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DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), CHENNAI, CHENNAI vs SOUTHERN AGRIFURANE INDUSTRIES PRIVATE LIMITED, CHENNAI | BharatTax

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

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ITA 1817/CHNY/2025Status: DisposedITAT Chennai21 November 2025AY 2020-21Bench: SHRI ABY T. VARKEY (Judicial Member), SHRI AMITABH SHUKLA (Accountant Member)1 pages

AI SummaryDismissed

Facts

The assessee, engaged in manufacturing and sale of Indian made foreign liquor, faced a search action leading to the seizure of materials. The Assessing Officer (AO) inferred bogus purchases of old bottles and transportation services. The AO completed assessments u/s 143(3) making additions/disallowances based on analysis of seized material and statements. The assessee preferred appeals to the CIT(A), who rejected the books of accounts and estimated profits at 10% of turnover.

Held

The Tribunal held that while there were accounting deficiencies, the AO's extrapolation of a three-month excel sheet to ten years was not justified. The Tribunal agreed with the CIT(A) in rejecting the books of accounts and estimating profit at 10% of turnover. The disallowance of CSR expenses was also found to be unwarranted as the assessee had not claimed it as a deduction.

Key Issues

Whether the AO was justified in adding the entire value of alleged bogus purchases based on extrapolated data? Whether the disallowance of CSR expenses was warranted when not claimed by the assessee?

Sections Cited

139, 153C, 132, 143(2), 143(3), 145(3), 271AAD, 144, 145, 40A(3), 29, 30, 43D, 68, 69, 69C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI ABY T. VARKEY & SHRI AMITABH SHUKLA

For Respondent: Mr. Bipin, CIT, Mr. N. Arjun Raj, Advocate

Pronounced: 21.11.2025

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‘).

Briefly stated the facts of the case are that, the assessee is a Briefly stated the facts of the case are that, the assessee is a Briefly stated the facts of the case are that, the assessee is a private limited company which company which company which is engaged in the business of is engaged in the business of is engaged in the business of manufacturing and sale of Indian mad manufacturing and sale of Indian made foreign liquor. For AYs 2020 e foreign liquor. For AYs 2020-21, 2021-22 & 2022-23, the assessee had filed return(s) of income u/s 139 of 23, the assessee had filed return(s) of income u/s 139 of 23, the assessee had filed return(s) of income u/s 139 of the Act declaring total income of Rs.53,36,75,280/ the Act declaring total income of Rs.53,36,75,280/-, Rs.47,04,60,043/ , Rs.47,04,60,043/- and Rs.34,98,31,681/- respectively. It is noted that, a search action was respectively. It is noted that, a search action was conducted upon SNJ Group on 06 ducted upon SNJ Group on 06-08-2019 and in connection with the 2019 and in connection with the same, the business premises of M/s Crystal Bottles was also searched same, the business premises of M/s Crystal Bottles was also searched same, the business premises of M/s Crystal Bottles was also searched where incriminating material relating to the assessee was seized. On where incriminating material relating to the assessee was seized. On where incriminating material relating to the assessee was seized. On analysis of the seized material found from the premises analysis of the seized material found from the premises of M/s Crystal Bottles, it was inferred that, they had facilitated inflation of expenses of Bottles, it was inferred that, they had facilitated inflation of expenses of Bottles, it was inferred that, they had facilitated inflation of expenses of the assessee by providing bogus invoices of purchase of old bottles. the assessee by providing bogus invoices of purchase of old bottles. the assessee by providing bogus invoices of purchase of old bottles.

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).

As noted above, the first As noted above, the first issue is common across all the AYs before common across all the AYs before us and therefore with the consent of both the parties, we take up and us and therefore with the consent of both the parties, we take up and us and therefore with the consent of both the parties, we take up and discuss the facts relating to AY discuss the facts relating to AY 2020-21 as the lead case and our findings as the lead case and our findings so rendered shall mutatis mutandis mutatis mutandis apply to all other AYs. Having perused apply to all other AYs. Having perused the assessment order for AY 2020 assessment order for AY 2020-21, it is noted that the Investigating the Investigating authorities had seized a silver color pen drive from the residential had seized a silver color pen drive from the residential had seized a silver color pen drive from the residential premises of Shri S Varatharaj, Deputy Manager of the assessee company premises of Shri S Varatharaj, Deputy Manager of the assessee company premises of Shri S Varatharaj, Deputy Manager of the assessee company which contained an Excel File comprising of seve which contained an Excel File comprising of several excel sheets titled ral excel sheets titled ‘ENA Schedule’. These excel sheets were printed and seized as Annexure ‘ENA Schedule’. These excel sheets were printed and seized as Annexure ‘ENA Schedule’. These excel sheets were printed and seized as Annexure ANN/ARS/SAFL/Loose Sheets/S ANN/ARS/SAFL/Loose Sheets/S-1, Pages 1 to 66. It is noted that, this 1, Pages 1 to 66. It is noted that, this excel file comprised of five( comprised of five(5)sheets which comprised of data relating to which comprised of data relating to purchase of old bottles for ttles for three-month period in the year 2020 month period in the year 2020. The AO is noted to have tabulated sample data from this excel file at Para 4.1.4 is noted to have tabulated sample data from this excel file at Para 4.1.4 is noted to have tabulated sample data from this excel file at Para 4.1.4 of the assessment order. It is seen that, this data comprised of month of the assessment order. It is seen that, this data comprised of month of the assessment order. It is seen that, this data comprised of month wise details of the old bottles purchased from certain ve wise details of the old bottles purchased from certain vendors. It inter alia ndors. It inter alia contained the date of invoice, manner of payment, date of cheque, contained the date of invoice, manner of payment, date of cheque, contained the date of invoice, manner of payment, date of cheque, invoice amount, GST, other charges & total. Another excel sheet, is noted invoice amount, GST, other charges & total. Another excel sheet, is noted invoice amount, GST, other charges & total. Another excel sheet, is noted to contain date-wise column wise column-wise notings of several figures against five wise notings of several figures against five vendors. According to the AO, these excel files were actually a summary the AO, these excel files were actually a summary the AO, these excel files were actually a summary 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 of the bogus invoices obtained by the assessee from these vendors and of the bogus invoices obtained by the assessee from these vendors and of the bogus invoices obtained by the assessee from these vendors and that the date-wise details were the notings of cash amounts due from wise details were the notings of cash amounts due from wise details were the notings of cash amounts due from them. It is observed that, this analogy of the Revenue was based on them. It is observed that, this analogy of the Revenue was based on them. It is observed that, this analogy of the Revenue was based on the statement(s) obtained from key employees of the assessee i.e., Shri S statement(s) obtained from key employees of the assessee i.e., Shri S statement(s) obtained from key employees of the assessee i.e., Shri S Varatharaj [from whose possession the pen drive was found] and Shri Varatharaj [from whose possession the pen drive was found] and Shri Varatharaj [from whose possession the pen drive was found] and Shri Augsutine Paulraj. These employees had explained that, the column . These employees had explained that, the column . These employees had explained that, the column ‘Others’ in the excel file represented the commission retained by the ‘Others’ in the excel file represented the commission retained by the ‘Others’ in the excel file represented the commission retained by the vendors for facilitating bogus invoices and that the column ‘Total’ denoted vendors for facilitating bogus invoices and that the column ‘Total’ denoted vendors for facilitating bogus invoices and that the column ‘Total’ denoted the cash which was to be returned back by the vendors against the cash which was to be returned back by the vendors against the cash which was to be returned back by the vendors against the cheques paid to them in lieu of bogus invoices. The AO thereafter cheques paid to them in lieu of bogus invoices. The AO thereafter cheques paid to them in lieu of bogus invoices. The AO thereafter extracted the data of old extracted the data of old-bottle supplier-wise purchase ledgers from the wise purchase ledgers from the SAP software along with their off SAP software along with their off-set accounts of old bottle purchases. set accounts of old bottle purchases.

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

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.

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 ::

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.

After considering the gamu After considering the gamut of facts placed before us, it is noted t of facts placed before us, it is noted that, the foundational basis of the impugned addition was that, the foundational basis of the impugned addition was that, the foundational basis of the impugned addition was the excel file 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 comprising of fivesheets heets which contained details of old bottle purchases which contained details of old bottle purchases only for a three-month period in the year 2020. month period in the year 2020. The Ld. AR pointed out The Ld. AR pointed out that, when the Investigating authorities required Shri that, when the Investigating authorities required Shri that, when the Investigating authorities required Shri Varatharaj to explain the contents of this excel file, he had averred that the details of explain the contents of this excel file, he had averred that the details of explain the contents of this excel file, he had averred that the details of invoices tabulated in this excel file comprised of bogus purchases. It was invoices tabulated in this excel file comprised of bogus purchases. It was invoices tabulated in this excel file comprised of bogus purchases. It was brought to our notice that, the quantum of purchases noted in this excel ur notice that, the quantum of purchases noted in this excel ur notice that, the quantum of purchases noted in this excel file was minimal compared to the aggregate purchases made by the file was minimal compared to the aggregate purchases made by the file was minimal compared to the aggregate purchases made by the assessee. The Ld. AR accordingly claimed that, the AO’s action of assessee. The Ld. AR accordingly claimed that, the AO’s action of assessee. The Ld. AR accordingly claimed that, the AO’s action of proceeding on an assumption that the assessee was making similar proceeding on an assumption that the assessee was making similar proceeding on an assumption that the assessee was making similar bogus purchases across all months in all the years and, thereby extrapolating purchases across all months in all the years and, thereby extrapolating purchases across all months in all the years and, thereby extrapolating the figures found noted for the the figures found noted for the three-month period in the year 2020 month period in the year 2020 and estimating the bogus purchases across all the years, was unjustified. He estimating the bogus purchases across all the years, was unjustified. He estimating the bogus purchases across all the years, was unjustified. He contended that, the entire exerc contended that, the entire exercise conducted by the AO was predicated ise conducted by the AO was predicated on surmises and estimations. As noted by us above, these excel files by on surmises and estimations. As noted by us above, these excel files by on surmises and estimations. As noted by us above, these excel files by themselves did not suggest that the invoices raised by the regular old themselves did not suggest that the invoices raised by the regular old themselves did not suggest that the invoices raised by the regular old bottle suppliers were bogus or that the assessee received back cash from bottle suppliers were bogus or that the assessee received back cash from bottle suppliers were bogus or that the assessee received back cash from them. Hence, in the facts and circumstance of this case, in the facts and circumstance of this case, there is merit in there is merit in the assessee’s submission that the AO’s action of extrapolating these the assessee’s submission that the AO’s action of extrapolating these the assessee’s submission that the AO’s action of extrapolating these notings to allege bogus purchases across all the impugned AYs was on a notings to allege bogus purchases across all the impugned AYs was on a notings to allege bogus purchases across all the impugned AYs was on a weak footing.

It is also not in dispu It is also not in dispute that, the vendors in question were indeed te that, the vendors in question were indeed genuine old bottle suppliers and that they were regularly supplying old genuine old bottle suppliers and that they were regularly supplying old genuine old bottle suppliers and that they were regularly supplying old bottles to the assessee. The Ld. AR has rightly pointed out that, most of bottles to the assessee. The Ld. AR has rightly pointed out that, most of bottles to the assessee. The Ld. AR has rightly pointed out that, most of the purchases made from them had been accepted to be genuine by t the purchases made from them had been accepted to be genuine by t the purchases made from them had been accepted to be genuine by the AO. It is seen by us that, only those purchases where GRN details were AO. It is seen by us that, only those purchases where GRN details were AO. It is seen by us that, only those purchases where GRN details were not found in the accounting software were alleged to be bogus by the not found in the accounting software were alleged to be bogus by the not found in the accounting software were alleged to be bogus by the Revenue. What the AO has done is that, he first attempted to correlate Revenue. What the AO has done is that, he first attempted to correlate Revenue. What the AO has done is that, he first attempted to correlate the entries found in the excel files with the entries found in the excel files with the accounting entries in SAP the accounting entries in SAP software and thereafter highlighted the accounting anomalies discovered software and thereafter highlighted the accounting anomalies discovered software and thereafter highlighted the accounting anomalies discovered regarding the purchases with GRNs and without GRNs. It is the Revenue’s regarding the purchases with GRNs and without GRNs. It is the Revenue’s regarding the purchases with GRNs and without GRNs. It is the Revenue’s case that, the notings found in the excel sheet for the case that, the notings found in the excel sheet for the three three-month period of 2020 correlated with purchase entries having no GRN details and correlated with purchase entries having no GRN details and correlated with purchase entries having no GRN details and therefore it was assumed that all the purchases which lacked GRNs across therefore it was assumed that all the purchases which lacked GRNs across therefore it was assumed that all the purchases which lacked GRNs across all the years was bogus. At the time of hearing, the Ld. AR for the all the years was bogus. At the time of hearing, the Ld. AR for the all the years was bogus. At the time of hearing, the Ld. AR for the assessee furnished a written note explaining the assessee furnished a written note explaining the modus operandi operandi of the liquor business and the activity involving purchase of liquor business and the activity involving purchase of both new bottles both new bottles and old bottles. He submitted that, He submitted that, ordinarily the new bottle used he new bottle used generally goes for 5 to 6 cycles as old bottles generally goes for 5 to 6 cycles as old bottles and therefore and therefore when the old bottle is procured for usa bottle is procured for usage, the bottles may belong to different life may belong to different life cycles. Consequently, the old bottles so received Consequently, the old bottles so received may not be of the same may not be of the same quality and understandably some bottles may be and understandably some bottles may be covered with covered with dust, chipped etc. and when they are and when they are double washed & inspected, inspected, at 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 ::19 ::

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.

10.

Having considered the above submissions, we Having considered the above submissions, we cannot conclusively cannot conclusively agree with the AO that agree with the AO that, the material seized from the premises of the the material seized from the premises of the assessee would show that assessee would show that the assessee was indulging in availing bogus indulging in availing bogus invoices from their old bottle suppliers heir old bottle suppliers across all the years across all the years. The data contained in the excel sheet is found to be an anecdotal sample and contained in the excel sheet is found to be an anecdotal sample and contained in the excel sheet is found to be an anecdotal sample and therefore it is not safe to use it as the is not safe to use it as the basis to allege that basis to allege that the purchases made across ten years was bogus. The AO’s action of ex made across ten years was bogus. The AO’s action of ex made across ten years was bogus. The AO’s action of extrapolating the data for three months found in an excel sheet across ten years and data for three months found in an excel sheet across ten years and data for three months found in an excel sheet across ten years and assuming that same modus operandi (non assuming that same modus operandi (non-recording of GRNs) would have recording of GRNs) would have been followed in all the years, in our opinion, cannot be entirely been followed in all the years, in our opinion, cannot be entirely been followed in all the years, in our opinion, cannot be entirely countenanced, particularly in absence countenanced, particularly in absence of any direct evidence of any direct evidence found from the assessee’s premises the assessee’s premises to support such a proposition. Moreover, to support such a proposition. Moreover, according to us, at first blush, the explanation given by the assessee for according to us, at first blush, the explanation given by the assessee for according to us, at first blush, the explanation given by the assessee for non-recording of GRNs relating to their emergency purchases is found to recording of GRNs relating to their emergency purchases is found to recording of GRNs relating to their emergency purchases is found to be plausible. At the same time however, it is observed that, the key ble. At the same time however, it is observed that, the key ble. At the same time however, it is observed that, the key employees had admitted that, the purchases without GRNs were bogus. employees had admitted that, the purchases without GRNs were bogus. employees had admitted that, the purchases without GRNs 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 ::

12.

Overall therefore, we are in agreement with the Ld. CIT(A) that, Overall therefore, we are in agreement with the Ld. CIT(A) that, Overall therefore, we are in agreement with the Ld. CIT(A) that, there are indeed discrepancies in the discrepancies in the books of accou books of accounts as rightly highlighted by the lower authorities, highlighted by the lower authorities, but it cannot be alleged that the it cannot be alleged that the entire value of purchases lacking GRNs, made from these entire value of purchases lacking GRNs, made from these entire value of purchases lacking GRNs, made from these genuine suppliers were bogus. The Ld. AR for the assessee has also has also tacitly acknowledged before us before us that, there were accounting anomalies in maintaining the books of accounts maintaining the books of accounts, but he contended that contended that, these accounting anomalies cannot be accounting anomalies cannot be ipso facto assumed to be falsification of ipso facto assumed to be falsification of entries, which requires strict proof , which requires strict proof of mens-rea, which is absent , which is absent. He pointed out that the AO in the assessment order erroneously treated pointed out that the AO in the assessment order erroneously treated pointed out that the AO in the assessment order erroneously treated these accounting deficiencies these accounting deficiencies to tantamount to false entries and thereby to tantamount to false entries and thereby initiated penal action u/s 271AAD of the Act. initiated penal action u/s 271AAD of the Act. At this juncture, i At this juncture, it is imperative for us to clarify that to clarify that the accounting deficiencies deficiencies seen in the books of accounts cannot be equated with cannot be equated with falsification of entries in the falsification of entries in 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 books of accounts. In our opinion, . In our opinion, in a given case, if corroborated, in a given case, if corroborated, the statements recorded during the course of the search statements recorded during the course of the search can be used to make can be used to make addition(s) in the hands of the assessee, but it cannot on(s) in the hands of the assessee, but it cannot alone alone be taken as conclusive proof to allege conclusive proof to allege falsification of entries in the books of accounts. falsification of entries in the books of accounts.

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.

“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) .

“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.

13.

In light of our finding rendered at para 12 supra In light of our finding rendered at para 12 supra, we now turn our , we now turn our attention to the estimation of attention to the estimation of the profits. It is seen that the It is seen that the turnover is the only undisputed figure the only undisputed figure between the parties and therefore i rties and therefore in our thoughtful consideration, thoughtful consideration, it would be suitable to adopt and apply it would be suitable to adopt and apply reasonable profit ratio to the turnover reported in the audited financials reasonable profit ratio to the turnover reported in the audited financials reasonable profit ratio to the turnover reported in the audited financials for arriving at the assessable income of the assessee. For this, the Ld. AR for arriving at the assessable income of the assessee. For this, the Ld. AR for arriving at the assessable income of the assessee. For this, the Ld. AR urged us to consider the consider the comparative analysis of other similarly placed comparative analysis of other similarly placed entities and also the average profits earned by the assessee itself in the average profits earned by the assessee itself in the average profits earned by the assessee itself in the comparable years. It is seen that, similarly placed entities such as KALS . It is seen that, similarly placed entities such as KALS . It is seen that, similarly placed entities such as KALS Distilleries Ltd, Enrica Enterprises Pvt Ltd, S Distilleries Ltd, Enrica Enterprises Pvt Ltd, Shiva Tillers Pvt Ltd had hiva Tillers Pvt Ltd had reported net profit margins in the range of 1% to 6% and the profits reported net profit margins in the range of 1% to 6% and the profits reported net profit margins in the range of 1% to 6% and the profits reported by the assessee ranged between AYs 2019 reported by the assessee ranged between AYs 2019-20 to 2022 20 to 2022-23 ranged from 5.38% to 7. 7.69%. The Ld. AR further pleaded that, . The Ld. AR further pleaded that, there 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 ::32 ::

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”.

“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 ::

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.

15.

In so far as the next two issues viz., disallowance of data centre In so far as the next two issues viz., disallowance of data centre In so far as the next two issues viz., disallowance of data centre expenses and addition on account of sale of scrap is concerned, t expenses and addition on account of sale of scrap is concerned, t expenses and addition on account of sale of scrap is concerned, the Ld. CIT, DR assailing the order of Ld. CIT(A) assailing the order of Ld. CIT(A) urged that, even if the booksof at, even if the booksof accounts are rejected, the disallowance of accounts are rejected, the disallowance of this item of expen item of expenditure and income from sale of scrap income from sale of scrap ought to be separately adjudicated and decided separately adjudicated and decided upon as to whether it is to be separately upon as to whether it is to be separately added to the estimated business added to the estimated business income. According to us however, once According to us however, once the books of account are rejected the books of account are rejected by invoking the provisions of section 145of the Act and the income is by invoking the provisions of section 145of the Act and the income is by invoking the provisions of section 145of the Act and the income is estimated to the best of judgment as per the estimated to the best of judgment as per the provisions of section 144 of provisions of section 144 of the Act, the said estimate is made in the Act, the said estimate is made in substitution of the business income on of the business income that is to be computed in accordance that is to be computed in accordance with the provisions contained in with the provisions contained in sections 30 to 43D as laid down in section29 of the Act. Consequently, all sections 30 to 43D as laid down in section29 of the Act. Consequently, all sections 30 to 43D as laid down in section29 of the Act. Consequently, all 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 deductions which are referred to in the deductions which are referred to in sections 30 to 43D of the Act are sections 30 to 43D of the Act are deemed to have been taken into account ave been taken into account while making such an estimate while making such an estimate.

“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

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.