Income Tax Appellate Tribunal - Chandigarh
Assistant Commissioner Of Income Tax, ... vs Oasis Commercial Private ... on 17 March, 2026
ITA 694/Chd/2025
ITA/Chd//2025
Oasis Commercial Pvt. Ltd.
आयकर अपीलीय अिधकरण,च ीगढ़ ायपीठ"बी", च ीगढ़
IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH "B", CHANDIGARH
HEARING THROUGH: PHYSICAL MODE
ी लिलत कुमार, ाियक सद एवं ी कृणव सहाय, ले खा सद
BEFORE: SHRI. LALIET KUMAR, JM&SHRI. KRINWANT SAHAY, AM
आयकर अपील सं ./ ITA No. 694 /Chd/ 2025
िनधारण वष / Assessment Year : 2020-21
Oasis Commercial Pvt. Ltd बनाम The DCIT
Village Jatwar(41) Jatwar, Central Circle-2, Ludhiana
S.O Ambala, Ambala City, Haryana-
134201
थायीले खासं ./PAN NO: AAACO8412B
अपीलाथ /Appellant थ /Respondent
आयकर अपील सं ./ ITA No. 859 /Chd/ 2025
िनधारण वष / Assessment Year : 2020-21
The ACIT बनाम Oasis Commercial Pvt. Ltd
Central Circle-2 Village Jatwar(41) Jatwar,
Ludhiana S.O Ambala, Ambala City, Haryana-
134201
थायीले खासं ./PAN NO: AAACO8412B
अपीलाथ /Appellant थ /Respondent
िनधा रती की ओर से/Assessee by : Shri Sudhir Sehgal, Advocate
राज की ओर से/ Revenue by : Smt. Geetinder Mann, CIT DR
सुनवाई की तारीख/Date of Hearing : 13/01/2026
उदघोषणा की तारीख/Date of Pronouncement : 18/03/2026
आदे श/Order
PER LALIET KUMAR, J.M:
The present appeal filed by the Assessee and Cross Appeal filed by the Revenue against the order of the Ld. CIT(A)-5, Ludhiana dt. 31/03/2025.
2. In the appeal of the Assessee in ITA No. 694/Chd/2025 for the Assessment Year 2021 following grounds were raised :
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
1. That the Ld. AO has erred in sustaining the addition of Rs.18,71,47,636/- as per para (xvi), at page 65 of the order against the addition of Rs.71,70,12,570/-, as made by the AO on account of certain so called 'polo sheets' as found during the course of search conducted on the assessee company on 18.05.2023.
b) That the Ld. CIT(A) has erred in relying on said 'polo sheets'& holding about carrying on unaccounted production, as per finding given by him at page 60, para (vi)on account of the following reasons:-
ii. The Ld. CIT(A) has failed to appreciate that the said 'polo sheets' have been found from the 'recycle bin' of ex-employee, namely Sh. Phool Singh, who had left the company in July, 2021 and as said reliance, as placed, on said 'corrupted data' which was not retained by the assessee/employee, is not proper and CIT(A) has failed to appreciate that the said data was not reliable at all.
ii. That even CIT(A) has failed to appreciate, that Sh. D.S Sandhu an senior official of the Company, during the search, had categorically denied having any knowledge about so called retrieved data and also no queries were made from the directors of the Company, regarding such rough so called 'polo sheets' either during search/post search or during assessment proceedings.
iii. That the Ld. AO/CIT(A)has failed to appreciate the sworn affidavit, as filed of the ex-employee, namely 'Sh. Phool Singh' before the AO and both the authorities have failed to appreciate that when 'Sh. Phool Singh', the author of 'polo sheets'has categorically in the sworn affidavit denied any linkage of polo sheet viz a viz unaccounted production, the reliance on such 'polo sheets' by the AO/CIT(A) is misplaced. The contents of the affidavit have to be accepted as per the binding judgement of the Hon'ble Apex Court in the case of the Mehta Parikh & Co. Vs. CIT as reported in 30ITR 181, followed by the Judgement of Gujrat High court in the case of 'Glass Lines Equipment Co. Ltd Vs. CIT' as reported in 119 Taxman 813.
iv. That the finding of the CIT(A) in confirming the addition of alleged un- accounted production as per 'polo sheet' is not proper, ignoring the fact that the capacity of the plant is 107.5 KLPD and which has been proved beyond any iota of doubt.
v. That the Ld. CIT(A) has failed to appreciate that the unit of the assessee is directly controlled and monitored by the 'State Excise Department' and day to day production and dispatch is carried out under the direct/strict supervision of the 'State Excise Department' and, as such, there cannot be a case of unaccounted production as being alleged, as per the order of the AO and confirmed by the CIT(A) as per para (v), (vi) of the order, at page 60.
2. Notwithstanding, the above said ground of appeal, the action of Ld. CIT(A) in applying the GP rate of 16.5% on the entire sales as per polo sheets to the tune of Rs.71,70,12,570/- is not proper and against the facts and circumstances of the case.
3. Without prejudice to the above said grounds of appeal, the Ld. CIT(A) has failed to appreciate that, if at all, the GP rate was to be applied that could have applied only on the so called 'un-accounted sales' as had been worked out by the Ld. AO at Rs.71,70,12,570/- and not on the book sales.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
4. Notwithstanding, the above said grounds of appeal, the Ld. CIT(A) has failed to appreciate that, if at all, the profit rate was to be applied, it should have the 'net profit' which works out to 4.46% during the year under consideration and not the gross profit.
5. That the Ld. CIT(A) has erred in confirming the action of the AO in rejecting the books of accounts u/s 145(3) and has ignored the facts that books of accounts were duly audited and all the purchases, sales and expenses are fully vouched and no specific defects have been pointed out by the AO and CIT(A) in the maintenance of the said regular books of accounts.
6. That the Ld. CIT(A) has erred in making an addition of Rs.8,14,105/- u/s 69C r.w.s 115BBE as per para XIV page 79 of the order of the CIT(A).
7. That the confirmation of the addition is against the facts and circumstances of the case.
8. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
Besides the above Assessee has also raised an additional ground which read as under:
1. That the assessment as framed by the Ld. DCIT, CC-II, Ludhiana vide order, dated 26/09/2024 deserves to be quashed since the approval as granted by the Ld. Addl. CIT vide approval, dated 28/09/2024 is mechanical and without any application of mind.
Similarly In the appeal of the revenue Assessee in ITA No. 694/Chd/2025 for the Assessment Year 2021 following grounds were raised :
1. Whether upon facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts of the case by not appreciating the detailed re-
computation of net profit by the AO on account of computation of the suppressed production of ENA, Ethanol and Country Liquor and thereby restricting the addition by applying gross profit rate in the case?
2. Whether upon facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts of the case in applying GP @ 16.5% on the total sales declared as per books of account alongwith the unaccounted sales to compute the total sales and applying GP 16.05%?
3. Whether upon facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts of the case in deleting the addition made by the AO u/s 68 of the Act on account of bogus sales whereas there were sufficient contrary findings on record including statement recorded u/s 132(4) of the Act of head of the accounts department of the assessee company?
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
4. Whether upon facts and circumstances of the case, the Ld. CIT(A) has erred in law in applying the principle of consistency in restricting the addition made by the Assessing Officer and in applying GP rate to the accounted and unaccounted sales?
5. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.
1. Briefly, the facts of the case are that the assessee i.e; M/s Oasis Commercial Private Limited, is a distillery belonging to the Oasis Group, primarily engaged in the manufacturing of Ethyl Neutral Alcohol (ENA), Country Liquor (CL), and Ethanol, alongside the collection and distribution of electricity. The company utilizes broken rice (Rice Kani) as its core raw material and paddy husk for boiler fuel to generate steam for the fermentation process. For the 2020-21 assessment year, the assessee originally filed a return of income on 31/12/2020, declaring a total income of Rs.6,34,44,000. While the case was initially selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) system with a notice issued on 29/06/2021, the proceedings shifted significantly following a search and seizure operation under Section 132 of the Income Tax Act conducted on 18/05/2023. This search spanned multiple business and residential premises of the group and resulted in the seizure of various incriminating documents that pointed toward undisclosed business activities.
2. The Assessing Officer's primary finding centered on the discovery of a deleted Excel file named "Polo" recovered from the recycle bin of a desktop used by company employees. This file contained detailed production data for ENA, Ethanol, and Country Liquor for the financial year 2019-20 which, when analyzed, revealed that the actual production quantities were significantly higher than those recorded in the assessee's official books of accounts. Based on this evidence, the AO concluded that the company was engaged in extensive "out of books" production and sales that were not disclosed in its financial statements. Furthermore, the AO ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
determined that the company had engaged in bogus sales of Rice Kani and Paddy Husk, leading to additions for unexplained credits. Due to these pervasive discrepancies and the suppression of production figures, the AO rejected the assessee's books of accounts under Section 145(3) of the Act and redrew the Trading and Profit & Loss accounts to include the undisclosed income. Additionally, the AO made specific disallowances regarding unpaid or late ESI/EPF contributions and expenditures claimed for charity and donations.
3. The Assessing Officer in the assessment order has recorded as under:
In the show cause notice the Assessing Officer at page 4 to 21 has given the monthly statement as per the polo sheet found from the computer of the erstwhile employee namely shri Phool Singh which was used by Shri Vinay Kumar at the time of search proceedings. The polo sheets were found from the recycle bin of the computer of Shri Vinay Kumar. The sum and substance of these polo sheets, though given from page 4 to 21 is summarized as under:
4. The assessee had given the reply and submitted the production of ENA, Ethanol and Country liquor for F.Y. 2019-20. The had summarized the same at page 22 in pagraph 1.10 as under:
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
1.10 Further assessee has furnished his submissions related to production of ENA.
Ethanol & Country Liquor (In Cases) for all months for F.Y. 2019-20 by Oasis (M/s Oasis Commercial Private Limited). The reply of the assessee company is reproduced here as:
ENA Sales ENA Sales as ENA ENA Ethanol Ethanol as CL as per CL as per as per reply per reply of Consumption Consumption as per per reply of reply of reply of the of the the assessee in CL (Qty) in CL (Rs.) reply of the the assessee (Rs.) assessee (Amount) Rs. the assessee assessee (Qty) assessee (Amount) (Qty) (Qty) April 170000 8160000 212217 10610850 2088000 98407440 52300 16631363 May 711000 3,23,30,500 289256 13016520 2674000 126025620 92220 28815846 June 677000 3,26,40,000 140245 6731760 1521000 71684730 104960 32435403 July 336000 1,68,76,000 130747 6537350 2641000 124470330 19000 6041471 August 1002000 5,35,13,000 61741 3272273 1869000 88085970 34600 10843590 September 1161000 6,55,90,000 251245 14069720 936000 44113680 70274 21940368 October 811800 4,55,44,600 175859 9760175 127000 5985510 74100 23129831 November 966500 5,30,09,500 161615 8646403 1378000 64945140 43600 13478800 December 2722800 13,88,06,000 105740 5551350 212000 10097560 71300 22339165 January 1634000 8,17,67,750 179007 8950350 58000 2762540 40100 12574700 February 2748000 13,53,46,750 120918 5864523 283000 13479290 50475 15534165 March 1797000 8,78,55,000 52795 2547359 0 0 16300 5061550 Total 14737100 751439100 1881385 95558632 13787000 650057810 669229 208826252
5. Thereafter the Assessing Officer had madethe comparison of the sale made by the assessee with the polo sheet and in pagraph 1.11 has concluded as under:
1.11. Comparison of the production (including sales) made by the assessee company as per incriminating document (Polo Sheet) with the submissions submitted by the assessee company and as per financial statements of the assessee in tabulated form are as: F.Y. 2019-20:
Particulars Name of Polo Sheet As per Assessee Excess Avg. Amount (Value Entity Company Production Rate of excess production) ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
ENA Oasis 28,686,443 16,618,485 12,067,958 55 66,37,37,690
Commercial (14737100+1881385)
Pvt Ltd
ETHANOL (IN Oasis 14,070,000 13,787,000 283,000 47.36 1,34,02,880
LTR) Commercial
Pvt Ltd
CL (IN CASES) Oasis 793,829 669,229 124,600 320 3,98,72,000
Commercial
Pvt Ltd
Total 71,70,12,570/-
6. The assessee had given the elaborate reply to the show cause notice given by the Assessing Officer. The Assessing Officer has reproduced the reply in paragraph 4.2 at pages 24 to 27 of the assessment order which read as under:
4.2 In response to show cause notice assessee submitted his reply on 23.09.2024.
The relevant portion is reproduced here as under:-
"1. Your goodself have alleged excess production on the basis of unverified and rough 'excel sheets' found from recycle bin of a disgruntled ex-employee and which is totally baseless. It is respectfully submitted that excel sheet named 'Polo' marked as Exhibit-7, consisting of 9 pages has reportedly been retrieved from 'recycle bin' of a computer with username 'Phool Singh' during search and seizure operations on 18/05/2023. The fact that the said data was allegedly retrieved from the recycle bin of computer with username 'Phool Singh' is not in our knowledge at all and neither, the same was extracted in the presence of responsible person of the company. Further, the said data under username of 'Phool Singh" was retrieved from the computer desk top of Sh. Vinay Kumar and previously, it was used by Sh. Phool Singh and that data was not in the knowledge of management or Senior Officials of the company and also the fact that Sh. Phool Singh had left the company in July 2021. Thus, no reliance should be placed on such corrupted data and also the said data being of no use of the company and, as such, the same was not retained in the computer. This should be enough proof of the fact that no reliability can be placed on such data.
1B). Further, this alleged excel sheet was put to Sh. D.S. Sandhu, a Senior Official of the company during search and he had categorically denied having any knowledge about such so-called retrieved data and he stated that his job is limited to supervising work, related to Accounts department and also he stated that he has no knowledge of ENA & Country Liquor and others and thus, no reliance should be placed on such data, which your goodself have confronted to us.
2. Further, at the very outset, we would like to submit that this wrong data recorded in unauthenticated and unverified rough excel sheet was allegedly ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
maintained by Sh. Phool Singh of his own, for showing his performance and capacity to increase the quantity of dispatches, if more resources would have been deployed with him. In every review meeting with the management, he used to unpleasantly argue with the management for not giving him enough incentives even, though, he claimed that he was having a capacity to increase sales with support of increased resources. The self-claimed additional dispatches that could have been possible in presence of sufficient resources were mentioned as "Others" in the impugned excel sheets, named as "Polo". The impugned sheet shows unverified figures related to ENA, Ethanol, Specialized Denatured Spirit (SDS), Country Liquor (CL) for financial year 2019-20.
5. Respected Sir, the assessee being a manufacturer of alcoholic beverages is subject to the provisions of Excise and needs to maintain the record of Rectified Spirit, Specialized Denatured Spirit (SDS) and finished goods of CL under direct and strict supervision of an Excise Officer, who is stationed at the factory premises and verifies and authorizes various records such as dispatches, productions, opening stock, closing stock etc. The factory operates only upon his permission and the officer leaves only after the factory is shut down. As such, no transaction of sale or purchase or any production of finished goods can go unnoticed by the excise official for such a long period of time. The Movement of Rectified Spirit, Specialized Denatured Spirit (SDS) and finished products are made under the signature of authorized person in The State Excise Department. Every morning, before the factory commences its operations, an inspection is done by the Excise Officer, who performs various physical inspections and counts and checks as per the State Excise Law and only after the same checks are completed, the factory is permitted to start the operations.
12. It is further brought to your kind notice that this unit was taken over by us from A.B. Grain Spirit Pvt. Ltd., under 'slum sale' in the year 2013 and the initial owners had placed the order for installation of plant with 'Praj Industries Ltd.', which is a leading company of India for installation of Distilleries and we are furnishing herewith the agreement with earlier owner, A.B. Grain Spirit Pvt. Ltd., with 'Praj Industries Ltd.', dated 14.03.2010 and in the said agreement, the manufacturing capacity of plant has been listed at 107.50 KLPD of the total spirit of which100 KLPD will be Extra Neutral Alcohol (ENA). Thus, there cannot be production beyond the capacity installed and the said purchase order is attached as Annexure 'B" at page No. 8 to 10.
13. Thus, this is a maximum production, which can be carried out per day and it is a settled law that the maximum production cannot achieved even in the most ideal condition beyond 90% and in our case, we have been achieving the target of Approximately 88.56% of our installed capacity to the maxumum and, thus, your goodself's observation, based on rough and unverifiable/unauthentic data and drawing the conclusion, about substantial amount of unaccounted production is wholly misconceived and deserves no consideration at all and copy of the capacity utilized is being enclosed herewith as Annexure "C", at page 11.
14. We have also submitted the production data of financial year 2019- 20,monthwise of ENA, Ethanol, country liquor and which is as per 'Excise Record' and we had also produced the excise register/production register during the course of hearing before your goodself and no discrepancy has been pointed out by your goodself. Copy of production register And D-12 Excise register attached, Annexure D, pages 12 to 15 and Annexure "E" as D-12 Register at pages 16 to 28 for shut down of Plant during the year and which is day-wise and ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
sample copy is attached. The same was also produced before your goodself and E-1 as D-18 from pages 29 to 32, which shows daily production as per tankers stalled, where ENA is stored. We have five tankers as per register from SST-1, to SST- 5, daily dip is taken by Excise Authorities to monitor the production of ENA, duly authenticated by the Excise officials.
15. We had also submitted that our production is controlled by Excise Authorities and in the morning, Excise officials, come and in their presence, the production of country liquor begins and in the evening, the said production is stopped and the said production area is under lock and key of the Excise officials and nobody can carry out the said production. In order to substantiate this, we are submitting herewith some sample copy of the invoices in respect of sale of ENA, copy of the Excise permit as issued by the Excise department of that party and then same is sanctioned for the purposes of sale by Excise Officials of our area and then, the goods are dispatched. Such few example copies are being submitted herewith as Annexure-'F' at pages 33 to 59. Further, then there are certain orders of supply of the ENA received from outside the state, the same procedure is followed and alongwith that, there is designated route duly certified by the Excise Official to be followed for the purposes of transportation and evidence of such supply to the parties located outside State, sample copies are being submitted herewith as Annexure 'F-1" at pages 62 to 105. Further, all such activity is under the watchful eye of the Excise Officials, through Cameras installed as stated above.
23. Sir, it is also submitted that in case, there was an excess production/sales as allegedly being mentioned in the seized sheets, then there would have been abundant evidences of interception of vehicles carrying such illegal liquor/ENA in the state of Haryana, as well as, in other states. However, there is not even a single such case registered against the company for illegal sales/transportation of goods. Sir, the well settled legal position is that a non-speaking document without any corroborative material, evidence on record and finding, that such document has materialized into transactions giving rise to income of the assessee, which had not been disclosed in regular books of account by such assessee, has to disregarded for the purposes of assessments to be framed pursuant to search and seizure action. From the search and seizure perspective, such non speaking seized documents are referred to as "Dumb Documents" which cannot be solely relied upon for drawing adverse inferences against us. Thus, this unauthenticated, unverified and imaginated figures in the excel sheets have no relevance in the eyes of law.
26. Sir, now we would like to draw your kind attention towards the summary of the alleged production as mentioned in the questionnaire as under:-
As per polo sheet, the imaginary figures of the total production of ENA and Ethanol during the year 2019-20 is 2,86,86,443 + 1,40,70,000 = 4,27,56,443 liters. However, the total installed capacity of the plant is 107.50 klpd liters per day and the number of days, for which, the factory was functional in 2019-20 was 306 days as verified by the excise authorities as well. Based on these, the maximum production can be calculated as 306 x 107.50 = 32895000/- liters, which is far less than the production as alleged as per polo sheet. It is submitted that this figure has been calculated by using 100% capacity, which is not possible in any manufacturing concern. We have through best efforts achieved the achieved the capacity of 88.56%, which is considered to be very good in the manufacturing process and by that, our production as per Annexure-C as per books of accounts is 29132681 BL and, thus, the whole basis of such unwanted and uncalled for addition is not justifiable.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
30. Notwithstanding the above said facts and without prejudice to that, we fail to understand one basic concept of the accountancy and settled law that your goodself have issued a show cause notice for making an uncalled for addition of Rs. 71,70,12,570/- in respect of alleged outside book production of ENA, ETHANOL, COUNTRY LIQUOR and sought to treat the same in toto as unaccounted income of the assessee on the basis of unauthenticated/rough and unreliable data.
31. We would like to submit for the sake of argument only that, how, can the total sales be unaccounted income of the assessee. it is a settled law that the total sales cannot be the profit and cannot be taxed at all and it can be only profit embedded, if any, in the sales, which can be brought to tax as per basic accountancy principle, and it is a settled position both on the facts and on law.
we need not to refer here too many case laws on this issue as, we assume that you are well aware of it being a designated and senior official of the department and, as such, the above observation may, please, be considered."
7. The Assessing Officer was not satisfied with the submission of the assessee and therefore, the Assessing Officer has made the addition of Rs. 71,70,12,570/- in the hands of the assessee. The summary of findingare given in para 4.12 to the following effect:
4.12 Conclusion
(a) The authenticity of the incriminating document polo sheet has already been proved beyond doubt. The assessee company as per polo sheet has not disclosed production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-. Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-.
(b) The excel sheet found from the premise NFAM, Path:-
NFAM/SureshAccount Desktop 320GB/Export/Ex/xls Basic data_OCPL&OOEPL.xls.. which further proves the fact the assessee company as per polo sheet has not disclosed production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-. Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-.
(c) As per incriminating document the production capacity of the plant is 120 KLPD rather than the plant capacity @107.50 KLPD claimed by the assessee, which again proves the fact the assessee company has not disclosed production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-. Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-.
(d) The assessee has claimed 16669 MT of rice kani as sales but 16669 MT of rice kani is also actually involved in the consumption of the raw material (Rice Kani) in the manufacturing of ENA. It further augments that fact the assessee company has not disclosed production of ENA, Ethanol, CL amounting to ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
Rs.71,70,12,570/-. Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-.
(e) The rice kani is the basic raw material involved in the production of ENA and it has direct correlation with the production of ENA. From perusal of the above incriminating document, it is observed that the grain consumption is 77515 MT during F.Y. 2019-20. But, the assessee company in the audit report of column No.35 (bA) has shown the stock Grain Consumption of only 52210 Ton. Hence, the assessee company has not disclosed production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-. Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-.
(f) The assessee company has manipulated the quantitative details of stock in its books of accounts.
(g) The raw materials required for total production is already recorded in the regular books of the accounts of the assessee as discussed above. Hence, no benefit of expenses/ no benefit of GP/ no benefit of NP is given to the assessee.
(h) The assessee thus during the course of search proceedings, post search proceedings and assessment proceedings was unable to explain discrepancy.
Considering the above facts, the assessee company has under reported the production (Receipts/dispatch) in its books of accounts. Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-. Therefore, the excess production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/- is treated as undisclosed income of the assessee and not unaccounted sale receipts and no benefit of gross profit/net profit is given to the assessee company. Therefore, amount of Rs.71,70,12,570/- is treated as undisclosed income of the assessee and added to the total income of the assessee. Since the raw materials required for total production is already recorded in the regular books of the accounts of the assessee as discussed above, no benefit of expenses/ no benefit of GP/ no benefit of NP is given to the assessee. Since the assessee has failed to substantiate its claim by any evidence, the assessee has misreported its income as per section 270A(9) of I.T. Act above. Hence, penalty proceedings u/s 270A(1) r.w.s. 270A(8) of Income Tax Act are initiated separately since the under-reported income of the assessee is in consequence of misreporting thereof.
8. In paragraph 4.4.2 the Assessing Officer analysed the seized Polo Sheet and compared it with the assessee's books and excise data for the Month of May 2019. The figures relating to ENA sold (7,11,000 BL), ENA transferred to bottling for country liquor (2,89,256 BL), dispatch of country liquor (92,220 cases excluding "others"), and ethanol sales (26,74,000 litres) were found to match the ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
assessee's recorded data. However, the Polo Sheet also contained entries under heads such as "Bottling Others", "ENA Others" and "Others" which were not recorded in the books of account. The AO therefore inferred that while regular transactions were recorded, certain additional quantities existed outside the books.
9. Similarly in para4.4.3 the Assessing Officer For June 2019, the AO prepared a reconciliation chart comparing Polo Sheet data with the assessee's records and excise information. Regular production and dispatch -- ENA sales (6,77,000 BL), ENA transferred to bottling (1,40,245 BL), CL dispatch (1,04,960 cases), and ethanol sales (15,21,000 litres) -- matched with the books. It was again noted at page 31 in para 4.4.4 (v) v. But It was further noticed that there are certain terms like Bottling Others, ENA Others, Others reflected in the incriminating document polo sheet which were not recorded in the books of accounts of assessee company M/s OCPL.
10. In paragraph 4.4.5 the Assessing Officer had concluded as under:
4.4.5 Similarly as discussed in detail show cause notice, there are figures in the polo sheet for all the months of A.Y. 2020-21 which are matched with the ENA, sale, ENA transferring bottling and ethanol sales. Hence, during search, the authenticity of Polo Excel document was established beyond doubt and the same was accepted by the key persons of both OCPL and OOEPL. But it was further noticed that there are certain terms like Bottling Others, ENA Others, in the incriminating document polo sheet which were not recorded in the books of accounts of assessee company M/s OCPL. Hence, the contention of the assessee that the alleged excess production on the basis ofun verified, unauthenticated rough excel sheet and a dumb document is totally baseless and factually incorrect.
11. The Assessing Officer, thereafter, rejected the argument of the assessee with respect to plant capacity as 107.50 KLPD. The findings are given in paragraph 4.5.2 as under:
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
4.5.2 Perusal of the above agreement between AB Spirits Private Limited and Praj Industries yielded the following observations:-
(a) At the outset the agreement is dated 14 March 2010
(b) As per agreement, the production capacity of the plant 107.50 KLPD of which100 KLPD will be Extra Neutral Alcohol (ENA) The above unit of M/s AB Spirits Private Limited situated at village Jatwar, distt.
Ambala was purchased by the assessee company M/s Oasis Commercial Private Limited in A.Y. 2014-15 and the distillery unit of assessee company M/s OCPL had started in production in Oct, 2014. Further, a letter has been found on writing pad of Oasis Commercial Pvt Ltd. The scanned copy of the letter is written by M/s OCPL to Ministry of Environment, Forests & Climate Change.
To, The Director IA Divislon(Industry 3) Ministry of Environment, Forests & Climate Change Govt. of India, India Paryavaran Bhavan, Jor bag Road, Aliganj, New Delhi . Ito 003 Subject: Change of name in the Environment Clearance Letter No. Pito11/136/2010tA Ii (I) dated ii" October, 2011 issued by MoEFCC for Grain Based Distillery Unit (120 KLPD) and CPP (BMW) at village Jet war, Teshil ;Naraingarh, District ; Ambale(Slaryarta) in the name of M/s A. B. Grain Spirits Pvt. Ltd. to M/s Oasis Commercial NI .Ltd.
Ref
1. Environment clearance issued by MoEr&CC. New Delhi vides Letter no. 1- tici11n36/2010.IA II (I) dated the 5th of October, 2011 (Copy enclosed as Annexe
1).
2. Our Request Letter submitted to MoEFCC dated 09 June, 2017. (Copy enclosed as Annexure 2).
Sir, With reference to the aforesaid subject and above cited reference matter, we would like to bring to you kind notice that the Environment clearance for the subject cited project was granted by MoEF&CC. New Delhi, vide letter no. 1- ti011/i36/2010.IA It (I) dated 11thOctober, 2011.
M/s Oasis Commercial Pvt. Ltd. take over the above saki project from M/s A. B. Grain Spirits Pvt. Ltd. through demerger/ Memorandum of understanding.
The unit will henceforth be known as M/s Oasis Commercial Pvt. Ltd.
In the same context, as per the provisions laid down under Para 11, of EIA Notification dated 14 September 2006; we are herewith submitting the following documents (Hard & Soft) for your kind consideration.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
1. No Objection Certificate from A. B. Grain Spirits Pvt. Ltd. (Transferor) for transferring the Environment Clearance letter no. J-11011/140/2010-IA II (I) dated 11th October, 2011 to Oasis Commercial Pvt. Ltd. (Copy enclosed as Annexure 3)
2. Undertaking from Oasis Commercial Pvt. Ltd. (Transferee) stating to comply with all the Environmental safeguards/ the terms and condition as stipulated in the Environmental clearance letter no. J-11011/140/2010-IA II (I) dated 11th October, 2011. (Copy enclosed as Annexure 4) All further communication relating to the subject referred above may please be address to "M/s. Oasis Commercial Pvt. Ltd.Village Jatwar, Tehsil Naraingarh, District ; Ambala, Haryana.
You are requested to kindly take note of the above and change the name the name of M/s A. B. Grain Spirits Pvt. Ltd. to M/s Oasis Commercial Pvt. Ltd. in your record.
Yours Faithfully, For Oasis Commercial Pvt. Ltd.
[Signature] S.K. Sharma Executive Vice President Enclosures
1. Copy of Environment clearance Letter 11th October, 2011 issued by MoEFCC, New Delhi
2. Our Request Letter submitted to MoEFCC dated 19th June, 2017.
3. NOC from A. B. Grain Spirits Pvt. Ltd. to transfer EC to Oasis Commercial Pvt. Ltd.
4. Undertaking of Oasis Commercial Pvt. Ltd
12. The Assessing Officer in para 4.5 has rejected the plant capacity argument, having concluded that the assessee claimed production could not exceed 107.50 KLPD based on the installation agreement with Praj Industries Ltd. The AO recorded this contention but proceeded to examine it for rejection, implying that capacity limitation would not negate the excess production reflected in the seized records.
13. Based on the above letter Assessing Officer concluded as under:-
5.3 Perusal of the above mentioned document shows the following observations:-
(a) The above document is written to Ministry of Environment, Forests & Climate Change on
(b) The above document is regarding change of name in the Environment clearance letter No.J-11011/136/2010-IA II (1) dated 11th October, 2011 issued by ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
MoEFCC for Grain Based Distillery Unit (120 KLPD) and CPP (8MW) at village Jatwar, TeshilNaraingarh, District; Ambala (Haryana) in the name of M/s A.B. Grain Spirits Pvt Ltd to M/s Oasis Commercial Pvt Ltd.
(c) In the said document in the Sub the capacity of the plant is clearly written flour Grain Based Distillery Unit (120 KLPD)
(d) Reference in the above document is also made to Environment clearance letter No.J-11011/136/2010-IA II (1) dated 11th October, 2011 issued by MoEFCC for Grain Based Distillery Unit (120 KLPD)
14. The Assessing Officer in para 4.5.4 mentioned that another excel sheet has been found from the premise NFAM, Path:-NFAM/Suresh Account Desktop 320GB/Export/Ex/xls Basic data_OCPL& OOEPL.xls. and the same is reproduced here as:-
Capacity FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 Data Plant Capacity - 120 120 120 120 120 120 120 120 120 klpd ENA Productio 0 39600000 39600000 39600000 39600000 39600000 39600000 39600000 39600000 n Capacity
- BL Capacity #DIV/0! 66% 77% 87% 78% 92% 95% 94% 95% Utilisation From perusal of the above excel sheet it is clear that the production capacity of the plant from F.Y. 2014-15 to F.Y. 2023-24 is 120 KLPD and ENA production capacity is 39600000 BL in all these F.Y.s. Therefore, the financial year 2019-20 the production capacity of the plant is 120 KLPD and ENA production capacity is 39600000 BL. Hence, the assessee company during the assessment proceedings has provided the wrong facts to the undersigned. Hence, it is beyond doubt that the capacity of plant is 120 KLPD.
On the basis of the reasoning given above and also in paragraph 4.12, the Assessing Officer had made an addition of Rs 71,70,12,570/- in the hands of the assessee.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
15. On the basis of the above, it can be summarized that the basis of making addition in the hands of the assessee was for the following reasons:
1. That polo sheet were found from the computer of erstwhile employee which provides two set of figures namely one matching with the declared / disclosed sales by the assessee and other were named by the Assessing Officer "like Bottling Others, ENA Others, in the incriminating document polo sheet which were not recorded in the books of accounts of assessee company M/s OCPL".
2. A letter dt. 12/09/2017 was found from the system, which was send by the assessee for change of name in the record of environmental authorities wherein the capacity of the land of the assessee was mentioned as 120KLPD.
3. Another excel sheet was found wherein the plant capacity was mentioned as 120KLPD and ENA production capacity was mentioned as 39600000(page 38 of the Assessing Officer order).
4. Another excel sheet at page 39 was referred by the Assessing Officer wherein the total production ENA was mentioned as 36432000 in the F.Y. 2019.
5. The Assessing Officer has rejected the submission of the assessee whereby the assessee has claimed the production capacity of the plant was only 107.50 KLPD and the production shown by the assessee at 29132681 for 306 days was also rejected.
6. The Assessing Officer had tabulated and compared the production shown by the assessee vis a vis the production of ENA as per the document and thereafter has mentioned in para 4.5.11 as under:
"4.5.11 From the above chart, it is clear that the actual capacity utilizations by the assessee company is 92% based on incriminating documents. So from the above facts, that the undisclosed production by the assessee on account the capacity of plant @120 KPLD rather than 107.50 KLPD as claimed by the assessee company. More the capacity of the plant more ENA is produced as discussed above. Hence, the total production of extra neutral alcohol (3,64,32,000 KLPD) as mentioned and discussed as above in detail is not beyond the capacity installed (39600000 KLPD) and is much beyond the total production of extra neutral alcohol (3,64,32,000 KLPD) claimed by the assessee (29132686 KLPD)."
16. After recording the above, the Assessing Officer has recorded in paragraph 4.6.1 onwards that though the assessee has claimed 16669 MT of rice kani as sales, but 16669 MT of rice was actually involved in the consumption of raw material (rice kani) in the manufacturing of ENA.
17. The assessee has submitted that the sale transaction of rice Kani with its group concern. The Assessing Officer has reproduced the extract of audit report in para 4.6 and 4.6.1 of the order. The Assessing Officer has recorded that the ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
sale of 16669 MT of grain was bogus as there is no actual sale of said rice kani by the assessee to its sister concern. On the basis of this it was concluded by the Assessing Officer that the bogus rice Kani was used by the assessee for manufacturing of ENA. On the basis of this, the Assessing Officer has rejected the books of account of the assessee. The Assessing Officer has concluded since the raw material has already recorded in the books of account therefore no benefit of GP rate and NP rate was given to the assessee.
18. Furthermore, the Assessing Officer in paragraph 4.6.3 has examined the audit report of the assessee and, thereafter, has also tabulated the damage to paddy husk at page 43. At page 44 of his order the Assessing Officer has concluded that the sale transaction of 15040MT of paddy husk as sale by the assessee with its group company was bogus. Further, the Assessing Officer has mentioned that the paddy husk is a basic raw material for the production of steam. This paddy husk (raw material for steam) was used to increase ENA production. On the basis of the above, it was concluded that the reduction of stock of 15040 MT of paddy husk claimed by the assessee was incorrect, and therefore, the books of account of the assessee were rejected.
19. In paragraph 47, the Assessing Officer had given two reasons as to why the bogus sales of rice kani and paddy husk were recorded in the books of account of the assessee. As per the Assessing Officer, the gross profit on the sale of rice kani and paddy husk only generates a GP of 1-2%. As against the GP of 24-25% declared by the assessee for various financial years. Further, rice kani and paddy husk sale do not attract levy of GST whereas sale of ENA attractGST @ 18%. On the basis of the above the Assessing Officer has rejected the books of account of assessee.
20. The Assessing Officer has concluded that the excess production of ENA is required to be treated as undisclosed income and no benefit of GP / NP can be given to the assessee. (page 45 of the Assessing Officer order) ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
21. Assessing Officer in para 4.8 had referred to the Excel sheet and mentioned that the grain consumption in FY 2019 was mentioned as 77515MT, whereas in the audit report, it was mentioned in Column 35 (bA) as 52210MT. Thus, on the basis of this, the Assessing Officer concluded that the assessee has manipulated the quantitative details in the books of account and has not disclosed the correct picture of consumption.
22. Further, the Assessing Officer had mentioned the specification of the grain-based distillery and mentioned that 1MT of broken rice would yield 442-468 Ltr of alcohol / ENA. In the same report, it was mentioned that the yield was calculated @ 96% V by V per MT of grain flour. The Assessing Officer, without getting the expert report either from the manufacturer or from the third party / expert opinion have juxtaposed the per MT production with the broken rice / Rice Kani mentioned in the polo sheet (77515MT) and arrived at the production of 35656900, whereas by the same formula, the production of the assessee based on 52210MT would come to 24016600MT.
23. Interestingly, as per the production shown by the assessee for 52210MT of rice kani, it was mentioned as 29132686MT, whereas as per the formula given by the Assessing Officer, it was 24016600MT. Similarly, the production as per the polo sheet was 36432000 MT, whereas, as per the Assessing Officer's formula, it came to 35656900 MT.
24. The Assessing Officer in para 4.94 had compared the ENA production of the assessee as 29132686 MT as against the polo sheet calculation of 36432000MT.
25. The Assessing Officer has tabulated the ENA sale as per polo sheet with the ENA production claimed by the assessee in para 4.9.5 and thereafter in para 4.9.6 has drawn a comparative table as under:
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
Particulars Name of Entity Polo Sheet As per Assessee Excess Avg. Amount (Value of
Company Production Rate excess
production)
ENA (BL) Oasis 2,68,05,058 12,067,958 55.00 66,37,37,690
14737100
Commercial
(28,686,443 - (16,618,485 -
Pvt Ltd
1881385) a s 1881385) as 1881385
1881385 BL of BL of
ENA is used in the
ENA is used in consumption of
consumption CL
1881385 ENA the of
26. In para 4.9.7, the Assessing Officer has concluded that the excess production amounting to Rs. 663737690/- was on account of non-recording of ENA others and ENA bottling other CL, which was not reflected in the books of account of the assessee. The Assessing Officer has mentioned that the ENA bottling other CL production was 5,78,645, and ENA others production was 1,15,01,113 (total 12079758), and has valued the same at Rs. 66,43,86,690/-.
27. In para 4.9.11, the Assessing Officer made the comparison of the production (including sales) made by the assessee with that of the polo sheet and has recorded as under:
Particulars Name of Entity Polo Sheet As perExcess Avg. Rate Amount (Value of Production excess Assessee Company production) ETHANOL Oasis Commercial 14,070,000 13,787,000 283,000 47.36 1,34,02,880 (IN LTR) Pvt Ltd CL (IN Oasis Commercial 793,829 669,229 124,600 320.00 3,98,72,000 CASES) Pvt Ltd ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
Total 5,32,74,880/-
Thus, on the basis of the above-noted reasoning, the Assessing Officer in para 4.11, 4.12 had concluded as under:
4.11 Therefore, Comparison of the excess production (Receipts/dispatch) made by the assessee company as per incriminating document (Polo Sheet) as well as the excel sheet found from the premise NFAM, Path:-
NFAM/SureshAccount Desktop 320GB/Export/Ex/xls Basic data_OCPL& OOEPL.xls. with the submissions submitted by the assessee company shows that the assessee company has under reported the production (Receipts/dispatch). Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-.
4.12 Conclusion The authenticity of the incriminating document polo sheet has already been proved beyond doubt. The assessee company as per polo sheet has not disclosed production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-. Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-.
The excel sheet found from the premise NFAM, Path:-NFAM/SureshAccount Desktop 320GB/Export/Ex/xls Basic data_OCPL&OOEPL.xls.. which further proves the fact the assessee company as per polo sheet has not disclosed production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-. Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-.
As per incriminating document the production capacity of the plant is 120 KLPD rather than the plant capacity @107.50 KLPD claimed by the assessee, which again proves the fact the assessee company has not disclosed production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-. Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-.
The assessee has claimed 16669 MT of rice kani as sales but 16669 MT of rice kani is also actually involved in the consumption of the raw material (Rice Kani) in the manufacturing of ENA. It further augments that fact the assessee company has not disclosed production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-. Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-.
The rice kani is the basic raw material involved in the production of ENA and it has direct correlation with the production of ENA. From perusal of the above incriminating document, it is observed that the grain consumption is 77515 MT during F.Y. 2019-20. But, the assessee company in the audit report of column No.35 (bA) has shown the stock Grain Consumption of only 52210 Ton. Hence, the assessee company has not disclosed production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-. Thus, the assessee company ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-.
The assessee company has manipulated the quantitative details of stock in its books of accounts.
The raw materials required for total production is already recorded in the regular books of the accounts of the assessee as discussed above. Hence, no benefit of expenses/ no benefit of GP/ no benefit of NP is given to the assessee.
The assessee thus during the course of search proceedings, post search proceedings and assessment proceedings was unable to explain discrepancy.
Considering the above facts, the assessee company has under reported the production (Receipts/dispatch) in its books of accounts. Thus, the assessee company has suppressed its total income by not disclosing production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/-. Therefore, the excess production of ENA, Ethanol, CL amounting to Rs.71,70,12,570/- is treated as undisclosed income of the assessee and not unaccounted sale receipts and no benefit of gross profit/net profit is given to the assessee company. Therefore, amount of Rs.71,70,12,570/- is treated as undisclosed income of the assessee and added to the total income of the assessee. Since the raw materials required for total production is already recorded in the regular books of the accounts of the assessee as discussed above, no benefit of expenses/ no benefit of GP/ no benefit of NP is given to the assessee. Since the assessee has failed to substantiate its claim by any evidence, the assessee has misreported its income as per section 270A(9) of I.T. Act above. Hence, penalty proceedings u/s 270A(1) r.w.s. 270A(8) of Income Tax Act are initiated separately since the under-reported income of the assessee is in consequence of misreporting thereof.
28. Similarly, the findings of the Assessing Officer with regard to the transactions relating to Rice Kani amounting to ₹33,04,17,346 are discussed in the assessment order beginning from paragraph 5.1 onwards (page 57). The Assessing Officer examined the ledger account of sale of Rice Kani recorded in the books of account of the assessee company for the financial year 2019-20 and observed that substantial sales of Rice Kani were recorded during a relatively short period. In this regard, the Assessing Officer noted that:
"During search proceedings, ledger account of Sale of Rice Kani of OCPL for F.Y. 2019-20 were analysed and it was observed that total sale of rice kani has been made at Rs.33,04,17,346/- during the period of approx 5 months i.e. from ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
14.11.2019 to 31.03.2020. Sh. Daljit Singh Sandhu, being head of Accounts department was asked to furnish transporter's bills, entry in outward register, weight measurement record, stock register w.r.t to sale of Rice Kani mentioned above, but he was unable to produce the same and further stated that no rice kani has been sent outside and these are bogus sale booked in OCPL Tally."
(Para 5.1)
29. Based on the above observation, the Assessing Officer proceeded to analyse the sale ledger of Rice Kani maintained in the books of the assessee company and the transactions recorded with various entities, including certain group concerns and other parties. The Assessing Officer recorded that during post-search enquiry, the investigation wing examined the ledger accounts relating to sale of Rice Kani and summarised the transactions recorded with various parties. In this context, the Assessing Officer observed:
"During post search enquiry, by the investigation wing the sale ledger of Rice Kani in the books of accounts of OCPL with group companies was examined and the same is summarised for F.Y. 2019-20 as:" (Para 5.1)
30. The Assessing Officer thereafter analysed the inter-company transactions reflected in the books of the group entities and examined the flow of funds through the bank accounts and unsecured loan accounts. While analysing the books of another group entity, the Assessing Officer recorded the following observation:
"At first, the Unsecured Loans ledger of OOEPL was scrutinized, as per this ledger, in F.Y. 2019-20, OOEPL has received unsecured loans from M/s Om Sons Marketing Pvt Ltd (Indore) of total Rs.3.45 Crore."
31. The Assessing Officer further noted that upon examination of the bank ledger of the said entity, it was observed that on the dates on which ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
unsecured loans were received, substantial funds were transferred to the assessee company. The Assessing Officer recorded:
"Thereafter, Bank Ledger of OOEPL was analysed and it was observed on 10.02.2020 & 27.02.2020 i.e. the dates on which unsecured loan of Rs.3.4 Crore was received by OOEPL, that Rs.7.90 Crore was transferred to OCPL from OOEPL."
32. On further examination of the ledger entries, the Assessing Officer observed that several adjustment entries were passed towards the end of the financial year and inferred that the ledger accounts were created to record transactions between group concerns which were subsequently adjusted through journal entries. In this regard, the Assessing Officer noted:
"On detailed analysis of the ledger, it was observed that this ledger was created for sale of Denatured Spirit from OOEPL to OCPL. However, on 31.03.2020, few adjustment entries were passed."
33. On the basis of the above analysis of ledger accounts, inter-company transactions and the absence of supporting documentary evidence regarding the physical movement of goods, the Assessing Officer formed a view that the transactions relating to sale of Rice Kani recorded in the books were not genuine. According to the Assessing Officer, the assessee failed to produce transport documents, outward register entries, weight records or stock registers to substantiate the alleged sales of Rice Kani. Further reliance was placed on the statement of the accounts head, who stated that no Rice Kani had actually been transported outside and that the entries represented book entries recorded in the accounting software.
34. In view of the above observations and the analysis of ledger accounts and fund movements among group entities, the Assessing Officer concluded that the sale transactions of Rice Kani recorded in the books were not genuine and represented accommodation entries. Accordingly, ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
the Assessing Officer treated the amount of ₹33,04,17,346, being the value of the alleged sale of Rice Kani, as unexplained credits and added the same to the income of the assessee under the provisions of the Income- tax Act.
35. Similarly, the findings of the Assessing Officer regarding the alleged bogus sale of Paddy Husk are discussed in paragraph 6 of the assessment order (pages 96-108). The AO examined the transactions recorded in the books of the assessee company relating to sale of paddy husk and concluded that the said transactions were not genuine but were merely accommodation entries recorded in the books.
36. The AO observed that the assessee had shown substantial sales of paddy husk to group entities and other parties, particularly to M/s Oasis Overseas Export Pvt. Ltd. (OOEPL) and M/s Gauravh Wines Pvt. Ltd.. On examination of the ledger accounts of paddy husk maintained in the books of the assessee and the corresponding accounts in the books of the alleged purchasing parties, the AO noted that the assessee had recorded significant sales during the year. However, according to the AO, the assessee failed to produce credible documentary evidence to establish the actual movement of paddy husk, such as transportation records, weighment slips issued by independent agencies, outward register entries or other supporting documents.
37. The assessee had explained before the AO that the entries relating to the sale of paddy husk were recorded to account for the value of steam supplied by OCPL to OOEPL, since paddy husk was used as fuel in the boiler for generating steam, which was consumed by the sister concern in its manufacturing process. However, the AO rejected this explanation on the ground that the assessee had not maintained any scientific or quantitative record of steam generation or consumption, nor any basis for ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
determining the cost of steam supplied. In the absence of such records, the AO held that the explanation offered by the assessee was not supported by verifiable evidence.
38. The AO further compared the quantitative details available in seized material and other records with the entries recorded in the books of the concerned entities and observed that while other materials were duly reflected in the books of the purchasing parties, no corresponding purchases of paddy husk were recorded in the books of OOEPL. According to the AO, this discrepancy indicated that the alleged sale of paddy husk recorded in the books of the assessee did not represent actual transactions.
39. The AO also noted deficiencies in the documentary evidence relating to the alleged transactions, observing that the invoices did not contain complete commercial particulars such as proper delivery destination and transportation details. Further, the weighment slips produced by the assessee were stated to have been generated by entities within the group and not by independent parties, thereby raising doubts regarding the authenticity of the transactions.
40. On the basis of the above analysis, including the absence of transportation evidence, lack of quantitative records for steam generation, discrepancies in the books of the alleged purchasing parties, and the nature of supporting documents produced by the assessee, the Assessing Officer concluded that the sale transactions of paddy husk recorded in the books were not genuine and represented bogus accommodation entries. Consequently, the AO treated the receipts arising from such alleged sale of paddy husk as unexplained credits and proceeded to make addition while also rejecting the books of account under section 145(3) of the Income-tax Act. Based on these finding ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
Assessing Officer made the addition of Rs 5,88,00,254/- in the hands of the assessee .
41. Against the order of the AO the assessee went in appeal before the Ld. CIT(A).
42. The learned CIT(A) examined the addition of ₹71,70,12,570 made by the Assessing Officer on account of alleged suppressed production of ENA, Ethanol and Country Liquor, which had been computed by the AO on the basis of the data contained in the seized "Polo sheets". The CIT(A) observed that the said sheets were recovered from the business premises of the assessee and contained details of production which distinguished between disclosed and undisclosed quantities. The CIT(A) noted that the Assessing Officer had worked out the suppressed production of ENA, Ethanol and Country Liquor from the figures appearing in these sheets and treated the same as undisclosed income of the assessee.
43. After considering the submissions of the assessee, the CIT(A) observed that the seized "Polo sheets" contained detailed data relating to production over a period of time and clearly showed separate columns indicating disclosed and undisclosed production. According to the CIT(A), the expression "others" appearing in the sheets represented unaccounted production and therefore the data contained in the seized sheets constituted reliable evidence for determining undisclosed production. The CIT(A) therefore held that the data contained in the Polo sheets was sufficient to establish that the assessee had carried out production outside the books of account.
44. The CIT(A) further examined the contention of the assessee that the plant capacity was only 107.50 KLPD and not 120 KLPD as assumed by the Assessing Officer. On this issue, the CIT(A) observed that the figure of 120 ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
KLPD appearing in the environmental clearance report was based on projection or estimation and that no conclusive material was available on record to establish that the plant had actually operated at that capacity. The CIT(A) therefore found merit in the argument of the assessee to the extent that the assumption regarding higher plant capacity could not be conclusively established merely on the basis of the environmental clearance document.
45. The CIT(A) also noted that the assessee had explained the conversion ratios of ethanol into ENA and had relied upon BIS standards and technical specifications. The CIT(A) accepted that these standards represented recognized benchmarks and there was no reason to disagree with the same. However, the CIT(A) held that the existence of such standards did not negate the fact that the seized Polo sheets clearly reflected undisclosed production.
46. While deciding the issue of taxability, the CIT(A) further considered the legal position regarding whether the entire value of unaccounted production could be assessed as income. Relying on various judicial precedents, including decisions of the Hon'ble High Courts, the CIT(A) held that the entire sales cannot be treated as income and only the profit element embedded in such sales can be brought to tax. The CIT(A) also noted that in the case of another group concern, the Assessing Officer had adopted the gross profit method while making similar addition based on the same Polo sheets.
47. Accordingly, following the principle that only profit embedded in unaccounted turnover should be taxed, the CIT(A) held that the gross profit rate of 16.5% would be reasonable having regard to the gross profit declared by the assessee in earlier years. Applying this rate on the total sales (both accounted and alleged unaccounted production), the CIT(A) ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
determined the profit attributable to such production and restricted the addition accordingly.
48. Consequently, the CIT(A) partly confirmed the addition to the extent of ₹18,71,47,636 and granted relief of the balance amount out of ₹37,19,90,809/- to the assessee. Thus, while upholding the finding that there was unaccounted production reflected in the Polo sheets, the CIT(A) held that only the profit element embedded in such production could be brought to tax, and not the entire value of such production.
49. Similarly the learned CIT(A) thereafter adjudicated Ground Nos. 4 to 6( pertaining to Rice Kani and Paddy husk, ) of the appeal wherein the assessee had challenged the addition made by the Assessing Officer on account of alleged bogus sales of Rice Kani amounting to ₹33,04,17,346 and sale of Paddy Husk amounting to ₹5,88,00,254, which were treated by the Assessing Officer as unexplained credits under section 68 read with section 115BBE of the Act. The Assessing Officer had formed the view that these transactions were not genuine primarily on the ground that the assessee had failed to produce transportation documents, delivery notes and other supporting evidence to establish the physical movement of the goods and also relied upon the statement of the accounts head recorded during the course of search proceedings.
50. During the appellate proceedings, the assessee contended that the sales of Rice Kani were made to group concerns engaged in the manufacture of ENA and other liquor products and that the purchases of Rice Kani had been duly recorded in the books of the respective concerns and consumed in their manufacturing activities. It was further submitted that the transactions had been recorded in the regular books of account, were supported by invoices and were reflected in the audited financial statements as well as GST returns. The assessee also pointed out that no ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
incriminating material was found during the course ofsearch to indicate that such sales were bogus or fictitious in nature.
51. The assessee also disputed the reliance placed by the Assessing Officer on the statement of the accounts officer recorded during search, submitting that the said statement was recorded under pressure and had subsequently been retracted immediately after the search. It was contended that the entries relating to the sale of Rice Kani were duly recorded in the books of account of both the assessee as well as the purchasing concerns and the transactions had been carried out through proper banking channels. Therefore, according to the assessee, the mere absence of certain transportation documents could not lead to the conclusion that the transactions were bogus.
52. After considering the submissions of the assessee and examining the material placed on record, the learned CIT(A) observed that the sales of Rice Kani and Paddy Husk had been duly recorded in the books of account of the assessee and corresponding purchases were also reflected in the books of the group concerns. The CIT(A) noted that the transactions were carried out through banking channels and were part of the regular business activities of the group entities. The CIT(A) further observed that the Assessing Officer had not brought any independent material on record to establish that the sales recorded in the books were fictitious or that the goods had not been supplied to the purchasing parties.
53. The CIT(A) also took note of the fact that the statement relied upon by the Assessing Officer had been retracted and in the absence of corroborative material, such a statement could not form the sole basis for making the addition. The CIT(A) further observed that the books of account of the assessee were duly audited and the transactions had also been reported ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
in the GST returns, which had been accepted by the GST authorities. Thus, the CIT(A) held that the addition made by the Assessing Officer merely on the basis of suspicion and assumptions without any supporting evidence was not sustainable in law.
54. Accordingly, the learned CIT(A) held that the transactions relating to sale of Rice Kani and Paddy Husk could not be treated as unexplained credits under section 68, particularly when the same were recorded in the regular books of account and were supported by corresponding entries in the books of the purchasing parties. The CIT(A), therefore, deleted the additions made by the Assessing Officer on this account and allowed the grounds of appeal raised by the assessee.
55. Feeling aggrieved by the order of Ld. CIT(A) the assessee as well as revenue are in appeal before us on the grounds mentioned herein above, Grounds relating to Alleged Unaccounted Production based on "Polo Sheets"
56. The Ld. Authorised Representative (AR) submitted that the entire addition is based solely on certain excel sheets retrieved from the recycle bin of a desktop allegedly used by an ex-employee, Shri Phool Singh, who had left the services of the assessee much prior to the search. It was contended that the said sheets do not record any actual production or sales and merely contain projected figures or unfulfilled demand estimates. The AR submitted that a sworn affidavit of the said employee was filed categorically denying any linkage of the said sheets with actual production, which affidavit has neither been rebutted nor discredited by the Assessing Officer. It was further submitted that no corroborative evidence such as excess raw material consumption, excess electricity ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
usage, packing material, transportation or clandestine sales was found during search.
57. The AR further submitted that the assessee's manufacturing activity is carried out under strict and continuous supervision of the State Excise Department, with permanent posting of excise officials, statutory registers, CCTV surveillance and mandatory permits for each dispatch. It was argued that in such a heavily regulated environment, unaccounted production of the magnitude alleged by the Assessing Officer is practically impossible. Therefore, reliance on loose sheets alone is legally untenable. The Ld.AR had filled detailed written submissions that had been taken into record.
58. The Ld. Departmental Representative (DR), on the other hand, strongly relied upon the assessment order. The DR submitted that the "polo sheets"
clearly reflected excess production and dispatches which were not recorded in the regular books of account. It was contended that these sheets were recovered during search proceedings and therefore constitute incriminating material. The DR argued that the assessee failed to satisfactorily explain the figures appearing in the sheets and that the affidavit of the ex-employee is a self-serving document filed as an afterthought. The DR thus supported the findings of the Assessing Officer and contended that the Ld. CIT(A) erred in not sustaining the entire addition.
59. Further Ld. DR strongly relied upon the findings of the Assessing Officer and submitted that the addition on account of unaccounted production is fully justified. The Ld. DR had drawn our attention to the show cause notice dt. 13/09/2024 (reproduced at page 3 of the assessment order) wherein the detail of the incriminating document (polo sheet) relating to ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
production of ENA (in BL) Country Liquor (CL) in cases and ethanol production (Ltr) by the assessee were found and the Ld. DR drawn our attention to the table at page 16 of the assessment order
60. Further, the Ld. DR had drawn our attention to the statement of Shri Daljeet Singh Sandhu overall incharge of the account department which was recorded during the search proceedings and forming part of the assessment order at page 17 to 18.
61. The Ld. DR, had thereafter refer to the analysis of the incriminating document at page 18 to 23. It was submitted that the Assessing Officer, had called upon the assessee to show cause, it was mentioned as under
:-
1.12 Therefore, Comparison of the production (including sales) made by the assessee company as per incriminating document (Polo Sheet) with the submissions submitted by the assessee company shows that the assessee company has not disclosed production (including sales) of ENA, Ethanol, CL & IMFL amounting to Rs. 71,70,12,570/-. Hence you are show caused why out of books production of ENA, Ethanol, CL & IMFL amounting to Rs.71,70,12,570/- should not be treated as unaccounted income of the assessee for A.Y. 2020-21. (Copy of the incriminating documents (an excel file named Polo, containing multiple sheets was retrieved from the recycle bin of desktop having username, Phool Singh) already provided to you.)"
62. It was submitted by the Ld. DR that not only the polo excel sheet which was recovered from the computer of the employee of the assessee but the same was also accepted by the key person of the assessee namely ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
Shri Daljeet Singh Sandhu and thus, the additions were rightly made by the Assessing Officer based on these documents.
63. The Ld. DR submitted that the AO has rightly relied upon the statement recorded during search proceedings, which corroborates the incriminating documents.The Ld. DR further submitted that the AO has scientifically quantified the undisclosed income after comparing polo- sheet data with books of account. He had drawn our attention to the para graph 1.12 reproduced hereinabove whereby the Assessing Officer has made the comparison of the figures disclosed in the books of account and found in the polo sheet.
64. The Ld. DR submitted the explanation given by the assessee by way of an Affidavit etc. were duly examined by the Assessing Officer and thereafter it were rejected by the Assessing Officer. The Ld. DR drawn our attention to page 27 to 30 of the order passed by the Assessing Officer. The summary of the finding of the Assessing Officer at page 27 to 30 of the order is as under:
Page 27 - Rejection of Assessee's Explanation on "Polo Sheets"
On page 27, the Assessing Officer deals with the assessee's detailed reply to the show cause notice. The AO has recorded that the assessee's explanation regarding the nature of the "polo sheets" is not acceptable. According to the AO, the assessee has attempted to disown the data by claiming that it represents projections or rough estimates; however, the AO observes that the sheets contain specific date-wise figures of production and dispatch, which, in his view, cannot be treated as hypothetical or imaginary.
The AO further notes that the assessee's contention that the sheets are "dumb documents" is rejected on the ground that the sheets are detailed, systematic and structured, and therefore, according to the AO, they ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
represent actual production activity rather than estimates.
Page 28 - Treatment of Polo Sheets as Incriminating Evidence On page 28, the AO elaborates on why the "polo sheets" are treated as incriminating material. The AO emphasizes that the sheets were found during the course of a search action and therefore have evidentiary value. The AO observes that the sheets record quantities of ENA, Ethanol and Country Liquor and that these quantities exceed the production recorded in the books of account.
The AO further states that the assessee has failed to reconcile the figures appearing in the polo sheets with the statutory books. According to the AO, mere denial or explanation without quantitative reconciliation does not discharge the assessee's burden.
The AO also rejects the assessee's argument that no corroborative evidence was found, observing that the detailed nature of the sheets themselves constitutes sufficient evidence of undisclosed activity.
Page 29 - Assumption of Plant Capacity and Rejection of Assessee's Claims On page 29, the AO addresses the assessee's submission regarding installed capacity and working days. The AO states that the assessee's claim of installed capacity of 107.5 KLPD is not acceptable and observes that, based on environmental clearance documents and other material, the plant capacity is taken at 120 KLPD.
The AO further rejects the assessee's claim that the plant operated only for 306 days, stating that the assessee has not satisfactorily explained why full capacity could not be achieved. The AO also refers to internal data and projections relied upon during ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
assessment proceedings to support the conclusion that higher production was possible and actually achieved.
Based on these assumptions, the AO concludes that the assessee has suppressed production beyond what is recorded in the books.
Page 30 - Final Conclusion on Undisclosed Production and Income On page 30, the AO consolidates his findings and concludes that the assessee has indulged in undisclosed production and sales of ENA, Ethanol and Country Liquor. The AO holds that the assessee's explanation is an afterthought and lacks credibility.
The AO reiterates that the polo sheets are reliable evidence, that the assessee's books of account do not reflect true and correct income, and that rejection of books under section 145(3) is justified. The AO concludes that the difference between production as per polo sheets and production recorded in the books represents undisclosed income, which is liable to be brought to tax.
Further the Ld. DR relied upon the AO's categorical finding that the installed capacity of the plant is 120 KLPD and not 107.5 KLPD. The Ld. DR drawn our attention to finding of the Assessing Officer on this aspect from pages 36 to 39. The summary of the finding given by the Assessing Officer is as under:
Page 36 - Rejection of Assessee's Claim of Installed Capacity On page 36, the Assessing Officer begins by addressing the assessee's explanation regarding the installed production capacity. The AO notes that the assessee claimed the plant capacity was restricted to 107.50 KLPD under the agreement with Praj Industries.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
The AO records that although the agreement mentions a capacity of 107.50 KLPD, the assessee company subsequently approached the Ministry of Environment, Forest and Climate Change for a higher capacity. The AO observes that the assessee itself submitted documents to the Government authorities indicating higher production capability.
Based on these facts, the AO expresses doubt over the assessee's contention that production could not exceed 107.50 KLPD.
On page 37, the AO places reliance on the environmental clearance proposal and related correspondence. The AO notes that environmental clearance had been sought and granted for a grain- based distillery of 120 KLPD.
The AO reasons that environmental clearance is granted after a technical examination and therefore reflects the plant's true production capacity. According to the AO, if the plant were not capable of producing 120 KLPD, the assessee would not have applied for such clearance.
On page 38, the AO refers to production-related data submitted by the assessee to Indus Bank. The AO notes that the assessee had submitted projections showing production levels consistent with a capacity of 120 KLPD and capacity utilisation of around 92%.
The AO observes that such projections cannot be treated as hypothetical when submitted to a bank for financial assistance. According to the AO, these documents constitute the assessee's admission of its true production capability.
Based on this data, the AO rejects the assessee's argument that production was limited by installed capacity.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
Page 39 - Final Conclusion on Capacity and Undisclosed Production On page 39, the AO consolidates his findings and concludes that:
The installed capacity of the plant is 120 KLPD;
The assessee was capable of operating the plant at near full capacity;
The production figures reflected in the "polo sheets" are achievable and realistic.
The AO holds that the assessee deliberately suppressed production in its books and that the difference between production as per polo sheets and production recorded in the books represents undisclosed production, liable to be taxed as undisclosed income.
Arguments relating to Installed Capacity and Working Days
65. The AR submitted that the Assessing Officer erroneously assumed the plant capacity at 120 KLPD on the basis of an environmental clearance proposal, whereas the actual installed capacity is 107.5 KLPD as certified by the plant supplier. It was further submitted that the plant did not operate for 365 days but only for 306 days during the year, which is duly supported by Excise D-12 shutdown registers authenticated by Excise Authorities. The AR submitted that these documentary evidences were ignored by the Assessing Officer without any justification.
66. The DR submitted that the assessee itself had given projections to financial institutions indicating higher capacity utilisation and therefore the Assessing Officer was justified in relying upon such data. The DR argued ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
that the Ld. CIT(A) ought to have accepted the Assessing Officer's estimation of capacity and production.
Arguments relating to Application of Gross Profit Rate @ 16.5%
67. The AR submitted that once the very basis of alleged unaccounted production fails, no question arises of applying any GP rate. Without prejudice, it was contended that the Ld. CIT(A) erred in applying GP @ 16.5% without considering the nature of products, especially Ethanol, which is not fit for human consumption and is sold only to oil marketing companies at regulated prices. It was argued that substantial costs of bottling, handling, transportation and statutory levies are involved and, at best, only net profit rate could be considered. The AR thus prayed for deletion of the entire sustained addition.
68. The DR supported the order of the Ld. CIT(A) on this issue and submitted that once unaccounted sales are established, some reasonable profit has to be brought to tax. The DR contended that the GP rate applied by the Ld. CIT(A) is reasonable and in fact lenient, and the Revenue in its appeal has challenged even this restriction.
Arguments on the Grounds relating to Addition u/s 68 on Alleged Bogus Sales (Revenue's Appeal)
69. The AR submitted that the addition under section 68 was rightly deleted by the Ld. CIT(A). It was contended that all sales were supported by invoices, quantitative stock records and banking transactions. The AR pointed out that the statement relied upon by the Assessing Officer was retracted immediately and cannot override documentary evidence. It ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
was further submitted that the sister concerns had duly recorded the purchases in their books, which were accepted by the Department.
70. The DR submitted that the Assessing Officer had sufficient reasons to doubt the genuineness of sales and relied upon the statement recorded during search proceedings. The DR argued that the Ld. CIT(A) erred in discarding the said statement and deleting the addition.
Ground relating to Freight Addition of ₹8,14,105/-
71. The AR submitted that even this small addition is unjustified as the freight expenses were genuine and incurred in the normal course of business. It was argued that merely because some supporting evidence could not be produced, the addition should not have been sustained.
72. The DR supported the order of the Ld. CIT(A) on this limited issue and submitted that the addition was reasonable and based on factual findings.
73. We have heard the rival contention of the parties and perused the material available on the record. We will first deal with the Ground No.3 of the Revenue Appeal which deals with deletion by the Ld. CIT(A) of the additions made by Assessing Officer on account of bogus sales of Rice Kani and Paddy Husk
74. The Assessing Officer has dealt with this issue primarily in paras 3.2 to 3.10 and paras 9 to 11 of the assessment order. The AO observed that the assessee had shown sales of Rice Kani amounting to ₹33,04,17,346/- to various group concerns and also sales of Paddy Husk amounting to ₹5,88,00,254/-. According to the AO, the assessee failed to furnish satisfactory evidence regarding transportation, delivery challans and outward registers relating to such transactions.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
75. The AO further observed that the assessee is mainly engaged in the manufacture of ENA, Ethanol and Country Liquor, and therefore, according to him, the explanation regarding the sale of Rice Kani and Paddy Husk was not acceptable. The AO also referred to the statement recordedduring the course of the search of the head of the accounts department, namely Sh. D.S. Sandhu, and inferred that the alleged sales were not supported by proper documentary evidence. On the basis of the above observations, the Assessing Officer concluded that the transactions relating to Rice Kani and Paddy Husk were merely accommodation entries recorded in the books of account without actual movement of goods. Consequently, the AO treated the said sales as unexplained credits and made additions under section 68 read with section 115BBE, amounting to:
₹33,04,17,346/- on account of alleged bogus sales of Rice Kani, and ₹5,88,00,254/- on account of alleged bogus sales of Paddy Husk.
76. Aggrieved by the assessment order, the assessee challenged the aforesaid additions before the Ld. CIT(A) and filed detailed submissions along with documentary evidence. The assessee contended that the Assessing Officer had mis- appreciated the facts of the case and ignored the material placed on record.
77. The assessee submitted that Rice Kani constitutes the principal raw material used in the manufacture of ENA and Ethanol, whereas Paddy Husk is used as fuel in the boiler for generation of steam in the fermentation process, and therefore the purchases and consumption of these items are ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
fully recorded in the books of account as well as statutory records maintained by the assessee.
78. It was further submitted that the transactions referred to by the AO were inter-unit transactions with sister concerns, which were duly reflected in the books of both parties. The assessee furnished confirmations, ledger accounts and financial statements of the concerned entities to establish the genuineness of the transactions. The assessee also submitted that the AO had failed to bring any material on record to demonstrate that the said transactions were fictitious.
79. The assessee further contended that the additions were made purely on suspicion arising from the absence of certain transportation documents, whereas the transactions were duly accounted for in the regular books of account and supported by documentary evidence. It was therefore submitted that the provisions of section 68 had been wrongly invoked by the Assessing Officer.
80. The Ld. CIT(A) considered the assessment order, the submissions made by the assessee and the documentary evidence placed on record. The CIT(A) observed that the Assessing Officer had treated the sales of Rice Kani and Paddy Husk as bogus primarily on the basis of presumptions regarding the non-availability of certain outward registers and transportation documents.
81. The CIT(A), however, found that the assessee had furnished ledger confirmations, documentary evidence and financial ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
records of the sister concerns, and the transactions were duly reflected in the books of account of the respective parties. The CIT(A) also observed that the Assessing Officer had not brought on record any independent evidence to establish that the transactions were fictitious or represented unexplained income.
82. In view of the above factual position, the CIT(A) held that the Assessing Officer was not justified in treating the impugned transactions as unexplained credits under section
68. Accordingly, the CIT(A) deleted the additions made by the Assessing Officer in respect of the alleged bogus sales of Rice Kani and Paddy Husk.
83. The Ld. Authorised Representative for the assessee supported the order passed by the Ld. CIT(A) on legal as well as merits.
84. On the legal issue, the Ld. AR submitted that the additions made by the Assessing Officer in respect of alleged bogus sales of Rice Kani and Paddy Husk are wholly unsustainable in law as the same are not based on any incriminating material found during the course of search. It was contended that the assessment year under consideration was a completed assessment on the date of search and therefore, in terms of settled judicial precedents, no addition could have been made in the absence of incriminating material.
85. The Ld. AR submitted that the Assessing Officer has not referred to any seized document which could demonstrate that the transactions relating to Rice Kani and Paddy Husk were fictitious. The additions have been made merely on the ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
basis of certain presumptions regarding non-availability of transportation documents and outward registers.
86. In support of the above proposition, the Ld. AR relied upon the judgment of the Hon'ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Ltd. (454 ITR 212) wherein it has been held that no addition can be made in respect of completed assessments in the absence of incriminating material found during the course of search. Reliance was also placed on the judgments in the cases of CIT vs. Kabul Chawla (380 ITR 573) and CIT vs. Sinhgad Technical Education Society (397 ITR 344).
87. On merits, the Ld. AR submitted that the Assessing Officer has completely misdirected himself in treating the transactions relating to Rice Kani and Paddy Husk as bogus. It was submitted that Rice Kani constitutes the principal raw material used in the manufacture of ENA and Ethanol, whereas Paddy Husk is used as fuel in the boiler for generation of steam in the fermentation process.
88. The Ld. AR further submitted that the impugned transactions were inter-unit transactions with sister concerns, which were duly recorded in the books of account of both parties. Confirmations, ledger accounts and financial statements of the concerned entities were furnished before the Assessing Officer as well as before the CIT(A) to establish the genuineness of the transactions.
89. It was argued that the Assessing Officer has neither disproved the documentary evidence filed by the assessee nor brought any independent evidence on record to ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
establish that the transactions were fictitious. The additions have therefore been made merely on the basis of suspicion and conjecture.
90. The Ld. AR therefore submitted that the Ld. CIT(A) was fully justified in deleting the additions made by the Assessing Officer and the same deserves to be upheld.
91. Per contra, the Ld. Departmental Representative supported the order of the Assessing Officer and submitted that the Assessing Officer had made the additions after examining the material available on record during the course of assessment proceedings.
92. The Ld. DR submitted that the assessee had failed to produce proper supporting documents, such as transportation evidence, outward registers and delivery challans, in respect of the alleged sales of Rice Kani and Paddy Husk. According to the Ld. DR, the absence of such documentary evidence raised serious doubts regarding the genuineness of the transactions.
93. It was further submitted that the assessee is primarily engaged in the manufacture of ENA, Ethanol and Country Liquor and therefore the explanation regarding sale of Rice Kani and Paddy Husk to sister concerns was not satisfactorily established.
94. The Ld. DR argued that the Assessing Officer was justified in invoking the provisions of section 68 of the Act and treating the impugned transactions as unexplained credits in the books of account of the assessee.
95. The Ld. DR further submitted that the CIT(A) had erred in deleting the additions without properly appreciating the ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
observations recorded by the Assessing Officer in the assessment order.
96. The Ld. DR therefore prayed that the order of the CIT(A) deleting the additions may be set aside and the additions made by the Assessing Officer may be restored.
97. We have considered the rival submissions and carefully perused the material available on record. The core issue for adjudication in the present ground relates to whether the addition made by the Assessing Officer on account of alleged bogus transactions of Rice Kani and Paddy Husk can be sustained in the absence of any incriminating material found during the course of search.
98. From the perusal of the assessment order, it is evident that the Assessing Officer has not referred to any seized document or incriminating material discovered during the course of the search proceedings, which could demonstrate that the transactions relating to Rice Kani and Paddy Husk were fictitious or represented undisclosed income of the assessee. The additions have been made primarily on the basis of certain presumptions regarding the non-availability of transportation documents and outward registers, and alsoon the basis of the statement of Mr Sandhu.
99. It is well settled that additions cannot be made merely on the basis of conjectures, surmises or suspicion without any corroborative evidence on record. The Assessing Officer is required to bring on record cogent material demonstrating that the impugned transactions represent undisclosed income of the assessee.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
100. In the present case, we find that the assessee had furnished confirmations, ledger accounts, and financial records of the concerned parties before the lower authorities. However, the Assessing Officer has not brought any material on record to disprove these evidences or to establish that the transactions were fictitious in nature. It is also a matter of record that, even as per the case of the Department, the sale of rice kani and paddy husk took place during the months of November 2019, January 2020, February 2020 and March 2020.
101. However, the Assessing Officer has attempted to treat the sale of rice kani and paddy husk as bogus by correlating it with the production for the period April 2019 to March 2020. In our considered view, the sales effected after November cannot be held to be bogus merely on the presumption that rice kani or paddy husk could have been utilised earlier.
102. Furthermore, it is an admitted fact that a search was carried out at the assessee's premises and those of its sister concerns. During the course of proceedings, the assessee produced the books of account of the sister concerns, wherein the impugned sales were duly recorded and audited. The said transactions were thus disclosed in the regular books of account of the sister concerns, and no contrary material has been brought on record by the Assessing Officer to rebut the same. In view of the above, we do not find any merit in the submission of the Ld DR, and the same are required to be rejected. Accordingly, Ground NO.03 of the Revenue appeal is liable to be rejected.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
103. More importantly, the assessment in the present case emanates from a search conducted under section 132 of the Act. It is a settled position of law that in proceedings under section 153A, no addition can be made in respect of completed or unabated assessments unless such addition is based on incriminating material found during the course of search. In the present case, the year involved is Assessment Year 2020-21. The notice under section 143(2) was issued on 29.06.2021. As per the provisions of section 153, the time limit for passing the assessment order is twenty-one months from the end of the assessment year in which the income was first assessable. Since the relevant assessment year ended on 31.03.2021, the period of twenty-one months expired on 31.12.2022. Therefore, the assessment for the year under consideration was completed as on that date.
Consequently, the assessment was an unabated/completed assessment and, therefore, any addition in proceedings initiated pursuant to the search conducted on 18.05.2023 could have been made only on the basis of incriminating material found during the course of the search.
104. Notably, the assessment in this case arises from a search carried out under section 132 of the Act. Further, a perusal of paragraph 5.1 of the assessment order shows that the Assessing Officer stated that the "ledger account of sale of OCPL for the financial year 2019-20 was analysed." It is also recorded in paragraph 2.1 of the show-cause notice, forming part of paragraph 5.1 of the order, that pursuant to certain post-search enquiries carried out by the Investigation Wing, the sale ledger relating to Rice Kani was examined ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
and summons were issued to the alleged purchasers to verify the genuineness of the sales (paragraph 2.4). It has also been noted in paragraph 2.8 that Shri Daljeet Singh Sandhu was confronted with the sale ledger and, in response to various questions, he stated that rice Kani had been sold to different parties. However, in response to question No. 45, he allegedly admitted that the sales of rice Kani were bogus.
105. From a reading of the assessment order, particularly paragraph 5.1 onwards, it becomes evident that the Assessing Officer has not referred to any incriminating material found during the course of the search as the basis for the impugned addition. The only document relied upon by the Assessing Officer is the sale ledger. Admittedly, the said sale ledger forms part of the regular books of account and was already available with the department, as it formed the basis of the return of income filed by the assessee declaring income of ₹6,34,44,000/-. Apart from this ledger, no material has been referred to by the Assessing Officer to demonstrate that the addition was founded on any incriminating material discovered during the search. In our considered opinion, a sale ledger which formed part of the regular books of account and was duly disclosed at the time of filing the original return of income cannot be regarded as incriminating material, as the same was already within the knowledge and possession of the Revenue.
106. Further, the reliance placed on the answer to question No. 45 of Shri Daljeet Singh Sandhu cannot, by itself, form the sole basis for the addition. The statement must be read as a whole. In response to all other questions, except question No. 45, the said Head of Finance, Shri Daljeet Singh Sandhu, ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
consistently affirmed that the sales of rice Kani were genuine and had been carried out in the normal course of business. Moreover, the said statement was retracted within a week of its recording, and Shri Daljeet Singh Sandhu filed an affidavit before the Investigation Wing clarifying the circumstances in which the admission was made. Unfortunately, neither the Assessing Officer nor the Ld. CIT(A) has made any reference to or dealt with this retraction. It is also a settled proposition of law that a statement recorded during the course of a search, in the absence of any corroborating incriminating material, cannot by itself be treated as incriminating evidence so as to justify an addition under section 153A of the Act.
107. The Hon'ble Supreme Court in the case of PCIT vs Abhisar Buildwell Pvt. Ltd. (454 ITR 212) has categorically held that in respect of completed assessments, no addition can be made in the absence of incriminating material found during the course of a search. Similar views were expressed by the Hon'ble Delhi High Court in CIT vs Kabul Chawla (380 ITR 573). In the present case, the Revenue has failed to demonstrate that any incriminating material relating specifically to the alleged bogus transactions involving Rice Kani and Paddy Husk was found during the search. The additions made by the Assessing Officer are therefore not based on any seized material but are merely the result of post-search enquiries and presumptions drawn by the Assessing Officer.
108. It is also relevant to note that the additions appear to have been made by treating the recorded sales as unexplained credits under section 68 of the Act. However, ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
for invoking the provisions of section 68, the Assessing Officer must demonstrate that the credit appearing in the books of account is unexplained and that the assessee has failed to establish the identity, creditworthiness and genuineness of the transaction.
109. In the present case, the assessee has placed documentary evidence on record demonstrating that the transactions were duly recorded in the books of account and supported by confirmations and ledger accounts. The Assessing Officer has not brought any material on record to establish that the impugned entries represent unexplained income.
110. In the present case, there is nothing on record to indicate that any seized material specifically relating to the alleged bogus transactions involving Rice Kani and Paddy Husk was found during the course of the search. Furthermore, the law is fairly settled that the additions on account of alleged bogus sale cannot be solely made on the basis of the statement of Shri Daljit Singh Sandhu, which was later retracted by him in the eyes of the law.
111. We find support from the decision of the Hon'ble Telangana High Court in the case of Surabhi Shelters (P.) Ltd.[2025] 180 taxmann.com 555 (Telangana) wherein it was held as under
18. The fact remains that, no incriminating material was seized during the course of search on 17.08.2000 and the quantification was made basing on the confessional statement of the Managing Director record under Section 132(4) of the Act, who alleged to have disclosed an undisclosed profit of Rs.1,50,00,000/-.
19. In Pr. CIT v. Abhisar Buildwell (P.) Ltd [2023] 149 taxmann.com 399 /[2023] 293 Taxman 141 /[2023] 454 ITR 212 (SC)/(2024) 2 SCC 433 the Apex Court while upholding the ratio of Hon'ble Delhi High Court's in CIT v. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi)/[2015] 234 ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
Taxman 300 (Delhi)/[2016] 380 ITR 573 (Delhi) and Hon'ble Gujarat High Court in CIT v. Saumya Construction (P) Ltd. [2017] 81 taxmann.com 292 (Gujarat)/[2016] 387 ITR 529 (Gujarat) held that for completed or unabated assessments, the Revenue has no jurisdiction under Section 153A or 153C of the Act, in the absence of any 'incriminating material' being found during a search under Section 132 or requisition under Section 132A and held that such statement in the absence of incriminating material cannot form basis for quantification. In the instant case assessment was completed for the subject assessment years and no incriminating materials was seized by the authorities during the course of search, except recording the statement of the Managing Director, which was retracted.
20. Further, in Ramdas Motor Transport's case (supra), a Division Bench of the erstwhile High Court of Andhra Pradesh held that under Sub- Section (4) of Section 132 of the Act, during a raid, the authorized officer is empowered to examine any person found in possession or control of undisclosed material and record his statement, and such statements recorded can be used in evidence in any subsequent proceedings initiated against such person under the Act, only basing on the incriminating material found during the course of search. Further, the Division Bench of the erstwhile High Court of Andhra Pradesh in Naresh Kumar Agarwal's case(supra), relying on Ramdas Motor Transport's case (supra), has categorically held that when no incriminating material is found in the course of search conducted by the respondent-authorities, the confession recorded under Section 132(4) of the Act, especially if retracted on grounds of threat or coercion, lacks evidentiary value and such statement cannot form the basis for quantification.
21. The law laid by the Hon'ble Supreme Court in PCIT's case(supra) as well as the judgments of the Division Bench of this Court in Naresh Kumar Agarwal's case(supra) and Ramdas Motor Transport's case (supra), squarely applies to the facts of the instant case, as it is evident that on the date of search, quantification of the assessment was done solely basing on the statement recorded under Section 132(4) of the Act and the department did not seize any unaccounted money, bullion nor any other valuable articles or things or any such other incriminating material either from the premises of the company or from the residential houses of the Managing Director or other directors. More so, no mention was made as to how the quantification was done. Therefore, we are of the considered view that the retracted statement of the Managing Director recorded under Section 132(4) of the Act has no evidentiary value and the said statement cannot be made sole basis for quantification of the amount.
22. Further, the judgment relied upon by the respondent/Revenue in Smt Konda Sanjeeva Rani's case(supra), wherein it was held that burden is on the assessee to prove that the confession was obtained under threat or coercion, and in the absence of the same, the said statement can be relied upon, is distinguishable on the facts of the present case, in the light of the decision of the Hon'ble Supreme Court in PCIT'case(supra) that in the absence of any incriminating material, the Revenue has no ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
jurisdiction under Section 153A or 153C. More so, the said issue is no longer res integra in view of the judgments of the erstwhile High Court of Andhra Pradesh in Ramdas Motor Transport's case (supra) and Naresh Kumar Agarwal's case(supra).
112. Similarly, in the case of Harjeev Aggarwal [2016] 70 taxmann.com 95 (Delhi) Hon'[ble Delhi High Court had held as under:-
19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under Section 132 (4) of the Act would by itself be sufficient to assess the income, as disclosed by the Assessee in its statement, under the Provisions of Chapter XIV-B of the Act.
20. In our view, a plain reading of Section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words "evidence found as a result of search" would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to Section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the AO to make a block assessment merely because any admission was made by the Assessee during search operation.
21. A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken.
Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB(1) read with Section 158B(b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded.
22. In CIT v. Shri Ramdas Motor Transport [1999] 238 ITR 177/102 Taxman 300, a Division Bench of Andhra Pradesh High Court, reading the provision of Section 132(4) of the Act in the context of discovering undisclosed income, explained that in cases where no unaccounted documents or incriminating material is found, the powers under Section 132(4) of the Act cannot be invoked. The relevant passage from the aforesaid judgment is quoted below:--
"A plain reading of sub-section (4) shows that the authorised officer during the course of raid is empowered to examine any person if he is found to be in possession or control of any undisclosed books of account, documents, money or other valuable articles or things, elicit information from such person with regard to such account books or money which are in his possession and can record a statement to that effect. Under this provision, such statements can be used in evidence in any subsequent proceeding initiated against such per son under the Act. Thus, the question of examining any person by the authorised officer arises only when he found such person to be in possession of any undisclosed money or books of account. But, in this case, it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section 132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub- section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle."
23. It is also necessary to mention that the aforesaid interpretation of Section 132(4) of the Act must be read with the explanation to Section 132(4) of the Act which expressly provides that the scope of examination under Section 132(4) of the Act is not limited only to the books of accounts or other assets or material found during the search. However, in the context of Section 158BB(1) of the Act which expressly restricts the computation of undisclosed income to the evidence found during search, the statement recorded under Section 132(4) of the Act can form a basis for a block assessment only if such statement relates to any incriminating evidence of ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
undisclosed income unearthed during search and cannot be the sole basis for making a block assessment.
24. If the Revenue's contention that the block assessment can be framed only on the basis of a statement recorded under Section 132(4) is accepted, it would result in ignoring an important check on the power of the AO and would expose assessees to arbitrary assessments based only on the statements, which we are conscious are sometimes extracted by exerting undue influence or by coercion. Sometime sta are recorded by officers in circumstances which can most charitably be described as oppressive and in most such cases, are subsequently retracted. Therefore, it is necessary to ensure that such statement, which are retracted subsequently, do not form the sole basis for computing undisclosed income of an assessee.
25. In CIT v. Naresh Kumar Agarwal [2014] 369 ITR 171/[2015] 53 taxmann.com 306, a Division Bench of Telangana and Andhra Pradesh High Court held that a statement recorded under Section 132(4) of the Act which is retracted cannot constitute a basis for an order under Section 158BC of the Act. The relevant extract from the said judgement is quoted below:--
"17. The circumstances under which a statement is recorded from an assessee, in the course of search and seizure, are not difficult to imagine. He is virtually put under pressure and is denied of access to external advice or opportunity to think independently. A battalion of officers, who hardly feel any limits on their power, pounce upon the assessee, as though he is a hardcore criminal. The nature of steps, taken during the course of search are sometimes frightening. Locks are broken, seats of sofas are mercilessly cut and opened. Every possible item is forcibly dissected. Even the pillows are not spared and their acts are backed by the powers of an investigating officer under section 94 of the Code of Criminal Procedure by operation of sub-section (13) of section 132 of the Act. The objective may be genuine, and the exercise may be legal. However, the freedom of a citizen that transcends, even the Constitution cannot be treated as non- existent."
"18. It is not without reason that Parliament insisted that the recording of statement must be in relation to the seized and recovered material, which is in the form of documents, cash, gold, etc. It is, obviously to know the source thereof, on the spot. Beyond that, it is not a limited licence, to an authority, to script the financial obituary of an assessee."
"19. At the cost of repetition, we observe that if the statement made during the course of search remains the same, it can constitute the basis for proceeding further under the Act even if there is no other material. If, on the other hand, the staement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee cannot constitute the basis for an order under section 158BC of the Act."
113. Respectfully following the decision of the Hon'ble High Court, we are of the considered view that the addition on account of alleged bogus sales cannot be sustained merely ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
on the basis of a statement recorded under Section 132(4) of the Act. Accordingly, Ground No. 3 raised by the Revenue is liable to be dismissed.
114. In view of the above factual and legal position, we hold that the Assessing Officer was not justified in making the additions on account of the alleged bogus sales of rice kani and paddy husk. The Ld. CIT(A) has rightly deleted the additions, and we find no reason to interfere with the well- reasoned order passed by the Ld. CIT(A).
115. Accordingly, Ground No. 3 raised by the Revenue on this issue stands dismissed.
116. Having dealt with ground no.3 of the Revenue Appeal, now we will deal with ground no.1 of the Assessee Appeal.
Ground No.1 of the Assessee Appeal
117. In this regard, it is noted that during the course of assessment proceedings, the Assessing Officer relied upon certain electronic data referred to as "polo sheets", which were allegedly retrieved during the course of search proceedings conducted in the case of the assessee. According to the Assessing Officer, the entries appearing in the said polo sheets represented production and sales of ENA/Ethanol/Country Liquor, which were not recorded in the regular books of account maintained by the assessee. The Assessing Officer compared the production recorded in the ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
books of account with the production figures allegedly appearing in the polo sheets and concluded that the assessee had suppressed its actual production. The Assessing Officer further relied upon the installed capacity of the plant and observed that the production figures reflected in the polo sheets were feasible, having regard to the capacity of the plant. Further reliance was placed on information furnished by the consultant of the assessee to the bank while seeking financial assistance, which allegedly indicated a higher production capacity of the plant. On the basis of the figures appearing in the polo sheets and the alleged production capacity of the plant, the Assessing Officer interpreted the entries as representing unaccounted production and corresponding unaccounted sales and accordingly computed the suppressed turnover at ₹71,70,12,570/-, which was added to the income of the assessee.
118. In appeal, the learned CIT(A) examined the findings recorded by the Assessing Officer as well as the submissions made by the assessee.
119. The learned CIT(A) broadly agreed with the Assessing Officer to the extent that the polo sheets recovered during the course of the search constituted material indicating possible unaccounted production and sales. However, the learned CIT(A) held that the entire sales could not be treated as the assessee's income. According to the learned CIT(A), in cases of unaccounted sales, only the profit element embedded in such sales could be brought to tax. Accordingly, the learned CIT(A) applied a gross profit rate of ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
16.5% on the alleged sales of ₹71,70,12,570/- and restricted the addition to ₹18,71,47,636/-.
120. Before us, the learned DR strongly supported the findings recorded by the Assessing Officer and submitted that the addition was based on incriminating material found during the course of the search proceedings and, therefore, could not be disregarded.
121. It was submitted that the Assessing Officer had not proceeded merely on conjectures but had relied upon specific electronic data retrieved during the search proceedings, described as the "polo sheets". According to the learned DR, these sheets contained detailed figures relating to production and dispatch of ENA, Ethanol and Country Liquor, which, when compared with the production figures recorded in the books, clearly indicated suppression of production and corresponding unaccounted sales. The learned DR submitted that the Assessing Officer had analysed the entries appearing in the polo sheets and had correlated them with the nature of business carried on by the assessee. The entries in the sheets corresponded to the products manufactured by the assessee, and therefore, the inference drawn by the Assessing Officer that the sheets represented parallel records of production maintained outside the books of account was justified. It was further submitted that the Assessing Officer had not relied upon the polo sheets in isolation but had also examined the installed production capacity of the plant. According to the learned DR, the Assessing Officer observed that the production figures appearing in the polo sheets were consistent with the production capacity of the plant and therefore could not be ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
treated as hypothetical projections. The learned DR further pointed out that the Assessing Officer had referred to information furnished by the assessee to the bank through its consultant, wherein higher production capacity and projected production figures were disclosed. According to the learned DR, such financial projections constituted important circumstantial evidence indicating that the plant had the capability to produce quantities far exceeding those disclosed in the books. It was therefore contended that the Assessing Officer had drawn a reasonable inference that the assessee had suppressed its actual production and sales, and that the figures appearing in the polo sheets represented unaccounted turnover generated outside the books. The learned DR further argued that the learned CIT(A) erred in restricting the addition only to the profit element. According to the learned DR, once the existence of unaccounted turnover is established, the entire amount representing such turnover ought to be brought to tax as income from undisclosed sources. It was therefore submitted that the entire amount of ₹71,70,12,570/- representing unaccounted sales should have been taxed and the order of the Assessing Officer deserved to be restored.
122. The learned AR strongly challenged the addition made by the Assessing Officer as well as the partial confirmation by the learned CIT(A).
123. At the outset, it was submitted that the assessee is engaged in the business of manufacturing Extra Neutral Alcohol (ENA), Ethanol and Country Liquor, and that the entire manufacturing activity is carried out under the strict supervision and regulatory control of the State Excise ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
Department. The learned AR submitted that excise officials are permanently stationed on the distillery premises and monitor the entire production process, including blending, bottling, and dispatch of finished goods. Various statutory registers relating to production, storage, and dispatch are maintained and authenticated by the excise authorities and are periodically verified by the excise department and vigilance teams. It was further submitted that no bottle of liquor can be dispatched without the permission and transport permit issued by the excise authorities, and even the route of transportation is pre-approved by the excise department. Any deviation from the prescribed route or quantity constitutes a punishable offence under the excise laws. The learned AR also pointed out that the distillery premises are subject to continuous CCTV surveillance under the control of the excise department, which enables real- time monitoring of production and dispatch activities. In such a regulatory environment, it was argued that the allegation of large-scale unaccounted production running into several crores of rupees is factually impossible and contrary to the statutory scheme governing the distillery industry.
124. With regard to the finding of the Assessing Officer/Ld. CIT(A) pertaining to Plant Capacity learned AR further submitted that the Assessing Officer had wrongly assumed that the installed capacity of the plant was 120 KLPD, whereas the documentary evidence placed on record clearly showed that the plant installed by M/s Praj Industries had an installed capacity of 107.50 KLPD.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
125. It was further submitted that the plant had operated only for 306 days during the relevant year, and therefore, the assumption of full-year production made by the Assessing Officer was incorrect.
126. Similarly, for the reliance on the Polo sheet, the learned AR submitted that the alleged polo sheets were retrieved from the recycle bin of the computer system of an ex- employee, namely Sh. Phool Singh, who had already left the company. It was submitted that these sheets were merely rough internal notes reflecting projected dispatch capacity or market demand and did not represent actual production or sales. The said employee had filed a sworn affidavit explaining the nature of the entries and stating that the sheets had no connection with any unaccounted production of the assessee. The learned AR submitted that the affidavit was never rebutted by the Revenue, nor was the deponent cross-examined.
127. The learned AR also raised a legal objection regarding the admissibility of the electronic data relied upon by the Assessing Officer.
128. It was submitted that the alleged polo sheets constitute electronic evidence and, as such, must comply with the requirements of Section 65B of the Evidence Act.
In the present case:
• no certificate under section 65B has been
produced
• the person having control of the computer
system has not been examined
ITA 694/Chd/2025
ITA/Chd//2025
Oasis Commercial Pvt. Ltd.
• no forensic verification of the electronic data
has been conducted.
129. Reliance was placed on the decision of the Hon'ble Supreme Court in Anvar P.V. v. P.K. Basheer, wherein it was held that electronic evidence is admissible only if the requirements of section 65B are satisfied.
130. We have carefully considered the reasoning adopted by the Assessing Officer/Ld. CIT(A), while making the addition, has examined each of the factors relied upon by the Assessing Officer. Our findings with respect to the issues raised by the Assessing Officer/Ld. CIT(A) are recorded as under:
Polo Sheets Found in the Computer System
131. The first and primary basis adopted by the Assessing Officer/Ld. CIT(A) for making the impugned addition is the alleged "polo sheets"
stated to have been retrieved from the computer system of an erstwhile employee of the assessee. According to the Assessing Officer, the said sheets contain two sets of figures -- one corresponding to the production and sales declared by the assessee and the other described as "Bottling Others", "ENA Others", etc., which the Assessing Officer has treated as representing alleged unaccounted production and sales.
132. In this regard, we find that the said documents neither bear any signature nor contain any narration explaining the nature or source of the figures recorded therein. The documents also fail to establish any direct nexus with the assessee's regular books of account. Further, the alleged author of these sheets, namely Sh. Phool Singh, has filed a sworn affidavit explaining that the said sheets were merely internal rough workings reflecting potential market demand or projected dispatches and did not represent any actual production or sales undertaken by the assessee.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
133. It is an admitted position on record that the Revenue has neither cross-examined the said deponent nor brought any material evidence to contradict or discredit the contents of the affidavit. The settled position of law is that where an affidavit filed by a party is not controverted by cross- examination or by any contrary material, the same cannot be lightly disregarded. In the absence of any independent corroborative evidence linking the figures appearing in the said sheets with actual production, dispatch or sales, the documents can at best be regarded as loose or dumb documents having no independent evidentiary value. Consequently, in our considered view, the Assessing Officer was not justified in treating the entries appearing in the alleged polo sheets as conclusive evidence of unaccounted production.
134. Apart from the above factual infirmities, the learned Authorised Representative also raised a legal objection regarding the admissibility of the electronic data relied upon by the Assessing Officer. It was contended that the alleged polo sheets constitute electronic evidence, and therefore their admissibility must satisfy the mandatory requirements prescribed under Section 65B of the Indian Evidence Act.
In the present case, it is not in dispute that:
(i) no certificate under section 65B of the Evidence Act has been produced;
(ii) the person having control or custody of the computer system has not been examined; and
(iii) no forensic verification of the electronic data has been conducted.
135. The learned AR relied upon the decision of the Hon'ble Supreme Court in Anvar P.V. v. P.K. Basheer, wherein it has been categorically held that electronic evidence is admissible only if the requirements of Section 65B are duly satisfied.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
136. After considering the rival submissions and examining the material available on record, we find that the entire addition made by the Assessing Officer is primarily based on the interpretation of certain electronic data described as 'polo sheets,' allegedly retrieved from the recycle bin of a computer system used in the assessee's office. The Assessing Officer has recorded at page 3 of the assessment order that the said polo sheets were retrieved from the recycle bin of a computer presently used by Sh. Vinay Kumar, an employee of the assessee, which was earlier used by Sh. Phool Singh.
137. Despite recording this factual position, the Assessing Officer did not consider it necessary to examine Sh. Phool Singh, who was the person alleged to have created the said documents. At the outset, we note that the Assessing Officer has not produced any certificate under Section 65B of the Evidence Act in respect of the electronic data relied upon. In view of the law laid down by the Hon'ble Supreme Court in Anvar P.V. v. P.K. Basheer, compliance with the requirements of Section 65B is mandatory for the admissibility of electronic evidence. In the absence of such certification, the evidentiary value of the alleged electronic data becomes highly doubtful.
138. On the contrary, the alleged author of the documents has filed an affidavit explaining the nature of the entries appearing in the said sheets. However, neither the Assessing Officer nor the appellate authority undertook any enquiry to rebut or disprove the contents of the said affidavit.
139. In our considered opinion, it was incumbent upon the Revenue to bring on record primary evidence by examining the person who allegedly created the polo sheets so as to explain the nature and contents of the entries recorded therein. Alternatively, the Revenue could have produced secondary evidence, such as an expert or forensic examination, to ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
establish the authenticity and evidentiary value of the electronic data. However, the Revenue has failed on both counts. More importantly, when the assessee produced the affidavit of the very person alleged to have prepared the said sheets, the Revenue neither examined him nor brought any material on record to contradict his statement.
140. It is further observed that Sh. Vinay Kumar, from whose computer system the alleged polo sheets were stated to have been retrieved, is not the author of the said documents and therefore cannot reasonably comment on their genuineness, authenticity, or the basis on which such sheets were prepared or maintained. A person who merely uses the computer later cannot be expected to explain the origin or contents of files allegedly created by another individual.
141. In such circumstances, the only competent person who could have clarified the nature and authenticity of the said documents was the alleged author, namely Sh. Phool Singh. Alternatively, the Revenue could have substantiated its case by producing expert evidence in the form of a forensic examination of the electronic data to establish that the said polo sheets were indeed created by Sh. Phool Singh and that they pertained to the assessee company's business activities.
142. However, in the present case, the Revenue has failed to do either. Neither has the statement of Sh. Phool Singh been recorded to establish the authorship and contents of the documents, nor has any certificate under section 65B of the Evidence Act been produced to authenticate the electronic record relied upon by the Assessing Officer. In the absence of such foundational evidence, the authenticity and evidentiary value of the alleged polo sheets remain unsubstantiated. Therefore, in the absence of either the statement of the alleged author or proper certification and verification of the electronic data in accordance with law, it would not be safe or legally sustainable to draw any adverse ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
inference or arrive at any conclusion solely on the basis of the said documents Letter Dated 12.09.2017, Referring to Plant Capacity
143. The second circumstance relied upon by the Assessing Officer/Ld. CIT(A) for drawing the inference of excess production is a letter dated 12.09.2017 found in the computer system of the assessee, which was addressed to the environmental authorities for a change of name in their records and in which the capacity of the plant was mentioned as 120 KLPD. The Assessing Officer has treated this figure as representing the plant's installed capacity and, on that basis, computed the alleged excess production of ENA.
144. Upon careful consideration of the material available on record, we find that the said document, at best, contains a reference to a figure mentioned in correspondence with regulatory authorities and cannot, by itself, be treated as conclusive evidence of the plant's actual installed or operational capacity during the relevant previous year. The determination of the installed capacity of an industrial unit, particularly a distillery plant, is a technical matter that necessarily requires verification from appropriate technical sources, such as the plant manufacturer, installation agreements, technical specifications, inspection reports, or competent statutory authorities regulating such industries. The Assessing Officer, however, has not undertaken any such verification nor has he brought on record any technical report, expert opinion, or certification from the plant supplier or any competent authority to substantiate the assumption that the actual installed capacity of the plant was 120 KLPD.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
145. Significantly, even the learned Commissioner of Income Tax (Appeals), while dealing with this issue in the appellate order, at page 60- 61 of his order has observed that the figure of 120 KLPD appearing in the environmental clearance documents was primarily in the nature of a projection or estimation. The learned CIT(A) further noted that the assessee had placed on record documents indicating that the plant purchased from the manufacturer had a capacity of 107.50 KLPD, and that any proposal to enhance it to 120 KLPD was only at a proposed or projected stage. The appellate authority also recorded that the question relating to the actual capacity of the plant was essentially a factual issue which ought to have been verified during the course of assessment or search proceedings through proper technical verification, such as by obtaining confirmation from the plant manufacturer, engaging technical specialists, or calling for relevant information from the competent governmental authorities. However, no such exercise was carried out by the Assessing Officer.
146. Thus, even the observations recorded by the learned CIT(A) themselves indicate that the figure of 120 KLPD relied upon by the Assessing Officer was not supported by any independent factual or technical verification. In the absence of such verification, reliance on a mere reference in a communication addressed to regulatory authorities cannot be regarded as reliable evidence for determining the plant's actual installed capacity. Importantly, this finding of CIT Appeal has not been challenged by the revenue in the grounds of appeal filed before us. ( reproduced herein above) It is a settled principle that assumptions regarding technical parameters, such as plant capacity, must be supported by cogent technical material and cannot be inferred merely from isolated documents or projected figures in regulatory correspondence.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
147. Therefore, the foundation adopted by the Assessing Officer for assuming that the plant had an installed capacity of 120 KLPD lacks proper factual and technical support. Consequently, the computation of alleged excess production based on such an assumption cannot be regarded as sustainable in law.
148. The said document, by itself, does not conclusively establish the plant's actual operational capacity during the relevant year and, therefore, cannot form a reliable basis for drawing an adverse inference regarding undisclosed production.
Excel Sheet Mentioning Plant Capacity of 120 KLPD
150. The Assessing Officer/Ld. CIT(A) have also relied upon another Excel sheet, referred to at page 38 of the assessment order, wherein the plant capacity has been mentioned as 120 KLPD and the annual ENA production capacity has been indicated at 39,600,000 litres. On the basis of these figures, the Assessing Officer has proceeded to treat the said capacity as representing the actual installed capacity of the assessee's distillery and has drawn an inference that the assessee had suppressed production to the extent reflected in the seized "polo sheets".
151. Upon careful consideration, we find that the said Excel sheet does not contain any authentication, source, or explanatory note regarding the basis on which the figures of plant capacity or annual production capacity were arrived at. The document neither bears the name of its author nor contains any indication that it was prepared on the basis of any technical study, plant specifications, or certification issued by the manufacturer or any competent authority. Despite the absence of such foundational details, the Assessing Officer has proceeded to treat the figures mentioned therein as representing the actual installed capacity of the plant, without undertaking any independent technical verification.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
152. On the contrary, the assessee has placed on record documentary evidence in the form of the purchase agreement and certificate issued by the plant supplier, M/s Praj Industries Ltd., which clearly indicate that the installed capacity of the plant was 107.50 KLPD. The learned CIT(A), while dealing with this aspect at page 55 of the appellate order, has also recorded the submission of the assessee that the figures relied upon by the Assessing Officer were merely projections or estimates prepared for financial purposes, including projections submitted to the bank, and not the actual operational capacity of the plant.
153. It is well settled that the determination of installed capacity of an industrial plant is essentially a technical matter, which requires verification from technical experts, the plant manufacturer, or other competent authorities regulating such industries. However, in the present case, the Assessing Officer has not obtained any technical report, expert opinion, or verification from the plant supplier to substantiate the assumption that the plant had a capacity of 120 KLPD or an annual production capacity of 39,600,000 litres. In the absence of such verification, the figures in an unauthenticated Excel sheet cannot be treated as reliable evidence for determining the plant's actual installed capacity.
154. The assessee has further explained before the authorities below that the figures appearing in certain spreadsheets were part of projected financial data prepared for submission to Indus Bank in September 2018, and the relevant correspondence and supporting documents were placed in the paper book. As noted in the submissions reproduced in the appellate order, the figure of 77,515 was part of the projected production figures submitted to the bank and was not reflective of actual production during the relevant year. These projections were merely estimates prepared for financial planning and cannot be treated as evidence of actual production or plant capacity.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
155. Apart from the above, we also find merit in the assessee's contention that the addition made by the Assessing Officer is not supported by any corroborative evidence regarding the procurement or consumption of essential raw materials and inputs required for such large- scale production. The alleged unaccounted production valued by the Assessing Officer at Rs. 71.70 crores would necessarily require substantial quantities of rice kani (the principal raw material), husk or other fuel for the boilers, packaging materials, and other manufacturing inputs, apart from corresponding evidence of procurement, storage, and consumption. We have already adjudicated the additions made on account of alleged bogus sales of Rice Kani and Paddy Husk and have held that such additions are unsustainable. It has been concluded that the sales made by the assessee to its sister concerns were genuine and, therefore, no addition can be made on that count. Once it has been held that the sales of Rice Kani and Paddy Husk were genuine, it necessarily follows that neither the raw material nor the fuel allegedly attributed to the assessee would have been available in its premises for the production of ENA or any other by-products. Besides that, no such material has been brought on record by the Assessing Officer. The entire computation of the alleged production and its corresponding sale value appears to have been derived solely from figures in certain spreadsheets, without any supporting evidence of actual manufacturing activity.
156. We further note from the record that the assessee had specifically raised an objection during the appellate proceedings that the Excel sheet relied upon by the Assessing Officer at page 38 of the assessment order was never confronted to the assessee during the course of assessment proceedings. The assessee had contended that the said Excel sheet was allegedly retrieved from the computer of an ex-employee and was merely a rough, unauthenticated document, which had not been shown to or put to the assessee for rebuttal at the time of assessment.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
157. On perusal of the appellate order, particularly pages 30 to 34 of Ld. CIT(A) order, we find that this contention of the assessee has been duly recorded by the learned CIT(A). The assessee had categorically submitted that the so-called "Polo Sheet" or Excel sheet was neither prepared by the assessee nor formed part of the regular books of account and that the same represented only projected figures prepared for financial planning purposes. It was also submitted that the said document was allegedly extracted from the computer of a former employee and, therefore, could not be treated as reliable evidence unless properly confronted and verified.
158. In our considered view, any material proposed to be used against the assessee must necessarily be confronted to the assessee during the assessment proceedings so as to provide an effective opportunity of rebuttal. In the present case, since the Excel sheet relied upon by the Assessing Officer was not confronted with the assessee during the course of assessment, reliance placed on such material for the purpose of making an addition cannot be sustained. The objection raised by the assessee in this regard, as recorded in the appellate order, therefore carries merit.
159. In these circumstances, we are of the considered view that the reliance placed by the Assessing Officer on the said Excel sheet for determining plant capacity and estimating annual production is not supported by any reliable technical or documentary evidence. Consequently, the assumption that the plant had an installed capacity of 120 KLPD and the consequential computation of alleged unaccounted production based thereon cannot be sustained. The addition made on this basis, therefore, lacks a proper factual foundation and cannot be sustained.
Excel Sheet Showing Production of ENA at 36,432,000 ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
160. The Assessing Officer has further relied upon another Excel sheet, referred to at page 39 of the assessment order, wherein the production of ENA for the financial year 2019 has been reflected at 36,432,000 litres. On the basis of this document, the Assessing Officer concluded that the assessee had suppressed its actual production and accordingly proceeded to estimate undisclosed production by comparing the figures appearing in the said sheet with the production disclosed in the books of account. However, upon careful examination of the material on record, we find that this document suffers from the same infirmities as those noted in respect of the other spreadsheets relied upon by the Assessing Officer. The Excel sheet in question does not indicate the source of the figures recorded therein, the identity of the person who prepared it, or the basis on which the production figures were computed. The document is merely an unauthenticated spreadsheet containing certain numerical figures without any accompanying explanation or supporting technical details. Despite this, the Assessing Officer has treated the figures appearing in the sheet as representing the actual production of ENA without undertaking any independent verification. The learned CIT(A), while dealing with this issue in the appellate order, has also recorded the assessee's submission that the figures relied upon by the Assessing Officer were part of projected data prepared for financial purposes, including projections furnished to the bank, and were not reflective of actual production. It was further pointed out that the Assessing Officer had selectively relied on certain figures appearing in these spreadsheets and, in the process, had even adopted incorrect conversion factors while attempting to derive ENA production from ethanol quantities. The assessee had demonstrated that if the correct conversion figures were applied, the resulting production figures would materially differ from those adopted by the Assessing Officer.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
161. More importantly, the Assessing Officer has not brought any corroborative evidence on record to substantiate the inference of suppressed production. In cases involving alleged excess production of such magnitude, it would normally be expected that there would be corresponding evidence in the form of excess consumption of raw materials such as rice kani, additional procurement of fuel such as husk, higher electricity consumption, additional use of packing materials, or evidence of unaccounted dispatch of finished goods. However, no such material has been brought on record by the Assessing Officer. There is also no finding regarding any discrepancy in the quantitative records maintained by the assessee under the supervision of the Excise authorities, nor any evidence of unrecorded purchases of raw materials or clandestine removal of finished goods.
162. In the absence of such corroborative evidence, the figures appearing in an unauthenticated spreadsheet cannot, by themselves, be treated as reliable evidence of actual production. The mere existence of certain projected or unexplained numerical figures in a computer file, without any supporting material demonstrating corresponding manufacturing activity, cannot form the sole basis for concluding that the assessee had suppressed production.
163. Accordingly, we are of the considered view that the reliance placed by the Assessing Officer on the Excel sheet showing production of 36,432,000 litres of ENA is not supported by any credible or corroborative evidence. The document, in the absence of authentication and supporting material, cannot be treated as conclusive proof of actual production during the relevant financial year, and therefore cannot form a valid basis for making the impugned addition.
164. The Assessing Officer has rejected the assessee's explanation that the installed capacity of the plant was only 107.50 KLPD and that ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
production of 29,132,681 litres was achieved over approximately 306 operational days. We find that the assessee has placed on record documentary evidence, including technical documents issued by the plant supplier and records maintained under the supervision of the excise authorities, indicating the plant's actual installed capacity and operational days. The Assessing Officer has rejected these submissions without conducting any independent verification or obtaining any expert opinion. In our view, when the assessee has produced technical documentation regarding plant capacity and operational records, the same cannot be disregarded merely on the basis of assumptions drawn from certain unauthenticated Excel sheets.
165. The Assessing Officer has further concluded in paragraph 4.5.11 of the assessment order that the capacity utilisation of the plant was around 92% based on the figures appearing in the alleged incriminating documents and therefore inferred that the undisclosed production was attributable to the plant capacity being 120 KLPD rather than 107.50 KLPD as claimed by the assessee.
166. In our considered opinion, the entire inference drawn by the Assessing Officer is based on assumptions and unverified electronic documents. The Assessing Officer has not undertaken any technical study regarding the production capability of the plant, nor has any evidence been brought on record to show that the assessee had actually produced quantities exceeding those recorded in the statutory registers maintained under the supervision of the State Excise Department. It is an undisputed fact that the assessee operates a distillery unit which is subject to strict regulatory control by the excise authorities, where production, storage and dispatch of spirit are continuously monitored and recorded in statutory registers. The Assessing Officer has not pointed out any discrepancy in these statutory records.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
167. In the absence of any corroborative evidence regarding excess procurement of raw materials, excess fuel consumption, unaccounted bottling material or unrecorded dispatch of finished goods, the conclusion drawn by the Assessing Officer regarding alleged excess production cannot be sustained merely on the basis of rough electronic sheets and assumptions regarding plant capacity.
168. Lastly, we have carefully examined the approach adopted by the Assessing Officer while determining the alleged production of ENA. The Assessing Officer has discussed this aspect in detail at pages 39 to 41 of the assessment order, wherein it has been concluded that the total production of ENA during the relevant financial year was 36,432,000 litres as against the production of 29,132,686 litres declared by the assessee in its books of account. However, on a closer examination of the working adopted by the Assessing Officer, it is evident that the computation itself suffers from a fundamental error.
169. It is observed that while converting the quantity of ethanol into equivalent ENA, the Assessing Officer has adopted a figure of 7,745,557 litres in the tabulated computation. However, when the same conversion is carried out in accordance with the formula applied by the Assessing Officer himself, the correct equivalent quantity is 9,476,828 litres, and not 7,745,557 litres as taken in the assessment order. Thus, the conversion adopted by the Assessing Officer is arithmetically incorrect.
170. If the correct conversion figure of 9,476,828 litres is substituted in place of the wrongly adopted figure of 7,745,557 litres, the total production of ENA would work out to 38,506,991 liters instead of 36,432,000 litres as mentioned by the Assessing Officer.
171. This corrected computation clearly demonstrates that even on the basis of the methodology adopted by the Assessing Officer himself, the alleged production would exceed the maximum production capacity of the plant. As noted earlier, even if the plant capacity is assumed to be ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
120 KLPD, the maximum possible production over 306 operational days would be 36,720,000 litres. However, once the arithmetical error committed by the Assessing Officer is corrected, the alleged production would increase to 38,506,991 litres, which is significantly higher than the plant's maximum theoretical production capacity.
172. Thus, the computation adopted by the Assessing Officer results in a presumption that the plant operated at approximately 104.86% (38,506,991 / 36,720,000 x 100 = 104.86%) of its presumed capacity of 120 KLPD ( installed capacity of 107 KLPD), which is technically impossible. Industrial plants cannot exceed their mechanical and engineering limits unless additional machinery is installed or production facilities are enhanced. No material has been brought on record by the Revenue to show that any additional plant, machinery or production line was installed by the assessee during the relevant period so as to enable such extraordinary production.
173. The above inconsistency itself demonstrates that the interpretation placed by the Assessing Officer on the alleged polo sheets is fundamentally flawed. If the figures appearing in the said sheets are accepted as representing actual production, the inevitable consequence would be that the plant has produced quantities far exceeding even the maximum theoretical capacity assumed by the Assessing Officer himself, even for the assumed capacity of 120KLPD. Such a conclusion defies basic principles of industrial production and therefore cannot be sustained.
174. In our considered view, this mathematical inconsistency clearly establishes that the entries appearing in the alleged polo sheets cannot represent the assessee's actual production. At best, such entries may represent rough projections, internal estimates or hypothetical figures prepared for internal purposes. In the absence of any corroborative ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
evidence, such as excess consumption of raw materials, fuel usage, procurement of packing material or unaccounted dispatch of finished goods, the figures appearing in the said sheets cannot be treated as evidence of actual production.
175. Therefore, the very foundation of the addition made by the Assessing Officer, namely the assumption that the figures appearing in the polo sheets represent actual production over and above the production declared by the assessee, stands disproved by the comparative capacity analysis itself
176. Therefore, the comparative production analysis clearly demonstrates that the approach adopted by the Assessing Officer leads to an impossible level of capacity utilisation, exceeding even the theoretical maximum production capability of the plant with an assumed capacity of 120 KLPD. In the absence of any technical evidence regarding the enhancement of plant capacity or the installation of additional production facilities to 120 KLPD, the conclusion drawn by the Assessing Officer that the alleged figures in the polo sheets represent actual production cannot be sustained.
177. In view of the above discussion, we are of the considered opinion that the factors relied upon by the Assessing Officer, namely the alleged polo sheets, certain unauthenticated Excel sheets and assumptions regarding plant capacity, do not constitute reliable evidence for concluding that the assessee had carried out unaccounted production and sales. The addition made by the Assessing Officer on the basis of such material, therefore, cannot be sustained. In view of the above, the Ground No.1 of the Assessee Appeal is allowed.
Ground No.1-2 of the Renevue Appeal and Ground No. 2 to 4 of the Assessee Appeal ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
178. Since we have already held that no addition can be made on the basis of the "polo sheet" for alleged suppression of sales, the question of determination of GP rate/NP rate on such alleged bogus sales, or taxation of profit embedded therein, does not arise. However, for the sake of completeness of record, we are adjudicating these issues as argued by both parties and have upheld the findings of the Ld. CIT(A) .
179. As mentioned hereinabove, the Assessing Officer, based on the polo sheets, computed the suppressed turnover at ₹71,70,12,570/-, which was added to the assessee's income.
180. In appeal, the learned CIT(A) examined the findings recorded by the Assessing Officer and the assessee's submissions. The learned CIT(A) broadly agreed with the Assessing Officer that the polo sheets recovered during the course of search constituted material indicating the possibility of unaccounted production and sales. We have already held that no additions can be made on the basis of such evidence.
181. After wrongly agreeing with the Assessing Officer that the polo sheets recovered during the course of search constituted material indicating the possibility of unaccounted production and sales, the learned CIT(A) held that the entire amount of the alleged sales could not be treated as the assessee's income. According to the learned CIT(A), in cases of unaccounted sales, only the profit element embedded in such sales can be brought to tax and not the entire turnover. Accordingly, the learned CIT(A) applied a gross profit rate of 16.5% on the alleged sales of ₹71,70,12,570/- and restricted the addition to ₹18,71,47,636/-.
182. The Departmental Representative strongly supported the findings recorded by the Assessing Officer and submitted that the addition was based on incriminating material found during the course of search proceedings and therefore could not be disregarded lightly. It was submitted that the Assessing Officer had not proceeded merely on conjectures but had relied upon specific electronic data retrieved during ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
the search proceedings, described as the "polo sheets". According to the learned DR, these sheets contained detailed figures relating to production and dispatch of ENA, Ethanol and Country Liquor, which, when compared with the production figures recorded in the books of account, clearly indicated suppression of production and corresponding unaccounted sales. The learned DR submitted that the Assessing Officer had analysed the entries appearing in the polo sheets and had correlated them with the nature of business carried on by the assessee. The entries in the said sheets corresponded to the finished products manufactured by the assessee and therefore the inference drawn by the Assessing Officer that the sheets represented parallel records of production maintained outside the books of account was justified. It was further submitted that the Assessing Officer had not relied upon the polo sheets in isolation but had also examined the installed production capacity of the plant and observed that the production figures appearing in the polo sheets were consistent with the production capacity of the plant. The learned DR also relied upon certain information furnished by the assessee to the bank through its consultant, wherein higher production capacity and projected production figures were disclosed. According to the learned DR, such financial projections constituted circumstantial evidence indicating that the plant had the capability to produce quantities far exceeding those disclosed in the books of account. The learned DR therefore submitted that the Assessing Officer had rightly concluded that the assessee had suppressed its actual production and sales and that the figures appearing in the polo sheets represented unaccounted turnover generated outside the books of account. The learned DR further argued that the learned CIT(A) erred in restricting the addition only to the profit element. According to the learned DR, once the existence of unaccounted turnover is established, the entire amount representing such turnover ought to be brought to tax ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
as income from undisclosed sources. It was therefore submitted that the entire amount of ₹71,70,12,570/- representing unaccounted sales should have been taxed and the order of the Assessing Officer deserved to be restored.
183. Per contra, the learned Authorised Representative reiterated the earlier submissions, which are reproduced above, strongly challenged the addition made by the Assessing Officer as well as the partial confirmation by the learned CIT(A). It was submitted that no addition, much less an addition of Rs 71,70,12,570/- at @ 16.5 to the suppressed sales, can be upheld by the Ld. CIT(A).
184. We have heard the rival submissions and perused the material available on record, including the assessment order and the order of the Ld. CIT(A). At the outset, we have already adjudicated ground no. 1 in the appeal of the assessee, wherein we have held that no addition can be made on the basis of the polo sheet and other documents for the reason mentioned hereinabove. However, the present ground pertains to the determination of the income computed by the Ld. CIT(A) @ 16.5% of the turnover as mentioned by the Ld. CIT(A) at page 65 of his order in paragraph 5.1.3 (xv) and (xvi) .
185. On perusal of the order, it is clear that the Ld. CIT(A) has determined/computed the profit of the assessee on the basis of the order passed in the case of M/s Oasis Overseas Exports Pvt. Ltd. for the A.Y. 2020-21. In our view, once the Ld. CIT(A) had adjudicated the issue on the basis of the submission of the assessee; the assessee cannot be said to be aggrieved by the order passed by the Ld. CIT(A). Even otherwise, the dispute in the present case relates to the addition made by the Assessing Officer on account of the alleged suppressed production of ENA, Ethanol and Country Liquor and the corresponding unaccounted sales. The Assessing Officer determined the alleged suppressed production by applying certain theoretical production norms and input-output ratios and ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
thereafter computed the alleged unaccounted sales and profit thereon. The Ld. CIT(A), however, after examining the methodology adopted by the Assessing Officer, concluded that the addition was largely based on estimations and theoretical calculations. The Ld. CIT(A) further observed that even if the alleged unaccounted sales were accepted, the entire value of such sales could not be treated as income of the assessee and only the profit element embedded in such sales could be brought to tax. Accordingly, the Ld. CIT(A) restricted the addition by applying a gross profit rate of 16.5% on the total sales, including the alleged unaccounted sales.
186. In our considered opinion, the approach adopted by the Ld. CIT(A) is based on an estimated basis only, and no scientific basis for arriving at the rate of 16.5% has been given by the Ld. CIT(A). However, we have already held that no addition can be made on the basis of the "polo sheet" for alleged suppression of sales; the question of determining the GP rate/NP rate on such alleged bogus sales, or the taxation of the profit embedded therein, does not arise, as it becomes academic.
187. In view of the above discussion, the grounds raised by the Revenue challenging the restriction of addition by the Ld. CIT(A) is dismissed. Similarly, the grounds raised by the assessee challenging the addition on an estimated basis are allowed.
188. CONCLUSION:
A. Ground No. 1 of the assessee's appeal is allowed.
Accordingly, it is held that the addition of
₹7,17,01,257/- made by the Assessing Officer is
unsustainable and is hereby deleted.
B. Since Ground No. 1 of the assessee's appeal has been allowed, Grounds No. 2, 3, and 4 of the assessee's appeal have become academic in nature and, therefore, do not call for separate adjudication.
ITA 694/Chd/2025 ITA/Chd//2025 Oasis Commercial Pvt. Ltd.
C. Grounds No. 1 and 2 of the Revenue's appeal are dismissed.
D. Grounds No. 3 and 4 of the Revenue's appeal are also dismissed. We hold that no addition can be made on account of alleged bogus sales of rice, kanni, and paddy husk in the assessee's hands, as no incriminating material was found during the search relating to such alleged transactions.
E. No other grounds were pressed by the Ld. Authorised Representative (AR) of the assessee; accordingly, the remaining grounds of the assessee's appeal are dismissed as not pressed.
In the result, the appeal of the assessee is partly allowed and the appeal of the revenue is dismissed Pronounced in open court on 18th March, 2026.
-Sd- -Sd-
कृणव सहाय लिलत कुमार
(KRINWANT SAHAY) (LALIET KUMAR)
ले खा सद / ACCOUNTANT MEMBER ाियक सद /JUDICIAL MEMBER
AG
आदे शकी ितिलिपअ ेिषत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. थ / The Respondent
3. आयकरआयु / CIT
4. आयकरआयु (अपील)/ The CIT(A)
5. िवभागीय ितिनिध, आयकरअपीलीयआिधकरण, च ीगढ़/ DR, ITAT, CHANDIGARH
6. गाडफाईल/ Guard File