ITAT Delhi Deletes Bogus Purchase Addition as Sales Were Recorded

SNT Agro Industries Pvt. Ltd. Vs ITO (ITAT Delhi)

ITAT deleted addition under Section 68 towards alleged bogus purchases, noting that sales had already been undertaken and reflected from the same purchases

Facts:

• The assessee, SNT Agro Industries Pvt. Ltd., filed its return of income for Assessment Year 2012–13 electronically on 19.09.2012 declaring total income of Rs. 6,76,120/-. The return was accordingly processed under Section 143(1) of the Income-tax Act, 1961 on 21.02.2013, accepting the returned income. Thereafter, in this case, very vital and credible information was received from DDIT (Investigation), Karnal vide letter dated 05.02.2019 informing that during post-search proceedings it was noticed that Mr. Hitesh Jain was engaged in the activity of providing accommodation entries to various beneficiaries with the help of approximately 40 shell/paper concerns. Summons issued under Section 131(1A) to such concerns had returned back and inspectors deputed for verification reported that none of such concerns existed at their Income-tax addresses.
• It was further informed that bank statements along with account opening forms and KYC documents of the said 40 shell/paper concerns were called from the respective banks and furnished to the office of the Investigation Wing. Upon perusal of those bank statements, it was noted that huge entries were credited as well as debited in the bank accounts during FY 2011–12. Thereafter, letters were issued to banks with UTR numbers/instruction IDs/RTGS details to identify IFSC codes and source banks of such transactions. Based upon information furnished by the banks, further letters were issued to obtain PAN details and jurisdictional particulars. Since jurisdiction of M/s SNT Agro Industries Pvt. Ltd. (PAN: AABCS8002L) was stated to lie with the concerned Assessing Officer, information relating to the assessee was forwarded for taking action under the provisions of the Act and, if jurisdiction did not pertain to that office, the same was directed to be transferred to the concerned Assessing Officer.
• The information further recorded details of amounts allegedly credited in bank accounts of concerns stated to be controlled by Mr. Hitesh Jain for providing accommodation entries to the assessee. The details reflected transactions with M/s Raghuveer Singh Davinder Kumar, having account no. 03302560004498 maintained with HDFC Bank, Kunjpura Road, Karnal, where amount credited during FY 2011–12 was stated to be Rs. 48,50,400/-, and M/s Gagan Enterprises, having account no. 02172320017643 maintained with HDFC Bank, Delhi, where amount credited was stated to be Rs. 65,37,270/-, aggregating to Rs. 1,13,87,670/-. It was requested that appropriate action be taken in respect of the above transactions and further verification be undertaken if any additional transactions were found with the said concerns.
• As recorded in paragraph 2.1 of the order, the information alleged that the assessee had taken accommodation entries from dummy companies controlled by Mr. Hitesh Jain, namely M/s Raghuveer Singh Davinder Kumar and M/s Gagan Enterprises, for an amount of Rs. 1,13,87,670/-.
• On the basis of the aforesaid information, the case of the assessee was reopened under Section 147 after recording reasons and obtaining necessary approvals under Section 151 of the Act and notice under Section 148 was issued on 28.03.2019. In response thereto, the assessee furnished return of income for AY 2012–13 on 25.04.2019 declaring income of Rs. 6,76,120/-. Thereafter, notices under Sections 143(2) and 142(1) along with questionnaire were issued. In compliance with notice under Section 142(1), the assessee furnished details through ITBA on 25.10.2019 and relevant information was submitted before the Assessing Officer.
• After examining the submissions, the Assessing Officer issued show-cause notice dated 14.11.2019 proposing addition under the head of unexplained bogus purchases of Rs. 1,13,87,670/-, unsecured loan taken during the year of Rs. 7,91,670/-, increase in sundry creditors of Rs. 7,40,462/-, and increase in security premium account of Rs. 8,10,300/-. In response, the assessee filed reply to the show-cause notice on 16.11.2019 and requested supply of reasons recorded for formation of belief regarding escapement of income. After receiving such reasons, the assessee filed objections to reopening and those objections were disposed of by a speaking order dated 28.11.2019, following which the assessee furnished remaining information sought by the department.
• During assessment proceedings, notices under Section 133(6) were issued to M/s Gagan Enterprises and M/s Raghuveer Singh Davinder Kumar requiring production of relevant documents relating to transactions with the assessee; however, both notices returned unserved. Summons under Section 131 were also issued to those entities but none attended the proceedings. Accordingly, the Assessing Officer formed the view that transactions entered into with M/s Gagan Enterprises and M/s Raghuveer Singh Davinder Kumar were not genuine and constituted bogus purchase transactions.
• The Assessing Officer further observed that there was substantial increase in share capital issued, security premium and purchases during the year and that information received regarding accommodation entries allegedly taken by the assessee from companies controlled by Shri Hitesh Jain supported the finding that such transactions/financials were bogus during AY 2012–13. It was further observed that during search proceedings statement of Shri Hitesh Jain had been recorded wherein he allegedly admitted involvement in providing accommodation entries by issuing bogus bills in lieu of commission and that no actual sale/purchase took place. Accordingly, the Assessing Officer came to the conclusion that Shri Hitesh Jain was engaged in the business of providing entries of bogus sale/purchase.
• The Assessing Officer further observed that several documents seized from the premises of Shri Hitesh Jain revealed that bogus sale/purchases amounting to Rs. 1,13,87,670/- had been taken/made by the assessee company from M/s Raghuveer Singh Davinder Kumar and M/s Gagan Enterprises, stated to be controlled by Shri Hitesh Jain. Accordingly, the Assessing Officer held that the amount represented unexplained credit under Section 68 in the books of account of the assessee and treated Rs. 1,13,87,270/- as unexplained transaction and added the same to the income of the assessee under Section 68 of the Act.
• Aggrieved by the assessment order, the assessee preferred appeal before the CIT(A)/NFAC and filed detailed submissions. The CIT(A), vide order dated 03.12.2025, sustained the additions. Aggrieved thereby, the assessee preferred the present appeal before the Tribunal.

Issues:

• Whether the proceedings initiated under Section 147/148 of the Income-tax Act were valid in the absence of valid reasons leading to the belief of escapement of income?
• Whether the order passed under Section 143(3) read with Section 147 of the Act determining taxable income at Rs. 1,20,63,390/- as against the returned income of Rs. 6,76,120/- was sustainable in law?
• Whether the addition of Rs. 1,13,87,270/- on account of alleged bogus purchases under Section 68 of the Act was justified?

Observations:

• The Tribunal observed that the Assessing Officer had received information from DDIT-INV that Mr. Hitesh Jain was providing accommodation entries to various beneficiaries with the help of 40 shell companies. The Tribunal recorded that, based on the report and post-search statements of Mr. Hitesh Jain, the Investigation Wing treated those entities as shell companies and advised the Assessing Officer to verify the case of the assessee, who was found to have taken benefit from the said entry provider. On the basis of such information, the Assessing Officer formed an opinion that the assessee had taken bogus accommodation entries and obtained approval to proceed with reopening. However, the Tribunal specifically observed that the Assessing Officer had no material apart from the information and statement recorded from Mr. Hitesh Jain. The Tribunal further observed that the assessee was never confronted with any material except forwarding of the investigation report in the case of Hitesh Jain and connected entities alleged to be providing accommodation entries. It was further noted that the Assessing Officer only had information that Raghuveer Singh Davinder Kumar and Gagan Enterprises had credit entries in their bank accounts from the assessee during the relevant year amounting to Rs. 48,50,400/- and Rs. 65,37,270/- respectively. The Tribunal also noted that the Assessing Officer reopened the assessment to verify the transactions and that the Investigation Wing had advised verification of any other transactions as well. It was further observed that the assessee had submitted relevant information and details relating to increase in creditors and security premium which were already recorded in the books.
• The Tribunal further noticed that the Assessing Officer had issued notices to the above entities, who were already alleged as entry providers by the Investigation Wing, and observed that when the Assessing Officer himself was satisfied on the basis of the investigation report that these were entry providers, the question arose as to what he was attempting to establish. The Tribunal observed that the Assessing Officer was only creating documentation rather than making actual investigations. According to the Tribunal, the Assessing Officer ought to have supplied relevant information establishing that the assessee had in fact taken accommodation entries from Hitesh Jain. Instead of gathering information against the assessee, the Assessing Officer simply relied on the detailed findings of investigation and statement recorded in the case of Hitesh Jain.
• From the record, the Tribunal observed that the Assessing Officer had only focused on the allegation that the assessee had taken accommodation entries in the form of purchases and had not bothered about how the assessee had carried on the business. The Tribunal noticed that the assessee is a wholesaler and sells the goods purchased by them and retains the gross margin. Looking at the financial statements, the Tribunal observed that it was a fact on record that the assessee is only a whole sale trader.
• Coming to the issue raised by the assessee, the Tribunal observed that the Assessing Officer had made addition which was already declared by the assessee in their books of account, both the purchases and sales. The Tribunal recorded that the coordinate bench in Kishore Jerom Bhai Khaniya (ITA no 1220/Del/2011 dtd. 13.05.2014.) had clearly held that once the assessee declared the sales in the books, the same cannot be added under Section 68 of the Act, and reproduced the ratio from that decision.
• The Tribunal observed that the Assessing Officer cannot reopen the case without properly establishing himself that income had actually escaped assessment even though relevant and credible information was received from internal or external sources. In the present case, the Tribunal recorded that there was absolutely no material in possession of the Assessing Officer except information from the Investigation Wing and statement of Mr. Hitesh Jain and therefore proceedings were initiated without credible evidence or material in possession of the Assessing Officer. While dealing with case laws relied upon by the Revenue, the Tribunal observed that Amit Polyprints was distinguishable because in that case the Assessing Officer had credible and definite material, whereas in the present case the Assessing Officer never had any material except information forwarded by DDIT Investigation. Similarly, Pr.CIT-7 vs. Paramount Communications (P.) Ltd. (2017)392 ITR 444 (Del.) and Raymond Woollen Mills vs. ITO [1999] 236 ITR 34 (SC). were held distinguishable on facts. The Tribunal further observed that the assessee had already declared sales out of the same purchases and therefore addition under Section 68 could not be sustained where purchases and corresponding sales had already been recorded in the books of account. Following Kishore Jerum Bhai Khaniya (supra), the Tribunal allowed the grounds raised by the assessee.
• Accordingly, the Tribunal allowed the appeal for AY 2012–13 and held that since the facts in AY 2013–14 were exactly similar, the findings for AY 2012–13 would apply mutatis mutandis, and both appeals were allowed.

FULL TEXT OF THE ORDER OF ITAT DELHI

These appeals are filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 03.12.2025 for the Assessment Year2012-13 and 2013-14.

2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. First, we take up the appeal for the Assessment Year 2012-13 wherein the assessee has raised the following grounds of appeal:-

“On the facts and in the circumstances of the case and in law the Ld. NFAC/CIT(A) erred in confirming the following actions of the Assessing Officer –

1. initiating proceedings u/s 147/148 of Act without there being any valid reasons leading to the belief of escapement of income;

2. passing order u/s 143(3) r.w.s. 147 of the Act determining taxable Income at Rs.1,20,63,390/- against returned income in a sum of Rs.6,76,120/- ;

3. making an addition of Rs. 1,13,87,270/- on account of alleged bogus purchases u/s 68 of the Act;

The above actions being arbitrary, fallacious, unwarranted and opposed to principles of natural justice must be quashed with directions for appropriate relief.”

3. Brief facts of the case are, return of income for the A.Y.2012-13 was electronically filed by the assessee company on 19.09.2012 declaring total income of Rs.6,76,120/-. The return was accordingly processed u/s 143(1) of the Income-tax Act, 1961 (for short ‘the Act’) on 21.02.2013 accepting the returned income. In this case, very vital and credible information was received from DDIT(Inv.), Karnal vide letter dated 05.02.2019 informing that:

“During the post search proceedings, it is noticed that Mr. Hitesh Jain is doing activity of providing accommodation entries to the various beneficiaries with the help of approx. 40 shell/paper concerns. When summons u/s 131(1A) of the I. T. Act were sent to these shell concern, the same were returned back. The inspectors of this office were also deputed to verify the existence of this concern. In its reports, the inspectors reported that none of these concerns were existing at their ITR addresses.

It is further informed thereafter bank statements along with account opening form and KYC documents of the said discussed 40 shell/paper concerns, were called from the respective banks, by the office of the undersigned and the same have been furnished by the banks to this office. On perusal of these bank statements. It is noted that huge entries were credited as well as debited in the bank account during the F. Y.2011-12, thereafter letters have been issued to the banks with UTR no./instruction ID/RTGS no. of the transaction credited as well as debited during the F.Y.2011-12 to give IFS C code or name of the bank from whom transaction were credited/ debited in the bank accounts. In response thereto, banks furnished information to this office with IFSC code or name of the banks where the accounts of these are being maintained of the parties. Thereafter, further letters have been issued to respective banks to furnish PAN Nos. provided by the bank, the jurisdiction of the M/s. SNT Agro Industries Pvt. Ltd. PAN No.(AABCS80002L) lies with your office, therefore the information related to M/s. SNT Agro Industries Pvt. Ltd., PAN No.(AABCS8002L) are being passed to your office for taking appropriate action as per the provisions of Income Tax Act,1961. Further, it is requested that if the jurisdiction of the PAN doesn’t pertain to your office, please transfer the information and PAN No. to the concerned assessing officer under intimation to this office. The detail of amount credited controlled by Mr. Hitesh Jain for providing accommodation entries by your assessee, is being given asunder:-

It is further requested that please take appropriate action in respect of the above credited/debited transactions by your assessee with dummy concerns for the time barring year F. Y.2011-12, as per the provisions of the Income Tax Act, 1961. Further, it is advised to please verify if you found any other transactions besides these amounts with the above concerns, then also take the necessary action.

2.1. As per the information, the assessee has taken accommodation entries from the following dummy companies controlled by Hitesh Jain :-

4. On the basis of information and further verification, the case of assessee was reopened u/s.147 after recording reasons and obtaining necessary approvals u/s.151 of the Act, a notice u/s.148 was issued on 28.03.2019 to the assessee company. The assessee furnished its return of income for A.Y.2012-13 in response to the notice u/s. 148 on 25.04.2019 at an income of Rs.6,76,120/-. Further notices u/s 143(2) and 142(1) along with questionnaire were issued. In compliance of notice u/s. 142(1) the assessee company furnished details through ITBA on 25.10.2019. In response, assessee furnished the relevant informations. The Assessing Officer examined the submissions and issued a show cause notice dated 14.11.2019 with a proposed addition in the head of unexplained bogus purchase of Rs.1,13,87,670/-, unsecured loan taken during the year under consideration of Rs. 7,91,6701-, increase in sundry creditor of Rs. 7,40,462/- and increase in security premium account of Rs.8,10,300/-. In response, assessee furnished reply to said show notice dated 16.11.2019 and requested, AO provided the reason recorded for forming belief of escapement of Income to the assessee. After receiving the reason recorded for reopening of the assessment, the assessee filed objection to reasons recorded which was disposed off by a speaking order on 28.11.2019 and the assessee was asked to furnish the remaining information and the same was furnished by the assessee.

5. Further, during the assessment proceedings, notice u/s. 133(6) was sent to M/s. Gagan Enterprises and M/s. Raghuveer Singh Davinder Kumar to furnish relevant documents of transaction with the assessee, M/s. SNT Agro Industries Pvt. Ltd. but both the notices were returned un-served. Summons u/s.131 were also issued to M/s. Raghuveer Singh Davender Kumar and M/s. Gagan Enterprises but none attended the proceedings. Hence, Assessing Officer came to the conclusion that the transaction with M/s. Gagan Enterprises and M/s. Raghuveer Singh DavinderKumar are not genuine and it is bogus purchase transactions.

6. Assessing Officer observed that there is substantial increase in the share capital issued, security premium and purchase during the year and the information received about accommodation entries taken by the assessee from companies controlled by Shri Hitesh Jain supports findings that these are bogus transactions/financials during A.Y.2012-13. He further observed that during the search proceedings, the statement of Sh. Hitesh Jain was recorded and in his statement, he has admitted that he was involved in providing accommodation entries by issuing bogus bills in lieu of certain commission and no actual sale/purchase take place. Accordingly, he came to the conclusion that Shri Hitesh Jain was engaged in the business of providing entries of bogus sale/purchase.

7. He further observed that several documents seized from the premises of Shri Hitesh Jain also revealed that bogus sale/purchases amounting to Rs.1,13,87,670/- taken/made by the assessee company from the entry provider companies i.e. M/s. Raghuveer Singh Davinder Kumar and M/s. Gagan Enterprises, which were controlled by Shri Hitesh Jain, an entry operator. Accordingly, an amount of Rs.1,13,87,670/- represented unexplained credit u/s.68 of the Act in books of account of the assessee. Hence, he held that the amount of Rs.1,13,87,270/- being bogus purchases of the assessee company during the year is treated as unexplained transaction and added the same to the income of the assessee u/s 68 of the Act.

8. Aggrieved with the above order, assessee preferred an appeal before the ld. CIT (A) and filed detailed submissions. Ld. CIT (A) after going through the detailed submissions of the assessee sustained the additions.

9. Aggrieved with the above order, assessee is in appeal before us.

10. At the time of hearing, ld. AR of the assessee submitted that the assessee is a wholesaler dealing in business of Pulses. He brought to our notice the detailed submissions made by the assessee before Ld CIT(A), which is filed in the paper book at pages 1 to 16, in reference to the above submission, he submitted that the AO had only received the information from the investigation wing and with the preconceived view, he proceeded to initiate the reassessment proceedings, also got the approval from the appropriate authorities and completed the assessment without having any material against the assessee. He merely relied heavily on the findings and statement recorded in the case of Hitech Jain. The AO had not even investigated properly to conclude on the issue of bogus or accommodation entries. He further wondered how the AO had initiated and sustained the addition u/s 68 over looking the fact that the assessee also made sales of the same purchases. In this regard, relied on the decision of the ITAT Delhi bench in the case of Kishore Jeram Bhai Khaniya Vs ITO, ITA no 1220/Del/2011 dated 13.05.2014. The issue under consideration is similar in the next year under appeal.

11. On the other hand, ld. DR of the Revenue brought to our notice the detailed findings of AO and impugned order and relied on the above orders and also brought to our notice the relevant ratios and relied on the following decisions: –

(i) Decision of Hon’ble Delhi High Court in Pr.CIT-7 vs. Paramount Communication (P.) Ltd. – (2017)392 ITR 444 (Del.);

(ii) Decision of Hon’ble Gujarat High Court in Amit Polyprints (P.) Ltd. vs. DCIT (2018) 94 taxmann.com393 (Gujarat);

(iii) Decision of Hon’ble Gujarat High Court in Ankit Financial Services Ltd. vs. DCIT (2017) 78 com58 (Gujarat).

12. In rejoinder, the ld. AR of the assessee submitted as under:-

1. It was submitted on behalf of the Appellant that in the subject cases there were no valid reason to believe escapement of income because there was no tangible material in the possession of the Assessing Officer which could lead to the formation of a valid belief of escapement of income; that no enquiry was conducted by the Assessing Officer prior to the issuance of the reopening notice to ascertain the validity, propriety or adequate of the information; that the reopening was not based on any material on record which would demonstrate the nexus between such material and the formation of the belief of the escapement of income by the Assessing Officer and that the reopening was done entirely on borrowed satisfaction.

2. In this context, in reply, the Id. Departmental Representative relied upon the following three cases which are clearly distinguishable on facts and do not in any way answer otherwise to the above listed objections pleaded on behalf of the Appellant:-

(a) Amit Polyprints (P) Ltd. Vs. DClT [2018] 94 taxman.com393 (Guj)

(b) Pro CIT Vs. Paramount Communication (P.) Ltd. [2017] 392 ITR 444 (Del)

(c) Raymond Woollen Mills Ltd. Vs. Income Tax Officer [1999] 236 ITR 34 (SC).

3. As to the first decision of the Gujarat High Court at (a) of Amit Polyprints, the facts are clearly distinguishable, in as much as, in the said case the Surat Unit of the Income Tax Department had obtained both credible and definite information from the Investigation Unit of the Department at Kolkata about the falsity of the impugned transactions. Such fact stood duly confirmed by the entry providers themselves. Before the Investigation Unit at Kolkata the concerned entry operators had categorically stated that the relevant entries were all make believe. It was only after the receipt of such material that the Surat Unit of the Income Tax Department initiated reassessment proceedings in the subject case which, the Hon’ble Court in the face of the existence of definite material indicating escapement of income held the proceedings to be valid. That is not the fact situation in the subject case.

4. As to the decision in the case (b) of Pr. CIT VS. Paramount Communication (P.) Ltd. (supra) there was no dispute about the existence of tangible material on record which persuaded the Authorities to uphold the reopening of the case. The only dispute raised by the assessee in that case was that such material was received from an outside source. That objection raised by the assessee was over-ruled by the Hon’ble Court because the information as to escapement of income can emanate from any source – internal or external.

5. The third case (c) cited by the Department is the case of Raymond Woollen Mills Ltd. vs. Income Tax Officer (supra) where the Apex Court ruled that notwithstanding the sufficiency or correctness of the information being finally upheld in the reassessment, a reopening would be valid if there was otherwise some prima facie material on record indicating escapement of income. The facts in the subject case are completely distinguishable from the facts in this cited case.

6. In view of the fact that the Department has not been able to distinguish the ratios of the Apex Court and High Courts in the cases of Income Tax Officer Vs. Lakhmani Mewal Das [1976] 103 ITR 437 (SC); CIT VS. Kelvinator of India Ltd. [2010] 187 Taxman 312 (SC) and Pro CIT VS. G & G Pharma India Ltd. [2017] 81 taxmann.com 109 (Delhi), which define the conditions for the validity of the reopening of case under Section 147 of the Act. the three citations pressed by the Department as listed supra are of no avail which merit to be rejected.

In the process the appeals of the assessee may kindly be directed to be allowed.”

13. Considered the rival submissions and material placed on record. We observe that the AO received information from DDIT-INV that Mr. Hitesh Jain is providing accommodation entries to various beneficiaries with the help of 40 shell companies. Based on the above report, it was established fact on the basis of post search statements made by Mr. Hitesh Jain that these companies are shell companies and DDIT-INV advised the AO to verify the case of the assessee, who was found to be taken benefit from the above said entry provider. On the above information and basis, the AO formed an opinion that the assessee had taken bogus accommodation entries, he also obtained the approval from the appropriate authorities to proceed with the reopening of the assessee’s case. We observed that the AO had no material with him apart from the above information and statement recorded from Mr. Hitesh Jain. The assessee was never confronted with any material except forwarding the investigation report in the case of Hitesh Jain and the connected entities who were found to be providing accommodation entries.

The AO had only information that the entities, Raghuveer Singh Davinder Kumar and Gagan Enterprises had credit entries in their bank accounts from the assessee during the year under consideration to the extent of Rs. 48,50,400/- and Rs. 65,37,270/- respectively. The AO reopened the assessment in order to verify the above transaction but the investigation wing advised the AO to verify apart from the above, if there is any other transaction also to be verified and suitable action may be taken. The AO sent show notices and the assessee also submitted the relevant information and also other information like increase in the creditors, security premium etc., which was already recorded in the books.

14. We further noticed that the AO had issued notices to the above said entities who are already alleged as entry providers by the investigation wing to summon, when the AO himself satisfied that these are entry providers on the basis of investigation report, what he is trying to establish. He is only creating documentation rather than making actual investigations. In our view, the AO had to supply relevant information for establishing that the assessee in fact taken accommodation entries from Hitesh Jain. AO instead of gathering information against the assessee, he simply relied on the detailed findings of investigation and statement recorded in the case of Hitesh Jain.

15. From the record, we observed that the AO had only focused on the fact that the assessee had taken accommodation entries in the form of purchases and not bothered about how the assessee had carried on the business. We noticed that the assessee is a wholesaler and they sells the goods purchased by them and retains the gross margin. Looking at the financial statement, it is fact on record that the assessee is only a whole sale trader.

16. Coming to the issue raised by the assessee, we observed that the AO had made addition which was already declared by the assessee in their books of account, both the purchases and sales, the coordinate bench clearly held in the case of Kishore Jerom Bhai Khaniya (supra) that once the assessee declared the sales in their books, the same cannot be added u/s 68 of the Act and for the brevity, we are reproducing the ratio as under:

“5. We have heard the rival submissions and perused the relevant material on record. There is no dispute on the fact that the search carried out on 5.10.2005 resulted into seizure of cash amounting to Rs. 54 lacs, whose source was explained as, inter alia a sum of Rs. 23.1 lacs coming from Poonam Enterprises, namely, the assessee’ s proprietorship concern. The assessee produced his books of accounts to show that this much cash was available in his books on the date of search. Apart from other invoices, the assessee issued four cash memos totaling Rs. 22.06 lacs, as tabulated above, which amount was included in the books of account. The assessee replied to the A.O’s objections by stating that usually sales were made through demand draft/cheque and only in a case of certain new unknown party, the assessee was making sales either after collection of cheque or on receipt of cash. The reason for the above four cash memos amounting to Rs. 22.06 lacs was stated to be for as these parties approaching the assessee and coming directly to god own for collecting their goods and directly transporting them to their respective destinations. The assessee further submitted that all the goods were sold after charging due VAT, which amount was duly deposited in the government account within the specified time. The reason for such cash memos in the handwriting of a different person, was stated to be their issuance by the assessee’s brother who was there at the time of delivery of goods at stockyard. Relevant extract or the assessees cash book from 7.6.2005 to 4.10.2005 is available on pages 34 and 35 of the paper book, from which it is clear that the cash in hand of the assessee stood at Rs. 23.10 lacs at the close of 4.10.2005. It is further relevant to note that the assessee was maintaining stock register in respect of the items dealt with by him. A copy of the relevant parts of the stock register is available on pages 44 to 49 of the paper book. This stock tally was admittedly before the Assessing Officer, who has not pointed out any deficiency in them. There is no law which prohibits a trader or a manufacturer in making cash sales. The Hon’ble Bombay High Court in R.BJessaram Fatehchand (Sugar Deptt) VS. CIT (1970) 75 ITR 33 (Born) has held that sales can be in cash and it is hardly necessary for the seller to bother about the name and address of the purchaser. We find that so long as the availability of stock is there and there is nothing adverse against the cash memos issued by the assessee, such cash sales cannot be doubted. Here it is pertinent to note that the volume of such cash sales at Rs. 22.06 is to be seen in the light of the assessee’s total turnover of Rs. 10.29 crore. It is but natural that if a customer makes cash purchase and lifts the goods. There is no duty cast upon the seller to insist for the address of the purchaser. In the light of the fact that the stock record was available with the assessee, which evidenced the making of sale, we fail to appreciate as to how any addition can be made by treating cash sales as bogus.

6. There is another dimension to this issue. The Assessing Officer made addition of Rs.22.06 lacs u/s 68 of the Act, which contemplates the making of addition where any sum found credited in the books of the assessee is not proved to the satisfaction of the A.O. It is only when such a sum is not proved that the Assessing Officer proceeds to make addition u/s 68 of the Act. We are dealing with a situation in which the assessee has himself offered the amount or cash sales as his income by duly including it in his total sales. Once a particular amount is already offered for taxation, the same cannot be again considered u/s 68 of the Act. In fact, such addition has resulted into double addition.”

17. Therefore, in our considered view, the AO cannot reopen the case without properly establishing himself that the income was actually escaped assessment even though the relevant and credible information received from the internal source of external source. In the given case, there is absolutely no material in the possession of the AO to establish the escapement of income except the information from the investigation wing and the statement of Mr. Hitesh Jain. Hence, the proceedings initiated by the AO is without any credible evidence or material at his possession.

18. Coming to the case law relied by Ld DR, we noticed that the case of Amit Polyprints, the facts are distinguishable to the facts in the present case, even though the information received from the investigation wing, still the AO had credible and definite material to initiate the proceedings. In the given case, AO never had any material except information as forwarded by the DDIT investigation. The next case of Paramount Communications (P) Ltd (supra), the information was received from the outside sources and High court had right sustained the findings, whereas in this case, the information was received from the internal sources. Next case, Raymond Woollen Mills (Supra), the AO had prima facie material on record to reopen the assessment indicating escapement of income. Whereas in the given case, the same was not established. Therefore, we observed that the assessee had already declared the sales out of the same purchases and the AO had not made up the case to make addition on the basis of information received from the investigation wing that the assessee had taken accommodation entries, how the addition can be sustained when the assessee had already declared the purchases as well as sales out of the same purchases in the books of account, how the same can be added invoking the provisions of section 68 in the given facts on record. As held by the coordinate bench in the case of Kishore Jerum Bhai Khaniya (supra), when the sales are already declared in the books, there is no room for invoking provisions of section 68. Respectfully, following the same, we are inclined to allow the grounds raised by the assessee in this regard.

19. In the result, the appeal filed by the assessee for AY 2012-13 is allowed.

20. Since the facts in AYs 2012-13 are exactly similar to Assessment Year 2013-14, our above findings in AY 2012-13are applicable mutatis mutandis in Assessment Year 2013-14. Accordingly, the appeal filed by the assessee for AY 2013-14 is allowed.

21. In the result, both the appeals filed by the assessee are allowed.

Order pronounced in the open court on this 20^thday of May, 2026.