ITAT Quashes Assumption-Based Additions; Holds Tax Additions Are Unjustified Without Solid Evidence

The ITAT Kolkata Bench recently gave relief to Balmukund Concast Pvt. Ltd by dismissing two appeals of the tax authorities relating to Assessment Years 2019-20 and 2023-24 and allowing the company’s appeal. The tribunal flagged that tax additions must be backed by proper evidence, not assumptions or incomplete data.

ITA No. 1892/KOL/2025

During the assessment of the assessee’s income tax return (ITR) for the Assessment Year 2019-20, the tax authorities had noticed that the assessee had made purchases amounting to about Rs 3.11 crore from M/s Rajmata Dealers Pvt Ltd., which was suspected to be a bogus entity as per the data available with DIT (Investigation), Kolkata. In conclusion, the tax authorities treated the purchases made by the assessee as being made from the grey market at a lower price and bogus bills obtained from the shell entities as stated above and estimated the assessee’s income by applying a 4% profit on purchases made from the said bogus entity, i.e., Rs 12.45 lakh and made an addition of the same to the assessee’s income.

When the tribunal analysed the case, it noted that the assessee had submitted all relevant documents, including invoices, e-way bills, transport documents, and proper books of accounts, in respect of the purchases made. Further held that the tax authorities cannot make such additions merely based on assumptions; solid evidence is required. If sales are genuine, purchases cannot be denied. Previously, the CIT(A) had also deleted the additions made in the present case, noting that no objections were raised by the tax authorities in the books of account, and also the assessee’s sales were accepted.

ITA No. 1380/KOL/2025

In the assessee’s case pertaining to the Assessment Year 2023-24, the tax authorities had taken two major actions in relation to two issues. In the first issue, the tax authorities had noticed certain mismatches between the price recorded in these dispatch details vis-à-vis sales actually recorded by the assessee in the books of accounts. In conclusion, an addition amounting to Rs 47.93 lakh was made to the assessee’s income on the grounds of suppression of sale.

When the tribunal analysed the facts of the case, it noted that price differences can occur due to timing gaps, discounts, and unexecuted orders. Since the company explained these differences and no proof of extra income was found, the addition was deleted.

In the second issue, the tax authorities had made an addition amounting to Rs 20.47 lakh on the assessee’s income based on the WhatsApp chats between Shri Rajesh Dhandaria and Patna Tiwarji. The tax authorities had found these chats during the search operation. Cash transactions made out of books were estimated at Rs 1.53 crore; using these WhatsApp chats, the same were added entirely to the assessee’s income. The CIT(A) reduced this by applying a profit rate, but the ITAT rejected the entire addition. It held that WhatsApp messages alone are not enough to make any addition without supporting evidence.