SHAKTI AGENCIES PVT. LTD.,PATNA vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, PATNA, PATNA

IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA (VIRTUAL HEARING AT KOLKATA) SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER SHRI SONJOY SARMA, JUDICIAL MEMBER

ITA No. 158/PAT/2026 Assessment Year : 2018-19

Shakti Agencies Private Vs. Assistant Limited, Commissioner of D-204, Golchha Residency, Income Tax, Circle – 1, Shankar Nagar, Raipur (C.G.) Patna, [PAN: AAFCS5530F] Lok Nayak Bhawan, Dak Bunglow Road, Patna (Bihar) - 800001 APPELLANT RESPONDENT

Assessee by : Shri R B Doshi, AR Revenue by : Shri Manab Adak, Sr. DR

Date of hearing : 11.05.2026 Date of Pronouncement : 13.05.2026

O R D E R PER LAXMI PRASAD SAHU, ACCOUNTANT MEMBER

This is an appeal filed by the assessee against the order passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “the Ld. CIT(A)] dated

2 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. 06.02.2026, DIN & order No. ITBA/NFAC/S/250/2025- 26/1085710428(1) on the following grounds of appeal:

“1. Ld. CIT(A) erred in confirming disallowance of Rs. 31,24,759/-made by AO on account of alleged bogus purchases from M/s Sunil Enterprises invoking sec. 37. The addition made by the AO and confirmed by Ld. CIT(A) is arbitrary, baseless and not justified. 2. Ld. CIT(A) erred in confirming addition of Rs. 5,24,89,337/- made by AO on account of alleged bogus sales, to M/s Rajendra Ispat treating it to be unexplained credits u/s 68. The addition represents double addition also. The addition made by the AO and confirmed by Ld. CIT(A) is arbitrary, illegal, baseless and not justified. 3. Ld. CIT(A) erred in upholding the validity of reassessment order without appreciating that copy of approval u/s 151 was not provided to the appellant even after specific request. The assessment order passed by AO is illegal and liable to be quashed. 4 The appellant reserves the right to add, amend or alter any ground/s of appeal. 2. Briefly stated the facts of the case are that the assessee filed its return of income on 01.10.2018 under Section 139(1) of the Act declaring income at Rs. 4,14,700/-. Later on as per information received from the insight portal of the income tax department that the assessee is indulged in bogus purchases of Rs. 26,48,100/- made from M/s Sunil Enterprises and further it was observed that the assessee has made bogus sales of Rs. 5,01,39,367/- to M/s Rajendra Ispat, thereafter, following the due procedure as provided under Section 148A of the Act. The AO has issued show cause notice under Section 148A(b) of the Act on 09.03.2022 after obtaining prior approval of the specified authorities under Section 151 of the Act. The assessee was given opportunity of being heard by serving upon him a show cause notice within seven days as to why notice under

3 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. Section 148 of the Act shall not be issued on the basis of information which suggest that income chargeable to tax has escaped assessment for the A.Y. 2018-19. However, the assessee did not make any compliance to the above show cause notice issued under Section 148A(b) of the Act, in absence of any compliance on the part of the assessee, it was reason to believe that the assessee did not have any explanation/evidence to the queries raised in the notice under Section 148A(b) of the Act, the information and material available on record was analysed by the AO and it was observed that the assessee had made bogus sales to the tune of Rs. 5,01,39,367/- in addition to the bogus purchases based on the observation which originates from the material/information available on record. The assessee had indulged in both bogus sales, bogus purchase as noted aforesaid which has escaped assessment for the year under consideration. In this regard, the requirement to be said proceeding under Section 147 of the Act as provided under Section 148A read with section 148 of the Act have been duly followed . Accordingly, notice under Section 148 of the Act dated 27.03.2022 was issued to the assessee, in compliance of the notice under Section 148 of the Act the assessee filed return of income on 16.04.2022 declaring the same income has filed on 01.10.2018. Thereafter, notice under Section 143(2) of the Act was issued on 16.04.2022 and other statutory notices were issued to the assessee. During the course of reassessment proceeding, various

4 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. information were called for and assessee furnished the same accept the stock register, transportation bills . During the course of reassessment proceeding notice under Section 133(6) of the Act was issued to M/s Sunil Enterprises to ascertain the identity and the genuineness of the transaction which remained uncomplied and observed that the assessee was unable to provide copy of delivery challan confirmation from the assessee and the genuineness of existence of the party. Further, physical verification in the case of M/s Sunil Enterprises it was carried out by verification unit which reveals that the said place is identified as residential house. The transactions with M/s Sunil Enterprises was a bogus entity and the entire purchases made from M/s Sunil Enterprises were recorded in the books of accounts and claimed as expenditure which was disallowed under Section 37 of the Act. Accordingly, addition of Rs. 31,24,759/-. Was made. Further, it was observed that the assessee has made sales to Rajendra Ispat proprietor of Shri Rajendra Agarwal. During the course of survey under Section 133A of the Act at the business premises of M/s Rajendra Ispat situated at 404, 4th Floor, Samta Shopping Arcade, where it was observed that apart from the assessee two other were running business from the same address.. During the course of survey proceedings, the persons are found at the premises in the name of Mr. Abhishek Aggarwal and Mr. Rajendra Kumar Chauhan managing the control of these entities were recorded. During

5 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. the course of survey operation the handler of M/s Rajendra Ispat but Shri Gitesh Agarwal accepted on oath and that they had issued original bill without actual supply of goods based on the information the assessee was confronted with all the relevant documents relied upon by the department including statement taken on oath and show cause notice was issued to the assessee to show cause as to why the sales made to M/s Rajendra Ispat of Rs. 5,01,39,337/- should not be treated as unaccounted sales. The assessee filed detailed written submission and produced documents whatever available alonwith copy of invoices for purchase and the goods were directly delivered to M/s Rajendra Ispat (Consignee), financial statement, proof for payment through banking transactions were filed and submitted that these were one to one sales. The AO observed from the invoices that the goods have been purchased from M/s Mangal Commercial Pvt. Ltd. and have been delivered directly at the address of M/s Rajendra Ispat (consignee) the transactions have been substantiated by the movement of goods and detail statements were provided by the assessee vide reply dated 27.02.2023, wherein for every purchase entry is showing , from M/s Mangal Commercial Pvt. Ltd. have been directly transferred to M/s Rajendra Ispat on the same day with minor alterations. The quantity of purchased goods and sales goods were also the same in all these transactions of the movement of goods, the statement for the date 01.02.2018 was reproduced as under:

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“During Physical Verification Proceedings, it is evident that at the particular address 404 4th Floor, 116 1st FLOOR, Samta Shopping Arcade, Samta Colony, Raipur Chhattisgarh India 492001, no such entity is running their business and no such board etc was found at the mentioned address. On

7 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. local enquiry, it is evident that no such business premises is at this shopping complex Thus, it results that the taxpayer is not identified and thus the genuineness of the transaction made by the assessee is not ascertained Since the taxpayer does not furnished any documents and information to the above transaction made with the above named assessee to the tune of Rs 5,01,39,337/- on account of purchase. Thus, it is treated as bogus sales as per Income Tax Act 1961 in the hands of assessee Shakti Agencies Pvt Ltd. PAN AAFCS5530F Further, the taxpayer neither furnished any response nor reply in response to the statutory notices issued by the department. Thus, it gets crystal clear that the taxpayer has willfully made default to the above statutory notice. Therefore, the taxpayer is in default as per provision of Section 272A(1)(c) of income Tax Act 1961and initiate penalty u/s 2724(1)(c) of income Tax Act 1951 accordingly.” 4. Accordingly, the AO observed that the sales shown from M/s Rajendra Ispat from M/s Shakti Mines and Minerals (a unit of Shakti Agency Pvt. Ltd.) are bogus in nature as no physical dealing of goods have taken place to this effect. The assessee has failed to provide delivery challan, bill, etc till date. Moreover, it has already been recorded in statement of handler during the course of survey of these entities that these business are only providing bogus/fake invoices. Thus, the sales transactions carried out with these entities remained unexplained. Further, it was found that there is no explanation regarding the genuineness of transaction of bogus sales as the assessee neither provided any documentary proof nor substantiated the genuineness of sale to M/s Rajendra Ispat. When such transactions were carried out by the assessee it is imperative on the part of the assessee to provide documentary evidence which would through light as to the nature of

8 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. true transactions, source and purpose of these transactions to prove the genuineness of the transactions made by it. Accordingly, the entire sales shown by the assessee in its books of accounts were treated as income from under Section 68 of the Act relying on the judgment of NK Proteins Ltd. Vs. CIT (SC) vide SLP (C) No. 769 of 2017. Accordingly, income was determined at Rs. 5,24,89,337/-.

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29 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. Enterprises only on the basis of statement recorded during the course of survey and information received in respect of M/s Sunil Enterprises is indulged for providing bogus sales bills. The entire transactions are recorded in the books of accounts of the assessee, books of accounts have not been rejected by the AO and profit computed by the assessee has been accepted. The AO made addition under Section 37 of the Act which is not correct. The same purchase have been disallowed by the AO without disturbing the sales made on one-to-one co-relation by the assessee. Further, in respect of sales made to M/s Rajendra Ispat Ltd., it is a direct delivery of goods from M/s Mangal Commercial Pvt. Ltd., the goods are directly delivered to the consignee, therefore, the assessee could not prove the delivery challan and the transportation expenditure have been borne either by a consigner or consignee. Since, the goods were not delivered to the assessee, it is delivered to the consignee directly , the details were produced during the course of reassessment proceedings which have been examined by the AO. The AO accepted the entire purchase for the supply of goods from the supplier and the AO has only disbelieve on the sales made to M/s Rajendra Ispat only on the basis of statement recorded during the course of survey and he submitted that the statement recorded during the course of Rule 33A is not relevant and no cross examination was provided, the entire payments were received through banking channel in the bank account of the assessee and the

30 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. entire sales have been disclosed in the financial statement, if the observation of the revenue authorities are accepted it is the duty of the revenue to show that there must be closing stock at the end of the financial year but the revenue has accepted the stock position shown by the assessee in its financial statement.

31 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. 26,48,100/- excluding GST and sales made to Indian Steel and Infrastructure Pvt. Ltd. for Rs. 26,52,174/- excluding GST. Therefore, allegation made by the AO that the assessee has claimed bogus purchase to reduce the profit and the income of the assessee is incorrect. We also gone through on the invoices issued by M/s Sunil Enterprises it is seen that the name of the buyer is Shri Shakti Mines & Minerals (a unit of Shri Shakti Agency Pvt. Ltd.) and the name of consignee is Indian Steel and Infrastructure Pvt. Ltd. It is clear from the paper book page No. 82 and 83 in which Lorry No. OD14E0537 loaded at Rourkela, Lorry No. 0R16E0086 loaded at Rourkela, Lorry No. OD14E0537 loaded at Rourkela and Lorry No. 0R14W0441 loaded at Rourkela are showing, which shows that the goods were transported at the address of the consignee. The MOU is also placed at paper book, page No. 84 to 87 as per the terms of the delivery placed at paper book page No. 86 the goods have delivered in accordance with the terms stated herein under:

“Terms of payment The Buyer shall pay the price of the Goods within the time period as agreed upon, usually within fourteen (14) days of the date of the Seller's invoice or delivery of goods, whichever takes earlier. The time of payment of the price shall be of the essence of the Contract. Receipts for payment will be issued only on request. Payment of the price shall be made by the Buyer without any discount or deduction whatsoever or on account of any boxes, levies, duties, charges, fees, withholdings, discounts, set-offs, counterclaims, restrictions or conditions of any nature and notwithstanding any claims of whatsoever nature and howsoever arising

32 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. If the Buyer fails to make any payment on the due date or defaults on any of its obligations then, without limiting any other right or remedy available to the Seller, the Seller may: (a) cancel the Contract or suspend any further deliveries to the Buyer: (b) appropriate any payment made by the Buyer to such of the Goods as the Seller may think fit, and/or (c) charge the Buyer interest on the amount unpaid, at the rate 12% per annum, from the date payment is due to the date full payment is received.” 12. As per the above terms, the goods have been delivered to the buyer , the assessee has produced copy of consignment note issued by SR transport as paper book page No. 89 to 90. During the course of assessment proceeding, the entire purchase bills agreement for purchase of materials between M/s Sunil Enterprises and the assessee was produced , the impugned party in the books of the assessee was produced, extract of banking transactions, statement showing one to one co-relation between goods purchase from M/s Sunil Enterprises with cost subsequently, shown to the Indian Steel and Infrastrcture Pvt. Ltd. and copy of GSTR-1, where the sales were made by the M/s Sunil Enterprises to the assessee, copy of transport receipts before the Ld.CIT(A) since extract of purchase register quantity details. However, the AO has accepted the sales made on one-to-one co-relation towards purchase made from M/s Sunil Enterprises. The one side cannot be treated as bogus purchase if the sales have been accepted and the revenue is also unable to establish that the payments made to M/s Sunil Enterprises have been received back. Accordingly, the AO is not justified to make addition towards bogus purchase.

33 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. 13. Further, in respect of sales made to M/s Rajendra Ispat Pvt. Ltd. It is undisputed fact that the entire purchase made from M/s Mangal Commercial Pvt. Ltd. has been accepted and it is directly delivered to the consignee M/s Rajendra Ispat. There is no doubt on this point which is clear from the aforesaid table extracted from the assessment order and the assessee has also received sales amount which is credited into the bank account of the assessee and the revenue is unable to prove that the assessee has returned back the sales amount received from M/s Rajendra Ispat by any other mode. If the sales are treated as bogus the closing stock effect should have been given in the financial statement where as the same was accepted. It is a double addition once the profit is embedded on the sale made and the same sales are also added under Section 68 of the Act. In the present facts of the case the case law relied on by the Ld. Counsel are squarely applicable in this case. The relevant case law is CIT Vs. Simit P. Sheth reported in (2013) 356 ITR 451 (Guj). The relevant part of the judgment is as under:

34 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. view in the case of CIT v. Vijay M. Mistry Construction Ltd. [2013] 355 ITR 498 (Guj) and in the case of CIT v. Bholanath Poly Fab (P.) Ltd. [2013] 355 ITR 290 (Guj). The view taken by the Tribunal in the case of Vijay Proteins Ltd. v. Asstt. CIT [1996] 58 ITD 428 (Ahd.) came to be approved.” 14. Respectfully following the above judgment, we delete the addition made by the AO of Rs. 5,01,39,337/-.

Order pronounced on 13.05.2026. Sd/- Sd/- (Sonjoy Sarma) (Laxmi Prasad Sahu) Judicial Member Accountant Member Dated: 13.05.2026 AK, Sr. P.S.

35 ITA No. 158/PAT/2026 Shakti Agencies Pvt. Ltd. Copy of the order forwarded to: 1. Appellant 2. Respondent 3. Pr. CIT 4. CIT(A) 5. CIT(DR)

//True copy// By order Assistant Registrar, Kolkata Benches