DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, LUDHIANA V. MALBROS INTERNATIONAL PVT LTD, FARIDKOT

ITA 992/CHANDI/2024

AI Insights

The case involves the appeals by the Revenue against the orders of the CIT (Appeals) which had deleted the additions made by the Assessing Officer on the grounds that the assessee had made bogus purchases from two concerns controlled by Shri Ashok Kumar Gupta. The Tribunal examined the validity of the re-opening of the assessment and the evidentiary value of the statement recorded from Shri Ashok Kumar Gupta during a survey. The Tribunal found that the re-opening was justified based on the information received from the investigation wing, but the additions made on the basis of the statement were not sustainable as they were not corroborated by any other evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 669154 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: Collector Land Acquisition Vs. Mst. Katiji & Others, N. Balakrishnan Vs. M. Krishnamurthy, Supertek Forging India Pvt. Ltd. Vs. PCIT, Tejua Rohit Kumar Kapadia Vs. CIT, Principal Commissioner of Income-tax vs. Nitin Cylinders Ltd., Deputy Commissioner of Income-tax vs. VVD & Sons (P.) Ltd., Jagbir Singh Nehra vs. The DCIT, Central Circle-3, Ludhiana, Maple Destinations and Dreambuild (P.) Ltd, CIT vs. Mantri Share Broker P. Ltd, Kohinoor Crafts vs, ACIT, CIT vs. Pashupati Nath Agro Food products, Sukhvir Singh vs. Income-tax Officer, Andaman Timber Industries Vs. Commissioner of Central Excise, Principal Commissioner of Income-tax (Central) vs. DSG Papers (P.) Ltd., CIT vs. Anil Kumar & Co., ITO vs. Dr, RL Narang, CIT vs. Mascot India Tools & Forgings (P) Ltd., Piyush Developers Pvt. Ltd V/s ACIT, CIT vs. OM Overseas, CIT vs. Paradise Holidays, Rajeev Aggarwal vs. CIT, Forum Sales (P.) Ltd. vs. CIT, Marg Ltd. vs. CIT, KMV Collegiate Sr. Sec. School vs. ITO, Fortune Metaliks Limited vs. DCIT, Shakti Industries vs. CIT, CIT vs. Leader Values, CIT vs. Century Plyboards (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUSUM BA NSAL
• Assessee Lawyers: SUDHIR SEHGAL
• Keywords: Condonation of delay; Set aside; Additional evidence; Question of law; Unexplained expenditure; Bogus purchase; Onus to prove; Gift; Reopening of assessment; Principle of natural justice; Search and seizure; Accommodation entries; Block assessment; Opportunity of cross examination; Bogus
• Section: 148; 144; 143(3); 271(1)(c); 132; 153A; 68; 131; 69C; 234B; 145; 37; 133A

Judgement Text

"आयकर अपीलȣय अͬधकरण,चÖडीगढ़ Ûयायपीठ, चÖडीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, ‘B’ CHANDIGARH BEFORE SHRI RAJPAL YADAV, VICE PRESIDENT AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER आयकर अपील सं./ ITA Nos. 992 & 993/CHD/2024 Ǔनधा[रण वष[ / Assessment Years: 2017-18, 2016-17 The DCIT, Central Circle-2, Ludhiana. Vs Malbros International Pvt. Ltd., Village – Mansoorwal, Teh-Zira, Head Offices Old Cantt. Road, Faridkot. èथायी लेखा सं./PAN NO: AADCM7203R अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent & C.O. Nos. 46 & 45/CHD/2024 IN आयकर अपील सं./ ITA Nos. 992 & 993/CHD/2024 Ǔनधा[रण वष[ / Assessment Year: 2017-18, 2016-17 Malbros International Pvt. Ltd., Village – Mansoorwal, Teh-Zira, Head Offices Old Cantt. Road, Faridkot. Vs The DCIT, Central Circle-2, Ludhiana. èथायी लेखा सं./PAN NO: AADCM7203R अपीलाथȸ/Appellant Ĥ×यथȸ/Respondent Assessee by : Shri Sudhir Sehgal, Advocate Revenue by : Smt. Kusum Bansal, CIT DR Date of Hearing : 14.05.2025 Date of Pronouncement : 25.06.2025 HYBRID HEARING O R D E R PER RAJ PAL YADAV, VP The present two appeals are directed at the instance of Revenue against the separate orders of ld. CIT (Appeals) ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 2 dated 09.07.2024 passed for assessment year 2017-18 and 2016-17. 2. On receipt of notice, assessee has filed Cross Objections bearing Nos. 45/CHD/2024 and 46/CHD/2024 in assessment year 2016-17 and 2017-18. 3. The Registry has pointed out that both the Cross Objections are time barred by 26 days. The assessee has filed application for condonation of delay wherein it has been pleaded that earlier litigation was being held by Shri Varun Makhija, Tax Consultant, in whose opinion, no Cross Objection is to be filed because these are departmental appeals, however, when assessee contacted the Senior Counsel, then he opined to file Cross Objections challenging the re-opening of assessment. Accordingly, Cross Objections have been filed. 4. Sub-section 5 of Section 253 contemplates that the Tribunal may admit an appeal or permit filing of memorandum of cross- objections after expiry of relevant period, if it is satisfied that there was a sufficient cause for not presenting ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 3 it within that period. This expression sufficient cause employed in the section has also been used identically in sub- section 3 of section 249 of Income Tax Act, which provides powers to the ld. Commissioner to condone the delay in filing the appeal before the Commissioner. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for consideration before Hon’ble High Court as well as before the Hon’ble Supreme Court, then, Hon’ble Court were unanimous in their conclusion that this expression is to be used liberally. We may make reference to the following observations of the Hon’ble Supreme court from the decision in the case of Collector Land Acquisition Vs. Mst. Katiji& Others, 1987 AIR 1353: 1. Ordinarily a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 4 be decided on merits after hearing the parties. 3. \"Every day’s delay must be explained\" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk. 6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so. 5. Similarly, we would like to make reference to authoritative pronouncement of Hon’ble Supreme Court in the ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 5 case of N. Balakrishnan Vs. M. Krishnamurthy (1998) 7 SCC 123 dated 03.09.1998. It reads as under: “Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life-span for such legal remedy for the redress of the legal injury so suffered. Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finislitium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words \"sufficient cause\" under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain Vs. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal Vs. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 6 the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss”. 6. In the light of above, if we examine facts of the present case, then it would reveal that impugned order against which Department is in appeal, is open for debate while hearing the appeal of the Revenue. Therefore, any cross issue can be agitated by the assessee. It is also pertinent to note that Rule 27 of ITAT Rules contemplates that respondent can raise any issue which was decided against it by the ld. First Appellate Authority for getting the appeal of the appellant dismissed. Thus, in the Cross Objection, assessee is challenging the re-opening which has been decided against the assessee and with the help of Rule 27, assessee can always raise that re- opening is bad in the eyes of law and therefore, appeals of the Revenue deserve to be dismissed on the ground that re- opening was not valid. Thus, we condone the alleged delay and proceed to decide the Cross Objections on merit in both the assessment years. 7. The Revenue has taken four grounds of appeal in each ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 7 assessment year. In brief, its grievance revolves around a single issue and the issues pleaded in rest of the grounds are peripheral arguments qua the central point. The common issue is that ld. CIT (Appeals) has erred in deleting the addition of Rs.6,67,08,792/- and Rs.2,93,25,267/- which were added on the ground that assessee has made bogus purchases from two concerns, namely M/s S.A.Agro International and M/s Ridhi Sidhi Impex which are controlled by one Shri Ashok Kumar Gupta. 8. Though the facts on all vital points are common in both the years, but for the facility of a reference, we take facts mainly from assessment year 2017-18. 9. The brief facts are that assessee has filed its return of income on 31.10.2017 and 01.10.2016 declaring total income of Rs.5,73,17,740/- and Rs.4,60,52,060/- in assessment year 2017-18 and 2016-17 respectively. The return was selected for scrutiny assessment in assessment year 2017-18 and the assessment order was passed on 31.12.2019 vide which income of the assessee was assessed at Rs.7,23,74,980/- whereas in assessment year 2016-17, return was accepted u/s 143(1). The AO has reopened both these assessments on the ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 8 ground that he has received information from Dy. Director of Investigation (Investigation Unit)-6(2), New Delhi wherein it was informed that survey u/s 133A of the Act in the case of Shri Ashok Kumar Gupta and Shri Sandeep Gupta was conducted at their business premises on 30.11.2018. During the course of survey proceedings, statement of Shri Ashok Kumar Gupta was recorded ‘on oath’ u/s 131(1)(A) of the Act. According to the Revenue, Shri Ashok Kumar Gupta has disclosed in his statement that he is providing accommodation entries to various concerns, therefore, the AO harboured a belief that purchases alleged to have been made from the concern of Shri Ashok Kumar Gupta are bogus and he reopened the assessment. The AO has heard the assessee and ultimately disallowed the claim of purchases from these concerns in both the years. 10. Dissatisfied with the assessment order, assessee carried the matter in appeal before the CIT (Appeals). The ld. CIT (Appeals) has examined the issue in detail and thereafter deleted the disallowance in both the assessment years. The relevant part of the finding recorded by the ld. CIT (Appeals) in assessment year 2017-18 read as under : ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 9 “5.2.2 Summary of the facts highlighted by the assessee during the appellate proceedings • The appellant has contested the addition of Rs. 2,93,25,267/- made by the AO on account of non-genuine purchases made by the appellant amounting to Rs.1,88,58,885/- from M/s. S.A. Agra International & amounting to Rs. 1,04,66,382/- from M/s Umesh Kumar Vivek Kumar. These purchases have been treated as bogus purchases on the basis of statement of Sh. Ashok Kumar Gupta and these two firms are the proprietorship concern of the family members of Sh. Ashok Kumar Gupta. • Sh. Ashok Kumar Gupta in his statement recorded during the course of survey proceedings had admitted that both the firms as stated above came into existence for trading of Rice, Broken Rice, Rice Husk but in fact he affirmed that no business was carried out by the firm and bogus bills were issued to various parties and the payment was received through cheque/RTGS and the amount was later on transferred to the some other entity or any other account as informed by the party who had taken the bogus bill. On the basis of such statement, detailed questionnaire was issued to the assessee and the assessee submitted the copy of the invoices, ledger account, lorry receipts, weight slips, good slips and also argued that no disallowance could be made u/s 37 on the basis of the third party information and there is no evidence on record that the amount as remitted by the assessee in respect of the purchase of the Rice Nakku had been received by the assessee. It was further argued that as and when the material is received at the factory premises, the same is subjected to lab checking in order to determine the quality of the material, moisture content and each such lab report bears the description of the items, date, vehicle number and other details and for that he placed the sample copies of such quality check, even in respect of the two parties doubted by the Assessing Officer and then at the time of making the payment to the parties, the relevant deduction is made while making the payment to the respective parties and in nutshell, it was vehemently argued that the same modus operandi is adopted in respect of the parties not doubted by the Assessing Officer and in respect of two parties whose purchases have been doubted as bogus purchases. • It was further argued that the raw material from these doubtful parties have been purchased at lesser process than the rates as charged by the parties whose purchases have not been doubted. The same plea was also taken before the Assessing Officer. A chart in this respect is placed during the appellate proceedings and sample copies of both types of parties i.e. treated genuine and tatted non-genuine. Further it has been brought on record that there is a daily receipt of Grain record being maintained having complete details of the material inward, date, party-name, vehicle number, gross weight, Tare Weight, Net Weight, Moisture, Starch, and Total Cut and the detail of weight received as per each consignment is being maintained and further the said material had gone into production of the finished product. Another important argument of the appellant is that the manufacturing operations of the company are under direct control and supervision of the State Excise and Taxation Department, Government of Punjab and said official remained stationed in the ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 10 factory premises and the production and the dispatched of the goods are under direct supervision and control and thus, the same are regularly monitored by the official station therein and thus under such circumstances, no addition of disallowance u/s 37 of the Income Tax Act, 1961 can be made. It was further argued that a request was made for cross-examination of the statement of Sh. Ashok Kumar Gupta which was not granted to the appellant. It was argued that no definite conclusion could be drawn against the appellant on the basis of statement recorded at the back of the assessee. Also, it was argued that in the statement, Sh. Ashok Kumar Gupta has never disclosed the name of the assessee concern and it is a general statement. Thus, under such circumstances and on the basis of the various judgments of the Hon'ble Apex Court in the case of Tejua Rohit Kumar Kapadia reported in 94 taxman.com 325 (SC) and of the jurisdictional Hon'ble Punjab & Haryana High Court in ITA No. 101/2022 vide order dated 05.09.2023 have upheld le decision of the Hon'ble Amritsar Bench of the ITAT in the case of Supertek Forging India Pvt. Ltd. in ITA No. 563/Asr/2018 where the similar issue of the bogus purchases was there, following the earlier judgment in the case of Leader Values reported in 285 ITR 435 had deleted the addition on account of the bogus purchases and besides that many other judgments of the Jurisdictional Benches of the Hon'ble Chandigarh ITAT and other coordinate benches cited during the appellate proceedings, that no addition on account of bogus purchases can be made. DECISION 5.1.3 I have considered the reasoning given by the AO in assessment order, submissions & documents submitted by the appellant, facts of the case and legal position. (i) The issue involved is whether the purchases made by these two parties are genuine or not. It is a matter of record, which have not been disputed that the purchases of the Rice Nakku have been made, for which day to day daily receipt sheet of grain is maintained by the appellant. The purchases as well as this system of recording, has been not doubted by the Assessing Officer except in respect of the purchases from the two parties which have been treated as bogus purchases. For reference, a sample of daily receipt sheet of grain is reproduced as under: x x x (ii) It has also been brought on record before Assessing Officer and during appellate proceedings that the rates of the raw material purchases from the doubtful ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 11 parties almost similar, as in case of other parties whose purchases have not been doubted, and rather these are lower rates. The appellant has submitted the copies of the bills of both the parties. The rates as charged by the doubtful parties are less than the rates as charged by the other parties. (iii) It is also a matter of record that the Rice Nakku as purchased from these doubtful parties and the other parties have been consumed for the purpose of manufacturing of finished product like Liquor/spirit/ENA. (iv)The sales have not been doubted by the AO. (v) All the payments in respect of the purchases made from the doubtful parties have been made through RTGS and there is no evidence on record to demonstrate that the amount as paid by the assessee in respect of the purchases made from the doubtful parties have come back to the assessee. (vi)The Hon'ble Supreme Court in the case of Pr. CIT vs. Tejua Rohit Kumar Kapadia (Tax Appeal No. 691 of 2017), Date of Order: 04.05.2018, dismissed the SLP filed by department upholding the verdict of Hon'ble Gujarat High Court reported in (94 taxmann.com page 324 Gujarat). The Decision of Hon'ble Gujarat High Court is reproduced as under: Quote 1. The Revenue is in appeal against the judgment of Income Tax Appellate Tribunal dated 16.1.2017 raising the following question for our consideration: \"Whether on the facts and circumstances of case and in laws the Appellate Tribunal was justified in treating the bogus purchase of Rs.5,19,86,285/legitimate only on the basis that purchases are duly supported by bills and all the payments were made by account payee cheques by overlooking findings of the Investigation Wing in the case of Shri Kulwant Singh Yadav, who was running shroff business and he in his statement on oath stated that he issue acknowledgment to the beneficiary on receipt of cheque and delivered cash and the assessee was one of the beneficiaries?\" The Assessing Officer had disallowed purchase expenditure of Rs. 5.19 crore's making the additions treating the purchases as bogus. The assessee carried the matter in appeal. CIT(Appeals) allowed the appeal interalia on the ground that all payments were made by the assessee by Account Payee cheque. The assessee was in fact, a trader. All purchases made from M/s. Raj Impex were found to have been sold and sales were also accepted by the Assessing Officer. The Revenue carried the matter in appeal before the Tribunal. The Tribunal dismissed the earlier making following observations: \"31. We have given a thoughtful consideration to the orders of the authorities below. ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 12 There is no dispute that the purchases made from M/s. Raj Impex were duly supported by bills and all the payments have been made by account payee cheques. There is also no dispute that M/s Raj Impex have confirmed all the transactions. There is no evidence to draw the conclusion that the entire purchase consideration which the assessee had paid to M/s. Raj Impex had come back to the assessee in cash. 32. It is also true that no adverse inference has been drawn so far as the sales made by the assessee is concerned. We also find that the entire purchases made by the assessee from M/s. Raj Impex have been accounted by Raj Impex and have paid the taxes accordingly. Considering the facts in totality well appreciated by the First Appellate Authority, we do not find any error or infirmity in the findings of the First Appellate Authority. Ground No. 1 is accordingly dismissed.\" It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee were duly supported by bills and payments were made by Account Payee cheque/RTGS. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises. 4. Tax Appeal is dismissed.\" Unquote (vi) Thus, basic conditions for the purchaser, under which purchases cannot be treated as non-genuine can be summarized as under: (a) The purchases are duly supported by bills, (b) All payments are made by account payee cheques, (c) There is no evidence to show that the purchase consideration has come back to the assessee in cash i.e., the payment has been recycled. (d) The sales out of purchases have been accepted\" (vii) On the basis of these criteria, it is observed that, (a) Purchases are supported by the bills. (b) All payments by account payee cheque or RTGS/NEFT. ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 13 (c) No evidence that cash has been received back by the appellant. (d) Sales have been accepted in assessment. (viii) Further, it is also observed that books of account have not been rejected u/s 145(3) by the AO. There is no adverse finding in assessment order about sale of the appellant. This means sales have been accepted by the AO. (ix) Further, the appellant has placed reliance on the recent judgment of Hon'ble ITAT, Amritsar (jurisdictional ITAT) in the case of Supertek Forging Pvt. Ltd., which has been affirmed by the Hon'ble Punjab & Haryana High Court. The facts of the present case are similar to this decision where the issue was with regard to the bogus purchases on account of statement of the third party recorded at the back of the assessee. (x) Further there is no material on record to prove that the transactions were not genuine. As alleged, there was issue of cheque, and the same amount was received in cash. However, there is no material on record to prove this allegation that cash has been received back by the appellant. (xi) From the above discussion, it is thus clear that the appellant has provided all the documents in support of its claim of purchase. There is nothing on record to prove that these documents are not genuine. (x) The stock stated to be purchased from these parties, has been subjected to lab test used for production and also there is evidence of transportation. Since there is al on record, which suggests these documents as non-genuine. (xi) Under the facts & circumstances of the case, assessment order and considering the submissions of the appellant, and legal position, it is held that the appellant has been able to prove the genuineness of the purchases with documents and there is no material on record, on the basis of which, these purchases can be distinguished from the other purchases (which has been accepted). Statement of a third person, who has given a general statement without naming the appellant and also not supported by any corroborative evidence or any further inquiry, cannot alone form a basis of addition on account of bogus purchase. Therefore, the addition amounting to Rs. 2,93,25,267/- made by the AO is deleted. Accordingly, these grounds of appeal are allowed. 5.2 Ground of Appeal No. 2,3 & 4 In these grounds, the AR have taken legal grounds. As the addition has already been deleted on merits, these grounds of appeal become academic in nature, and need no further adjudication. 5.3 Ground of Appeal No. S is regarding charging of interest u/s 234B & 234C of the Income Tax Act, 1961 which is consequential in nature. The AO shall charge the Interest as per law. 5.4 Ground of Appeal No. 6 is regarding penalty u/s 271(1)(C) of the Income Tax Act, 1961 which is premature in nature. ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 14 5.5 Ground of Appeal No. 7 is consequential in nature. 5.6 Ground of Appeal No. 8 has not been argued by the AR during the course of appellate proceedings. 6. In the result the appeal is allowed on factual grounds.” 11. Before us, ld. DR submitted that AO put reliance upon the statement of Shri Ashok Kumar Gupta which has been extensively reproduced in the assessment order, though such reproduction is not very legible but complete copy of the statement has been placed on record by the assessee on page No. 78 to 94 of the Paper Book. According to the ld. CIT DR, the Department has confronted Shri Ashok Kumar Gupta and his son about the details found from their premises wherein instead of giving reply on substantive basis, they have admitted that they are engaged in providing accommodation entries to various concerns. Thus, AO has made the addition on the basis of evidence which is worthy of credence. The ld. CIT (Appeals) has erred in deleting the additions. 11.1 The ld. counsel for the assessee, on the other hand, relied upon the order of CIT (Appeals). He has also filed a detailed synopsis and also placed on record copy of the judgments cited in the synopsis in a separate Paper Book. The ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 15 submissions made by him read as under : OUR SYNOPSIS AND CROSS APPEAL: 1.The Ld. AO has made the addition solely on the bases of the statement of Sh. Ashok Kumar Gupta recorded during the survey conducted at his business premises which was recorded at the back of the assessee wherein he has admitted that he was providing accommodation entries through his two firms namely M/s S.A. Agro International and M/s Ridhi Sidhi Implex Pvt. Ltd. without their being any corroborated and incriminating material on the record, and, there are plethora of judgments wherein it is held that addition solely basis of statement recorded during the survey is bad in law reliance is being placed on following judgment of the difference High Courts as under:- a) Principal Commissioner of Income-tax, Central-2, Mumbai vs. Nitin Cylinders Ltd. [2024] 159 taxmann.com 649 (Bombay)/[2024] 298 Taxman 33 (Bombay)[31- 01-2024] INCOME TAX : Where Assessing Officer made an addition on account of bogus purchases solely on a statement made by only one party recorded under section 131 without adducing evidence of other necessary parties, Tribunal was justified in deleting impugned addition Section 69C of the Income-tax Act, 1961 - Unexplained expenditure (Bogus purchases) - Assessee-company was engaged in manufacture of high-pressure seamless cylinders - Pursuant to search and seizure operations of group concerns of assessee, Assessing Officer on basis of statement made by a director of assessee opined that assessee-company siphoned off cash by issuing cheques against bogus capital expenses debited in accounts of assessee-company - Accordingly, he made an addition on account of bogus purchases which was confirmed by Commissioner (Appeals) - However, Tribunal had held that capitalization could not be denied to assessee merely on a statement given by director of assessee, without adducing evidence of other necessary parties - It was found that assessee had produced certain documents including ledger extracts of parties, confirmation from parties, bank statements and certificate from registered valuer showing construction of a building indicating procurement of steel for which said payments were made by cheque - Capitalization was denied solely based on statement made by only party recorded under section 131 - No enquiry in this regard was made and no evidence generally was made available by Assessing Officer - Whether since entire order of Assessing Officer was based merely on statement of Director of assessee without summoning or adducing additional/supplementary evidence of any other person corroborating allegation regarding bogus payments made by assessee, Tribunal was justified in deleting impugned addition - Held, yes [Paras 6 to 9] [In favour of assessee] b) Deputy Commissioner of Income-tax vs. VVD & Sons (P.) Ltd. [2024] 158 taxmann.com 395 (Chennai - Trib.)[13-09-2023] ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 16 INCOME TAX :Where Assessing Officer, based onsworn statement recorded from one directors of assessee-company, disallowed claim of expenditure made by assessee towards special salary etc. and brought same to tax, since impugned addition was made merely on basis of statement and without any credible evidence, same was to be deleted Reliance is being placed herewith the more case laws on the issue of addition made solely replying on statement without any incriminating material on record:  Jagbir Singh Nehra vs. The DCIT, Central Circle-3, Ludhiana in ITA 687/CHD/2023  Maple Destinations and Dreambuild (P.) Ltd as reported in 162 taxmann.com 157  CIT vs. Mantri Share Broker P. Ltd as reported in 133 taxmann.com 280 (SC)  Kohinoor Crafts vs, ACIT as reported in 133 taxmann.com 365 (Del Trib)  PCIT vs Nitin Cylinder Ltd (BOM HC)  ITO vs, Dr, RL Narang as reported in 174 taxmann 96 (CHD)  CIT vs Pashupati Nath Agro Food products (Allahabad HC) c) Reliance is also being placed herewith the judgement Hon’ble Amritsar Bench passed by the Hybrid Court in the case of ITO vs. Vohra Solvex Pvt Ltd in ITA No 588/Asr/2024 and CO No. 3/ASR/2025 having identical facts as in the case if the assessee which is tabulated as under: Sr.No Facts of the case of Vohra Solvex Facts of the case of assessee 1 Reopening based on mere statement of Third party, recorded during the survey conduced at business premises of two supplier namely Naresh Kumar and Vijay Kumar, who has admitted that they were entries provides as per para 3 page no 4 of the above judgement. Reopening based on mere statement of Third party, recorded during the survey conduced on the business premises of the supplier namely Ashok Kumar Gupta 2 The sale alleged to be have made from two proprietors namely Sh. Naresh Kumar and Sh. Vijay Kumar were bogus sales made by assessee. The sale alleged to be have made from namely M/s. SA Agro International (Prop. Sandeep Gupta S/o Ashok Kumar Gupta) and M/s. Ridhi Sidhi Implex (Prop. Mr. Ashok Gupta) were bogus sales made by assessee ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 17 3 Figures of sales mentioned in the reasons to believe were wrong in figures Figures of sales mentioned in the reasons to believe were wrong in figures of M/s. SA Agro International The Hon’ble tribunal has followed the judgement of M/s. Supertech Forgeins India Pvt. Ltd. Vs PCIT of jurisdictional Punjab and Haryana High court in the case of Vohra Solvex and the relevant extract of findings given by the court is as under: 22. We have heard the rival submissions of the counsels and we have considered the materials on record and also the contents of the paper book filed by the assessee along with the copy of the judgment set of various decisions of various courts relied upon by the assessee in support of his argument. We find that in the instant case, the original assessment was framed u/s 143(3) on 19th December, 2016 and the reopening notice u/s 148 was issued on 19th March, 2021 which has been issued beyond four years, on the basis of statement of two parties recorded behind the back of the assessee by the ITO, Ward 2(4), Abohar and on the basis of information supplied by the ITO, Ward-2(4), Abohar to the AO of the assessee, proceedings has been initiated u/s 148 without verifying the particulars and the contents of such information. The AO has not made any enquiry before issue of such notice u/s 148. We find that the Assessing Officer has not recorded his independent satisfaction. He has simply relied upon the information passed on to him by the AO, Abohar and relying on the report of the investigation wing, he has proceeded to reopen the assessment without any independent satisfaction or findings that there has been any escapement of income. Respectfully, following the law laid down by the jurisdictional High Court in the case of M/s Supertech Forgings (India) Pvt. Ltd. Vs PCIT (supra) where the AO has disallowed the entire purchase as bogus purchase on the basis of statement of third parties recorded on the back of the assessee where they have denied making any sales to the assessee company and this information received by the AO was neither corroborated nor verified by the AO, the Hon’ble jurisdictional High Court quashed the reopening of the assessment. Thus, the reopening merely on basis of statement and without any credible evidence same was to be deleted following above case law of jurisdictional High court of Punjab and Haryana, which is followed in the case of ITO vs Vohra Solvex Pvt Ltd and the assessment deserves to be quashed as in the case of assessee also. 2.Further, our submission on the ground that, no opportunity of cross-examination was given to the assessee to confront the statements that was recorded at the back of the Assessee and the same cannot be relied upon. Moreover, no opportunity has been afforded to the Assessee for cross examination. The Assessee has specifically ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 18 stated in the objections as filed in response to reasons recorded u/sec 148 of the Act, that, any statement taken at the back of the Assessee cannot be relied upon unless chance to cross examine is given to the Assessee as per objection filed by the assessee on 08.03.2022 vide point no 6 of the objections and the Ld. CIT(A) has appreciated the fact that the assessee argued for request of cross examination of Sh. Ashok Kumar and Reliance in this regard is being placed upon the following Judgments wherein it has been held that the statements taken at the back of the Assessee cannot be used for making additions unless a chance to cross examine has been given to the Assessee. a) [2024] 162 taxmann.com 5 (SC) Principal Commissioner of Income-tax v. Kishore Kumar Mohapatra , “INCOME TAX : SLP dismissed against order of High Court that where Assessing Officer denied exemption claimed by assessee under section 10(38) on long-term capital gain on sale of shares on basis of statement of entry operators recorded on various dates in some other proceedings not connected with assessee and no opportunity to cross-examine so-called entry providers was given to assessee thereby violating principles of natural justice, Tribunal was justified in deleting addition made by Assessing Officer” b) [2023] 157 taxmann.com 193 (SC) SUPREME COURT OF INDIA Principal commissioner of Income-tax v. Hadoti Punj Vikas Ltd INCOME TAX : SLP dismissed against impugned High Court's order that where AO made addition under section 68 solely on basis of information received from Investigation Wing that lenders from whom assessee-company acquired loans were indulged in bogus accommodation entries, since assessee was not granted an opportunity to cross-examine persons whose statements were recorded during investigation, impugned addition made on basis of such investigation which was not privy to assessee were to be deleted c) [2015] 281 CTR 0241 (SC) Andaman Timber Industries Vs. Commissioner of Central Excise. d) [2024] 161 taxmann.com 586 (Punjab & Haryana) Principal Commissioner of Income-tax (Central) v. DSG Papers (P.) Ltd.* INCOME TAX : Where pursuant to a search conducted at business premises of assessee, department made additions on account of suppressed turnover through under-invoicing based on third-party statements, since said statements were recorded at back of assessee and without giving proper opportunity for cross- examination, Tribunal rightly deleted said addition From perusal of above referred case laws, it is submitted that, wherein the opportunity of cross examination has not been provided to assessee then the assessment framed will be considered as invalid assessment, thereby violating the principal of natural justice, therefore, needs to be quashed. ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 19 Wrong Reasons to believe 3. Even otherwise, the reasons recorded in the case of the assessee in wrong in fact, that the amount of purchases mentioned in reasons from alleged doubtful party namely M/s. SA Agro International is wrongly considered at Rs. 3,31,81,650/- instead of original purchase to be considered amount to Rs. 3,34,07,389/- as per copy of account placed at 35-38 of PB, which means the reasons recorded are incorrect and also the proprietor of M/s. SA Agro International is Sh. Sandeep Gupta and the reopening is based on statement of his father Sh. Ashok Kumar Gupta, which has no reliance and there are many judgments of different courts that specifies reopening cannot be made based on wrong reasons to believe. That Sh. Sandeep Gupta proprietor’s father is Sh. Ashok Kumar is evident from page 96 of the PB, which is reasons to believe. Reliance is being placed on judgments of the different Hon’ble High Court and Worthy Tribunals as under:  [2024] 165 taxmann.com 197 (Amritsar - Trib.) IN THE ITAT AMRITSAR BENCH in the case of Sukhvir Singh v. Income-tax Officer* at page 52-57 of J. Set INCOME TAX : Where Assessing Officer received AIR information that assessee had deposited substantial amount of cash in bank account and issued reopening notice, since AIR information relied upon was incorrect and Assessing Officer failed to verify amount of cash deposited in bank from copies of bank statements duly furnished by assessee during course of assessment proceedings, there was non-application of mind by Assessing Officer and thus, impugned reopening notice was void ab initio  Smt. Monika Rani in ITA no. 582/chd/2019 dated 28.02.2020 at page 58-68 of J. Set “10.6 In the present case also the A.O. reopened the assessment on the basis of wrong facts, so respectfully following the ratio laid down in the aforesaid referred to cases, I am of the view that the reopening of the assessment in the present case was not valid, accordingly, the same is quashed.”  Gaurav Joshi vs. ITO as reported at (2019) 55 CCH 0083 (Jalandhar Camp) “Held, AO while issuing notice u/s 148 had mentioned that assessee had deposited cash during FY 2009-10 in bank account which had escaped assessment—On contrary, in assessment order, he mentioned that cash deposited in assessee’s bank account was less than amount mentioned in reopening notice—Therefore, reasons recorded by AO were not emerging from record available with him—AO recorded reasons which were not found to exist on record, therefore, reassessment framed deserved to be quashed—Assessee’s appeal allowed.” ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 20  Sagar Enterprises vs. ACIT (2002) 257 ITR 335 (Gujarat High Court)  Harjeet Singh vs. ITO (ITAT Delhi), order dated 12.11.2018, in ITA No. 2013/DEL/2015  KMV Collegiate Sr. Sec. School vs. ITO (2017) 163 ITD 653 (Asr.) (Trib.)  Fortune Metaliks Limited vs. DCIT, ITA No. 1090/Chd/2019 dated 12.01.2021 – CHD Trib. Thus AO recorded reasons which were not found to incorrect/non-existing on record, therefore, reassessment framed deserved to be quashed. On the issue of Books of Account not rejected 4. Our contention is that firstly, that the AO & CIT (A) having accepted the books of accounts of the assessee and it is a settled law that, when the book results have been accepted, which means, there is no doubt with regard to purchases and sales as made by the assessee, neither with regard to rate or quantum of such purchases or any doubt or suspicion with regard to the maintenance of day to day stock tally and Daily day to day grain register is being maintained by the assessee, thus, when the books of accounts have been accepted and when no such defects have been pointed out in any documentary evidences filed by the assessee, thus, no such addition can be made in the trading results of the assessee and reliance is being placed on the following judgments:-  Judgment of Hon’ble Punjab & Haryana High Court in the case of Rajeev Aggarwal in ITA No. 35/2020 (O&M)wherein, it has been held as under: “Against the same, the Revenue as such was in appeal. The Tribunal, vide its order dated 22.05.2019 (Annexure-A-III), has also examined the record and it was noticed that the assessee had produced stock statement where no negative stock had been shown and, therefore, it was concluded that how the AO had noted that the negative stock was not clear. The record produced showed that evidence was part of the account books furnished in support of the assessee’s contention and the evidence had also been filed before the first Appellate Authority. Accordingly, it was held that is was not justified for rejecting the accounts simply because the names of the buyers were not mentioned in the bills of cash sales and it would not go to disbelieve the books of accounts since the assessee was trading in gold bullion. The day to day rates would have also been ascertainable from the rates declared by National market, Sarrafa Bazzars etc. Resultantly, a finding was recorded that the AO was not justified in rejecting the book version of the assessee and to apply the profit rate of 0.54% without any good reason and no comparable instance had been given and there was no valid reason to doubt the record of the assessee and the assessee had maintained quantitative tally of the stock. The Revenue had not been, thus, able to make out a case that the assessee had not ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 21 adopted consistent method of accounts and the profit and gains earned by the assessee could easily be detected from the books of accounts. The appeal as such was dismissed.”  Judgment of Hon’ble Delhi High Court in the case of Forum Sales (P.) Ltd. as reported in 160 Taxmann.com 93(Delhi) wherein, it has been held as under: “Section 145, read with sections 144 and 153A, of the Income-tax Act, 1961 - Method of accounting - Rejection of (General) - Assessment years 2013-14 and 2014-15 - Assessee-company was engaged in providing corporate gifting solutions to various companies - A search and seizure operation under section 132 was conducted upon AMQ group of companies including assessee - Assessing Officer issued a notice under section 153A to assessee - Assessing Officer made additions to income of assessee on account of estimation of unaccounted profit, disallowance of expenses and inflated purchases - It was noted that Assessing Officer was provided with requisite bills, vouchers and addresses of transacting parties but he did not make any effort to confirm veracity of alleged bogus or inflated bills - Whether since Assessing Officer made additions to income of assessee on estimate basis without rejecting books of account, said additions were to be deleted - Held, yes [Paras 25 and 29] [In favour of assessee]”  Judgment of the Hon’ble High Court of Gujarat in the case of Shakti Industries as reported in 36 taxmann.com 16 (Gujarat) wherein, it has been held as under: “Section 144, read with section 143, of the Income-tax Act, 1961 - Best judgment assessment [Addition] - Assessing Officer made additions without rejecting books of account of assessee during assessment under sections 144 and 143 - Commissioner (Appeals) deleted addition on ground that addition of items made by Assessing Officer were mentioned in audited accounts and therefore, they could not be added without rejecting books of account - He, further held that in best judgment assessment fair estimate of income of assessee should have a reasonable nexus with available material and circumstances of case - Whether, where addition was made without rejection of books of account of assessee and further amounts added were shown in audited accounts, addition made by Assessing Officer could not be sustained - Held, yes [Para 5] [In favour of assessee]”  Judgment of the Hon’ble High Court of Madras in the case of Marg Ltd. as reported in 84 taxmann.com 52 (Madras) wherein, it has been held as under: “Section 145 of the Income-tax Act, 1961 - Method of accounting (Estimation of Profit) - Assessment year 2012-13 - Assessing Officer had made addition to income returned by assessee by estimating gross profit - Tribunal held that profits of assessee could not be estimated without rejecting its books of account and deleted addition - Whether no substantial question of law arose from Tribunal's order - Held, yes [Para 5] [In favour of assessee]” Besides that, the following judgments are also applicable to the facts and circumstances of the case: a) CIT vs. Anil Kumar & Co. in ITA No. 200001 & 200002 vide order dated ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 22 25.02.2016 (Karnataka HC) wherein it has been held as under: “The tribunal has rightly held that when the books of account of the assessee had not been rejected and assessment having not been framed under section 144, the Assessing Officer and the Commissioner (Appeals) were in error in resorting to an estimation of income and such exercise undertaken by them was not sustainable.” b) ITO vs. Amit Verma in ITA No. 4558/Del /2011 vide order dated 19.12.2012 (Del Bench) c) ACIT vs. Ercon Composites as reported in 49 taxmann.com 489 (Jodhpur Bench) d) ITO vs. Pranab Prakash Dutta in ITA No 1492/Kol/2011 vide order dated 25.06.2012. e) ITO vs. M/s Rajeev & Company in ITA No. 46/Lkw/2012 vide order dated 17.12.2014 f) 315 ITR 185 (P&H) CIT vs. OM Overseas g) 320 ITR 116 (All) CIT vs. Mascot India Tools & Forgings (P) Ltd. h) 64 DTR 409 (Jai) Asstt. CIT vs. Shankar Exports i) 325 ITR 13 (Del) CIT vs. Paradise Holidays “6 The AO has not pointed out any specific defect or discrepancy in the account books maintained by the assessee. Admittedly, the assessee had been maintaining regular books of accounts, which were duly audited by an independent chartered accountant. As noted by CIT(A), the financial results were fully supported by the assessee with vouchers and the books of account were complete and correct in all respects. The accounts which are regularly maintained in the course of business and are duly audited, free from 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 as such that true profits of the assessee cannot be deducted therefrom.” j) ITA No. 999/2010 dated 03.08.2010 (Del) CIT vs. M/s Rice India Exports Pvt. Ltd. “3 It is settled law that in revenue matters, the onus of proof is not a static one. Though the initial burden of proof lies on the assessee yet when it files purchase bills and affidavits, the onus shifts to the Revenue. One must not forget that it is Revenue which has powers regarding discovery, inspection, production and calling for evidence as well as survey, search, seizure and requisition of books of accounts.” Thus, from perusal of the above judgments, it is clear that the assessee had discharged its onus and no specific defects having been pointed out in respect of ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 23 voluminous information as submitted and, when the books have been accepted, then whole basis of making addition is un-called for. Merits of the case 5. Further, it is submitted that, the assessee during the course of appellate proceedings filed various documentary evidences that proves the purchases made by the assessee from two alleged doubted parties as well as from other non- doubted parties, which have been reproduced at para 4.1 onwards at page 16 to 17 of the order of the CIT(A), also the findings have been given by the CIT(A) on the issue that what conditions that an assessee needs to fulfill under which purchases cannot be treated as non-genuine can be summarized, which is summarized at page 24 of the order of CIT(A) and the relevant extract is as under: Here is the list of documentary evidences filed before the AO and CIT(A) to prove the genuineness of the purchases as under: a. Copy of audit report of the assessee showing consumption of the assessee yield of different items as per point no 35 of the of the audit report at page 14 of the Paper book. b.Copy of ledger account of the both the parties showing purchases made by the assessee from M/s. SA Agro International as per page 35-38 of the PB & M/s. Ridhi Sidhi Enterprises as per page 39-42 of the PB. c. Sample copy of purchase bills, along with description of Vehicle number, weight and other particular made from doubted party namely M/s. SA Agro International as per page 43-51. d.Sample copy of purchase bills, along with description of Vehicle number, weight and other particular made from doubted party namely M/s. Ridhi Sidhi Enterprises as per page 52-60. e. Copy of purchase bills of non-doubted parties, along with description of Vehicle number, weight and other particular showing rates of Rice Nakku purchases at favorable rates made from doubted party namely M/s. SA Agro International as per page 43-51. ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 24 f. Comparative chart showing rates of purchases made by assessee from doubted parties viz-a-viz other non-doubted parties as per copy placed at page 114 of the PB. g.Details of sample bills showings quality cut charged by the assessee and payment made accordingly as per copy placed at page 125 of the PB. h.Copy of Daily receipt sheet of grain having complete details of material inward having particulates of party name, Vehicle No, Item, Gross Weight, Tare Weight, Net Weight, Moisture, Starch, EM, Total Cut and details of Weight received as per page 61-72 of the Paper book. i. Copy of sample bills placed at page 130-141 of the PB along with the quality check report. Reliance is being placed on judgments on the issue, wherein, purchases made by the assessee was supported with the invoices and all payment made through account payee cheque, and other sales were accepted by the AO then the purchase cannot be doubted itself, and following case laws of different high courts, which have been decided in the favor of the assessee on the same issue, based on the issue of Bogus purchases, which are stated as under:- (i) Judgements in the case of Century Plyboards (P) Ltd as reported in [2019] 103 taxmann.com 179 (SC). (Placed at Pages – J. Set 1) IT: Where High Court upheld Tribunal's order that in view of copies of invocies and challans, proof of payments, bank statements, transportation payments, vouchers for movement of goods etc, it could be concluded that purchase transactions between assessee and 'D' were not bogus or fraudulent and, thus, addition could not be made under section 69C, SLP filed against decision of High Court was to be dismissed (ii) Judgment in the case of Supertech Forgings (India) Pvt. Ltd as reported in ITA -101-2022 followed by CIT(A) on the legal issues as well on merits of the case. (iii) M/s. Prime Steel Industries Pvt. Ltd. vs. The DCIT Circle, Patiala in ITA No. 275/CHD/2024, wherein the Hon’ble tribunal had given findings on merits, which is as under: 20. The Ld. Counsel also relied upon the number of judgments of Hon'ble 'Apex Court', Punjab & Haryana High Court and also the judgment of ITAT in the case of M/s Supertech Forgings (India) Pvt. Ltd. in ITA No. 6599/2014, vide order, dated 12.12.2018, which has been approved by the Hon'ble Punjab 8t Haryana High Court in ITA No. 10/2022 and many other judgments of different Benches of the Jurisdictional ITAT and Others for the preposition that since the sales have not been doubted and inflation in the purchases and no defects have been found in day to day maintenance of quantitative record, consumption register, stock tally and, as such, no addition could be made on account of such bogus purchases. 21. Further, as regards the profit element embedded, the Ld. Counsel drew our attention to the chart submitted before the Ld. CIT (A) for the preposition that the finding of the Authorities below regarding the profit embedded in such purchases, ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 25 is wholly misconceived and not sustainable, because the rates on which, the material have been purchased from the alleged doubtful parties, is same or less than the rates with regard to the rates of other parties and that chart is self- explanatory and from the said chart, it was argued vehemently that since there is no inflation in respect of purchases made from the alleged doubtful parties, whole basis of applying the gross profit or profit embedded as applied by the Assessing Office or CIT(A) is out of context and that finding deserves to be quashed. Our attention particularly was drawn to the judgment of Apex Court in the case of CIT Vs Century Plyboards (I) Ltd. reported in [2019] 153 taxman.com 179, it has been held as under:- \"Section 69C, read with section 263, of the Incometax Act, 1961 - Unexplained expenditure (Bogus purchases) - After completion of assessment, Commissioner received a complaint from Director General that assessee had entered into bogus purchase transactions with one 'D' - On basis of said complaint, Commissioner passed a revisional order setting aside assessment - In appellate proceedings, Tribunal having noticed copies of invoices and challans, proof of payments, bank statements, transportation payments, vouchers for movement of goods and like documents, concluded that transactions between assessee and \"D* were not bogus or fraudulent - Accordingly, impugned revisional order was set aside - High Court upheld order passed by Tribunal - Whether, on facts, SLP filed against decision of High Court was to be dismissed - Held, yes [In favour of assessee].\" 22. Our attention was also drawn to the judgment of Supreme Court in the case of PCIT Vs Tejua Rohit Kumar Kapadia, reported in 94 taxman. Com 325, in which, it has been held as under: - \"Section 69C of the Income-tax Act, 1961 - Unexplained expenditure (Bogus purchases) - Assessing Officer had disallowed some expenditure treating purchases as bogus and made addition - High Court in impugned order noted that purchases made by assessee-trader were duly supported by bills and payments were made by account payee cheque and seller also confirmed transaction and there was no evidence to show that amount was recycled back to assessee, and held that addition was not called for - Whether, on facts, SLP against said order was to be dismissed - Held, yes - In favour of assessee. (iv) Judgment in the case of CIT vs. Odeon Builders (P.) Ltd as reported in [2019] 110 taxmann.com 64 (SC). INCOME TAX: Where assessee had submitted purchase bills, transportation bills, confirmed copy of accounts and VAT Registration of sellers as also their Income- tax Return and payment was made through cheques, impugned purchases could not be disallowed. (v) Judgment in the case of PCIT vs. Tejua Rohit Kumar Kapadia reported in [2018] 94 taxmann.com 325 (SC) Where purchases made by assessee-trader were duly supported by bills and payments were made by account payee cheque, seller also confirmed transaction and there was no evidence to show that amount was recycled back to assessee, Assessing Officer was not justified in treating said purchases as bogus under section 69C: SLP dismissed. ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 26 (vi) Judgement iin the case of PCIT vs. Nitin Ramdeoji Lohia as reported in [2022] 145 taxmann.com 546 (Bombay) INCOME TAX: Where Assessing Officer made addition by disallowing expenses on purchases on ground that an information was received from sales tax department that assessee was beneficiary of accommodation entries on account of bogus purchases, since Assessing Officer had not disputed corresponding sales transactions, purchases also could not be bogus and, thus, impugned addition made on account of bogus purchases to be deleted (vii) Also, it is submitted that assessee has filed quantitative stock tally in form stock inventory, yield chart showing consumptions, purchases, goods returned, sales made by the assessee and no defect has been pointed out by the AO as well as CIT(A) during the course of assessment proceedings and appellate proceedings and reliance is being placed on judgment in the case of Piyush Developers Pvt. Ltd V/s ACIT in ITA No.5599/DEL/2010, ITAT, Delhi Bench (on the issue, if no defect have been pointed out, no addition is called for) “No defects have been found in the stock register nor any defects have been pointed out by the A.O. in the audited books of accounts maintained by the assessee. Despite search and seizure no adverse material was found to substantiate the disallowance made by the A.O. Coming to the identity of the parties we find that all the parties are registered with sales tax department and have charged VAT in each of the bills. All these parties have bank accounts and payments were made through account payee cheques. Evidence of material having been received by the assessee, has been filed.” The above documentary evidences and relevant case laws filed before the Worthy CIT(A) & AO were not doubted i.e. ‘Invoices of doubted parties’ and ‘Invoices of Non-doubted parties filed before the AO to show the similarity between the rate’. The trading results of the assessee have been accepted by the AO considering the facts that the State Excise department look after the complete sales being made by the assessee. No defects have been pointed out by AO in the books of assessee, which means the book of the assessee were found clear, without appreciating the fact that the purchase made from the doubted parties have been already shown by the assessee in the books of the assessee. Further, it is submitted that, the Ld. CIT(A) has rightly deleted the addition made by the AO. From perusal of above referred case laws, the assessee has proved the genuineness of the purchases by way of various documentary evidences as mentioned above, wherein, it is mentioned that, if sales the sales results are accepted and no defect has been pointed out in the stock inventory and no material on record that proves transactions not genuine. Thus, the addition cannot be made. Conclusion of the Case: 1.Reopening made in the case of the assessee based on mere statement of third party, recorded at the back of assessee during the course time of survey, which had no admissibility. ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 27 2.No opportunity of cross examine the person, whose statement have been relied up for selecting the case of assessee. 3.Reopening made by the assessee based on wrong reasons to believe having wrong figures. 4.Reopening made by the AO after four years, wherein original assessment of the assessee have been already completed u/s 143(1) of the Act, 1961. 5.Purchase made by the assessee were supported by the sufficient no of evidences. 6.Trading results of the assessee have been accepted and no books of account have been rejected. 7.Sales made by the assessee was also accepted. 8.No evidence of Cash received by the assessee, anywhere filed by the AO.” 12. We have duly considered the rival contentions and gone through the record. A perusal of the record would suggest that in assessment year 2017-18, scrutiny assessment of the assessee was open when this survey was conducted upon the premises of Shri Ashok Kumar Gupta. The material could have been easily transmitted to the AO and the alleged witness could also be produced for the cross-examination but nothing of that course was adopted by the Revenue. A perusal of the assessment order would indicate that there are two sets of facts, on the one hand, the assessee is maintaining complete details and its accounts are audited. It has produced copy of the invoices, ledger account, lorry receipts, weight slips, goods slips and transportation details. It is engaged in the business of manufacturing and trading of liquor and allied products. It ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 28 has purchased various type of grains and other items required for this manufacturing process. Its books have not been doubted by the AO. Its gross sales have not been doubted or disturbed by the AO. The only single aspect doubted by the AO is that purchases made by the assessee from concerns of Shri Ashok Kumar Gupta are doubtful. The ld. counsel for the assessee pointed out that action was taken on the basis of statement of Shri Ashok Kumar Gupta whereas he was not the proprietor of these concerns, rather his son Shri Sandeep Gupta is proprietor and his statement has not been used by the AO in the impugned assessment order. Thus, on the one hand, details were maintained in a tabulated manner as expected by a business concern u/s 145 sub-section (2) of the Income Tax Act, on the other hand, AO has doubted the genuineness of the purchases made by the assessee on the basis of alleged statement recorded during the course of survey. Let us evaluate the evidentiary value of this statement. No doubt, a reference of Section 131(1)(A) is being mentioned in the statement, but whether the Act authorize the officer to take statement ‘on oath’ during the course of survey u/s 133A. This position has been analytically examined by Hon'ble Chennai High Court in the case of CIT Vs S.Khadar Khan Son ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 29 reported in 300 ITR 157 (Madras). The Hon'ble Court has made reference to the judgement of Hon'ble Kerala High Court in the case of Paul Mathews & Sons Vs. CIT 263 ITR 101. The questions formulated by the Chennai High Court for consideration, which are being reproduced as under : “(i) Whether, on the facts and in the circumstances of the case, the Income-tax Tribunal is right in law in holding that the statement made during a survey under section 133A of the income-tax Act has no evidentiary value ? ii) Whether, on the facts and in the circumstances of the case, the Income-tax Tribunal is right in not considering the fact that the branch contractors' agent account book in which entries were made subsequent to the survey and not found during the survey nor proceed the survey, could be relied upon ? (iii) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in not considering the fact that the voluntary statement made without any coercion or duress given during the course of survey action under section 133A could form the basis of the assessment ?\" 12.1 A perusal of these questions would indicate that issue before the Hon'ble Court was whether on the strength of the statement recorded during the course of survey and an admission made by the deponent in his statement, addition could be made in the hands of the person upon whom survey was conducted “. After a detailed examination and reference to Section 132, where search is being conducted, Hon'ble Court has replied these questions in favour of the assessee and against the Revenue. We deem it appropriate to take note ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 30 of the observations of the Hon'ble Court on page No. 165 of the Journal, which read as under : “What is more relevant, in the instant case, is that the attention of the Commissioner and the Tribunal was rightly invited to the circular of the Central Board of Direct Taxes dated 10.3.2003 with regard to the confession of additional income during the course of search and seizure and survey operations. The said circular dated 10.3.2003 reads as follows: \" Instances have come to the notice of the Board where assessees 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 assessees while filing returns of income. In these circumstances, on 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 be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.\" From the foregoing discussion, the following principles can be culled out:- (i) An admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 18]; (ii) In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 31 the other hand, whatever statement is recorded under section 133A of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. Commissioner of Income-tax [(2003) 263 I.T.R. 101]; (iii) The expression \"such other materials or information as are available with the Assessing Officer\" contained in Section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under Section 133A, vide Commissioner of Income-tax v. G.K.Senniappan [(2006) 284 I.T.R. 220]; (iv) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this Court in T.C.(A) No.2620 of 2006 (between Commissioner of Income-tax v. S.Ajit Kumar); [2008] 300 ITR 153 (Mad) (v) Finally, the word \"may\" used in Section 133A (3)(iii) of the Act, viz., \"record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself. For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated 10.3.2003, extracted above, for arriving at the conclusion that the materials collected and the statement obtained under Section 133A would not automatically bind upon the assessee, we do not see any reason to interfere with the order of the Tribunal. Accordingly, finding no substantial question of law arises for consideration, the tax case appeal stands dismissed.” 12.2 The Hon'ble Kerala High Court has held that whatever statement is recorded under Section 133A, during the course of survey, it has no independent evidentiary value. It is only a corroborative piece of evidence. If Section 133A is being perused, it does not empower the authorized officer to ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 32 administer the oath. 12.3 Apart from the above, Shri Ashok Kumar Gupta was never put to cross-examination during the assessment proceedings. The assessee had prayed for such an opportunity but he was not produced before the AO for cross-examination. Hon'ble Supreme Court has considered this aspect in the case of Andaman Timber Industries V CCE in Civil Appeal No. 4228 of 2006 dated 02.09.2015 and has given following observation: \"……..According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable.\" 12.4 According to this judgement, if the deponent was not put to cross-examination, then statement of such a witness cannot be used against the interest of any other person. In the present case, this statement was recorded from the back ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 33 of the assessee and the assessee was not given an opportunity to cross-examine the deponent. Therefore, the statement is to be excluded from the evidence used against the assessee. If the statement is excluded, then nothing remains with the AO for making the addition. 13. We find that ld. CIT (Appeals) has appreciated all these aspects in the above finding in both the years and thereafter deleted the addition. After analyzing the well reasoned order of the CIT (Appeals) in the light of the submissions made by the ld. counsel for the assessee, extracted supra, and the quality of evidence possessed by the AO, we are of the view that no interference is called for in the orders of the CIT (Appeals) in both the years. Accordingly, appeals of the Revenue are dismissed. 14. As far as re-opening of the assessment is concerned, we find that a credible information is being transmitted by ADIT (Investigation) which raised a suspicion about nature of expenditure debited by the assessee in the books qua purchases made by it. There is a slight variation in the quantum of purchases referred by the AO in assessment year ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 34 2017-18 but in substance, Department was able to lay its hands on some information indicating the fact that some of the expenses debited by the assessee could be of doubtful nature. At the stage of forming the belief that income has escaped assessment for re-opening of the assessment, it is only a prima-facie opinion required to be formed by the AO. He is not required to record a categorical finding about the escapement of income. He has to only form a belief. Therefore, we are of the view that AO has rightly formed the opinion on the basis of information supplied by ADIT (Investigation) that a re-opening is required to be made. Accordingly, we do not find any error in the re-opening of assessment, hence, Cross Objections of the assessee in both the years are rejected. 15. In the result, both the appeals and the Cross Objections are dismissed. Order pronounced on 25.06.2025. Sd/- Sd/- (KRINWANT SAHAY) (RAJPAL YADAV) ACCOUNTANT MEMBER VICE PRESIDENT “Poonam” ITA No.992 & 993/CHD/2024 & CO 46 & 45/CHD/2024 A.Y.2017-18 & 2016-17 35 आदेश कȧ ĤǓतͧलͪप अĒेͪषत/ Copy of the order forwarded to : 1. अपीलाथȸ/ The Appellant 2. Ĥ×यथȸ/ The Respondent 3. आयकर आयुÈत/ CIT 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय आͬधकरण, चÖडीगढ़/ DR, ITAT, CHANDIGARH 5. गाड[ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "