SOUTHERN AGRIFURANE INDUSTRIES PVT. LTD.,CHENNAI vs. ACIT, CENTRAL CIRCLE-2(2), CHENNAI

to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt आदेश / O R D E R PER BENCH: These appeals preferred by the assessee and the Revenue are preferred by the assessee and the Revenue are preferred by the assessee and the Revenue are against the order of the against the order of the Learned Commissioner of Income Tax (Appeals) Commissioner of Income Tax (Appeals)- 19, (hereinafter referred to as ‘Ld.CIT(A)‘), Chennai, hereinafter referred to as ‘Ld.CIT(A)‘), Chennai, all dated dated 04.04.2025 for the Assessment Year Assessment Years (hereinafter referred to as ‘AY‘) 2020 (hereinafter referred to as ‘AY‘) 2020-21 to 2022-23 u/s. 250 of the 23 u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘).

During the pendency of the assessment proceedings which was initiated During the pendency of the assessment proceedings which was initiated During the pendency of the assessment proceedings which was initiated u/s 153C of the Act, a s u/s 153C of the Act, a search u/s 132 of the Act was conducted upon the earch u/s 132 of the Act was conducted upon the to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt assessee on 15-06-2022, in the course of which several 2022, in the course of which several 2022, in the course of which several materials viz., books of accounts, documents & electronic data, loose sheets, note books books of accounts, documents & electronic data, loose sheets, note books books of accounts, documents & electronic data, loose sheets, note books etc. was found and seized. According to the AO, the seized mater etc. was found and seized. According to the AO, the seized mater etc. was found and seized. According to the AO, the seized material inter alia contained details of suppression of income by the assessee by alia contained details of suppression of income by the assessee by alia contained details of suppression of income by the assessee by debiting bogus purchases from vendors of old liquor bottles and debiting bogus purchases from vendors of old liquor bottles and debiting bogus purchases from vendors of old liquor bottles and transportation & logistics services. Consequent to the search action, the transportation & logistics services. Consequent to the search action, the transportation & logistics services. Consequent to the search action, the income-tax assessments for AYs 2020 tax assessments for AYs 2020-21 to 2022-23 was selected for 23 was selected for complete scrutiny by issue of notice(s) u/s 143(2) of the Act and the complete scrutiny by issue of notice(s) u/s 143(2) of the Act and the complete scrutiny by issue of notice(s) u/s 143(2) of the Act and the assessment(s) were completed u/s 143(3) assessing the total income for assessment(s) were completed u/s 143(3) assessing the total income for assessment(s) were completed u/s 143(3) assessing the total income for AYs 2020-21, 2021- -22 & 2022-23 at Rs Rs 95,03,99,772/ 95,03,99,772/-, Rs 108,50,73,297/-, Rs 94,94,33,711/ , Rs 94,94,33,711/- respectively, after making the respectively, after making the following addition(s)/disallowance(s). following addition(s)/disallowance(s).

(in Rs.)

Sl Particulars Particulars 2020-21 2021 2021-22 2022-23 No 1 Addition on a/c of old bottle purchases Addition on a/c of old bottle purchases 41,11,59,615 56,41,82,236 56,41,82,236 58,23,45,992 2 Disallowance of data center expenses Disallowance of data center expenses 55,64,877 61,36,677 61,36,677 1,29,61,697 3 Addition on a/c of unaccounted sale of Addition on a/c of unaccounted sale of NA 42,94,341 42,94,341 42,94,341 scrap 4 Addition on a/c of bogus CSR contribution of bogus CSR contribution NA 4,00,00,000 4,00,00,000 NA

According to the AO, though these vendor According to the AO, though these vendors were actually supplying old s were actually supplying old bottles for which genuine invoices were being raised, but these same bottles for which genuine invoices were being raised, but these same bottles for which genuine invoices were being raised, but these same vendors were also providing bogus invoices to facilitate inflation of vendors were also providing bogus invoices to facilitate inflation of vendors were also providing bogus invoices to facilitate inflation of expenses of the assessee. This inference was drawn from the purchase expenses of the assessee. This inference was drawn from the purchase expenses of the assessee. This inference was drawn from the purchase ledgers, which according to the AO, contained entries both for genuine old ording to the AO, contained entries both for genuine old ording to the AO, contained entries both for genuine old bottle purchases and bogus old bottle purchases. In the Revenue’s bottle purchases and bogus old bottle purchases. In the Revenue’s bottle purchases and bogus old bottle purchases. In the Revenue’s opinion, the actual old bottles purchased were accompanied by opinion, the actual old bottles purchased were accompanied by opinion, the actual old bottles purchased were accompanied by Goods Receipt Note (herein after ‘ herein after ‘GRN/GRNs’) whereas the same was lacki whereas the same was lacking in bogus old bottle purchases. The AO accordingly deduced that, in case of old bottle purchases. The AO accordingly deduced that, in case of old bottle purchases. The AO accordingly deduced that, in case of bogus purchases, the bills were processed without GRN entry. The AO bogus purchases, the bills were processed without GRN entry. The AO bogus purchases, the bills were processed without GRN entry. The AO to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt thereafter elaborately discussed the accounting processes followed by the thereafter elaborately discussed the accounting processes followed by the thereafter elaborately discussed the accounting processes followed by the assessee upon purchase of old bottle assessee upon purchase of old bottles with screenshots of SAP system, s with screenshots of SAP system, invoices in light of the statements obtained from the accounts & audit invoices in light of the statements obtained from the accounts & audit invoices in light of the statements obtained from the accounts & audit staff. The AO inferred that wherever the purchases invoices were bogus, staff. The AO inferred that wherever the purchases invoices were bogus, staff. The AO inferred that wherever the purchases invoices were bogus, there was no movement from top to bottom for accounting and payment. there was no movement from top to bottom for accounting and payment. there was no movement from top to bottom for accounting and payment.

According to AO, the assessee would simply collect cash from the old to AO, the assessee would simply collect cash from the old to AO, the assessee would simply collect cash from the old bottle suppliers in lieu of payments made towards bogus purchase bottle suppliers in lieu of payments made towards bogus purchase bottle suppliers in lieu of payments made towards bogus purchase invoices after deducting commission retained by these suppliers for invoices after deducting commission retained by these suppliers for invoices after deducting commission retained by these suppliers for facilitating such bogus bills. To support his theory, the AO is facilitating such bogus bills. To support his theory, the AO is facilitating such bogus bills. To support his theory, the AO is noted to have undertaken sample analysis of holograms label supplied by Excise have undertaken sample analysis of holograms label supplied by Excise have undertaken sample analysis of holograms label supplied by Excise Department which are required to be used on the final bottles dispatched Department which are required to be used on the final bottles dispatched Department which are required to be used on the final bottles dispatched for sale. According to AO, ideally the total number of hologram labels for sale. According to AO, ideally the total number of hologram labels for sale. According to AO, ideally the total number of hologram labels supplied by the Excise Department supplied by the Excise Department should match with the total number of should match with the total number of bottles consumed in production. The AO however observed that, the bottles consumed in production. The AO however observed that, the bottles consumed in production. The AO however observed that, the purchases booked in the SAP software was much higher than the actual purchases booked in the SAP software was much higher than the actual purchases booked in the SAP software was much higher than the actual bottles utilized as per the hologram details and thus concluded that, the bottles utilized as per the hologram details and thus concluded that, the bottles utilized as per the hologram details and thus concluded that, the excess number of old bottle bottle purchases as per SAP actually represented purchases as per SAP actually represented bogus purchases. Thereafter, the AO is noted to have extensively bogus purchases. Thereafter, the AO is noted to have extensively bogus purchases. Thereafter, the AO is noted to have extensively reproduced the statements of several employees of the assessee viz., Shri reproduced the statements of several employees of the assessee viz., Shri reproduced the statements of several employees of the assessee viz., Shri S Varatharaj, Shri Augsutine Paulraj etc., recorded acr sutine Paulraj etc., recorded across several dates in oss several dates in the assessment order, wherein they had admitted that, the invoices which the assessment order, wherein they had admitted that, the invoices which the assessment order, wherein they had admitted that, the invoices which did not carry seal or GRN details were bogus purchases.It is observed did not carry seal or GRN details were bogus purchases.It is observed did not carry seal or GRN details were bogus purchases.It is observed to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt that, Shri Austine Paulraj had identified eight (8) regular suppliers who Paulraj had identified eight (8) regular suppliers who Paulraj had identified eight (8) regular suppliers who were inter alia providing these bogus invoices to the assessee, apart from oviding these bogus invoices to the assessee, apart from oviding these bogus invoices to the assessee, apart from actual supply of old bottles and quantified the bogus transactions at actual supply of old bottles and quantified the bogus transactions at actual supply of old bottles and quantified the bogus transactions at Rs.390 crores for the past ten years. According to the employees, the Rs.390 crores for the past ten years. According to the employees, the Rs.390 crores for the past ten years. According to the employees, the vendors would return back the cash in lieu of the payments vendors would return back the cash in lieu of the payments vendors would return back the cash in lieu of the payments made against such bogus invoices after dedu such bogus invoices after deducting their commission and cting their commission and such cash was utilized to meet other cash expenses of the assessee. The AO also utilized to meet other cash expenses of the assessee. The AO also utilized to meet other cash expenses of the assessee. The AO also reproduced the statement of the Managing Director of the assessee, Shri reproduced the statement of the Managing Director of the assessee, Shri reproduced the statement of the Managing Director of the assessee, Shri M Anand who had confirmed the stat M Anand who had confirmed the statements given by Shri S Varatharaj & ements given by Shri S Varatharaj & Shri Austine Paulraj. Thereafter, the AO at Para 6 of his order elaborately Paulraj. Thereafter, the AO at Para 6 of his order elaborately Paulraj. Thereafter, the AO at Para 6 of his order elaborately set out the findings unearthed upon conducting search/survey action on set out the findings unearthed upon conducting search/survey action on set out the findings unearthed upon conducting search/survey action on these suppliers. To sum up, according to the AO, these suppliers had also these suppliers. To sum up, according to the AO, these suppliers had also these suppliers. To sum up, according to the AO, these suppliers had also corroborated the statements of the employee(s) that they had facilitated corroborated the statements of the employee(s) that they had facilitated corroborated the statements of the employee(s) that they had facilitated inflation of expenses by providing bogus invoices. The AO is found to have inflation of expenses by providing bogus invoices. The AO is found to have inflation of expenses by providing bogus invoices. The AO is found to have summarized the evidences unearthed with respect to old bottle purchases summarized the evidences unearthed with respect to old bottle purchases summarized the evidences unearthed with respect to old bottle purchases at Para 8 of his order, which is ex at Para 8 of his order, which is extracted below:-

“During the course of search, the following evidences have been During the course of search, the following evidences have been During the course of search, the following evidences have been unearthed with respect to bogus old bottle purchase invoices booked by unearthed with respect to bogus old bottle purchase invoices booked by unearthed with respect to bogus old bottle purchase invoices booked by M/s SAFL: a) During the course of search at the residence of Shri.S.Varatharaj, During the course of search at the residence of Shri.S.Varatharaj, During the course of search at the residence of Shri.S.Varatharaj, DGM (Finance) M/s SAFL, i DGM (Finance) M/s SAFL, it was found that he was systematically t was found that he was systematically maintaining month wise details of bogus expenses, booked in the guise maintaining month wise details of bogus expenses, booked in the guise maintaining month wise details of bogus expenses, booked in the guise of purchase of old bottles, in an excel workbook named "ENA Schedule" of purchase of old bottles, in an excel workbook named "ENA Schedule" of purchase of old bottles, in an excel workbook named "ENA Schedule" in a silver colour pen drive (Neel Max 32 GB). He has explained the in a silver colour pen drive (Neel Max 32 GB). He has explained the in a silver colour pen drive (Neel Max 32 GB). He has explained the evidences found in an elaborate manner, the modus operandi of booking found in an elaborate manner, the modus operandi of booking found in an elaborate manner, the modus operandi of booking to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt the bogus expenses and accepted that M/s SAFL booked bogus old the bogus expenses and accepted that M/s SAFL booked bogus old the bogus expenses and accepted that M/s SAFL booked bogus old bottle purchases against payments through banking channel and bottle purchases against payments through banking channel and bottle purchases against payments through banking channel and received back the amount corresponding to the bogus invoices in cash. received back the amount corresponding to the bogus invoices in cash. received back the amount corresponding to the bogus invoices in cash. The evidences found at his residence reveal The evidences found at his residence reveal

Ans. Sir, As I stated earlier, I accept that we were generating Ans. Sir, As I stated earlier, I accept that we were generating Ans. Sir, As I stated earlier, I accept that we were generating unaccounted income through bogus invoices and by accommodation unaccounted income through bogus invoices and by accommodation unaccounted income through bogus invoices and by accommodation entries. M/s Southern Agrifurane industries Pvt. Ltd has hooked bogus entries. M/s Southern Agrifurane industries Pvt. Ltd has hooked bogus entries. M/s Southern Agrifurane industries Pvt. Ltd has hooked bogus Invoices for purchase old liquor bottles from its suppliers viz. M/s Sree urchase old liquor bottles from its suppliers viz. M/s Sree urchase old liquor bottles from its suppliers viz. M/s Sree Ramachandra Bottle Stores, M/s Lotus Bottle Suppliers, M/s Niha Ramachandra Bottle Stores, M/s Lotus Bottle Suppliers, M/s Niha Ramachandra Bottle Stores, M/s Lotus Bottle Suppliers, M/s Niha International Private Limited, M/s GLR Holdings, M/s GLR Holding Private International Private Limited, M/s GLR Holdings, M/s GLR Holding Private International Private Limited, M/s GLR Holdings, M/s GLR Holding Private Limited, M/s Crystal Bottles, M/s Kovai Sri Ganapathy Trade Limited, M/s Crystal Bottles, M/s Kovai Sri Ganapathy Trade Limited, M/s Crystal Bottles, M/s Kovai Sri Ganapathy Traders and M/s Sri Pachaivazhaiamman Traders for the FY 20 Sri Pachaivazhaiamman Traders for the FY 2012-13 to FY 2022 13 to FY 2022-23.

The modus operandi is that the old bottle suppliers have raised bogus The modus operandi is that the old bottle suppliers have raised bogus The modus operandi is that the old bottle suppliers have raised bogus invoices to M/s Southern Agrifurane Pvt. Ltd for purchase of cleaned old invoices to M/s Southern Agrifurane Pvt. Ltd for purchase of cleaned old invoices to M/s Southern Agrifurane Pvt. Ltd for purchase of cleaned old bottles. In turn, M/s SAFL has initia bottles. In turn, M/s SAFL has initiated RTGS payments against these ted RTGS payments against these bogus invoices. After receiving the RTGS, the bottle suppliers had bogus invoices. After receiving the RTGS, the bottle suppliers had bogus invoices. After receiving the RTGS, the bottle suppliers had withdrawn cash from bank accounts and handed over the cash, withdrawn cash from bank accounts and handed over the cash, withdrawn cash from bank accounts and handed over the cash, payments corresponding to bogus bills, to Shri. M. Raman after taking payments corresponding to bogus bills, to Shri. M. Raman after taking payments corresponding to bogus bills, to Shri. M. Raman after taking their commission. I accept their commission. I accept that M/s Sree Ramachandra Bottle Stores, that M/s Sree Ramachandra Bottle Stores, M/s Lotus Bottle Suppliers, M/s Niha International Private Limited, M/s M/s Lotus Bottle Suppliers, M/s Niha International Private Limited, M/s M/s Lotus Bottle Suppliers, M/s Niha International Private Limited, M/s GLR Holdings, M/s GLR Holding Private Limited, M/s Crystal Bottles, M/s GLR Holdings, M/s GLR Holding Private Limited, M/s Crystal Bottles, M/s GLR Holdings, M/s GLR Holding Private Limited, M/s Crystal Bottles, M/s Koval Sri Ganapathy Traders and M/s Sri Pochaivazhaiamman Traders Koval Sri Ganapathy Traders and M/s Sri Pochaivazhaiamman Traders Koval Sri Ganapathy Traders and M/s Sri Pochaivazhaiamman Traders have raised bogus invoices to the tune of Rs. 390,72,59,061/ raised bogus invoices to the tune of Rs. 390,72,59,061/ raised bogus invoices to the tune of Rs. 390,72,59,061/- to M/s SAFL for purchase of old bottles for the FY 2012 SAFL for purchase of old bottles for the FY 2012-13 to FY 2022 13 to FY 2022-23. In this process, M/s SAFL had generated unaccounted cash income and the this process, M/s SAFL had generated unaccounted cash income and the this process, M/s SAFL had generated unaccounted cash income and the bottle suppliers have earned certain percentage of co bottle suppliers have earned certain percentage of commission income mmission income in the years in which they have raised bogus invoices, I accept that I will in the years in which they have raised bogus invoices, I accept that I will in the years in which they have raised bogus invoices, I accept that I will offer this unaccounted cash income generated through bogus invoices, offer this unaccounted cash income generated through bogus invoices, offer this unaccounted cash income generated through bogus invoices, for taxation for F.Y. 2012 for taxation for F.Y. 2012-13 to F.Y. 2022-23.

Further, Further, Further, M/s M/s M/s Anand Anand Anand Transport Transport Transport Pvt. Pvt. Pvt. Ltd. Ltd. Ltd. has has has book book booked bogus accommodation expenses in the name entities introduced by Shri. accommodation expenses in the name entities introduced by Shri. accommodation expenses in the name entities introduced by Shri. Narendra Jain. The company has raised unaccounted income of Rs. Narendra Jain. The company has raised unaccounted income of Rs. Narendra Jain. The company has raised unaccounted income of Rs. 36.42 crore for the FY 2013 36.42 crore for the FY 2013-14 to FY 2017-18. Further, M/s SAFL has 18. Further, M/s SAFL has claimed bogus CSR expenses through accommodation en claimed bogus CSR expenses through accommodation en claimed bogus CSR expenses through accommodation entry providing institutions for claiming bogus CSR expenses and this transaction was institutions for claiming bogus CSR expenses and this transaction was institutions for claiming bogus CSR expenses and this transaction was mediated by shri. Narendra Jain. mediated by shri. Narendra Jain.

Hence, in order to avoid litigation and buy peace I hereby offer Hence, in order to avoid litigation and buy peace I hereby offer Hence, in order to avoid litigation and buy peace I hereby offer Rs.230,00,00,000/ Rs.230,00,00,000/- as undisclosed income earned through above as undisclosed income earned through above entities for various financial years and I will pay the taxes accordingly. various financial years and I will pay the taxes accordingly. various financial years and I will pay the taxes accordingly. However, as of now I could not derive year wise exact quantum of However, as of now I could not derive year wise exact quantum of However, as of now I could not derive year wise exact quantum of unaccounted income earned in each entity. I request you to provide unaccounted income earned in each entity. I request you to provide unaccounted income earned in each entity. I request you to provide to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt two-week time to arrive that M/s SAFL had paid 8% commission week time to arrive that M/s SAFL had paid 8% commission week time to arrive that M/s SAFL had paid 8% commission on basic value of invoice, le without GST and TDS/TCS, to the old bottle basic value of invoice, le without GST and TDS/TCS, to the old bottle basic value of invoice, le without GST and TDS/TCS, to the old bottle suppliers for raising bogus old purchase invoices. suppliers for raising bogus old purchase invoices. b) Shri. Augustine Paulraj Vice President (Finance) M/s SAFL, vide his Shri. Augustine Paulraj Vice President (Finance) M/s SAFL, vide his Shri. Augustine Paulraj Vice President (Finance) M/s SAFL, vide his sworn statement, recorded at his residence, deposed that M/s sworn statement, recorded at his residence, deposed that M/s sworn statement, recorded at his residence, deposed that M/s SAFL had booked bogus/ excess invoicing to the tune of Rs.390,72,59,061/ booked bogus/ excess invoicing to the tune of Rs.390,72,59,061/ booked bogus/ excess invoicing to the tune of Rs.390,72,59,061/- from FY 2012-13 to FY 2022 13 to FY 2022-23 to meet certain hidden overhead expenses, 23 to meet certain hidden overhead expenses, which were not all which were not allowable expenses under I.T. Act. c) Shri.M.Mani, Accounts Officer at M/s.SAFL, testified that Shri.M.Mani, Accounts Officer at M/s.SAFL, testified that he processed old bottle purchase invoices without GRN in SAP software under the old bottle purchase invoices without GRN in SAP software under the old bottle purchase invoices without GRN in SAP software under the directions of Shri. Augustine Paulraj. He also clarified that, those directions of Shri. Augustine Paulraj. He also clarified that, those directions of Shri. Augustine Paulraj. He also clarified that, those genuine invoices received at the factory processed in SAP had the GRN genuine invoices received at the factory processed in SAP had the GRN genuine invoices received at the factory processed in SAP had the GRN details and purchase order number, w details and purchase order number, whereas the bogus invoices had no hereas the bogus invoices had no GRN details in remarks section of SAP. remarks section of SAP. d) Based on the clarifications provided by Shri.S.Varatharaj on the Based on the clarifications provided by Shri.S.Varatharaj on the Based on the clarifications provided by Shri.S.Varatharaj on the evidences found, vide his sworn statement recorded u/s 132(4) of the evidences found, vide his sworn statement recorded u/s 132(4) of the evidences found, vide his sworn statement recorded u/s 132(4) of the Act at the business premises of M/s SAFL, it is Act at the business premises of M/s SAFL, it is gathered that there were gathered that there were no purchase orders raised for bogus purchases and as per the direction no purchase orders raised for bogus purchases and as per the direction no purchase orders raised for bogus purchases and as per the direction of Shri. Augustine Paulraj, the bogus invoices were directly delivered to of Shri. Augustine Paulraj, the bogus invoices were directly delivered to of Shri. Augustine Paulraj, the bogus invoices were directly delivered to Shri. Augustine Paulraj. Shri. Augustine Paulraj in turn had sent the Shri. Augustine Paulraj. Shri. Augustine Paulraj in turn had sent the Shri. Augustine Paulraj. Shri. Augustine Paulraj in turn had sent the bogus invoices to Shri. S.Varatharaj and Shri. Mani, who had processed to Shri. S.Varatharaj and Shri. Mani, who had processed to Shri. S.Varatharaj and Shri. Mani, who had processed the bogus invoices manually in "A/P Invoice" module of SAP. Further, the bogus invoices manually in "A/P Invoice" module of SAP. Further, the bogus invoices manually in "A/P Invoice" module of SAP. Further, from his deposition it is seen that 'off from his deposition it is seen that 'off-set account name' given for actual set account name' given for actual purchase was "allocation account" and 'off purchase was "allocation account" and 'off-set account name' given for name' given for bogus purchase was "Stock bogus purchase was "Stock-pack-Mtrl-Bottle" and for earlier years, it Bottle" and for earlier years, it was "consumption was "consumption- bottles" and "cost of goods sold-FG". During the FG". During the course of search, the ledgers of 'off course of search, the ledgers of 'off-set accounts' of bogus old bottle set accounts' of bogus old bottle purchases were seized vide anne purchases were seized vide annexure: ANN/TM/SAFL/LS/S-2 to 5 2 to 5-9. e) Shri.J.Ramesh, Chief Manager of Internal Audit in MGM Group, Shri.J.Ramesh, Chief Manager of Internal Audit in MGM Group, Shri.J.Ramesh, Chief Manager of Internal Audit in MGM Group, deposed in his sworn statement that two types of invoices had been deposed in his sworn statement that two types of invoices had been deposed in his sworn statement that two types of invoices had been processed by internal audit unit, one with supporting documents, such processed by internal audit unit, one with supporting documents, such processed by internal audit unit, one with supporting documents, such as purchase orders, su as purchase orders, supplier bills, GRN from store, DC, Security gate pplier bills, GRN from store, DC, Security gate pass and another type of bills were not having any of these supporting pass and another type of bills were not having any of these supporting pass and another type of bills were not having any of these supporting documents. Further, he stated that on the instruction of Shri. Augustine documents. Further, he stated that on the instruction of Shri. Augustine documents. Further, he stated that on the instruction of Shri. Augustine Paulraj, he had approved the invoices without any su Paulraj, he had approved the invoices without any su Paulraj, he had approved the invoices without any supporting documents for payment. uments for payment. f) The cashier of M/s SAFL, Shri.M.Raman, in his sworn statement The cashier of M/s SAFL, Shri.M.Raman, in his sworn statement The cashier of M/s SAFL, Shri.M.Raman, in his sworn statement accepted that he collected a sum of Rs.2 to 3 Crores (approx.) in cash accepted that he collected a sum of Rs.2 to 3 Crores (approx.) in cash accepted that he collected a sum of Rs.2 to 3 Crores (approx.) in cash every month from the old bottle suppliers and kept the cash in the safe every month from the old bottle suppliers and kept the cash in the safe every month from the old bottle suppliers and kept the cash in the safe lockers maintained with M/s lockers maintained with M/s Kothari Safe Deposits Ltd. Such cash was Kothari Safe Deposits Ltd. Such cash was to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt seized vide annexure: ANN/AK/MGM/Cash/Seizure. During the course of seized vide annexure: ANN/AK/MGM/Cash/Seizure. During the course of seized vide annexure: ANN/AK/MGM/Cash/Seizure. During the course of search, search, search, a a a set set set of of of loose loose loose sheets sheets sheets seized seized seized vide vide vide annexure: annexure: annexure: ANN/AS/MGMC/LS/S ANN/AS/MGMC/LS/S-1, which were written by him and having the 1, which were written by him and having the details of cash collected from old details of cash collected from old bottle suppliers. This established that bottle suppliers. This established that M/s SAFL received back cash M/s SAFL received back cash from the old bottle suppliers. g) From the statement of Shri. Augustine Paulraj, it was gathered that From the statement of Shri. Augustine Paulraj, it was gathered that From the statement of Shri. Augustine Paulraj, it was gathered that on his direction Shri.M.Mani raised bogus invoices in SAP and forwarded on his direction Shri.M.Mani raised bogus invoices in SAP and forwarded on his direction Shri.M.Mani raised bogus invoices in SAP and forwarded the same for authorization of Shri.S.Varatharaj and Shri.S.Varatharaj in authorization of Shri.S.Varatharaj and Shri.S.Varatharaj in authorization of Shri.S.Varatharaj and Shri.S.Varatharaj in turn had forwarded the invoices physically to him for approval. After turn had forwarded the invoices physically to him for approval. After turn had forwarded the invoices physically to him for approval. After approval, approval, approval, Shri. Shri. Shri. Augustine Augustine Augustine Paulraj Paulraj Paulraj had had had sent sent sent them them them back back back to to to Shri.S.Varatharaj, who forwarded the same to Shri. Ramesh for audit Shri.S.Varatharaj, who forwarded the same to Shri. Ramesh for audit Shri.S.Varatharaj, who forwarded the same to Shri. Ramesh for audit approval. After the approval of audit team, Shri.M.Mani from accounts proval. After the approval of audit team, Shri.M.Mani from accounts proval. After the approval of audit team, Shri.M.Mani from accounts office processed the payments towards the bogus invoices and the office processed the payments towards the bogus invoices and the office processed the payments towards the bogus invoices and the corresponding amount in cash was received by Shri. Raman from the corresponding amount in cash was received by Shri. Raman from the corresponding amount in cash was received by Shri. Raman from the suppliers and in order to track this payment, Shri. Varat suppliers and in order to track this payment, Shri. Varatharaj prepared a haraj prepared a monthly report towards such bogus payment, which was seized at his monthly report towards such bogus payment, which was seized at his monthly report towards such bogus payment, which was seized at his residence. Further, from his statement it is also gathered that Shri. residence. Further, from his statement it is also gathered that Shri. residence. Further, from his statement it is also gathered that Shri. Augustine Paulraj handed over the monthly payments report to Augustine Paulraj handed over the monthly payments report to Augustine Paulraj handed over the monthly payments report to Shri.M.Raman for payment tracking which a Shri.M.Raman for payment tracking which also was seized along with lso was seized along with hand written noting of Shri. M Raman with respect to the payments hand written noting of Shri. M Raman with respect to the payments hand written noting of Shri. M Raman with respect to the payments received from the supplier. It is pertinent to mention here that the received from the supplier. It is pertinent to mention here that the received from the supplier. It is pertinent to mention here that the 'modus operandi' of raising bogus old bottle purchase explained by Shri. 'modus operandi' of raising bogus old bottle purchase explained by Shri. 'modus operandi' of raising bogus old bottle purchase explained by Shri. Augustine Paulraj has Augustine Paulraj has been accepted by all the key people of M/s SAFL been accepted by all the key people of M/s SAFL involved in raising and processing of bogus invoices, making payments involved in raising and processing of bogus invoices, making payments involved in raising and processing of bogus invoices, making payments and collecting the corresp and collecting the corresponding cash from the suppliers. h) Based on the findings and evidences gathered during the course of Based on the findings and evidences gathered during the course of Based on the findings and evidences gathered during the course of search, a sworn statement u/s 132(4) of I.T. Act, 1961 was recorded worn statement u/s 132(4) of I.T. Act, 1961 was recorded worn statement u/s 132(4) of I.T. Act, 1961 was recorded from Shri.Manuel Gnana Muthu Anand, MD, M/s SAFL, wherein he had from Shri.Manuel Gnana Muthu Anand, MD, M/s SAFL, wherein he had from Shri.Manuel Gnana Muthu Anand, MD, M/s SAFL, wherein he had categorically accepted that M/s SAFL had booked bogus old bottle categorically accepted that M/s SAFL had booked bogus old bottle categorically accepted that M/s SAFL had booked bogus old bottle purchases against payment through banking channel and received back purchases against payment through banking channel and received back purchases against payment through banking channel and received back the amount corresponding to bogus bills, in cash. Further, after he amount corresponding to bogus bills, in cash. Further, after he amount corresponding to bogus bills, in cash. Further, after confirming the depositions made by Shri. S Varatharaj, Shri. Augustine confirming the depositions made by Shri. S Varatharaj, Shri. Augustine confirming the depositions made by Shri. S Varatharaj, Shri. Augustine Paulraj and Shri. M Raman, he testified that these people were Paulraj and Shri. M Raman, he testified that these people were Paulraj and Shri. M Raman, he testified that these people were responsible for booking this bogus expense, maintaining pa responsible for booking this bogus expense, maintaining payment details yment details and collecting cash and collecting cash from the old battle suppliers. i) Shri.Gottam Rami Reddy, Proprietor of M/s. Sree Durga Devee Shri.Gottam Rami Reddy, Proprietor of M/s. Sree Durga Devee Shri.Gottam Rami Reddy, Proprietor of M/s. Sree Durga Devee Traders, deposed on oath that he raised bogus old bottle purchase Traders, deposed on oath that he raised bogus old bottle purchase Traders, deposed on oath that he raised bogus old bottle purchase invoices against cheque payment to M/s SAFL and returned back invoices against cheque payment to M/s SAFL and returned back invoices against cheque payment to M/s SAFL and returned back the amount corresponding to bogus invoices in cash. The same was amount corresponding to bogus invoices in cash. The same was amount corresponding to bogus invoices in cash. The same was accepted by Shri. Bandi Venkat Kumar, Deputy Manager accepted by Shri. Bandi Venkat Kumar, Deputy Manager (Accounts & Finance) M/S SAFL. Finance) M/S SAFL. to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt j) The ex-group president of MGM, Shri.P.S.Mahadevan testified that he group president of MGM, Shri.P.S.Mahadevan testified that he group president of MGM, Shri.P.S.Mahadevan testified that he was aware of the fact that M/s SAFL was aware of the fact that M/s SAFL was generating unaccounted cash was generating unaccounted cash through excess billing to mee through excess billing to meet certain business compulsions. t certain business compulsions. k) During the course of search proceedings at the production plant of During the course of search proceedings at the production plant of During the course of search proceedings at the production plant of M/s SAFL, Shri. Y Victor Vasantha Kumar provided the hologram label M/s SAFL, Shri. Y Victor Vasantha Kumar provided the hologram label M/s SAFL, Shri. Y Victor Vasantha Kumar provided the hologram label consumption data, which i consumption data, which is exactly matching with production and s exactly matching with production and dispatch details provided by Shri. Sanjeev Yash Roy. This shows that dispatch details provided by Shri. Sanjeev Yash Roy. This shows that dispatch details provided by Shri. Sanjeev Yash Roy. This shows that data given by these two people are the actual number of bottles data given by these two people are the actual number of bottles data given by these two people are the actual number of bottles consumed for production. But, on comparison of SAP data with the data consumed for production. But, on comparison of SAP data with the data consumed for production. But, on comparison of SAP data with the data provided by Shri. Y.Victor Vasantha Kumar and Shri. Sanjeev Yash Roy, ri. Y.Victor Vasantha Kumar and Shri. Sanjeev Yash Roy, ri. Y.Victor Vasantha Kumar and Shri. Sanjeev Yash Roy, it is established beyond doubt that assessee company had booked huge it is established beyond doubt that assessee company had booked huge it is established beyond doubt that assessee company had booked huge amount of bogus expensed in the guise of old bot amount of bogus expensed in the guise of old bottle purchases. tle purchases. l) Shri.M.Raman, in his sworn statement recorded on 10.08.2022, Shri.M.Raman, in his sworn statement recorded on 10.08.2022, Shri.M.Raman, in his sworn statement recorded on 10.08.2022, provided the name of the persons of old bottle suppliers who had ided the name of the persons of old bottle suppliers who had ided the name of the persons of old bottle suppliers who had handed over cash to him. This is exactly matching with the sworn handed over cash to him. This is exactly matching with the sworn handed over cash to him. This is exactly matching with the sworn statement provided by the key persons of old bottle suppliers. Further, statement provided by the key persons of old bottle suppliers. Further, statement provided by the key persons of old bottle suppliers. Further, Shri. Augustine Paulraj in his sworn statement recorded on Shri. Augustine Paulraj in his sworn statement recorded on Shri. Augustine Paulraj in his sworn statement recorded on 02.09.2022 testified that 6% commission on the base value of invoice was provided testified that 6% commission on the base value of invoice was provided testified that 6% commission on the base value of invoice was provided to old bottle supplier for raising bogus invoices and further testified after to old bottle supplier for raising bogus invoices and further testified after to old bottle supplier for raising bogus invoices and further testified after GST induction and due to continuous demand from the bottle suppliers, GST induction and due to continuous demand from the bottle suppliers, GST induction and due to continuous demand from the bottle suppliers, the commission was revise the commission was revised from 6% to 8% w.e.f 01.08.2017. Further, d from 6% to 8% w.e.f 01.08.2017. Further, Shri. Manuel Gnana Muthu Anand, after reconfirming the statement of Shri. Manuel Gnana Muthu Anand, after reconfirming the statement of Shri. Manuel Gnana Muthu Anand, after reconfirming the statement of Shri.S.Vartharaj, Shri. Augustine Paulraj and Shri. M Raman and Shri.S.Vartharaj, Shri. Augustine Paulraj and Shri. M Raman and Shri.S.Vartharaj, Shri. Augustine Paulraj and Shri. M Raman and statements of various old bottle suppliers, had accepted that M/s SAFL statements of various old bottle suppliers, had accepted that M/s SAFL statements of various old bottle suppliers, had accepted that M/s SAFL booked bogus purchases to the tune of Rs.390,72,59,061/ us purchases to the tune of Rs.390,72,59,061/ us purchases to the tune of Rs.390,72,59,061/- from FY 2012-13 to FY 2022 13 to FY 2022-23 and offered the undisclosed income earned by 23 and offered the undisclosed income earned by MGM group to the tune of Rs.230 crores for FYs:201 MGM group to the tune of Rs.230 crores for FYs:2012-13 to 2022 13 to 2022-23. m) The comparative analysis of hologram consumption data maintained The comparative analysis of hologram consumption data maintained The comparative analysis of hologram consumption data maintained by Shri.Y.Victor Vasantha kumar, production and dispatch details by Shri.Y.Victor Vasantha kumar, production and dispatch details by Shri.Y.Victor Vasantha kumar, production and dispatch details provided by Shri. Sanjeev Yash Roy, old bottle utilization details provided by Shri. Sanjeev Yash Roy, old bottle utilization details provided by Shri. Sanjeev Yash Roy, old bottle utilization details maintained by Shri K.Parathasarathy at factory premises of M/s SAFL maintained by Shri K.Parathasarathy at factory premises of M/s SAFL maintained by Shri K.Parathasarathy at factory premises of M/s SAFL and actual books of accounts of M/s SAFL, it is establi and actual books of accounts of M/s SAFL, it is established beyond doubt shed beyond doubt that M/s SAFL had booked bogus old bottle purchase invoices o that M/s SAFL had booked bogus old bottle purchase invoices o that M/s SAFL had booked bogus old bottle purchase invoices over and above actual purchases. above actual purchases. n) The evidence found during the course of search proceedings at the The evidence found during the course of search proceedings at the The evidence found during the course of search proceedings at the business premises of M/s Lotus Bottle Suppliers, established that M/s business premises of M/s Lotus Bottle Suppliers, established that M/s business premises of M/s Lotus Bottle Suppliers, established that M/s Lotus Bottle Suppliers had raised bogus old bottle purchase Invoices to Bottle Suppliers had raised bogus old bottle purchase Invoices to Bottle Suppliers had raised bogus old bottle purchase Invoices to M/s SAFL and returned back the amount corresponding to bogus M/s SAFL and returned back the amount corresponding to bogus M/s SAFL and returned back the amount corresponding to bogus invoices in cash after taking its commission. Further, the evidences invoices in cash after taking its commission. Further, the evidences invoices in cash after taking its commission. Further, the evidences established that the entity had booked bogus bought note cas established that the entity had booked bogus bought note cas established that the entity had booked bogus bought note cash purchases in random names and bogus purchase invoices from purchases in random names and bogus purchase invoices from purchases in random names and bogus purchase invoices from to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt accommodation parties in order to compensate the bogus sales made to accommodation parties in order to compensate the bogus sales made to accommodation parties in order to compensate the bogus sales made to M/s SAFL. Shri. ND Venkatesan has accepted the above modus and the M/s SAFL. Shri. ND Venkatesan has accepted the above modus and the M/s SAFL. Shri. ND Venkatesan has accepted the above modus and the same was accepted on oath by Shri. R Palanivelu, Proprietor same was accepted on oath by Shri. R Palanivelu, Proprietor same was accepted on oath by Shri. R Palanivelu, Proprietor of M/s Lotus Bottle Suppliers. Further, Shri. R Palanivelu reconfirmed the Lotus Bottle Suppliers. Further, Shri. R Palanivelu reconfirmed the Lotus Bottle Suppliers. Further, Shri. R Palanivelu reconfirmed the statement given by Shri. Augustine Paulraj, Shri. M Raman and Shri. S statement given by Shri. Augustine Paulraj, Shri. M Raman and Shri. S statement given by Shri. Augustine Paulraj, Shri. M Raman and Shri. S Varatharaj and stated that his entity has raised bogus old bottle Varatharaj and stated that his entity has raised bogus old bottle Varatharaj and stated that his entity has raised bogus old bottle purchase invoices to the tune of Rs.123,44,0 purchase invoices to the tune of Rs.123,44,01,832/- to M/s SAFL during to M/s SAFL during the FYs: 2012-13 to 2022 13 to 2022-23 and offered the undisclosed commission losed commission income to tax. o) The evidence found during the course of search proceedings at the The evidence found during the course of search proceedings at the The evidence found during the course of search proceedings at the business premises of M/s Niha International Pvt. Ltd., M/s GLR Holding business premises of M/s Niha International Pvt. Ltd., M/s GLR Holding business premises of M/s Niha International Pvt. Ltd., M/s GLR Holding Pvt. Ltd. and M/s GLR Holding and the sworn statement recorded from d. and M/s GLR Holding and the sworn statement recorded from d. and M/s GLR Holding and the sworn statement recorded from Smt. Sornavalli, accountant, established that these entities had raised Smt. Sornavalli, accountant, established that these entities had raised Smt. Sornavalli, accountant, established that these entities had raised bogus old bottle purchase invoices to M/s SAFL against cheque or RTGS bogus old bottle purchase invoices to M/s SAFL against cheque or RTGS bogus old bottle purchase invoices to M/s SAFL against cheque or RTGS payments and returned the amount corresponding to bog payments and returned the amount corresponding to bogus invoices in us invoices in cash, after taking their commission. Further, in order to compensate the cash, after taking their commission. Further, in order to compensate the cash, after taking their commission. Further, in order to compensate the bogus sale made to M/s SAFL, these entities had booked bogus bought bogus sale made to M/s SAFL, these entities had booked bogus bought bogus sale made to M/s SAFL, these entities had booked bogus bought note cash purchases in random cities name. Further, Shri. S Rajendran note cash purchases in random cities name. Further, Shri. S Rajendran note cash purchases in random cities name. Further, Shri. S Rajendran had accepted the deposition ma had accepted the deposition made by Smt. Sornavalli and confirmed the de by Smt. Sornavalli and confirmed the statements of Shri. Augustine Paulraj, Shri. M Raman and Shri. statements of Shri. Augustine Paulraj, Shri. M Raman and Shri. statements of Shri. Augustine Paulraj, Shri. M Raman and Shri. S.Varatharaj. On comparison of cash book of Niha group seized during S.Varatharaj. On comparison of cash book of Niha group seized during S.Varatharaj. On comparison of cash book of Niha group seized during the course of search with "ENA Schedule" excel workbook maintained by the course of search with "ENA Schedule" excel workbook maintained by the course of search with "ENA Schedule" excel workbook maintained by Shri. S.Varatharaj, it is found that the cash payment entries of the cash araj, it is found that the cash payment entries of the cash araj, it is found that the cash payment entries of the cash books are exactly matching with cash receipt entries in the excel books are exactly matching with cash receipt entries in the excel books are exactly matching with cash receipt entries in the excel workbook, which shows that the entities had returned back the amount workbook, which shows that the entities had returned back the amount workbook, which shows that the entities had returned back the amount corresponding to bogus invoices in cash to M/s SAFL. Further, corresponding to bogus invoices in cash to M/s SAFL. Further, corresponding to bogus invoices in cash to M/s SAFL. Further, from the production register maintained at cleaning facility of Niha Group, it is production register maintained at cleaning facility of Niha Group, it is production register maintained at cleaning facility of Niha Group, it is quantified that 74,03,824 number of old bottles were cleaned and sent quantified that 74,03,824 number of old bottles were cleaned and sent quantified that 74,03,824 number of old bottles were cleaned and sent to M/s SAFL for FY 2021 to M/s SAFL for FY 2021-22, which is matching with details of old bottle 22, which is matching with details of old bottle the factory premises of SAFL u the factory premises of SAFL utilised for production, maintained by Shri tilised for production, maintained by Shri K Parthasarathy Whereas the total number of old bottle purchases from K Parthasarathy Whereas the total number of old bottle purchases from K Parthasarathy Whereas the total number of old bottle purchases from Niha group, booked in M/s SAFL for the year was 6,83.39,600 which Niha group, booked in M/s SAFL for the year was 6,83.39,600 which Niha group, booked in M/s SAFL for the year was 6,83.39,600 which proves that. Niha group entities had raised bogus sale invoices. Further, proves that. Niha group entities had raised bogus sale invoices. Further, proves that. Niha group entities had raised bogus sale invoices. Further, Shri. S Rajendran accepted on oath that Niha group entities raised i. S Rajendran accepted on oath that Niha group entities raised i. S Rajendran accepted on oath that Niha group entities raised bogus old bottle Invoices the tune of Rs.69,78,04,742/ bogus old bottle Invoices the tune of Rs.69,78,04,742/- during during the FYs: 2012-13 to 2022- -23 and offered the undisclosed commission income for commission income for taxation. p) From the statement of Shri. Murugan an From the statement of Shri. Murugan and Shri. B Siva and evidence d Shri. B Siva and evidence gathered during the course of search action at the business premises of gathered during the course of search action at the business premises of gathered during the course of search action at the business premises of M/s Sri Pachaivazhiamman Traders, it is established beyond doubt that M/s Sri Pachaivazhiamman Traders, it is established beyond doubt that M/s Sri Pachaivazhiamman Traders, it is established beyond doubt that the entity had raised bogus invoices to M/s SAFL. Further, the year wise the entity had raised bogus invoices to M/s SAFL. Further, the year wise the entity had raised bogus invoices to M/s SAFL. Further, the year wise amount of bogus invoices raised by M/s Sri Pachaivazhiamman Traders us invoices raised by M/s Sri Pachaivazhiamman Traders us invoices raised by M/s Sri Pachaivazhiamman Traders provided by Shri. R Murugan is exactly matching with bogus invoice provided by Shri. R Murugan is exactly matching with bogus invoice provided by Shri. R Murugan is exactly matching with bogus invoice to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt ledger, 'Stock-Pack MtrI Pack MtrI-Bottle', extracted from the SAP software of M/s Bottle', extracted from the SAP software of M/s SAFL. The number of old bottles supplied by M/s Sri Pachaivaz SAFL. The number of old bottles supplied by M/s Sri Pachaivaz SAFL. The number of old bottles supplied by M/s Sri Pachaivazhiamman Traders to M/s SAFL for FY 2019 Traders to M/s SAFL for FY 2019-20 and 2020-21, extracted from the 21, extracted from the excel sheets found in HP metal 16GB pen drive, is matching with details excel sheets found in HP metal 16GB pen drive, is matching with details excel sheets found in HP metal 16GB pen drive, is matching with details of old bottle utilised for production, maintained by Shri. K Parthasarathy of old bottle utilised for production, maintained by Shri. K Parthasarathy of old bottle utilised for production, maintained by Shri. K Parthasarathy at the factory premises of SAFL. W at the factory premises of SAFL. Whereas the total number of old bottle hereas the total number of old bottle purchases from M/s Sri Pachaivazhiamman Traders, booked in M/s SAFL purchases from M/s Sri Pachaivazhiamman Traders, booked in M/s SAFL purchases from M/s Sri Pachaivazhiamman Traders, booked in M/s SAFL for these financial years was much more than the above quantification. for these financial years was much more than the above quantification. for these financial years was much more than the above quantification. This proved that M/s Sri Pachaivazhiamman Traders had raised bogus This proved that M/s Sri Pachaivazhiamman Traders had raised bogus This proved that M/s Sri Pachaivazhiamman Traders had raised bogus old bottle purchase invoices to M/s SAFL against RTGS/ cheque urchase invoices to M/s SAFL against RTGS/ cheque urchase invoices to M/s SAFL against RTGS/ cheque payments to the tune of Rs.26,29,58,828/ payments to the tune of Rs.26,29,58,828/- for the FYs:2019 for the FYs:2019-20 to 2022-23 and returned back this amount in cash(correspo 23 and returned back this amount in cash(corresponding to bogus nding to bogus invoices), after deducting its commission. after deducting its commission. q) The evidence gathered at the business premises of M/s Crystal The evidence gathered at the business premises of M/s Crystal The evidence gathered at the business premises of M/s Crystal Bottles and M/s KSGT, it was established that these entities had raised Bottles and M/s KSGT, it was established that these entities had raised Bottles and M/s KSGT, it was established that these entities had raised bogus old bottle purchase invoices to M/s SAFL against cheques/RTGS bogus old bottle purchase invoices to M/s SAFL against cheques/RTGS bogus old bottle purchase invoices to M/s SAFL against cheques/RTGS payments and returned the amount corresponding to bogu payments and returned the amount corresponding to bogu payments and returned the amount corresponding to bogus invoices in cash after deducting their commission. Further, the evidence established cash after deducting their commission. Further, the evidence established cash after deducting their commission. Further, the evidence established that these entities had booked bogus bought note cash purchases in that these entities had booked bogus bought note cash purchases in that these entities had booked bogus bought note cash purchases in random names in order to compensate bogus sales made to M/s SAFL. random names in order to compensate bogus sales made to M/s SAFL. random names in order to compensate bogus sales made to M/s SAFL. Further, the excel sheets found from Further, the excel sheets found from Smt. K Kasturi's desktop Smt. K Kasturi's desktop established that these entities had raised bogus invoices in excess of established that these entities had raised bogus invoices in excess of established that these entities had raised bogus invoices in excess of actual bottles supplied to M/s SAFL and prepared bogus bought notes actual bottles supplied to M/s SAFL and prepared bogus bought notes actual bottles supplied to M/s SAFL and prepared bogus bought notes with predetermined combination of quantities and rate. Therefore, It is with predetermined combination of quantities and rate. Therefore, It is with predetermined combination of quantities and rate. Therefore, It is established that M/ established that M/s Crystal Battles and M/s KSGT raised bogus s Crystal Battles and M/s KSGT raised bogus involcesto M/s SAFL for purchase of old bottles to the tune of involcesto M/s SAFL for purchase of old bottles to the tune of involcesto M/s SAFL for purchase of old bottles to the tune of Rs.13,70,60,915/ Rs.13,70,60,915/- and Rs.12,89,04,614/- respectively f respectively for the FYs: 2012-13 to 2022- -23. r) During the course of search proceeding at the business premi During the course of search proceeding at the business premi During the course of search proceeding at the business premises of M/s.Sree Ramachandra Bottle Stores, Shri. Arun Kumar K and Shri. S M/s.Sree Ramachandra Bottle Stores, Shri. Arun Kumar K and Shri. S M/s.Sree Ramachandra Bottle Stores, Shri. Arun Kumar K and Shri. S Muralidharan deposed that on the instruction of the partners of the firm Muralidharan deposed that on the instruction of the partners of the firm Muralidharan deposed that on the instruction of the partners of the firm they had prepared bogus delivery challan and invoices for sale of old they had prepared bogus delivery challan and invoices for sale of old they had prepared bogus delivery challan and invoices for sale of old bottles to M/s SAFL Further, Shri. K Kr bottles to M/s SAFL Further, Shri. K Krishna Kumar, one of the partners ishna Kumar, one of the partners of the firm, testified that in order to receive contract for supply of old of the firm, testified that in order to receive contract for supply of old of the firm, testified that in order to receive contract for supply of old bottles and sustained revenue and on the direction of Shri.S. Varatharaj, bottles and sustained revenue and on the direction of Shri.S. Varatharaj, bottles and sustained revenue and on the direction of Shri.S. Varatharaj, he engaged M/s SRBS In raising bogus old bottle purchase Invoices to he engaged M/s SRBS In raising bogus old bottle purchase Invoices to he engaged M/s SRBS In raising bogus old bottle purchase Invoices to M/s SAFL and returned back the amount corresponding to bogus AFL and returned back the amount corresponding to bogus AFL and returned back the amount corresponding to bogus invoices in cash after deducting its commission. Further, after confirming invoices in cash after deducting its commission. Further, after confirming invoices in cash after deducting its commission. Further, after confirming the statement of Shri. S Varatharaj, Shri. Augustine Paulraj and Shri. M the statement of Shri. S Varatharaj, Shri. Augustine Paulraj and Shri. M the statement of Shri. S Varatharaj, Shri. Augustine Paulraj and Shri. M Raman, on oath he accepted that the firm had raised Raman, on oath he accepted that the firm had raised bogus old bottle bogus old bottle invoices to M/s SAFL to the tune of Rs. 144,61,26,131 during the FYs: invoices to M/s SAFL to the tune of Rs. 144,61,26,131 during the FYs: invoices to M/s SAFL to the tune of Rs. 144,61,26,131 during the FYs: 2012-13 to 2022 13 to 2022-23 and offered the unaccounted commission income 23 and offered the unaccounted commission income earned through accommodation entries for earned through accommodation entries for taxation. to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt ::14 ::

8.1.2 In view of the above discussions and evidence g In view of the above discussions and evidence g In view of the above discussions and evidence gathered during the course of search, it is categorically established that M/s SAFL during the course of search, it is categorically established that M/s SAFL during the course of search, it is categorically established that M/s SAFL had booked bogus old bottle purchase invoices in its regular books of had booked bogus old bottle purchase invoices in its regular books of had booked bogus old bottle purchase invoices in its regular books of accounts, through old bottle suppliers, against RTGS / cheque payments accounts, through old bottle suppliers, against RTGS / cheque payments accounts, through old bottle suppliers, against RTGS / cheque payments and received back the amount cor and received back the amount corresponding to bogus invoices in cash responding to bogus invoices in cash from the bottle suppliers after giving them 6% to 8% of commission from the bottle suppliers after giving them 6% to 8% of commission from the bottle suppliers after giving them 6% to 8% of commission…”

The books of accounts in relation to books of accounts in relation to this business are noted to have been noted to have been maintained in the SAP accounting SAP accounting software. The facts as noted above The facts as noted above reveals that, in the course of search, a pen drive was found from the reveals that, in the course of search, a pen drive was found from the reveals that, in the course of search, a pen drive was found from the possession of one employee which inter alia contained an excel file. This possession of one employee which inter alia contained an excel file. This possession of one employee which inter alia contained an excel file. This excel file comprised of five excel sheets which contained tabulation of file comprised of five excel sheets which contained tabulation of file comprised of five excel sheets which contained tabulation of to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt purchases made from five different vendors pertaining to three purchases made from five different vendors pertaining to three purchases made from five different vendors pertaining to three-month period of 2020. The Ld. AR showed us that, if these excel sheet(s) are period of 2020. The Ld. AR showed us that, if these excel sheet(s) are period of 2020. The Ld. AR showed us that, if these excel sheet(s) are read on stand-alone basis, which has also been ext alone basis, which has also been extensively extracted in ensively extracted in the assessment order, it shall be observed that, no prudent person could the assessment order, it shall be observed that, no prudent person could the assessment order, it shall be observed that, no prudent person could have deduced that, the details of purchases noted therein represented have deduced that, the details of purchases noted therein represented have deduced that, the details of purchases noted therein represented entries of bogus purchases or receipt of unaccounted cash in lieu of bogus entries of bogus purchases or receipt of unaccounted cash in lieu of bogus entries of bogus purchases or receipt of unaccounted cash in lieu of bogus purchases by the assessee. Rather, he pointed out that, the entries assessee. Rather, he pointed out that, the entries assessee. Rather, he pointed out that, the entries consisted of date-wise and bill wise and bill-wise details of the purchases along with wise details of the purchases along with the invoiced amount, GST, date of payment, cheque details etc., which in the invoiced amount, GST, date of payment, cheque details etc., which in the invoiced amount, GST, date of payment, cheque details etc., which in his opinion, cannot be alleged to be incriminating in natu his opinion, cannot be alleged to be incriminating in nature. Having gone re. Having gone through the same, there is merit in the assessee’s contention that, these through the same, there is merit in the assessee’s contention that, these through the same, there is merit in the assessee’s contention that, these excel sheets, if considered alone, cannot be said to suggest that the excel sheets, if considered alone, cannot be said to suggest that the excel sheets, if considered alone, cannot be said to suggest that the assessee had inflated their expenses by booking bogus purchases from assessee had inflated their expenses by booking bogus purchases from assessee had inflated their expenses by booking bogus purchases from these suppliers.

Further, Mr. Varatharaj Mr. Varatharaj from whose possession this excel file was found from whose possession this excel file was found to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt had averred that, the details of p had averred that, the details of purchases noted therein were summary of urchases noted therein were summary of bogus purchases. Relying on these statements, the AO deduced that bogus purchases. Relying on these statements, the AO deduced that bogus purchases. Relying on these statements, the AO deduced that these vendors, apart from making genuine supplies to the assessee, were these vendors, apart from making genuine supplies to the assessee, were these vendors, apart from making genuine supplies to the assessee, were also raising bogus invoices at the behest of the assessee and that the also raising bogus invoices at the behest of the assessee and that the also raising bogus invoices at the behest of the assessee and that the payments made in lieu of such bogus invoices was being returned back by made in lieu of such bogus invoices was being returned back by made in lieu of such bogus invoices was being returned back by these vendors in cash. It is observed that, to identify the purported bogus these vendors in cash. It is observed that, to identify the purported bogus these vendors in cash. It is observed that, to identify the purported bogus invoices, the Revenue had analyzed the accounting entries being made by invoices, the Revenue had analyzed the accounting entries being made by invoices, the Revenue had analyzed the accounting entries being made by the assessee. The purchases made from these the assessee. The purchases made from these vendors were divided by vendors were divided by the AO into two categories viz., (a) genuine supplies which were the AO into two categories viz., (a) genuine supplies which were the AO into two categories viz., (a) genuine supplies which were supported by GRN details in the software and (b) bogus supplies wherein supported by GRN details in the software and (b) bogus supplies wherein supported by GRN details in the software and (b) bogus supplies wherein only invoices were recorded only invoices were recorded without GRN because there was no actual because there was no actual movement of goods. In suppo movement of goods. In support of this inference, the AO also undertook rt of this inference, the AO also undertook extensive analysis of hologram utilization across the years and relied extensive analysis of hologram utilization across the years and relied extensive analysis of hologram utilization across the years and relied upon the statement(s) obtained from the key persons of these vendors in upon the statement(s) obtained from the key persons of these vendors in upon the statement(s) obtained from the key persons of these vendors in the course of the search/survey action conducted upon them. The Ld. the course of the search/survey action conducted upon them. The Ld. the course of the search/survey action conducted upon them. The Ld.

CIT, DR thus wants us to consider all these material, statement(s) and IT, DR thus wants us to consider all these material, statement(s) and IT, DR thus wants us to consider all these material, statement(s) and analysis made out by the AO cumulatively, which according to her, proved analysis made out by the AO cumulatively, which according to her, proved analysis made out by the AO cumulatively, which according to her, proved that the old bottle purchases to the tune as quantified by the AO was that the old bottle purchases to the tune as quantified by the AO was that the old bottle purchases to the tune as quantified by the AO was indeed bogus.

to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt ::18 ::

factory, more rejections would occur. It was explained that, the purchase , more rejections would occur. It was explained that, the purchase , more rejections would occur. It was explained that, the purchase of these old bottles was was also divisible into two categories viz., (i) also divisible into two categories viz., (i) inspected washed quantity with accepted quality and (ii) u quantity with accepted quality and (ii) u quantity with accepted quality and (ii) uninspected quantity chipped, dust and partially washed bottle quantity chipped, dust and partially washed bottles (for emergency s (for emergency requirements). According to the Ld. AR, the first category being already According to the Ld. AR, the first category being already According to the Ld. AR, the first category being already inspected, verified and of accepted quality was inspected, verified and of accepted quality was accepted on receipt and accepted on receipt and therefore the Goods Receipt Note (GRN) Goods Receipt Note (GRN) was immediately was immediately raised, as minimal wastage was expected minimal wastage was expected in the production process. in the production process. He took us through the details of these first categories these first categories of purchases along with the of purchases along with the quantities of wastage and the final utilization to show that the wastage in quantities of wastage and the final utilization to show that the wastage in quantities of wastage and the final utilization to show that the wastage in this category was indeed minimal. It is seen that, the explanation this category was indeed minimal. It is seen that, the explanation this category was indeed minimal. It is seen that, the explanation given by the assessee regarding the inspected purchases is also supported by by the assessee regarding the inspected purchases is also supported by by the assessee regarding the inspected purchases is also supported by the statement(s) obtained from the factory staff at the time of search. In the statement(s) obtained from the factory staff at the time of search. In the statement(s) obtained from the factory staff at the time of search. In so far as the second category was concerned, the Ld. AR submitted that, so far as the second category was concerned, the Ld. AR submitted that, so far as the second category was concerned, the Ld. AR submitted that, depending on production requirem depending on production requirements and order(s), many a times ents and order(s), many a times immediately bottles are required due to which these vendors are insisted immediately bottles are required due to which these vendors are insisted immediately bottles are required due to which these vendors are insisted to dump the uninspected, chipped, dust and partially washed bottles into uninspected, chipped, dust and partially washed bottles into uninspected, chipped, dust and partially washed bottles into the factory to expedite the entire production process to expedite the entire production process. . As the exact accepted quantity during production quantity during production is not ascertainable at the time of is not ascertainable at the time of receipt of goods, the assessee claimed that it would not raise receipt of goods, the assessee claimed that it would not raise receipt of goods, the assessee claimed that it would not raise GRN for such purchases and the same were routed through KWWH warehouse. such purchases and the same were routed through KWWH warehouse. such purchases and the same were routed through KWWH warehouse. It was thus submitted that, the concerned accounts staff w was thus submitted that, the concerned accounts staff w was thus submitted that, the concerned accounts staff would maintain to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt separate tabulation for these uninspected purchases so that, when the separate tabulation for these uninspected purchases so that, when the separate tabulation for these uninspected purchases so that, when the final usable old bottles identified from the lot, the numbers can be final usable old bottles identified from the lot, the numbers can be final usable old bottles identified from the lot, the numbers can be reconciled and appropriate GRNs can be raised in the system. The Ld. AR reconciled and appropriate GRNs can be raised in the system. The Ld. AR reconciled and appropriate GRNs can be raised in the system. The Ld. AR explained this entire activity explained this entire activity of purchase of both inspected and of purchase of both inspected and uninspected bottles through the SAP entries and also provided the details uninspected bottles through the SAP entries and also provided the details uninspected bottles through the SAP entries and also provided the details of wastage generally found in different stages of production. He further of wastage generally found in different stages of production. He further of wastage generally found in different stages of production. He further submitted that, since these old bottle suppliers are unorganized segment submitted that, since these old bottle suppliers are unorganized segment submitted that, since these old bottle suppliers are unorganized segment and it is the assessee which makes these emergency purchases, they d it is the assessee which makes these emergency purchases, they d it is the assessee which makes these emergency purchases, they usually press for immediately release of payments towards the old usually press for immediately release of payments towards the old usually press for immediately release of payments towards the old bottles, which is paid by the assessee bottles, which is paid by the assessee through banking channel through banking channel.

Accordingly, the accounts staff maintains separate records for these Accordingly, the accounts staff maintains separate records for these Accordingly, the accounts staff maintains separate records for these purchases so that excess payments made to these suppliers can be purchases so that excess payments made to these suppliers can be purchases so that excess payments made to these suppliers can be demanded back, where uninspected bottles are found to be mostly demanded back, where uninspected bottles are found to be mostly demanded back, where uninspected bottles are found to be mostly damaged. The Ld. AR further pointed out that, damaged. The Ld. AR further pointed out that, the hologr the hologram analysis carried out by the AO AO proceeded on the assumption that there is no proceeded on the assumption that there is no wastage in utilization of old bottles, which according to him is totally wastage in utilization of old bottles, which according to him is totally wastage in utilization of old bottles, which according to him is totally implausible. He pointed out that, the AO had omitted to implausible. He pointed out that, the AO had omitted to implausible. He pointed out that, the AO had omitted to consider the actual loss suffered with respect t actual loss suffered with respect to the old bottles as discussed discussed in the preceding paragraphs and therefore his analysis of estimating excess old and therefore his analysis of estimating excess old and therefore his analysis of estimating excess old bottle purchases was incomplete and skewed bottle purchases was incomplete and skewed. The case sought to be The case sought to be made out by the assessee is that, the non made out by the assessee is that, the non-recording of GRNs in certain recording of GRNs in certain instances was due to the s was due to the complexities in the business pursued, the complexities in the business pursued, the to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt difficulties in the accounting of old bottle purchases inclu difficulties in the accounting of old bottle purchases inclu difficulties in the accounting of old bottle purchases including for emergency requirements etc. According to him therefore, it was emergency requirements etc. According to him therefore, it was emergency requirements etc. According to him therefore, it was unjustified on the AO’s part to baldly allege that, all purchases unjustified on the AO’s part to baldly allege that, all purchases unjustified on the AO’s part to baldly allege that, all purchases lacking GRN details were bogus. GRN details were bogus.

We are aware that, statements alone cannot be the basis to justify any We are aware that, statements alone cannot be the basis to justify any We are aware that, statements alone cannot be the basis to justify any to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt addition(s) but having perused the contents thereof, thei addition(s) but having perused the contents thereof, thei addition(s) but having perused the contents thereof, their persuasive value in the given facts of the present case, cannot be ruled out. Further, value in the given facts of the present case, cannot be ruled out. Further, value in the given facts of the present case, cannot be ruled out. Further, we observe that, even these suppliers in their statement(s) had confirmed we observe that, even these suppliers in their statement(s) had confirmed we observe that, even these suppliers in their statement(s) had confirmed the version of the employee(s) and admitted that the purchase invoices the version of the employee(s) and admitted that the purchase invoices the version of the employee(s) and admitted that the purchase invoices issued without GRNs we issued without GRNs were bogus. According to us, these third re bogus. According to us, these third-party statements did support the AO’s case statements did support the AO’s case, but it is seen that, it is seen that, these statements were not tested by affording the assessee opportunity of statements were not tested by affording the assessee opportunity of statements were not tested by affording the assessee opportunity of cross-examination which examination which considerably diminishes their evidentiary value diminishes their evidentiary value and the Hon’ble Apex Court in Andaman Timber Industries vs CCE [2015 e Hon’ble Apex Court in Andaman Timber Industries vs CCE [2015 e Hon’ble Apex Court in Andaman Timber Industries vs CCE [2015] 127 DTR 241/281 CTR 241 (SC) held that failure to give the assessee the 127 DTR 241/281 CTR 241 (SC) held that failure to give the assessee the 127 DTR 241/281 CTR 241 (SC) held that failure to give the assessee the right to cross-examine witnesses whose statements are relied upon examine witnesses whose statements are relied upon examine witnesses whose statements are relied upon results in violation of natural justice and such omiss results in violation of natural justice and such omission is a serious flaw ion is a serious flaw which renders the order a nullity. which renders the order a nullity. We are also conscious of the fact that, conscious of the fact that, the old bottle suppliers were not found to be shell entities or the old bottle suppliers were not found to be shell entities or the old bottle suppliers were not found to be shell entities or accommodation entry providers. Instead, they were admittedly genuine accommodation entry providers. Instead, they were admittedly genuine accommodation entry providers. Instead, they were admittedly genuine vendors and most of the pu vendors and most of the purchases made from them were were also accepted to be legitimate by the AO. The dispute before us relates to only those to be legitimate by the AO. The dispute before us relates to only those to be legitimate by the AO. The dispute before us relates to only those purchases made purchases made from from these genuine suppliers which were these genuine suppliers which were not accompanied by seal or GRNs. The fallacies pointed out by the AO in the accompanied by seal or GRNs. The fallacies pointed out by the AO in the accompanied by seal or GRNs. The fallacies pointed out by the AO in the purchases lacking GRNs coupled with the statement(s) of the employees acking GRNs coupled with the statement(s) of the employees acking GRNs coupled with the statement(s) of the employees and suppliers, does raise doubt on the veracity of these purchases. In and suppliers, does raise doubt on the veracity of these purchases. In and suppliers, does raise doubt on the veracity of these purchases. In our considered opinion therefore, there is indeed more than what meets our considered opinion therefore, there is indeed more than what meets our considered opinion therefore, there is indeed more than what meets to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt the eye, but at the same time, there is no conclusive the eye, but at the same time, there is no conclusive evidence basis which evidence basis which the entire value of purchases which lacked GRNs can be treated to be the entire value of purchases which lacked GRNs can be treated to be the entire value of purchases which lacked GRNs can be treated to be bogus and be entirely added to the total income of the assessee. added to the total income of the assessee. added to the total income of the assessee.

CIT(A) is noted to have analyzed the profitability of the assessee in light CIT(A) is noted to have analyzed the profitability of the assessee in light CIT(A) is noted to have analyzed the profitability of the assessee in light of the operating profit margins of similar players in the liquor industry. It of the operating profit margins of similar players in the liquor industry. It of the operating profit margins of similar players in the liquor industry. It was observed that, not only was observed that, not only was the profits being reported by the the profits being reported by the assessee comparatively highe assessee comparatively higher than the industry standards, but if the r than the industry standards, but if the impugned addition is upheld, then it would result in absurd profit impugned addition is upheld, then it would result in absurd profit impugned addition is upheld, then it would result in absurd profit numbers, which is not possible in this line of business. Moreover, though numbers, which is not possible in this line of business. Moreover, though numbers, which is not possible in this line of business. Moreover, though the case of the Revenue is that, the entire value of purchases is bogus, the case of the Revenue is that, the entire value of purchases is bogus, the case of the Revenue is that, the entire value of purchases is bogus, but it is crucial to note that, it is crucial to note that, the search team had failed to search team had failed to unearth corresponding value of value of unaccounted asset or unexplained investment or unaccounted asset or unexplained investment or expenditure, in the course of search which was conducted across several , in the course of search which was conducted across several , in the course of search which was conducted across several days across several premises of the assessee days across several premises of the assessee. At the direction of this . At the direction of this Bench, the Ld. CIT, DR for the Revenue has placed on record copies of all Bench, the Ld. CIT, DR for the Revenue has placed on record copies of all Bench, the Ld. CIT, DR for the Revenue has placed on record copies of all the panchnamas drawn at different premises of the assessee group. the panchnamas drawn at different premises of the assessee group. the panchnamas drawn at different premises of the assessee group. to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt ::24 ::

Having perused the same, it is observed that, only cash aggregating to Having perused the same, it is observed that, only cash aggregating to Having perused the same, it is observed that, only cash aggregating to Rs.2.5 crores was found & seized from different premises and no other found & seized from different premises and no other found & seized from different premises and no other unaccounted asset or investment was found by the Investigating unaccounted asset or investment was found by the Investigating unaccounted asset or investment was found by the Investigating authorities. Hence, it would be ludicrous to allege that the assessee authorities. Hence, it would be ludicrous to allege that the assessee authorities. Hence, it would be ludicrous to allege that the assessee inflated expenses by Rs.390 crores across several years and received inflated expenses by Rs.390 crores across several years and received inflated expenses by Rs.390 crores across several years and received back cash, when neither the alleged cash received back ck cash, when neither the alleged cash received back ck cash, when neither the alleged cash received back nor any corresponding asset or investment was unearthed in the course of search. corresponding asset or investment was unearthed in the course of search. corresponding asset or investment was unearthed in the course of search.

In our view, the case of In our view, the case of falsification of entries sought to be made out by sought to be made out by the AO in the assessment assessment order cannot be said to be established established from the seized records. Hence, it is observed Hence, it is observed in the given facts discussed supra in the given facts discussed supra that such conclusions drawn by the Assessing Officer on falsification of that such conclusions drawn by the Assessing Officer on falsification of that such conclusions drawn by the Assessing Officer on falsification of entries in books of accounts entries in books of accounts is untenable. Having said so, Having said so, we maintain that, there are deficiencies in the books of accounts maintained by the there are deficiencies in the books of accounts maintained by the there are deficiencies in the books of accounts maintained by the Assessee leading to the difficulties in determining the correct assessable Assessee leading to the difficulties in determining the correct assessable Assessee leading to the difficulties in determining the correct assessable income considering the complex nature of the business carried out by the income considering the complex nature of the business carried out by the income considering the complex nature of the business carried out by the assessee. We find that this similar . We find that this similar aspect was considered by the considered by the jurisdictional High Court in the case of urisdictional High Court in the case of Empee Distilleries Ltd Vs. ACIT Empee Distilleries Ltd Vs. ACIT (187 Taxman 188), which was also involved in the same line of , which was also involved in the same line of , which was also involved in the same line of business as that of the assessee and similar allegation was levelled in business as that of the assessee and similar allegation was levelled in business as that of the assessee and similar allegation was levelled in relation to their old bottle purchases. It is seen that, the Hon’ble High ld bottle purchases. It is seen that, the Hon’ble High ld bottle purchases. It is seen that, the Hon’ble High Court had denounced the AO’s action of adding the entire value of Court had denounced the AO’s action of adding the entire value of Court had denounced the AO’s action of adding the entire value of purchases and instead estimated the disallowance at 10%. Following the purchases and instead estimated the disallowance at 10%. Following the purchases and instead estimated the disallowance at 10%. Following the decision (supra), we countenance the Ld CIT(A) action to the ext countenance the Ld CIT(A) action to the ext countenance the Ld CIT(A) action to the extent that there were accounting deficiencies in the books of accounts viz (i) SAP there were accounting deficiencies in the books of accounts viz (i) SAP there were accounting deficiencies in the books of accounts viz (i) SAP entries were not properly handled, (ii) standard accounting procedures entries were not properly handled, (ii) standard accounting procedures entries were not properly handled, (ii) standard accounting procedures to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt were not fully followed and (iii) the purchases without GRNs lacked proper were not fully followed and (iii) the purchases without GRNs lacked proper were not fully followed and (iii) the purchases without GRNs lacked proper documentation, and therefore nd therefore on these counts sustain the action of the sustain the action of the Ld. CIT(A) in rejecting the books of accounts and estimat in rejecting the books of accounts and estimating ing the profits of the assessee. The relevant findings of Ld.CIT(A) The relevant findings of Ld.CIT(A) as partly as partly countenanced by us supra, are as under: , are as under:-

“6.2.19 During the course of the appel During the course of the appellate proceedings, the AR, along late proceedings, the AR, along with the representatives of the appellant company, provided an with the representatives of the appellant company, provided an with the representatives of the appellant company, provided an explanation of the actual events and the accounting process related to explanation of the actual events and the accounting process related to explanation of the actual events and the accounting process related to the purchase of old bottles from the vendors. The old bottles are the purchase of old bottles from the vendors. The old bottles are the purchase of old bottles from the vendors. The old bottles are purchased routinely in purchased routinely in the regular course of business. The use of these the regular course of business. The use of these bottle undergo reconditioning for reuse, involves several steps to ensure bottle undergo reconditioning for reuse, involves several steps to ensure bottle undergo reconditioning for reuse, involves several steps to ensure that the bottles meet industry standards for hygiene, safety, and that the bottles meet industry standards for hygiene, safety, and that the bottles meet industry standards for hygiene, safety, and regulatory compliance. The bottles are sorted to separate those tha regulatory compliance. The bottles are sorted to separate those tha regulatory compliance. The bottles are sorted to separate those that are still in good condition from those that are damaged and cannot be still in good condition from those that are damaged and cannot be still in good condition from those that are damaged and cannot be reused. The bottles undergo an inspection process to assess their reused. The bottles undergo an inspection process to assess their reused. The bottles undergo an inspection process to assess their condition. Bottles with cracks, chips, or other defects are discarded. condition. Bottles with cracks, chips, or other defects are discarded. condition. Bottles with cracks, chips, or other defects are discarded. Bottles that pass the inspection are cleaned an Bottles that pass the inspection are cleaned and sanitized before re d sanitized before re-use. This ensures that there are no foreign substances or contamination This ensures that there are no foreign substances or contamination This ensures that there are no foreign substances or contamination inside the bottles.The bottles are washed to remove any remaining inside the bottles.The bottles are washed to remove any remaining inside the bottles.The bottles are washed to remove any remaining liquids, labels, or external dirt. This is usually done through a liquids, labels, or external dirt. This is usually done through a liquids, labels, or external dirt. This is usually done through a mechanical washing process. T mechanical washing process. The bottles are then sanitized to remove he bottles are then sanitized to remove any bacteria or contaminants. This is typically done using high any bacteria or contaminants. This is typically done using high any bacteria or contaminants. This is typically done using high-pressure water, steam, or chemical sanitizers that are safe for food water, steam, or chemical sanitizers that are safe for food water, steam, or chemical sanitizers that are safe for food-grade packaging. After cleaning and sanitizing, the bottles are thoroughly packaging. After cleaning and sanitizing, the bottles are thoroughly packaging. After cleaning and sanitizing, the bottles are thoroughly dried to avoid any moisture retention that could affect the new contents. o avoid any moisture retention that could affect the new contents. o avoid any moisture retention that could affect the new contents.

6.2.20 In this process, there are instances where the bottles, being In this process, there are instances where the bottles, being In this process, there are instances where the bottles, being fragile, break, resulting in a significant reduction in the number of fragile, break, resulting in a significant reduction in the number of fragile, break, resulting in a significant reduction in the number of bottles available for refilling. This, in turn, bottles available for refilling. This, in turn, impacts the overall production impacts the overall production estimates. In such situations, to meet the marketing demand, the estimates. In such situations, to meet the marketing demand, the estimates. In such situations, to meet the marketing demand, the appellant company is compelled to replace the rejected bottles by appellant company is compelled to replace the rejected bottles by appellant company is compelled to replace the rejected bottles by sourcing additional old bottles from their vendors on emergency sourcing additional old bottles from their vendors on emergency sourcing additional old bottles from their vendors on emergency situations. This was done by o situations. This was done by overlooking the usual purchase procedures verlooking the usual purchase procedures to fulfil the daily production requirements. In view of this recurrent to fulfil the daily production requirements. In view of this recurrent to fulfil the daily production requirements. In view of this recurrent event happening in this line of business, the AR has contended that event happening in this line of business, the AR has contended that event happening in this line of business, the AR has contended that emergency purchases effected by the appellant company was only to emergency purchases effected by the appellant company was only to emergency purchases effected by the appellant company was only to meet its business requirements. Therefore, it has been claimed that usiness requirements. Therefore, it has been claimed that usiness requirements. Therefore, it has been claimed that these kinds of purchases cannot be termed as “bogus” and further these kinds of purchases cannot be termed as “bogus” and further these kinds of purchases cannot be termed as “bogus” and further to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt claimed that the disallowance of claimed that the disallowance of Rs. 3,13,75,315/- & Rs. 37,97,84,300/ & Rs. 37,97,84,300/- for the AY 2020- -21 and Rs.56,41,82,236/- & Rs. 58,23,45,992/ & Rs. 58,23,45,992/-for the AY(s) 2021-22 & 2022 22 & 2022-23 in the hands of the appellant company 23 in the hands of the appellant company is not justified. Further, the AR stated that, the alleged Old Bottle purchases justified. Further, the AR stated that, the alleged Old Bottle purchases justified. Further, the AR stated that, the alleged Old Bottle purchases were properly debited to stock account and issues for production were were properly debited to stock account and issues for production were were properly debited to stock account and issues for production were credited. Also, the AR stated that, credited. Also, the AR stated that, the bottles that were said to be bogus the bottles that were said to be bogus were also consumed in production. Further, the AR submitted that even were also consumed in production. Further, the AR submitted that even were also consumed in production. Further, the AR submitted that even though the bottles were purchased without following the regular though the bottles were purchased without following the regular though the bottles were purchased without following the regular procedures which are said to be bogus, whereas in reality, these were procedures which are said to be bogus, whereas in reality, these were procedures which are said to be bogus, whereas in reality, these were consumed in production requiring no disallowance. roduction requiring no disallowance.

6.2.21 The The The undersigned undersigned undersigned has has has carefully carefully carefully considered considered considered the the the written written written submission, supporting documents and arguments advanced by the AR submission, supporting documents and arguments advanced by the AR submission, supporting documents and arguments advanced by the AR during the course of appellate proceedings, with respect to the process during the course of appellate proceedings, with respect to the process during the course of appellate proceedings, with respect to the process involved in the bottle purchase in the regular course as well as involved in the bottle purchase in the regular course as well as involved in the bottle purchase in the regular course as well as sourced on emergency basis. As seen from the documents presented before the on emergency basis. As seen from the documents presented before the on emergency basis. As seen from the documents presented before the undersigned that the purchase of bottles either following the normal undersigned that the purchase of bottles either following the normal undersigned that the purchase of bottles either following the normal process or sourced on emergency basis without GRN, both were process or sourced on emergency basis without GRN, both were process or sourced on emergency basis without GRN, both were reflected as debit entry in stock in the SAP Softw reflected as debit entry in stock in the SAP Software, although it was a are, although it was a manual entry in the SAP software in the case of bottles purchased manual entry in the SAP software in the case of bottles purchased manual entry in the SAP software in the case of bottles purchased without GRN numbers. The appellant’s contention is that the stock without GRN numbers. The appellant’s contention is that the stock without GRN numbers. The appellant’s contention is that the stock debits were made for both kind of purchases in the SAP, evidences that debits were made for both kind of purchases in the SAP, evidences that debits were made for both kind of purchases in the SAP, evidences that the same were consumed in the the same were consumed in the production and hence cannot be production and hence cannot be rejected in toto. On the other hand, there seems to be accounting rejected in toto. On the other hand, there seems to be accounting rejected in toto. On the other hand, there seems to be accounting anomalies in as much as classification of incorrect offset account such anomalies in as much as classification of incorrect offset account such anomalies in as much as classification of incorrect offset account such as “Stock_PackMtrl Bottle”, “Consumption as “Stock_PackMtrl Bottle”, “Consumption-Bottles" and "Cost of Goods Bottles" and "Cost of Goods Sold-FG," On obse FG," On observing these accounting anomalies, it can be rving these accounting anomalies, it can be reasonable construed that the books does not reflect the true affairs of reasonable construed that the books does not reflect the true affairs of reasonable construed that the books does not reflect the true affairs of the appellant company. the appellant company. 6.2.22 Further, Further, t the he undersigned undersigned observes observes that that neither neither the the Investigation Officer nor the AO has made any specific fin Investigation Officer nor the AO has made any specific findings that the dings that the appellant company has utilised the unaccounted income generated appellant company has utilised the unaccounted income generated appellant company has utilised the unaccounted income generated through alleged bogus purchases of old bottles in the form of through alleged bogus purchases of old bottles in the form of through alleged bogus purchases of old bottles in the form of unaccounted application of such income. During the course of the search unaccounted application of such income. During the course of the search unaccounted application of such income. During the course of the search conducted in the case of the appellant comp conducted in the case of the appellant company and all other connected any and all other connected entities including the Managing Director and other key persons who entities including the Managing Director and other key persons who entities including the Managing Director and other key persons who were also subjected to search, the search team quantified an were also subjected to search, the search team quantified an were also subjected to search, the search team quantified an approximate amount of Rs. 392 Crores as bogus purchases made by the approximate amount of Rs. 392 Crores as bogus purchases made by the approximate amount of Rs. 392 Crores as bogus purchases made by the appellant during the FY(s) 2012 appellant during the FY(s) 2012-13 to 2022-23. It is significant to bring 23. It is significant to bring on record that neither the Investigation officer nor the AO were able to on record that neither the Investigation officer nor the AO were able to on record that neither the Investigation officer nor the AO were able to identify the corresponding application of the quantified bogus purchases identify the corresponding application of the quantified bogus purchases identify the corresponding application of the quantified bogus purchases in the form of any unaccounted asset or unaccounted expenditure or in the form of any unaccounted asset or unaccounted expenditure or in the form of any unaccounted asset or unaccounted expenditure or unaccounted investments. As evident in the assessment order, the AO naccounted investments. As evident in the assessment order, the AO naccounted investments. As evident in the assessment order, the AO has treated the purchases being held as bogus and disallowed the same. has treated the purchases being held as bogus and disallowed the same. has treated the purchases being held as bogus and disallowed the same. As per the discussion made supra, the appellant was able to As per the discussion made supra, the appellant was able to As per the discussion made supra, the appellant was able to to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt demonstrate the necessity to purchase old bottles by overl demonstrate the necessity to purchase old bottles by overl demonstrate the necessity to purchase old bottles by overlooking the regular purchase procedures. Therefore, the purchases made by regular purchase procedures. Therefore, the purchases made by regular purchase procedures. Therefore, the purchases made by overlooking the regular procedure also requires to be regularised. As per overlooking the regular procedure also requires to be regularised. As per overlooking the regular procedure also requires to be regularised. As per the evidences found, it cannot be ruled out that, there existed purchases the evidences found, it cannot be ruled out that, there existed purchases the evidences found, it cannot be ruled out that, there existed purchases not utilised for business purposes not utilised for business purposes too. 6.2.23 As evident in the order passed by the AO, it can be seen that As evident in the order passed by the AO, it can be seen that As evident in the order passed by the AO, it can be seen that the AO treated the amount(s) the AO treated the amount(s) of Rs. 3, 13,75,315/ Rs. 3, 13,75,315/- & Rs. 37,97,84,300/- for the AY 2020 for the AY 2020-21 and Rs.56,41,82,236/ 21 and Rs.56,41,82,236/- & Rs. 58,23,45,992/-for the AY(s) 2021 for the AY(s) 2021-22 & 2022-23 being the bogus being the bogus purchases as income of the appellant. The AR contended that if the purchases as income of the appellant. The AR contended that if the purchases as income of the appellant. The AR contended that if the disallowance of alleged bogus purchases made by the AO is considered, disallowance of alleged bogus purchases made by the AO is considered, disallowance of alleged bogus purchases made by the AO is considered, the resultant net profit would be an unreasonable net profit which the resultant net profit would be an unreasonable net profit which the resultant net profit would be an unreasonable net profit which cannot be achieved in the kind of business of the cannot be achieved in the kind of business of the appellant company. appellant company. The AR has drawn the attention of the undersigned to the fact that the The AR has drawn the attention of the undersigned to the fact that the The AR has drawn the attention of the undersigned to the fact that the appellant company had already admitted a higher net profit by appellant company had already admitted a higher net profit by appellant company had already admitted a higher net profit by comparing with companies in the same line of business. comparing with companies in the same line of business.

6.2.24 The undersigned on account of the detail The undersigned on account of the detailed discussion made ed discussion made supra, is of the view that as the actual profits cannot be reliably supra, is of the view that as the actual profits cannot be reliably supra, is of the view that as the actual profits cannot be reliably determined due to these discrepancies in the books, the determined due to these discrepancies in the books, the taxable income taxable income cannot be accurately determined cannot be accurately determined based on the current books of based on the current books of accounts. The non accounts. The non-compliance with basic accounting norms, such as sic accounting norms, such as proper proper proper documentation documentation documentation and and and accurate accurate accurate entry entry entry of of of invoices, invoices, invoices, further further further substantiates the claim that the substantiates the claim that the books do not reflect true income books do not reflect true income. Therefore, the books of accounts in this case should indeed be Therefore, the books of accounts in this case should indeed be Therefore, the books of accounts in this case should indeed be rejected under Section 145(3) under Section 145(3) for the following reasons:

 Inconsistent accounting treatments Inconsistent accounting treatments, such as the use of incorrect , such as the use of incorrect offset accounts for bogus transactions. offset accounts for bogus transactions.  Handling of SAP entries Handling of SAP entries to process invoices without valid supporting to process invoices without valid supporting documentation (e.g., missing GRN, no purchase orders). documentation (e.g., missing GRN, no purchase orders).  Failure to comply with standard accounting procedures Failure to comply with standard accounting procedures Failure to comply with standard accounting procedures for genuine purchases.  The inability to substantiate purchases with proper documentation The inability to substantiate purchases with proper documentation The inability to substantiate purchases with proper documentation, which significantly impacts the reliability of the accounts. which significantly impacts the reliability of the accounts.

6.2.25 Based on the above factors, the undersigned Based on the above factors, the undersigned holds that the holds that the current books of accounts cannot be considered reliable books of accounts cannot be considered reliable for determining for determining the true taxable income for the relevant assessment years. Therefore, the true taxable income for the relevant assessment years. Therefore, the true taxable income for the relevant assessment years. Therefore, as per the provisions of section 145(3) of the Act, the undersigned has as per the provisions of section 145(3) of the Act, the undersigned has as per the provisions of section 145(3) of the Act, the undersigned has the authority to the authority to reject these books of accounts and determine the and determine the taxable income to ascertain the true taxable income of the appellant taxable income to ascertain the true taxable income of the appellant taxable income to ascertain the true taxable income of the appellant company for the year under consideration. company for the year under consideration. The undersigned, in order to The undersigned, in order to set right the issues related in determination of the profit element set right the issues related in determination of the profit element set right the issues related in determination of the profit element to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt embedded in such purchases rejects the books of accounts in in such purchases rejects the books of accounts in in such purchases rejects the books of accounts in accordance to section 145(3) of the Act. accordance to section 145(3) of the Act.

6.2.26 At this juncture it is appropriate to rely upon the decisions At this juncture it is appropriate to rely upon the decisions At this juncture it is appropriate to rely upon the decisions rendered by the Hon’ble Allahabad High Court in the case of rendered by the Hon’ble Allahabad High Court in the case of rendered by the Hon’ble Allahabad High Court in the case of Shri Venkteshwar Sugar Mills v. CI Venkteshwar Sugar Mills v. CIT(A) (2012) 341 ITR 588 (All) ) wherein the Hon’ble High Court has concurred with the decision of the ITAT in Hon’ble High Court has concurred with the decision of the ITAT in Hon’ble High Court has concurred with the decision of the ITAT in upholding the rejection of books of account maintained by the assessee upholding the rejection of books of account maintained by the assessee upholding the rejection of books of account maintained by the assessee when the same are not properly maintained. The relevant para of the when the same are not properly maintained. The relevant para of the when the same are not properly maintained. The relevant para of the judgment is extracted below for ready reference: is extracted below for ready reference:

“12. For the assessment year under consideration, the assessee has For the assessment year under consideration, the assessee has For the assessment year under consideration, the assessee has shown the G.P. rate 16.20 per cent. as against 33.44 per cent. in the shown the G.P. rate 16.20 per cent. as against 33.44 per cent. in the shown the G.P. rate 16.20 per cent. as against 33.44 per cent. in the previous assessment year. Thus, during the assessment year under previous assessment year. Thus, during the assessment year under previous assessment year. Thus, during the assessment year under consideration, the G.P. rate was low. The Commissioner of consideration, the G.P. rate was low. The Commissioner of consideration, the G.P. rate was low. The Commissioner of Income-tax (Appeals) discussed the facts and circumstances pertaining to the (Appeals) discussed the facts and circumstances pertaining to the (Appeals) discussed the facts and circumstances pertaining to the manufacturing cost and selling price. The Assessing Officer has taken manufacturing cost and selling price. The Assessing Officer has taken manufacturing cost and selling price. The Assessing Officer has taken the G.P. rate at 27 per cent. on the estimated sale, which is lower in the G.P. rate at 27 per cent. on the estimated sale, which is lower in the G.P. rate at 27 per cent. on the estimated sale, which is lower in comparison to earlier year i.e. 33.44 comparison to earlier year i.e. 33.44 per cent. When the books of per cent. When the books of account were not properly maintained and the vouchers pertaining to account were not properly maintained and the vouchers pertaining to account were not properly maintained and the vouchers pertaining to the consumable items were not available for verification, then we find the consumable items were not available for verification, then we find the consumable items were not available for verification, then we find justification for rejection of the books of accounts by the Assessing justification for rejection of the books of accounts by the Assessing justification for rejection of the books of accounts by the Assessing Officer Once the bo Officer Once the books of account rejected, then there is no option oks of account rejected, then there is no option before the Assessing Officer except to estimate the sale and G. P. rate before the Assessing Officer except to estimate the sale and G. P. rate before the Assessing Officer except to estimate the sale and G. P. rate which he determined by taking by comparative figure of the assessee for which he determined by taking by comparative figure of the assessee for which he determined by taking by comparative figure of the assessee for the previous assessment year. The Tribunal has already given th the previous assessment year. The Tribunal has already given th the previous assessment year. The Tribunal has already given the partial relief and in the facts and circumstances of the case, there is no scope relief and in the facts and circumstances of the case, there is no scope relief and in the facts and circumstances of the case, there is no scope to give any further relief specially when the estimation is a question of to give any further relief specially when the estimation is a question of to give any further relief specially when the estimation is a question of fact. The Tribunal is a final fact finding authority as per the ratio laid fact. The Tribunal is a final fact finding authority as per the ratio laid fact. The Tribunal is a final fact finding authority as per the ratio laid down in the case of the case of Kamala Ganapathy Subramaniam v. v. Collector of Estate Duty [2002] 253 [2002] 253 ITR 692/121 Taxman 615 (SC) .

13. In the instant case, the addition is made on the estimate basis, In the instant case, the addition is made on the estimate basis, In the instant case, the addition is made on the estimate basis, which is a question of fact as per the ratio laid down in which is a question of fact as per the ratio laid down in the case of the case of Utkal Road Lines v. Registrar, ITAT Registrar, ITAT [2011] 336 ITR 149 (Orissa) , wherein it 149 (Orissa) , wherein it was observed that the application of G.P. rate on estimate basis is a was observed that the application of G.P. rate on estimate basis is a was observed that the application of G.P. rate on estimate basis is a question of fact. The hon'ble Supreme Court in the case of question of fact. The hon'ble Supreme Court in the case of question of fact. The hon'ble Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. Ltd Nippon Chemicals Co. Ltd . [2003] 261 ITR 275/130 Taxman 179 275/130 Taxman 179 (SC) observed that valuation of raw material for the purpose of tax on observed that valuation of raw material for the purpose of tax on observed that valuation of raw material for the purpose of tax on estimate basis is a question of fact. Similar views were expressed in the estimate basis is a question of fact. Similar views were expressed in the estimate basis is a question of fact. Similar views were expressed in the following cases : ….

impugned order passed by the Tribunal which is hereby sustained along impugned order passed by the Tribunal which is hereby sustained along impugned order passed by the Tribunal which is hereby sustained along with reasons mentioned therein.” with reasons mentioned therein.”

6.2.27 Further the Hon’ble Punjab & Haryana High Court in the case of the Hon’ble Punjab & Haryana High Court in the case of the Hon’ble Punjab & Haryana High Court in the case of Mahavir Rice Mills v. CIT (2023) 153 taxmann.com 686 (P&H) Mahavir Rice Mills v. CIT (2023) 153 taxmann.com 686 (P&H) Mahavir Rice Mills v. CIT (2023) 153 taxmann.com 686 (P&H) has upheld the estimation made, by rejecting the books of account of the upheld the estimation made, by rejecting the books of account of the upheld the estimation made, by rejecting the books of account of the assessee in the absence of details of stock. The relevant para of th assessee in the absence of details of stock. The relevant para of th assessee in the absence of details of stock. The relevant para of the judgment is extracted below for ready reference: judgment is extracted below for ready reference:

“9. As per above Section, the income has to be computed in accordance As per above Section, the income has to be computed in accordance As per above Section, the income has to be computed in accordance with the method of accountancy followed by an assessee with the method of accountancy followed by an assessee with the method of accountancy followed by an assessee i.e. cash or mercantile. Such method has to be followed keeping in view the mercantile. Such method has to be followed keeping in view the mercantile. Such method has to be followed keeping in view the accounting standard notified by the Central Government from time to ounting standard notified by the Central Government from time to ounting standard notified by the Central Government from time to time. In the absence of qualitative details, it is quite difficult to examine time. In the absence of qualitative details, it is quite difficult to examine time. In the absence of qualitative details, it is quite difficult to examine the sales of the assessee. The higher quality of a the sales of the assessee. The higher quality of a rice can be shown as can be shown as sold at a lower rate in the bills. There sold at a lower rate in the bills. There was flaw in the maintenance of was flaw in the maintenance of the details. Thus, the addition of Rs. 2,00,000/ the details. Thus, the addition of Rs. 2,00,000/- on account of sale on account of sale of rice has rightly been made. has rightly been made.

10. Thus, order dated 28 Thus, order dated 28-3-2013 (A-3) passed by Income- tax Appellate Tribunal, Chandigarh Bench 'F does not require any inte Tribunal, Chandigarh Bench 'F does not require any interference by this rference by this Court.”

6.2.28 In addition the Hon’ble Calcutta High Court in the case of In addition the Hon’ble Calcutta High Court in the case of In addition the Hon’ble Calcutta High Court in the case of Amiya Kumar Roy v. CIT (1994) 206 ITR 306 (Cal) Amiya Kumar Roy v. CIT (1994) 206 ITR 306 (Cal) has held that non has held that non maintenance of stock accounts is a substantial defect justifying an maintenance of stock accounts is a substantial defect justifying an maintenance of stock accounts is a substantial defect justifying an inference that the accounts were maintained in a manner from which the inference that the accounts were maintained in a manner from which the inference that the accounts were maintained in a manner from which the true and correct profits were not deducible. Relevant para of the true and correct profits were not deducible. Relevant para of the true and correct profits were not deducible. Relevant para of the judgment is extracted below for judgment is extracted below for ready reference:

“We would have been impressed with the contentions if the assessee “We would have been impressed with the contentions if the assessee “We would have been impressed with the contentions if the assessee had maintained the stock book showing stock tally. In that case, the had maintained the stock book showing stock tally. In that case, the had maintained the stock book showing stock tally. In that case, the accounts being fool proof, no addition could be warranted. There are accounts being fool proof, no addition could be warranted. There are accounts being fool proof, no addition could be warranted. There are certain trades, specially in the certain trades, specially in the retail market, where stock tally may be retail market, where stock tally may be impracticable and the assessee can reasonably advance the plea that impracticable and the assessee can reasonably advance the plea that impracticable and the assessee can reasonably advance the plea that the accounts have been maintained in the best manner possible in the the accounts have been maintained in the best manner possible in the the accounts have been maintained in the best manner possible in the special circumstances of the case. But such is not the case with the special circumstances of the case. But such is not the case with the special circumstances of the case. But such is not the case with the assessee. The assessee deals in wholesale spices. Failure to maintain The assessee deals in wholesale spices. Failure to maintain The assessee deals in wholesale spices. Failure to maintain stock accounts is a substantial defect in the accounts justifying an stock accounts is a substantial defect in the accounts justifying an stock accounts is a substantial defect in the accounts justifying an inference that the accounts are maintained in a manner from which the inference that the accounts are maintained in a manner from which the inference that the accounts are maintained in a manner from which the true and correct profits are not deducible. Nor is it con true and correct profits are not deducible. Nor is it contended at any tended at any stage that the gross profit rate shown is the market norm. stage that the gross profit rate shown is the market norm.

Therefore, in our view, the Tribunal was right in holding that the Therefore, in our view, the Tribunal was right in holding that the Therefore, in our view, the Tribunal was right in holding that the estimate which was made in the case and the addition made on such estimate which was made in the case and the addition made on such estimate which was made in the case and the addition made on such to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt estimate was quite reasonable and fair taking a c estimate was quite reasonable and fair taking a cumulative view of all umulative view of all the factors the case presents. Moreover, the Tribunal's finding that the the factors the case presents. Moreover, the Tribunal's finding that the the factors the case presents. Moreover, the Tribunal's finding that the assessee's rate of gross profit is below the market rate which is ten per assessee's rate of gross profit is below the market rate which is ten per assessee's rate of gross profit is below the market rate which is ten per cent. is a finding of fact which the assessee has not challenged.” cent. is a finding of fact which the assessee has not challenged.” cent. is a finding of fact which the assessee has not challenged.”

6.2.29 The Hon’ble The Hon’ble jurisdictional High Court has held in the case of jurisdictional High Court has held in the case of CIT v. Marg Ltd. [2017] 84 taxmann.com 52 (Madras) has held that CIT v. Marg Ltd. [2017] 84 taxmann.com 52 (Madras) has held that CIT v. Marg Ltd. [2017] 84 taxmann.com 52 (Madras) has held that the AO's disallowance of expenses was not justified without rejecting the AO's disallowance of expenses was not justified without rejecting the AO's disallowance of expenses was not justified without rejecting the books of accounts under Section 145(3). books of accounts under Section 145(3).

6.2.30 The jurisdictional jurisdictional jurisdictional tribunal tribunal tribunal vide vide vide its its its order order order in in in ITA dated 09.08.2023 has upheld the decision of the 366/Chny/2023 dated 09.08.2023 has upheld the decision of the 366/Chny/2023 dated 09.08.2023 has upheld the decision of the Commissioner of Income Tax (Appeal) in rejecting the books of accounts Commissioner of Income Tax (Appeal) in rejecting the books of accounts Commissioner of Income Tax (Appeal) in rejecting the books of accounts in the case of M/s. Beach Mineraals Company. in the case of M/s. Beach Mineraals Company. The ratio of the above The ratio of the above judgments are squarely applicable to the facts of the Appellant’s case.” nts are squarely applicable to the facts of the Appellant’s case.” nts are squarely applicable to the facts of the Appellant’s case.”

a significant reduction in p significant reduction in profit margins in this industry on account of the on account of the nationwide lockdown imposed during nationwide lockdown imposed during the breakout of COVID pandemic of COVID pandemic which affected both the production as well as sales reduction in the prices which affected both the production as well as sales reduction in the prices which affected both the production as well as sales reduction in the prices of IMFL (Indian Made Foreign Liquor) by the purchasing agency, TA of IMFL (Indian Made Foreign Liquor) by the purchasing agency, TA of IMFL (Indian Made Foreign Liquor) by the purchasing agency, TASMAC, and therefore wants us to estimate the profits at 8% of the turnover. We and therefore wants us to estimate the profits at 8% of the turnover. We and therefore wants us to estimate the profits at 8% of the turnover. We find that, the Ld. CIT(A) had examined the foregoing figures & data along find that, the Ld. CIT(A) had examined the foregoing figures & data along find that, the Ld. CIT(A) had examined the foregoing figures & data along with the contentions of the assessee and having regard to the decision of with the contentions of the assessee and having regard to the decision of with the contentions of the assessee and having regard to the decision of jurisdictional High Court in urisdictional High Court in the case of Empee Distilleries Ltd Vs. ACIT Empee Distilleries Ltd Vs. ACIT (supra), he had estimated the profit at 10%. The relevant findings of the he had estimated the profit at 10%. The relevant findings of the he had estimated the profit at 10%. The relevant findings of the Ld. CIT(A) are noted to be as under: Ld. CIT(A) are noted to be as under:-

“6.2.31 Now, after having rejected the books of accounts, Now, after having rejected the books of accounts, Now, after having rejected the books of accounts, the issue before the undersigned is before the undersigned is, the next question that arise is what will be , the next question that arise is what will be the profits that can be attributable as income of the appellant company the profits that can be attributable as income of the appellant company the profits that can be attributable as income of the appellant company for the purpose of taxation with respect to the disallowance of bogus for the purpose of taxation with respect to the disallowance of bogus for the purpose of taxation with respect to the disallowance of bogus expenses relating the purchase of old bottles. expenses relating the purchase of old bottles.

6.2.32 At this juncture, it is significant to rely upon the decision of juncture, it is significant to rely upon the decision of the jurisdictional tribunal in the case of the jurisdictional tribunal in the case of ACIT Central Circle ACIT Central Circle -1(2) Vs. M/s. Empee Distilleries Ltd M/s. Empee Distilleries Ltd (a company that is in the same line of (a company that is in the same line of business as that of the appellant company) vide its order business as that of the appellant company) vide its order in 507, 627, 628,686,629,684,630, 688/Mds/2007 dated 29.08.2008 507, 627, 628,686,629,684,630, 688/Mds/2007 dated 29.08.2008 507, 627, 628,686,629,684,630, 688/Mds/2007 dated 29.08.2008 wherein the Hon’ble ITAT Chennai has held as under. wherein the Hon’ble ITAT Chennai has held as under. “Next, we will consider the appeals of the Revenue and the assessee for Next, we will consider the appeals of the Revenue and the assessee for Next, we will consider the appeals of the Revenue and the assessee for the assessment year 1999 the assessment year 1999-2000 in 2000 in and I.T.A. No. 628/Mds/2007 respectively. Similar to the assessment year 1998 No. 628/Mds/2007 respectively. Similar to the assessment year 1998 No. 628/Mds/2007 respectively. Similar to the assessment year 1998- 99, the common issue raised by the Revenue as well as by the assessee 99, the common issue raised by the Revenue as well as by the assessee 99, the common issue raised by the Revenue as well as by the assessee for the impugned assessment year 1999 for the impugned assessment year 1999-2000 is the addition made and 2000 is the addition made and sustained against the purchase of old sustained against the purchase of old bottles. The Assessing Officer has bottles. The Assessing Officer has made a disallowance and addition of Rs.3,58,19,987/ made a disallowance and addition of Rs.3,58,19,987/- which is modified which is modified to Rs 85,41,680/ 85,41,680/- by the CIT(Appeals). The CIT(Appeals) has modified by the CIT(Appeals). The CIT(Appeals) has modified disallowance to 10% of the purchase of old bottles, as done for earlier disallowance to 10% of the purchase of old bottles, as done for earlier disallowance to 10% of the purchase of old bottles, as done for earlier assessment year 1998 t year 1998-99. The issue is discussed by the IN COME 99. The issue is discussed by the IN COME Assessing Officer in para 5 of his order. The facts and circumstances Assessing Officer in para 5 of his order. The facts and circumstances Assessing Officer in para 5 of his order. The facts and circumstances relating to the issue are just the same considered for the earlier relating to the issue are just the same considered for the earlier relating to the issue are just the same considered for the earlier to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt assessment year 1998 assessment year 1998-99. On a careful consideration of the issue, 99. On a careful consideration of the issue, we have upheld the order of the CIT(Appeals) for the preceding assessment have upheld the order of the CIT(Appeals) for the preceding assessment have upheld the order of the CIT(Appeals) for the preceding assessment year 1998-99, thereby confirming the disallowance of 10%. Following 99, thereby confirming the disallowance of 10%. Following 99, thereby confirming the disallowance of 10%. Following our findings and order for the said earlier assessment year, we uphold our findings and order for the said earlier assessment year, we uphold our findings and order for the said earlier assessment year, we uphold the decision of CIT (Appeals) on the point the decision of CIT (Appeals) on the point and reject the grounds raised and reject the grounds raised by the Revenue as well as by the assessee by the Revenue as well as by the assessee”.

6.2.33 Further, the Hon’ble Madras High Court in the above case Further, the Hon’ble Madras High Court in the above case Further, the Hon’ble Madras High Court in the above case M/s. Empee Distilleries Ltd Vs. ACIT, Central Circle1(2) [2010]187 Taxman Empee Distilleries Ltd Vs. ACIT, Central Circle1(2) [2010]187 Taxman Empee Distilleries Ltd Vs. ACIT, Central Circle1(2) [2010]187 Taxman 188 (Madras) has held as under with respect to the inflation of purchase has held as under with respect to the inflation of purchase has held as under with respect to the inflation of purchase expenditure as under. expenditure as under.

“In respect of the first question, the inflation of the purchase “In respect of the first question, the inflation of the purchase “In respect of the first question, the inflation of the purchase expenditure of the old bottles, though for the sake of claim the relief expenditure of the old bottles, though for the sake of claim the relief expenditure of the old bottles, though for the sake of claim the relief was disputed before the authorities was disputed before the authorities, yet the fact remained that such , yet the fact remained that such huge inflation had been accepted by the managing director of the huge inflation had been accepted by the managing director of the huge inflation had been accepted by the managing director of the company, who offered a sum of Rs. 74.50 lakhs for taxation. It was also company, who offered a sum of Rs. 74.50 lakhs for taxation. It was also company, who offered a sum of Rs. 74.50 lakhs for taxation. It was also proved by the authorities below that a very huge purchase of old bottles proved by the authorities below that a very huge purchase of old bottles proved by the authorities below that a very huge purchase of old bottles had been made by the assessee through its employees. However, when e by the assessee through its employees. However, when e by the assessee through its employees. However, when questioned the employees had categorically admitted before the questioned the employees had categorically admitted before the questioned the employees had categorically admitted before the authorities that they were forced to sign on the dotted lines and, as authorities that they were forced to sign on the dotted lines and, as authorities that they were forced to sign on the dotted lines and, as such, there was no proof for such huge purchase forthcoming from the such, there was no proof for such huge purchase forthcoming from the such, there was no proof for such huge purchase forthcoming from the assessee. The proof adduced had been rejected as stated above. The assessee. The proof adduced had been rejected as stated above. The assessee. The proof adduced had been rejected as stated above. The Commissioner (Appeals) had rejected the claim of wastage of 4.50 per Commissioner (Appeals) had rejected the claim of wastage of 4.50 per Commissioner (Appeals) had rejected the claim of wastage of 4.50 per cent as on the higher side, however, it was found with the available cent as on the higher side, however, it was found with the available cent as on the higher side, however, it was found with the available material that it was not possible to quantify the material that it was not possible to quantify the purchase inflation of old purchase inflation of old bottles with accurate bottles with accurate precision and the disallowance of 10 per cent and the disallowance of 10 per cent would meet the ends of justice, and granted the relief in favour of the would meet the ends of justice, and granted the relief in favour of the would meet the ends of justice, and granted the relief in favour of the assessee barring the 10 per cent of disallowance.” assessee barring the 10 per cent of disallowance.”

6.2.34 In the light of the decision of In the light of the decision of the jurisdictional High Court and the jurisdictional High Court and the consistent decision taken for the earlier years by the undersigned in the consistent decision taken for the earlier years by the undersigned in the consistent decision taken for the earlier years by the undersigned in the appellate order(s) passed u/s 250 of the Act for the AY(s) 2017 the appellate order(s) passed u/s 250 of the Act for the AY(s) 2017 the appellate order(s) passed u/s 250 of the Act for the AY(s) 2017-18, 2018-19 & 2019 19 & 2019-20, the undersigned is of the view that the the undersigned is of the view that the disallowance to the extent of 10% would meet the ends of justice. the extent of 10% would meet the ends of justice. the extent of 10% would meet the ends of justice. At the outset, the profit percentage in the business of manufacturing and the outset, the profit percentage in the business of manufacturing and the outset, the profit percentage in the business of manufacturing and sale of Indian Made Foreign Liquor (IMFL) Indian Made Foreign Liquor (IMFL) can vary significantly based can vary significantly based on several factors, including the type of liquor, brand positioning, on several factors, including the type of liquor, brand positioning, on several factors, including the type of liquor, brand positioning, production efficiency, distribution strategies, and regulatory conditions. production efficiency, distribution strategies, and regulatory conditions. production efficiency, distribution strategies, and regulatory conditions. During the course of appellate proceedings, the AR has provided the During the course of appellate proceedings, the AR has provided the During the course of appellate proceedings, the AR has provided the details of the net profit to turnover ratio as admitted in the financial net profit to turnover ratio as admitted in the financial net profit to turnover ratio as admitted in the financial statements of the appellant company for the AY(s) 2020 statements of the appellant company for the AY(s) 2020-21 to 2022 21 to 2022-23, the extract of the same is reproduced here as under. the extract of the same is reproduced here as under. to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt ::34 ::

Sl Particulars as 2019 2019-20 2020-21 2021-22 2022-23 No. reported u/s 139 of the Act 1 Gross turnover 4019755197 4019755197 4948770663/- 4331164415 4331164415 4339734105 2 Gross profit 1018627340 1018627340 1342904502 1236791836 1236791836 1119511678 reported 3 Net Profit 216197529 216197529 380487732 326693496 200910922 reported as per books 4 % of net profit 5.38 5.38 7.69 7.54 4.63 Average % of net 6.31 profit

6.2.35 The AR, during the course of the appellate proceedings, has The AR, during the course of the appellate proceedings, has The AR, during the course of the appellate proceedings, has pleaded that there was a fall in profit for the relevant assessment pleaded that there was a fall in profit for the relevant assessment pleaded that there was a fall in profit for the relevant assessment year(s) more particularly AY 2022 year(s) more particularly AY 2022-23, on account of the nationwide 23, on account of the nationwide lockdown imposed during the breakout of COVID pandemic which imposed during the breakout of COVID pandemic which imposed during the breakout of COVID pandemic which affected both the production as well as sales reduction in the prices of affected both the production as well as sales reduction in the prices of affected both the production as well as sales reduction in the prices of IMFL (Indian Made Foreign Liquor) by the purchasing agency, TASMAC, IMFL (Indian Made Foreign Liquor) by the purchasing agency, TASMAC, IMFL (Indian Made Foreign Liquor) by the purchasing agency, TASMAC, has led to a significant reduction in the profit margin for th has led to a significant reduction in the profit margin for the FY 2021 e FY 2021-22, relevant to AY 2022 relevant to AY 2022-23. On account of this profit reduction, the AR has 23. On account of this profit reduction, the AR has requested for consideration of a reduced percentage while estimating requested for consideration of a reduced percentage while estimating requested for consideration of a reduced percentage while estimating the net profit for the AY 2022 the net profit for the AY 2022-23, rather than the estimated 10 % of the 23, rather than the estimated 10 % of the turnover for the earlier ye turnover for the earlier years in the appellant company's case. The ars in the appellant company's case. The undersigned, on careful examination of this issue raised, including a undersigned, on careful examination of this issue raised, including a undersigned, on careful examination of this issue raised, including a review of the appellant's financial statements, observes that the review of the appellant's financial statements, observes that the review of the appellant's financial statements, observes that the turnover of Rs. 433,97,34,105/ turnover of Rs. 433,97,34,105/- for the year in question is consistent for the year in question is consistent with that of previous years. In light of this, it is held that the plea raised at of previous years. In light of this, it is held that the plea raised at of previous years. In light of this, it is held that the plea raised by the AR that the price reduction by TASMAC has materially affected by the AR that the price reduction by TASMAC has materially affected by the AR that the price reduction by TASMAC has materially affected the appellant’s income is not substantiated by the financial data and the appellant’s income is not substantiated by the financial data and the appellant’s income is not substantiated by the financial data and therefore is not considered. therefore is not considered.

6.2.36 Based on the above, it is observed that the Based on the above, it is observed that the average average net profit- to-turnover ratio for AYs 2019 turnover ratio for AYs 2019-20 to 2022-231 stands at 6.31%. Having 231 stands at 6.31%. Having rejected the books of accounts, the undersigned by observing the rejected the books of accounts, the undersigned by observing the rejected the books of accounts, the undersigned by observing the judicial discipline( judicial discipline(s) and in order to ensure equity and fairness, is of the airness, is of the view that an average rate of 10 average rate of 10% of gross turnover turnover would be appropriate to be considered as the net profit. Accordingly, the balance to be considered as the net profit. Accordingly, the balance to be considered as the net profit. Accordingly, the balance that requires to be considered in the hands of the appellant company for that requires to be considered in the hands of the appellant company for that requires to be considered in the hands of the appellant company for the years under consideration the years under consideration are quantified as under:- to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt ::35 ::

Sl Particulars as 2020 2020-21 2021-22 2022-23 No. reported u/s 139 of the Act 1 Gross turnover 494,87,70,663/ 494,87,70,663/- 433,11,64,415/- 433,97,34,105/- 2 Gross profit reported 134,29,04,502/ 134,29,04,502/- 123,67,91,836/- 111,95,11,678/- 3 Net Profit reported 38,04,87,732/ 38,04,87,732/- 32,66,93,496/- 20,09,10,922/- as per books 4 % of net profit 7.69 7.69 7.54 4.63 5. Balance that requires to be considered 10 10-7.69= 2.31% 10-7.54=2.46% 10-4.63=5.37% 6. % of turnover to be 2.31% 2.31% of of 2.46% of 5.37 % of considered in the 494,87,70,663 494,87,70,663 433,11,64,415 433,97,34,105 hands of the =Rs.11,43,16,602 =Rs.11,43,16,602/- =Rs.10,65,46,645 appellant /- =Rs.23,30,43,721/ -

6.2.37 Thus, for the AY(s) 2020 Thus, for the AY(s) 2020-21,2021-22 & 2022 2022-23 the disallowances of expenditure to the extent disallowances of expenditure to the extent of Rs. 11,43,16,602/ . 11,43,16,602/- Rs. 10,65,46,645/- & Rs.23,30,43,721/ & Rs.23,30,43,721/- only needs to considered as bogus only needs to considered as bogus purchases of old bottles as against the disallowances contemplated by purchases of old bottles as against the disallowances contemplated by purchases of old bottles as against the disallowances contemplated by the AO in the assessment order(s) p the AO in the assessment order(s) passed by the AO for the years under assed by the AO for the years under consideration. Accordingly, all the grounds raised by the appellant upon consideration. Accordingly, all the grounds raised by the appellant upon consideration. Accordingly, all the grounds raised by the appellant upon the issue of disallowance of expenditure towards bogus purchase of old the issue of disallowance of expenditure towards bogus purchase of old the issue of disallowance of expenditure towards bogus purchase of old bottles for the years under consideration are hereby treated as the years under consideration are hereby treated as the years under consideration are hereby treated as partly allowed and the AO is directed to and the AO is directed to delete the addition made on account of the addition made on account of bogus old bottle purchases as under. bogus old bottle purchases as under.

Sl No. AY Amount added Amount added Amount sustained Amount to be Amount to be towards bogus old towards bogus old as per the deleted deleted bottle purchases. ( In bottle purchases. ( In discussions (in Rs.) (in Rs.) Rs.) ( in Rs.) 1 2020-21 Rs. 41,11,59,615 Rs. 41,11,59,615 Rs.11,43,16,602/- Rs. 29,68,43,013/ Rs. 29,68,43,013/- (Rs.37,97,84,300 / (Rs.37,97,84,300 /- + Rs.3,13,75,315/ Rs.3,13,75,315/-)

2 2021-22 Rs.56,41,82,236/ Rs.56,41,82,236/- Rs.10,65,46,645/- Rs. 45,76,35,591/ Rs. 45,76,35,591/- 3. 2022-23 Rs.58,23,45,992/ Rs.58,23,45,992/- Rs.23,30,43,721/- Rs. 34,93,02,271/ Rs. 34,93,02,271/- to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt ::36 ::

14. In our opinion, In our opinion, the Ld. CIT(A) had rightly followed the ratio followed the ratio decidendi laid down in the above decision (supra) for decidendi laid down in the above decision (supra) for rejecting the books rejecting the books of accounts and estimating the profits of the assessee of accounts and estimating the profits of the assessee of accounts and estimating the profits of the assessee at 10%. We therefore see no reason to interfere with the same. Si therefore see no reason to interfere with the same. Si therefore see no reason to interfere with the same. Since the facts involved in the lead case of AY involved in the lead case of AY 2020-21 is common in AYs is common in AYs 2021-22 & 2022-23, our foregoing findings shall be followed , our foregoing findings shall be followed mutatis mutandis mutatis mutandis in the appeals for AYs2021-22 & 2022 22 & 2022-23 as well. Hence, all the grounds raised Hence, all the grounds raised by the assessee and the Reven by the assessee and the Revenue on this issue in AYs 2020 ue on this issue in AYs 2020-21 to 2022-23 stands dismissed.

Useful reference in this regard may be Useful reference in this regard may be made to the decision of Hon’ble made to the decision of Hon’ble Andhra Pradesh High Court in the case of Andhra Pradesh High Court in the case of Indwell Constructions Vs. Indwell Constructions Vs. CIT (232 ITR 776) and Hon’ble Allahabad and Hon’ble Allahabad High Court in the c High Court in the case of CIT vs Banwari Lal Banshidhar (229 ITR 229) vs Banwari Lal Banshidhar (229 ITR 229). Likewise, no separate Likewise, no separate additions by way of unexplained cash credit u/s 68 of the Act is additions by way of unexplained cash credit u/s 68 of the Act is additions by way of unexplained cash credit u/s 68 of the Act is permissible, when the books of accounts have been rejected. Our view is permissible, when the books of accounts have been rejected. Our view is permissible, when the books of accounts have been rejected. Our view is supported by the decision of the coordinate B supported by the decision of the coordinate Bench in the case of in the case of ACIT vs S. Moorthy, (ITAT No. 3091/CHNY/2019) S. Moorthy, (ITAT No. 3091/CHNY/2019) wherein it was held as wherein it was held as under:-

"If books of account of the assessee are rejected and income is "If books of account of the assessee are rejected and income is "If books of account of the assessee are rejected and income is estimated by applying certain profit rate, it would take care of all estimated by applying certain profit rate, it would take care of all estimated by applying certain profit rate, it would take care of all expenses necessarily to be expenses necessarily to be incurred for earning profit and hence, when incurred for earning profit and hence, when profit is estimated no separate addition can be made towards profit is estimated no separate addition can be made towards profit is estimated no separate addition can be made towards unexplained commission u/s.69 of the Act. The Ld. CIT (Appeal) after unexplained commission u/s.69 of the Act. The Ld. CIT (Appeal) after unexplained commission u/s.69 of the Act. The Ld. CIT (Appeal) after considering the relevant facts has rightly held that AO is erred in making considering the relevant facts has rightly held that AO is erred in making considering the relevant facts has rightly held that AO is erred in making addition towards cash credits u/s 68 of the Act and unexplained on towards cash credits u/s 68 of the Act and unexplained on towards cash credits u/s 68 of the Act and unexplained commission u/s 69C of the Act, when the books of accounts were commission u/s 69C of the Act, when the books of accounts were commission u/s 69C of the Act, when the books of accounts were rejected u/s 145(3) of the Act rejected u/s 145(3) of the Act.”

“The undersigned is of the view that the above addition / disallowance The undersigned is of the view that the above addition / disallowance The undersigned is of the view that the above addition / disallowance relate to income declared under the head “Income from Business or relate to income declared under the head “Income from Business or relate to income declared under the head “Income from Business or Profession” Profession” Profession” by by by the the the appellant appellant appellant company. company. company. The The The undersigned undersigned undersigned while while while adjudicating the issue adjudicating the issue relating to the bogus purchase of old bottles has relating to the bogus purchase of old bottles has rejected the books of accounts u/s 145(3) of the Act and determined the rejected the books of accounts u/s 145(3) of the Act and determined the rejected the books of accounts u/s 145(3) of the Act and determined the profits that can be attributable as income under the head “Income from profits that can be attributable as income under the head “Income from profits that can be attributable as income under the head “Income from business or profession” by estimating the income @ 10% of the g business or profession” by estimating the income @ 10% of the g business or profession” by estimating the income @ 10% of the gross turnover by relying upon the various judicial decisions viz.. turnover by relying upon the various judicial decisions viz.. i) The Hon'ble High Court of Rajasthan in the case of The Hon'ble High Court of Rajasthan in the case of The Hon'ble High Court of Rajasthan in the case of CIT vs. G.K. Contractor 19 DTR 305 (Raj) Contractor 19 DTR 305 (Raj) hasheld that "AO having estimated the AO having estimated the profit by applying a higher net profit rate to total con profit by applying a higher net profit rate to total contract receipt after tract receipt after rejecting assessee's books of account by invoking the provisions of rejecting assessee's books of account by invoking the provisions of rejecting assessee's books of account by invoking the provisions of section 14(3), no separate addition can be made on account of cash section 14(3), no separate addition can be made on account of cash section 14(3), no separate addition can be made on account of cash credit u/s.68, even though the assessee has failed to discharge its onus credit u/s.68, even though the assessee has failed to discharge its onus credit u/s.68, even though the assessee has failed to discharge its onus of proof in explaining the a of proof in explaining the amount shown in the books of account" mount shown in the books of account" ii) The Hon'ble High Court of Punjab and Haryana, in the case of The Hon'ble High Court of Punjab and Haryana, in the case of The Hon'ble High Court of Punjab and Haryana, in the case of CIT vs. Aggarwal Engg. Co., (2008) 302 ITR 0246 Aggarwal Engg. Co., (2008) 302 ITR 0246 had considered an identical had considered an identical issue and held that " issue and held that "no separate addition on account of cash credit and no separate addition on account of cash credit and on account of unexplained payments for purchases made outside the ount of unexplained payments for purchases made outside the ount of unexplained payments for purchases made outside the books can be made once the net profit rate is applied on contract books can be made once the net profit rate is applied on contract books can be made once the net profit rate is applied on contract receipts of an assessee for estimating his income from contract work" receipts of an assessee for estimating his income from contract work" receipts of an assessee for estimating his income from contract work" iii) The Hon'ble High Court of Allahabad in the case of The Hon'ble High Court of Allahabad in the case of CIT vs. Banwarilal vs. Banwarilal Banshidhar, (1998) 229 ITR 0229 Banshidhar, (1998) 229 ITR 0229 had taken a similar view and held that had taken a similar view and held that where income is assessed at G.P. rate by rejecting the books of where income is assessed at G.P. rate by rejecting the books of where income is assessed at G.P. rate by rejecting the books of assessee assessee assessee u/s.145(3), u/s.145(3), u/s.145(3), no no no disallowance disallowance disallowance can can can be be be made made made separately separately separately u/s.40A(3) of the Act". u/s.40A(3) of the Act". iv) The Hon'ble Andhra The Hon'ble Andhra Pradesh High Court in the of Pradesh High Court in the of in the case of Maddi Sundaram Oil Mills vs. CIT reported in 3187/M/2010 in the case of Maddi Sundaram Oil Mills vs. CIT reported in 3187/M/2010 in the case of Maddi Sundaram Oil Mills vs. CIT reported in 37 ITR 369 has held that has held that when the AO rejects the books of account and when the AO rejects the books of account and estimates the income of the assessee, no further addition can be made estimates the income of the assessee, no further addition can be made estimates the income of the assessee, no further addition can be made relying on the rejected books of account. g on the rejected books of account. v) The Hon'ble ITAT Chennai in the case of The Hon'ble ITAT Chennai in the case of ACIT vs S. Moorthy, (ITAT ACIT vs S. Moorthy, (ITAT No. 3091/CHNY/2019) No. 3091/CHNY/2019) had also taken a similar view and held that " had also taken a similar view and held that "If books of account of the assessee are rejected and income is estimated books of account of the assessee are rejected and income is estimated books of account of the assessee are rejected and income is estimated by applying certain profit rate, it would take care of all expenses by applying certain profit rate, it would take care of all expenses by applying certain profit rate, it would take care of all expenses to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt necessarily to be incurred for earning profit and hence, when profit is necessarily to be incurred for earning profit and hence, when profit is necessarily to be incurred for earning profit and hence, when profit is estimated no separate addition can be made estimated no separate addition can be made towards unexplained towards unexplained commission u/s.69 of the Act. The Ld. CIT (Appeal) after considering the commission u/s.69 of the Act. The Ld. CIT (Appeal) after considering the commission u/s.69 of the Act. The Ld. CIT (Appeal) after considering the relevant facts has rightly held that AO is erred in making addition relevant facts has rightly held that AO is erred in making addition relevant facts has rightly held that AO is erred in making addition towards cash credits u/s 68 of the Act and unexplained commission u/s towards cash credits u/s 68 of the Act and unexplained commission u/s towards cash credits u/s 68 of the Act and unexplained commission u/s 69C of the Act, when the 69C of the Act, when the books of accounts were rejected u/s 145(3) of books of accounts were rejected u/s 145(3) of the Act

The Hon’ble ITAT Mumbai in the case of The Hon’ble ITAT Mumbai in the case of ITO vs. Naresh S. Shah (Prop. ITO vs. Naresh S. Shah (Prop. M.H. Builders) , (ITA No. 3187/Mum/2010 ) M.H. Builders) , (ITA No. 3187/Mum/2010 ) has also taken a similar has also taken a similar view that when the books of accounts are rejected by the AO and t when the books of accounts are rejected by the AO and t when the books of accounts are rejected by the AO and the income of the assessee is determined on estimated basis, no further income of the assessee is determined on estimated basis, no further income of the assessee is determined on estimated basis, no further addition can be made to the income so estimated by relying on the addition can be made to the income so estimated by relying on the addition can be made to the income so estimated by relying on the rejected books of account. rejected books of account.

On the basis of the above judicial decisions relied upon, it can be On the basis of the above judicial decisions relied upon, it can be On the basis of the above judicial decisions relied upon, it can be concluded that once the concluded that once the business income is estimated by rejecting the business income is estimated by rejecting the books of accounts u/s 145(3) of the Act, the other disallowance(s) / books of accounts u/s 145(3) of the Act, the other disallowance(s) / books of accounts u/s 145(3) of the Act, the other disallowance(s) / addition(s) contemplated by the AO relating to the income under the addition(s) contemplated by the AO relating to the income under the addition(s) contemplated by the AO relating to the income under the head “ Income from Business or Profession” will no longer hold good. head “ Income from Business or Profession” will no longer hold good. head “ Income from Business or Profession” will no longer hold good. Accordingly, the grounds raised upon the above issues identified as ordingly, the grounds raised upon the above issues identified as ordingly, the grounds raised upon the above issues identified as Issue No. 2 & issue No.

3. Issue No. 2 & issue No. 3 for the AY(s) 2020-21, 2021-22 & 2022 22 & 2022-23 vide order(s) u/s 143(3) of the Act are hereby treated as vide order(s) u/s 143(3) of the Act are hereby treated as vide order(s) u/s 143(3) of the Act are hereby treated as allowed and the AO is directed to the AO is directed to delete all the additions and disallowance made allowance made upon the Issue No. 2 & issue No.

3. Issue No. 2 & issue No. 3 identified asunder.”

Aggrieved, the assessee carried the matter in appeal. On appeal the Ld. ieved, the assessee carried the matter in appeal. On appeal the Ld. ieved, the assessee carried the matter in appeal. On appeal the Ld. CIT(A) after analyzing the seized material and the details furnished by the CIT(A) after analyzing the seized material and the details furnished by the CIT(A) after analyzing the seized material and the details furnished by the assessee, firstly held that, the assessee, firstly held that, the disallowance of the donations as bogus, disallowance of the donations as bogus, to 1819 1817 to 1819/Chny/2025 & to 1552 1550 to 1552 /Chny/2025 (AYs 2020 2020-21 to 2022-23) Southern Agrifurane Industries Pvt. Ltd. M/s.Southern Agrifurane Industries Pvt without further investigation into the without further investigation into the nature of the charitable entities nature of the charitable entities was unjustified. The Ld. CIT(A) further noted that, the impugned contribution unjustified. The Ld. CIT(A) further noted that, the impugned contribution unjustified. The Ld. CIT(A) further noted that, the impugned contribution of Rs.4,00,00,000/- had neither been debited by the assessee in the P&L had neither been debited by the assessee in the P&L had neither been debited by the assessee in the P&L A/c nor had been claimed as deduction in the return of income and A/c nor had been claimed as deduction in the return of income and A/c nor had been claimed as deduction in the return of income and therefore when the assessee itself had not claimed deduction for the ore when the assessee itself had not claimed deduction for the ore when the assessee itself had not claimed deduction for the impugned impugned impugned expenditure, expenditure, expenditure, the the the disallowance disallowance disallowance made made made by by by the the the AO AO AO was was was unwarranted. The relevant findings of the Ld. CIT(A) in this regard, are as unwarranted. The relevant findings of the Ld. CIT(A) in this regard, are as unwarranted. The relevant findings of the Ld. CIT(A) in this regard, are as follows:-

“6.4.9 Further, the appellant has consistently em Further, the appellant has consistently emphasized that the phasized that the disputed sum of Rs. 4,00,00,000/ disputed sum of Rs. 4,00,00,000/- was not debited to the Profit & Loss was not debited to the Profit & Loss account and therefore should not be treated as part of taxable income. account and therefore should not be treated as part of taxable income. account and therefore should not be treated as part of taxable income. The undersigned is aligned with this contention. According to accounting The undersigned is aligned with this contention. According to accounting The undersigned is aligned with this contention. According to accounting principles and tax laws principles and tax laws, only amounts debited to the Profit & Loss , only amounts debited to the Profit & Loss account or claimed as expenses can be included in the computation of account or claimed as expenses can be included in the computation of account or claimed as expenses can be included in the computation of taxable income. Since the appellant did not claim the disputed sum as a taxable income. Since the appellant did not claim the disputed sum as a taxable income. Since the appellant did not claim the disputed sum as a deduction in the Profit & Loss account, it cannot be treated as income deduction in the Profit & Loss account, it cannot be treated as income deduction in the Profit & Loss account, it cannot be treated as income for taxation purposes. The addition made by the AO, based on an for taxation purposes. The addition made by the AO, based on an for taxation purposes. The addition made by the AO, based on an amount that was never actually claimed as a deductible expense, is amount that was never actually claimed as a deductible expense, is amount that was never actually claimed as a deductible expense, is therefore legally untenable. The undersigned accentuates the principle therefore legally untenable. The undersigned accentuates the principle therefore legally untenable. The undersigned accentuates the principle of fairness in taxation, which ensures that taxpayers of fairness in taxation, which ensures that taxpayers are taxed only on are taxed only on income that is properly accounted for and reported. In this case, since income that is properly accounted for and reported. In this case, since income that is properly accounted for and reported. In this case, since the disputed CSR donations were neither debited to the accounts nor the disputed CSR donations were neither debited to the accounts nor the disputed CSR donations were neither debited to the accounts nor claimed for tax purposes, it would be inequitable to bring the sum to claimed for tax purposes, it would be inequitable to bring the sum to claimed for tax purposes, it would be inequitable to bring the sum to tax.

Order pronounced on the 21st day of November, 2025 Order pronounced on the 25, in Chennai.