INCOME TAX OFFICER, DELHI V. MOHD RIZWAN, DELHI

ITA 3535/DEL/2025

AI Insights

The case revolves around an appeal by the Income Tax Officer against Mohd. Rizwan concerning the assessment year 2021-22. The primary issue was the addition made by the Assessing Officer under section 144 of the Income-tax Act, 1961, which estimated the income on alleged bogus purchases at 25%. The CIT (A) later deleted this addition, a decision which the Revenue appealed against. The Tribunal, after reviewing the submissions and evidence, upheld the CIT (A)'s decision, noting the lack of rejection of the books of account and the reliance on circumstantial evidence by the Assessing Officer.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779795 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2021-2022
• Appeal Filed On: 28-05-2025
• Other Referred Cases: India Woolen Carpet factory vs. CIT, VISP (P) Ltd vs. CIT, Precision Finance vs. CIT, Golcha Prop. Pvt Ltd vs. CIT, Chaturbhuj Pandey vs. CIT, Sumati Dayal vs. CIT, C Vasant Lal & Co. vs. CIT, Sanjay Oil Cakes vs. CIT, Nikunj Eximp Enterprises vs. CIT, ACIT vs Tarla R Shah
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHIJEET KUMAR; LEADING
• Keywords: Question of law; Unexplained cash credit; Bogus purchase; Search and seizure; Accommodation entries; Assessment record; Cancellation of registration; Bogus
• Section: 144; 132; 68; 131; 69

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘E’: NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER and SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER ITA No.3535/DEL/2025 (Assessment Year: 2021-22) Income Tax Officer, vs. Mohd. Rizwan, Delhi. C – II/139, New Ashok Nagar, New Delhi – 110 002. (PAN : AOWPS6859K) (APPELLANT) (RESPONDENT) ASSESSEE BY : None REVENUE BY : Shri Abhijeet Kumar, Sr. DR Date of Hearing : 07.10.2025 Date of Order : 15.10.2025 O R D E R PER S. RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. This appeal preferred by the assessee is directed against the order of the ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [for short ‘ld. CIT (A)] dated 13.03.2025 for Assessment Year 2021-22. 2. At the time of hearing, none appeared on behalf of the assessee. Hence, we are proceeding to decide the appeal with the assistance of ld. DR of the Revenue. Printed from counselvise.com 2 ITA No.3535/DEL/2025 3. Ld. DR of the Revenue brought to our notice facts of the case and from the facts, we observe that the assessment was completed under section 144 of the Income-tax Act, 1961 (for short ‘the Act’) and the Assessing Officer has estimated the income on alleged bogus purchases @ 25%. However, we observe from the record that Assessing Officer has not rejected the books of account and not brought on record the reasons for the same. After considering the submissions of the assessee, ld. CIT (A) deleted the addition by observing as under :- “6. Decision – I have examined facts of the case, and gone through the Order and WSs. GoA no. 1-5 challenge additions made by the AO for doubtful purchases and disallowance of deduction u/s 80C, 80D and 80TTA of the Act. The AO has made addition on account of doubtful purchases on the grounds of non-filing of ITRs, non-availability of suppliers at the given addresses, non-submission of bank statements and invoices by suppliers, cancellation of registration on GST portal, mention of different business on GST Portal and use of small-sized transport vehicles for carrying large quantity of goods. The details in this regard can be summarised in the following table (the “Table’)as follow – Printed from counselvise.com 3 ITA No.3535/DEL/2025 # (‘Y’ for ‘YES’ and ‘N’ for ‘NO’) @ Vehicle is too big in comparison of quantity transported *Vehicle not found on RTO Portal %Transport vehicle not mentioned on bill With regard to comments in column number (3), it is noticed from the Order that notice was not served in the case of supplier mentioned at sl.no.5 only. With regard to comments in column number (4)-wherever ‘Y’ is mentioned - the registrations were either cancelled suo-moto, cancelled on application of taxpayer or suspended. They were not cancelled by the GST department after finding these firms as bogus entities. Printed from counselvise.com 4 ITA No.3535/DEL/2025 With regard to comments in column number (5), suppliers mentioned at sl.no.7-10 and 11 were not found available. In all other cases, notices were sent but the suppliers did not respond. The AO did not make any enquiry in other cases except for case mentioned at sl.no.4 and 10. In the case of supplier mentioned at sl.no.10, he conducted enquiry at the address mentioned in PAN whereas the address of the supplier was different i.e 2269-71, GaliHinga Beg, Tilak Bazar, North Delhi as is noticed from the copy of account of the supplier available on CPC 2.0. With regard to comments in column number (6), the supplier mentioned at sl.no.4 denied to have made sales to the appellant but no opportunity of cross- examination was provided to the appellant. With regard to comments in column number (7), the supplier mentioned at sl. no.12 was found to be an entry-operator by ADIT (Inv.) but no independent investigation was carried out by the AO and he relied on the report of ADIT(Inv) and that too without providing copy of that report to the appellant. With regard to comments in column number (8), the suppliers mentioned at sl.no.1,3,6 &9 used smaller vehicles but it is noticed that the goods were delivered from Delhi to Noida in the cases of suppliers mentioned at sl.no.1,4,6,7 & 9 and from Delhi to Gurugram in the case of supplier mentioned at sl. no. 3. Since distance from Delhi to Noida is not much, same vehicle could have ferried at least two times for supply of material. The AO did not undertake any further enquiry in the matter. With respect to the supplier mentioned at sl. no.2, the vehicle was found over-sized but this feature does not prove that sales were bogus. The AO failed to conduct any further enquiry in the matter. With regard to comments in column number (9), all the suppliers were found to be non-filers of ITR but they were having PANs and GST numbers. The stand of the AO is that no bank-statements, confirmation and invoices were submitted either by the appellant or by the suppliers. However, it is noticed from the reply filed by the appellant before the AO (as available on CPC 2.0 that signed copies of invoices were filed before the AO and bank statement of the appellant would have shown the same transactions with the suppliers if he had asked for or obtained that directly from the bank. During the appellate proceedings, the appellant has filed copy of bank statement along-with copy of accounts of the suppliers and marked the entries which are in respect of payment to suppliers. This is made part of this order as Annexure- ‘A’. The entries in bank statement tally with entries of payments to the respective suppliers. The appellant also filed copy of sales register for Delhi, PU and Rajasthan and copy of purchase register showing party-wise purchases. They are made part of this order as Annexure-‘B’ and ‘C’. The purchases and sales shown in these register match with financials of the appellant. Another basis for doubting the purchases is that the signatures on invoices in the cases of suppliers mentioned at sl.no. 1,2,3,4,5,6,7,8,9 and 12 are in similar handwritings and with same pen. This finding is not supported with any opinion of handwriting expert. Printed from counselvise.com 5 ITA No.3535/DEL/2025 In as much as mention of different business on GST Portal is concerned, it is noticed from the GST website that field related to nature of business is a non- core field and it can be changed by the assesse itself any time and approval or verification of GST department is not required for this change. The reliance on nature of business on GST Portal for disallowing purchases is, therefore, not proper and sufficient for doubting purchases. The AO has tested the cases of suppliers on seven parameters and in none of the cases, all the parametersproved negative in as much as the genuineness of the sales are concerned. For example, in the case of supplier mentioned at sl.no.1 of the Table, he was not found an entry-operator, he was not found unavailable as notice was served, and he did not deny the sales but the purchases from him were found doubtful as the vehicle was small-sized and his registration on GST Portal was cancelled (albeitsuo-moto not by the GSS department for being bogus). Likewise in the case of supplier mentioned at sl.no.11, neither he was found an entry operator, nor did he deny the sales, nor was he found unavailable nor was use of any small/over-sized vehicle, the purchases were found doubtful since the registration on GSST Portal was cancelled suo-moto and he was not filing ITR. From the above and discussion made in the Order, it is clear that the case of the AO is based on circumstantial evidence. This finding could have been a platform for conducting further enquiry but not for making addition by holding the purchases as doubtful. The AO himself has used word ‘DOUBTFUL’ with respect to this purchase. But the AO failed to conduct any further enquiry so as to prove that these sales were bogus or inflated. Meaning of the word “doubtful’ is ‘not certain’. Conversely, when other features of the case are examined the ‘doubtful’ purchases do not appear doubtful. The appellant declared net profit of 2.12% of turnover for the assessment year under consideration and of 2.57% for the preceding assessment year. If the addition of Rs. 2,13,15,433/- for doubtful purchases is added to the declared net profit of the assessment year under consideration, the net profit rate comes at 13.77% (38,73,984+2,13,15,433/18,28,90,173) which is almost 50% more than gross profit of previous year and almost five times of net profit of previous year. This profit rate should have been justified by concrete evidence rather than relying on circumstantial evidence. Further, the AO was having details of closing stock and he did not point out if this doubtful purchase was forming part of closing stock or was shown as consumed. The amount of closing stock as on 31.03.2021 was substantial as it was shown at Rs. 2,28,61,272/- as against purchases of Rs. 13,78,38,452/-. If this purchase was forming part of closing stock either in full or in part, no addition was required to that extent as no expenditure could have been claimed by the appellant so as to reduce the profits in that case. Furthermore, the AO did not examine if this case was a case of inflated quantity or inflated price. If this case was a case of inflated quantity, analysis of quantitative figure of opening stock, purchases, and consumption could have found the inflated quantity and corresponding bogus purchases and if this case was a case of inflated price, price-comparison could have captured that detailbut again If this purchase was forming part of closing stock either in full or in part, no addition was required to that extent as no expenditure could have been claimed by the appellant so as to reduce the Printed from counselvise.com 6 ITA No.3535/DEL/2025 profits in that case. The appellant has filed copies of bank-statements highlighting the entries of payments made to the suppliers as well as copy of accounts of the suppliers. The payments were made by RTGS etc. Apart from that, the AO accepted sales but disallowed purchases without rejecting books of account and applying provisions of section 144 of the Act. The addition thus fails on facts of the case. In the Order, the AO has relied on following case-laws : 1. India Woolen Carpet factory 178 ITR 420 (Raj.), 2. VISP (P) Ltd 186 CTR 717 (MP), 3. Precision Finance 208 ITR 465 (Cal), 4. Golcha Prop. Pvt Ltd 227 ITR 391 (Raj), 5. ChaturbhujPandey AIR 1969 (SC) 255, 6. Sumati Dayal 214 ITR 801 (SC),and 7. C VasantLal& Co. 45 ITR 206 (SC) 8. Sanjay Oil Cakes 316 ITR 274 (Gujarat),and In the case of India Woolen Carpet factory supra, the assesse failed to provide addresses of the suppliers as well as evidence to prove genuineness of the transactions. But in the present case, copies of invoices were provided and payments were made through banking channel. Relevant part of this judgement is reproduced below - “4. The Assessing Officer in compliance of the direction of the Commissioner of Income tax (Appeals) deputed the Inspector of Income-tax. The Inspector of Income-tax went and contacted some parties. As per his report, some parties had expired and whereabouts of most of the parties were not available as they belong to Khatic community and Khatics are nomadics. Again opportunity was given to the assessee to produce those parties, and to prove the genuineness of the purchase made from those parties, as referred to in para. 6 of the original assessment order. Many opportunities were given, but the assessee could not produce those parties neither any other evidence was adduced to prove the purchases from those parties. 8. We can understand that they will not be available at one point of time. When the parties from whom the wool was purchased are not nomadics, it cannot be said that they have no permanent address and if they are the genuine parties, they should have some address. No person in the name of such party was found particularly when the summons were issued under section 131 to those parties. If the transactions are genuine and if the parties have migrated somewhere else, their latest address should have been supplied and the burden is on the assessee to prove the genuineness of the transaction, when the assessee claimed that the purchases are genuine.” This case is distinguishable as facts of the present case are different. In the case of VISP (P) Ltd 186 CTR 717 (MP) supra, the goods was received prior to the date of bill. Relevant part of this judgement is reproduced below - Printed from counselvise.com 7 ITA No.3535/DEL/2025 “2. Before the Income-tax Appellate Tribunal the assessee had raised three grounds. The Appellate Tribunal did not agree with the contention of the assessee with regard to ground No. 2 (wrongly mentioned as ground No. 3 in para. 9), and affirmed the finding of fact, recorded by the Assessing Officer and the Commissioner of Income-tax (Appeals) with regard to the addition of Rs. 72,100 under Section 68 of the Act. The assessee derived the income from purchase and sales of sintex water tanks, etc., agents of Sinter Plast Containers, Kalol, and Bhopal. During the relevant financial year, the assessee claimed that it had purchased water tanks from Surya Services of Rs. 72,100 and made the entry in the books of account as a liability. The Assessing Officer, after recording the statement of Mr. Anurag Shrivastava, one of the partners of the assessee, who was alleged to be the proprietor of Surya Services and after examining the bank accounts of the Surya Services, found that the whole transaction of alleged purchase by the assessee to be bogus and the entry made in the trade account as a liability, was, only a paper entry. This finding of fact has been affirmed by the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) has held as under ; \"3. The learned authorised representative has contended that Mr. Anurag Shrivastava, one of the partners, is a proprietor of M/s. Surya Services, from whom goods worth Rs. 72,100 were purchased by the appellant and Mr. Shrivastava is responsible for the sales and all the transactions of the appellant. Since Mr. Shrivastava is always on tour and away from Indore, he does not have any knowledge of office administration, accounts, finance etc., and these things are being looked after by Mr. Init Shrivastava. About the possession of tanks of various sizes with M/s. Surya Services from whom the appellant had purchased goods worth Rs. 72,100, it is explained that date of bill is April 3, 1980, and delivery challan is dated March 28, 1989, and March 30, 1989, and cheque dated for payment is April 15, 1989. About the cheque of the Assessing Officer that there was pre-dating of invoices from Surya Services, it is pointed out that the bill was made on transfer of goods and purchases bills were received afterwards and the goods were in the possession of M/s. Surya Services through delivery challan which can be verified from M/s. Sintex Plast Containers, Kalol (N.G.). After considering the facts and submissions of the appellant it is noticed that M/s. Surya Services belonging to the same group was not assessed to tax and its credentials are doubtful and the books of account are stated to be lost when the appellant was cornered about the goods allegedly purchased from that sister concern. For the reasons discussed in detail by the Assessing Officer addition of Rs. 72,100 is in order and upheld.\" 3. Against this finding of fact, the assessee preferred an appeal before the Income-tax Appellate Tribunal, who, after examining the documents in detail, found, that no infirmity can be attributed to the order of the Assessing Officer from the Commissioner of Income-tax (Appeals). Thus, the contention of the assessee was rejected. 4. Learned counsel, appearing for the assessee placing reliance on the decision of the Supreme Court reported in Baladin Ram v. CIT [1969] 71 ITR 427 and the decisions of the Mumbai and Allahabad High Courts reported in CIT v. Bhaichand H. Gandhi [1983] 141 ITR 67 and SundarLal Jain v. CIT [1979] 117 ITR 316, respectively, contended, that Printed from counselvise.com 8 ITA No.3535/DEL/2025 Section 68 of the Act can be invoked only, when, the books of account of the assessee show the cash entry and not otherwise. 5. We are afraid, such a narrow and restricted interpretation of the provisions, contained in Section 68 was advanced by learned counsel for the appellant/assessee, cannot be accepted. If the liability shown in the said account, which, is found to be bogus and in the absence of any plausible and reasonable explanation offered by the assessee, then, certainly, the amount can be added towards the income of assessee and brought to tax in the hands of the assessee. 6. The reliance placed on the decisions, in our considered opinion, do not apply to the facts and circumstances of the case and are distinguishable. 7. In view of the above discussions, we find no substance and merit in this appeal, as no substantial questions of law is involved which requires answer by this court. 8. Consequently, the appeal fails and, is, accordingly, dismissed.” This case is distinguishable as facts of the present case are different. In the case of Precision Finance 208 ITR 465 (Cal)supra, the issue was pertaining to section 68 of the Act which cast a greater responsibility on the assessee to prove the genuineness of the transaction. Further, in that case, parties were not traceable whereas in the present case, the AO could find only one case of supplier viz Dev Singh where party was not traceable but in that case too enquiry was made at the address mentioned in PAN whereas address was different in his copy of account provided to the AO. Relevant part of this judgement is reproduced below - “8. It appears from the order of the Commissioner of Income-tax (Appeals) that the Income tax Officer allowed opportunity to the assessee for about 7 ½ years starting from September 16, and ending on February 24, 1986, to produce the relevant documents in support of the contentions that the loans were genuine. Those opportunities were not availed of Nothing was produced before the Commissioner of Income- tax (Appeals). Enquiries were conducted through the inspector on different dates and it was found that either the files do not exist as per details given by the assessee or the records do not tally with the facts mentioned by the assessee, except in two cases where the records were available in respect of Moolchand Chhabra and Somani Supply Syndicate Company and in all other cases creditors were not even found at the addresses given by the appellant. Apart from having enquiries made by the inspectors several letters were also issued to the assessee between January 16, 1982, and February 24, 1986, bringing to its notice that the loans could not be verified and adequate proof is required. At no stage have the appellant's representatives responded properly. Nowhere was the question of checking up the bank account raised. 9. It is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. In our view, on the facts of this case, the Tribunal did not take into account all these ingredients which have to be satisfied by the assessee. Mere furnishing of the particulars is Printed from counselvise.com 9 ITA No.3535/DEL/2025 not enough. The enquiry of the Income-tax Officer revealed that either the assessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not been established. If the identity of the creditors had not been established, consequently the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, accordingly, it is to be presumed that the transactions were genuine. It was not for the Income-tax Officer to find out by making investigation from the bank accounts unless the assessee proves the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine. In that view of the matter, the question before us is answered in the negative and in favour of the Revenue. There will be no order as to costs.” This case is distinguishable as facts of the present case are different. In the case of Golcha Prop Pvt Ltd 227 ITR 391 (Raj) (supra),the issue was related to benami transaction and parties were traceable. Relevant part of this judgement is reproduced below – “12. On the basis of the above circumstances which were taken note of, it was found that the Income-tax Officer has found that both Dhartidhan and Madans were contractors created due to favour by the assessee, otherwise none of them had .any role to play as contractors and the cinemas were in fact managed and run by the assessee-company itself and the profits flowing from the exhibition of films at these two theatres rightly belong to the assessee. The Appellate Tribunal did not take into consideration all the above facts and circumstances pointed out by the Income-tax Officer while holding the contracts to be not genuine but laid great emphasis on the fact that it was the Department which was alleging that the income of the two contracts from the exhibition of the films in the cinema of the assessee-company belonged to the assessee and when the Department made such a positive averment it was apparently for the Department to substantiate and prove its averments. The Tribunal further held that the case of benamiship could not be made out merely on the basis of certain inferences and presumptions and there must be some positive evidence to show that the income of the contractors was in fact the income of the assessee. It has observed that as there was nothing on the record to prove that there was evidence in the present case on the basis of which it could be held that the transactions were benami. In arriving at this conclusion, in our view, the Tribunal took a wrong approach. The Tribunal was wrong in taking the view that in such cases the Department has to bring some positive evidence. On the basis of primary facts proved on record, the Tribunal should have arrived at a finding whether the transactions were genuine or not. In this view of the matter, the Tribunal has committed an error in taking a wrong approach of the case and in holding that the Department must prove by positive evidence the case of benamiship and ignored the primary facts proved on record. In other words, the Tribunal committed an error of law in taking the view that such burden could only be discharged by the Department by leading Printed from counselvise.com 10 ITA No.3535/DEL/2025 positive evidence only. It was observed that the Department could have relied on the facts and circumstances held established by the assessee's own record as highlighted by the Income-tax Officer in his order. From the above observations, it is evident that the approach of the Tribunal was not in accordance with law. It was not necessary for the Department to bring positive evidence and it was observed that the Tribunal should have drawn a finding that the transactions were genuine or not in the light of the basic primary facts proved on record.” This case is distinguishable as facts of the present case are different. In the case of ChaturbhujPandey AIR 1969 (SC) 255supra,the issue was pertaining to Land Acquisition Act and not the Act. Relevant part of this judgement is reproduced below – “In this appeal from the decision of the High Court of Madhya Pradesh in First Appeal No. 180 of 1959 on its file the principal question that arises for decision is as to the market value of the appellants' orchard acquired under the provisions of Land Acquisition Act 1894 (to be hereinafter referred to as “the Act”) in connection with the construction of Hirakud Dam in Orissa State. 2. Several lands in the Raigarh district of Madhya Pradesh were acquired by the Collector of Raigarh in pursuance of the request made by the Government of Orissa. Among the lands so acquired some of the appellants' lands were also included. For those lands the appellants' claimed compensation in a sum of Rs 7,95,770 under various heads but the Special Land Acquisition Officer under two different awards awarded to them a sum of Rs 59,494/6. The appellants did not agree to the award made by the Special Land Acquisition Officer and at their instance the question of compensation was referred to the District Court of Raigarh under Section 18 of the Act. The Additional District Judge who tried the reference in question enhanced the compensation payable to the appellants to Rs 3,29,480. In particular he valued the trees in the orchard acquired at Rs 2,19,220. Aggrieved by the decision of the learned Additional District Judge, the Collector of Raigarh appealed to the High Court of Madhya Pradesh. In that appeal the appellants filed a memorandum of cross- objections praying for the enhancement of the compensation payable to them. The High Court substantially modified the decree of the learned Additional District Judge. It determined the compensation payable to the appellants at Rs 1,47,751/7 with interest as provided in the decree. Against that decision the appellants have brought this appeal after obtaining a certificate under Article 133(1)(a) of the Constitution.” This case is distinguishable as facts of the present case are different. In the case of Sumati Dayal 214 ITR 801 (SC), the assessee did not produce winning ticket to the race club and claimed income arising out of winnings from races but in the present case, the appellant produced purchase-vouchers, bank statements, quantitative tally of goods and GST returns. Relevant part of this judgement is reproduced below – Printed from counselvise.com 11 ITA No.3535/DEL/2025 “12. This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasised that the appellant did possess the winning ticket which was surrendered to the Race Club and in return a crossed cheque was obtained. It is, in our view, a neutral circumstance, because if the appellant had purchased the winning ticket after the event she would be having the winning ticket with her which she could surrender to the Race Club. The observation by the Chairman of the Settlement Commission that “fraudulent sale of winning ticket is not an usual practice but is very much of an unusual practice” ignores the prevalent malpractice that was noticed by the Direct Taxes Enquiry Committee and the recommendations made by the said Committee which led to the amendment of the Act by the Finance Act of 1972 whereby the exemption from tax that was available in respect of winnings from lotteries, crossword puzzles, races, etc., was withdrawn. Similarly the observation by the Chairman that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available. An inference about such a purchase has to be drawn on the basis of the circumstances available on the record. Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on the record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winnings from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence.” This case is distinguishable as facts of the present case are different. In the case of C Vasant Lal & Co. 45 ITR 206 (SC), the AO proved by collecting evidence in the form of statements - which were also provided to the assessee – that fictitious profits were purchased. Relevant part of this judgement is reproduced below – “3. The Income Tax Appellate Tribunal on a review of the evidence recorded the following findings: (1) That the assessees in the years previous to Samvat 2002 had no transactions which Messrs Meghaji Kapurchand or with Messrs Bhimaji Motiji and it was not possible to believe that transactions involving large sums of money would be put through by the assessees in respect of new constituents without taking any depositor security. (2) That the entries made in the books of accounts of the assessees were suspicious and appeared to have been written not in the usual course of business. Printed from counselvise.com 12 ITA No.3535/DEL/2025 (3) That the transactions with Messrs Meghaji Kapurchand and Messrs Bhimaji Motiji always showed gains in their favour, there being not a single transaction where they had suffered loss. This in the opinion of the Appellate Tribunal was “unrealistic”. (4) The partners of the two firms had stared before the Income Tax Officer that the transactions were “bogus transactions” and that they had “sold the profits with an ulterior motive.” (5) Even in their statements before the Appellate Assistant Commissioner Achaldas and Poonamchand did not pretend that these transactions were genuine transactions. They merely asserted that the transactions were effected by persons “who were not available” at the time of the enquiry. (6) That Messrs Meghaji Kapurchand and Messrs Bhimaji Motiji had encashed the cheques issued by the assessees and admitted that they had paid back the amounts thereof. 4. Before the Income Tax Officer they stated that the amounts of the cheques were returned by them to the assessees but before the Appellate Assistant Commissioner they stated that they had returned those amounts to “unknown and unidentifiable parties. 7. We are unable to hold that the statements made by Achaldas and Poonamchand before the Income Tax Officer were not material on which the Tribunal could act. The case of the assessees was that the transactions in respect of which they had maintained accounts were genuine transactions and that they had received payment from the parties who suffered losses, and had made it over to the parties who had earned profits. The Income Tax authorities held that the transactions were not genuine transactions. Again the evidence of Achaldas and Poonamchand clearly showed that these amounts were repaid. In the statements made by these two persons before the Income Tax Officer it was asserted that the repayment of the amounts of the cheques was made to the assessees. Before the Appellate Assistant Commissioner they stated that they handed over the moneys to some other persons whose presence could not be procured. There is nothing on the record to show that the Income Tax Officer had not disclosed to the assessees the material he had collected by examining Achaldas and Poonamchand. In any event, the Appellate Assistant Commissioner in the interest of justice and fair play gave the assessees an opportunity to cross-examine these two persons. The Income Tax Officer is not bound by any technical rules of the law of evidence. It is open to him to collect materials to facilitate assessment even by private enquiry. But if he desires to use the material so collected, the assessee must be informed of the material and must be given an adequate opportunity of explaining it. The statements made by Achaldas and Poonamchand before the Income Tax Officer were material on which the Income Tax Authorities could act provided that the material was disclosed and the assessees had opportunity to render their explanation in that behalf. It was therefore open to the Tribunal in appreciating the evidence to rely upon the statements made by Achaldas and Poonamchand before the Income Tax Officer and to disbelieve the statements made by them before the Appellate Assistant Commissioner.” Printed from counselvise.com 13 ITA No.3535/DEL/2025 This case is distinguishable as facts of the present case are different. The case of Sanjay Oil Cakes supra does not support the stand of AO. In that case, the AO made comparison of purchase price, made enquiries in the cases of bank accounts of suppliers where cash was withdrawn through bearer cheques after receiving payments and the suppliers were not traceable. Had the AO taken lead from this judgement, he would have proceeded to conducted enquiries in the direction where the AO in that case had proceeded. Relevant part of this judgement is reproduced below – “Thus, it is apparent that both the Commissioner (Appeals) and the Tribunal have concurrently accepted the finding of the Assessing Officer that the apparent sellers who had issued sale bills were not traceable. That goods were received from the parties other than the persons who had issued bills for such goods. Though the purchases are shown to have been made by making payment thereof by account payee cheques, the cheques have been deposited in bank accounts ostensibly in the name of the apparent sellers, thereafter the entire amounts have been withdrawn by bearer cheques and there is no trace or identity of the person withdrawing the amount from the bank accounts. In the light of the aforesaid nature of evidence it is not possible to record a different conclusion, different from the one recorded by the Commissioner (Appeals) and the Tribunal concurrently holding that the apparent sellers were not genuine, or were acting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the Commissioner (Appeals) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether the purchase price reflected in the books of account matches the purchase price stated to have been paid to other persons. The issue is whether the purchase price paid by the assessee is reflected as receipts by the recipients. The assessee has, by set of evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee have been actually received by the apparent sellers. Hence, the estimate made by the two appellate authorities does not warrant interference. Even otherwise, whether the estimate should be at a particular sum or at a different sum, can never be an issue of law. In the aforesaid set of facts and circumstances of the case, the impugned order of the Tribunal is an order which is made in accordance with law and does not require any interference. The questions referred at the instance of the assessee as well as the Revenue are, therefore, answered in the affirmative, i.e, in favour of the Revenue and against the assessee in relation to the questions at the instance of the assessee, and in favour of the assessee and against the Revenue in relation to the questions at the instance of the Revenue.” This case is distinguishable as facts of the present case are different. During the assessment proceedings and appellate proceedings, the appellant has relied on following case-laws – 1. CIT vs. Nikunj Eximp Enterprises 372 ITR 619 (Bombay),and 2. ACIT vs Tarla R Shah in ITA No. 5295/Mum/2013 (ITAT, Mumbai) Printed from counselvise.com 14 ITA No.3535/DEL/2025 In the case of CIT vs. Nikunj Eximp Enterprises supra, Hon’ble Bombay High Court dismissed the appeal of revenue. The Hon’ble High Court held that the Hon’ble ITAT had rightly deleted the addition which had held that “the respondent- assessee had filed letters of confirmation of suppliers, copies of bank statement showing entries of payment through Account Payee cheques to the suppliers, copies of invoices for purchases and stock statement i.e. stock reconciliation statement. This reconciliation statement gave complete details with regard to opening stock, purchases, sales and closing stock and no fault with regard to it was found.”The Hon’ble High Court also held that “the Books of Accounts of the respondent- assessee have not been rejected. Similarly, the sales have not been doubted”. Relevant part of this judgement is reproduced below – “2. The following question of law has been formulated for consideration of this Court. \"Whether on the facts and in the circumstances of the case and in law the Tribunal was right in deleting the addition made by the Assessing Officer of Rs.1,33,41,917/- towards bogus purchases even though the suppliers were non- existent and one of the parties had categorically denied having any business dealings with the Assessee Company?\" 3. The respondent-assessee had filed its return of income for the Assessment Year 2001-02 declaring a total income of Rs.42.08 lacs. The Assessing Officer interalia disallowed an expenditure of Rs.1.33 crores on account of non- genuine purchases from 7 parties alongwith other disallowances. The Assessing Officer by order dated 25-03-2004 assessed the respondent-assessee to an income of Rs.1.87 crores. 4. Being aggrieved an appeal was filed by the respondent-assessee with the Commissioner of Income-tax (Appeals) ('CIT(A)'). By an order dated 19- 08-2004, the CIT(A) upheld the order of the Assessing Officer inter-alia to the extent Rs.1.33 crores disallowed as bogus purchases. 5. Being aggrieved by the order dated 19-08-2004 of the CIT(A), the respondent-assessee preferred an appeal to the Tribunal. The Tribunal in the impugned order dated 30-04-2010 while allowing the appeal records that the respondent- assessee had filed letters of confirmation of suppliers, copies of bank statement showing entries of payment through Account Payee cheques to the suppliers, copies of invoices for purchases and stock statement i.e. stock reconciliation statement. This reconciliation statement gave complete details with regard to opening stock, purchases, sales and closing stock and no fault with regard to it was found. Besides, substantial amount of sales made by the respondent assessee was to Government Department i.e. Defence Research and Development Laboratory, Hyderabad and such sales could not be bogus. Besides the Books of Account of the respondent- assessee have not been rejected. In view of the above, by order dated30- 04-2010 the Tribunal deleted the disallowance of Rs.1.33 crores by holding that the purchases were not bogus. 6. Mr.Vimal Gupta, Senior Counsel appearing in support of the appeal submits that the Tribunal could not have relied only upon the stock statement i.e. the reconciliation statement to conclude that the purchases were genuine. Printed from counselvise.com 15 ITA No.3535/DEL/2025 Therefore, he submits that the question formulated is a substantial question of law and needs to be decided by this Court. 7. We have considered the submission on behalf of the revenue. However, from the order of the Tribunal dated 30-04-2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement i.e. reconciliation statement, but also in view of the other facts. The Tribunal records that the Books of Accounts of the respondent-assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department i.e. Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were infact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the CIT(A), one cannot conclude that the purchases were not made by the respondent- assessee. The Assessing Officer as well as CIT(A) have disallowed the deduction of Rs.1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs.1.33 crores was not bogus. No fault can be found with the order dated 30-04-2010 of the Tribunal. 8. In view of the above, we find that question as formulated is not a substantial question of law. Therefore, the appeal is dismissed with no order as to costs.” Though the AO did not find the facts of the above case similar to the facts of this case, I find that the facts are similar. In the present case also, copies of purchase-vouchers, signed by suppliers were filed, payments were made through RTGS etc, sales were not disputed and books of account were not rejected. Further, the purchased goods was used for completing project of a renowned company and was not sold to unregistered buyers. In the case of ACIT vs Tarla R Shah supra, Hon’ble ITAT Mumbai held that “the statement of hawala dealer that he provided accommodation entries to the assessee is a good material for conducting further investigation, verification and enquiries but AO instead making further investigation, the AO completed the assessment on suspicion. The assessee had submitted before the AO that payments were made by account payee cheques/ RTGS through banking channel and materials were received and property recorded in the books of accounts. The AO had not made any further enquiry/ investigation to verify the same and added the same to the income of the assessee on mere suspicion. The CIT(A) also confirmed the addition in the same fashion i.e. on suspicion basis that suppliers were engaged in supplying accommodation bills to the assessee.” Relevant part of this order is reproduced below – Printed from counselvise.com 16 ITA No.3535/DEL/2025 9. . We have considered the rival submissions and perused the materials on record. We find from the records and orders of the authorities below that there three additions made by the AO of Rs.87,24,259/- , Rs.14,36,653/- and Rs.20 lakhs u/s 69 C of the IT Act and in respect of 4th ,the AO did not allow any relief in respect of Rs. 74,08,737/- which was offered at the time of statement of the assessee u/s 131 by rejecting the claim of the assessee to allow the relief in respect of the same. We find that there was a search action u/s 132 of the Act in the case of M/s. Neev Infrastructure (P) Ltd. on 22.09.2011 following which survey was conducted on Shri Mafatlal V. Shah wherein he stated that he was providing accommodation bills to various parties and during post search verification it was found that the assessee had also received accommodation entries from Shri Mafatlal V. Shah and various other suppliers who were declared a hawala dealer by sales tax department, Govt. of Maharashtra. The statement of hawala dealer that he provided accommodation entries to the assessee is a good material for conducting further investigation, verification and enquiries but AO instead making further investigation, the AO completed the assessment on suspicion. The assessee had submitted before the AO that payments were made by account payee cheques/ RTGS through banking channel and materials were received and property recorded in the books of accounts. The AO had not made any further enquiry/ investigation to verify the same and added the same to the income of the assessee on mere suspicion. The CIT(A) also confirmed the addition in the same fashion i.e. on suspicion basis that suppliers were engaged in supplying accommodation bills to the assessee. 5.1 Now the issue before us is whether the aforesaid case of the assessee is covered in favour of the assessee by the various decisions cited by the ld. Counsel. In the case of ITA No.6727/Mum/2012 (AY-2009-10) dated 20.08.2014 we find that the similar addition was made on the basis of information available on website of Sales Tax Department, Government of Maharashtra, which was deleted by the Tribunal. The relevant para 2.4 is extracted as below. 2.4. “We have heard the rival submissions and perused the material before us. We find that AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock. As far as the case of Western Extrusion Industries. www.taxguru.in ITA/6727/Mum/2012/RGK 4 (supra)is concerned, we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But, in the case before us, there is nothing, in the order of the AO, about the cash trial. Secondly, proof of movement of goods is not in doubt. Therefore, considering the peculiar facts and circumstances of the case under appeal, we are of the Printed from counselvise.com 17 ITA No.3535/DEL/2025 opinion that the order of the FAA does not suffer from any legal infirmity and there are not sufficient evidence on file to endorse the view taken by the AO. So, confirming the order of the FAA, we decide ground no.1 against the AO.” …………. We are of the view that the facts of case of the assessee are same as in the foregoing decisions and thus the case of the assessee is squarely covered by these decisions of the tribunal. We, therefore, find no reason to interfere in the order of the CIT(A) and uphold the same by dismissing the appeal of the revenue. The AO is directed accordingly. 7. In the result, the appeal of the revenue is dismissed.” Though the AO did not find the facts of the above case similar to the facts of this case, I find that the facts are similar. In the present case also, payments to the suppliers were made though RTGS etc, copies of purchase-vouchers, signed by suppliers were filed, payments were made through RTGS etc, material was received and recorded in books of account, no enquiries were made by the AO in the case of Shri Sameer in whose case the ADIT(Inv) found him an entry-operator. In the present case, books of account of the appellant are audited, the sales are not disputed and books of account were not rejected by the AO. As was held in the case of CIT vs. NikunjEximp Enterprises supra,it has been held in the case of /// that rejection of books of account is must before disturbing book- results. Hon’ble ITAT-Jaipur in the case of Mahesh Kumar Guptavs ACIT, Jaipur has held that the AO was not justified in making the addition without rejecting books of account. Though this order was passed in the matter of addition u/s 68 of the Act, it emphasises upon the requirement of rejection of books of account before making any addition for an entry which is comprised in books of account. Relevant part of this judgement is reproduced below – \"9.7.In the light of the detailed discussions and finding that has been recorded by us in the preceding para we are of the considered view that the action of the id. AD making an addition under section 68 for an amount of Rs. 80,00,000/- as unexplained cash deposit without rejecting the books of account a unwarranted based on the discussion so recorded here in above. Even the id.AO has no find any defects in the details submitted by the assessee and audited books were considered and accepted while finalizing the assessment, Similar view has been taken by this co-ordinate bench of Jaipur in the case of Chandra Surana in ITA No. 166/JP/2023 wherein the similar view has been taken. The relevant finding is reproduced here in below, 2.6 We have heard both the parties and perused the materials available on record. From the assessment records, it is noted that the AO made an addition of Rs.2,90,93.500/- in declared income by holding that said amount of cash deposited by the assessee in his bank account during the demonetization period is nothing but the undisclosed income of assessee which was shown under the garb of cash sales and thus it is liable to be added u/s 68 of the Act and taxable @ 60% under the provision of Section 115BE of the Act. It is also noted from the order of the id. CIT(A) at para 4.1 wherein the id. CIT(A) has described para 1.4 of assessee written submission that complete regular books Printed from counselvise.com 18 ITA No.3535/DEL/2025 of accounts, bill, vouchers and day to day stock register having complete quantitative Mahesh Kumar Gupta vs ACIT, Circle-04, Jaipur details have been maintained by the assessee. The said books of accounts are audited. A copy of audited statement of account along with complete quantitative details have been submitted along with the return of income. The assessee maintained manual item wise stock register. The said stock register was bulky and so could not be produced in e- proceedings but was produced before the AO in course of hearing as is evident from submission dated 27-09¬2019. The fact of maintenance of stock register manually is stated in Tax Audit Report also. Thus the cash sales transaction is recorded in regular books of accounts, sales are made out of stock-in-trade. The assesses also filed copies of sales invoice No. 82 to 158 of Bangaluru and 110 to 216 of Kolkata outlets before AO which were of 28-10-2016 and these were earlier produced before Investigation Wing in F.Y. 2016-17 after the sales were made and same were verified by the Investigation Wing also. This view of the Id. CIT(A) indicates that the assessee has maintained regular books of accounts, hills, vouchers and day to day stock register having complete quantitative details and said books of accounts are audited. The assessee vide submission dated 27-09-2019 had produced stock record during the course of hearing. The cash sales transactions are recorded in regular books of accounts and the sale are made out of stock in trade for which no adverse finding had been observed by the AD except for the change in the methodology in issuing bills as mentioned at page 7 to 8 of the assessment order. Further the Id. CTT(A) observed that the AO had treated the cash deposited in the bank during the demonetization period in demonetized currency as unexplained cash credit u/s 68 of the Act although the nature and source of the cash deposits being proceeds arising out of cash sales etc. was evident from the entries to the audited books of accounts of the assessee in this case, the books of account of the assessee had been audited by an independent auditor. The cash sales and receipts are duly supported by relevant bills which were produced in the course of assessment proceedings before the AD and it is not the case of the AO that the assessee did not have sufficient stock for making the sales. Hence, it cannot be said that the figures of sains and purchases are not supported by the quantitative details and the AO did not make any enquiry on the material supplied by the assessee. Thus the AO neither brought any material on record to establish that the sale bills are bogus nor provided any evidence that such sales are bogus. It is also an open fact that the demonetization of Rs. 500/-and Rs. 1000/-note was declared by the Hon'ble Prime Minister at 8 PM on 8-11-2016 and after this announcement the persons reached the jewellery shop to buy jewellery in exchange of notes. Thus all such scenario indicates that the assessee had duly substantiated its claim from the documentary evidences and also with the facts It is also observed from the assessment order that the AO had not rejected the books of account of the assessee as no contrary material was available with him to reject the books of account of the assessee. As regards the addition of Rs.2.90,93,500/- made by the AO by applying the provisions of Section 68 of the Act, it is noted that Mahesh Kumar Gupta vs ACIT, Circle- 04, Jaipur provisions of Section 68 are not applicable on the sale transactions Printed from counselvise.com 19 ITA No.3535/DEL/2025 recorded in the books of accounts as sales are already part of the income which is already credited in P&L account. Hence, there is no occasion to consider the same as income of the assessee by invoking the provisions of Section 68 of the Act. In view of the above deliberations and case laws relied upon by both the parties, we find that the AO was not justified in making an addition of Rs.2.90,93,500/- u/s 68 of the Act which has rightly been deleted the ld. CITIA) and we concur with his findings. Thus the appeal of the Revenue is dismissed. 9.8 Respectfully following the consistent view and after considering the factual matrix of the cash on hand in our considered view the addition made cannot sustain and therefore, we vacate the addition of Rs. 80,00,000/- made under section 68 of the Act as the same cannot be made without rejecting the books of account of the assessee regularly maintained by the assessee and the said cash deposited is duly supported by the entries passed in the books of account and part of the sale accepted by the AO. In terms of these observations ground no. 1 raised by the assessee is allowed.\" Hon’ble ITAT-Delhi in the case of Patent Tea Company in ITA No. 1130/Del/2021 has held that when regular books of account have been maintained by the appellant and have been accepted by the AO, the AO was not justified in making the addition for cash deposited in bank when source of cash deposited was out of sales. Relevant part of this judgement is reproduced below – \"4.3.3 Therefore, considering the facts and circumstances of the case, It is seen that when the books of accounts maintained in the regular course of business and stand accepted by the Assessing Officer, then there is no justification for the A.O. to invoke the provisions of section 68 of the Act to make an addition of Rs.2,39,00,000/- in the hands of the assessee firm. It is further seen that once the sales, purchases as well as stocks and the trading result declared by the assessee firm are accepted by the Assessing Officer on the basis of regularly maintained books of accounts then there is no justification to disbelieve the deposit of cash in the bank accounts which is also fully reflected and recorded in the same books of accounts, more so when no discrepancy has been pointed out. Reliance for above submissions is placed on following orders of ITAT 1.SINGHAL EXIM VS IT (ITA. NO. 6520/DEL/2018) (DELHI-ITAT); 2. PAWAN KUMAR R MODI VS ITO ((ΙΤΑ NO2345/MUM/2014 (MUMBAI-ITAT)] It has been held in both the cases that provisions of Section 68 are not applicable where cash deposit is found recorded in books of account and the source and nature is verifiable from such books of accounts. The Hon'ble ITAT, New Delhi in the case of Agson Global Pvt. Ltd. in ITA No3741 and many others/Del/2019 vide their order dated 31.10.2019 has examined this issue and detail and has decided the issue in favour of appellant. Therefore, considering the facts and circumstances of the case and the judicial position discussed above, the action of the AO is not tenable and accordingly the addition of Rs 2,39,00,000/- made by the Assessing Officer is hereby deleted.\" Printed from counselvise.com 20 ITA No.3535/DEL/2025 10. On reading of the order of the Id. CIT (Appeals) and the observations therein we find that the Id. CIT (Appeals) deleted the addition on the ground that the assessee is maintaining regular books of accounts and the same were audited. The assessee furnished complete books of accounts including the cash book, ledger account, sale account, purchase account, stock registers etc. before the Assessing Officer in the course of assessment proceedings and there was no adverse comments by the Assessing Officer in respect of the books of accounts maintained by the assessee including the opening stocks and closing stocks. It was also observed by the ld. CIT (Appeals) that the books of accounts were neither rejected nor any discrepancies were pointed out and, therefore, in the absence of any adverse comments or inferences in the books of accounts, is of the opinion that there is no justification to disbelieve the deposits of cash in the bank accounts. The ld. CIT (Appeals) also observed that out of total deposits made by the assessee into bank accounts only Rs.1,16,50,000/- is in old currency and the balance of Rs. 1,47,50,000/- is in new currency and the assessee has explained the sources for the deposits of old currency and the assessee has sufficient sales to explain the cash deposits made into bank account. Therefore, we do not see any infirmity in the order passed by the ld. CIT (Appeals) in deleting the addition made under section 68 of the Act. Thus, we sustain the order of the ld. CIT (Appeals) and reject the grounds of the Revenue.\" Above decisions support the case of the appellant as the AO has not found any defects in maintenance of books of account of the appellant and has not rejected. The AO accepted sales but disallowed purchases without rejecting books of account and applying provisions of section 144 of the Act. The addition made towards doubtful purchases thus fails on the test of law also. In the result, addition of Rs. 2,13,15,433/- is deleted.” 4. After considering the detailed findings of the ld. CIT (A), we do not find any reason to disturb the same and accordingly grounds of appeal filed by the Revenue are dismissed. 5. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on this 15th day of October, 2025. Sd/- sd/- (YOGESH KUMAR U.S.) (S.RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 15.10.2025 TS Printed from counselvise.com 21 ITA No.3535/DEL/2025 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals). 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "