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Facts
The assessee, RSWM Ltd, appealed against the disallowance of purchases amounting to Rs. 30,56,706/-. The purchases were alleged to be bogus accommodation entries, based on information from an Investigation Wing report.
Held
The Tribunal held that the Assessing Officer relied solely on the Investigation Wing's report without conducting independent enquiries. The statement from the vendor was not confronted to the assessee. The assessee provided sufficient documentary evidence to prove the genuineness of the purchases.
Key Issues
Whether purchases from M/s. Arunoday Cotton Corporation were bogus, and if so, whether the disallowance made by the AO was justified.
Sections Cited
147, 143(3), 37, 139(1), 132, 153A, 148, 142(1), 145(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2012-13, arises out of the order of the ld Commissioner of Income Tax (Appeals)-31, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] dated 28.07.2025 against the order of assessment passed u/s 147 r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 13.12.2019 by the Assessing Officer, ACIT, Central Circle-31, New Delhi (hereinafter referred to as ‘ld. AO’).
Ground No. 1 raised by the assessee was stated to be not pressed by the ld AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly dismissed as not pressed.
Ground Nos. 3 and 4 raised by the assessee are general in nature and does not require any adjudication.
Ground No. 2 raised by the assessee is challenging the confirmation of disallowance of Rs. 30,56,706/- u/s 37 of the Act on account of bogus purchases.
We have heard the rival submissions and perused the materials available on record. The assessee is a listed company engaged in the business of manufacturing of yarn. The original return of income was filed u/s 139(1) of the Act on 28.09.2012. The assessment was completed u/s 143(3) of the Act on 28.11.2014 determining loss and unabsorbed depreciation of Rs. 31,96,75,001/- after making few additions. On first appeal, the ld CIT(A) provided partial relief to the assessee. Aggrieved by that order, both assessee as well as revenue has filed appeals before this Tribunal. Meanwhile, a search action was carried out u/s 132 of the Act in Bhilwara Group on 04.08.2016 and the premises of the assessee was also covered. The assessee filed return of income u/s 153A of the Act on 03.03.2018 declaring total loss and unabsorbed depreciation of Rs. 74,95,70,726/-. The assessment was completed u/s 153A of the Act on 29.12.2018 determining the assessed loss of Rs. 66,76,20,786/-. Aggrieved by this order, the assessee filed appeal before the ld CIT(A). Pending disposal of the appeal by the ld CIT(A), the case of the assessee was reopened vide issuance of notice u/s 148 of the Act on 31.03.2019 based on the information received from the Investigation Wing, Indore revealed that assessee had taken accommodation entry in the form of bogus purchases of Rs. 30,56,706/-. The assessee filed its return of income on 30.04.2019 and again on 25.07.2019 in response to notice issued u/s 148 of the Act declaring total income of Rs. Nil and claiming current year’s loss of Rs. 74,95,70,726/- to be carried forward. The reasons recorded for reopening the assessment was sought for and the same was provided to the assessee on 22.05.2019. The objections were filed by the assessee for reopening and the same were disposed of vide letter dated 28.10.2019 by the ld AO. In response to the notice issued u/s 142(1) of the Act, the assessee filed a detailed letter dated 11.11.2019 giving the details of receipts and consumption of cotton purchased from Arunoday Cotton Corporation and filed the ledger account copies, invoices and payment evidences etc.
It is not in dispute that assessee had made certain purchases from M/s. Arunoday Cotton Corporation to the tune of Rs. 30,56,706/-. The assessee had purchased cotton which is essential raw material to be used in the manufacturing process and the purchases made were duly reflected in the books of account of the assessee. The payment was made to the suppliers through regular banking channels. It is not in dispute that the cotton purchased from M/s. Arunoday Cotton Corporation was utilized by the assessee in the manufacturing process which is supported from the quantitative records and overall trading results. The assessee in order to prove the veracity of the purchase from M/s Arunoday Cotton Corporation had furnished the following documentary evidences:-
a) Ledger Account of M/s Arunoday Cotton Corporation b) Copies of purchase invoices c) Copy of material receipt note in support of actual delivery of goods d) Bank Statement highlighting the payments made to M/s Arunoday Cotton Corporation. e) Copy of Lorry receipt in evidence of actual delivery of goods f) Relevant extract of stock register
Further, the assessee furnished the quantitative details of receipt and consumption of the cotton purchased from M/s Arunoday Cotton Corporation as under:
Date Quantity in Kgs. Receipt Consumption Closing Balance 07.01.2012 16390.00 16390.00 16.01.2012 9998.00 6392.00 - 19.01.2012 - 0.00 6392.00 10.01.2012 16070.00 - 16070.00 28.01.2012 - 15000.00 1070.00 28.01.2012 - 1070.00 0.00 8. The above table goes to prove that purchase made from M/s. Arunoday Cotton Corporation has been duly utilized in the consumption of manufacturing process by the assessee. The ld AO noted at page 3 of the assessment order that Shri Vijay Mishra proprietor of M/s. Arunoday Cotton Corporation had maintained account with Bank of Baroda and HDFC Bank and was involved in converting unaccounted cash of various persons/ companies/ businessman through banking channel to provide benefits to various persons by way of accommodation entries and assessee was also one of the beneficiary of getting accommodation bills in the form of purchases for Rs. 30,56,706/-. It was also noted that after the receipt of payment through banking channels from the assessee, there was withdrawal of cash made from the bank account of Shri Vijay Mishra proprietor of M/s. Arunoday Cotton Corporation. This cash withdrawal was alleged to have been paid back to the assessee herein and accordingly the deduction claimed on account of purchase for Rs. 30,56,706/- was disallowed u/s 37 of the Act by the ld AO.
The assessee also placed reliance on the decision of the Hon'ble Supreme Court in the case of Odeon Builders Pvt. Ltd reported in 418 ITR 315 in support of its contentions. It was submitted that the books of account, purchase bills, sales bills, stock registers submitted by the assessee Page | 4 before the ld AO were not sought to be rejected by applying the provisions of Section 145(3) of the Act by pointing out some defects therein. Hence, it was submitted that there is no adverse material brought on record by the revenue to support the allegations of bogus purchase as the same is already accepted by the VAT Authorities and input tax credit in relation to these purchase from M/s. Arunoday Cotton Corporation have been duly allowed by the GST Authorities. It was submitted that the assessee was not provided any opportunity to cross examine the party who had given any adverse statement on the transaction of purchase from M/s. Arunoday Cotton Corporation. It was submitted that purchases are intrinsic part of trading results and the same has intimate nexus with corresponding manufacturing process, stock and sales. Quantitative records submitted by the assessee were accepted by the revenue. The assessee, on without prejudice basis, made a submission before the ld CIT(A) that in any event, only the profit element embedded in the value of purchase could be brought to tax and not the entire value of purchase. It was submitted that the gross profit rate declared by the assessee for the year under consideration @8.03% has been accepted by the revenue.
The ld CIT(A) having reproduced the entire written submissions of the assessee from pages 3 to 12 of his appellate order grossly erred in stating that no details were submitted by the assessee and simply endorsed the assessment order.
We find that the assessee on its part had given all the details to prove the genuineness of the purchase. First of all, the ld AO in the assessment order had merely relied on the information received from Investigation Wing, Indore. The ld AO on his own had not conducted any independent enquiry with M/s. Arunoday Cotton Corporation. The investigation Wing, Indore report suggested that Shri Vijay Mishra had after receiving the cheque from the assessee had withdrawn cash from his bank account. Investigation Wing did not even check that the said cash had been passed on to the assessee therein. Mr. Vijay Mishra had given a statement that he had been involved in providing accommodation bills by converting the unaccounted cash into the bogus bills. Admittedly the said statement was not even confronted with the assessee nor provided to the assessee for rebuttal. This statement was taken behind the back of the assessee and not even furnished to the assessee for his cross examination. Hence, the said statement and the contents thereon cannot be relied upon at all in any manner whatsoever by the revenue while framing the assessment in the case of the assessee herein. Reliance has been rightly placed by the ld AR on the decision of the Hon'ble Supreme Court in the case of Andaman Timber Industries Vs. CCE In Civil Appeal No. 4228 of 2006 reported in 62 taxmann.com 3. The assessee has furnished the complete stock register, material received note in support of actual delivery of goods together with copy of lorry receipt for evidence of actual delivery of goods to prove the genuineness of the purchase made from M/s. Anunoday Cotton Corporation. No enquiry whatsoever was made by the ld AO to check the veracity of the documents filed by the assessee. When all the documents are before the ld AO, the onus stands duly discharged by the assessee and thereafter the onus gets shifted to revenue. We also find that the reliance placed by the ld AR on the decision of the Hon'ble Supreme Court in the cased of Odeon Builders Pvt. Ltd reported in 418 ITR 315 is squarely applicable to the facts of the instant case and respectfully following the same, we delete the disallowance of purchase of Rs. 30,50,706/- in the facts and circumstances of the instant case. Accordingly, Ground No. 2 raised by the assessee is allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 11/03/2026.