The addition rests on statements of ex-employees and third parties I was never allowed to question. Is the assessment good?
The additions were deleted, but read the High Court decision for what it is. The Chandigarh Tribunal directed deletion of the additions in all five years, holding that the assessee had not been allowed to cross-examine the persons on whose statements the Assessing Officer relied and that the evidence was internally contradictory - invoices said to have been destroyed were recovered from the residence of an ex-president against whom the company had filed an FIR before the search. The Punjab and Haryana High Court dismissed the revenue's appeal, but its order is two sentences long and gives no reasons of its own: it adopts a detailed judgment of even date in a companion appeal, ITA-38-2023, which is not on indiankanoon and is not available in a subscription case-law database.
Decided by the High Court (Punjab and Haryana High Court — G.S. Sandhawalia and Ms. Lapita Banerji, JJ. (order delivered by G.S. Sandhawalia, J.); IT Appeal No. 281 of 2022 (O & M)) on 2023-11-09, reported as [2024] 161 taxmann.com 586 (P&H); IT Appeal No. 281 of 2022 (O & M), dismissed for the reasons in the detailed judgment of even date in Pr. CIT (Central) v. DSG Papers (P.) Ltd., IT Appeal No. 38 of 2023. The reported order is indexed for assessment year 2016-17. The (2024) 461 ITR 4 (P&H) citation rests on a single digest index, appears nowhere on the citation line, and could not be traced in a subscription case-law database. The Tribunal order below is reported at [2023] 147 taxmann.com 195 / (2022) 99 ITR(T) 241 (Chandigarh - Trib.), dated 29 July 2022, ITA Nos. 82 to 86 (Chd.) of 2022.. It bears on section 145(3), section 147, section 148, section 143(3), section 260A of the Income Tax Act 1961, in Evidence & Burden of Proof, Assessment & Scrutiny and Reassessment & Reopening matters.
Bogus-purchase and suppressed-sales additions are now routinely built on GST intelligence material and on statements recorded elsewhere, and this is a direct-tax application of the cross-examination rule that survived a revenue appeal to the High Court. Two things should travel with it. The reasoning is the Tribunal's: the High Court order is a two-sentence dismissal that adopts a companion judgment which is not available, so the case is best cited for the Tribunal's route with the High Court dismissal noted, rather than as a High Court exposition of natural justice. And the relief was outright deletion in all five years, not a remand for a fresh hearing with cross-examination, which is the practical point a reader will want.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
Read aloud by your device. Press again to stop.
The assessee manufactured paper. The Directorate General of GST Intelligence searched its business premises on 5 August 2016, along with the residence of Shri Sanjay Dhawan, the ex-president of the company, who had left in 2013, and three or four dealers. 225 parallel invoices of goods manufactured and sold by the assessee were said to have been recovered from Dhawan's residence, and statements were recorded from him and from the ex-dispatch incharge under s.14 of the Central Excise Act 1944. On that information the Assessing Officer reopened five years, assessment years 2013-14 to 2017-18, rejected the books under s.145(3) in each year and applied net profit rates to a computed suppressed turnover, making additions ranging from Rs 31,40,021 to Rs 2,84,00,292. The company's director had lodged a complaint and an FIR against Dhawan for theft of bill books, bilties, rubber stamps, cash and electronic items before the date of the search. The Commissioner (Appeals) partly allowed each appeal: he upheld the rejection of the books but substituted the assessee's own declared net profit rate for the average rate the officer had used, cutting the additions substantially. The assessee had asked to cross-examine the dealers and the makers of the statements and had not been permitted to.
The High Court order decides nothing for itself. Its whole text is two sentences carrying no paragraph numbers: the first records that the hearing was preponed by consent from 7 February 2024 because the connected matters were being decided the same day, and the second dismisses the appeal for the reasons given in the detailed judgment of even date in ITA-38-2023. Only the revenue was represented, by Ms. Gauri Neo Rampal Opal, Senior Standing Counsel. The reasoning that decided the case therefore lives in that companion judgment, which is not on indiankanoon and is still not available as a separate document in a subscription case-law database, and in the Tribunal order below. The reported order is indexed for one year, assessment year 2016-17, while the Tribunal order it upholds covered five years. What the Tribunal did was direct deletion of the additions in all five years, assessment years 2013-14 to 2017-18; it did not set aside the assessments or remit them for a fresh hearing, and having given relief on the merits it left the separate challenge to the rejection of books under s.145(3) unadjudicated as academic, so that rejection was neither upheld nor set aside. The Tribunal's own disposal line is 'In the final result, the entire five appeals stand partly allowed.'
The High Court order contains no reasoning: its second sentence dismisses the appeal for the reasons in the companion judgment of even date. The reasoning that decided the case is the Tribunal's, in ITA Nos. 82 to 86/CHD/2022 decided on 29 July 2022 by Shri N.K. Saini, Vice President, and Shri Sudhanshu Srivastava, Judicial Member. On the record it read, the assessee's case was that its books were audited, its sales and purchases vouched, and its yield percentage constant from 2011-12 to 2016-17, so nothing justified rejection of the books or an estimate of profit; that Shri Sanjay Dhawan had worked for the company only from 2009 to 2013 and had left three years before the search, and that the director had lodged an FIR against him alleging theft of documents; and that the internal contradictions were fatal - Shri Shiv Charan Lal, an ex-employee, had said the parallel invoices were destroyed after the consignment, which cannot stand with 225 of them being recovered from Dhawan's residence years later, and he later accepted that he had alleged the creation of fake invoices under pressure from the excise authorities, while a chart of journey timings showed the second trip attributed to a vehicle on the same day was physically impossible. The Tribunal also recorded that the Assessing Officer had relied on the statements of Sarvashri Sanjay Dhawan, Gulshan Gaba, Naveen Salley and Sudhir Sethi while ignoring the statement of Shri Manoj Kumar, the assessee's director, who denied any out-of-books sales or any issue of parallel invoices. On the cross-examination point the assessee had asked the officer to summon the dealers and had been refused, and relied on Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3 (SC) that no reliance can be placed on statements where cross-examination is not afforded. For the last three years the additions rested on e-mail extracted from the electronic records of a Delhi firm and on the statement of a person from that firm, whom the assessee was also refused the chance to cross-examine, and the identity of the sender of the e-mails was never established. The Tribunal directed deletion in all five years, following Andaman Timber Industries and, besides CIT v. Rajesh Kumar [2008] 306 ITR 27 (Delhi), also CIT v. Dharam Pal Prem Chand Ltd. [2008] 295 ITR 105 (Delhi) and Prakash Chand Nahta v. CIT [2008] 301 ITR 134 (M.P.).
Since the connected matters are decided today, by consent of the counsel for the appellant, hearing of the present appeal is preponed from 07.02.2024 to today. For the detailed judgment of even date passed in ITA-38-2023 'Pr. Commissioner of Income Tax (Central), Ludhiana Vs. M/s DSG Papers Pvt. Ltd., Patiala', the present appeal stands dismissed.
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Handle my notice → Ask a CA on WhatsAppThe additions were deleted, but read the High Court decision for what it is. The Chandigarh Tribunal directed deletion of the additions in all five years, holding that the assessee had not been allowed to cross-examine the persons on whose statements the Assessing Officer relied and that the evidence was internally contradictory - invoices said to have been destroyed were recovered from the residence of an ex-president against whom the company had filed an FIR before the search. The Punjab and Haryana High Court dismissed the revenue's appeal, but its order is two sentences long and gives no reasons of its own: it adopts a detailed judgment of even date in a companion appeal, ITA-38-2023, which is not on indiankanoon and is not available in a subscription case-law database. This was decided by the High Court (Punjab and Haryana High Court — G.S. Sandhawalia and Ms. Lapita Banerji, JJ. (order delivered by G.S. Sandhawalia, J.); IT Appeal No. 281 of 2022 (O & M)) and bears on section 145(3), section 147, section 148, section 143(3), section 260A of the Income Tax Act 1961. It is reported as [2024] 161 taxmann.com 586 (P&H); IT Appeal No. 281 of 2022 (O & M), dismissed for the reasons in the detailed judgment of even date in Pr. CIT (Central) v. DSG Papers (P.) Ltd., IT Appeal No. 38 of 2023. The reported order is indexed for assessment year 2016-17. The (2024) 461 ITR 4 (P&H) citation rests on a single digest index, appears nowhere on the citation line, and could not be traced in a subscription case-law database. The Tribunal order below is reported at [2023] 147 taxmann.com 195 / (2022) 99 ITR(T) 241 (Chandigarh - Trib.), dated 29 July 2022, ITA Nos. 82 to 86 (Chd.) of 2022.. Bogus-purchase and suppressed-sales additions are now routinely built on GST intelligence material and on statements recorded elsewhere, and this is a direct-tax application of the cross-examination rule that survived a revenue appeal to the High Court. Two things should travel with it. The reasoning is the Tribunal's: the High Court order is a two-sentence dismissal that adopts a companion judgment which is not available, so the case is best cited for the Tribunal's route with the High Court dismissal noted, rather than as a High Court exposition of natural justice. And the relief was outright deletion in all five years, not a remand for a fresh hearing with cross-examination, which is the practical point a reader will want. If it applies to you, the first step is this: Ask for cross-examination in writing, early, and record in the reply that the request was made and when.
The assessee manufactured paper. The Directorate General of GST Intelligence searched its business premises on 5 August 2016, along with the residence of Shri Sanjay Dhawan, the ex-president of the company, who had left in 2013, and three or four dealers. 225 parallel invoices of goods manufactured and sold by the assessee were said to have been recovered from Dhawan's residence, and statements were recorded from him and from the ex-dispatch incharge under s.14 of the Central Excise Act 1944. On that information the Assessing Officer reopened five years, assessment years 2013-14 to 2017-18, rejected the books under s.145(3) in each year and applied net profit rates to a computed suppressed turnover, making additions ranging from Rs 31,40,021 to Rs 2,84,00,292. The company's director had lodged a complaint and an FIR against Dhawan for theft of bill books, bilties, rubber stamps, cash and electronic items before the date of the search. The Commissioner (Appeals) partly allowed each appeal: he upheld the rejection of the books but substituted the assessee's own declared net profit rate for the average rate the officer had used, cutting the additions substantially. The assessee had asked to cross-examine the dealers and the makers of the statements and had not been permitted to. The matter was decided on 2023-11-09 by the High Court (Punjab and Haryana High Court — G.S. Sandhawalia and Ms. Lapita Banerji, JJ. (order delivered by G.S. Sandhawalia, J.); IT Appeal No. 281 of 2022 (O & M)). On those facts the High Court held as follows. The High Court order decides nothing for itself. Its whole text is two sentences carrying no paragraph numbers: the first records that the hearing was preponed by consent from 7 February 2024 because the connected matters were being decided the same day, and the second dismisses the appeal for the reasons given in the detailed judgment of even date in ITA-38-2023. Only the revenue was represented, by Ms. Gauri Neo Rampal Opal, Senior Standing Counsel. The reasoning that decided the case therefore lives in that companion judgment, which is not on indiankanoon and is still not available as a separate document in a subscription case-law database, and in the Tribunal order below. The reported order is indexed for one year, assessment year 2016-17, while the Tribunal order it upholds covered five years. What the Tribunal did was direct deletion of the additions in all five years, assessment years 2013-14 to 2017-18; it did not set aside the assessments or remit them for a fresh hearing, and having given relief on the merits it left the separate challenge to the rejection of books under s.145(3) unadjudicated as academic, so that rejection was neither upheld nor set aside. The Tribunal's own disposal line is 'In the final result, the entire five appeals stand partly allowed.'
The High Court order contains no reasoning: its second sentence dismisses the appeal for the reasons in the companion judgment of even date. The reasoning that decided the case is the Tribunal's, in ITA Nos. 82 to 86/CHD/2022 decided on 29 July 2022 by Shri N.K. Saini, Vice President, and Shri Sudhanshu Srivastava, Judicial Member. On the record it read, the assessee's case was that its books were audited, its sales and purchases vouched, and its yield percentage constant from 2011-12 to 2016-17, so nothing justified rejection of the books or an estimate of profit; that Shri Sanjay Dhawan had worked for the company only from 2009 to 2013 and had left three years before the search, and that the director had lodged an FIR against him alleging theft of documents; and that the internal contradictions were fatal - Shri Shiv Charan Lal, an ex-employee, had said the parallel invoices were destroyed after the consignment, which cannot stand with 225 of them being recovered from Dhawan's residence years later, and he later accepted that he had alleged the creation of fake invoices under pressure from the excise authorities, while a chart of journey timings showed the second trip attributed to a vehicle on the same day was physically impossible. The Tribunal also recorded that the Assessing Officer had relied on the statements of Sarvashri Sanjay Dhawan, Gulshan Gaba, Naveen Salley and Sudhir Sethi while ignoring the statement of Shri Manoj Kumar, the assessee's director, who denied any out-of-books sales or any issue of parallel invoices. On the cross-examination point the assessee had asked the officer to summon the dealers and had been refused, and relied on Andaman Timber Industries v. CCE [2015] 62 taxmann.com 3 (SC) that no reliance can be placed on statements where cross-examination is not afforded. For the last three years the additions rested on e-mail extracted from the electronic records of a Delhi firm and on the statement of a person from that firm, whom the assessee was also refused the chance to cross-examine, and the identity of the sender of the e-mails was never established. The Tribunal directed deletion in all five years, following Andaman Timber Industries and, besides CIT v. Rajesh Kumar [2008] 306 ITR 27 (Delhi), also CIT v. Dharam Pal Prem Chand Ltd. [2008] 295 ITR 105 (Delhi) and Prakash Chand Nahta v. CIT [2008] 301 ITR 134 (M.P.). In the words reproduced by the source cited on this page: "Since the connected matters are decided today, by consent of the counsel for the appellant, hearing of the present appeal is preponed from 07.02.2024 to today. For the detailed judgment of even date passed in ITA-38-2023 'Pr. Commissioner of Income Tax (Central), Ludhiana Vs. M/s DSG Papers Pvt. Ltd., Patiala', the present appeal stands dismissed." The decision followed or applied andaman-timber-industries-v-cce.
It was decided by the High Court on 2023-11-09 and is reported as [2024] 161 taxmann.com 586 (P&H); IT Appeal No. 281 of 2022 (O & M), dismissed for the reasons in the detailed judgment of even date in Pr. CIT (Central) v. DSG Papers (P.) Ltd., IT Appeal No. 38 of 2023. The reported order is indexed for assessment year 2016-17. The (2024) 461 ITR 4 (P&H) citation rests on a single digest index, appears nowhere on the citation line, and could not be traced in a subscription case-law database. The Tribunal order below is reported at [2023] 147 taxmann.com 195 / (2022) 99 ITR(T) 241 (Chandigarh - Trib.), dated 29 July 2022, ITA Nos. 82 to 86 (Chd.) of 2022.. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 145(3), section 147, section 148, section 143(3), section 260A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The High Court order decides nothing for itself. Its whole text is two sentences carrying no paragraph numbers: the first records that the hearing was preponed by consent from 7 February 2024 because the connected matters were being decided the same day, and the second dismisses the appeal for the reasons given in the detailed judgment of even date in ITA-38-2023. Only the revenue was represented, by Ms. Gauri Neo Rampal Opal, Senior Standing Counsel. The reasoning that decided the case therefore lives in that companion judgment, which is not on indiankanoon and is still not available as a separate document in a subscription case-law database, and in the Tribunal order below. The reported order is indexed for one year, assessment year 2016-17, while the Tribunal order it upholds covered five years. What the Tribunal did was direct deletion of the additions in all five years, assessment years 2013-14 to 2017-18; it did not set aside the assessments or remit them for a fresh hearing, and having given relief on the merits it left the separate challenge to the rejection of books under s.145(3) unadjudicated as academic, so that rejection was neither upheld nor set aside. The Tribunal's own disposal line is 'In the final result, the entire five appeals stand partly allowed.' It arises in Evidence & Burden of Proof, Assessment & Scrutiny and Reassessment & Reopening matters, on section 145(3), section 147, section 148, section 143(3), section 260A of the Income Tax Act 1961, and was decided by Punjab and Haryana High Court — G.S. Sandhawalia and Ms. Lapita Banerji, JJ. (order delivered by G.S. Sandhawalia, J.); IT Appeal No. 281 of 2022 (O & M). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Ask separately for copies of the statements and the underlying material, not just the gist reproduced in the show-cause. Where the maker of the statement has an axe to grind — a dismissed employee, a party in litigation with you — put that on the record before the assessment is completed. Do not let the point be argued for the first time at the Tribunal; the denial has to be visible in the assessment record.
Still good law. Applied by a later decision, which is what the status requires. Pr. CIT (Central) v. DSG Papers (P.) Ltd. [2024] 161 taxmann.com 586 (P&H) is recorded as followed in the case review block of Homelife Buildcon (P.) Ltd. v. Dy. CIT [2025] 176 taxmann.com 614 / (2025) 126 ITR(T) 557 (Chandigarh - Trib.), Rajpal Yadav, Vice President and Krinwant Sahay, Accountant Member, ITA Nos. 880 and 1036 (Chd.) of 2024, assessment year 2021-22, decided 17 July 2025, at its paragraph 61, on the cognate point that an addition cannot rest on material seized from a third party where no cross-examination was allowed. Two qualifications travel with the upgrade. The decision that follows it is a coordinate Tribunal bench, so this is application and not affirmation by a higher court. And what is being followed is a one-line order whose reasons live in IT Appeal No. 38 of 2023, a judgment that could not be found in a subscription case-law database. No note of a special leave petition appears anywhere on the report. Two further 2025 Amritsar Tribunal decisions — ITO v. Vohra Solvex (P.) Ltd. [2025] 178 taxmann.com 150 and Rana Iqbal Singh v. ITO [2025] 178 taxmann.com 473 — surfaced on the same full-text search as possible further citations and were not opened. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The High Court order has now been read in full at https://indiankanoon.org/doc/83981723/ and the Tribunal order below at https://indiankanoon.org/doc/168572245/, so this entry no longer rests on a digest. Four things a reader must know. First, the reported High Court decision has no reasoning of its own. Its entire text is two sentences with no paragraph numbers, dismissing the appeal for the reasons given in the detailed judgment of even date in ITA-38-2023; the sentence previously carried as the key quote here was a database's re-rendering of it and not the Court's own words, and the quote has been replaced with the text as printed. Second, the companion judgment in ITA-38-2023 is still not available: it is not on indiankanoon either - two searches, one on the case number with the assessee's name and one listing all fifteen Punjab and Haryana documents mentioning DSG Papers, return only the four one-line companion orders, ITA-1-2023 (assessment year 2017-18), ITA-8-2023 (2014-15), ITA-11-2023 (2015-16) and this one, ITA-281-2022 (2016-17). So it would still have to be obtained from the court record before any natural-justice ratio is attributed to this Court. Third, the citation (2024) 461 ITR 4 (P&H) rests on a single digest index, appears nowhere on the citation line, and returns no result in that database; it should not be presented as settled. Fourth, the Tribunal order below, ITA Nos. 82 to 86/CHD/2022 decided 29 July 2022 by N.K. Saini, Vice President, and Sudhanshu Srivastava, Judicial Member, covered assessment years 2013-14 to 2017-18 and its disposal line reads 'In the final result, the entire five appeals stand partly allowed'; it is reported at [2023] 147 taxmann.com 195 and (2022) 99 ITR(T) 241, the same order reported in the taxmann.com series for 2023, which explains the apparent conflict of years between digests. Of the two further references a digest gives for that order, (2022) 219 TTJ 194 and 217 DTR 49, neither appears on its citation line and neither is adopted here. The judges are G.S. Sandhawalia and Ms. Lapita Banerji, JJ., the order is dated 9 November 2023, and only counsel for the revenue, Ms. Gauri Neo Rampal Opal, Senior Standing Counsel, is shown as appearing. Section 69 has been removed from the sections list: it appears nowhere in either the High Court order or the Tribunal order - two differently worded probes agree, and what the Tribunal records is that the officer rejected the books under s.145(3) and applied a net profit rate to a computed suppressed turnover, which is not a s.69 addition at all. Section 147 has been added because the Tribunal order records that the case was reopened 'in terms of section 147 read with section 148'. Section 260A is retained as the provision under which the appeal to the High Court lay; the one-line order does not name it. Indiankanoon prints a neutral citation line on these orders but the number shown, 2023:PHHC:143650-DB, came back identical on two different companion orders and returns no result when searched, so it is not carried here. The Tribunal directed deletion of the additions in all five years and did not remit for a fresh hearing with cross-examination, and the challenge to the rejection of books under s.145(3) was left unadjudicated as academic, so the case says nothing about whether that rejection was good. What remains missing is the reasoning itself: the detailed judgment in IT Appeal No. 38 of 2023, in which the High Court's reasons are given, is still not available as a separate document in a subscription case-law database and has not been read. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The High Court order decides nothing for itself. Its whole text is two sentences carrying no paragraph numbers: the first records that the hearing was preponed by consent from 7 February 2024 because the connected matters were being decided the same day, and the second dismisses the appeal for the reasons given in the detailed judgment of even date in ITA-38-2023. Only the revenue was represented, by Ms. Gauri Neo Rampal Opal, Senior Standing Counsel. The reasoning that decided the case therefore lives in that companion judgment, which is not on indiankanoon and is still not available as a separate document in a subscription case-law database, and in the Tribunal order below. The reported order is indexed for one year, assessment year 2016-17, while the Tribunal order it upholds covered five years. What the Tribunal did was direct deletion of the additions in all five years, assessment years 2013-14 to 2017-18; it did not set aside the assessments or remit them for a fresh hearing, and having given relief on the merits it left the separate challenge to the rejection of books under s.145(3) unadjudicated as academic, so that rejection was neither upheld nor set aside. The Tribunal's own disposal line is 'In the final result, the entire five appeals stand partly allowed.'
TaxSphere, “PCIT v DSG Papers (P) Ltd”, https://taxnotice.vittsphere.com/caselaw/case/pcit-v-dsg-papers-cross-examination-in-a-bogus-entries-case/ (validity last checked 2026-08-23)
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The department says my purchases are bogus. Do the suppliers' returns and the input credit allowed on those invoices count for anything in the income-tax assessment?
The Assessing Officer has disallowed forty per cent of my client's purchases on an estimate, but has not rejected the books. Is that open to him?
My client's books were rejected because the gross profit rate fell. Is a fall in gross profit by itself enough?
We are a foreign company on an approved turnkey power project. We keep books, they are audited, and we recognise revenue on percentage of completion under AS-7. The Assessing Officer has rejected the books under section 145(3) and taxed 10 per cent of our billings under section 44BBB(1). Can he do that?
