Third-Party Papers Without Corroboration Cannot Prove Cash Coal Purchases: Kolkata ITAT

Shyam Steel Industries Ltd. Vs DCIT (ITAT Kolkata)

Additions for alleged cash coal purchases and under-invoiced mill-scale sales deleted in absence of corroborative evidence: Kolkata ITAT

The Kolkata Bench of the Income Tax Appellate Tribunal has deleted additions arising from alleged unrecorded coal purchases and under-invoicing of mill-scale sales, holding that additions cannot be sustained merely on the basis of third-party documents, CCTV footage, a retracted statement, conjectures or presumptions, without corroborative material.

Alleged unrecorded coal purchases

A search conducted in the case of the Majee Group allegedly revealed that the assessee had purchased 9,253.55 metric tonnes of coal, valued at approximately ₹4.44 crore, in cash and outside its books.

Relying primarily upon a third-party document marked “SMVD-06”, the Assessing Officer treated the entire alleged purchase value as unexplained expenditure under Section 69C.

In appeal, the CIT(A) observed that the entire purchase amount could not be added because:

• No corroborative seized material had been produced;
• The coal was allegedly consumed in manufacturing sponge iron;
• The assessee’s books had not been rejected;
• No abnormality was found in its production, consumption or input-output ratios; and
• The sales and GST returns had not been disputed.

Nevertheless, the CIT(A) presumed that the possibility of some unaccounted coal trading could not be ruled out. He, therefore, applied the assessee’s net profit rate of 5.25% to the alleged purchases and sustained an addition of approximately ₹23.29 lakh.