DCIT Vs Sanjay Aggarwal (ITAT Delhi)
Borrowed Satisfaction Cannot Replace an AO’s Investigation: Addition Based Solely on Investigation-Wing Report Fails u/s 131 & 133(6)
Background
The Revenue filed an appeal against the order dated 30 December 2025 passed by the NFAC u/s 250, whereby the CIT(A) had granted substantial relief to the assessee, including deletion of an addition of ₹2.82 crore alleged to represent bogus purchases.
There was a delay of 20 days in filing the Revenue’s appeal. The Department explained that the delay occurred due to a gap in inter-office communication. Considering the explanation, the Tribunal condoned the delay & admitted the appeal for adjudication.
Reassessment & Addition
The AO issued notice u/s 148 on 30 March 2019. The reassessment proceedings were initiated on the basis of information relating to cash deposits of ₹30,44,500 in the assessee’s bank account, purchase of a motor vehicle worth ₹22,03,833 & another transaction of ₹2.82 crore involving the assessee.
During reassessment, the assessee furnished copies of bills in support of the ₹2.82-crore transaction. The AO, however, considered the documents insufficient & treated the entire amount as bogus purchases.
Significantly, the AO did not explain what defect existed in the bills, which particular document was unreliable or what further evidence was necessary. There was no independent verification of the transaction. Nevertheless, the addition of ₹2.82 crore was made merely on the basis of information received from the Investigation Wing.
The assessee challenged the reassessment before the CIT(A) & succeeded on several grounds, including the assumption of jurisdiction as well as the merits of the addition. The Revenue carried the matter to the Tribunal, alleging that the assessee had not satisfactorily explained the suspicious transaction & that the CIT(A)’s order was perverse.
Revenue’s Argument
The Departmental Representative relied upon the reassessment order & contended that the assessee had failed to furnish cogent evidence proving that the transaction of ₹2.82 crore was genuine & had been properly disclosed in the return.
According to the Revenue, the documents submitted by the assessee did not adequately establish the bona fides of the transaction. Therefore, the CIT(A) was not justified in deleting the addition.
Assessee’s Defence
The assessee relied upon the detailed findings recorded by the CIT(A). It was submitted that all relevant bills & supporting documents had been placed before the AO.
Despite receiving those documents, the AO neither identified any deficiency nor undertook an inquiry to verify their correctness. The AO did not issue notice u/s 133(6) to the alleged supplier, summon any person u/s 131, examine banking transactions or bring any adverse material on record.
The assessee argued that an addition of such magnitude could not be sustained merely because the Investigation Wing had characterised the transaction as suspicious.
CIT(A)’s Crucial Finding
The CIT(A) recorded that the addition was solely on the basis of the Investigation Wing’s report. The AO had produced no independent evidence demonstrating that the impugned transaction was bogus.
There was no reference in the assessment order to any inquiry conducted by issuing notice u/s 133(6) or summons u/s 131. Although the assessee had submitted copies of bills, the AO made no attempt to verify their correctness or genuineness.
In the absence of evidence establishing that the transaction was not genuine, the CIT(A) deleted the addition.
ITAT’s Findings
The Tribunal found that the AO’s conclusion was cryptic. The AO had not stated even once how or why the evidence furnished by the assessee was inadequate.
An AO cannot reject documentary evidence through a bare assertion that it is insufficient. If bills or supporting documents appear doubtful, the AO must test them through statutory inquiries, call for information from the counterparty, examine the payment trail or confront the assessee with contrary material.
The Tribunal was particularly critical of the AO’s failure to discharge his investigative responsibilities. The information received from the Investigation Wing could justify further inquiry, but it could not by itself prove that the assessee’s transaction was bogus.
Once the assessee furnished primary evidence, the AO was expected to examine it & establish its falsity through cogent material. The burden could not be discharged by simply reproducing an Investigation Wing allegation & treating suspicion as proof.
The Tribunal observed that the AO had been lax in carrying out the necessary investigation & inquiries. This was not a minor defect capable of being repaired during the Revenue’s appellate proceedings. The Department could not ask the Tribunal to sustain the addition by undertaking an inquiry that the AO himself had failed to conduct.
An assessment must stand or fall on the evidence & reasoning contained in the assessment proceedings. The AO’s omission to verify the documents could not be cured at the Tribunal stage merely by repeating that the transaction remained suspicious.
Decision
The Tribunal upheld the CIT(A)’s finding that there was no evidence on record establishing that the ₹2.82-crore transaction was bogus. The deletion of the addition was consequently affirmed & the Revenue’s appeal was dismissed.
Key Takeaway
An Investigation Wing report is an input for investigation—not evidence sufficient by itself to make an addition. Where the assessee produces bills & supporting documents, the AO must verify them through notices, summons or other meaningful inquiries & record why they are unacceptable.
The AO cannot skip the investigation, label the evidence “insufficient” & expect the appellate authority to fill the evidentiary gap. Suspicion may ring the alarm bell, but only investigation can prove the fire.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT DELHI BENCH
1. In this case, the ITAT Registry has reported a delay of 20 days. The Ld. DR made an oral submission at the Bar that the delay happened due to some gap in inter-office communication. He prayed for condonation of the same.
1.1 Considering the circumstances narrated by the Ld. DR, we deem it fit to condone the delay and admit this appeal for adjudication.
2. This appeal arises from order dated 30.12.2025, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by NFAC.
2.1 In this case, the Ld. AO vide order dated 25.12.2019, issued a notice u/s 148 of the Act on 30.03.2019 on account of a deposit of cash amounting to Rs.30,44,500/- in the bank account of the assessee and also a purchase of motor vehicle worth Rs.22,03,833/-. There was, additionally, information regarding the transaction of Rs.2.82 crores involving the assessee. It is seen from the Ld. AO’s order that some bills were submitted by the assessee in proof of the bona fides of the said transaction but the same was not deemed sufficient enough for escaping the addition of Rs.2.82 crores as alleged bogus purchases.
2.2 The assessee approached the CIT(A) where he could succeed on several counts including on the ground of assumption of jurisdiction, leading to the present appeal.
2.3 The Revenue has challenged the action of Ld. CIT(A) on several counts, mainly averring that the suspicious transaction amounting to Rs.2.82 crores was not suitably explained by the assessee and therefore the first appellate order is perverse.
3. Before us the Ld. DR took us through the Ld. AO’s order, especially page 2 para 3. It was the submission that the assessee never submitted any cogent evidence in support of his claim that the amount of Rs.2.82 crores was justified and duly disclosed by the assessee in his return.
3.1 The Ld. AR, on the other hand, relied on the impugned order and brought to our notice para 6.6 at page 126 of the impugned order to canvass the point that the assessee had submitted the necessary evidences but the Ld. AO never indicated as to how such evidences were insufficient.
4. We have considered the rival submissions and have gone through the records before us. We find that the Ld. AO has given a very cryptic finding and has not even once mentioned in what way the evidence supplied by the assessee was inadequate. We also find that there is a recording of fact in the impugned order at para 6.6 on page 126 as under:
“6.6 It is seen that the AO made the addition solely based on report of the investigation wing. The AO did not bring any evidence on record to establish that the transaction with the impugned party was bogus. There is no reference for any enquiries conducted by the AO either by issue notice u/s 133(6) of the I.T. Act, 1961 or summons u/s 131 of the I.T. Act, 1961. The appellant submitted copies of bills etc. before the AO. However, the AO did not make any attempt to verify its correctness/genuineness. There is no evidence on record to establish that the impugned transaction was not genuine.
6.7 In absence of any evidence on record to establish that the impugned transaction was bogus, the additions so made by the AO stands deleted.”
Considering the totality of facts and circumstances of this case, we find that the Ld. AO has been lax in his responsibilities in terms of carrying out due investigations and enquiries in this case. This failing cannot be cured at this stage and we are constrained to rely on the finding of Ld. CIT(A) given in para 6.6 (supra), to dismiss the appeal of Revenue.
5. In the result, the appeal is dismissed.
Order pronounced in the open court on 09.09.2026
