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Judgment
PER ANUBHAV SHARMA, JM:
These appeals preferred by the Assessee against the orders of the Ld. Commissioner of Income Tax (Appeals)-30, New Delhi (hereinafter referred to as the First Appellate Authority or ‘the ld. FAA’ for short) in appeals filed before him against the orders of the ld. Assessing Officer (hereinafter referred to as the Ld. AO, for short) passed u/s 153C r.w.s 153A of the Income-tax Act, 1961 (hereafter referred to as ‘the Act’). Further details of the orders of the lower authorities are as under: -
| ITA No. & AY | Ld. FAA who passed the appellate order | Appeal No. & Date of order of the Ld. FAA | AO who passed the assessment order & Date of order |
| 8537/D/25 2019-20 | CIT(A)-30, New Delhi | DIN No : ITBA/APL/M/250/2025-26/1082630383(1) Dated 14.11.2025 | ACIT, CC-31, New Delhi Dated 30.03.2024 |
| 8538/D/25 2020-21 | CIT(A)-30, New Delhi | DIN No : ITBA/APL/M/250/2025-26/1082547995(1) Dated 12.11.2025 | DCIT, CC-31, New Delhi Dated 29.03.2024 |
Heard and perused the records. The appeals were heard together as they involve common question of law and facts. The facts and findings, where ever relevant are reproduced from AY 2019-20. It thus comes up that the assessee filed return of income u/s 139 of the Act on 22.10.2019 declaring income of Rs.1,84,78,44,910/- for the year under consideration. Thereafter, a search action u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was conducted in Sanjay Jain Group of cases by Investigation Wing, New Delhi on 26.10.2020. During the post search investigation, it was allegedly revealed that Shri Sanjay Jain along with his facilitators was involved in issuing bogus bills for cement and other such items and cash was returned back to the beneficiaries in lieu of RTGS, after deduction of commission.
It was brought to the notice of the then Assessing Officer, Central Circel-31, New Delhi by the Assessing Officer of Shri Sanjay Jain, in whose case action under section 132 of the Act was undertaken, that during the search and seizure action on the entry operator Shri Sanjay Jain, tally data was found and seized of various entities controlled and managed by Shri Sanjay Jain and his family members from the office premise at 87, First Floor, Dharamvir Mann Marg, Sabzi Market, Hari Nagar Ashram, New Delhi. Further, it was informed that the ledger of the assessee, Ahluwalia Contracts India Ltd, was part of seized tally data. The Assessing Officer of the searched person has recorded his satisfaction dated 05.08.2022 that the seized documents, being ledgers of the assessee in seized tally data and the information contained in the ledgers relates to a person other than the searched person i.e.Ahluwalia Contracts India Ltd (the assessee).
On perusal of the ledgers of the assessee, ld. AO concluded that the assessee made purchases from M/s Shri Lakshmi Associates, M/s Forever Exim India Pvt. Ltd., M/s Jain Cement Udyog and M/s Mahaveer Associates during F.Ys. 2018-19 and 2019-20. The stated entities were controlled and managed by Shri Sanjay Jain for bogus billing and the same had also been admitted by Shri Sanjay Jain in his statement. Further, on perusal of statement of Shri Sanjay Jain recorded on oath u/s 131 of the Act dated 11.06/2921, it was found that he admitted that accommodation entry by issuance of bogus purchase bill from entities controlled and managed by him was provided in F.Ys. 2018-19 and 2019-20 to the assessee, i.e. Ahluwalia Contracts India Limited. Thus, it was concluded that the assessee reported bogus purchases in the books and ITR for F.Ys. 2018-19 and 2019-20.
The assessee stated that purchase of cement bags was made from Forever Exim India Private Limited, M/s Jain Cement Udyog, M/s Mahaveer Associates and M/s Shri Lakshmi Associates during the relevant year for the sites at different sites for basic amount of Rs. 4,46,53,322.81/-, plus GST of Rs. 1,25,02,928.19/-, aggregating to Rs. 5,71,56,251/-. Further, MS Angle & TMT Bar have been purchased from M/s Shri Lakshmi Associates for basic amount of Rs. 42,37,968.02/-, plus GST of Rs. 7,62,833.98, aggregating to Rs. 50,00,802/-. Thus, in totality purchases of Rs. 4,88,91,290/- (excluding GST component) have been made from entities controlled by Shri Sanjay Jain. The assessee contended that the purchases are genuine and bonafide, by submitting following documents:
“i.Copy of invoice issued by the bogus entities with stamp of store entry and gate entry.
ii.Copy of e-way bill.
iii.Copy of bank account statement highlighting the payment.
iv.Copy of gate entry register.
v.Copy of Cement Stock Register site wise.
vi.Copy of confirmation of account from Forever Exim India Private Limited.”
However, ld. AO concluded that quantitative details and movement of goods has been proved. However, the admission made by Shri Sanjay Jain cannot be ignored. Under these circumstances, it is understood that it is a case of untested purchases wherein actual purchases are made from grey market in cash and bills and vouchers for purchase are obtained from bill providers accommodation entry to suppress profit. To further verify this fact, notice u/s 142(1) dated 02.05.2023 was issued to the assessee to furnish comparative price of Cement purchased from Forever Exim India Private Limited, M/s Jain Cement Udyog, M/s Mahaveer Associates and M/s Shri Lakshmi Associates and other vendors. In response to the notice, the assessee submitted reply dated 21.02.2024. On perusal of reply of the assessee, ld. AO observed that the average rate of cement purchased from other vendors at the same sites was lower than the average rate of cement purchased from Forever Exim India Private Limited. Thus ld. AO concluded that the purchases from Forever Exim India Private Limited, M/s Jain Cement Udyog, M/s Mahaveer Associates and M/s Shri Lakshmi Associates fall under the ambit of 'untested purchase. Accordingly, after a show cause notice dated 18.03.2024 addition of Rs. 72,84,802l-, being Gross Profit/ Turnover % (i.e. 14.9%) of untested purchases of Rs. 4,88,91,290/-, was added to income as undisclosed income u/s 28 of the Act, considering that transaction with bogus entities have been made by the assessee to suppress profits.
Similar additions of Rs.42,18,150/- was made for AY: 2020-21 and the same have been sustained by the Ld. CIT(A) by following findings as reproduced from the impugned order for AY: 2019-20:
“7.Ground no.2: The appellant contends that the purchases are genuine, supported by documents (bills, confirmations, e-way bills, bank statements, stock and gate registers), the onus is discharged, and the disallowance is based on surmises without cogent reasons. The appellant has further submitted that it purchased cement totaling Rs.5,71,56,251/- from various parties including Shri Lakshmi Associates, Jain Cement Udyog, and others. It has enclosed party-wise details, ledgers, account confirmations, e-way bills, bank statements highlighting payments, cement stock registers, gate entry registers, store entry records with details like MR No., Date GR No., and evidence of utilization in construction. The appellant argues that suspicion based on information from another authority is not a basis for addition, and cites judicial precedents where courts have held that even in cases of bogus purchases, only the profit element embedded therein should be added as income.
7.1Upon detailed examination of the AO's order and the record, it is evident that the assessee was afforded full opportunity during assessment to substantiate the transactions. The documents submitted were evaluated but found lacking in probative value due to the overwhelming incriminating evidence from the search, such as Shri Sanjay Jain's admission of providing only bogus bills without supply, non-cooperation from the supplier, and absence of quantitative corroboration linking purchases to actual consumption in construction projects. In post-search assessments u/s 153C detailed examination of the AO's order and the record, it is evident that the assessee was afforded full opportunity during assessment to substantiate the transaction. The appellant's submissions, while detailing purchases and enclosing documents, do not rebut the direct admission by the accommodation entry provider (Shri Sanjay Jain) that no actual supplies were made, and the payments were routed back in cash or otherwise. The evidence provided, such as stock registers and gate entries, appears self-serving without independent third-party verification tying the specific purchases to site utilization, especially in light of the search findings.
7.2The AO's decision to limit the addition to the GP margin of 14.9% (Rs.72,84,602/-) rather than the full purchase amount is judicious and aligns with settled law, recognizing that alternative sourcing might have occurred without disturbing accepted sales. This is reinforced by precedents like CIT vs. Bholanath Poly Fab Pvt. Ltd. (Gujarat High Court), where it was held that for bogus purchases, the profit component embedded therein should be brought to tax, not the entire amount, especially when quantitative details of opening stock, purchases, and manufacturing support that goods were obtained but through unrecorded means. Here, the addition stems from incriminating material seized during a search u/s 132, including the direct admission by Shri Sanjay Jain the alleged supplier/entry provider) that bogus bills were issued without actual supply, and the assessee was given opportunity for cross-examination which it declined. Thus, the AO's findings are based on concrete evidence from the search, not mere external information, and the appellant has failed to discharge the onus under a post-search assessment. Accordingly, the grounds lack merit and are accordingly dismissed.”
The primary contention of ld. Counsel for the assesse was that all the relevant evidence were there before ld. tax authorities which have been discredited without any sound reasoning and merely on the basis of oral statements which were not subjected to cross examination right additions have been made. Reliance was thus placed on the decision in case of M/s Andaman Timber Industries vs. Commr. Of Central Excise, Kolkata-II in Civil Appeal No. 4228 of 2006 (SC); CIT-7, New Delhi Vs. Odeon Builder (P) Ltd. (2019) 418 ITR 315 (SC); Pr. CIT Vs. Shapoorji Pallonji and Co. Ltd. (2022) Taxman 61 (SC) & L.S. Contractors Pvt. Ltd. vs. DCIT vide ITA Nos. 2207 & 2208/Del/2025 dated 21.11.2025.
Ld. DR has relied the findings of ld. Tax authorities below and it was contended that independently of statement, ld. AO has made enquiry to establish bogus purchases.
We have given thoughtful consideration to the matter on record and the contentions of ld. Counsel and very apparently we find that in the evidence filed by the assesse no irregularity or infirmity have been pointed out and attributing probative value and merely relying the statements of Shri Sanjay Jain the additions were made and sustained. We are of the considered view that when documentary evidences of assesse establishing genuineness of a transaction and quantitative details and mode of transaction are filed and the same are being rebutted on the basis of oral statement of a searched person then giving opportunity to cross examine such material witnesses is of vital significance and the assessing officer record in para 6.8 that relevant part of this statement of Sanjay Jain has been provided to the assesse and there is no requirement of cross examination while ld. CIT(A) makes factually incorrect observation in concluding para of 7.2 that assesse was given opportunity for cross examination which it declined. Thus, we are of the considered view that relying inadmissible oral evidences, the documentary evidences of the assesse have been rebutted by the assessing officer and ld. CIT(A) has erroneously held that the statement relied were admissible as ld. AO relied the same after duly giving opportunity of cross examination. Thus, ground raised in both appeals are sustained. The appeals are allowed and the impugned additions are deleted.