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Judgment
PER RAMIT KOCHAR, AM:
Both these appeals are filed by Revenue against separate order(s) of Learned Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [CIT(A), in short) both dated 18.12.2025 , firstly vide DIN & Order No. ITBA/NFAC/S/250/2025-26/1083844710(1) against quantum additions, and secondly vide DIN & Order No. ITBA/NFAC/S/250/ 2025-26/1083845688(1) against penalty levied by the AO u/s 271AAC of the 1961 Act, respectively, which appeals in turn have arisen firstly from the assessment order dated 23.05.2023 passed by the learned Assessing Officer, Assessment Unit u/s. 147 read with section 144B of the Income-tax Act, 1961 (hereinafter called “the 1961 Act” ) and secondly penalty order dated 19.02.2024 passed by the ld. AO u/s 271AAC(1) of the 1961 Act levying penalty of Rs. 2,17,505/- against the assessee, both for Assessment Year 2017-18 respectively.
First we will take up the quantum appeal in ITA No.1439/Del/2026 for Asst. Year 2017-18 , wherein the Revenue has raised following grounds of appeal in Memo of Appeal filed with the Income Tax Appellate Tribunal, Delhi Benches, New Delhi, which reads as under :-
“1.1. Whether on facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in deleting the addition of Rs. 36,25,099/ made u/s 69C of the Act.
2.Whether on facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC was right in allowing the appeal of the assessee merely relying on the remand report of the AO and without carrying out any further enquiry into the matter.
3.Whether on facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in holding that the purchases made by the assessee from M/s Sunrise Trading Company are genuine ignoring the fact that the submission made by the assessee during the appellate proceedings and the remand report of the AO could not justify the genuineness of transaction and source of funds.
4.Whether on facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in not ensuring that the ends of justice are met by making enquiry into factual issues especially when perfunctory/weak investigation has been done by the lower authorities.
5.Whether on facts and circumstances of the case and in law, the Ld. CIT(A)/NFAC has erred in ignoring the findings of the Investigation wing and the AO that the the assessee is one of the beneficiary of accommodation entries and transaction of Rs. 36,25,099/ made with M/s Sunrise Trading Co. are bogus and not genuine.
6.The appellant craves leave to add, alter or amend any/all the grounds of appeal before or during the course of hearing of the appeal.”
The brief facts of the case are that the assessee has filed return of income declaring income of Rs.6,20,000/- for the year under consideration. As per information, assessee has made significant transactions which were considered to be suspicious transactions as bogus sale and purchase entered in his books of accounts for the manage of unaccounted cash through the nexus managed by entry operator Mr. Rajeev Singh Kushwaha to the tune of Rs.36,25,099/-. The AO observed from the information received, that a search was conducted, according to the statement of Shri Rajeev Kushwaha wherein he admitted that none of these entities existed in realty and merely existed only on paper and no business activity was being carried out by them. He was using his entities to provide bogus sale/purchase bills to various parties on a commission basis , wherein payments were received through banking channel for sales made which were returned in cash after deducting commission , and vice versa for purchases.As per information received, the assessee has entered into suspicious transactions as accommodation entry beneficiary during the year under consideration. Proceedings u/s 147/148 of the 1961 Act were initiated by the AO against the assessee including proceedings under section 148A(b) of the Act, which culminated into an order u/s 148A(d) of the 1961 Act passed by the AO. The AO issued notice u/s 148 of the 1961 Act, dated 21.07.2022 to the assessee requiring the assessee to file return of income in response to notice issued by the AO u/s 148 of the 1961 Act. Statutory notices u/s 142(1) and 143(2) of the 1961 Act were issued by the AO to the assessee, from time to time , during the course of reassessment proceedings, details of which stood recorded in the assessment order. There was a reply dated 13.02.2023 submitted by the assessee, wherein assessee submitted ledger account of Sunrise Trading Co. and written reply. The AO observed that assessee has failed to furnish creditworthiness of the supplier, and genuineness of the said party , and also failed to prove physical delivery of commodities. The AO asked assessee to submit details with respect thereto such as address, PAN , GST No. and registration number of the aforesaid entity Sunrise Trading Company in which he has made the transaction during the year under consideration as well as disclose the status of Mr. Rajeev Singh Kushwaha in the firm M/s Sunshine Trading Company , return of income and computation of total income of the aforesaid entity , sales and purchase register of the aforesaid party as well as copy of the bank statement in which transaction reflected of the said party and transportation bill or voucher connected to the above mentioned entity. The assessee did not submitted the details called for , and the AO made addition to the tune of Rs.36,25,099/- to the income of the assessee u/s 69C r.w.s. 115BBE of the 1961 Act, vide reassessment order dated 23.05.2023.
Aggrieved, the assessee filed first appeal with ld. CIT(A). During the course of appellate proceedings, the assessee submitted details before the Ld. CIT(A) by way of additional evidences, and also submitted replies which are recorded in Page No.4 to 13 of the CIT(A)’ order. The Ld. CIT(A) called for remand report from the AO, and the AO submitted remand report dated 16.12.2025 , which reads as under:
of purchase made from the party in question along with relevant ledger copies and bank statements. All these evidences have been examined and placed on record. The report is submitted for kind consideration.
The assessee has submitted details before the ld. CIT(A) and the AO during remand report proceedings, which he could not submit earlier during assessment proceedings. The AO submitted remand report in which no adverse inference was drawn against the assessee. Based upon the remand report, the Ld. CIT(A) allowed the appeal of the assessee wherein ld. CIT(A) ordered deletion of the additions as were made by the AO , by holding as under:
“6. DECISION
I have carefully considered the submissions made by the appellant, the facts on record and the applicable law in this regard.
6.1The appellant is an individual stated to be carrying on the business of fabrication of Bottle trolley, Highway Rack, Display rack, bottle stand, etc. in the name of Anil Fabricator. Assessment was reopened u/s 147 on account of alleged bogus purchased from M/S Sunrise Trading Company based on the statement of Mr. Rajeev Singh Kushwaha and addition was made of Rs. 36,25,099/- to the returned income of Rs 6,20,000/-.
The sole ground of appeal is against the action of the Assessing officer in reopening and assessment passing order u/s 147 r.w.s 144B of the income tax act making addition on account of alleged bogus purchase and alleged unaccounted cash transaction from M/S Sunrise trading Company of Rs. 36,25,099/-.
6.2Before me, the appellant submitted that he had made purchases during F.Y 2016-17 from the said vendor M/S Sunrise trading Company for an amount of Rs.3222310 on which VAT was Rs.402789/- i.e. total purchase of Rs. 3625099/-Further, the Appellant submitted an application under Rule 46A of the Income Tax Rules, 1962, for the submission of additional evidence, and the case was remitted to the AO for verification and comments on the application and merits.
6.3The Appellant submitted evidence pertaining to the purchases of Rs. 36,25,099/-(Purchase amount Rs. 32,22,310/- plus VAT Rs. 4,02,789/-) from M/s Sunrise Trading Co. during FY 2016-17 including:
1.Copy of invoices.
2.Copy of ledger accounts.
3.Copy of VAT returns (D-VAT-2A and 2B), confirming the transaction details were included in the regulatory filings.
4.Copy of bank statements.
5.Transportation bills/vouchers (GR details of inward supply) and confirmation of payments made to transporters.
6.Details of subsequent sales derived from these purchases, accompanied by sales invoices, ledger copies, and bank statements, confirming all sale receipts were received through banking channels.
6.4As seen from the remand report, the AO on verification of the additional evidence has reported that a sample verification of the documents yielded "nothing adverse". It is pertinent to note that the addition under Section 69C was based on the non-furnishing of supporting evidence (transportation bills, bank proof) during the assessment and reliance on the statement of a third party, Mr. Rajeev Singh Kushwaha, establishing the transactions as bogus accommodation entries.
The detailed evidence provided during the appellate stage, particularly the documentation confirming the physical movement of goods (GR/transportation bills), the corresponding reporting in VAT returns, and the evidence indicating that the resultant goods were sold to major customers via banking channels, constitutes credible evidence that substantiates the genuineness of the purchase transactions. Further, as pointed out by the appellant, the sales made by him suggest that the underlying purchases must have been genuine, as a product is sold only after it is purchased.
In view of the above, the foundation for deeming the purchases of Rs. 36,25,099/- as unexplained expenditure under Section 69C fails, as the source and nature of the expenditure are now supported by sufficient, corroborated documentary evidence, which the AO could not refute in the remand proceedings.
Accordingly, the addition of Rs. 36,25,099/- under Section 69C read with Section 115BBE is deleted.”
Now it was the turn of the Revenue to have been aggrieved by the appellate order passed by ld. CIT(A), and Revenue has filed second appeal before the Tribunal. The Ld.Sr. DR opened argument before the Bench , and submitted that there were allegedly bogus purchases made by the assessee . The ld. Sr. DR submitted that the assessee had not submitted any details/evidences before the AO during the course of assessment proceedings , however, during the course of appellate proceedings, the assessee submitted details/evidences before ld. CIT(A) as an additional evidences. The ld. CIT(A) called for remand report from the AO. The Ld. CIT(A) deleted the additions by relying upon the remand report submitted by the AO. The Ld. Sr. DR however, relied upon the assessment order of the AO.
The Ld. Counsel for the assessee submitted that complete details as were called by the AO during assessment proceedings were submitted by the assessee during appellate proceedings conducted by ld. CIT(A) by way of additional evidences. It was submitted that the ld. CIT(A) called for remand report from the AO, and the AO has given positive remand report in favour of the assessee wherein no adverse inference was drawn by the AO after considering additional evidences.
We have considered rival submissions and perused the materials available on record. The assessee is an individual and is engaged in the business of fabrication of Bottle trolley, Display Rack, highway Rack, etc.. The assessee has claimed that it has various customers such as Bisleri International Private Limited, Hindustan Coca-Cola Beverages , Moon Beverages Limited, A.K. Beverages etc. . The case of the assessee was re-opened based upon the information that the assessee has entered into allegedly suspicious transactions of bogus purchases from M/s Sunrise Trading Company to the tune of Rs.36,25,099/. There was a search conducted , and Mr. Rajeev Singh Kushwaha statement was recorded in which he had admitted that he is an entry operator engaged in the providing bogus bills, and the said concern M/s Sunrise Trading Company from whom the assessee allegedly made purchases was engaged in providing bogus accommodation entry. During the course of reassessment proceedings conducted by the AO u/s 147/148, assessee had not submitted complete details/information/evidences called for by the AO to prove genuineness of the transaction and creditworthiness of the supplier. The AO rejected contentions of the assessee made additions to the income of the assessee to the tune of Rs. 36,25,099/- by treating the said purchases as bogus vide reassessment order dated 23.05.2023. However, during appellate proceedings before ld. CIT(A), the assessee submitted all the details called for by the AO by way of additional evidences , and submitted reply as under:-
The ld. CIT(A) called for remand report from the AO with respect to additional evidences submitted by the assessee. The AO submitted remand report which is reproduced in preceding para’s of this order wherein the AO did not drew any adverse inference with respect to aforesaid purchases made by the assessee from the concern M/s Sunrise Trading Company. The said remand report is reproduced by us in the preceding para’s of this order. The ld. CIT(A) based upon remand report submitted by the AO and details which were submitted by the assessee before ld. CIT(A) during appellate proceedings , deleted the additions , by holding as under:
“ 6. DECISION
I have carefully considered the submissions made by the appellant, the facts on record and the applicable law in this regard.
6.1The appellant is an individual stated to be carrying on the business of fabrication of Bottle trolley, Highway Rack, Display rack, bottle stand, etc. in the name of Anil Fabricator. Assessment was reopened u/s 147 on account of alleged bogus purchased from M/S Sunrise Trading Company based on the statement of Mr. Rajeev Singh Kushwaha and addition was made of Rs. 36,25,099/- to the returned income of Rs 6,20,000/-.
The sole ground of appeal is against the action of the Assessing officer in reopening and assessment passing order u/s 147 r.w.s 144B of the income tax act making addition on account of alleged bogus purchase and alleged unaccounted cash transaction from M/S Sunrise trading Company of Rs. 36,25,099/-.
6.2Before me, the appellant submitted that he had made purchases during F.Y 2016-17 from the said vendor M/S Sunrise trading Company for an amount of Rs.3222310 on which VAT was Rs.402789/- i.e. total purchase of Rs. 3625099/-Further, the Appellant submitted an application under Rule 46A of the Income Tax Rules, 1962, for the submission of additional evidence, and the case was remitted to the AO for verification and comments on the application and merits.
6.3The Appellant submitted evidence pertaining to the purchases of Rs. 36,25,099/-(Purchase amount Rs. 32,22,310/- plus VAT Rs. 4,02,789/-) from M/s Sunrise Trading Co. during FY 2016-17 including:
1.Copy of invoices.
2.Copy of ledger accounts.
3.Copy of VAT returns (D-VAT-2A and 2B), confirming the transaction details were included in the regulatory filings.
4.Copy of bank statements.
5.Transportation bills/vouchers (GR details of inward supply) and confirmation of payments made to transporters.
6.Details of subsequent sales derived from these purchases, accompanied by sales invoices, ledger copies, and bank statements, confirming all sale receipts were received through banking channels.
6.4As seen from the remand report, the AO on verification of the additional evidence has reported that a sample verification of the documents yielded "nothing adverse". It is pertinent to note that the addition under Section 69C was based on the non-furnishing of supporting evidence (transportation bills, bank proof) during the assessment and reliance on the statement of a third party, Mr. Rajeev Singh Kushwaha, establishing the transactions as bogus accommodation entries.
The detailed evidence provided during the appellate stage, particularly the documentation confirming the physical movement of goods (GR/transportation bills), the corresponding reporting in VAT returns, and the evidence indicating that the resultant goods were sold to major customers via banking channels, constitutes credible evidence that substantiates the genuineness of the purchase transactions. Further, as pointed out by the appellant, the sales made by him suggest that the underlying purchases must have been genuine, as a product is sold only after it is purchased.
In view of the above, the foundation for deeming the purchases of Rs. 36,25,099/- as unexplained expenditure under Section 69C fails, as the source and nature of the expenditure are now supported by sufficient, corroborated documentary evidence, which the AO could not refute in the remand proceedings.
Accordingly, the addition of Rs. 36,25,099/- under Section 69C read with Section 115BBE is deleted.”
We do not find any infirmity in the appellate order of the Ld. CIT(A) in directing deleting of the additions as were made by the AO to the tune of Rs. 36,25,099/- , since in remand proceedings conducted by the AO at the behest of ld. CIT(A) during appellate proceedings, the assessee duly submitted all details/evidences called for by the AO during assessment proceedings which the assessee could not submit during assessment proceedings, and AO after considering the aforesaid details/evidences, did not drew any adverse inference in its remand report. We donot find any infirmity in the appellate order passed by ld. CIT(A), which we confirm , and accordingly dismiss the appeal of the Revenue. Ultimately, it is the AO who made the additions in the hand of the assessee for want of necessary documents/evidences, and once these documents/evidences were submitted during the appellate proceedings before ld. CIT(A) by the assessee by way of additional evidences, and the AO has arrived at conclusion that now that no grievance is left as all the necessary details/information/evidences with respect thereto stood submitted, there is no justification for the ld. CIT(A) to have taken any different view other than deleting the additions as were made by the AO. We order accordingly.
In the result, appeal in ITA no. 1439/Del/2026 filed by Revenue stands dismissed.
ITA No.1440/Del/2026
This appeal in ITA No.1440/Del/2026 has its genesis from the penalty order passed by the AO u/s 271AAC(1) of the 1961 Act , wherein AO levied penalty of Rs. 2,17,505/- against the assessee, with respect to the quantum additions which were made to the tune of Rs.36,25,099/- with respect to alleged bogus purchases made by the assessee from the concern namely Sunrise Trading Company. The ld. CIT(A) deleted aforesaid quantum additions vide appellate order dated 18.12.2025 (which was subject of appeal matter before us in ITA no. 1439/Del/2026 which is disposed off by us vide this common order in the preceding para’s) , and consequently deleted the aforesaid penalty levied by the AO. We have adjudicated vide this common order in ITA No.1439/Del/2026 , quantum additions by deleting the same wherein we have confirmed the appellate order passed by the Ld. CIT(A) and dismissed the appeal filed by the Revenue.Hence, in view of above, consequently the said penalty of Rs. 2,17,505/- levied by the AO u/s 271AAC will not survive and hence, we confirm the appellate order by the Ld. CIT(A) and delete the penalty levied by the AO to the tune of Rs. 2,17,505/- u/s 271AAC of the 1961 Act. We order accordingly.
In the result appeal in ITA no. 1440/Del/2026 for assessment year 2017-18 filed by Revenue stand dismissed.
In the result, both the appeals filed by the Revenue are dismissed.