Assessee Cannot Be Asked To Prove Non-Occurrence Of Transaction Once Documentary Evidence Is Produced: ITAT

LThe Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has stated that the assessee is not required to prove negative once documentary evidence is produced.

Section 69C of the Income Tax Act, 1961 provides that if an assessee incurs any expenditure during a financial year and fails to provide a satisfactory explanation, or if the Assessing Officer does not accept the explanation, the amount of such expenditure may be treated as the assessee's deemed income for that year.

Amit Shukla (Judicial Member) and Girish Agrawal (Accountant Member) stated the assessee cannot be made to prove the negative stance for which has been taken by it, right from the very first hearing by bringing on record all the corroborative documentary evidence in respect of its actual and real purchase made by it, forming part of the books of accounts.

In this case, the assessee was a partnership firm carrying on business of import, manufacturing, trading of cut and polished diamonds during the year under consideration. Assessee filed its return of income, reporting total income at Rs.2,40,31,330/-.

Assessee in the state of partnership firm existed only from 01.04.2011 to 26.04.2011 after which it got converted into a private limited company.

Documentary evidences in respect of conversion of status of assessee from a partnership firm into a private limited company are placed on record in the form of incorporation issued by the Registrar of Companies, Mumbai, Maharashtra.

Also, placed on record is a deed of dissolution of partnership which also mentions about the date of dissolution as 26.04.2011.

The Assessing Officer observed that assessee had taken accommodation entries of purchase from one M/s. Millennium Concern.

The Assessing Officer concluded that the assessee has manipulated its books of accounts and thus, rejecting the claim of the assessee, made the addition towards purchases from Millennium Concern by invoking the provisions of Section 69C.

The CIT(A) uphold the addition made by the Assessing Officer u/s. 69C of the Act.

The Tribunal observed that the Assessee has all along the entire proceedings has always denied making any purchase from the said party. There is nothing cogent on record which is made available by the authorities below to demonstrate purchase made by the assessee from the said concern except for certain finding which became available in the course of search and survey action in the year 2013 in the case of Bhanwarlal Jain Group.

The Assessing Officer and CIT(A) have not been able to bring anything cogent to negate the claim of the assessee and demonstrate effectively and evidently that assessee had in fact made a bogus purchase transaction from Millennium Concern as alleged for invoking the reopening proceedings, added the Tribunal.

In view of the above, the Tribunal allowed the appeal.

Case Title: Ankit Gems Private Limited v. Circle 5(1)(1), Mumbai

Case Number: ITA No. 3097/MUM/2025

Counsel for Appellant/ Assessee: Rahul Sarda

Counsel for Respondent/ Department: Aditya M. Rai

Click Here To Read/Download Order