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Income Tax Appellate Tribunal, DELHI BENCH “E”, DELHI
Before: SH. S. RIFAUR RAHMAN & SH. SUDHIR KUMAR
Date of hearing: 11/08/2025 Date of Pronouncement: 20/08/2025 ORDER
PER SUDHIR KUMAR, JUDICIAL MEMBER:
1. This appeal by the revenue is directed against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] vide order dated 22.11.2023 pertaining to A.Y. 2018-19 arising out the assessment order dated 29.03.2023 under section 147 read with section 144B of the Income Tax Act,1961, (in short ‘the Act’).
2. The revenue has raised the following grounds in appeal:
1. Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in deleting the addition made by the AO of Rs. 1,70,19,475/s 69C of 1.T Act 1961 on account of bogus purchases made from S.K Agencies controlled and managed by Sh. Yashpal Gupta, Smt Rani Sharma and Sh. Mrityunjay Singh entity operator 2 The L.d. CIT(A) erred in entirely disregarding the finding of the AO that Yashpal Gupta and his associates who categorically accepted that entities controlled and managed by them M/s S.K. Agencies involved in providing accommodation entities 3 Whether on the facts and circumstances of the case the L.d. CIT(A) was justified in deleting the addition and ignoring the finding of AO that the assessee failed to submit any confirmation from the party or any third party document to prove the transactions genuine 4 Whether on the facts and circumstances of the case the L.d. CTT(A) was justified by deleting the addition made us 69C of Rs. 1,70.19.475/-and ignoring the decision of Hon'ble Supreme Court in case of N.K. Protiens Ltd. vs DCIT dated 16.01.2017 SLP(C) 963/20172
5. That the department craves to add or amend the grounds of appeal before Hon’ble ITAT is finally heard or disposed off.
The assessee, a company has filed return of income under section 139(1) of the Act for the A.Y. 2018-19 on 31.10.2018 declaring a total income of Rs.40,87,550/-. The assessee M/s. My Paper Merchants Pvt. Ltd. is engaged in the business of wholesale trading of fresh and scrap paper. As per the information in possession as flagged by the Directorate of income-tax (System) as per risk management strategy formulated by CBDT, the information relating to evasion of tax by the assessee has been disseminated on the basis of report of DDIT (Inv.) AIU 8 (3), Delhi. As per the information, a survey action was conducted on 27.04.2018 on M/s Sarvroopey Vyapar Pvt. Ltd. at Sec 23, Dwarka and M/s Shashi Sales & Marketing Pvt. Ltd., M/s Astral Food Pvt. Ltd. & M/s Rabik Exports Ltd at G-10 Padma Tower, Rajendra Place, Delhi by the Investigation wing Delhi. Information in this case was received that during demonetization that huge amount of cash was deposited in the bank accounts of these entities. However, during the course of survey and from post survey proceedings it was found that there were two main persons namely Smt Rani Sharma and Shri Yash Pal Gupta, who were involved in providing accommodation entries of sale & purchase bills to various beneficiaries from many paper entities. The assessee company, M/s My Paper Merchants Pvt. Ltd. has also benefitted by taking bogus accommodation entries by way of bogus purchase amounting to Rs. 1,70,19,475/- from the shell entities namely S.K. Agencies controlled/managed by Smt. Rani Sharma, Mrityunjay Singh and Yash Pal Gupta.
Hence, as per er the information, the assessee has entered into a purchase transaction of Rs. 1,70 19,475/- from the bogus party i.e. M/s S.K. Agencies controlled and managed by Shri Yash Pal Gupta, Smt. Rani Sharma and Sh. Mrityunjay Singh. Thereby increasing its expenses and suppressing its income suggesting that income chargeable to tax to an extent of Rs. 1,70,19,475/- has escaped assessment for the relevant A.Y the Act. Subsequently, the case was reopened 2018-19 by issuing notice u/s 148 of the Act.
Further the AO gave various opportunities to the assessee to explain his case. In response the assessee has furnished the relevant information. The AO observed that the assessee failed to submit any confirmation from the parties or any third, party documents to prove genuineness of the transactions. Accordingly, he observed that the purchases made from M/s. S.K. Agencies are not regular transactions. During the course of survey proceedings, conducted by the Investigation wing Delhi, statements of Shri Yashpal Gupta and his associates were recorded on oath wherein they accepted that entities controlled by them are involved in providing accommodation entries in lieu of cash provided by beneficiary. It was also found that these entitles were regularly receiving credits from certain entities whereas there was no stock with these entities and they were not doing regular business. In the statement recorded on 27.08.2018, Shri Yashpal Gupta has clearly stated the modus operandi of his business of fake billing.
The aforementioned facts lead to the irresistible conclusion that the assessee did undertake the sale activity and, therefore, made the corresponding purchases. However, the claim of purchases from the suppliers identified by the assessee, cannot be accepted due to reasons mentioned above. In other words, while the impugned purchases were not made from bogus parties, the purchases per se did happen. The assessee has not furnished any evidence to show comparables supported by purchase of similar items from other parties to establish that the transactions were at arm's length. Accordingly, additional gross profit needs to be estimated on the purchases claimed to be made from the suspected suppliers.
Further, AO observed that the present matter is a clear case of purchases made from bogus parties rather than a case of bogus purchases indicating that the purchase was made from the open market without insisting for genuine bills. Accordingly, he observed that the gross profit declared by the assessee cannot be relied upon and he made a disallowance of Rs.1,70,19,475/- on account of bogus purchases. Accordingly, he issued the show caused notice to the assessee as to why the purchase transaction of Rs. 1,70,19,475/- should not be treated as bogus and added back to the total income vide show cause notice dated 15.03.2023. The AO issued several notices but the assessee has asked for adjournment and did not file any details. Accordingly, since was not compliance to the show cause notice the matter is decided as per the documents on record and in this view of the matter a disallowance of Rs. 1,70,19,475/- was made on account of bogus purchases from the bogus party i.e. M/s. S.K. Agencies added back to the total income of the assessee u/s. 69C r.w.s. 115 BBE and assessed the total income at Rs.2,11,07,025/-.
Aggrieved by the order of the AO, the assessee is in appeal before CIT(A) and filed detailed submissions. The ld. CIT(A) after going through the detailed submissions of the assessee and going through the assessment order held as under:
“Grounds No: 1 to 5 Since these grounds of appeal pertain to addition of Rs 1,70,19,475/- by the Ld. A.O. in respect of bogus purchases from M/s S.K. Agencies u/s 69. C of the Act, these are being adjudicated together. The assessment order of Ld. A.O, the written submissions filed by the Appellant and the facts and circumstances of case have been perused in this matter and my findings and decision are being discussed in the succeeding paras.
Before going into the merits of the case, it is important to revisit the relevant facts of the assessment proceedings. The Ld. AO issued a final show cause notice on 15.03.2023 and the Appellant in response filed his reply on 24.03.2023. It is stated by the AO that the Appellant had only requested for a cross- examination of Sh. Yashpal Gupta in his response. However, on perusal of the said reply, I find that in addition to the request for cross examination, the Appellant had also filed a detailed submission on the merits of the case and filed certain evidences such as Stock register, confirmation from the transporter of the goods, proof of delivery/bilties, etc. UM It is quite clear that the Ld. AO did give cognizance to this evidence but failed to detail or controvert the submissions of the assessee in the assessment order, despite the fact that the assessment order had been passed after good 5 days from the date of such response.
Coming to the merits of the case, it is seen that the basis/reason of addition made by the AO are as under: -.
1. Merely showing that payments were made from banking channels does not prove the genuineness of the purchase transaction.
2. Trend of purchase and payment with M/s SK Agencies is different from other parties.
3. No confirmation has been filed from the vendor or any third party.
4. Sh. Yashpal Gupta, controller and manager of M/s SK Agencies has accepted that this entity is involved in providing accommodation entries.
In response, the Appellant has submitted that:
1. The purchase made from M/s S.K Agencies are genuine, relying on the following pieces of evidence: -
GST invoices raised by M/s S.K Agencies
2. Transportation Bills/Bilty/Proof of delivery and confirmation from the transporter proving actual delivery of goods.
3. Proof of payments made to M/s S.K Agencies
4. Ledger accounts
5. Stock register showing movement of stock purchased and its sale.
The AO has not pointed out any infirmities in the evidence submitted and thus, chose to not even discuss these in the assessment order.
3. The AO ought to have atleast shared the statement of Sh. Yashpal Gupta, which was so heavily relied upon, even if the cross examination was for on was not allowed. The statement was asked multiple occasions.
On perusal of the records, I find that the basis of addition, as stated in the assessment order has been specifically dealt with by the Appellant. Firstly, it is seen that the Appellant had never relied on this fact alone that the payments had been made through banking channels. Instead, it did submit plethora of evidence to establish genuineness of the transactions with M/s SK Agencies.
Secondly, the Ld. AO has pointed out of difference in the pattern of purchase and payment with the impugned vendor when compared to other vendors. The Ld. AO states that out of total purchases of Rs.170 Crores (approx.), only a meagre sum of Rs. 40 Lacs was paid to the impugned vendor in that previous year and the balance was paid in the next previous year. This, in my view, is actually an intra-contradiction in the order of the Ld. AO as in the case of accommodation entries, the sums are to be paid instantly and the provider shall never allow late payment as the corresponding cash payment would have concluded upon raising of the purchase invoice. The trend pointed by the Ld. AO is very unlikely if a party is engaging in accommodation entries. Even otherwise, as long as the payments have been received, the transaction is complete. These observations are merely circumstantial and cannot lead to any conclusion per se.
Thirdly, the Ld. AO has questioned the non-filing of confirmation by such vendor or any third-party. The Ld. AO has failed to refer to the confirmation filed by the transport who transported such goods from the impugned vendor to the Appellant. It clearly shows that there was actual delivery of goods from the said party and transaction had in fact taken place physically as well.
As for the statement of Sh. Yashpal Gupta, the Ld. AO states that he is the controller of impugned vendor and admitted for having provided accommodation entries through this entity. The initial onus to disprove the statement of Sh. Yashpal Gupta and prove the genuineness of the purchase transaction was on the Appellant The Appellant duly discharged its onus by producing the invoices, transportation bills, stock register and transporter's confirmation. Thus, the onus now shifted to the AO for disproving the evidence filed by the Appellant or by bringing any new material on record. The AO has grossly failed to point out any discrepancy or infirmities in the evidence produced. Also, despite repeated requests, the Ld. AO should have shared the statement of Sh. Yashpal Gupta with the Appellant in consonance with the principles of natural justice.
In respect of facts of the case reliance is placed on the judgment of Hon'ble Supreme Court in the case of Commissioner of Income Tax-7, New Delhi Vs. Odeon Builder Pvt. Limited as reported in (2019) 418 ITR 315 (SC) wherein it has been opined by the Apex Court that :-
Where assessee had submitted purchase bills, transportation bills. confirmed copy of accounts and VAT registration of sellers as also their Income Tax Return and payment was made through cheques, impugned purchases could not be disallowed.
Further, in the case of Principal Commissioner of Income Tax Vs. Sanjay Dhokad, as reported in (2023) 456 ITR 77 (Bombay), Hon'ble High Court of Bombay has ruled that: - "Where assessee, engaged in business of civil construction, made certain purchases in course of its business, since assessee had discharged initial burden of proving genuineness of transactions by providing details of parties, and, further, payments for purchases were made through proper banking channels, no addition under section 69C was to be made on account of such purchases In this case, the Hon'ble High Court Bombay had the occasion to follow its own decision in CIT vs. Nikunj Exim Enterprises (P) Ltd. (2013) 35 taxmann.com 384 (Bom) and distinguish the facts from the judgment of Hon'ble Supreme Court in Pr. CIT vs. NRA Iron and Steel (P) Ltd. (2019) 103 taxmann.com 48 (SC). The entire facts and discussion centered around the discharge of onus by the Assessing Officer/s in these cases. From the facts of the case, it is clear that for once, the assessee had discharged the onus to prove the genuineness of transactions, the onus fell on the Ld. AO to controvert the same.
“In view of the foregoing, I find merit in the arguments of the appellant and that sufficient evidence has been produced thereof to prove the actual delivery of goods amongst other evidence showing genuineness of the transactions. In the light of the above discussion, I, hereby hold the purchase transactions of the appellant with M/s. S.K. Agencies as genuine and delete the addition of Rs.1,70,19,475/- made u/s. 69C of the Act. Here, grounds of appeal 1 to 5 are allowed. Ground No.6 is in respect of initiation of penalty u/s. 271AAC(1) which is consequential in nature and does not require adjudication at this juncture.
In the result, the appeal is allowed.”
Aggrieved by the order of the Ld. CIT(A), the revenue is in appeal before us.
The Ld. DR relied upon the order of the Assessing Officer.
On the other hand, Ld. AR for the assessee reiterated the submissions made before the Ld. CIT(A) and submitted that the Ld. CIT(A) has rightly deleted the additions and the order of the Ld. CIT(A) may be upheld. He further submitted that Ld.AO passed the order without providing the copy of the statement Shri Yas Pal Gupta. He also submitted that assessee has discharged its onus by providing the invoices, transportation bills stock register and transporter’s confirmation.
We have heard the rival submissions and perused the material available record. We observed that the Ld. CIT(A) has examined the issue in the correct prospective and rightly deleted the additions made by the AO. The reasoning and findings of the Ld. CIT(A), while granting relief is on proper appreciation of law expounded by the judicial dicta. We do not find any infirmity in the order of the Ld. CIT(A) and accordingly we do not interfere with the findings of the same. Hence, the grounds taken by the Revenue are dismissed.
In the result, the appeal filed by the revenue is dismissed.