M/S. DIACH CHEMICALS & PIGMENTS PVT. LTD.,,HOWRAH vs. DCIT, CENTRAL CIRCLE 4(2),, KOLKATA

Per Rajesh Kumar, AM:

These are appeals by the assessee and Revenue against the orders of the Commissioner of Income-tax (Appeals), Kolkata-27 (hereinafter referred to as the “Ld. CIT(A)”] dated

ITA No. 1979/KOL/2024 2. At the outset, we observe from the appeal folder that there is a delay of 23 days in filing the appeal by the department and in support of this a condonation petition was filed. It was stated in the condonation petition that the delay has occurred due to obtaining the administrative approval from the competent authorities, which took quite a long time and other hand, did not oppose the condonation of delay. Considering the reasons cited before us to be bonafide and genuine , we are inclined to condone the delay and admit the appeal for hearing.

“08. Finally, the addition was made of ₹9,68,45,467/- in respect of purchases made from non-filing of IT return. In our view, the very initiation of proceedings u/s 148B of the Act are itself flawed and full of infirmities and the issue for which the notice was issued were not carried into the order passed u/s 148A(d) of the Act on 31st.03.2022 as is apparent from the above. We note that in Para 6 of the order issued u/s 148A(d) of the Act, he ld. AO noted that the assessee has taken accommodation entry for bogus billing amounting to ₹1,69,43,316/- and accordingly, the income has escaped assessment. In our opinion, the casualness in issuance of notice u/s 148A(b) of the Act and then passing the order u/s 148A(d) of the Act is apparent from the above. Therefore, re-assessment proceeding is flawed and cannot be stayed. The case of the assessee find force from the decision of Hon'ble Delhi High Court in the case of Banyan Real Estate Fund Mauritius Vs. ACIT in WP(c) 10485/2023, CM Appeal, 40640/2023 (Direction) & C Appl 40642/2023, wherein similar issue has been decided in favour of the assessee. Similarly, Hon'ble Karnataka High at Bengaluru Bench in case of Smt. Vasanthi Ramdas Pai Vs. ITO in W.P. No. 8797/2022 has held has under:- “(iii) A perusal of the impugned orders issued under Section 148A(d) clearly shows that these contentions of the assesses have not been addressed at all. In fact, at paragraph 6 of the order, non-disclosure of

ITA Nos. 1469 /KOL/2025 A.Y. 2019-20 9. The only issue raised by the assessee is against the part conformation of addition of ₹62,48,680/- in respect of purchases from seven suppliers by the ld. CIT(A) as against the addition made by the AO of ₹ 1,20,56,748/- b applying a GP rate of 6%.

“7.2.5. In the above judgement, the Hon'ble ITAT in para no.586, in the assessee's own case, had categorically held to calculate N.P. rate @ 2% brushing aside the declared NP rate lower than that. As the issue before the undersigned is identical with the decision of the Hon'ble ITAT, Kolkata that is why the same is being respectfully applied to decide the issue. Thus, in view of the proposition laid down by the Hon'ble ITAT, Kolkata, I direct the AO to calculate the net profit at 2% on the bogus purchases which may be calculated as follows: Bogus purchase has been worked out at Rs.80,11,128/- (hereinafter referred to as 'a') (i.e.. 2% of purchases of Rs.40,05,56,388/-). It is stated in the asst. order that the assessee itself offered GP at the rate of 2.99% and NP at the rate of 0.44% on the aforesaid purchase made by it of Rs.40,05,56,388/- in the return filed by it, in response to the notice u/s 148 of the Act, which comes to Rs. 17,62,448/- (hereinafter referred to as 'b') as undisclosed income of the assessee on the said bogus purchase. Hence, the difference of 'a' & 'b' i.e., Rs.62,48,680/-is liable to be treated as assessee's undisclosed income for the subjected AY in view of the decision of the Hon'ble Jurisdictional ITAT, Kolkata, Bench-B in ITA No.99/Kol/2021 in respect of AY 2016-17 in the case of assessee itself. Hence, the addition made by the AO of Rs.62,48,680/- is confirmed and Rs.58,08,068/- is deleted (Rs.1,20,56,748/- minus Rs.62,48,680/-). Accordingly, these grounds of appeal raised by the assessee is partly allowed.” 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

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.

11.4. 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

Supplier Ledger Invoice with E-way Ledger in GSTR- 1 GSTR- 3B Trade Prof. Bill, LR, supplier's books Licence Tax Weighment Slip & Vehicle Photo Jagdamba Traders 1-4 5-1529 1530- 1533 1535- 1579 - - 1534 NV Aluminium Cast Pvt. Ltd. 1580 1581-1847 1580 - - 1848 - New Kumar Battery Industries 1849- 1850 1851-2493 2494- 2495 2496- 2555 2556- 2579 2580 2581 NewMK Traders 2582- 2583 2584-3361 3362- 3364 3365- 3384 3385- 3391 3392 3393 Om Traders 3394- 3395 3396-3705 3706- 3707 3708- 3767 3768- 3792 3793 3794 Utkarsh LED 3795 3796-3806 3807 3808- 3812 3813- 3814 - -

11.5. We note that each supplier also helds a valid PAN, GST registration, trade licence 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

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 can not 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.

Order pronounced on 21.05.2026.

Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 21.05.2026 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT DR, ITAT, 4. 5. Guard file. BY ORDER, True Copy//

Asst. Registrar Income Tax Appellate Tribunal, Kolkata