DCIT (CENTRAL)-2 INDORE, INDORE V. ADVEN TYRE TUBE INDIA PVT. LTD, INDORE

ITSSA 40/IND/2024

AI Insights

The case involves Adven Tyre Tube India Pvt. Ltd., which was subjected to a search under section 132 of the Income Tax Act on 28.09.2016. Following the search, the Assessing Officer (AO) made an addition of Rs. 2,43,29,759 to the assessee's income for the Assessment Year 2016-17, alleging suppression of stock based on a document seized during the search. The assessee contested this addition, arguing that the document was a rough calculation for a loan application and not a true reflection of its stock. The Commissioner of Income-Tax (Appeals) deleted the addition, a decision which the revenue appealed against in the Tribunal. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of corroborative evidence and the nature of the seized document.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 828997 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 13-01-2026
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: Indore
• Assessment Year: misc
• Appeal Filed On: 04-04-2024
• Other Referred Cases: Samir Kishor Parekh Vs ACIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: FORTHEAPPELLANTFROMKOTAKMAHINDRA; FORASSESSEESUPPORTEDTHEORDERPASSEDBYCIT A; FORREVENUESUBMITTEDTHATTHEAOHASRELIEDUPON; FORTHEASSESSEETOKEEPAN; SHRIANUPSINGH; MEANSOFABOVEGROUNDSISTHAT
• Assessee Lawyers: SHRIHARSHVIJAYWARGIYA
• Keywords: Document seized; Onus to prove; Valuation report; Loose papers
• Section: 143(3); 132; 153A

Judgement Text

"Page 1 of 14 आयकरअपीलीयअिधकरण, इंदौरɊायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER IT(SS)A No.40/Ind/2024 Assessment Year: 2016-17 DCIT (Central)-2 Indore बनाम/ Vs. Adven Tyre Tube India Pvt. Ltd. Plot no.147-1521A, Sector F, Sanwer Road, Opp. Deepmala Dhaba Indore (Assessee/Appellant) (Revenue/Respondent) PAN: AAJCA1351J Revenue by Shri Anup Singh, CIT-DR Assessee by Shri Harsh Vijaywargiya, AR Date of Hearing 23.12.2025 Date of Pronouncement 13.01.2026 आदेश/ O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by order of first appeal dated 10.01.2024 passed by learned Commissioner of Income-Tax (Appeals)-3, Bhopal [“CIT(A)”] which in turn arises out of assessment-order dated 20.12.2018 passed by learned DCIT (Central)-2, Indore [“AO”] u/s 153A r.w.s. 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2016-17, the revenue has filed this appeal. Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 2 of 14 2. The background facts leading to present appeal are such that the assessee is a company engaged in the business of manufacturing and trading of rubber tubes, etc. A search u/s 132 of the Act was conducted by Income-tax authorities on 28.09.2016 pursuant to which the assessments of AYs 2011-12 to 2017-18 were finalized u/s 153A/143(3). In present appeal, we are concerned with AY 2016-17 only for which the AO finalized assessment at a total income of Rs. 2,68,72,660/- after making certain additions/disallowance and deductions. Aggrieved, the assessee carried matter in first-appeal before CIT(A) and got part relief. Now, the revenue is aggrieved by order of CIT(A) and has come in present appeal before us. 3. The grounds raised by revenue are as under: “1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 2,43,29,759/- made on account of suppression of stock u/s 69B of the Income Tax Act, 1961? 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition amounting to Rs. 2,43,29,759/- made on account of suppression of stock u/s 69B of the income Tax Act, 1961 by holding Page 1 of LPS-06 as a dumb document ignoring that: a) all the documents available in LPS-6 are in the nature of interconnected documents having details/entries related to the business transactions of the assessee? b) the document contains detailed working of closing stock for various months including the month of March 2016?” 4. The sole issue raised by revenue by means of above grounds is that the CIT(A) was not justified in deleting the addition of Rs. 2,43,29,759/- made by AO on account of suppression of stock u/s 69B. Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 3 of 14 5. The AO has dealt this issue in Para 8 of assessment-order. Precisely stated, the AO has observed that during search proceeding, a document inventorised as “LPS-6-Page 1” was seized from assessee. This document is although not re-produced by AO in assessment-order but the assessee has filed in Paper-Book at Page 446, the same is scanned and re-produced below for an immediate reference: Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 4 of 14 6. In above document, which contains monthwise details of sales, purchase, stock of finished goods, etc., there is a noting of closing stock of Rs. 6,11,84,891/- against “Mar-16” month. The AO compared this figure with the figure of closing stock shown by assessee in audited Balance-Sheet and found that the assessee has disclosed closing stock of Rs. 3,68,55,132.59 only as on 31.03.2016. Accordingly, the AO computed difference of two figures at Rs. 2,43,29,759/- [Rs. 6,11,84,891 (-) Rs. 3,68,55,132] and inferred the same as suppressed stock of assessee as on 31.03.2016. During assessment proceeding, the AO issued a show-cause notice to assessee seeking explanation qua this difference and in response to same, the assessee filed a detailed reply which is extracted by AO on Pages 9-10 of assessment-order. Basically, the assessee submitted that the seized document containing monthly details was a rough calculation prepared under process for submission to Kotak Bank for taking a loan. This calculation was prepared by accountant of DSA [“Direct Selling Agent”] who was instrumental for arranging loan from Kotak Bank. However, neither this document was correct nor it was ultimately submitted to Kotak Bank. It was further submitted that the said document was neither signed nor sealed by anyone. The assessee also submitted that as on the date of search i.e. 28.09.2016, the physical verification of stock had also been carried out by search authorities and the valuation was referred to Govt. valuer and thereafter, the excess physical stock as compared to books of account was worked out at Rs. 29,65,824/- only on 28.09.2016. Therefore, there cannot Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 5 of 14 be excess closing stock of Rs. 2,43,29,759/- on 31.03.2016 assessable in previous year 2015-16 relevant to AY 2016-17. However, the AO rejected assessee’s entire submission and made addition by passing following order: “8.1 The assessee's contention is not acceptable because the said LPS- 6 was found and seized from the possession of the assessee company and which were also confronted during the search proceedings. Thus, the difference in stock of Rs. 2,43,29,759/- is added u/s 69B to its total income of the assessee on account of suppression of stock for AY. 2016-17.” 7. During first-appeal, the CIT(A) reversed AO’s action and deleted addition by passing following order: “3.2.4. I have considered the facts and circumstances of the case, observation of the AO, rival submission of the appellant. The AO has made addition of Rs. 2,43,29,759/ on account of difference of closing stock of finished goods as valued by the valuer and as per Page 1 of LPS 6 seized during the course of Search. The closing stock of finished goods as on 31/03/2016 as per audited financial statements of the appellant was Rs. 3,68,55,132/-. The department had appointed a valuer to value the stock and valuation report issued by Valuer dated 27/09/2016 has not reflected any excess stock. The AO while making addition was relying only on the dumb piece of paper marked as Pg 1 of LPS 6 ignoring the valuation report prepared by Valuer. No evidence was found by the Search team of availability of any excess stock in the premises of the appellant or elsewhere. The value mentioned on page number 1 of the LPS 6 is nothing but a rough calculation prepared for submission to banks against the loans taken from them. This was prepared by an accountant of Direct Selling Agent (DSA) who was instrumental in getting a loan for the appellant from Kotak Mahindra Bank and was not the correct version and hence was neither adopted nor submitted to the bank. Moreover, the alleged paper was neither signed by anyone nor was any seal affixed on it. It was merely a rough calculation which was not adopted anywhere. The appellant has submitted the correct version (Value of stock of finished goods at Rs. 3,68,55,132 as on 31/03/2016) to the bank authorities which was submitted to Kotak Mahindra bank on 06/08/2016 (Date of Search u/s 132 is 28/09/2016) i.e. filed before bank much before the date of search. On the basis of this submission before bank on 06/08/2016, Kotak Mahindra bank had taken over the existing loan from Canara Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 6 of 14 bank and disbursed the amount to appellant on 20/09/2016. (Date of Search u/s 132 is 28/09/2016) i.e. disbursement was made by Kotak Mahindra Bank much before the date of search. The appellant has submitted the copy of Bank Statement of Kotak Mahindra Bank for relevant period. The director of the company had certified all the documents which are to be sent to bank for loan purposes and this piece of document does not have any signature of the director either. The actual paper which was submitted before the bank does not suffer from any shortcomings and the figures of closing stack of finished goods in the submission made before bank are the same as per books i.e. Rs. 3,68,55,132/- which was duly acknowledged by the bank also. 3.2.5. The AO before making estimated addition of stock amounting to Rs. 2,43,29,759/- ought to have rejected audited books of account u/s 145(3) of Income Tax Act, 1961 of the appellant and should have given effect of enhancing closing stock of last financial year in opening stock of next financial year i.e. 01/04/2016 but, both the actions were not performed by AO while making the addition. Hon'ble ITAT Ahmedabad Bench in the case of Samir Kishor Parekh Vs ACIT in ITA No. 265/Ahd/2020 vide order dated 22/06/2022 has held that addition of excess stock made on estimated basis, without rejecting books of accounts of the assessee, is unsustainable in law. In the instant case, the impugned loose paper is nothing but a rough jotting. Also, the Ld. AO does not have any independent corroborative evidence to establish the alleged excess stock of the appellant. Absence of these vital details makes the loose papers under consideration a \"deaf & dumb document\". The onus was solely on the Ld. AO to fill such vital gaps by bringing positive evidence on record and prove the allegation about alleged \"excess stock\" of the appellant, which he utterly failed to do. The seized material has not been corroborated with independent evidence and such document cannot be termed as books of account and thus, cannot be used to assess total income of the appellant. 3.2.6. It is settled legal position that onus of proof is on the person who makes any allegation and not on the person who has to defend. The legal maxim \"affairmanti non neganti incumbit probation\" means burden of proof lies upon him who affirms and not upon him who denies. Similarly, as per doctrine of common law \"incumbit probation qui digit non qui negat\" i.e. burden lies upon one who alleges and not upon one who deny the existence of the fact. The Ld. AO has failed to discharge his onus of proof especially when addition has been made under \"deeming fiction\". In view of this lacunae on the part of Ld. AO, impugned addition is legally not sustainable. Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 7 of 14 3.2.7. In view of the above discussion, the Ld. AO was not justified in making addition simply on guess work and solely on the basis of a ‘dumb document’. Thus, the addition made by the Ld. AO amounting to Rs. 2,43,29,759/- in AV 2016-17 is hereby deleted. Therefore, appeal on this ground is allowed.” 8. Before us, Ld. AR for assessee supported the order passed by CIT(A) by following submissions: (i) That, originally the assessee was utilizing loan facility granted by Canara Bank but subsequently on suggestion by DSA, the assessee wanted to switch to Kotak Bank. For this purpose, the staff of DSA initially prepared rough/incorrect statement of monthly data for submission to Kotak Bank; such statement is the document seized and inventorised during search as “LPS-6-Page-1”. But thereafter the DSA prepared a correct statement and submitted to Bank. To corroborate and substantiate this fact, Ld. AR drew us to a letter dated 06.08.2016 issued by DSA to assessee before making onward submission to Kotak Bank, copy of DSA’s letter is placed at Page 447 of Paper-Book. This letter is accompanied by the final/correct statement submitted by DSA to Kotak Bank which is also placed at Page 448 of Paper-Book. The final/correct statement actually submitted to Kotak Bank shows the closing stock of Mar-16 at Rs. 3,68,55,132.59 and the same is duly sealed, signed and acknowledged by Kotak Bank; this document is also scanned and re-produced below for an immediate reference: Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 8 of 14 Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 9 of 14 Further, Ld. AR also drew us to the A/c Statement of Kotak Bank for the financial year 2016-17 placed at Pages 449-458 of Paper-Book which clearly reflects that the Kotak Bank granted a loan of Rs. 2,79,14,585.86 to assessee on 20.09.2016 by taking over earlier loan from Canara Bank. Thus, the entire exercise of submitting correct monthly data by DSA to Kotak Bank as well as grant of loan by Kotak Bank to assessee was done before search on 28.09.2016. Referring to these documents, Ld. AR submitted that the assessee made a correct submission to AO about rough/incorrect working contained in the seized document for taking loan but the AO has wrongly rejected assessee’s submission and made addition. During first-appeal, the CIT(A) has judiciously considered the very same submission of assessee and thereafter reversed AO’s action and deleted addition, the CIT(A)’s order is very much perfect. (ii) That, the search was conducted on 28.09.2016 and as on date of search, the physical verification of stock held by assessee was also carried out by search-authorities and the valuation was also got done from Govt. valuer. Based on report of Govt. Valuer, excess stock of just Rs. 29,65,824/- was worked out by AO in comparison to books of account and a separate addition of Rs. 29,65,824/- was made in previous year 2016-16 relevant to AY 2017-18. Even the difference of Rs. 29,65,824/- was also reconciled and the CIT(A) has already Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 10 of 14 deleted the addition made by AO in AY 2017-18. Thus, when there was no excess stock found on the date of search (28.09.2016), it clearly strengthens assessee’s claim that there was no excess stock on 31.03.2016 and the seized document was a mere rough working. (iii) That, in the statements recorded u/s 132(4), the search authorities did not ask any question to assessee qua the seized document. 9. Per contra, Ld. DR for revenue submitted that the AO has relied upon LPS-6-Page-1 found and seized during search. He contended that the said document must be treated as a document containing correct information. He submitted that there would be no reason for the assessee to keep an incorrect statement at premise. In response to a query raised by bench as to whether any excess-stock was found on the date of search, the Ld. DR asserted “No” in open court. 10. We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. The dispute in present case relates to the addition of Rs. 2,43,29,759/- made by AO but deleted by CIT(A) in first- appeal. Admittedly, the AO has made impugned addition by taking into account the document “LPS-6 Page-1” seized during search conducted on 28.09.2016. The said document, as re-produced in earlier para, contains monthwise details of sales, purchase and stock. From this document, the AO has picked the figures of closing stock of Rs. 6,11,84,891/- mentioned Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 11 of 14 against “Mar-16” month. The AO compared this figure with the closing stock of Rs. 3,68,55,132/- declared in assessee’s audited Balance-Sheet as on 31.03.2016 and treated the difference of Rs. 2,43,29,759/- as unexplained excess stock and made addition in previous year 2015-16 relevant to AY 2016-17 under consideration. During assessment-proceeding, the assessee explained to AO that the said document was prepared by DSA for facilitating loan from Kotak Bank and it contained incorrect information. The assessee further explained to AO that the said document was, however, not submitted to Kotak Bank and it remained only a rough noting. While the AO rejected this submission of assessee and made addition but the CIT(A) has accepted the very same submission of assessee and deleted addition; this has given rise to present controversy before us. Thus, the core issue for our adjudication is whether the addition of ₹2,43,29,759/- made by the AO under section 69B of the Act on account of alleged suppression of stock, solely on the basis of seized paper marked as LPS-6-Page-1, is sustainable on facts and in law? 11. At the outset, it is an undisputed fact that no excess stock was found during the course of search conducted on 28.09.2016. Physical verification of stock was carried out by the search authorities and valuation was made through a Govt. valuer. The valuation report did not reveal any excess stock corresponding to the figure reflected in the seized document “LPS-6-Page-1”. On the contrary, the only excess stock determined on the date of search was Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 12 of 14 Rs. 29,65,824/-, which pertained to a subsequent assessment year 2017-18 and which has also been deleted by Ld. CIT(A). This first and vital point substantially weakens the very foundation of the impugned addition of Rs. 2,43,29,759/- made by AO in AY 2016-17. In our considered view, the Ld. CIT(A) has rightly accepted this point. 12. Going further, the impugned addition has been made exclusively on the basis of the loose paper “LPS-6-Page-1” which, on the face of it, is an unsigned, unsealed and uncorroborated document. The assessee has furnished a consistent explanation that the said document, containing a rough and incorrect working, was prepared by an employee of DSA in the process of arranging a loan from Kotak Bank and was neither finalized nor submitted to Kotak Bank. This explanation stands duly supported by contemporaneous documentary evidence being the final statement, containing correct figures, submitted to Kotak Bank prior to the date of search which bears the same closing stock of Rs. 3,68,55,132/- as reflected in audited Balance-Sheet of assessee as on 31.03.2016. Significantly, the final statement submitted to the bank was acknowledged by Kotak Bank and formed the basis for sanction and disbursement of loan before the date of search. This fact lends considerable credence to the assessee’s explanation and demolishes the revenue’s allegation that the figure mentioned in the seized loose paper represented actual stock as on 31.03.2016. It is a settled legal position that loose papers, not supported by Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 13 of 14 independent evidence cannot form the sole basis for making an addition, particularly under a deeming provision such as section 69B. The burden to establish suppression of stock squarely lay upon the AO, which has remained undischarged in the present case. We find merit in the observation of the Ld. CIT(A) that the impugned document is a “dumb document”, as it does not indicate ownership, authenticity, correctness or actual existence of excess stock. The AO has failed to bring on record any positive material to corroborate the figures mentioned therein. Mere possession of such a document, without more, is insufficient to justify the impugned addition. 13. The Ld. CIT(A) is also very right in accepting one more technical/legal point that although the AO has increased income of AY 2016-17 by taking into account the increased value of closing stock but there is no corresponding adjustment made in opening stock of next year i.e. AY 2017- 18. If the closing stock of AY 2016-17 is to be increased, it will correspondingly increase the opening stock of next year which in turn will reduce taxable income of next year and hence the whole exercise would be revenue neutral. 14. Thus, considering the totality of facts and circumstances as discussed above, we find no infirmity in the well-reasoned and speaking order passed by Ld. CIT(A). The deletion of the addition of Rs. 2,43,29,759/- is fully justified both on facts and in law. Accordingly, the grounds raised by the revenue are dismissed and the order of the Ld. CIT(A) is upheld. Printed from counselvise.com Adven Tyre Tube India Pvt. Ltd. IT(SS)A No. 40/Ind/2024 – AY 2016-17 Page 14 of 14 15. Resultantly, this appeal is dismissed. Order pronounced by putting up on notice board as per Rule 34 of ITAT Rules, 1963 on 13/01/2026 Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 13/01/2026 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order E COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore Printed from counselvise.com "