MRIGNAYANI COSMETICS PVT. LTD.,KOLKATA vs. ITO, WARD 12(1), KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, KOLKATA BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI GOPALAN GURUSAMY, ACCOUNTANT MEMBER ITA No.1974/KOL/2026 Assessment Year: 2018-19

Mrignayani Cosmetics Private Vs. ITO, Ward-12(1), Kolkata Limited 78A, Raja Basanta Roy Road, 1st Floor, Kolkata-700029 [PAN: AABCM7965J] APPELLANT RESPONDENT Appellant by : Shri S.K. Tulsiyan and Ms. Puja Somani, ARs Respondent by : Shri Ambrish Mishra, DR Date of hearing : 03.08.2026 Date of Pronouncement : 11.09.2026 O R D E R PER YOGESH KUMAR U.S., JUDICIAL MEMBER: This Appeal is filed by the Assessee against the order of the NFAC, Delhi (‘Ld. CIT(A)’ for short) dated 16.03.2026, passed u/s 250 of the Income Tax Act, 1961 (“the Act”, for short) for the Assessment Year 2018-19.

“1. The assessee filed its return of income for Assessment Year 2018-19 on 31.10.2018 declaring total income of Rs.1,80,280/-. The assessee is engaged in the business of construction and real estate.

ITA No.1974/Kol/2026 Mrignayani Cosmetics Private Limited; A.Y: 2018-19 2. Subsequently, information was received by the Ld. Assessing Officer through Insight Portal that assessee-Company had made bogus purchases of Rs.13,44,000/- from M/s. Barbarik Consultancey Private Limited. Information was also received by the Ld. Assessing Officer through Insight Portal that M/s Saraff Enterprises was found to be indulging in issuing fake invoice to other entities and had evaded GST thereon. The invoices were issued without actual supply of goods and service implying bogus purchases. On going through the list of the entities making alleged bogus purchases from M/s. Saraff Enterprise, it was found that Marignayani Cosmetics Private Limited during the F.Y. 2017- 18 corresponding to A.Y. 2018-19 had made purchases to the tune of Rs.25,51,275/- from Saraff Enterprise. 3. Notice u/s 148A(b) of the Act was issued to the assessee to explain the transactions with M/s. Barbarik Consultancy Private Limited and M/s. Saraff Enterprises during the year. Subsequently, order u/s 148A(d) of the Act was passed and notice u/s 148 of the Act was issued to the assessee dated 12.04.2022. In response, the assessee filed the return of income u/s 148 of the Act on 29-04-2022. However, the return of income filed by the assessee was not acknowledged in the assessment order, for reasons best known to the learned AO. Subsequently, notice u/s 142(1) of the Act was issued to the assessee to explain the transactions with these parties. In response, the assessee filed submission along with the copy of invoices, GST return, bank statement and ledger of the parties in its books. In the submission, the assessee stated that M/s. Barbarik Consultancy Private Limited is a consultant and supplier of labour and man power. M/s. Barbarik Consultancy Private Limited provided labour and other services to the assessee for its construction projects amounting to Rs. 13,44,000/- during the year. The payment was made to them through normal banking channels after deduction of TDS. M/s. Barbarik Consultancy Private Limited had also filed its GST return and the same was reflected in the assessee's GSTR 2A. It was also submitted that the transactions were duly recorded in the audited accounts of the assessee. This proved the genuineness of the transaction with M/s. Barbarik Consultancy Private Limited. W.r.t. transactions with M/s. Saraff Enterprises, it was submitted that the assessee had purchased goods from M/s. Saraff Enterprises amounting to Rs.25,51,275/- during the year. However, the goods were returned back to the said party. As such, neither any deduction was claimed on account of the purchase nor any payment was made to this party. It was submitted that the assessee has not claimed any deduction on account of the alleged purchases made from this party as the goods were returned back and therefore no question of any Page | 2

ITA No.1974/Kol/2026 Mrignayani Cosmetics Private Limited; A.Y: 2018-19 escapement of income arises. As such, no addition could be made w.r.t purchases from this party. 5. However, the Ld. AO was not satisfied with the submission of the assessee and held that the assessee is not able to substantiate the genuineness of the transactions with these parties and added the sums of Rs. 13,44,000/- and Rs. 25,51,275/- to the income of the assessee u/s 69C of the Act.” 3. Aggrieved by the Assessment Order dated 18.03.2024, Assessee preferred an Appeal before the CIT(A). The Ld. CIT(A) vide Order dated 16.03.2026, partly allowed the Appeal of the Assessee. As against the Order of the Ld. CIT(A) dated 16.03.2026, Assessee preferred the present Appeal on following Grounds of Appeal:-

“1). That on the facts and in the circumstances of the case and in law, the order passed by the Ld. CIT(A), NFAC, Delhi u/s 250 of the Act in respect of the appeal filed against assessment order u/s 147 r.w.s. 144B of the Act dated 18/03/2024 is arbitrary, erroneous, opposed to law and contrary to the facts of the case. 2a). That the Ld. CIT(A) erred in law and on facts in confirming the addition of Rs. 13,44,000/- u/s 69C of the Act by treating genuine business expenditure for labour and manpower services paid to M/s Barbarik Consultancy Pvt. Ltd. as unexplained, completely ignoring that the appellant had fully discharged its onus of proof by providing adequate documentary evidence including TDS details, reflection of transaction in the appellant's bank account, audited books, GSTR-2A entries confirming that the service provider uploaded the corresponding GST invoices and filed their returns. 2b). That the Ld. CIT(A) also erred in confirming the addition of Rs.13,44,000/- u/s 69C of the Act merely because third-party notice u/s 133(6) remained uncomplied with by the vendor and also by completely ignoring that the appellant cannot be penalized for the non- cooperation of a third party when the transaction proof is available on record and hence reliance upon the judgment of CIT vs. Precision Finance P. Ltd. (208 ITR 465) is completely distinguishable on facts and does not apply to transaction backed by statutory tax compliance evidence like GST reflection (GSTR-2A) and TDS. 3a). That the Ld. CIT(A) erred in law by remanding/restoring the issue of Rs.25,51,275/- back to the file of the A.O. for fresh verification, Page | 3

ITA No.1974/Kol/2026 Mrignayani Cosmetics Private Limited; A.Y: 2018-19 which is in direct violation of sec. 251(1)(a) of the 1961 Act as the Ld. CIT(A) has no power to set aside or remand an assessment back to the A.O. for fresh enquiry, which was passed u/s 147 of the Act. 3b). That without prejudice, the Ld. CIT(A) failed to exercise his co- terminus powers and erred in not deleting the addition of Rs.25,51,275/- on merits despite clear evidence that the purchases made from M/s Saraff Enterprises were returned, no payments were made and hene no expenditure was claimed in the P/L Account and hence the provisions of sec. 69C of the Act are completely inapplicable. 4. That, as the order u/s 250 of the Act of the Ld. CIT(A), NFAC, Delhi dated 16.03.2026 in view of the above grounds suffers from illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for. 5. That, the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds.”

ITA No.1974/Kol/2026 Mrignayani Cosmetics Private Limited; A.Y: 2018-19 been made merely because the notice issued to the third-party u/s 133(6) of the Act remained uncompiled with by the vendor. Further contended that for the non-corporation of a third party, when the transaction proof is available on record, Assessee cannot be penalized. Thus, sought for deletion of the addition.

ITA No.1974/Kol/2026 Mrignayani Cosmetics Private Limited; A.Y: 2018-19 said entity to the tune of Rs.13,44,000/-. During the assessment proceedings, Assessee filed submission along with the copy of invoices, GST return, bank statement and ledgers of the parties in its books and contended that the said M/s Barbarik Consultancy Private Limited is a consultant and supplier of the labour and manpower, which provided labour and other services to the Assessee for its construction projects amounting to Rs.13,44,000/- exclusive of GST during the year on which TDS of Rs.26,880/- was deducted. The payment was made to the said entity in normal banking channels after deducting TDS and the said entity has also filed GST return and the same was reflected in Assessee’s GSTR-2A. The Assessee contended before the Assessing Officer that the transactions were duly recorded in the audited accounts of the Assessee, which confirmed that the transactions with M/s Barbarik Consultancy Private Limited as genuine one.

ITA No.1974/Kol/2026 Mrignayani Cosmetics Private Limited; A.Y: 2018-19 Consultancy Private Limited has provided labour and other services to the Assessee in its construction projects during the year under consideration and the payment was made through banking channel after deduction of TDS. The source of payment was explained as ‘Revenue from Operations’ of Rs.2,67,71,929/- received by the Assessee which was duly credited in the Profit and Loss account which can be corroborated with Page No.16 of the Paper Book. Further, the said M/s Barbarik Consultancy Private Limited as also filed GST return which is reflected in the Assessee’s GST-2A and the said transactions were duly recorded in the audited accounts of the Assessee. It is observed that the Assessing Officer has not controverted the document produced by the Assessee. However, it is observed by the Assessing Officer that the noticed issued u/s 133(6) of the Act to M/s Barbaric Consultancy Private Limited has not been replied by the said entity. It is an admitted fact that the said company itself has been struck off, therefore, for the very same reason, the notice issued u/s 133(6) of the Act could not have been replied by M/s Barbaric Consultancy Private Limited. Be that as may, non-compliance of the notice by the third party cannot be a ground to treat the transaction as non-genuine. The Assessing Officer committed error in rejecting the evidences submitted by the Assessee without even making further enquiry. The Hon’ble Apex Court in the case of

ITA No.1974/Kol/2026 Mrignayani Cosmetics Private Limited; A.Y: 2018-19 CIT Vs. Orissa Corporation Private Limited (1986) 159 ITR 0078 held as under:-

“The assessee had given the names and address of the alleged creditors. It was in the knowledge of the Revenue that the said creditors were income-tax assessees. Their index number was in the file of the Revenue. The Revenue, apart from issuing notice u/s 131 at the instance of the assessee, did not pursue the matter further. The Revenue did not examine the source of the income of the said alleged creditors to find out whether they were credit-worthy or were such who could advance the allowed loans. There was no effort made to pursue the so-called alleged creditors. In those circumstances, the assessee could not do any further. In the premise, if the Tribunal came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. If the conclusion is based on some evidence on which a conclusion could be arrived at, no question of law as such arises. It cannot, therefore, be said that any question of law arose in these cases. The High Court was, therefore, right in refusing to refer the question sought for.” 9. In view of the above discussion, we find merit in the Ground No.2(a) and 2(b) of the Assessee’s Grounds of Appeal. Accordingly, the addition of Rs.13,44,000/- made by the Assessing Officer u/s 69C of the Act which has been confirmed by the Ld. CIT(A) is hereby deleted. Accordingly, the Ground No.2(a) and 2(b) are allowed.

ITA No.1974/Kol/2026 Mrignayani Cosmetics Private Limited; A.Y: 2018-19 the file of the Assessing Officer, which was passed u/s 147 of the Act. The Learned Counsel also submitted that the Ld. CIT(A) committed error in not deleting the addition of Rs.25,51,275/-despite clear evidence produced to prove that the purchases were made from M/s Saraff Enterprises were returned, no payment was made and no expenditure was claimed in the Profit and Loss account, therefore, invocation of provisions of Section 69C of the Act by the Assessing Officer is erroneous. Thus, sought for allowing the Ground No.3(a) and 3(b) of the Appeal.

ITA No.1974/Kol/2026 Mrignayani Cosmetics Private Limited; A.Y: 2018-19 13. During the assessment proceedings, the Assessing Officer called the Assessee to explain the genuineness of the said transactions. In reply, Assessee stated that Assessee had purchased goods from M/s Saraff Enterprises amounting to Rs.25,51,275/- during the year under consideration, however, the goods were returned back to the said party in the immediately succeeding year and therefore no payment was required to be made to the said party. It was the case of the Assessee that Assessee has not claimed any deduction on account of the said purchases made from the said party as goods were returned back in the succeeding year. To substantiate the said contention, Assessee also produced the ledger of the party at Page No.4 & 5 of the Paper Book. Further, the Assessee claimed that purchases made from the said party remained unsold during the year and therefore the same were obviously forms part of the closing stock for the year of the current year which was duly credited to the Profit and Loss Account. In other words, Purchases account was debited in the Profit and Loss Account and Stock Account was credited, thus the net effect of those entries was tax neutral. The Assessee has also produced Profit and Loss account of the company at Page No.16 and 26 and on perusal of the Note 18, it is found that Cost of product sold was Rs.1,64,02,272/-. The breakup of the same is tabulated below:-

ITA No.1974/Kol/2026 Mrignayani Cosmetics Private Limited; A.Y: 2018-19 Particulars As on 31.03.2018 Opening Stock of WIP 2,32,40,327.38 Add: Purchases and Direct Expenses From Saraff Enterprises 25,51,275.00 From Other parties 64,11,529.40 Direct Expenses 1,26,07,364.50 Less: Closing Stock of WIP (2,84,08,223.87) Cost of Goods Sold 1,64,02,272.41

ITA No.1974/Kol/2026 Mrignayani Cosmetics Private Limited; A.Y: 2018-19 the Assessee during the year with respect to purchases made from the M/s Saraff Enterprises. The said purchases/ expenditure was neutralized by a corresponding credit entry made in the closing stock as the purchases made from the said party remained unsold during the year. In view of the above, we find no reason to sustain the addition made by the Assessing Officer. Accordingly, the addition of Rs.25,51,275/- made u/s 69C of the Act is hereby deleted. Thus, the Assessee’s Grounds No.3(a) and 3(b) are allowed.

Order pronounced on 11.09.2026.

Sd/- Sd/- (GOPALAN GURUSAMY) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 11.09.2026 DP, PS Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR) //TRUE COPY//