INDO PLASTIC CO,DELHI V. ACIT, CIRCLE- 49(1), DELHI

ITA 5481/DEL/2025

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The case involves Indo Plastic Co., a partnership firm engaged in manufacturing automobile components, which was accused of making inflated purchases amounting to Rs. 31,35,185 during the assessment year 2020-21. This allegation stemmed from a search and seizure operation at M/s Bharat Seats Ltd. and others, where it was discovered that these companies were involved in profit suppression through inflated purchases. The Assessing Officer (AO) issued a notice under section 148 of the Income Tax Act based on this information and added the amount to the assessee's income as unexplained money under section 69A. The assessee's appeal to the CIT(A) was dismissed, leading to the current appeal before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 785803 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2020-2021
• Appeal Filed On: 03-09-2025
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANOJ KUMAR
• Assessee Lawyers: RAJEEV MAGO
• Keywords: Principle of natural justice; Search and seizure
• Section: 148; 132

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH “SMC’’ : NEW DELHI) BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT ITA No. 5481/Del/2025 Asstt. Year : 2020-21 INDO PLASTIC CO., VS. ACIT, CIRCLE 49(1), A-90, Fateh Nagar, New Delhi West Delhi, Delhi-18 (PAN: AABF12885G) (Appellant) (Respondent) Appellant by: Shri Rajeev Mago, CA Respondent by: Shri Manoj Kumar, Sr. DR. Date of Hearing 27.10.2025 Date of Pronouncement 31.10.2025 ORDER This appeal by the assessee is emanating from the order of the NFAC, Delhi in Appeal No. ITBA/NFAC/S/250/2025-26/1079549570(1) dated 12.08.2025 relating to assessment year 2020-21. 2. Heard both the sides and perused the records. 3. Brief facts of the case are that the assessee is a partnership Firm engaged in the business of manufacturing of Automobiles Components. The assessee had filed its return of income for A.Y. 2020-21 on 31/01/2021, declaring total income at Rs. 15,34,910/-. In this case the information was received that during the search conducted u/s 132 in the case of M/s. Bharat Seats Ltd., M/s. Sharda Motor Industries Ltd. & Other on 19/05/2023. During the search operation, on the basis of material impounded it was seen that the above company is engaged in profit suppression through inflation of purchases wherein inflated invoices were raised and difference between the actual value and invoice value was returned in cash in BSL. The assessee was one who made inflated purchases amounting to Rs.31,35,185/- out of total purchases of Rs.10,45,06,180/-. Therefore, the notice u/s 148 of the Act dated 28/03/2024 was issued and served upon the assessee. In response to that the assessee filed its return of income for A.Y. 2020-21 on 07/06/2024. Further, multiple notices were issued and served upon the appellant for furnished various details. In response to that the assessee its submission. During the course of assessment proceedings, the appellant was asked to explain the transaction with M/s. Bharat Seats Ltd., but the assessee failed to Printed from counselvise.com 2 explain. On perusal of the information received, it was seen that the appellant had involved in inflation of purchase of Rs. 31,35,185/- (3% of total invoices of Rs. 10,45,06,180/-) on cash and the assessee had failed to furnish. In view of the above, the AO passed an order by making addition of Rs. 31,35,185/- on account of unexplained money u/s 69A of the Act and the same is added back to the total income of the assessee. Against the same, assessee preferred the appeal before the Ld. CIT(A) who dismissed the appeal of the assessee. Being aggrieved the order of the Ld.CIT(A)/ NFAC the assessee is in appeal before the Tribunal. 4. Ld. AR for the assessee has submitted that CIT(A) erred in holding that the principle of natural justice were not violated by denial of access of the records and information received by the AO form the JCIT(OSD), Central Circle, New Delhi and relied upon him during assessment proceedings. It was further submitted that Ld. CIT(A) erred in holding that the assessee had made inflated purchases based on third party nothings in the premises of searched party without there being any acknowledgement of the same by the assessee. It was further submitted that the transactions were duly recorded in the books of accounts and that no independent enquiry was conducted by the AO and the addition was based on presumptions and conjectures, which needs to be deleted. 5. Ld. DR relied upon the orders of the authorities below. 6. After hearing rival contentions and perusing the records. I find that AO noted that a search and seizure was conducted on 19.05.2023 at M/s Bharat Seats Ltd. (BSL), M/s Sharda Motor Industries Ltd. (SMIL), and others, resulting in the seizure of incriminating documents, including two diaries. Subsequent investigations revealed that BSL suppressed profits by inflating purchase, raising inflated invoices, and receiving the difference in cash. As per the information received from JCIT(OSD), Central Circle, New Delhi, M/s Indo Plastic Co. was found to be involved in profit suppression through the inflation of purchases, wherein inflated invoices were raised, and the difference between the actual value and the invoice value was returned in cash to BSL, amounting to Rs. 31,35,185/-, which was unexplained. AO observed that on the basis of above, the assessee, being one of the parties, made inflated purchase amounting to Rs. 31,35,185/- out of total purchases of Rs. 10,45,06,180/-. However, it was undisputed which the AO has admitted that the entire proceedings were initiated solely on the basis of information received from the High Risk CRIU/VRU data and communication from the JCIT (OSD), Central Circle, New Delhi and no independent enquiry or verification has been conducted regarding the alleged suppression of profits by the assessee. It is settled law that proceedings based on third party information, without any independent examination or corroboration, are not sustainable. Printed from counselvise.com 3 However, AO failed to provide the documents purportedly relied upon to substantiate the allegations of profit suppression. No enquiry has been conducted regarding the assessee’s purchases from its own vendors, thus the basis for linking the alleged cash generation to the assessee remains unclear. Assessee time and again asked the AO to provide the evidence of incriminating material on the basis of inflated purchases, but nothing has been provided to the assessee. In appeal, CIT(A) rejected the submissions of the Assessee and upheld the action of the AO. In view of the aforesaid discussions, I am of the considered view that addition was based on conjectures and surmises, as the department has failed to establish that any incriminating material is related to the assessee for the inflated purchases. Therefore, the addition in dispute is hereby deleted. 7. In the result the appeal of the assessee is allowed. Order pronounced in the open court on 31/10/2025. Sd/- (MAHAVIR SINGH) VICE PRESIDENT Date: 31.10.2025 SRBhatnaggar Copy forwarded to: - 1. Appellant 2. Respondent 3. DIT 4. CIT (A) 5. DR, ITAT Assistant Registrar, ITAT, Delhi Bench Printed from counselvise.com "