DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), CHENNAI, CHENNAI vs. SOUTHERN AGRIFURANE INDUSTRIES PVT LTD, CHENNAI

आयकर अपीलीय अिधकरण, ’सी’
यायपीठ, चे ई।
IN THE INCOME TAX APPELLATE TRIBUNAL
‘C’ BENCH: CHENNAI

ी एबी टी. वक
, ाियक सद एवं
एवं
एवं
एवं

ी अिमताभ शुा, लेखा सद के सम

BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER

आयकरअपीलसं./ITA Nos. 1613 to 1615/Chny/2025
िनधारणवष/Assessment Years: 2018-19 & 2019-20

The DCIT,
Central Circle-2(2),
Chennai.

v.
M/s. Southern Agrifurane –
Industries Pvt. Ltd.,
MGM Centre No.1,
9th Cross Street,
Dr. Radhakrishnan Salai,
Mylapore,
Chennai – 600 004. [PAN: AAGCS 9705 F]
(अपीलाथ/Appellant)

(यथ/Respondent)

आयकरअपीलसं./ITA Nos. 1547 & 1548/Chny/2025
िनधारणवष/Assessment Years: 2018-19 & 2019-20

M/s. Southern Agrifurane-
Industries Pvt. Ltd.,
MGM Centre No.1,
9th Cross Street,
Dr. Radhakrishnan Salai,
Mylapore,
Chennai – 600 004. v.
The DCIT,
Central Circle-2(2),
Chennai.

[PAN: AAGCS 9705 F]

(अपीलाथ/Appellant)

(यथ/Respondent)

Department by :
Mrs. C. Yamuna, CIT &
Mr. Bipin, CIT
Assessee by :
Mr. N. Arjun Raj, Advocate
सुनवाईक तारीख/Date of Hearing
:
08.10.2025
घोषणाक तारीख /Date of Pronouncement
:
01.12.2025

PER BENCH:

These appeals p against the orders of th
19, (hereinafter referred for the Assessment Ye
2019-20 u/s. 250 of the ‘the Act‘).
2. Before we advert first be relevant to cull brief in respect of these the assessee is a priv business of manufactu search u/s 132 of th
06.08.2019, i.e., AY 20
premises of one M/s.
subjected to search. Ac was found in the cou information relating to t
Bottles had facilitated i raising bogus invoices
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 2 ::

आदेश / O R D E R referred by the assessee and the e Learned Commissioner of Income d to as ‘Ld.CIT(A)‘), Chennai, all dat ears(hereinafter referred to as ‘AY e Income Tax Act, 1961 (hereinafte t to the grounds taken in these ap out the basic facts of the case and e AYs. Briefly stated, the facts of the vate limited company which is e ring and sale of Indian made fo he Act was conducted against S
020-21. As a sequel to this search
Crystal Bottles located at Coimba cording to the Revenue, the seized rse of search at M/s Crystal Bo the assessee and it was deduced th inflation of expenses debited by th for supply of old empty bottles to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
e Revenue are Tax (Appeals)- ted 29.03.2025
Y‘) 2014-15 to r referred to as ppeals, it would effect of law in e case are that, ngaged in the reign liquor. A SNJ Group on h, the business atore was also material which ttles contained hat M/s. Crystal e assessee, by s and that the payments received by was returned back to commission @ 6% on th the seized material was 2021 and that the sati
2021 i.e., AY 2022-23;
Act was issued upon the to the AO, ordinarily ha he was within his juris respect of six assessme i.e. in the present cas empowered u/s. 153C years preceding the s
AYs2014-15 to 2019-2
assessments of the ass were either completed u for issue of notice u/s income-tax assessment before AO on the date consequent to the searc these unabated AYs 2
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 3 ::

M/s. Crystal Bottles against such o the assessee in cash after d he bogus bill value. The Ld. CIT(A) s handed over to the AO of the asse sfaction note was recorded by the and on the same date, notice(s) u e assessee for AYs 2018-19 to 2019
ving regard to the date of search i. iction to issue notices u/s 153C ent years preceding the assessment se search took place, so, ordinari of the Act to reopen six precedi searched assessment year and th
20. It is not in dispute that, t sessee for the impugned AYs 2018- u/s 143(1)/143(3) of the Act and/o
143(2) of the Act had expired. A ts for AYs 2018-19 to 2019-20 w e of search, therefore, those year ch. Post the issue of notice u/s 153C
2018-19 to 2019-20, the AO is to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
bogus invoices deducting their had noted that, essee on 18-06-
AO on 24-06- u/s 153C of the 9-20. According e. 06-08-2019,
C of the Act in t year of search ly the AO was ng assessment ose AY's were the income-tax
-19 to 2019-20
r the time limit
Accordingly, the weren’t pending rs didn’t abate
C of the Act for noted to have completed both the inc by orders dated 28.03.2
purchases. Apart from t addition(s)/disallowance
80GGB, disallowance u/
of expenses.
3. Aggrieved by the appeal before the Ld. C the validity of the notice
CIT(A) had upheld the prior to issuance of noti
“6.7.3
The un consideration. A that the AO bas m/s. SNJ Grou appellant comp purchase expen vendors. The sa satisfaction. Th found and seize satisfaction rec reasons to belie determination o the years under 6.7.4 Therefore of the Act for th
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 4 ::

ome-tax assessments u/s 153C/14
2023 after making addition(s) on ac the foregoing, the AO is also noted e(s) on account of deduction(s) clai
/s 14A of the Act and disallowance o above order(s) of the AO, the asse
CIT(A). The assessee is noted to h e issued u/s 153C of the Act. It is se validity of satisfaction note record ce u/s 153C of the Act by observing ndersigned has carefully examined the As evident in the assessment order, it sed upon the findings of the search in up of concerns has recorded reason pany has made bogus purchases by i nses related to purchase of old bottl atisfaction arrived by the AO is only a e AO on the basis of the incriminatin ed at the third party premise and on re orded by the AO of the searched pa eve that the seized material has a be of the total income of the appellant c r consideration.
, the AO has rightly assumed juri ictio he years under consideration…”

to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
3(3) of the Act ccount of bogus d to have made imed u/s 80G /
of certain items essee preferred have challenged een that the Ld.
ded by the AO g as under: - issue under can be seen the case of ns that the inflating the les from its prima facie ng materials eceipt of the arty formed aring in the company for on u/s 153C

d. CIT(A) proceeded to adjudicate t
019-20 on their merits. The Ld. CIT ction of making addition of the e e bogus, was not justified. After c essee along with the gamut of giv noted to have rejected the books
Section 145(3) of the Act and estima at 10% of the turnover. The Ld. CIT made by the AO on account of bo jection of books of accounts and A) deleted all other separate d of Section 14A & sales promotion e
AY 2018-19, the disallowance made claimed u/s 80G of the Act was d of the Act was dismissed.
by the above order(s) of the Ld. CI ssee are in appeal before us. It is ded by the AO and the reasoning gi account of bogus purchases were id
19-20 impugned before us. Both th eals together. Hence, for the sake o to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
the appeals for T(A) was of the entire value of considering the en facts of the of accounts by ated the overall
T(A) thus partly gus purchases.
estimation of disallowance(s)/
expenses made e by the AO on eleted and the IT(A), both the noted that, the iven by him for dentical in both he parties have of convenience, and to avoid repetition common issues across t
6. Since the grounds legal challenge to the Act, we consider it prud
7. The Ld. AR has c and did not meet the p frame assessment unde satisfaction note(s), he satisfaction note for b disapproved by the H
Singhad Technical Ed submitted that, the ‘s satisfaction note that, t of bogus purchases fro nature. The Ld. AR cla satisfaction to issue no was absent in the pres juri iction by the AO
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 6 ::

of facts; we deem it fit to adjudica these AYs before us together.
s raised in the assessee’s appeal in validity of initiation proceedings u/
ent to take this up first.
contended that, the ‘satisfaction no re-requisite of section153C to usurp er Section 153C of the Act. Taking pointed out that, the AO had recor both the years and that such ac
Hon’ble Supreme Court in the ca ducation Society (397 ITR 344
seized material’ relied upon by t he assessee had inflated their expe om M/s Crystal bottles, was not i aimed that the law requires a hig tice u/s.153C of the Act, which acc sent case. He thus urged that, the u/s 153C of the Act suffered from to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
ate each of the nter alia involve
/s 153C of the ote’ was vague p juri iction to us through the rded a common ction had been se of CIT Vs
4). The Ld. AR the AO in the enses by means ncriminating in gh threshold of cording to him, e usurpation of m fundamental infirmity on account of wants us to quash the o
8. Per contra, the L that, the AO had ela incriminating material h the AO of the assessee in his view had a bearin
According to her theref before assuming juri attention the notice issu
2023 in the course of a Act and pointed out t material was found fr contained information re that, the AO had also e sought to be drawn fro further pointed out that assessee on 15-06-2022
and that the findings /
the assessee corrobora search at M/s Crystal B
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 7 ::

failure to record a valid satisfactio order(s) for these AYs 2018-19 to 20
Ld. CIT, DR appearing for the Reve aborately discussed the specific handed over by the AO of the sear and thereafter also quantified the ng on the total income for AYs 2018
fore, the AO had validly recorded t diction u/s 153Cof the Act. She a ued by the AO u/s 142(1) of the Ac ssessment proceedings conducted u that, the AO had identified the rom the premises of M/s Crystal elating to the assessee. The Ld. CIT elucidated in that notice, the infere m such seized material against the , later on, a search action was cond
2 when the impugned assessment(s material seized in the course of d ated the information unearthed in Bottles. According to her all these fa to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
on note and he
019-20. enue submitted details of the rched person to amounts which -19 & 2019-20. the satisfaction lso invited our ct dated 14-01- u/s 153C of the specific seized
Bottles which T, DR submitted ence which was e assessee. She ducted upon the s) were pending irect search on the course of acts considered cumulatively showed possession of the AO d income of the assessee u/s 153C of the Act. S order dismissing this leg
9. The Ld. AR in h repelled the purported
Crystal Bottles, in the co that neither was such m bearing on their total in impugned orders did no from the premises of M on account of bogus pu was made by relying on the direct search condu much later to the date that, the fact that the A from the premises of M course of their search co the impugned assessm the satisfaction note w
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 8 ::

that, there was sufficient seize demonstrating impact on the determ e and thus the AO had validly usur
She thus vehemently supported th gal plea of the assessee.
his rejoinder submitted that, the seized material found from the p ourse of assessment proceedings an material of incriminating nature nor ncome. According to him, the AO wh ot refer to or rely upon any of the M/s Crystal Bottles to justify the ad urchases. Instead, the addition of bo n the material seized and statement ucted at the premises of the assess of recording of satisfaction. The Ld
AO did not rely on any material wh
M/s SNJ Distilleries or M/s Crystal onducted on 06-08-2019, for makin ent order(s), bolstered the assess was recorded by the AO in a scan to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
ed material in mination of the ped juri iction he Ld. CIT(A)’s assessee had remises of M/s nd it was shown did it have any hile passing the material seized ddition(s) made ogus purchases t(s) recorded in see, which was d. AR submitted hich was seized
Bottles in the g addition(s) in ee’s case that, nty, vague and mechanical manner wi material seized from t income alleged to be es
10. We have heard b before us. It is well satisfaction note constit no notice u/s 153C of ‘satisfaction note’ forms
153C of the Act. The la
‘satisfaction’ that the searched person belong
[assessee, in this case]
nature leading to the co contemporaneous recor material to the assesse live nexus ascertained contained information r total income. Having p
2019-20, it is seen that material seized from assessee and has also s
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 9 ::

ithout demonstrating any live link he premises of third party with th caping tax in these AYs.
both the parties and perused the m settled in law by now that, the tutes a juri ictional fact, in the ab f the Act can be validly issued. A s the foundational basis to assume aw requires the AO of the assessee seized material handed over by gs to or pertains to or relates to th and further, that such material is i onclusion of undisclosed income. Th rding of satisfaction by the AO link ee. The satisfaction note should de upon examination of the seized elating to the assessee which has a perused the ‘satisfaction note’ for A t, the AO had demonstrated a linkag the premises of M/s Crystal Bo set out document-wise correlation w to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
k between the he quantum of material placed e recording of bsence of which Accordingly, the juri iction u/s e to arrive at a the AO of the he other person incriminating in ere has to be a king the seized emonstrate the material which a bearing on its AYs 2018-19 &
ge between the ottles with the with the specific assessment year and escaping tax in AYs 201
contents of certain loo filling status pertaining
The AO is found to have seized from the prem information relating to the key person of M/s
132(4) of the Act had assessee. We thus not analyze and compartm received from the AO o determination as to the and issue notices only satisfaction note record laid down by the Hon’b
Technical Education S
11. The requirement satisfaction of the AO o him by the AO of the income of the assessee.
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 10 ::

also quantified the amount(s) b
18-19 & 2019-20. The AO had set o se sheets containing details of inv to the old bottle purchases made by e also referred to specific excel she mises of M/s Crystal Bottles, w the assessee. The AO has also po s Crystal Bottles in his statement admitted to bogus purchases fac te that, the AO of the assessee entalize the incriminating material of the searched person, and arrive e year to which the incriminating m y for those years. In our opinion ed by the AO in these AYs meets t le Supreme Court in the case of CI
Society (supra).
of law for a valid assumption of jur of the assessee that the material h e searched person impacts the de
. In the facts of the present case, th to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
believed to be out the specific voices vis-a-vis y the assessee.
eets, ledger etc.
hich contained ointed out that, t recorded u/s cilitated for the has objectively l year-wise, as at a categoric material relates therefore, the he requirement
IT Vs Singhad ri iction is the handed over to etermination of here is no doubt that the material in po impact on the determ impugned AYs before u the satisfaction record received from the AO o present case] was not the assessment order(s our finding that, the sat the seized material and admittedly prima facie on a direct search w discovery of additional justified the addition, ca
According to us, there material which could h material impacting the d laws relied upon by the on facts, since in the fac evident from the mate
Crystal Bottles. In view legal grounds raised
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 11 ::

ossession of the AO sufficiently dem mination of the income of the ass us. The argument of the assessee t ded being vague and that the s of the searched person [M/s Crystal ultimately relied upon to make the s) are, we find, of no consequence tisfaction recorded was to be consid d statements in the possession of were adverse to the assessee. The as conducted upon the assessee material & evidence basis which th annot be fatal to the recording of sa e is no doubt that the AO was in have led to no other satisfaction b determination of income of the asse
Ld. AR of the assessee are clearly cts of the present case the satisfact erial gathered during search condu w of the foregoing, we do not find a by the assessee challenging t to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
monstrated the sessee for the to the effect of seized material
Bottles, in the e addition(s) in e in the light of dered in light of the AO, which fact that, later which led to he AO primarily atisfaction note.
n possession of but that of the essee. The case distinguishable ion of the AO is ucted upon M/s ny merit in the he validity of juri iction assumed by the same.
12. We now turn our the impugned AYs 201
these appeals relates t bogus old bottle purcha was conducted upon SN same, the business pre where incriminating m analysis of the seized
Bottles along with the s
Bottles u/s 132(4) of t inflation of expenses o purchase of old bottle premises of M/s Crysta the assessee, the AO ha
153C of the Act for AYs assessment proceedings u/s 132 of the Act was the course of which sev electronic data, loose
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 12 ::

y the AO u/s 153C of the Act and th attention to the merits of the addit
8-19 & 2019-20. The first issue in to the addition(s) made by the AO ases. The facts as noted are that, a NJ Group on 06-08-2019 and in conn emises of M/s Crystal Bottles was aterial relating to the assessee w material found from the premises statement given by the key person the Act, it was inferred that, they of the assessee by providing bog es. Relying upon the material se al Bottles which contained informat ad reopened the assessment(s) of th s 2018-19 & 2019-20. During the p s which was initiated u/s 153C of th s conducted upon the assessee on eral material viz., books of accounts sheets, note books etc. was foun to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
erefore dismiss tion(s) made in nvolved in both
O on account of a search action nection with the s also searched was seized. On of M/s Crystal n of M/s Crystal had facilitated gus invoices of eized from the tion relating to he assessee u/s pendency of the he Act, a search
15-06-2022, in s, documents &
nd and seized.

According to the AO, t suppression of income b several vendors of ol
Consequent to the com have also filed a lett proceedings, admitting
2019-20. It is noted f initially referred to the M/s Crystal Bottles a thereafter he primarily b course of direct search pendency of the assessm
13. The AO is noted pen drive seized from Deputy Manager of the comprising of several sheets were printed
Sheets/S-1, Pages 1 to five(5) Sheets which co for three-month period tabulated sample data
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 13 ::

the seized material inter alia conta by the assessee by debiting bogus d liquor bottles including M/s C mpletion of direct search, the assess ter with the AO, in the course additional income in the impugned from the assessment order(s) tha material which was seized from t t the beginning of the assessm based his findings on the material u upon the assessee, which took pl ment proceedings.
to have relied upon the contents o the residential premises of Shri assessee company which containe excel sheets titled ‘ENA Schedule and seized as Annexure ANN/A o 66. It is noted that, this excel fil mprised of data relating to purchas d in the year 2020. The AO is from this excel file in this assessm to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
ained details of purchases from Crystal Bottles.
see is found to of assessment
AYs 2018-19 &
t, the AO had he premises of ment order but nearthed in the lace during the of a silver color
S Varatharaj, ed an Excel File e’. These excel
ARS/SAFL/Loose e comprised of se of old bottles noted to have ent order. It is seen that, this data co purchased from certai invoice, manner of paym charges & total. Anot column-wise notings of the AO, these excel file obtained by the asses
Crystal Bottles and tha amounts due from them based on the statement i.e., Shri S Varatharaj [
and Shri Austine Paul column ‘Others’ in the the vendors for facilita denoted the cash which the cheques paid to th extracted the data of o
SAP software along wit
According to the AO, the which genuine invoices also providing bogus i
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 14 ::

omprised of month wise details of n vendors. It inter alia containe ment, date of cheque, invoice amou her excel sheet, is noted to con several figures against five vendor es were actually a summary of the see from these vendors inter alia at the date-wise details were the n m. It is observed that this analogy t(s) obtained from key employees o
[from whose possession the pen dr lraj. These employees had expla excel file represented the commiss ating bogus invoices and that the h was to be returned back by the v hem in lieu of bogus invoices. The old-bottle supplier-wise purchase le th their off-set accounts of old bo ese vendors were not only supplying were being raised, but these same nvoices to facilitate inflation of ex to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
the old bottles d the date of unt, GST, other ntain date-wise rs. According to bogus invoices a including M/s notings of cash of the AO was of the assessee rive was found]
ined that, the ion retained by column ‘Total’
vendors against e AO thereafter dgers from the ottle purchases.
g old bottles for e vendors were xpenses of the assessee. This inferenc according to the AO, purchases and bogus ol old bottles purchased w lacking in old bottle pur of bogus purchases, the thereafter elaborately d assessee upon purchas invoices in light of the staff. The AO inferred t there was no movemen
According to AO, the a bottle suppliers in lie invoices after deductin facilitating such bogus reproduced the stateme
S Varatharaj, Shri Aust the assessment order, w did not carry seal or G that, Shri Austine Pau including M/s Crystal B
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 15 ::

ce was drawn from the purchase contained entries both for genu d bottle purchases. In the AO’s opin were accompanied by GRNs whereas rchases. The AO accordingly deduce e bills were processed without GRN iscussed the accounting processes f se of old bottles with screenshots o statements obtained from the ac that wherever the purchases invoice t from top to bottom for accounting assessee would simply collect cash u of payments made towards b ng commission retained by these s bills. The AO is noted to ha ents of several employees of the ass tine Paulraj etc., recorded across s wherein they had admitted that, the GRN details were bogus purchases.
ulraj had identified eight (8) reg
Bottles who were inter alia providin to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
ledgers, which uine old bottle nion, the actual s the same was ed that, in case
N entry. The AO followed by the of SAP system, ccounts & audit es were bogus, g and payment.
h from the old ogus purchase e suppliers for ve extensively sessee viz., Shri several dates in e invoices which It is observed gular suppliers ng these bogus invoices. According to t cash in lieu of the pa deducting their commis cash expenses of the as the Managing Director o the statements given
Thereafter, the AO at P unearthed upon condu including M/s Crystal B suppliers had also corr they had facilitated infla
AO is thus noted to hav purchases, as quantifi assessment order, in bo
14. Aggrieved by the before the Ld. CIT(A). I submissions of the as ultimately rejected the the profits at 10% of t
Ld. CIT(A), both the ass
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 16 ::

the employees, the vendors would r yments made against such bogus sion and that such cash was utilized ssessee. The AO also reproduced th of the assessee, Shri M Anand who by Shri S Varatharaj & Shri A Para 6 of his order elaborately set o cting search and examination of t
Bottles. To sum up, according to oborated the statements of the em ation of expenses by providing bogu ve added the entire value of the b ed by him in the Table at Para oth the impugned AYs 2018-19 & 20
order of the AO, the assessee pr
It is seen that, the Ld. CIT(A) after sessee in light of the findings of books of accounts of the assessee the turnover. Being aggrieved by th sessee and Revenue are in appeal be to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
return back the s invoices after d to meet other he statement of had confirmed
Austine Paulraj.
out the findings these suppliers the AO, these mployee(s) that us invoices. The ogus old bottle a 8.1.2 of his
019-20. referred appeal considering the f the AO, had and estimated he order of the efore us.

arties. It is seen that the reasons g ed addition(s) and the findings rend e books of accounts and estimatin me to that of the orders passed
’s own case for AYs 2020-21 to 2
appeals of the assessee and Reven
9/Chny/2025 for AYs 2020-21 to 202
(A)’s order rejecting the books o of estimation of profits at 10%, b therefore, we are in agreement with th ndeed discrepancies in the books of accoun he lower authorities, but it cannot be alle purchases lacking GRNs, made from th bogus. The Ld. AR for the assessee has efore us that, there were accounting a books of accounts, but he contended alies cannot be ipso facto assumed to be f equires strict proof of mens-rea, which is the AO in the assessment order erroneo deficiencies to tantamount to false entries ction u/s 271AAD of the Act. At this ju s to clarify that the accounting deficiencies to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
given by the AO ered by the Ld.
ng the profit at by the lower
2022-23. While nue in ITA Nos.
22-23, we have f accounts u/s by observing as e Ld. CIT(A) nts as rightly eged that the hese genuine s also tacitly anomalies in that, these falsification of s absent. He ously treated s and thereby uncture, it is s seen in the books of account books of account statements recor make addition(s) taken as conclusi accounts. In our made out by the established from facts discussed s
Officer on falsific
Having said so, w accounts mainta determining the nature of the bu similar aspect w case of Empee D was also involved and similar alle purchases. It is AO’s action of estimated the dis countenance the accounting deficie not properly hand followed and ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 18 ::

ts cannot be equated with falsification of e ts. In our opinion, in a given case, if corro rded during the course of the search can in the hands of the assessee, but it can ve proof to allege falsification of entries in view, the case of falsification of entries e AO in the assessment order cannot b the seized records. Hence, it is observed supra that such conclusions drawn by th cation of entries in books of accounts i we maintain that, there are deficiencies in ined by the Assessee leading to the d correct assessable income considering usiness carried out by the assessee. We f as considered by the juri ictional High
Distilleries Ltd Vs. ACIT (187 Taxman d in the same line of business as that of gation was levelled in relation to thei seen that, the Hon’ble High Court had de adding the entire value of purchases sallowance at 10%. Following the decision e Ld CIT(A) action to the extent that encies in the books of accounts viz (i) SAP dled, (ii) standard accounting procedures w
(iii) the purchases without GRNs lack to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
entries in the oborated, the n be used to nnot alone be the books of sought to be e said to be in the given he Assessing is untenable.
the books of difficulties in the complex find that this Court in the 188), which the assessee ir old bottle enounced the and instead n (supra), we there were P entries were were not fully ked proper documentation, and therefo rejecting the books of accou findings of Ld.CIT(A) as part
“6.2.19
During the representatives actual events and t from the vendors.
of business. The us several steps to en safety, and regulat are still in good co
The bottles underg cracks, chips, or ot cleaned and saniti substances or con remove any rema through a mechan remove any bacter water, steam, or c
After cleaning and moisture retention
6.2.20
In this break, resulting in refilling. This, in situations, to meet to replace the rej vendors on emerg purchase procedure recurrent event ha emergency purchas business requirem purchases cannot disallowance of Rs.
Rs.56,41,82,236/- hands of the appel alleged Old Bottle for production were to be bogus were a even though the procedures which a in production requir
6.2.21
The und supporting docume
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 19 ::

ore on these counts sustain the action of unts and estimating the profits of the asses ly countenanced by us supra, are as under the course of the appellate proceedings, the A s of the appellant company, provided an expl the accounting process related to the purchase
The old bottles are purchased routinely in the se of these bottle undergo reconditioning for r nsure that the bottles meet industry standard ory compliance. The bottles are sorted to separ ondition from those that are damaged and cann o an inspection process to assess their conditio her defects are discarded. Bottles that pass the zed before re-use. This ensures that there a ntamination inside the bottles. The bottles a ining liquids, labels, or external dirt. This is nical washing process. The bottles are the ia or contaminants. This is typically done using chemical sanitizers that are safe for food-gra d sanitizing, the bottles are thoroughly dried that could affect the new contents.
process, there are instances where the bottles a significant reduction in the number of bottle turn, impacts the overall production estim t the marketing demand, the appellant compan ected bottles by sourcing additional old bott gency situations. This was done by overlook es to fulfil the daily production requirements. I appening in this line of business, the AR has c ses effected by the appellant company was on ents. Therefore, it has been claimed that t be termed as “bogus” and further claim
3,13,75,315/- & Rs. 37,97,84,300/- for the AY
& Rs. 58,23,45,992/-for the AY(s) 2021-22 & 2
lant company is not justified. Further, the AR s purchases were properly debited to stock acco e credited. Also, the AR stated that, the bottles also consumed in production. Further, the AR s bottles were purchased without following are said to be bogus, whereas in reality, these w ring no disallowance.
dersigned has carefully considered the writte ents and arguments advanced by the AR during to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
the Ld. CIT(A) in ssee. The relevant r:-
AR, along with anation of the e of old bottles regular course reuse, involves ds for hygiene, rate those that not be reused.
on. Bottles with inspection are are no foreign are washed to s usually done n sanitized to high-pressure ade packaging.
to avoid any , being fragile, es available for ates. In such ny is compelled tles from their king the usual
In view of this contended that nly to meet its these kinds of med that the Y 2020-21 and 2022-23 in the tated that, the unt and issues that were said submitted that g the regular were consumed en submission, g the course of appellate proceedi purchase in the reg from the documen bottles either follo without GRN, both although it was a purchased without debits were made same were consum the other hand, t classification of in “Consumption-Bott accounting anomal reflect the true affa

ngs, with respect to the process involved gular course as well as sourced on emergency nts presented before the undersigned that th owing the normal process or sourced on em were reflected as debit entry in stock in the manual entry in the SAP software in the c
GRN numbers. The appellant’s contention is for both kind of purchases in the SAP, evide med in the production and hence cannot be rejec there seems to be accounting anomalies in ncorrect offset account such as “Stock_Pac les" and "Cost of Goods Sold-FG," On ob ies, it can be reasonable construed that the b airs of the appellant company.
, the undersigned observes that neither the has made any specific findings that the appe accounted income generated through alleged bo e form of unaccounted application of such incom rch conducted in the case of the appellant co ntities including the Managing Director and othe jected to search, the search team quantified a Crores as bogus purchases made by the appell
2022-23. It is significant to bring on record th er nor the AO were able to identify the quantified bogus purchases in the form of any ed expenditure or unaccounted investments. As the AO has treated the purchases being held me. As per the discussion made supra, the appe e necessity to purchase old bottles by overlooki es. Therefore, the purchases made by overlook uires to be regularised. As per the evidences fo here existed purchases not utilised for business ent in the order passed by the AO, it can be see nt(s) of Rs. 3, 13,75,315/- & Rs. 37,97,84,30
6,41,82,236/- & Rs. 58,23,45,992/-for the AY e bogus purchases as income of the appe he disallowance of alleged bogus purchases m resultant net profit would be an unreasonable n d in the kind of business of the appellant com tention of the undersigned to the fact that dy admitted a higher net profit by comparing w business.
dersigned on account of the detailed discussion the actual profits cannot be reliably determine e books, the taxable income cannot be accurate rrent books of accounts. The non-complian to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
in the bottle basis. As seen e purchase of mergency basis
SAP Software, case of bottles that the stock ences that the cted in toto. On n as much as ckMtrl Bottle”, bserving these books does not e Investigation ellant company ogus purchases me. During the mpany and all er key persons n approximate lant during the hat neither the corresponding y unaccounted s evident in the as bogus and ellant was able ing the regular ing the regular ound, it cannot purposes too.
en that the AO
0/- for the AY
(s) 2021-22 &
ellant. The AR ade by the AO net profit which mpany. The AR the appellant with companies made supra, is d due to these ely determined ce with basic accounting norms, further substantiat
Therefore, the boo
Section 145(3) for  Inconsistent ac accounts for bogus
 Handling of SA documentation (e.g
 Failure to com purchases.
 The inability to significantly impact
6.2.25
Based o books of accounts c income for the rele section 145(3) of books of accounts taxable income of t undersigned, in or profit element emb accordance to secti
6.2.26
At this by the Hon’ble Alla v. CIT(A) (2012) concurred with the account maintaine maintained. The re reference:
“12. For the assess
G.P. rate 16.20 per year. Thus, during low. The Commis circumstances per
Assessing Officer h which is lower in co of account were n consumable items for rejection of the account rejected, t estimate the sale a figure of the asse already given the p there is no scope question of fact. Th
ITA Nos.1613
ITA Nos.1547
(AYs 2
M/s. Southern Agrifurane
:: 21 ::

such as proper documentation and accurate ent tes the claim that the books do not reflect oks of accounts in this case should indeed be the following reasons:
ccounting treatments, such as the use of in transactions.
AP entries to process invoices without va g., missing GRN, no purchase orders).
mply with standard accounting procedures o substantiate purchases with proper docume ts the reliability of the accounts.
on the above factors, the undersigned holds th cannot be considered reliable for determining th evant assessment years. Therefore, as per the the Act, the undersigned has the authority t s and determine the taxable income to asce the appellant company for the year under cons rder to set right the issues related in determ bedded in such purchases rejects the books on 145(3) of the Act.
juncture it is appropriate to rely upon the deci habad High Court in the case of Shri Venkteshw
341 ITR 588 (All) wherein the Hon’ble Hi e decision of the ITAT in upholding the rejectio ed by the assessee when the same are elevant para of the judgment is extracted be sment year under consideration, the assessee h r cent. as against 33.44 per cent. in the previo the assessment year under consideration, the ssioner of Income-tax (Appeals) discussed t rtaining to the manufacturing cost and selli as taken the G.P. rate at 27 per cent. on the e omparison to earlier year i.e. 33.44 per cent. W not properly maintained and the vouchers per were not available for verification, then we fin books of accounts by the Assessing Officer Onc then there is no option before the Assessing Of and G. P. rate which he determined by taking b essee for the previous assessment year. The partial relief and in the facts and circumstance to give any further relief specially when the e he Tribunal is a final fact finding authority as pe to 1615 /Chny/2025
&
7 & 1548/Chny/2025
2018-19 & 2019-20) e Industries Pvt. Ltd.
try of invoices, true income.
rejected under ncorrect offset lid supporting for genuine ntation, which hat the current he true taxable e provisions of to reject these ertain the true sideration. The mination of the of accounts in sions rendered war Sugar Mills igh Court has on of books of not properly elow for ready has shown the us assessment
G.P. rate was the facts and ng price. The estimated sale,
When the books rtaining to the nd justification ce the books of fficer except to by comparative e Tribunal has es of the case, estimation is a er the ratio laid down in the case
Duty [2002] 253 IT 13. In the instant c question of fact
Lines v.