S. Sagar Enterprise Vs DCIT (ITAT Mumbai)
The appeal before the ITAT Mumbai arose from reassessment proceedings conducted under Sections 147 and 148 of the Income Tax Act for Assessment Year 2019–20. The assessee, engaged in the business of trading diamonds, had originally filed its return declaring total income of ₹1.32 crore. The case was reopened through a notice dated 27.02.2023, and in response, the assessee reiterated the same income.
During reassessment, the Assessing Officer (AO) issued notices under Section 142(1) and completed the assessment on 08.02.2024 by making an addition of ₹6.65 lakh under Section 69C. The addition was based on an allegation that the assessee had made unaccounted cash purchases from M/s. Ratnakala Exports Private Limited (REPL). This conclusion was drawn from a search conducted at REPL, where it was found that the entity maintained separate software reflecting unaccounted transactions. Based on entries in such software, the AO inferred that the assessee had made cash purchases outside its books.
The assessee denied the allegation and submitted that it had made purchases from REPL amounting to ₹3.66 lakh, which were duly recorded. It provided supporting documents including purchase invoices, ledger accounts, confirmation from REPL, and evidence of payments made through banking channels. It was also shown that the goods purchased were exported, supported by sales invoices and stock records, and the related income was duly offered to tax. These aspects were not disputed by the Revenue authorities.
