ITAT Raipur Sets Aside Assessment Where Search-Based Evidence Was Withheld from Assessee

Background and Core Controversy

The Raipur Bench of the Income Tax Appellate Tribunal in Jeewan Kukreja Vs DCIT annulled the assessment framed on the assessee on the sole ground that the Revenue failed to share the incriminating search material on which the additions were founded.

The dispute arose from a search and seizure operation on the J.M. Jain Group, during which the Department claimed to have unearthed a sophisticated parallel accounting platform referred to as the “JSK Server”. This server was alleged to have been used for recording unaccounted cash dealings arising from systematic under-invoicing.

Relying exclusively on information gathered from this server and related investigation outputs, the Assessing Officer (AO) made the following additions in the hands of the assessee, who was allegedly identified on the server under the code “ROSHAN”:

  • Rs. 89,97,950 treated as unexplained accommodation entries/unaccounted transactions; and
  • Rs. 69,01,788 treated as unaccounted sales on account of mismatch between sales ledger and turnover declared.

In appeal, the CIT(A) removed the addition relating to alleged unaccounted sales of Rs. 69,01,788 but confirmed the substantive addition of Rs. 89,97,950 linked to the JSK Server entries.

Before the Tribunal, the assessee asserted that the foundational material used for making the addition—JSK Server data, corroborative seized records, statements of employees, screenshots from Investigation Wing and other supporting documents—had never been supplied to him, thereby depriving him of any real opportunity to rebut, explain, or cross-examine such material.

The ITAT accepted this contention and held that the assessment suffered from a fatal breach of the principles of natural justice, particularly the doctrine of audi alteram partem, and therefore quashed the entire assessment without adjudicating on the merits of the additions.

Factual Matrix

Business Profile of the Assessee

  • The assessee, Jeewan Kukreja, is a proprietor carrying on wholesale and retail trade in garments under the concern M/s Utkal Mens Zone.
  • For the relevant assessment year, the assessee filed the return of income on 10/25/2022 declaring total income of Rs. 15,35,607.
  • The return was processed under Section 143(1) on 10/26/2022.

The case was subsequently taken up for scrutiny, flagged on account of:

  • perceived high liabilities compared with relatively modest income/receipts, and
  • certain risk parameters identified from verification cases.

Search on J.M. Jain Group and Alleged JSK Server

A search under Section 132 was carried out on the J.M. Jain Group on May 28, 2022. The Department claimed to have detected a structured, concealed accounting mechanism:

  • A SAP-based JSK Server allegedly recorded two components for each transaction:
    • cheque portion – reflected in regular books of both vendor and customer, and
    • cash portion – allegedly representing unrecorded values attributable to under-invoicing (“kachcha” vs “pakka” billing).
  • The cash component was alleged to be off-the-books and said to facilitate:
    • unaccounted commission, and
    • interest income in cash to the J.M. Jain Group.
  • To conceal real identities, coded “Foreign entity” names were allegedly used; the assessee was purportedly mapped with the code “ROSHAN”.

According to the AO’s narration, the JSK Server data was said to be corroborated by:

  • admissions of key employees and cash handlers during the search operations;
  • seized “kachcha/pukka” invoices and reminder ledgers;
  • examination of ledgers/challans transmitted over email;
  • analysis of bank statements and ledgers of vendors and customers; and
  • cross-referencing between the JSK Server and the regular JMJ server, as well as assorted digital files cloned during the search.

On this basis, the Revenue alleged a systematic design of under-invoicing and off-book income generation in which the assessee was claimed to be a beneficiary.

Assessment Proceedings

Statutory notices were issued as follows:

  • Notice under Section 143(2) dated 06/02/2023;
  • Multiple notices under Section 142(1) dated 10/11/2023, 11/29/2023, and 01/40/2024 (typographical anomaly in date as per order).

The AO requisitioned, among other details: