ITAT Delhi Deletes Addition for Alleged Bogus Purchases: Cross-Examination Denial Renders Third-Party Statement Inadmissible
Overview of the Case
The Income Tax Appellate Tribunal, Delhi Bench, delivered a significant ruling in Ahluwalia Contracts India Ltd. Vs DCIT (ITAT Delhi), holding that additions made on the basis of an uncross-examined third-party statement cannot be sustained when the assessee has placed comprehensive and unimpeached documentary evidence on record. The Tribunal deleted additions of ₹72.84 lakh for AY 2019-20 and ₹42.18 lakh for AY 2020-21, allowing both appeals filed by the assessee against orders passed under Section 153C read with Section 153A of the Income Tax Act, 1961.
Background and Search Action
A search and seizure operation under Section 132 of the Income Tax Act, 1961 was carried out against the Sanjay Jain Group by the Investigation Wing, New Delhi, on 26.10.2020. In the course of post-search proceedings, it was alleged that Shri Sanjay Jain, along with his associates, was operating a network engaged in issuing accommodation bills for cement and allied materials, with cash being returned to the beneficiaries through RTGS after deduction of commission.
Tally data seized from the office premises at 87, First Floor, Dharamvir Maim Marg, Sabzi Market, Hari Nagar Ashram, New Delhi revealed the ledger of the assessee — Ahluwalia Contracts India Ltd. — as part of the records controlled and managed by Shri Sanjay Jain and his family members. The Assessing Officer of the searched person recorded satisfaction dated 05.08.2022 that the seized documents pertained to a person other than the searched person, namely the assessee.
Allegations and Assessment Proceedings
Purchases Alleged to Be Bogus
Based on the seized tally data and the statement of Shri Sanjay Jain recorded on oath under Section 131 of the Income Tax Act, 1961 dated 11.06.2021, the Assessing Officer concluded that the assessee had made purchases from the following entities controlled by Shri Sanjay Jain:
- M/s Shri Lakshmi Associates
- M/s Forever Exim India Pvt. Ltd.
- M/s Jain Cement Udyog
- M/s Mahaveer Associates
Shri Sanjay Jain had allegedly admitted in his statement that accommodation entries by way of bogus purchase bills were provided to Ahluwalia Contracts India Ltd. during FYs 2018-19 and 2019-20, without any actual supply of goods.
Quantum of Purchases Under Scrutiny
The assessee disclosed the following purchase details for AY 2019-20:
- Cement bags purchased from the above entities: Basic amount of ₹4,46,53,322.81, plus GST of ₹1,25,02,928.19, aggregating to ₹5,71,56,251/-
- MS Angle & TMT Bar purchased from M/s Shri Lakshmi Associates: Basic amount of ₹42,37,968.02, plus GST of ₹7,62,833.98, aggregating to ₹50,00,802/-
- Total purchases (excluding GST): ₹4,88,91,290/-
Documentary Evidence Furnished by the Assessee
The assessee placed the following records before the Assessing Officer to demonstrate the genuineness of the purchases:
- Copies of invoices issued by the concerned entities bearing store entry and gate entry stamps
- E-way bills for each consignment
- Bank account statements evidencing payments made
- Gate entry registers maintained at project sites
- Cement stock registers maintained site-wise
- Account confirmation obtained from Forever Exim India Private Limited