Deposits) -69,80,158 Insurance Exp 5,08,476 Total 14,80,94,020 38,18,22,206 40,02,15,714 10,74,53,436 15. However, the issues relating to (i) the alleged difference in closing stock, (ii) purchases of aggregates, and (iii) certain non-allowable items such as income-tax paid, advance tax paid, tax deducted at source and lease rent were left open by the JDIT(Inv) for examination by the AO during the course of the assessment proceedings. In so far as the items relating to income-tax paid, advance tax paid, tax deducted at source and similar inadmissible expenditures are concerned, no dispute survives, since the assessee had already disallowed and added back the same while computing its taxable income in the respective returns of income. Thus, the controversy that survives for adjudication is confined only to the additions made on account of the alleged bogus purchases of aggregates and the alleged difference in closing stock. 16. During the course of the asses....
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..... P.S. Blue Metals were duly recorded in its regular books of account and were supported by tax invoices. The transactions had suffered GST, and the corresponding sales had also been disclosed by M/s. P.S. Blue Metals in its own books of account. It was further pointed out that the purchases recorded in the hands of the assessee correspondingly stood reflected as sales in the books of the proprietary concern of its partner, thereby establishing the identity of the supplier as well as the genuineness of the transactions. On the aforesaid premises, the assessee contended that the purchases could not be characterised as bogus merely on the basis of suspicion or surmises and requested the AO to refrain from making any disallowance. 21. With regard to the proposed addition on account of the closing stock reflected in the seized Tally data, the assessee submitted that the figures appearing therein did not represent the actual value of the closing stock physically held by the assessee. It was explained that owing to an accounting error, substantial purchases of diesel and explosives had inadvertently remained grouped under the head "Closing Stock" instead of being transferred to the re....
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....ly "Modomines", maintained by the assessee did not contain any inward entries evidencing purchases of aggregates from third parties or from its partner. 27. Although the assessee had claimed that the purchases were made from M/s. P.S. Blue Metals, the proprietary concern of Shri Subramani Perumal, the AO observed that, upon examination, Shri Subramani Perumal stated that he procured the materials from various third-party suppliers before supplying them to the assessee. However, according to the AO, despite repeated opportunities, neither the assessee nor Shri Subramani Perumal furnished the names, Permanent Account Numbers (PAN), addresses, quarry details, invoices or other supporting particulars relating to such primary suppliers. The AO therefore concluded that the assessee had failed to establish the actual source of procurement of the aggregates and held that no genuine purchases had in fact taken place. Proceeding on this premise, the AO treated the expenditure claimed towards purchase of aggregates as bogus expenditure incurred with the intention of suppressing the taxable profits of the assessee. 28. With regard to the issue of closing stock, the AO observed that the f....
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....g stock difference u/s. 37 16,62,12,802 6,48,47,396 72,45,116 - Total Addition made by the AO 19,07,26,148 17,92,74,594 (Sum of the above additions amounts to Rs. 18,50,74,592/ -. However, the AO has erroneously arrived at a figure of Rs. 17,92,74,594/-) 10,15,74,102 1,06,84,717 31. Consequently, the impugned assessment orders came to be passed by the AO, determining the total income of the assessee as under: (Amount in Rs.) Particulars AY 2018-19 AY 2019-20 AY 2020-21 AY 2021-22 Assessment completed u/s. 147 147 147 143(3) Date of order 20.03.2025 27.03.2024 27.03.2024 30.12.2022 Total income returned by the assessee 3,41,81,690 2,60,07,840 8,87,92,520 1,86,96,770 Total additions made by the AO as detailed supra 19,07,26,148 17,92,74,594 10,15,74,102 1,06,84,717 Assessed Income 22,49,07,838 20,52,82,434 19,03,66,622 2,93,81,487 32. Being aggrieved by the assessment orders passed by the AO, making additions towards the alleged bogus purchases of aggregates and the alleged difference in the valuation of closing stock, the assessee preferred appeals before ....
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....genuine and consequently disallowing the corresponding expenditure claimed by the assessee u/s. 37 of the Act. The correctness and sustainability of the said disallowances are the subject matter of adjudication before us. 38. The assessee, before the Ld.CIT(A), assailed the impugned additions by contending that the purchases in question were effected from existing and identifiable concerns, viz., M/s. P.S. Blue Metals, M/s. RKG Earth Movers and M/s. Shri Chennai Mines, all of whom were duly registered under the GST Act and possessed valid PAN and GST registrations. It was further submitted that M/s. P.S. Blue Metals and M/s. Shri Chennai Mines were assessed to income- tax by the very same AO. Therefore, according to the assessee, once the identity and existence of the suppliers were never in dispute, there existed no justification for the AO to characterize the purchases as bogus. 39. The assessee further submitted that the purchases were duly supported by cogent documentary evidence comprising GSTR-2A reflecting the impugned transactions, ledger accounts of the suppliers, bank statements evidencing payments through normal banking channels, sales registers maintained by the s....
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....hat if the entire purchases were disallowed, the resultant Gross Profit ratio would increase abnormally, which would be commercially unrealistic and wholly inconsistent with the nature of the assessee's business. It was argued that the AO had not brought on record any comparable industry data or similar cases to justify such an abnormal Gross Profit ratio. 44. The assessee also assailed the observations of the AO regarding alleged excessive mining, absence of inward movement of materials and the failure of the suppliers to furnish details of their vendors, by submitting that such findings were founded merely on assumptions and surmises. It was contended that no technical report, scientific analysis or independent evidence had been brought on record to establish excessive mining. It was further explained that the blue metal aggregates purchased from the suppliers were transported directly from the crushing units to the customers and, therefore, there was no occasion for any inward movement of such materials into the assessee's quarry premises. It was also submitted that any alleged deficiency in the maintenance of records by the suppliers could not constitute a valid grou....
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....esented payments made towards aggregate purchases, all of which had been discharged through normal banking channels, thereby ruling out any inference of cash transactions or non-genuine dealings. It was further submitted that the AO had not disputed the genuineness of the payments nor alleged that the expenditure had been incurred for any purpose other than the legitimate business of the assessee. Consequently, the expenditure qualified for deduction u/s. 37(1) of the Act. 49. The assessee further submitted that the Gross Profit ratio declared for A.Y. 2020-21 was 19.32%, which was substantially in line with the Gross Profit ratio of 19.40% disclosed in the immediately preceding assessment year, thereby indicating consistency in the trading results and negativing any allegation of inflation of expenditure or suppression of income. It was also contended that the AO had not rejected the books of account u/s. 145 of the Act and had accepted the sales disclosed by the assessee. Therefore, in the absence of any specific defect, a partial disallowance of business expenditure was legally untenable. It was submitted that even assuming there were certain deficiencies in the supporting vo....
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....nced by the assessee and the material available on record, the Ld.CIT(A) granted relief in varying degrees across the assessment years under consideration. The additions made by the AO were deleted in entirety for AY(s) 2018-19 and 2019-20. In respect of A.Y. 2020-21, the Ld.CIT(A) sustained the addition only in part, whereas for A.Y. 2021-22, the addition was confirmed in full. The particulars of the relief granted by the Ld.CIT(A) for the respective assessment years are summarized hereinbelow for the sake of ready reference: AY Supplier Amount (Rs.) Relief given by the CIT(A) 2018-19 M/s. P.S. Blue Metals, a proprietary concern of Shri Subramani Perumal, one of the partners of the assessee-firm 2,45,13,346 Deleted 2019-20 M/s. P.S. Blue Metals, a proprietary concern of Shri Subramani Perumal, one of the partners of the assessee-firm 12,02,27,196 Deleted 2020-21 M/s. P.S. Blue Metals 7,77,33,236 Deleted M/s. RKG Earth Movers 1,10,97,410 Sustained M/s. Shri Chennai Mines 17,68,467 Deleted M/s. RKG Earth Movers (being payments reflected in the seized Tally data) 39,02,344 ....
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....ed through documentary explanation at the time of post-search proceedings itself. 5.3.8 Now adverting to the reasons recorded by the Assessing Officer for disbelieving the purchases from M/s P.S. Blue Metals, it is observed that the principal ground taken in the assessment order is that the appellant had access to sufficient boulders through alleged excessive mining from its own quarry, and that such extraction was made without incurring corresponding expenditure. The first limb of this reasoning, in substance, amounts to an allegation that the appellant had carried out mining operations in excess of the licensed or permitted capacity. However, no material whatsoever has been brought on record in the assessment order to substantiate such an allegation. An addition or disallowance cannot be sustained on the basis of presumption that the appellant must have mined beyond permissible limits, particularly when such an allegation carries regulatory and penal implications under the relevant mining laws. In the absence of any seized material evidencing unrecorded production, the very foundation of the Assessing Officer's reasoning lacks evidentiary support. 5.3.9 In t....
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....in the trade of construction materials and quarry products, where direct dispatch to customers is undertaken to reduce handling costs, avoid double transportation, and meet time-sensitive supply commitments. The absence of inward movement at the appellant's premises, therefore, cannot, by itself, lead to the conclusion that the purchases are fictitious, unless it is further demonstrated that the corresponding outward supplies, sales realization, or quantitative records are also unverifiable. 5.3.11 As per the assessment order, due inquiries were conducted with the supplier of impugned blue metals, namely the proprietor of M/s P.S. Blue Metals, who is also a partner in the appellant-firm and had been simultaneously searched along with the appellant. The proprietor, Sri Perumal confirmed the sales made through his proprietary concern and, as per the appellant, provided all relevant records in his possession, including GST returns, income tax filings, and other documentary evidence substantiating the transactions. However, despite the supplier's confirmation and the submission of comprehensive records, the Assessing Officer did not undertake any independent verificati....
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....ve not been found to be sham or fictitious / circuitous assumes evidentiary significance. In the absence of any material demonstrating that the GST findings were erroneous or that the transactions were merely accommodation entries, it would be inconsistent to disregard the purchases solely on presumptive grounds. Thus, the acceptance of the transactions by the GST authorities further fortifies the appellant's contention that the purchases from M/s P.S. Blue Metals are genuine and duly supported by statutory compliance and documentary evidence. 5.3.13 To conclude, in view of the foregoing discussion, when the Tally data found during the course of search has been substantially reconciled; when the allegation of excessive mining is unsupported by any material evidence; when the absence of inward movement stands satisfactorily explained in light of direct dispatch to customers; when the sole supplier has confirmed the transactions and furnished statutory records; when the supplier himself was subjected to search and assessment by the same Assessing Officer; and when the impugned transactions have been accepted by the GST authorities without any adverse finding - the cumula....
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....onstitute a specific and identifiable portion of the total purchases reported. The ratio of such disputed purchases to the overall purchases, when examined vis-à-vis the sales turnover declared by the appellant, does not ipso facto validate the genuineness of the transactions. Each purchase transaction must independently withstand scrutiny, and failure to substantiate the same with cogent and corroborative evidence cannot be cured merely by the existence of corresponding sales entries. 5.3.14 As regards production of evidences, mere production of GST returns and proof of payment through banking channels, without supporting evidence establishing the identity, creditworthiness, and business activity of the supplier, cannot by itself discharge this burden. The evidentiary deficiency in respect of M/s RKG Earth Movers, therefore, remains unaddressed and cannot be overlooked. In view of the foregoing discussion, it is evident that the appellant has failed to discharge the primary onus cast upon it to substantiate the genuineness of the purchases claimed from M/s RKG Earth Movers. Mere filing of GST returns and proof of payment through banking channels, in the absence of ....
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....iness; that the AO had not rejected the books of account and the sales declared are accepted as such and therefore, partial disallowance of business expenditure without identifying the specific discrepancy cannot be sustained. 6.1 I have gone through the assessment order and the submissions of the appellant. As discussed in para 5.3 above, the total purchases from M/s RKG Earth Movers were disallowed in the absence of any corroborative evidences furnished by the appellant, as was done while substantiating the purchases from the other two parties. Since the entire purchases of Rs. 1,10,97,410/- from this party for the year have already been held to be unsubstantiated and disallowed, any further disallowance of payments made to the same party would result in duplication of addition. Once the purchases themselves stand disallowed, the corresponding payments cannot again be subjected to separate disallowance. Therefore, the addition, to the extent it pertains to the disallowance of payments made to M/s RKG Earth Movers over and above the purchase disallowance, is not sustainable and is accordingly deleted. As such, Ground No. 4 is allowed." 60. The relevant observations and....
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....d cannot be overlooked. In view of the foregoing discussion, it is evident that the appellant has failed to discharge the primary onus cast upon it to substantiate the genuineness of the purchases claimed from M/s RKG Earth Movers. 5.9 The above discussion leaves for consideration the alternate claim of the appellant that only the profit element embedded in the alleged purchases should be disallowed. However, from the submissions and material placed on record, it is evident that the appellant has admitted that the impugned transactions were cash purchases. The issue in the present case, therefore, is not merely one of possible inflation of purchase price through accommodation entries, but one where the genuineness and verifiability of the transactions themselves remain unsubstantiated. In circumstances where the appellant has failed to furnish supporting documentary evidence such as confirmations, transportation details, delivery challans, or other corroborative material to establish the identity of the supplier and the genuineness of the transactions, the deficiency is not confined to estimation of excess profit. The foundational requirement of proving the authenticity of....
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....ani Perumal, a partner of the assessee- firm, was the proprietor/partner, thereby increasing the possibility of accommodation entries. In such circumstances, mere production of ledger accounts or self-serving confirmations could not discharge the burden cast upon the assessee to establish the genuineness of the purchases. 64. The Ld.DR further submitted that the Ld.CIT(A) accepted the explanation of the assessee primarily on the basis of GST returns and confirmation furnished by the supplier concern, without undertaking any independent verification of the transactions. According to the Ld.DR, the object and scope of proceedings under the GST law are entirely distinct from those under the Income-tax Act. Merely because the transactions were reflected in the GST returns or accepted by the GST authorities would not, by itself, establish the genuineness of the purchases for the purposes of the Income-tax Act. At best, the GST records only demonstrate that the supplier had collected and remitted GST on the alleged supplies, which, according to the Ld.DR, cannot be regarded as conclusive proof of the actual movement and delivery of goods. 65. The Ld.DR further submitted that the fi....
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....ffer from any legal or factual infirmity warranting interference by this Tribunal. 69. The Ld.AR submitted that the assessee, Shri Subramani Perumal, Proprietor of M/s. P.S. Blue Metals, and M/s. Shri Chennai Mines were all subjected to search proceedings on the same date, namely, 02.03.2022. It was contended that no incriminating material whatsoever was found or seized from any of the searched premises to establish that the purchases of aggregates made by the assessee from M/s. P.S. Blue Metals or M/s. Shri Chennai Mines were either fictitious or represented accommodation entries. It was further submitted that the AO had neither conducted any independent investigation nor brought on record any material to establish that the assessee had indulged in bogus purchases or accommodation transactions. According to the Ld.AR, in the complete absence of any incriminating evidence, the additions made by the AO rest merely upon suspicion and conjectures and, therefore, the Ld.CIT(A) was fully justified in deleting the same. 70. Replying to the submissions advanced by the Ld.DR, the Ld.AR submitted that even before this Tribunal, the Revenue has failed to place any material on record to....
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....sition, the Ld.AR placed reliance upon the decision of the Hon'ble Bombay High Court in PCIT v. SVD Resins & Plastics Pvt. Ltd. and submitted that purchases cannot be disallowed merely on the basis of general information, suspicion or surmises and that due weight ought to be given to the findings recorded by the Sales Tax authorities wherever the transactions have been accepted by them. It was submitted that the ratio laid down therein squarely applies to the facts of the present case. 75. The Ld.AR further submitted that no incriminating material was found during the course of search indicating that the impugned purchases were fictitious or represented accommodation entries. It was argued that no material has been brought on record to establish that the assessee had procured materials from the grey market or that any cash had flown back from the supplier to the assessee. Even the sworn statement of Shri P. Subramani recorded during the course of search does not contain any admission that the purchases were bogus. According to the Ld.AR, the additions are therefore founded entirely upon suspicion and presumptions unsupported by any tangible evidence. 76. Placing reliance ....
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....of materials proceeds on an erroneous appreciation of the business model adopted by the parties, since the aggregates were directly dispatched from the crushing unit of M/s. P.S. Blue Metals to the customers of the assessee, and therefore there was no occasion for the goods to physically enter the quarry premises of the assessee. It was further submitted that the inability of the supplier to furnish details relating to its own vendors cannot be held against the assessee, particularly when the supplier is an existing taxable entity whose sales have been accepted by the GST authorities. Summing up his arguments, the Ld.AR submitted that the AO has neither rejected the books of account maintained by the assessee nor disproved any of the documentary evidence produced in support of the purchases. No cash trail has been established, no incriminating material has been unearthed during the course of search, and neither the sales nor the consumption of materials has been disputed. The impugned additions, according to the Ld.AR, are thus based entirely on assumptions, conjectures and suspicion, which cannot legally sustain an addition under the provisions of the Act. 81. In the light of t....
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....te Agra Bench of the Tribunal in Shri Shanti Swaroop Jain v. CIT, wherein it was held that no addition towards bogus purchases could be sustained in the absence of conclusive evidence, particularly when the declared GP ratio was reasonable and the addition resulted in an abnormally high GP ratio. 85. The Ld.AR further submitted that the corresponding sales had been fully accepted by the AO and the books of account, duly audited u/s. 44AB of the Act, had not been rejected. It was argued that the impugned purchases had been converted into sales during the relevant previous year and the AO had not disputed the sales disclosed by the appellant. Therefore, once the sales were accepted as genuine, the corresponding purchases could not be treated as bogus, as no business could effect sales without procuring the corresponding goods. Reliance was placed on the decisions of the Hon'ble Bombay High Court in PCIT v. Nitin Ramdeoji Lohia and CIT v. Nikunj Eximp Enterprises (P.) Ltd., as well as the decisions of the Kolkata and Chennai Benches of the Tribunal in ITO v. Sri Puspal Kumar Das and Syed Mubarak Ali v. ACIT, to contend that where sales are accepted and books are not rejected, d....
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.... by actual movement of goods, the assessee has consistently maintained that the purchases were genuine business transactions duly supported by statutory records, banking transactions, GST compliances, books of account and corresponding sales. The Ld.CIT(A), after examining the evidence supplier-wise, accepted the explanation of the assessee in respect of purchases made from M/s. P.S. Blue Metals and M/s. Shri Chennai Mines and granted substantial relief, whereas the additions relating to purchases from M/s. RKG Earth Movers were sustained. Consequently, both the Revenue as well as the assessee are in appeal before this Tribunal. 90. Before adverting to the rival contentions, it would be appropriate to notice the settled legal position governing additions on account of alleged bogus purchases. The initial burden undoubtedly lies upon the assessee to establish the genuineness of the expenditure claimed by producing primary evidence demonstrating the identity of the supplier, the genuineness of the transaction and the business nexus of the expenditure. Equally well settled, however, is the principle that once the assessee produces primary documentary evidence in support of the tran....
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.... whatsoever which establishes that the purchases effected by the assessee from M/s. P.S. Blue Metals, M/s. Shri Chennai Mines or M/s. R.K.G. Earth Movers during the assessment years 2018- 19 to 2021-22 were sham, fictitious or accommodation transactions. Even during the course of hearing before us, the Ld.DR was unable to point out any specific seized document or electronic record forming the basis for such conclusion. 94. There is absolutely no material brought on record in the form of seized loose sheets, parallel books of account, unaccounted cash books, diaries, transport registers, delivery challans, weighbridge records, inward registers, electronic correspondence, digital data, WhatsApp messages, e-mails, accommodation bills or any other contemporaneous evidence to suggest that the suppliers had merely issued invoices without actual supply of goods. Likewise, no evidence has been brought on record to establish that the purchase consideration paid by the assessee had been returned in cash or that there existed any circulation of unaccounted money between the assessee and the aforesaid suppliers. Neither has any statement recorded during the course of search been relied upon....
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....ious, that no goods were actually supplied, or that the transactions were merely accommodation entries. In the absence of any such incriminating evidence, the impugned addition rests merely upon suspicion, surmises and generalized observations, which cannot substitute legal proof. It is a settled principle that however strong a suspicion may be, it cannot take the place of evidence. Accordingly, the addition made by the AO towards alleged bogus purchases of aggregates is unsustainable in law. 99. Therefore, considering the totality of the facts and circumstances of the case, we are of the considered opinion that, in the absence of any incriminating material unearthed during the course of search establishing that the assessee had indulged in booking bogus purchases from M/s. P.S. Blue Metals, M/s. Shri Chennai Mines or M/s. R.K.G. Earth Movers, the AO was not justified in making the impugned additions. We accordingly find no infirmity in the well-reasoned order of the Ld.CIT(A), who has rightly deleted the additions for the AY(s) 2018- 19, 2019-20 and 2020-21. The findings recorded by the Ld.CIT(A) are, therefore, affirmed. 100. One of the principal circumstances relied upon b....
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....ment of Geology and Mining, any inspection conducted by the competent authority, or any proceedings initiated alleging illegal or excessive extraction of minerals by the assessee. In the absence of any such objective and independent evidence, the conclusion drawn by the AO that the assessee had sufficient unaccounted boulders to meet its production requirements in lieu of the impugned purchases is nothing more than a conjectural inference unsupported by the record. 103. Even otherwise, the Revenue has failed to establish, by adducing any cogent material, that the quantities allegedly extracted through excessive mining had, in fact, found their way into the books of account by being reflected as purchases from the impugned suppliers. In the absence of any nexus between the alleged excess extraction and the disputed purchase transactions, the entire premise on which the addition has been founded remains wholly speculative. Accordingly, we are of the considered view that the allegation of the AO rests merely on suspicion and conjecture, unsupported by any legally admissible evidence, and therefore cannot be sustained in the eyes of law. 104. Equally untenable is the further assu....
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..... On perusal of the ledger accounts of purchases and sales placed in the paper book for the impugned assessment years, we find that the purchases in question have duly resulted in corresponding sales during the relevant assessment years. Significantly, it is not the case of the Revenue that the corresponding sales effected by the assessee are fictitious or have been rejected. On the contrary, the sales disclosed by the assessee, as well as the corresponding sales recorded by M/s. P.S. Blue Metals, the proprietary concern of Shri Perumal Subramani, and M/s. Shri Chennai Mines, have been accepted by the Revenue without any adverse finding. 109. Once the sales have been accepted as genuine, it would be incongruous to hold that the corresponding purchases are bogus merely because the inward movement of goods into the assessee's premises was not evidenced in the manner expected by the AO. Acceptance of the sales necessarily presupposes the existence and movement of the goods forming the subject matter of such sales. In the absence of any material establishing that the goods were procured from undisclosed sources or that the purchase transactions were sham, the inference drawn by ....
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....e disallowance of the corresponding expenditure in the hands of the purchaser. 113. Our aforesaid view is fortified by the decision of the Hon'ble Calcutta High Court in CIT v. Basant Investment Corporation (238 ITR 680), wherein it has been held that a purchaser cannot be penalised for defects or irregularities found in the books of account maintained by the seller. The ratio laid down therein squarely applies to the facts of the present case. The mere inability of the suppliers to furnish particulars of their own suppliers cannot, in law, lead to the conclusion that the purchases made by the assessee were bogus. 114. We further find from the paper book that the assessments of Shri Subramani Perumal, proprietor of M/s. P.S. Blue Metals, for AY(s) 2019-20 and 2020-21 were completed by the very same AO on 28.03.2024 and 29.03.2024 respectively, wherein the purchases debited in his Profit and Loss Account were accepted without any adverse inference or variation. Having accepted the purchases in the hands of the supplier as genuine, it does not lie in the mouth of the very same AO to contend, while framing the assessment of the purchaser, that the transactions are doubtful m....
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....eliable, isolated disallowance of purchases requires much stronger evidence than mere suspicion. The absence of rejection of books of account assumes greater significance in search assessments where additions are expected to emanate from incriminating material discovered during the course of search. In the present case, as already noticed by us, no such incriminating material has been brought on record. 117. We further notice that the assessee has produced substantial documentary evidence in support of the purchases effected from M/s. P.S. Blue Metals and M/s. Shri Chennai Mines. The purchases are reflected in the GSTR-2A of the assessee. Tax invoices bearing GST particulars have been produced. Ledger accounts maintained in the regular books of account corroborate the transactions. Payments have admittedly been effected through normal banking channels. The suppliers have accounted for the corresponding sales in their books of account and have discharged the indirect tax liability arising therefrom. Copies of GST assessment orders passed in the cases of the suppliers as well as the assessee have also been placed on record, demonstrating that the statutory authorities administerin....
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.... has never stated. 120. We also cannot lose sight of another important factual aspect noticed by the Ld.CIT(A.). The supplier M/s. P.S. Blue Metals as well as its proprietor were themselves subjected to search and were assessed by the same AO. If, despite conducting search proceedings, the Revenue was unable to unearth any incriminating material indicating that the concern merely issued accommodation bills without supplying goods, it becomes difficult to uphold the conclusion that the corresponding purchases in the hands of the assessee are bogus. The Revenue cannot simultaneously accept the sales recorded by the supplier in its own assessment and reject the corresponding purchases in the hands of the purchaser without bringing any independent material demonstrating that the transactions were sham. Such contradictory stands are impermissible in the absence of distinguishing circumstances. 121. The AO has also not disputed the fact that payments towards the purchases have been made through regular banking channels. No evidence has been brought on record showing that the amounts so paid returned to the assessee in cash or by any circuitous route. There is no allegation of cash ....
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....umentary evidence, including the relevant books of account, purchase invoices, GST records and other supporting materials, and therefore warrant no interference at our hands. 125. Accordingly, we find ourselves in complete agreement with the conclusion reached by the Ld.CIT(A.) in directing deletion of the additions made by the AO in respect of the purchases effected from M/s. P.S. Blue Metals amounting to Rs. 2,45,13,346/- for A.Y. 2018-19 Rs. 12,02,27,196/- for A.Y. 2019-20 and Rs. 7,77,33,236/- for A.Y. 2020-21, as well as the purchases effected from M/s. Shri Chennai Mines amounting to Rs. 17,68,467/- for A.Y. 2020-21. We, therefore, uphold the order of the Ld.CIT(A). on this issue and dismiss the corresponding grounds raised by the Revenue for the AY(s) 2018- 19, 2019-20 and 2020-21. 126. We shall now advert to the grievance raised by the assessee in respect of the addition of Rs. 1,10,97,410/- sustained by the Ld.CIT(A) for the A.Y. 2020- 21 in relation to the purchases alleged to have been made from M/s. RKG Earth Movers. Unlike the purchases effected from M/s. P.S. Blue Metals and M/s. Shri Chennai Mines, the Ld.CIT(A.) declined to grant relief in respect of this supp....
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....ce primary evidence is produced. If the Revenue proposes to disregard such evidence, it must necessarily produce some positive material to establish that the apparent transaction is not the real one. 130. The reasoning adopted by the Ld.CIT(A), in our considered opinion, proceeds substantially on the absence of additional corroborative evidence rather than the presence of any incriminating material. The distinction between these two situations is significant. Mere inadequacy of evidence cannot automatically be equated with proof of falsity. An expenditure claimed by an assessee may require closer scrutiny where certain supporting documents are unavailable; however, complete disallowance of the expenditure can be sustained only when the surrounding circumstances unmistakably establish that the transaction itself is sham or fictitious. In the present case, the Revenue has not discharged this burden. 131. We also find considerable force in the submission of the Ld.AR that the AO has accepted the corresponding sales in their entirety. The Revenue has nowhere suggested that the sales disclosed by the assessee were fictitious or inflated. The trading account has been accepted excep....
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....support the transaction. The Tribunal is required to appreciate evidence in its totality and not in isolation. Once invoices, books of account, banking transactions and accepted sales are available on record and there is no contrary material demonstrating falsity of the transactions, the omission to produce some additional corroborative documents cannot elevate suspicion into proof. 134. Another important aspect which persuades us to take a different view from that of the Ld.CIT(A) is the complete absence of any incriminating material unearthed during the course of search in relation to the purchases from M/s. RKG Earth Movers. Search assessments are expected to be found upon evidence discovered during search operations. However, neither the assessment order nor the arguments advanced by the Revenue point towards any seized material suggesting that the invoices issued by M/s. RKG Earth Movers were accommodation bills or that no actual supply of aggregates had taken place. The assessment is founded essentially upon the perceived inadequacy of documentation and not upon any positive evidence discovered during search. In our considered opinion, such deficiencies, though relevant fo....
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....e on record, notwithstanding that the reasoning adopted by the lower appellate authority may not be entirely acceptable. 139. In the preceding paragraphs of this order, we have, upon an elaborate appreciation of the documentary evidence, held that the purchases aggregating to Rs. 1,10,97,410/- effected by the assessee from M/s. RKG Earth Movers during the relevant previous year are genuine and represent bona fide business transactions. Having reached such a categorical finding, it necessarily follows that the payments made by the assessee to the said supplier towards discharge of the consideration for such genuine purchases cannot, by any stretch of reasoning, constitute an independent item of undisclosed expenditure or unexplained payment warranting a separate addition. Acceptance of the Revenue's stand would inevitably result in taxing the very same transaction twice once by doubting the purchases and again by treating the payments made towards such purchases as unexplained which is impermissible in law and contrary to the settled principles governing assessment proceedings. 140. We further find considerable force in the contention of the assessee that the impugned addi....
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....eaded that even assuming there existed deficiencies in the documentary evidence, the settled legal position permits taxation only of the profit element embedded in the disputed purchases and not the entire purchase value. It is this alternative contention which now falls for our consideration. 145. The facts relevant to the controversy are largely undisputed. During the relevant previous year, the assessee had recorded purchases aggregating to Rs. 2,06,84,717/- from M/s. RKG Earth Movers. While filing the return of income in response to the notice issued u/s. 148 of the Act, the assessee, taking note of certain deficiencies in the supporting documentation relating to the said purchases and with a view to buy peace and avoid prolonged litigation, voluntarily offered a sum of Rs. 1,00,00,000/- for taxation. The AO, however, proceeded to disallow the balance amount of Rs. 1,06,84,717/- u/s. 37 of the Act, treating the purchases as non-genuine. The Ld.CIT(A) affirmed the said disallowance by holding that the assessee had failed to establish the genuineness of the purchases by producing confirmations, transportation details, delivery challans and other corroborative evidence. 146.....
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....any, or the inflation embedded in such purchases can legitimately be brought to tax. 148. The Ld.CIT(A), while rejecting the alternative plea of the assessee, has observed that this is not a fit case for estimation of profit because the assessee itself admitted that the purchases represented cash transactions and failed to establish the genuineness of the supplier. We are unable to subscribe to this reasoning in its entirety. The ultimate objective of an assessment under the Act is determination of taxable profits. Even where deficiencies exist in the evidence supporting purchases, the Tribunal is required to arrive at a fair and reasonable estimate of income having regard to the surrounding circumstances. Complete disallowance of purchases is justified only where the Revenue establishes that no goods whatsoever were procured or where the expenditure itself proves to be fictitious. In the present case, neither of these foundational facts has been established. 149. An equally important circumstance which persuades us to adopt the embedded profit approach is the gross profit disclosed by the assessee during the year under consideration. It is an admitted position that the asses....
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....embedded profit. Such an approach also finds support from the decision of the Hon'ble Madras High Court in SPL Infrastructure Pvt. Ltd., wherein estimation was directed to be made having regard to the past trading results of the assessee rather than by adopting arbitrary percentages. 153. Accordingly, while we are unable to sustain the confirmation of the entire addition of Rs. 1,06,84,717/- made by the Ld.CIT(A), we are equally of the opinion that complete deletion would not be justified having regard to the deficiencies noticed in the supporting evidence. Balancing the equities and applying the settled principles governing estimation of business income, we direct the AO to restrict the addition to 20.38% of Rs. 1,06,84,717/-, being the gross profit ratio declared by the assessee during the relevant previous year. The balance addition shall stand deleted. The order of the Ld. CIT(A) is, therefore, modified to the above extent. 154. Accordingly, in the light of the foregoing discussion, the issue relating to the additions made by the AO u/s. 37 of the Act on account of alleged bogus purchases for the assessment years under consideration are adjudicated by us as under: ....
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....18-19 is taken as the lead case. Accordingly, our findings, reasoning and conclusion recorded herein for the A.Y. 2018-19 shall, mutatis mutandis, apply to the AY(s) 2019-20 and 2020-21, as the issues involved therein are identical in all material respects. 157. On examination of the seized Tally data, the AO noticed that the closing stock reflected therein amounted to Rs. 16,62,12,802/-, of which a sum of Rs. 16,61,03,331/- was shown as closing stock of diesel. According to the AO, diesel being a consumable item utilized in the day-to-day operations of the assessee's crusher plant and heavy machinery, there was no commercial justification for maintaining such an extraordinarily large quantity of diesel as closing stock. The AO further observed that the value of diesel shown as closing stock was substantially higher than the assessee's annual diesel consumption and that, during the course of search proceedings, no such quantity of diesel was found physically available. The AO also noted that similar discrepancies were noticed in the seized Tally data pertaining to the subsequent assessment years. On the aforesaid basis, the AO proposed to reject the assessee's claim ....
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....diture entries in fact remained unposted, it was inconceivable as to how the statutory audit could have been completed and the audited financial statements finalized. The explanation tendered by the assessee was, therefore, treated as a self-serving assertion unsupported by any contemporaneous documentary evidence. Accordingly, the AO rejected the explanation of the assessee and held that the claim of closing stock to the extent of Rs. 16,61,03,331/- was not acceptable. Consequently, the AO made an addition of the said amount u/s. 37 of the Act for the A.Y. 2018-19. On identical reasoning, the AO also made additions of Rs. 6,48,47,396/- and Rs. 72,45,116/- u/s. 37 of the Act for the AY(s) 2019-20 and 2020-21, respectively. 161. Aggrieved by the aforesaid addition made by the AO on account of the alleged difference in closing stock, the assessee carried the matter in appeal before the Ld.CIT(A). 162. The assessee contended before the Ld.CIT(A) that the closing stock reflected in the seized Tally data did not represent any physical stock but was merely the result of accounting/posting errors, wherein purchases of diesel and explosives aggregating to Rs. 16,62,12,802/- were wron....
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.... that no closing stock of diesel and explosives had been claimed in the return of income. 167. Accordingly, the assessee submitted before the Ld.CIT(A) that, since the impugned closing stock represented only consumed purchases wrongly classified due to posting errors, there being no physical stock or unexplained purchases and the transactions being fully supported by contemporaneous records and banking evidence, the addition of Rs. 16,62,12,802/- made by the AO be deleted in full. Similar submissions were made by the assessee before the Ld.CIT(A) for AY(s) 2019-20 and 2020-21 as well. 168. Upon consideration of the submissions of the assessee, the Ld.CIT(A) deleted the addition made by the AO on account of alleged difference in closing stock by observing as under: "5.4.3 Before proceeding to consider the submissions of the appellant, it is necessary to examine, from an independent analytical standpoint, the basis and sustainability of the disallowance made by the Assessing Officer on account of the alleged difference in closing stock. The AO has referred to an entry of closing stock amounting to Rs. 16.62 crores as reflected in the Tally data. At the outset, it requi....
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....tical position; it is now imperative to examine the actual figures as reflected in the books of account and the audited financial statements for the year under consideration. The Trading Account clearly discloses total purchases at Rs. 25,48,74,052/-, and the corresponding schedule specifically reflects purchase of consumable HSD (diesel) at Rs. 15,57,05,284/ -. In such circumstances, it defies logic and settled accounting principles to suggest that the appellant could simultaneously hold a closing stock of diesel valued at Rs. 16.61 crores, when the total purchase of diesel during the entire year itself is only Rs. 15.57 crores (excluding explosives). The closing stock cannot exceed the total purchases unless there is an opening stock of such magnitude - a fact which has neither been alleged nor established by the Assessing Officer. The impugned addition has thus been made without appreciating the fundamental arithmetical and accounting inconsistency apparent on the face of the record. The Assessing Officer has failed to reconcile these basic figures before drawing adverse conclusions. Such an addition, made in disregard of the primary financial data and without proper verificatio....
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....alue of closing stock. The said addition has been made notwithstanding the undisputed fact that the GST authorities, in their investigation orders, have duly accepted both the purchases and the closing stock declared by the appellant firm. 3. In this regard, kind attention of this respected authority is invited to the judgment of the Hon'ble Madras High Court in CIT v. Smt. Sakuntala Devi Khetan [2013] 33 taxmann.com 98 (Mad), wherein it has been categorically held that unless and until the competent authority under the Sales Tax Act disputes or varies the closing stock declared by the assessee, the return as accepted by the Commercial Tax Department is binding on the Income-tax Authorities. The Hon'ble Court further observed that, in such circumstances, the Assessing Officer has no jurisdiction to go beyond the value of closing stock declared by the assessee and accepted by the Commercial Tax Department, nor does he possess the authority to independently scrutinize or re-determine the same. 4. It is most respectfully submitted that the ratio laid down in the aforesaid judgment squarely applies to the facts of the present case, inasmuch as the GST authorit....
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....ed purchases. Further, no excess physical stock of diesel or explosives was found during the course of search, and the appellant has furnished a plausible explanation that the apparent figure arose due to erroneous ledger classification rather than actual existence of stock. The purchase of diesel / explosives is supported by documentary evidence, statutory records, and banking channels, and have not been shown to be fictitious. In such circumstances, reliance on entries in seized tally, without corroborative material or quantitative verification, falls short of the evidentiary standard required to sustain an addition. Accordingly, the disallowance made on account of alleged difference in closing stock cannot be upheld and the AO is directed to delete this disallowance. Accordingly, ground No. 3 is allowed." 169. On identical facts and findings, the Ld.CIT(A) deleted the corresponding additions for the AY(s) 2019-20 and 2020-21 as well. 170. Aggrieved by the order of the Ld.CIT(A) deleting the additions made by the AO on account of the alleged difference in closing stock for the AY(s) 2018- 19, 2019-20 and 2020-21, the Revenue has preferred the present appeals before us. 1....
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.... seized Tally data represented the books of account as maintained by the assessee on the date of search. The search was conducted on 02.03.2022, by which time the assessee had already finalized its accounts, completed the statutory audit and filed the return of income u/s. 139(1) of the Act for the relevant assessment year. Therefore, the contention that the seized data contained incomplete postings or temporary ledger classifications is wholly unacceptable. Once the books had attained finality, there was no occasion for such substantial discrepancies to exist. 176. It was further argued that the Ld.CIT(A) has erroneously proceeded on the premise that since no excess physical stock was found during the course of search, the entries reflected in the seized Tally data stood automatically explained. The absence of excess physical stock cannot by itself negate the evidentiary value of the books of accounts or the electronic records seized during search. The search took place much after the close of the financial year, and the physical stock available on the date of search could not conclusively establish the correctness of the closing stock recorded as on the balance sheet date. ....
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....esaid ledger accounts clearly substantiate the assessee's explanation that the figure appearing as closing stock in the seized Tally data was merely an accounting anomaly arising out of erroneous postings and did not reflect the actual stock position. It was, therefore, contended that the AO was not justified in treating the said figure as unexplained excess closing stock and making the impugned addition of Rs. 16,62,12,802/ -. Accordingly, the Ld.AR submitted that the Ld.CIT(A), after appreciating the documentary evidence placed on record, had rightly deleted the addition and the order of the Ld.CIT(A) does not call for any interference. 182. The Ld.AR submitted that the reconciliation of the stock summary as per the seized Tally data, placed at page 269 of the Paper Book, clearly establishes that the entire amount of Rs. 16,62,12,802/- comprises only purchases of diesel amounting to Rs. 15,57,05,284/- and purchases of explosives amounting to Rs. 1,05,07,518/-, which were inadvertently posted the ledger account under group head "Stock-in-Hand" instead of being debited to the ledger Purchases/Consumption Account. 183. It was submitted that, under the accepted principles o....
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...., the Authorised Officer had consciously allowed deduction of the value representing such erroneous closing stock, treating the same as consumption during the year. Therefore, once the Investigation Wing itself had accepted the accounting anomaly and neutralised its effect, the AO was not justified in once again treating the very same figure as unexplained closing stock and making an independent addition. Such an approach amounts to ignoring the findings of the search authorities themselves and results in double taxation of the same item. 188. The Ld.AR submitted that the AO, during the course of assessment proceedings, was fully apprised that the figure appearing as closing stock in the seized Tally represented only consumed purchases of diesel and explosives. Instead of disputing this factual explanation or demonstrating any actual difference in stock, the AO shifted the basis of addition and proceeded to treat the purchases themselves as unverifiable. Such a course adopted by the AO is factually incorrect and legally untenable. 189. It was submitted that the entire amount representing the impugned closing stock consists of genuine purchases made from reputed suppliers, nam....
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....closing stock of diesel or explosives in the return of income. Therefore, the AO's observation completely defeats the basis of the addition. 194. As regards the allegation that supporting documentary evidence was not furnished, the Ld.AR submitted that the observation is contrary to the material available on record. The seized Tally data itself contains the ledger accounts of the suppliers, and the corresponding payments are fully supported by bank statements. Hence, the allegation that purchases were not substantiated is factually incorrect. 195. With regard to the observation that expenditure was not proved, the Ld.AR submitted that the very fact that the return of income correctly treated the purchases as consumption and not as closing stock establishes that the expenditure had been duly recognised in accordance with accepted accounting principles. The seized Tally merely contained a posting mistake which stood corrected in the regular books maintained prior to the search. 196. In conclusion, the Ld.AR submitted that the entire addition rests solely upon an accounting classification error contained in the seized Tally data, which has already been recognised and corr....
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....ed addition. Such mutually destructive findings cannot coexist. Once the AO himself accepts that no such physical stock existed, the inevitable consequence would be that the figure reflected in the seized electronic records requires reconciliation and examination rather than blind acceptance. The assessment order, however, proceeds on an assumption that the figure reflected in the seized Tally data represents actual closing stock without undertaking any exercise to ascertain the true nature of the accounting entries which generated such figure. 200. We find that the explanation offered by the assessee has remained consistent from the very beginning. Immediately after the search, in the reconciliation statement furnished before the Investigation Wing, during the assessment proceedings, and subsequently before the first appellate authority, the assessee consistently explained that the purchases of diesel and explosives had been wrongly reflected as stock inward entries in the seized Tally data without the corresponding transfer entries to the respective expenditure and consumption ledgers. According to the assessee, since the transfer entries relating to consumption by the crusher....
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....elf noticed that the closing stock reflected in the seized Tally exceeded the total purchases recorded during the year. This finding itself renders the impugned figure inherently improbable. The audited financial statements disclose total diesel purchases of Rs. 15.57 crores whereas the seized Tally reflected diesel stock of Rs. 16.61 crores. Unless there existed an opening stock of comparable magnitude, which is admittedly not the case of the Revenue, the closing stock could never exceed the total purchases made during the year. This basic accounting inconsistency goes to the root of the matter. Surprisingly, instead of investigating how such an impossible figure emerged in the seized Tally, the AO proceeded to treat it as representing actual closing stock. We entirely agree with the Ld.CIT(A) that such an approach is contrary to fundamental accounting principles. 204. Another important circumstance supporting the assessee is that admittedly no excess physical stock of diesel or explosives was found during the course of search. This factual aspect has not been disputed by the Revenue. In fact, the AO himself records that such a quantity of diesel could not have been physically ....
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....se prohibited under law. In the present case, the AO has not identified any specific expenditure which fails to satisfy the conditions prescribed u/s. 37 of the Act. There is no finding that the diesel or explosives were not consumed for business purposes. Nor is there any finding that the purchases were fictitious or bogus. In fact, the Revenue has accepted that diesel is a consumable item required for the assessee's mining operations. Therefore, invocation of section 37 of the Act merely because the seized Tally reflected an abnormal closing stock is legally unsustainable. 208. Another aspect which cannot be overlooked is that the return of income had been filed much prior to the date of search. In the regular books of account accompanying the return, the purchases of diesel and explosives had already been recognised as consumption and no closing stock of such magnitude had been claimed. Therefore, the seized Tally data cannot override the regularly maintained books unless supported by independent corroborative evidence. The Ld.CIT(A) has rightly appreciated this distinction while holding that the seized Tally represented only an incomplete accounting record and not the fi....
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....udited financial statements and the admitted absence of physical stock, clearly supports the explanation offered by the assessee rather than the inference drawn by the AO. 213. We further note that the records of the search proceedings themselves reveal that the Authorized Officer, after a detailed verification of the seized Tally data, stock summaries and ledger accounts, had categorically recorded a finding that the closing stock of diesel reflected therein was not an actual physical closing stock but had arisen due to an accounting error whereby purchases of diesel issued for consumption by vehicles had inadvertently been posted as inward stock entries. The Authorized Officer, having identified the accounting anomaly, rectified the same while preparing the profit suppression analysis by treating such quantities as consumed during the relevant previous years and allowing the corresponding expenditure. The Authorized Officer further verified the ledger accounts of M/s. Nayara Energy Limited, M/s. Essar Oil Limited and M/s. Indian Oil Corporation Limited contained in the seized Tally data for the relevant assessment years and specifically found that the diesel purchases recorded....
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....by the Authorized Officer himself during the search proceedings. In these circumstances, the action of the AO in disregarding the findings of the Authorized Officer and treating the alleged closing stock as unexplained or suppressed stock cannot be sustained. 217. Having regard to the totality of the facts and circumstances of the case, we are of the considered view that the Ld.CIT(A) was fully justified in holding that the figure of Rs. 16,62,12,802/- reflected in the seized Tally data represented only a notional balance arising on account of incomplete and erroneous ledger postings and did not correspond to any actual physical closing stock available with the assessee. The Revenue has not brought on record any cogent material to establish either the existence of any undisclosed inventory or that the purchases recorded by the assessee were fictitious or non-genuine. In the absence of any corroborative evidence to substantiate the inference drawn by the AO, the addition made towards the alleged variation in closing stock cannot be sustained. 218. We, therefore, concur with the findings recorded by the Ld.CIT(A) in deleting the addition made by the AO for the A.Y. 2018-19. We ....