M/s Vestige Marketing Pvt. Ltd. vs. Revenue [TU-DT-06-ITAT-2026]
Background of the Case
The case involved cross appeals filed by both the Appellant and the Revenue before the ITAT, Delhi Bench, for AY 2018-19 to 2024-25. The dispute arose following a search and seizure operation conducted under Section 132 of the Income Tax Act on 20 September 2023. During the assessment proceedings completed under Section 147 read with Section 143(3), the Assessing Officer disallowed purchases amounting to Rs.8.86 crore under Section 37(1), treating them as bogus accommodation entries based primarily on statements recorded during the search proceedings. Additionally, an amount of Rs.40.18 lakh was added under Section 69A as unexplained money allegedly related to ticket sales.
On appeal, the Commissioner (Appeals) granted substantial relief by deleting most of the purchase disallowance and the entire Section 69A addition, leaving only a small portion of the purchase disallowance sustained. Both the Appellant and the Revenue challenged the respective relief and confirmations before the Tribunal.
Arguments by the Appellant (Assessee)
The Appellant contended that the additions made by the Assessing Officer were unsustainable as they were primarily based on statements recorded during the search which were subsequently retracted. It was argued that such statements, particularly when retracted and unsupported by corroborative evidence, cannot form the sole basis for making additions. The Appellant submitted that all purchases were supported by a complete documentary trail including GST invoices, e-way bills, goods receipt notes, ledger accounts, and payments made through banking channels. It was further emphasized that tax had been deducted at source where applicable and the vendors had disclosed the transactions in their income tax returns.
The Appellant also pointed out that the books of accounts were never rejected under Section 145 and that the sales declared by the company were accepted by the Department, which logically implied that corresponding purchases must exist. The retraction of statements was accompanied by documentary evidence demonstrating the genuineness of the transactions.
Respondent’s Response (Revenue)
The Revenue, on the other hand, supported the assessment order and argued that the Assessing Officer had correctly treated the purchases as bogus on the basis of statements recorded during the search proceedings. According to the Department, the statements of certain individuals indicated that the alleged suppliers were merely accommodation entry providers and that the payments made through banking channels were returned in cash. The Revenue further contended that the Commissioner (Appeals) erred in deleting most of the additions and should have upheld the entire disallowance of purchases made by the Assessing Officer.
The Department also challenged the deletion of the addition under Section 69A relating to the alleged sale of event tickets, asserting that the evidence gathered during the search justified the addition. It was argued that the Tribunal should restore the additions made in the assessment order.
Court Findings and Decision
The Tribunal held that additions cannot be sustained merely on the basis of statements recorded during search, particularly when such statements are subsequently retracted and are not supported by independent corroborative material. It observed that the Appellant had produced substantial documentary evidence demonstrating the genuineness of the purchases, including invoices, GST records, bank payments, and accounting entries, and that the books of accounts had not been rejected by the Assessing Officer. The Tribunal also noted that the Revenue failed to establish any direct evidence showing that the payments made to suppliers were returned in cash or that the transactions were fictitious. Relying on settled judicial principles that a retracted statement requires corroboration before it can be relied upon for making additions, the Tribunal concluded that the additions were based on assumptions rather than concrete evidence.
Accordingly, the Tribunal deleted the remaining purchase disallowance confirmed by the Commissioner (Appeals) and upheld the deletion of the addition made under Section 69A.
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