DCIT CENTRAL CIRCLE-3(1) MUMBAI, MUMBAI vs. EVEREST FOOD PRODUCTS PRIVATE LIMITED, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH MUMBAI BEFORE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER AND SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 338/MUM/2026 Assessment Year: 2022-23

DCIT Central Circle-3(1), Everest Food Products Private Mumbai Limited Off No. 505, Commercial Building Krushal Complex, Vs. G. M. Road, Tilak Nagar Chembur, Mumbai - 400089 (PAN: AAFCE8947A) (Appellant) (Respondent) Present for: Assessee : Shri Paresh Shaparia, CA Revenue : Shri Ritesh Misra, CIT DR Date of Hearing : 07.04.2026 Date of Pronouncement : 06.07.2026 O R D E R PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the Revenue is against the order of CIT (A) 51, Mumbai, vide order no. ITBA/APL/S/250/2025-26/1082437204(1), dated 10.11.2025, passed against the assessment order by ACIT, Central Circle 3(1), Mumbai, u/s. 143(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 31.03.2024, for Assessment Year 2022-23.

2 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 1961, without appreciating that the assessee failed to establish that the impugned payments were pure reimbursements devoid of any income element. 2. The learned CIT(A) failed to appreciate that, in the absence of any written agreement or contemporaneous contractual obligation, the alleged reimbursements towards TSR expenses cannot be treated as reimbursement in law and are in the nature of consideration for services rendered, liable to tax deduction at source. 3. The learned CIT(A) erred in extrapolating the facts of a single distributor to all other distributors, ignoring that the onus lay on the assessee to substantiate, party-wise and transaction-wise, that each payment was a reimbursement without profit or service element. 4. The learned CIT(A) erred in law in holding that absence of a written contract is immaterial, despite the fact that the existence of a contractual obligation is a sine qua non for treating any payment as reimbursement. 5. The learned CIT(A) failed to appreciate that the Trainee Sales Representatives worked exclusively for promotion and sale of the assessee's products, under monitoring and supervision linked to the assesse's business, thereby rendering marketing and promotional services attracting the provisions of section 194C / 194Н. 6. The learned CIT(A) erred in law in diluting the mandatory provisions of section 40(a)(ia) by importing equitable considerations, contrary to the statutory scheme which mandates disallowance once default in deduction of tax at source is established. 7. On facts and in law, the Ld. CIT(A) erred in deleting the disallowance of 51,05,57,000/- made by the Assessing Officer on account of provision for "additional discount under special scheme", without appreciating that the said provision represented an unascertained and contingent liability as on 31.03.2022.The Ld. CIT(A) erred in relying upon sample-based and selective evidence in respect of a provision relating to more than 200 distributors involving a substantial sum of ₹51.05 crore, without requiring complete and comprehensive verification. 8. The Ld. CIT(A) erred in law in relying upon subsequent issuance and utilisation of credit notes to conclude that the liability had accrued as on 31.03.2022, contrary to the settled principle that subsequent events cannot determine accrual of liability in an earlier year. 9. Without prejudice, the Ld. CIT(A) erred in holding that the provisions of section 194H were not applicable, despite the fact that the so-called additional discount was a post-sale incentive linked to achievement of targets, partaking the character of commission/incentive, attracting deduction of tax at source. 10. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 21,47,06,983/- made by the AO u/s 69C of the Income-tax Act, 1961, without appreciating that the assessee failed to establish the genuineness of the expenditure?

3 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 11.Whether the Ld. CIT(A) erred in law in holding that the assessee has no responsibility to prove the tax compliance and existence of the suppliers/service providers, despite complete non-compliance of notices issued u/s 133(6)? 12. Whether the Ld. CIT(A) erred in ignoring the fact that none of the seven parties were produced for verification and that non-response to statutory notices renders the transactions unverifiable and non-genuine? 13.Whether the Ld. CIT(A) erred in law in accepting invoices, e-way bills, and GST documents at face value without independent corroboration or third-party verification? 2.1. There are three issues involved in the present appeal filed by the Revenue. Ground No.1 to 6, they all relate to disallowance made u/s. 40(a)(ia) of Rs.1,11,79,405/- being 30% of the TSR expenses which according to the assessee are payments in the nature of reimbursement with out any income element. Second issue is in respect of disallowance of provision created for additional discount under special scheme amounting to Rs.51,05,57,000/- which the ld. Assessing Officer has treated it as un-ascertained and contingent liability covered by Ground No.7 to 9. Ground Nos. 10 to 14 relates to addition made u/s. 69C amounting to Rs.21,47,06,983/- as assessee could not prove the genuineness of the expenditure claimed by it. We take up each of the issue seriatim.

4 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23

Sr. Particulars Section Amount of No. Disallowance 1. Trainee Sales Disallowance 1,11,79,405 representative (TSR) u/s 40(a)(ia) Expenses 2. Provision for additional Disallowance of 51,05,57,000 discount under special provisions scheme 3. Non-genuine purchases Disallowance 21,47,06,983 u/s 69C Total 1,01,00,38,015

3.1. For the first issue, assessee claimed total expenses of Rs.3,72,64,683/- towards Training Sales Representatives (TSR) expenses, on which ld. Assessing Officer observed that TDS ought to have been done as done by the assessee in the case of one party, Teamhalt Pvt. Ltd. Since assessee has not done TDS on the said TSR expenses, he disallowed 30% of the same u/s. 40(a)(ia) by holding that these payments cannot be treated as reimbursement and were in the nature of contract or commission payments, liable to TDS.

5 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 towards these expenses of TSRs does not carry any income component and therefore, it is not liable to deduct tax at source on such payments which are pure reimbursements in nature. According to the assessee, it has a wide distribution network across the country so as cater its products to the last mile of the customers since its products are masalas and spices regularly used in the household. In the line of business in which assessee is, its sales are channelled through very wide network of distributors operating on a principal-to-principal basis. For the arrangement of reimbursement of TSR expenses, these are ordinarily governed by established commercial practice, consistent transaction pattern and supporting documentation which collectively demonstrates the genuineness and nature of the payment. According to the assesse, lack of formal contract or a written agreement cannot be the basis for disallowance made by the ld. Assessing Officer, requiring TDS to be done on such payments.

4.1. Assessee furnished extensive documentation on sample basis of one distributor to demonstrate the legitimacy and justification of the claim made by it. These evidences include- i. the distributor's invoice to the assessee clearly identifying the individual TSRs engaged exclusively for the assessee’s products and the precise salary paid to each, ii. copies of the distributor's bank statements evidencing direct salary payments to those employees, iii. attendance records and daily tour sheets showing the territories covered and orders procured for the assessee, iv. conveyance and travel claims duly supported by vouchers, v. email correspondence between the distributor and the assessee requesting reimbursement of the salary already paid, and

6 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 vi. internal verification notes by the assessee's Area Sales Manager confirming that the reimbursement related to verified work performed for the assessee.

4.2. According to the assesse, these documentary evidences demonstrate a direct link between the expenditure incurred by the distributor and reimbursement claimed by it, without any profit element.

4.3. In furtherance to these documents, assessee also furnished party- wise expense details, invoices, salary sheets, bank statement of distributors, attendance register and correspondence, evidencing that the payments were claimed as reimbursement by the distributor. In this regard, we perused the paper book placed on record containing these documents. We also take note of the fact that assessee has submitted extensive documentary evidences in the course of assessment proceedings. Despite this, ld. Assessing Officer has primarily drawn adverse inference for want of formal written agreement with the distributors.

4.4. In respect of reference made by the ld. Assessing Officer to one party Teamhalt Pvt. Ltd. in respect of which assessee did TDS for the payment made to it, it was explained that the nature of transaction undertaken by the assessee with this party was different from the TSR expenses which were reimbursed to the distributors. With this party, the payment was on account of promotional services provided by it as an independent marketing services provider at malls and exhibitions. On this account, assessee did TDS u/s. 194C and therefore, ld. Assessing Officer has grossly erred in equating treatment done for the

7 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 transaction with this one party with that of TSR expense reimbursement done to all the distributors.

5.1. In this regard, we find that the arrangement between the assessee and its distributor network is that of principal-to-principal basis whereby TSRs are engaged and employed by the distributor itself who makes the payment to them directly as its employees who are primarily engaged in marketing, promotion and selling of products of the assessee. In order to ensure that these TSRs work for the products of the assessee, required control sheets are in place based on which these TSRs are also given incentive when they outperform the targets given to them. These facts emanate from the material placed on record which has been perused by us. Assessee has adequately demonstrated on a sample basis that what is paid by the distributor to its employees (TSRs) is claimed as such by it from the assessee by putting up its claim supported by the relevant documentary evidences. Certain e-mail communication in this regard have also been perused which demonstrates this fact. Each distributor in the capacity of an employer is required to comply with its own TDS compliance as applicable u/s 192 for the payments made by it to their respective TSR employees.

8 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 Such a responsibility would not fall on the assessee as the arrangement is on a principal-to-principal basis. What is of essence in the present transaction is that whether any income element is embedded in the claim made by the distributor from the assessee which on perusal of the documents, we find that the claim is on a cost to cost basis without any mark up or element of profit. It is factually demonstrated before us by way of records that what is incurred by the distributor towards TSR expenses is claimed as such from the assessee.

5.2. In view of these factual position, which remains uncontroverted, we do not find any reason to interfere with the findings arrived at by the ld. CIT(A) in this regard, deleting the disallowance made by the ld. Assessing Officer. Accordingly, relevant ground nos. 1 to 6 raised by the Revenue are dismissed.

9 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 6.1. Assessee has made a detailed submission explaining how the special discount scheme is operated in its business for boosting the sales of its products. The same is extracted below for ready reference: “The special discount scheme is operated to boost the sales of company’s product in a particular market covering the city / state. The scheme is designed as per the market dynamics, depending on the market requirement and competitor activity. The scheme is operated on monthly basis with prior sanction from the Branch Manager of each zone. The scheme is operated through company’s distribution channel to the end retailer. There are various types of schemes operated in the Market, details as given below: • Free article (In regular Trade scheme). • Bond scheme. • Coupon scheme. • Power / Complimentary scheme. • QPS card scheme. The schemes operated in the market to the retail outlets are for the following reasons: • To encourage the sale of our product. • To develop new market for our Product line. • To minimize the presence of the competitor’s brand. • For launching new product in the market The appellant has very stringent and robust procedure for issue of special discounts on schemes. On the scheme being operative, the entire detail of the scheme is manually entered in company’s secondary claim format which consists of Form 1/3 (Sales Distributors retail market invoice details); Form ‘1/2 (Page wise Summary of 1/3 ) and Form 1/1 (Total detail of Monthly claim of the distributor). Sample copies of above Forms are part submission made. This format is than duly checked by all the seniors which is than duly stamped and signed by the respective distributor (whereby the is confirmation from the distributor) and finally it is passed by the Branch Head. After approval and passing by Branch Head the supporting documents are forwarded to Head Office for clearance. Since this process takes more than two months the assessee Company facilitates the distributor by giving them Special Discount in their primary purchase of consignment. Once the claim is scrutinized at the H.O. for the issue of credit note the following process is followed: From the total disbursement of the claim amount the special discount provided for that particular month is deducted and the final amount after deduction is reimbursed to the distributor as Credit note. In case if the Special discount is more than the claim amount than in that case debit note is issued to the distributor.

10 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 For understanding how the additional discount is computed a detailed working for discount of Rs. 12,019/- given in case of M/s Taj Trading Company under special discount scheme is enclosed as (Refer Factual PB Page no. 509-520) The company raises Credit Notes (CN)s during the subsequent years based on the claims received from the Clearing and Forwarding /Distributor. The company also periodically reviews to check on whether the CNs so raised are against the Provision which are based on the actual sales target achieved based on the schemes given during the relevant financial year. The details of the utilisation of the CNs by Party which are typically within +- 5% of the provision made is enclosed as (Refer Factual PB Page no. 503-508) Ledger copies of the parties as mentioned above has been attached (Refer Factual PB Page no.1061-1133) for the financial year 2021-22 and subsequent year 2022-23 where reference is given to ‘document description - customer credit memo’ where in it can be seen that credit notes have been issued by appellant to the aforesaid parties which goes to prove that there is subsequent utilization of provisions created as on March 2022. On the basis of scheme/offer, the discount is recorded in the books (which is reduced from sales) and for the provision for scheme. The following accounting entry is passed for Provision for Additional discount under special scheme Sales - Special Scheme Dr Sales - Special Discount Dr To CN Provision - 2021 Cr As and when the claims are received from Clearing and Forwarding /Distributor parties, the utilization entry is passed in the books by issuing the Credit Notes as CN Provision - 2021 Dr To Distributor Cr The provision is based on actual performance and achievement of scheme targets by dealers of various schemes and not merely an adhoc payment, it can be observed that the provisions are ascertained, and which are based on each dealer’s working and the said amounts are credited to party’s account subsequently. The said discount against these sales made to distributors is in the nature of cash discounts. Thus, the liability/provision is an ascertained liability.

6.2. By following the above methodology, assessee arrived at the amount of additional discount under special scheme to be provided in its books of accounts for the year under consideration, amounting to Rs.51,05,57,000/-. It explained how this provision, was utilised for claiming its deduction as ld. Assessing Officer observed that if regular

11 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 provision is made and no claim is made against that provision, then there should have been an add back in the computation of income. To mitigate this observation of ld. Assessing Officer, detailed tabulated details as submitted by the assessee is extracted below:

Provision for Additional discount under special scheme as on 31.3.2022 Particulars Amount 51,05,57,000 Total Provision for Additional discount under special scheme for 31.03.2022 Less: Utilized in FY 2022-23 49,31,65,290 Less: Utilized till 31.10.2023 (before filing of return for AY 2023- 1,69,75,509 24) Less: Utilized from 1.11.2023 to 29.02.2024 4,02,502 Unutilised 13,699

6.3. Assessee also furnished detailed year wise/party wise working as to how the amount of provision for additional discount under special scheme was utilised. It is worth noting a fact that there are more than 230 distributors involved in the sales, marketing and promotion of the products of the assessee. Assessee explained that there is a due process of issuing credit notes which are based on claims received from the distributors which are periodically reviewed based on actual sales target achieved under the given scheme. Relevant documentary evidence in this regard were furnished before the authorities below which included copies of ledger accounts of the parties, party wise details with their PAN and the amount towards the said additional discount. Assessee also furnished sample working of discount given to one party with relevant supporting which included monthly scheme summary in Form 1/1, scheme claim in Form 1/2 and scheme claim in Form 1/3 which gives details of the product sold by the distributor to the retailers. According to the assessee, the provision so created is based on actual

12 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 sales performance and achievement of the scheme targets by the distributors/dealers and is not an ad-hoc exercise of creating such a provision which is verifiable from the documentary evidence available with it. These documents go through proper check n’ balance as explained in the scheme narrated above.

6.4. On the view taken by the ld. Assessing Officer that even if the said provisioning is considered as an unascertained liability, then also, assessee ought to have complied with the provisions of TDS while making such payments to the distributors/dealers, it is submitted by the assessee that the transaction towards additional discount under special scheme is on a principal to principal basis and there is no element of commission involved in the same. The amount claimed by the assessee is a discount on sales which is determined based on actual sales performance and achievements of the scheme targets by the distributors/dealers.

13 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 relates and the provision is discharged subsequently by issuing credit notes which are adjusted against future invoices. Further, these relate to trade discount recorded as reduction of sales and is not in the nature of payment of commission so as to attract TDS u/s. 194H. On the observation of ld. Assessing Officer requiring party wise ledger confirmation which comprises more than 230 distributors, it is noted that for such a large distribution network, the scheme floated by the assessee operates by standardised forms comprising of internal check mechanism which has been substantiated by the assessee by putting on record sample chain of documents, which is verifiable and remains undisputed and uncontroverted. These sample documentary evidence demonstrates the claim of the assessee from sales made and credit notes issued. No discrepancy or deficiency has been pointed out in the documentary evidence furnished by the assessee.

8.1. In the conspectus of the above detailed narration of the factual position, we are in agreement with the fact based finding arrived at by the ld. CIT(A), deleting the disallowance made by the ld. Assessing Officer. Accordingly, ground nos. 7 to 9 raised by the Revenue are dismissed.

14 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 Sr. Party PAN Party Name Aggregated No. Transaction Value (Rs.) 1 AEZPR2846A Jayapaul Rajesh 16,80,000

2 AAFCC1525 Carnival Films Private 3,37,825 N Limited 3 ADYPT4545J Ravindra Rangnath Tiwari 22,73,862

4 ABNFM3466 Mrg Enterprises 20,57,37,058 E 5 ADLPT4928Q Shyam Trilokchand Tanna 30,79,760

6 ADYFS9763K S.K. Filter Fabric 3,83,926

7 AAKPB0123 Pankaj Haridas Bhatia 12,14,552 B Total 21,47,06,983

Sr. Particulars Before Before C1T Page No. No. AO (A) 9 Jayapaul Rajesh (Proprietor of Paramount Trading Company) a Sample Invoices along with Goods Yes Yes 106-117 received note. In House QC report, E- way Bill, Lorry receipt b Ledger Account Yes Yes 118

15 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 c Bank Statement highlighting payments Yes Yes 119 d Signed ledger confirmation from Yes Yes 120 Jayapaul Rajesh e GSTR2A Yes Yes 362

10 Carnival Films Private Limited a Sample Invoices Yes Yes 121-125 b Ledger Account Yes Yes 126 C Ledger confirmations along with GSTR Yes Yes 363-368 2A

11 Ravindra Rangnath Tiwari (Proprietor of Icon Express Courier) a. Sample Invoices along with Blue dart Yes Yes 127-164 supporting evidence b. Ledger Account Yes Yes 165 c. Bank Statement highlighting payments Yes Yes 166-178 d. Ledger confirmations along with GSTR Yes Yes 369-371 2A

12 MRG Enterprises a. Sample Invoices along with Goods Yes Yes 179-198 received note, In House QC report, E- way Bill, Goods storage list b. Ledger Account Yes Yes 199-200 c. Bank Statement highlighting pavments Yes Yes 201-204 d. Signed ledger confirmation from MRG Yes Yes 205-209 Enterprises e. Ledger confirmations along with GSTR Yes Yes 372-380 2A

13 Shyam Trilokchand Tanna (Proprietor of Krishna' Namo Dry fruits) a. Sample Invoices along with Goods Yes Yes 210-221 received note, E-way Bill b. Ledger Account Yes Yes 222

16 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23

c. Bank Statement highlighting payments Yes Yes 223-225 d. Ledger confirmations along with Yes Yes 381-382 GSTR 2A

14 S.K. Filter Fabric a. Sample Invoices Yes Yes 226-230 b. Ledger Account Yes Yes 231-232 c. Bank Statement highlighting Yes Yes 233-240 payments e. Ledger confirmations along with Yes Yes 383-384 GSTR 2A

IS Pankaj Haridas Bhatia (Proprietor of Tulsi Decorator) a. Sample Invoices Yes Yes 241-244 b. Ledger Account Yes Yes 245 c. Bank Statement highlighting Yes Yes 246-248 payments d. Ledger confirmations along with Yes Yes 385-386 GSTR 2A

17 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 Rs.20,74,17,058/- out of the total addition of Rs. 21,47,06,093/- comprising of 96.60% of the total addition. The Coordinate Bench after dealing with each of the parties, documentary evidences and the factual matrix concluded that addition made by the ld. Assessing Officer is not justifiable. It also referred to the detailed fact based findings of the ld. CIT(A) and found no infirmity with the same while deleting the addition so made by the ld. Assessing Officer. Relevant extracts in this regard are reproduced for ready reference: “9. The Ld. AO has sought for the details pertaining to the ledger account, invoices, proof of transportation, delivery challans, proof of payments from the assessee with regard to the above mentioned parties and had also issued notices u/s 133(6) of the Act to the said parties. With regard to the first party namely Jayapaul Rajesh, the Ld. AO made an addition on the impugned purchases amounting to Rs.2,62,73,000/- on the ground that the assessee has not submitted the ledger confirmation of the party and with regard to second party namely Mr. Gulmi the Ld. AO observed that though GST return has been filed by this party regularly no audit financials and return of income has been filed inspite of huge turnover made by the said party. With regard to the third party namely Madhukar Gorakhnath Devkar and MRG Enterprises though the ledger confirmation was filed, the Ld. AO held the same to be bogus for the reason that even these said parties have not filed their returns of income though GST return was filed regularly by the said entities. The Ld. AO proceeded to make an addition/disallowance of Rs.25,55,69,713/- which is the GP @ 46% on the total alleged transaction of Rs.55,55,83,331/-. …………… ……10. From the above observation, it is evident that the assessee has furnished various documentary evidences such as ledger account, invoice copies with goods receipt notes, E-way bills, transportation receipts and bank statement reflecting payments made regularly and also the ITR details of party No.1 for A.Y. 2018- 19, 2019-20 & 2020-21. It is also an undisputed fact that these parties have been filing GST returns regularly showing substantial business transaction and also the finding of the Ld. CIT(A) that none of these parties are "specified persons" u/s 206AB & 206CCA, which substantiates that they have duly filed their return of income for the impugned year and disallowance of expenses towards purchases cannot be made merely on the ground that these parties have not filed �ायurn of income, is not justifiable in our view. Further, it is also observed that the d has not given a finding on the veracity of the documentary evidences furnished by the assessee nor has she stated that these parties are alleged to be accommodation entry providers engaged in providing bogus purchase bills which is the modus operandi of a regular accommodation entry provider. Pertinently, we also find no observation as to whether any enquiry was conducted in these companies as to their existence or whether or not there is any business transaction carried out by these companies has not been examined by the Ld. AO. The purported bogus purchases are said to have been backed by bills and vouchers along with the books of accounts of the assessee duly audited where the said transactions have been recorded, corroborates the fact that the assessee has proved the transaction to be genuine. There is no iota of doubt that the Id. AO has failed to establish that

18 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 the parties through whom the assessee has purchased are accommodation entry providers neither by any documentary evidences nor by circumstantial evidences where the Ld. AO has not faulted with the supporting documents filed by the assessee to substantiate its case and we also reiterate the fact that no inquiry was carried out by the Revenue to justify the disallowance of 46% of the purchases by holding the same to be bogus. It is also a settled proposition of law that the Revenue while disallowing bogus purchases would necessarily have to ignore the corresponding sales recorded against the alleged parties, which has not been done so in the present case in hand. In the absence of these findings, we do not find any justification in upholding the addition/disallowance made by the Ld. AO and thereby holding that there is no infirmity in the order of the Ld. CIT(A) in deleting the addition/disallowance made in the hands of the assessee and the same warrants no interference. Hence, we dismiss the grounds of appeal raised by the Revenue on the above observation.”

19 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 registration details, invoices, goods receipt notes, transportation challans, bank statements evidencing payments and GST-2A statements showing input tax credit allowed by the tax authorities. He also records furnishing of primary documentary evidences such as e- way bills, quality reports, weighment or cold storage proof. None of these documents has been disproved by the ld. Assessing Officer nor has he pointed out any discrepancy or deficiency in the same. He gives his categorical finding after due verification of the records furnished by the assessee that documentary trail substantiates the genuineness of the expenditure and no contrary material has been brought on record to show that the documentation furnished by the assessee is not genuine. On the approach of ld. Assessing Officer to treat these purchase/expense transactions as not genuine based on tax behaviour of the parties, it has been objectively analysed by the ld. CIT(A) where upon he observes that assessee cannot be entrusted to discharge such onus to know the tax behaviour of the party to whom it is making the payment which is beyond its control. What is in the control of the assessee has been adequately and demonstrably discharged which has been subjected to due verification and examination as observed by the ld. CIT(A).

12.1. The meritorious adjudication done by the ld. CIT(A) in this regard is extracted below for ready reference: 8.4.1 I have carefully considered the assessment order, the detailed submissions made by the appellant, the supporting documentary evidence placed on record, and the judicial authorities relied upon. The AO has disallowed a sum of Rs.21,47,06,983/- under section 69C of the Income-tax Act, 1961, holding that purchases and expenses made from seven parties were non-genuine, primarily on the ground that the said parties either did not file their returns of income or failed to respond to notices issued under section 133(6). The AO has not disputed that the appellant has recorded the purchases and expenses in its regular books of account, that the books are duly audited under section 44AB, and that the payments to the suppliers and service providers were made through normal banking channels. There is also no finding that any of these payments were returned to the appellant in cash, or that the purchases were found to be inflated

20 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 or unaccounted for. The disallowance is based solely on the non-response of certain suppliers to notices issued under section 133(6) and the non-filing of their income-tax returns. 8.4.2 Before going into individual parties and ascertaining the nature of each transaction, I feel fit to first adjudicate on the action of the AO to suspect these payments for lack of adequate tax compliance on the part of the payees. The AO has proceeded to examine the tax behaviour of the persons to whom these payments have been made and has made this addition since they have not been regular in filing of return of income. In my view, with respect to expenses debited in the profit & loss account that are routine business expenses and otherwise satisfy the conditions laid down in Section 37(1) of the Act, the onus of the appellant is limited and does not extend to ensuring that the parties to whom the appellant is making these payments are tax compliant. It is also to be noted that none of these parties are admitted or identified accommodation entry providers. The appellant makes payments to thousands of parties in a financial year and to expect that the appellant shall examine the tax behaviour of each of these parties before making payments to them shall cast an enormous and impossible burden on the appellant. Moreover, there is no available SOP or database from which the return filing behaviour of a party can be known and hence the appellant cannot be in a position to know the tax behaviour of the entity to whom it is making the payment. It is also pertinent to note that there is no section in the Income Tax Act which prescribed such a direct disallowance on the basis of tax behaviour of the recipient. 8.4.3 Another finding of the AO in treating certain expenses as bogus is the fact of non compliance of the party to the notice issued by the AO. In this connection, the Courts have consistently held that non-compliance with a summons by itself is insufficient to treat an expense as bogus; rather, it may merely support an adverse inference when considered alongside other evidence. In CIT v. Orissa Corporation P. Ltd. [(1986) 159 ITR 78 (SC)], the Supreme Court ruled that once the assessee furnishes credible documents—such as names/addresses of creditors, confirmation letters, discharged Hundis and proof of banking transactions—the onus shifts to the Revenue, and simply because a summoned party fails to appear, one cannot automatically disbelieve the genuineness of the transaction. Similarly, the Supreme Court in CIT v. Lovely Exports (P.) Ltd. [(2008) 216 CTR 195 (SC)] reiterated that when share-application money (or any credit) is supported by prima facie evidence of identity and transactional bona fides, the Revenue must independently disprove it and non-appearance under summons is at best a secondary consideration. Thus, mere non-compliance cannot substantiate addition and there must be independent deficiencies in the submissions of the appellant, such as absence of documentary evidence, lack of banking trail, suspicious payment patterns, or contradictory records to legitimately disallow an expense. 8.4.4 The legal requirement under section 69C is that the AO must bring material evidence to establish that the expenditure has been incurred but not explained by the assessee. Where the assessee has substantiated the purchases with primary documentary evidence such as purchase invoices, goods receipt notes, e-way bills, transportation and quality reports, weighment or cold-storage proof, and payment through banking channels duly reflected in the audited accounts, the onus shifts to the AO to prove that such documentation is fabricated or that

21 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 the goods were not received. In the present case, no such evidence is available on record. 8.4.5 In the present case, the appellant has filed exhaustive evidence in support of each of the impugned transactions, including GST registration details, invoices, goods receipt notes, transportation challans, bank statements evidencing payments, and GST-2A statements showing input tax credit having been allowed by the tax authorities. The genuineness of the purchases and expenses is thus supported by independent third-party documentation under the GST regime. 8.4.6 Party-wise Findings (1) Jayapaul Rajesh (Proprietor – Paramount Trading Co.) – Rs.16,80,000/- Upon perusal of the submission of the appellant it is seen that the appellant had purchased cardamom from this party. There is no specific finding in the order of the AO, other than the non filing of return and non compliance to notice U/s 133(6) by this party. The appellant had submitted following documents before the AO at the time of assessment proceedings: (i) Party Ledger (ii) Invoice copies along with goods receipt note (iii) E-way Bill (iv) Transportation receipt (v) Quality check report (vi) Bank statement highlighting the payment made. The AO has not taken cognisance of these documents. However, in my considered view once the appellant furnishes the proof of movement of goods and the proof of delivery of the goods, it has discharged its onus in proving that the payment is genuine. In the instant case the appellant has filed the proof of movement of goods by way of transportation receipt and E-way bill and also the proof of delivery of goods by way of goods receipt note and quality check report. The AO has not pointed out that these documents are fabricated. Further the use of cardamom in making of the masala which is the end product of the appellant is undisputed and hence there can be no doubt as regard to the use of this good for business purpose. In view of the same and in view of the fact that the appellant has been able to prove the movement of good and the actual delivery of good, the action of the AO in holding that this purchase is bogus cannot be held to be correct. The addition of Rs.16,80,000/- on account of purchases made from this party that has bene treated as bogus by the AO is deleted. (2) Carnival Films Pvt. Ltd. – Rs.3,37,825/- Upon perusal of the submission of the appellant it is seen that this payment has been done for advertisement made on screen in various theatres. The AO has not given any specific finding in treating this expense as bogus. The appellant on the other hand has furnished documentary evidence such as vendor ledger, tax invoices, TDS deduction/Challan details and bank payment proof. The appellant has also furnished copy of Form GST R-2A wherein input tax credit in respect of this payment has been duly allowed. Since there is no specific finding and the appellant has been able to substantiate the genuinety of the payment by way of independent documents and also since there is no contrary finding that the campaign did not run or that consideration was returned to the appellant, the

22 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 onus cast upon the appellant to justify the genuiness of the expense stands discharged. The addition of Rs.3,37,825/- is therefore deleted. (3) Ravindra Rangnath Tiwari (Proprietor – Icon Express Courier) – Rs.22,73,862/- The nature of transaction of the appellant with this party is availing of courier service. The AO has not given any specific finding in treating this expense as bogus. The appellant on the other hand has furnished documentary evidence such as vendor ledger, tax invoices, TDS deduction/Challan details and bank payment proof. The appellant has also furnished copy of Form GST R-2A wherein input tax credit in respect of this payment has been duly allowed. Since there is no specific finding and the appellant has been able to substantiate the genuinety of the payment by way of independent documents and also since there is no contrary finding that the services were not taken or that consideration was returned to the appellant, the onus cast upon the appellant to justify the genuiness of the expense stands discharged. The addition of Rs.22,73,862/- is therefore deleted. (4) MRG Enterprises – Rs.20,57,37,058/- Upon perusal of the submission of the appellant it is seen that the appellant had purchased dry chilli from this party. There is no specific finding in the order of the AO, other than the non filing of return and non compliance to notice U/s 133(6) by this party. The appellant had submitted following documents before the AO at the time of assessment proceedings: (i) Party Ledger (ii) Invoice copies along with goods receipt note (iii) E-way Bill (iv) Transportation receipt (v) Quality check report (vi) Bank statement highlighting the payment made. The AO has not taken cognisance of these documents. However, in my considered view once the appellant furnishes the proof of movement of goods and the proof of delivery of the goods, it has discharged its onus in proving that the payment is genuine. In the instant case the appellant has filed the proof of movement of goods by way of transportation receipt and E-way bill and also the proof of delivery of goods by way of goods receipt note and quality check report. The AO has not pointed out that these documents are fabricated. In view of the same and in view of the fact that the appellant has been able to prove the movement of good and the actual delivery of good, the action of the AO in holding that this purchase is bogus cannot be held to be correct. The addition of Rs. 30,79,760/- on account of purchases made from this party that has bene treated as bogus by the AO is deleted. (6) S.K. Filter Fabric – Rs.3,83,926/- The nature of transaction of the appellant with this party is purchase of consumables for repair and maintenance. The AO has not given any specific finding in treating this expense as bogus. The appellant on the other hand has furnished documentary evidence such as vendor ledger, tax invoices and bank

23 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 payment proof. The appellant has also furnished copy of Form GST R-2A wherein input tax credit in respect of this payment has been duly allowed. Since there is no specific finding and the appellant has been able to substantiate the genuinety of the payment by way of independent documents and also since there is no contrary finding that the purchase was not made or that consideration was returned to the appellant, the onus cast upon the appellant to justify the genuiness of the expense stands discharged. The addition of Rs.3,83,926/- is therefore deleted. (7) Pankaj Haridas Bhatia (Proprietor – Tulsi Decorator) – Rs.12,14,552/- The nature of transaction of the appellant with this party is creation of temporary monsoon shed at the factory. The AO has not given any specific finding in treating this expense as bogus. The appellant on the other hand has furnished documentary evidence such as vendor ledger, tax invoices and bank payment proof. The appellant has also furnished copy of Form GST R-2A wherein input tax credit in respect of this payment has been duly allowed. Since there is no specific finding and the appellant has been able to substantiate the genuinety of the payment by way of independent documents and also since there is no contrary finding that the services were not taken or that consideration was returned to the appellant, the onus cast upon the appellant to justify the genuiness of the expense stands discharged. The addition of Rs.12,14,552/- is therefore deleted. 8.4.7 While non filing of income tax return by a supplier is a reason to further investigate the transaction, this reason alone is not sufficient to disallow the expenses and treat the same as non genuine. The appellant in the instant case has filed ample documentary evidence to not only support the purchase but also to justify its transportation and delivery. It is further noted that in respect of parties from whom purchases of raw materials or goods were made, the appellant has furnished complete proof of delivery, including purchase invoices, goods receipt notes, weighment slips, transport receipts, e-way bills, and quality inspection reports. These documents collectively establish both movement and receipt of goods at the appellant’s factory premises. The consumption of such materials in production and the corresponding sales of finished goods have been duly recorded and accepted in the assessment. Hence, the chain of evidence conclusively supports that the goods were actually purchased and utilised for business purposes. In respect of service providers such as those rendering advertisement, courier, or fabrication services, the appellant has produced contemporaneous records evidencing the actual rendering of services. These include invoices with service descriptions, TDS deduction and challan proof, ledger accounts, bank payments through normal banking channels, and in certain cases, correspondence or campaign material confirming service delivery. The GST returns and corresponding input tax credits allowed under the GST regime further corroborate that these service providers have rendered taxable services to the appellant. 8.4.8 Thus, for purchase transactions, proof of delivery is available and verified and for service-related expenditures, proof of rendering of services is adequately demonstrated. In both categories, the documentary trail substantiates the genuineness of the expenditure, and no contrary material has been brought on record by the AO to show that the documentation of the appellant is not genuine. Given the above party-wise findings and the common evidentiary pattern, the purchases/expenses cannot be characterised as “unexplained expenditure”

24 ITA No. 338/Mum/2026 Everest Food Products Pvt Ltd. AY 2022-23 within the meaning of section 69C. The addition of Rs.21,47,06,983/- is therefore deleted and this ground of appeal is allowed.”

Order is pronounced in the open court on 06 July, 2026

Sd/- Sd/- (Sandeep Gosain) (Girish Agrawal) Judicial Member Accountant Member Dated: 06 July, 2026 MP, Sr. P.S. Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER,

(Dy./Asstt.Registrar) ITAT, Mumbai