DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-4(2), KOLKATA , AAYAKAR BHAWAN POORVA vs. DIACH CHEMICALS PIGMENTS PRIVATE LIMITED, HOWRAH, DHULAGARH

Per Rajesh Kumar, AM:

The appeal preferred by the assessee is against the order passed by the Ld. Principal Commissioner of Income Tax (Central), Kolkata-2, (hereinafter referred to as the “Ld. PCIT”]

ITA No. 1890/KOL/2024 2. The only issue raised by the Revenue in the various grounds of appeal is against the order of ld. CIT (A) sustaining the addition of ₹1,19,16,598/-being 2% of the impugned purchases despite the fact that the assessee has furnished before the ld. AO all the evidences, documents, books of accounts and the summons under Section 131 of the Act and letters under Section 133(6) were duly received from the suppliers.

case of Radhasoami Satsang vs. Commissioner of Income-tax [1992] 60 Taxman 248 (SC)/[1992] 193 ITR 321 (SC)/[1991] 100 CTR 267 (SC)[15-11-1991], wherein it has held as under:-

“13. We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 14. On these reasonings in the absence of any material change justifying the revenue to take a different view of the matter—and if there was no change it was in support of the assessee—we do not think the question should have been reopened and contrary to what had been decided by the Commissioner in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative, namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under sections 11 and 12. 15. The counsel for the revenue had told us that the facts of this case being very special, nothing should be said in a manner which would have general application. We are inclined to accept this submission and would like to state in clear terms that the decision is confined to the facts of the case and may not be treated as an authority on aspects which have been decided for general application.” 5. The ld. DR on the other hand relied on the order of the ld. AO and submitted that the ld. CIT (A) has erred in reducing the profit rate to 2% as against 3.96% invoked by the ld. AO. Therefore, the order of the ld. CIT (A) may be restored.

all the evidences regarding purchases comprising purchase bills, challans, E way bills, VAT GST return, lorry movement receipts, supplier ledger GST, registration certificate to license, professional tax payment, bank statements, stock register and consumption of goods and corresponding sale of finished goods. We note that the books of accounts of the assessee were audited. We also note that the summons issued u/s 131 of the Act and enquiry letters issued u/s 133(6) of the Act were all complied with by the suppliers. Under these circumstances, we are of the view that the additions sustained by the ld. CIT (A) at the rate of 2% on the basis of suspicion and presumption without there being any substantive basis is incorrect and cannot be sustained. The issue is squarely covered by the decision of the Coordinated Bench in assessee’s own case in in ITA Nos. 1469 & 1470/KOL/2025 & 1979/KOL/2024 (supra), wherein the co- ordinate Bench has held as under:-

“11.1 After hearing the rival contentions and perusing the materials available on record, we find that that the assessee is undisputedly manufacturer and supplier of lead items and has been supplying material to the Exide Industries Ltd. During the year the assessee has been maintaining the regular books of accounts and including the purchase register, sale register, stock register, production records. The assessee is a manufacturing company maintaining regular books of account, including purchase register, sales register, stock register and production records. Financial statements are prepared in compliance with the Accounting Standards notified under the Companies Act, 2013, and the method of accounting has remained unchanged. The books of account were audited under (1) the Companies Act, 2013, (ii) section 44AB of the Income-tax Act, 1961, (ii) the Cost Audit framework, and (iv) the VAT/GST laws, and there is no adverse observation in any of these audit reports. 11.2. We note that during the assessment proceedings, the assessee filed, inter alia, the Audit Report, Tax Audit Report, Cost Audit Report, party-wise details of trade receivables, trade payables, purchases and sales, and a

comparative chart of Gross Profit and Net Profit ratios for FY 2016-17 to FY 2020-21, reproduced below:

Financial Year Assessment Year Gross Profit (%) Net Profit (%) 2016-17 2017-18 3.52 0.99 2017-18 2018-19 3.35 0.82 2018-19 2019-20 2.99 0.44 2019-20 2020-21 4.15 0.97 2020-21 2021-22 3.96 0.91 11.3. The Gross Profit ratio of 3.96% and Net Profit ratio of 0.91% for the year under consideration were entirely consistent with the assessee's profitability track record, and rule out any inflation of purchases. 1.4. We note that the Ld. AO issued notices under section 133(6) to all the six suppliers in question. The notices were duly served on, and complied with by, every supplier directly confirming the transaction with the assessee and furnishing the details, documents and evidences called for by the Ld. AO. In response to the Show Cause Notices, the assessee placed on record comprehensive documentary evidence in respect of each suppliers, including (1) ledger of the supplier in the books of the assessee, (ii) reciprocal ledger of the assessee in the books of the supplier, (iii) tax invoices, e-way bills, lorry receipts, weighment slips and photographs of the delivery vehicle taken at the factory gate, (iv) GST Registration Certificate, GSTR-1 and GSTR-3B returns filed by the supplier, and (v) trade license and professional tax registration action of the supplier. The paper-book references are tabulated below: 11.5. We note that each supplier also helds a valid PAN, GST registration, trade license and professional tax certificate. The suppliers have regularly filed their GST returns, which stand accepted by the GST authorities, and the corresponding input tax credit has been duly allowed to the assessee. All payments to the suppliers have been routed through banking channels. The assessee also placed on record its complete manufacturing process along with details of receipt and consumption of raw material, production of finished goods and corresponding sales. The actual production for the year was marginally higher than the standard yield, demonstrating that the raw material so purchased had been actually consumed in the manufacturing process. 11.6. We also note that the impugned purchases were supported by audited books of account, third-party confirmations obtained directly under section 133(6), exhaustive primary documentation, a yield reconciliation against standard norms, and a GP/NP profile consistent with the assessee's own history and AO had not pointed out any discrepancy or defect in the books of accounts. Therefore, as made by the AO and sustained by the ld. CIT(A) is wrong and and cannot be sustained. Considering facts and circumstances, we are of the view that the addition cannot be made merely on the ground of suspicion as the assessee has already accounted for purchases which had

gone into the production of the finished goods which were sold to the supplier Exide Industries Ltd. In our opinion, the addition sustained by the ld. CIT (A) is only on the basis of estimation and surmises and there is no substantive basis for the same. Similarly, the ld. AO made the addition on the basis of statement recorded during the course of search of the assessee. Under these circumstances, we are of the view that the order of ld. CIT (A) is not correct and accordingly, we set aside the same and direct the ld. AO to delete the addition.” 7. Considering the facts of the case in the light of the aforesaid decision and co-ordinate bench passed in the assessee’s appeal, the cross appeal of the revenue becomes in fructuous and accordingly is dismissed.

ITA No. 480/KOL/2025 8. Coming to assessee’s appeal in ITA No.480/KOL/2025, the assessee has challenged the order passed by the ld. CIT (A) u/s 263 of the Act setting aside the assessment framed u/s 143(3) of the Act dated 31.12.2022 to the AO, despite the fact that the same was subject matter of appeal before ld. CIT (A) as well as before the Income tax appellate tribunal.

Order pronounced on 22.07.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 22.07.2026 Sudip Sarkar, Sr.PS

Asst. Registrar Income Tax Appellate Tribunal, Kolkata