GANGADHAR AGARWAL,NIZAMABAD vs ITO., WARD-1, NIZAMABAD

Income Tax Appellate Tribunal, Hyderabad ‘A‘ Bench, Hyderabad

ORDER \nप्रति रवीश सूद, जे.एम./PER RAVISH SOOD, J.M.\nThe present appeal filed by the assessee is directed against the\norder passed by the Commissioner of Income-Tax (Appeals),\nNational Faceless Appeal Center (NFAC), Delhi, dated 08.04.2025,\nwhich in turn arises from the order passed by the Assessing Officer\nunder Section 143(3) of the Income Tax Act, 1961 (for short, “Act”),\ndated 23.12.2019 for A.Y. 2017-18. The assessee has assailed the\nimpugned order on the following grounds of appeal before us:\n\

1. The order of the Ld. CIT(A) NFAC, Delhi dated 08.04.2025 for the AY\n2017-18 is erroneous both on facts and in law to the extent the order is\nprejudicial to the interests of the appellant.\n2. The Ld. CIT(A) ought to have considered that the AO, while completing\nthe assessment under scrutiny which was selected under CASS for\nexamining the issue of \"Quantitative details of principal items of goods\ntraded or raw material as well as finished goods\" has called for certain\ninformation vide his notice u/s 142(1) dt. 24.07.2019, which has\nexceeded the limit for which the case selected for limited Scrutiny under\nCASS and therefore the assessment u/s 143(3) dt. 23.12.2019 suffers\nlegality and therefore deserves to be annulled.\n3. The Ld. CIT(A) ought to have considered that the AO, while explaining\nthe scope of the issues as that for the complete scrutiny, without\nobtaining prior approval of the Pr. CIT concerned and thus the\nassessment is bad in law and needs to be quashed/annulled.\n4. The Ld. CIT(A) ought to have considered that the AO failed to consider\nthe submissions made by the appellant with regard to the details of\nopening stock, purchases, sales and closing stock in respect of each item\nof commodity viz., item MOP etc. dealing by him in the year wherein no\ndiscrepancies were found and therefore the addition of Rs.5,19,12,599/-\nmade is not sustainable.\n5. The Ld. CIT(A) ought to have considered that the AO failed to make\naddition of Rs.5,19,12,599/- towards alleged suppression in purchases\nand sales without purchases item-wise as calculated from Trading, P&L\nA/c of the appellant in the items of commodities carried on business\nwithout identifying and variation in Trading, P&L A/c of the assessee\nand thus the addition needs to be deleted.\n6. The Ld. CIT(A) ought to have considered that no addition can be made\ntowards quantitative items of goods traded as the business carried on by\nthe appellant comes under the Essential Commodities Act and no\nvariation in stock was found out in the Audit report u/s 44AB of the Act.\n7. The Ld. CIT(A) ought to have considered that no addition can be made\ntowards quantitative items of good as no variation was found with\nreference to VAT return and GST Return.\n8. The Ld. CIT(A) ought to have considered that the AO, while sending his\nremand report on 03.01.2024 has observed in para 4 that the appellant\nfiled additional evidence in the form of ITR Copy, Form 3CD, Ledger\ncopies, VAT returns etc., which were already considered by the earst\nwhile AO while completing asst., which clearly established that he was\nnot verified before submitting his remand report and hence the said\nremand report cannot be taken into cognizance.\n9. The Ld. CIT(A) ought to have considered that no addition of Rs.\n5,19,12,599/- to be made in the assessment and presumptions as at\npara 4 of the remand report dt. 03.01.2024 of the AO ought not to have\nbeen accepted in his order, instead of rejecting the remand report and\npassed order without considering the facts of the case.\n10. The appellant may add or alter or amend or modify or substitute or\ndelete and/or rescind all or any of the grounds of appeal at any time\nbefore or at the time of hearing of the appeal.\n2. Succinctly stated, the assessee who is engaged in the business\nof trading of fertilizers had e-filed his return of income for A.Y.\n2017-18 on 08.12.2017, declaring an income of Rs.14,87,800/-.\nSubsequently, the case of the assessee was selected for scrutiny\nassessment for examining the “quantitative details of principal items\nof goods traded or raw material, as well as finished goods”.\n3. During the course of assessment proceedings, the assessee in\ncompliance to the notice issued by the A.O. under Section 142(1) of\nthe Act, dated 11.10.2019, filed before him a detailed “trading\naccount\" along with quantitative particulars of the items traded by\nhim and the “balance-sheet\" for the year under consideration. The\nA.O., after perusing the quantitative particulars once again called\nfor the information vide his letter dated 10.12.2019. In compliance,\nthe assessee furnished the quantitative particulars such as\nOpening stock + Purchases – Sales = Closing stock. Ostensibly, the\nA.O. observed that the quantitative details filed by the assessee did\nnot tally with those that were placed on his record on the earlier\noccasion. The A.O. culled out the discrepancy in the quantitative\nparticulars in a tabular form in the assessment order, as under:\n\n| Sl. No. | Product Name | Opening stock (Quintals) | Purchases (Quintals) | Sales (Quintals) | Closing Stock (Quintals) | Amount Rs. |\n|---|---|---|---|---|---|---|\n| 1 | MOP | 12030 | NIL | NIL | NIL | 8541300 |\n| 2 | PPL MOP | 4000 | 2020 | 50 | 1027725 |\n| 3 | 10.26.26 | 13506 | Nil | Nil | Nil | 14181300 |\n| 4 | 12.32.16 | 14390 | 79880 | 62580 | 31690 | 5111900 |\n| 5 | CIL Super G | Nil | 3160 | 2340 | 820 | 76000 |\nRemarks\nNeither the sales nor the\nclosing stock is appearing\nin the financial statements:\nDeemed to be\nunexplained expenditure\nu/s.69C\n1930 quintals is missing as\nclosing stock or sales :\nUnexplained Money\nu/s.69A\nNeither the sales nor the\nclosing stock is appearing\nin the financial statements:\nDeemed to be\nunexplained expenditure\nu/s.69C\nThe closing stock as per\nthe information submitted\nby assessee is\nappearing as 31690\nquintals against the\nclosing stock shown as\n26420 quintals shown in\ntrading account. Hence the\ndifference of 5270 Quintals\nis missing as closing stock\nor sales: Unexplained\nMoney u/s.69A\nActual closing stock was\nshown in Trading account\nas 1020 quintals against\n820 as per purchase and\nsales, thereby there is\nhidden purchases of 200\nquintals i.e., Unexplained\nexpenditure u/s.69C.\n| ZIL | Nil | Nil | 680 | 8486 | 8707700 |\n| 10.26.26 |\n| CIL Super D | Nil | Nil | 200 | Nil | 64762 |\n| CIL MOP | Nil | 13402 | 14052 | 540 | 595000 |\n| ZIL MOP | Nil | 440 | 5020 | Nil | 2331273 |\n| RCF MOP | Nil | 5317 | 8337 | Nil | 1486418 |\n| IFFCO | Nil | 1000 | 2560 | 1000 | 2457600 |\n| 10.26.26 |\n| SIL | Nil | 200 | 1780 | 200 | 1708800 |\n| 10.26.26 |\n| Deepak | Nil | Nil | 1200 | Nil | 604000 |\n| MOP |\n| Kribbco | Nil | Nil | 20 | Nil | 14000 |\n| MOP |\n| ZIL | Nil | Nil | 3700 | 1570 | 5004821 |\n| 10.32.16 |\nWithout opening stock and\npurchases, sales and\nclosing stock are appearing\nin Trading Account thereby\n9166 quintals of purchases\nare not shown which is\nunexplained\nExpenditure u/s.69C\nWithout purchases or\nopening stock sales were\nshown which is\nsuppressed expenditure\nu/s.69C.\nWithout sufficient\npurchases sales and\nclosing stock shown in\ntrading account thereby\n1190 quintals of purchases\nsuppressed which is\nunexplained expenditure\nu/s.69C.\nWithout sufficient\npurchases sales\nshown in trading account\nthereby 4580 quintals of purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\nWithout sufficient\npurchases sales\nshown in trading\naccount thereby 3020\nquintals of purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\nWithout sufficient\npurchases sales and\nclosing stock shown in\ntrading account thereby\n2560 quintals of purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\nWithout sufficient\npurchases sales and\nclosing stock shown in\ntrading account thereby\n1780 quintals of purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\nWithout purchases sales\nshown in trading account\nthereby 1200 quintals of\npurchases suppressed\nwhich is unexplained\nexpenditure u/s.69C.\nWithout purchases\nsales shown in trading\naccount thereby 20\nquintals of purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\nWithout purchases\nsales and closing\nstock shown in\ntrading account thereby\n5270 quintals of purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\n4. Thereafter, the A.O., vide his letter dated 10.12.2019, called\nupon the assessee for the quantitative stock details in a specific\nformat of Opening stock + Purchases – Sales = Closing stock for the\nitems referred to in the said letter. In reply, the assessee furnished\nthe requisite details along with other details, i.e., VAT receivables,\nledger accounts of all major creditors, sample invoices, etc.\n5. The A.O., after considering the reply of the assessee, observed\nthat the Trading, Profit & Loss account uploaded by the assessee\nof items, viz. MOP, PPL MOP, 10.26.26, 12.32.16, CIL Super G, ZIL\n10.26.26, CIL Super D, CIL MOP, ZIL MOP, RCF MOP, IFFCO\n10.26.26, SIL 10.26.26, Deepak MOP, Kribbco MOP, ZIL 10.32.16\nrevealed a quantitative suppression of a value of Rs.5,19,17,599/-\n, viz. (i). suppressed purchases; and (ii). sales without purchases.\nThus, the A.O. made an addition of Rs.5.19 crore (approx.) by\ntreating it as unexplained expenditure u/s 69C or unexplained\nmoney u/s 69A of the Act. Accordingly, the A.O., vide his order\nunder Section 143(3) of the Act, dated 23.12.2019, determined the\nincome of the assessee at Rs.5,34,00,399/-.\n6. Aggrieved, the assessee carried the matter in appeal before\nthe CIT(A).\n7. During the course of proceedings before the CIT(A), the\nassessee in order to fortify his claim that there was no suppression\nof purchases, sales or closing stock as was inferred by the A.O.,\nhad filed an application U/rule 46A of the Income-tax Rules, 1962,\nseeking liberty for admission of certain fresh/additional\ndocumentary evidence. The CIT(A) called for a “remand report” from\nthe A.O. As the A.O. did not raise any objection to the admission of\nthe additional evidence, therefore, the CIT(A), taking cognizance of\nthe fact that the said documents would have a material bearing on\nthe adjudication of the issue before him, admitted the same.\n8. The assessee submitted before the CIT(A) that the A.O. had\nfailed to appreciate that he was engaged in the business of trading\nin fertilizers, which was a government-controlled commodity\ncoming under the Essential Commodities Act. The assessee\nsubmitted that the A.O. had failed to appreciate that there was a\none-to-one relationship between the opening stock, purchases,\nsales and the closing stock. The assessee submitted before the\nCIT(A) that he had, in the course of the assessment proceedings,\nvide his letter dated 10.12.2019, furnished a commodity-wise\nreconciliation of the statement of stock tally with reference to his\ntrading and profit and loss account with all branch accounts\nconsolidated together, and a perusal of the same revealed that there\nwas no discrepancy. Elaborating further on his contention, it was\nthe claim of the assessee that the A.O. had grossly erred in not\ncomprehending the nomenclature of the products in relation to\nwhich he was conducting his business. It was submitted by him\nthat to ensure ease of conducting the business, he would make\npurchases of different products from different manufacturers and\nrecord such products in his books by prefixing the name of the\nmanufacturer from whom such product was purchased to the name\nof the product. The assessee, to dispel all doubts, had filed before\nthe CIT(A) the product-wise classification (manufacturer-wise),\nshowing quantity and amount of opening stock, purchases, sales,\nand closing stock with the stock report. The assessee submitted\nthat the A.O., without considering the correct factual position, had\nerroneously considered the manufacturer-wise classification of the\nproducts as different from the parent product itself, and thus, made\nthe additions merely based on his assumptions that had no legs to\nstand upon.\n9. The assessee submitted that he had submitted his Tax Audit\nReport on 11.10.2019 in response to the letter of the A.O. dated\n03.10.2019, wherein his financial statements though disclosed the\nmanufacturer-wise classification of the products under the heads\nopening stock, purchases, sales, and closing stock, but, few parent\nproducts like MOP, 10.26.26, 12.32.16, Super etc. were shown as\nproduct as a whole i.e. only with the name of the product under the\nhead \"Opening Stock\" without giving manufacturer-wise\nclassification. Elaborating further on his claim, the assessee\nsubmitted that he had thereafter in response to the letter dated\n10.12.2019, furnished a detailed Stock Report on 13.12.2019,\nwherein quantitative details of all products including, viz. MOP,\n10.26.26, 12.32.16, Super etc. were classified manufacturer-wise.\nThe assessee submitted that the A.O. without correctly\nappreciating the aforesaid factual position, had erroneously\ncaptured the quantitative details of the products, viz. MOP,\n10.26.26, 12.32.16, Super etc. disclosed in the assessee's financial\nstatements, as against the quantitative details of such products\nmanufacturer-wise as disclosed in the Stock Report, and had held\nthe impugned difference as unexplained. It was the assessee's\nsubmission that the A.O. had grossly erred in losing sight of the\nfact that the details of the parent products, viz. MOP, 10.26.26,\n12.32.16, Super etc. were disclosed by the assessee in his financial\nstatements by combining the balances of all manufacturer-wise\nproducts under the heads opening stock, purchases, sales, and\nclosing stock. The assessee had claimed before the CIT(A) that the\nalleged discrepancy in the stock had surfaced because of the\ncomparison of the quantitative details of the parent product as a\nwhole with the quantitative details of a particular manufacturer for\nsuch parent product by the A.O.\n10. The CIT(A), after deliberating on the contentions advanced by\nthe assessee in the backdrop of the “remand report” and the\ncomments of the assessee to the remand report, did not find favor\nwith the same and approved the view taken by the A.O., observing\nas under:\n5.3.4 I have perused the assessment order, submission of the\nappellant, remand report and judicial precedents on this issue. It is\nobserved that the AO held that that there were quantitative suppression\nof Rs.5,19,12,599/- in purchases and sales without purchases item-wise\nas calculated from the Trading, Profit & Loss Account of the appellant, in\nitems MOP, PPL MOP, 10.26.26, 12.32.16, CIL Super G, ZIL 10.26.26,\nCIL Super D, CIL MOP, ZIL MOP, RCF MOP, IFFCO 10.26.26, SIL\n10.26.26, Deepak MOP, Kribbco MOP, ZIL 10.

32. 16. The AO has also\nmade categorically observation in the assessment order in tabular format\nwhich is as under:\n\n| SI. No. | Product Name | Opening stock (Quintals) | Purchases (Quintals) | Sales (Quintals) | Closing Stock (Quintals) | Amount Rs. |\n|---|---|---|---|---|---|---|\n| 1 | MOP | 12030 | NIL | NIL | NIL | 8541300 |\n| 2 | PPL MOP | NIL | 4000 | 2020 | 50 | 1027725 |\n| 3 | 10.26.26 | 13506 | Nil | Nil | Nil | 14181300 |\n| 4 | 12.32.16 | 14390 | 79880 | 62580 | 31690 | 5111900 |\nRemarks\nNeither the sales nor the\nclosing stock is appearing\nin the financial statements:\nDeemed to be\nunexplained expenditure\nu/s.69C\n1930 quintals is missing as\nclosing stock or sales :\nUnexplained Money\nu/s.69A\nNeither the sales nor the\nclosing stock is appearing\nin the financial statements :\nDeemed to be\nunexplained\nexpenditure u/s.69C\nThe closing stock as\nper the information\nsubmitted by\nassessee is\nappearing as 31690\nquintals against the\nclosing stock shown as\n26420 quintals shown in\ntrading account. Hence the\ndifference of 5270\nQuintals is missing as\nclosing stock or sales\n: Unexplained Money\nu/s.69A\n| CIL Super G | Nil | 3160 | 2340 | 820 | 76000 |\nActual closing stock\nwas shown in Trading\naccount as 1020\nquintals against 820\nas per purchase and\nsales, thereby there is\nhidden purchases of\n200\nquintals\ni.e.,\nUnexplained\nexpenditure u/s.69C.\n|\nZIL\nNil\nNil\n680\n8486\n8707700\nWithout opening stock\nand purchases, sales\nand closing stock are\nappearing in Trading\nAccount thereby 9166\nquintals of purchases\nare not shown which is\nunexplained\nExpenditure u/s.69C\n|\n10.26.26\n|\nCIL\nNil\n200\nNil\n64762\nWithout purchases or\nopening stock sales\nwere shown which is\nsuppressed\nexpenditure u/s.69C.\n|\nSuper D\n|\nCIL MOP\nNil\n13402\n14052\n540\n595000\nWithout sufficient\npurchases sales and\nclosing stock shown\nin trading account\nthereby 1190 quintals\nof\npurchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\n|\nZIL MOP\nNil\n440\n5020\nNil\n2331273\nWithout sufficient\npurchases sales\nshown in trading\naccount thereby 4580\nquintals of purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\n|\nRCF MOP\nNil\n5317\n8337\nNil\n1486418\nWithout sufficient\npurchases sales\nshown in trading\naccount thereby 3020\nquintals of purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\n|\nIFFCO\nNil\n1000\n2560\n1000\n2457600\nWithout sufficient\npurchases sales and\nclosing stock shown\nin trading account\nthereby 2560 quintals\nof\npurchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\n|\n10.26.26\n|\nSIL\nNil\n200\n1780\n200\n1708800\nWithout sufficient\npurchases sales and\nclosing stock shown\nin trading account\nthereby 1780 quintals\nof\npurchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\n|\n10.26.26\n|\nDeepak\nNil\nNil\n1200\nNil\n604000\nWithout purchases\n|\nMOP\n|\nKribbco\nNil\nNil\n20\nNil\n14000\nsales shown in trading\naccount thereby 1200\nquintals of purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\nWithout purchases\nsales shown in trading\naccount thereby 20\nquintals of purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\n|\nMOP\n|\nZIL\nNil\nNil\n3700\n1570\n5004821\nWithout purchases\nsales and closing\nstock shown in\ntrading account\nthereby 5270 quintals\nof purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C.\n|\n10.32.16\n|\nHowever, the appellant has claimed that he has submitted reconciliation\nstatement of the principal goods as identified by the A.O. and there was\nabsolutely no difference what-so-ever. Thus, there was no reason for\nmaking any addition towards suppression of purchases & sales for the\nabove said amount.\n5.3.5 Here, it is important to note that the JAO in remand\nproceedings has verified the documents submitted by the appellant and\nhas categorically observed that documents related stock are all not\nbacked by any evidence in the form of Bills / Vouchers and also they are\nnot being tallied with the GST / VAT returns and the input claims have\nnot been mentioned therein. Further, despite being provided several\nopportunities during the course of assessment proceedings, the\nappellant failed to furnish these documents before the AO. Accordingly,\nthese documents seem to have been an after-thought and have been\nprepared now just as an afterthought which need no consideration at this\npoint of time. The documents are mere statements with no support of\ndocumentary evidence. Hence, it is held that the addition made by the\nAO of Rs.5,19,12,599/- on account of suppression of purchases and\nsales without purchases is upheld.\n5.2.6 Further, the appellant in his submission has contended that the\nAO has erred in applicability of section 115BBE of the Act. The claim of\nthe appellant has been perused vis-à-vis the provisions of section\n115BBE as amended by the taxation laws (Second Amendment) Act,\n2016 dated 15.12.2016. In this context, it is worthwhile to take note of the\ndecision of Hon'ble Kerala High Court dated 23.09.2020 in the case of\nMaruthi Babu Rao Jadav Vs ACIT WA.No. 984 of 2019. The Hon'ble\nCourt has discussed the applicability of section 115BBE and the rate of\ntax @ 60 percent at length and has observed as under:\n\"........

13.

Section 115 BBE was inserted by Finance Act 2012 w.e.f 01.04.2013. As on\n01.04.2016 the financial year in which the subject seizures occurred Section 155BBE provided for\n30% tax on income refereed to in Sections 68, 69, 69A, 69B, 69C and 69D. The same was\namended by the 2nd Amendment Act; w.e.f. 01.04.2017, enhancing the rate to 60%. Hence there\nwas no new liability created and the rate of tax merely stood enhanced which is applicable to the\nassessments carried on in that year. The enhanced rate applies from the commencement of the\n assessment year, which relates to the previous financial year.\"\n5.2.7 The Hon'ble Court has thus observed that the increased rate of\n60% for the purposes of section 115BBE are applicable for assessment\nyear 2017-18 and onwards. Hence, the AO has correctly charged tax u/s\n115BBE @ 60%. The contention of the appellant in this regard is\nhereby rejected.\nThe grounds of appeal raised are dismissed.\n11. The assessee aggrieved with the order of the CIT(A) has\ncarried the matter in appeal before us.\n12. We have heard the learned Authorized Representatives of both\nparties, perused the orders of the lower authorities, and the\nmaterial available on record.\n13. Controversy involved in the present appeal lies in a narrow\ncompass, i.e., the sustainability of the addition of Rs.5.19 crore\n(supra) made by the A.O. under Section(s) 69A/69C of the Act\nbased on the impugned multi-facet quantitative suppression of\npurchases/sales/closing stock.\n14. We find that the A.O. based on the “Chart” culled out by him\nin the assessment order had made the impugned addition of Rs.\n5.19 crore (supra) for multi-facet reasons, viz., (i). suppressed\nsales/closing stock; (ii) undisclosed purchases; and (iii).\nsales/closing stock without corresponding opening\nstock/purchases.\n15. Shri P. Murali Mohan Rao, the learned Authorized\nRepresentative (for short “Ld.AR”) for the assessee, at the threshold\nof hearing of the appeal, submitted that both the lower authorities\nhad grossly erred in law and on the facts of the case by misdirecting\nthemselves and making/sustaining the impugned addition based\non glaringly incorrect facts. The Ld. AR submitted that the genesis\nof the impugned discrepancy finds its roots in the failure on the\npart of the A.O., in the first instance, to appreciate the quantitative\ndetails of the opening stock/purchases/sales/closing stock of the\nsubject goods traded by the assessee. Elaborating further on his\ncontention, the Ld. AR submitted that the assessee, to ensure ease\nof conducting business, purchased products from different\nmanufacturers and recorded the same in his books of accounts by\nprefixing the name of the manufacturer from whom such product\nwas purchased to the name of the product. The Ld. AR submitted\nthat the impugned discrepancy in the quantitative stock tally had\ncrept in during the course of the assessment proceedings, because,\nthe A.O., without considering that the assessee was recording the\npurchases of different products from different manufacturers by\nprefixing their respective names, had most erroneously considered\nthe said manufacturer-wise products as different from the parent\nproducts itself, which, thus, had resulted to the consequential\nimpugned addition in the hands of the assessee.\n16. The Ld. AR to buttress his claim had placed before us a\nmanufacturer-wise reconciliation chart of the four parent products\ntraded by the assessee that had resulted in the impugned\ndiscrepancy, viz., (i). MOP (ii). 10.26.26 (iii). 12.32.16; and (iv)\nSuper. Also, the Ld. AR had drawn our attention to the \"Fertilizers\nTrading Account\" for the subject year, which revealed the\nquantitative details of the subject products, viz. (i). MOP\n(ii).10.26.26 (iii). 12.32.16 and (iv) Super. The Ld. AR had further\ndrawn our attention to the fact that under the parent items (traded),\nthere were sub-heads of the products by prefixing the name of the\nmanufacturer from whom the same was purchased. The Ld. AR on\nspecifically being queried to elaborate on the aforesaid\nmanufacturer-wise reconciliation, had taken us through all the\nrespective parent items traded along with the manufacturer-wise\ndetails.\n17. Before proceeding further, we deem it apposite to cull out the\n“Fertilizer Trading Account”, which reads as under:\n\nM/S OMKARMAL DWARKADAS & COMPANY, NIZAMABAD\n(Prop: Shri Gangadhar Agarwal)\n ASSESSMENT YEAR 2017-18\nFERTILIZER TRADING ACCOUNT\nTo OPG STOCK\nQty Amount Rs.\nIFFCO 20.20.0.13 17,900 1,51,25,500\nMoP 12,030 85,41,300\nZIL MOP 4,580 32,51,800\nCIL Super G 2,340 8,11,997\nPPL MOP 2,020 14,34,200\nRCF MOP 3,020 21,44,200\nCIL MOP 1,190 8,44,900\nKribhco MoP 20 14,200\nDeepak MoP 1,200 8,52,000\nCIL 28:28 26,720 2,26,58,560\nPPL20.20.0.13 31,662 3,67,27,920\nSpic 20.20.0.13 59,169 2,94,53,499\nMoP\nZIN IFFCO 12.32.16 1,439 11,79,980\nCIL 10.26.26 1,780 18,69,000\nIFFCO 10.26.26 2,560 26,88,000\nZIL 10.26.26 9,166 96,24,300\n19.19.19 (Foliar) 4,430 2,43,650\n28.28 140 1,54,840\nGypsum 1,370 5,20,600\nKribhco PSB 1,000 1,35,000\nSpeed Fal 800 9,35,200\n14.35.14 690 75,900\nF-4 400 1,62,400\nspic surabi 7,330 4,59,618\nIFFCO 20.20.0.13 35,100 2,77,99,890\nIPL 20.20.0.13 7,940 21,67,620\nMoP 14,390 1,52,53,400\nIPL Mop 22,040 1,12,43,914\nZIL Mop 440 2,33,200\nFact MOP 500 2,42,500\nMCF Mop 5,980 29,16,650\nPPL Mop 4,000 21,30,000\nCIL Mop 13,402 74,59,857\nRCF Mop 5,317 28,31,303\nCIL 20.20.0.13 1,100 12,07,250\nDAP 6,800 56,45,000\nCIL. 28:28 3,160 11,91,609\nSuper 3,560 13,30,609\nCIL Super G 3,160 11,91,609\nSpic SSP G 340 1,19,680\nSpic SSP P 60 19,320\nPURCHASES\nFolior 13-0-45 360 32,914\nBy SALES\nQty Amount Rs.\nForior 13-0-45 360 25,734\nSuper 2,940 10,15,026\nCIL Super G 2,340 8,11,997\nCIL Super D 200 64,762\nIPL 20.20.0.13 4,440 33,84,420\nCIL 28:28 1,100 11,64,210\nKribhco PSB 100 952\nSpic 20.20.0.13 59,169 2,94,53,499\nMoP\nFact MOP 500 2,50,000\nPPL Mop 2,020 10,13,334\nIPL Mop 22,040 1,07,82,912\nZIL Mop 5,020 25,55,239\nMCF Mop 5,980 28,30,098\nRCF Mop 8,337 41,03,400\nKribhco Mop 20 14,000\nDeepak Mop 1,200 6,04,667\nCIL Mop 14,052 72,99,849\nQty Amount Rs.\nQty Amount Rs.\nF-4 650 89,717\nTressure 60 35,314\nSpeed Fal 250 30,953\n14.35.14 1,960 20,91,885\nspic surabi 400 1,76,900\n19.19.19 (Foliar) 400 1,62,400\nIFFCO 20.20.0.13 7,330 4,59,618\nIPL 20.20.0.13 35,100 2,77,99,890\nIFFCO 12.32.16 62,580 6,33,08,537\nZIL 12:32:16 9,120 96,67,200\nBoon 125 9,762\nA/Sulphate 340 2,02,381\nSuper G 400 1,40,400\nCIL SSP 340 2.80.095\nCIL Super G 200 70,200\nIPL 20.20.0.13 1,000 26,666\nCALNIT 1,000 6,23,621\n10.26.26\n1,780 17,74,477\n5,250 1,66,666\nCIL 10:26:26 5,900 58,65,613\nSpic 10:26:26 880 8,69,810\nZIL 10.26.26 680 6,49,618\nIFFCO 10:26:26 2,560 25,71,708\nIPL 20.20.0.13 340 51,965\nMoP 22,040 1,12,43,914\nZIL Mop 440 2,33,200\nFact MOP 500 2,42,500\nMCF Mop 5,980 29,16,650\nPPL Mop 4,000 21,30,000\nCIL Mop 13,402 74,59,857\nRCF Mop 5,317 28,31,303\nCIL 20.20.0.13 1,100 12,07,250\nDAP 6,800 56,45,000\nZIN IFFCO 12.32.16\nUrea Neam\nUrea Granular\nPPL20.20.0.13\nCIL 20.20.0.13\nDAP\nSpic 20.20.0.13\n5,970 19,98,664\n3,29,637 8,81,35,462\n1,36,260 3,68,16,776\n31,160 2,44,18,089\n1,98,160 16,02,16,119\n56,667 6,01,10,808\n17,560 1,38,03,462\nGross Profit\n0\n49,18,731\nCREDITS\nFertilizer Credit Notes\nNational Fertilzers Ltd. - Handling Charges\nCLOSING STOCK\nMoP\n4,000 10,000 77,30,000\n77,30,000\n4,540\n23,10,000\nPPL Mop\nCIL Mop\n4,000 20,40,000\n540\n2,70,000\nElaborating on the nature of the discrepancy, the Ld. AR took us\nthrough one of the parent product, i.e MOP. The Ld. AR submitted\nthat the A.O. had observed that though the assessee in his financial\nstatements had disclosed the “Opening stock” of MOP at 12,030\nbags, but despite there being no sales of the said product during\nthe subject year, the “closing stock” of the said product was\nreflected as Rs. nil. Accordingly, the A.O., based on his aforesaid\nobservations, had made an addition towards the suppressed\n"closing stock” of MOP of Rs.85,41,300/-. The Ld. AR submitted\nthat the mistake had crept in for the reason that the A.O had\nconsidered MOP as an independent product, as against the\nbrands/sub-heads mentioned therein. Clarifying on the issue, the\nLd. AR submitted that perusal of the reconciliation chart/audited\nFertilizers Trading Account (enclosed with the return of income),\nrevealed that the assessee had during the subject year made\npurchases and sales of various brands of MOP, viz. (i) purchases of\n51,679 bags of MOP; and (ii). sales of 59,169 bags, which, thus, left\nwith him 4540 bags of MOP that comprised of viz. (i) PPL MOP\n4,000 bags; and CIL MOP - 540 bags.\n18. Elaborating further on his contention, the Ld. A.R. submitted\nthat the A.O., without appreciating the correct factual position, had\nnot only wrongly alleged quantitative suppression of “closing stock\"\nof MOP (parent product) but had also based on the said wrong facts\ndrawn adverse inference regarding the sub-heads/brands of MOP\n(parent product), viz., PPL MOP, RCF MOP, DFCL MOP, Kribco\nMOP, IPL MOP, ZIL MOP, FACT MOP. MCF MOP and CIL MOP. The\nLd. AR submitted that the A.O., by treating the aforesaid sub-\nheads/brands of MOP as separate products, i.e., independent of\nthe principal product MOP (Parent product), had wrongly observed\nthat the assessee had suppressed its closing stock/sales of the said\nrespective brands/sub-heads of MOP (parent product). Also, the\nLd. AR took us through similar discrepancies that were pointed out\nby the A.O. regarding the other parent products, i.e. SUPER,\n10.26.26 and 12.32.16 and their respective brands/sub-heads.\n19. To sum up, the Ld. AR submitted that the entire discrepancy\nhad surfaced for the solitary reason that the A.O. had failed to\nappreciate that the sub-heads/brand-wise of the parent items\ntraded by the assessee, viz. (i). MOP, (ii).10.26.26, (iii). 12.32.16\nand (iv) Super, were not independent items but only a brand/sub-\nhead of the respective parent items, and the said manufacturer-\nwise details of the said products was maintained by the assessee\nonly for the ease of doing his business. The Ld. AR submitted that\nthe aggregation of opening stock, purchases, sales, or closing stock\nof the parent products and their sub-heads/brand-wise\nclassifications revealed that there was no discrepancy in the\nquantitative stock tally that was filed by the assessee.\n20. Per contra, Shri Gurpreet Singh, the learned Senior\nDepartmental Representative (for short “Ld. DR”) relied upon the\norders of lower authorities. The Ld. DR submitted that as the\nassessee could not reconcile the discrepancy in the stock tally of\nthe various products, therefore, both the authorities below had\nrightly made/sustained the addition of Rs.5.19 crore (supra) based\non the said discrepancy.\n21. We have given thoughtful consideration to the contentions\nadvanced by the Ld. Authorized Representatives of both parties in\nthe backdrop of the orders of the lower authorities and the material\navailable on record.\n22. Before proceeding further, we deem it apposite to observe that\nthe assessee had placed on record a copy of the \"Fertilizer Trading\nAccount\" disclosing the parent products and the manufacturer-\nwise/brand-wise details of opening stock, purchases, sales, and\nclosing stock. Also, the Ld. AR has placed on record a product-wise\nreconciliation and an explanation to the said reconciliation\nstatement. We deem it apposite to cull out the “Product-wise\nreconciliation” as had been filed before us. Also, the explanation of\nthe assessee supplementing the reconciliation statement is being\nreproduced as under:\n\nGangadhar Agarwal\nAY 2016-17\nProduct wise Reconciliation\nProduct name sno. Brand name Opening Stock Amount(Rs.) Purchases Amount(Rs.) Sales Amount(Rs.) Closing Stock Amount(Rs.)\n1 PPL Mop 2,020 14,34,200 4,000 21,30,000 2,020 10,13,334\n2 RCF Mop 3,020 21,44,200 5,317 28,31,303 8,337 41,03,400\n3 DFPCL Mop 1,200 8,52,000 1,200 6,04,667\n4 Kribco Mop 20 14,200 20 14,000\nMOP\n5 IPL Mop 22,040 1,12,43,914 22,040 1,07,82,912\n6 ZIL Mop 4,580 32,51,800 440 2,33,200 5,020 25,55,239\n7 FACT Mop 500 2,42,500 500 2,50,000\n8 MCF Mop 5,980 29,16,650 5,980 28,30,098\n9 CIL Mop 13,402 74,59,857 14,052 72,99,849\n1,190 8,44,900\nTotal MOP 12,030 85,41,300 51,679 2,70,57,424 59,169 2,94,53,499 4,540 23,10,000\nProduct name sno. Brand name Opening Stock Amount(Rs.) Purchases Amount(Rs.) Sales Amount(Rs.) Closing Stock Amount(Rs.)\n1 CIL6uper G 200 70,200 3,160 11,91,609 2,340 8,11,997 1,020\nSUPER\n2 CIL Super D 200 70,200 200 64,762\n3 SPIC SSP G 340 1,19,680\n4 SPIC SSP P 60 19,320 60 18,457\nTotal SUPER 400 140400 3,560 13,30,609 2,940 10,15,026 1,020 3,87,600\nProduct name sno. Brand name Opening Stock Amount(Rs.) Purchases Amount(Rs.) Sales Amount(Rs.) Closing Stock Amount(Rs.)\n1 CIL 10.26.36 1,780 18,69,000 1,780 17,74,477 200 1,92,952\n2 SPIC 10.26.26 880 8,88,800 880 8,69,810\n10.26.26\n3 ZIL 10.26.26 9,166 96,24,300 680 6,49,618 8,486 80,61,700\n4 IFFCO 10.26.26 2,560 26,88,000 1,000 10,06,000 2,560 25,71,708 1,000 9,60,000\nTotal 10.26.26 13,506 1,41,81,300 2,080 20,87,752 5,900 58,65,613 9,686 92,13,700\nProduct name sno. Brand name Opening Stock Amount(Rs.) Purchases Amount(Rs.) Sales Amount (Rs.) Closing Stock Amount(Rs.)\n1 IFFCO 12.32.16 9,120 96,67,200 79,880 8,07,58,680 62,580 6,33,08,537 26,420 2,56,27,400\n12.32.16\n2 ZIL 12.32.16) 5,270 55,86,200 3,700 35,83,618 1,570 14,91,500\nTotal 12.32.16 14,390 1,52,53,400 79,880 8,07,58,680 66,280 6,68,92,155 27,990 2,71,18,900\nGangadhar Agarwal\n1. 10.26.26 is a product and 13506 Bags of opening\nstock of 10.26.26 consists of 4 brands such as CIL\n10.26.26, SPIC 10.26.26, IFFCO 10.26.26 and ZACL\n10.26.26, These 4 brands are under umbrella of\nproduct 10.26.26.\n2. The sum total of 4 brands of opening stock totals\nto 13506 bags and during the year assessee\nentered in purchase and sale transaction as\nmentioned in reconciliation column serial no.3 in\nthe same chart.\n3. Therefore, the contention of AO about neither\nsales nor closing stock appearing in financials is\nincorrect.\n1. 12.32.16 is the product and it has 2 different\nbrand categories namely ZACL 12.32.16 and IFFCO\n12.32.16\n2. AO considered 12.32.16, ZACL 12.32.16 and\nIFFCO 12.32.16 as 3 different products whereas\n12.32.16 is the only product and ZACL, IFFCO are\nbrands. The same is given in reconcilation column\nof serial no.4 in the same chart.\n3. AO did not consider the 3700 bags of sales of\nZACL 12.32.16 and did not consider 1570 bags\nclosing stock of ZACL 12.

32. 16. That is the reason\nthe AO made an Addition of 5270 bags which is\nincorrect.\n1. Super is the product and it consists of 4 brands\nnamely Granular Super GFL, Granular Super CIL\nSSP-(P) GFL, SSP-(Powder) CIL.\n2. The 200 bags opening stock of SSP-(Powder)\nCIL (CIL Super D) is included in the opening stock of\nsuper.\nCommodity (fertilizer) 10.26.26\nWithout opening stock and\npurchases, sales and\nclosing stock are appearing\nin Trading Account thereby\n9166 quintals of purchases\nare not shown which is\nunexplained\nExpenditure u/s.69C\nSales\nName of the\nCompany\nOpening\nPurchase of\nmade\nStock\nStock (Bags)\nGoods (Bags)\n(Bags)\nClosing\nStock (Bags)\n6\nZIL\n10.26.26\nZACL 10.26.26 (50Kg)\n9166\n0\n680\n8,486\nProduct \"Super\"\nSales\nName of the\nCompany\nOpening Stock\n(Bags)\nPurchase of\nGoods (Bags)\nmade\n(Bags)\nClosing\nStock (Bags)\n1\nGranular Super\nCIL\n200\n3160\n2340\n820\n2\nCIL Super G\n3160\n2340\n820\n76000\nProduct \"12.32.16\"\nSales\nName of the\nCompany\nOpening\nPurchase of\nmade\nStock (Bags)\nGoods (Bags)\n(Bags)\nClosing\nStock (Bags)\n1\nZACL 12.32.16\n5270\n0\n3700\n1,570\n2\nIFFCO 12.32.16\n9120\n79550\n62960\n26,420\nTotal\n14390\n79880\n66280\n27,990\n1. AO considered CIL, MOP and MOP as two\ndifferent products, whereas CIL MOP is a brand\ncaterory under MOP product\n2. Therefore, Opening stock of CIL MOP is already\nincluded in the opening stock of MOP as mentioned\nin reconciliation column of serial no.1 in the same\nchart.\n3. The addition of 1190 bags made by the AD as\nsuppression of Purchases is incorrect.\n1. AO considered ZIL MOP and MOP as two\ndifferent products, whereas ZIL MOP is a brand\ncategory under MOP product.\n2. Therefore, Opening stock of ZIL MOP is already\nincluded in the opening stock of MOP as mentioned\nin reconciliation column of serial no.1 in the same\nchart\n3. The addition of 4580 bags made by the AD as\nsuppression of Purchases is incorrect.\n1. AO considered RCF MOP and MOP as two\ndifferent products, whereas RCF MOP is a brand\ncategory under MOP product,\n2. Therefore, Opening stock of RCF MOP is already\nincluded in the opening stock of MOP as mentioned\nin reconciliation column of serial no.1 in the same\nchart.\n3. The addition of 3020 bags made by the AD as\nsuppression of Purchases is incorrect.\n1. 10.26.26 is the product and it has 4 brands such\nas CIL 10.26.26, SPIC 10.26.26, IFFCO 10.26.26 and\nZACL 10.26.26.\n2. The opening stock of IFFCO 10.26.26 is included\nin the product 10.26.26, the same can be observed\nfrom the reconciliation column of serial no.3 in\nthe same chart.\n3. Therefore, the addition of 2560 bags made by\nthe AD as suppression of purchases is incorrect.\n1. 10.26.26 is the product and SIL 10.26.26 is one of\nthe brand category\n2. The opening stock 1780 bags of CIL 10.26.26 is\nalready included in the opening stock of 10.26.26.\nThe same can be seen from reconciliation column\nof serial no.3 in the same chart.\n3. Therefore, the additon of 1780 bags made by AO\nas supperssion of purchases is incorrect.\n1. AO considered Deepak/DFPCL MOP and MOP as\ntwo different products, whereas DFPCL MOP sa\nbrand category under MOP product\n2. Therefore, Opening stock of DFPCL MOP is\nalready included in the opening stock of MOP as\nmentioned in reconciliation column of serial no.1\nin the same chart.\n3. Hence, the addition of 1200 bags made by AD as\nSuppression of purchases is incorrect\n4. The A.O., mistakenly,\nconsidered KRIBCO MOP and\nMOP as two different products,\nCIL Super D\nD\nCIL MOP\nZIL MOP\nRCF MOP\nIFFCO\n10.26.26\nCIL 10.26.26\nDFPCL MOP\nKribhco MOP\n(sub-product\nof SUPER)\nProduct \"Super\"\nName of the\nCompany\nOpening Stock\n(Bags)\nPurchase of\nGoods (Bags)\nSales\nmade\n(Bags)\nClosing\nStock (Bags)\n1\nGranular Super\nCIL\n200\n3160\n2340\n820\n2\nCIL Super G\n3160\n2340\n820\n76000\n\nProduct \"12.32.16\"\nName of the\nCompany\nOpening\nStock (Bags)\nPurchase of\nGoods (Bags)\nSales\nmade\n(Bags)\nClosing\nStock (Bags)\n1\nZACL 12.32.16\n5270\n0\n3700\n1,570\n2\nIFFCO 12.32.16\n9120\n79550\n62960\n26,420\nTotal\n14390\n79880\n66280\n27,990\nProduct \"10.26.26\"\nName of the\nCompany\nOpening\nStock (Bags)\nPurchase of\nGoods (Bags)\nSales\nmade\n(Bags)\nClosing\nStock (Bags)\n1\nCIL 10.26.26 (50kg)\n1780\n200\n1780\n200\n2\nSPIC 10.26.26 (50Kg)\n0\n880\n880\n0\n3\nIFFCO 10.36.26 (50Kg)\n2560\n1000\n2560\n1.000\n4\nZACL 10.26.26 (50Kg)\n9166\n0\n680\n8,486\nTotal\n13506\n2080\n5900\n9686\nProduct \"MOP\"\nName of the\nCompany\nOpening\nStock\n(Bags)\nPurchase of\nGoods (Bags)\nSales\nmade\n(Bags)\nClosing\nStock (Bags)\n1\nPPL MOP\n2020\n4000\n2020\n4,000\n2\nRCF MOP\n3020\n5317\n8337\n0\n3\nDFPCL MOP\n1200\n0\n1200\n0\n4\nKRIBCO MOP\n20\n0\n20\n0\n5\nIPL MOP\n22040\n0\n22040\n0\n6\nZIL MOP\n4580\n440\n5020\n0\n7\nFACT MOP\n500\n500\n0\n8\nMCF MOP\n5980\n5980\n0\n9\nCIL MOP\n1190\n13402\n14052\n540\nWithout purchases or\nopening shock sales vere\nshown whitis\nsuppressed expenditure\nSSP-(Powder)\nCIL\nWITOU Pruchases Sales\nand closing stock shown in\nfrading account thereby\n1190 quintals of purchases\nsuppressed vtich is\nunexplained expenditure\nMSC\nNitou purchases sales\nand closing stock shown in\ntrading account thereby\n1190 quintals of purchases\nsuppressed which is\nunexplained expenditure\nMSC\nWite sufident\nbunclaves sales and\nclosing slock shown in\nfrading account thereby\n1190 quintals of purchases\nsuppressed which is\nunexplained expenditure\nMSC\nAthout sufficient\npurchases sales shown in\ntrading account thereby\n2801273 4500 quintals of purchases\nsuppressed which is\nunexplained expenditure\n0\nWITOU Pruchases Sales\nand closing stock shown in\ntrading account thereby\n1190 quintals of purchases\nsuppressed which is\nunexplained expenditure\nMSC\nWITOU Pruchases Sales\nand closing stock shown in\ntrading account thereby\n1190 quintals of purchases\nsuppressed which is\nunexplained expenditure\nMSC\nWITOU Pruchases Sales\nand closing stock shown in\ntrading account thereby\n1190 quintals of purchases\nsuppressed which is\nunexplained expenditure\nMSC\nWithout purchases sales\nshown in trading account\nthereby 4580 quintals of purchases\nsuppressed which is\nunexplained\nexpenditure u/s.69C\nProduct \"Super\"\nName of the\nCompany\nOpening Stock\n(Bags)\nPurchase of\nGoods (Bags)\nSales made\n(Bags)\nClosing\nStock (Bags)\n1\nGranular Super\nCIL\n200\n3160\n2340\n820\n2\nCIL Super G\n3160\n2340\n820\n76000\nProduct \"12.32.16\"\nName of the\nCompany\nOpening\nStock (Bags)\nPurchase of\nGoods (Bags)\nSales\nmade\n(Bags)\nClosing\nStock (Bags)\n1\nZACL 12.32.16\n5270\n0\n3700\n1,570\n2\nIFFCO 12.32.16\n9120\n79550\n62960\n26,420\nTotal\n14390\n79880\n66280\n27,990\n1. 10.26.26 is the product and it has 4 brands such\nas CIL 10.26.26, SPIC 10.26.26, IFFCO 10.26.26 and\nZACL 10.26.26.\n2. The opening stock of IFFCO 10.26.26 is included\nin the product 10.26.26, the same can be observed\nfrom the reconciliation column of serial no.3 in\nthe same chart.\n3. Therefore, the addition of 2560 bags made by\nthe AD as suppression of purchases is incorrect.\n1. 10.26.26 is the product and SIL 10.26.26 is one of\nthe brand category\n2. The opening stock 1780 bags of CIL 10.26.26 is\nalready included in the opening stock of 10.26.26.\nThe same can be seen from reconciliation column\nof serial no.3 in the same chart.\n3. Therefore, the additon of 1780 bags made by AO\nas supperssion of purchases is incorrect.\n1. AO considered Deepak/DFPCL MOP and MOP as\ntwo different products, whereas DFPCL MOP sa\nbrand category under MOP product\n2. Therefore, Opening stock of DFPCL MOP is\nalready included in the opening stock of MOP as\nmentioned in reconciliation column of serial no.1\nin the same chart.\n3. Hence, the addition of 1200 bags made by AD as\nSuppression of purchases is incorrect\n4. The A.O., mistakenly,\nconsidered KRIBCO MOP and\nMOP as two different products,\nwhereas KRIBHCO MOP is a\nbrand of the MOP product\n(parent product). Thus, the A.O\nhad lost sight of the fact that as\nthe “Opening stock\" on\n01.04.2016 of 20 bags of\nKRIBHCO MOP was already\nincluded in the “Opening Stock”\nof 12030 bags of MOP (parent\nproduct) on 01.04.2016,\ntherefore, the “Sales” (20 bags) of\nKRIBHCO MOP by the assessee\nwas sourced out of the “Opening\nstock\" (20 bags) for the subject\nyear.\n5. The A.O. had based on his wrong\nobservation, concluded that the\nassessee\nhad\nincurred\nunexplained expenditure for\npurchase of 20 bags of\nKRIBHCO MOP and thus, on the\nsaid count made an addition of\nRs.14,000/-.\n6. We find that as the A.O had lost\nsight of the “Opening stock” of\n20 bags of KRIBHCO MOP that\nformed part of the “Opening\nStock\" of 12030 bags MOP\n(parent product) (as can be\ngathered from the “Fertilizer\ntrading A/c\" and the\nreconciliation filed by the\nassessee), there is no\nunaccounted\nexpenditure\nincurred by him for purchase of\n1. The\nΑ.Ο.,\nmistakenly,\nconsidered ZIL\n12.32.16 and\n12.32.16 as two different\nproducts, whereas ZIL 12.32.16\nMOP is a brand of the 12.32.16\nproduct (parent product). Thus,\nthe A.O lost sight of the fact that\nas the “Opening stock\" on\n01.04.2016 of 5270 bags of ZIL\n12.32.16 was already included\nin the “Opening Stock” of 14390\nbags of 12.32.16 (parent\nproduct) on 01.04.2016,\ntherefore, the “Sales” (3700\nbags) and "Closing Stock” (1570\nbags) of ZIL 12.32.16 were\nsourced out of the “Opening\nstock\" (5270 bags) for the\nsubject year.\nassessee\nhad\n2. The A.O. had based on his wrong\nobservations, concluded that the\nincurred\nunexplained expenditure for\npurchase of 5270 bags of ZIL\n12.32.16 and thus, on the said\ncount made an addition of Rs.\n50,04,821/-.\n3. We find that as the A.O had lost\nsight of the “Opening stock” of\n5270 bags of ZIL 12.32.16 that\nformed part of “Opening Stock\"\nof 14390 bags of 12.32.16\n(parent product) (as can be\ngathered from the “Fertilizer\ntrading A/c and the\nreconciliation filed by the\nassessee), there is no\nunaccounted\nexpenditure\nincurred by him for purchase of\n5270 bags of ZIL 12.

32. 16. We,\nthus, direct the A.O. to delete\nthe\naddition\nof Rs.\n50,04,821/- made by him u/s\n69C of the Act.\n1. The A.O., mistakenly, considered\nCIL Super G (brand) and SUPER\n(parent product) as two different\nproducts, whereas CIL Super G\nis a brand of the SUPER product\n(parent product). Thus, the A.O\nhad lost sight of the fact that as\nthe “Opening stock\" on\n01.04.2016 of 200 bags of CIL\nSuper G was already included in\nthe “Opening Stock” of 400 bags\nof SUPER (parent product) on\n01.04.2016,\ntherefore, the\nassessee had an actual “Closing\nstock\" of 1020 bags of CIL Super\nGon 31.03.2017.\n2. The A.O. had based on his wrong\nobservation, concluded that the\nassessee had made unaccounted\npurchases of 200 bags of CIL\nSuper G and thus, on the said\ncount made an addition of Rs.\n76,000/-.\n3. We find that as the A.O had lost\nsight of the “Opening stock” of\n200 bags of CIL Super G [that\nformed part of “Opening Stock\"\nof 400 bags of SUPER (parent\nproduct) (as can be gathered\nfrom the \"Fertilizer trading A/c\"\nand the reconciliation filed by\nthe assessee), therefore, the\n"Closing stock” of 1020 bags of\nCIL Super G is found to be duly\nexplained. We, thus, direct the\nA.O. to delete the addition of\nRs.76,000/- made by him u/s\n69C of the Act.\n1. The A.O., mistakenly, considered\nZIL 10.26.26 and 10.26.26 as\ntwo different products, whereas\nZIL 10.26.26 is a brand of the\n10.26.26 product (parent\nproduct). Thus, the A.O lost sight\nof the fact that as the “Opening\nstock\" on 01.04.2016 of 9166\nbags of ZIL 10.26.26 was already\nincluded in the “Opening Stock”\nof 13506 bags of 10.26.26\n(parent product) on 01.04.2016,\ntherefore, the assessee had a\nduly explained “Sales” of 680\nbags and “Closing stock” of 8486\nbags on 31.03.2017.\n2. The A.O. had based on his wrong\nobservation, concluded that the\nassessee\nhad\nincurred\nunexplained expenditure of Rs.\n87,07,700/- for purchase of\n9166 bsags of ZIL 10.26.26\n(disclosed by him as Sales (680\nbags) and Closing Stock (8486\nbags)] and thus, on the said\ncount made an addition of Rs.\n87,07,700/- u/s 69C of the Act.\n3. We find that as the A.O had lost\nsight of the “Opening stock” of\n9166 bags of ZIL 10.26.26 [that\nformed part of “Opening Stock\"\nof 13506 bags of 10.26.26\n(parent product) (as can be\ngathered from the “Fertilizer\ntrading A/c and the\nreconciliation filed by the\nassessee), there is no\nunaccounted purchases of ZIL\n10.

26. 26. We, thus, direct the\nA.O. to delete the addition of\nRs.87,07,700/- made by him\nu/s 69C of the Act.\n1. The A.O., mistakenly, considered\nCIL Super D (brand) and SUPER\n(parent product) as two different\nproducts, whereas CIL Super D\nis a brand of the SUPER product\n(parent product). Thus, the A.O.\nlost sight of the fact that as the\n“Opening stock” on 01.04.2016\nof 200 bags of CIL Super D was\nalready included in the “Opening\nStock\" of 400 bags of SUPER\n(parent product) on 01.04.2016,\ntherefore, the assessee had sold\n200 bags of CIL Super D during\nthe subject year from the duly\nexplained “Opening stock” that\nwas available with him on\n01.04.2016.\n2. The A.O. had based on his wrong\nobservation, concluded that the\nassessee\nhad\nincurred\nunaccounted expenditure for\npurchase of 200 bags of CIL\nSuper D that were sold by him\nduring the subject year and\nthus, on the said count had\nmade an addition of Rs.\n64,762/-.\n3. We find that as the A.O had lost\nsight of the “Opening stock\" of\n200 bags of CIL Super D that\nformed part of “Opening Stock\"\nof 400 bags of SUPER (parent\nproduct) (as can be gathered\nfrom the “Fertilizer trading A/c\"\nand the reconciliation filed by\nthe assessee), therefore, the sale\nof 200 bags of CIL Super D is\nduly explained. We, thus, direct\nthe A.O. to delete the addition\nof Rs.64,762/- made by him\nu/s 69C of the Act.\n1. The A.O., mistakenly, considered\nCIL MOP and MOP as two\ndifferent products, whereas CIL\nMOP is a brand of the MOP\nproduct (parent product). Thus,\nthe A.O lost sight of the fact that\nas the "Opening stock" on\n01.04.2016 of 1190 bags of CIL\nMOP was already included in the\n“Opening Stock” of 12030 bags of\nMOP (parent product) on\n01.04.2016, therefore, the\n"Sales" (14052 bags) and\n“Closing Stock” on (540 bags) of\nCIL MOP by the assessee during\nthe subject year was sourced out\nof the “Opening stock” (1190\nbags)) and “Purchases”(13402\nbags) for the subject year.\n2. The A.O. had based on his wrong\nobservation concluded that the\nassessee\nhad\nincurred\nunexplained expenditure for\npurchase of 1190 bags of CIL\nMOP and thus, on the said count\nhad made an addition of Rs.\n5,95,000/-.\n3. We find that as the A.O had lost\nsight of the “Opening stock" of\n1190 bags of CIL MOP that\nformed part of “Opening Stock\"\nof 12030 bags of MOP (parent\nproduct) (as can be gathered\nfrom the “Fertilizer trading A/c\"\nand the reconciliation filed by\nthe assessee), there is no\nunaccounted\nexpenditure\nincurred by him for purchase of\n1190 bags. of CIL MOP. We,\nthus, direct the A.O. to delete\nthe addition of Rs.5,95,000/-\nmade by him u/s 69C of the\nAct.\n1. The A.O., mistakenly, considered\nZIL MOP and MOP as two\ndifferent products, whereas ZIL\nMOP is a brand of the MOP\nproduct (parent product). Thus, the\nA.O lost sight of the fact that\nas the \"Opening stock\" on\n01.04.2016 of 4580 bags of ZIL\nMOP was already included in the\n“Opening Stock” of 12030 bags of\nMOP (parent product) on\n01.04.2016, therefore, the\n\"Sales\" (5020 bags) of ZIL MOP\nby the assessee was sourced out\nof the "Opening stock\" (4580\nbags)) and “Purchases” (440\nbags) for the subject year.\n2. The A.O. had based on his wrong\nobservation, concluded that the\nassessee\nhad\nincurred\nunexplained expenditure for\npurchase of 4580 bags of ZIL\nMOP and thus, on the said count\nhad made an addition of Rs.\n23,31,273/-.\n3. We find that as the A.O had lost\nsight of the “Opening stock” of\n4580 Qtls of ZIL MOP that\nformed part of “Opening Stock"\nof 12030 bags MOP (parent\nproduct) (as can be gathered\nfrom the “Fertilizer trading A/c\"\nand the reconciliation filed by\nthe assessee), there is no\nunaccounted\nexpenditure\nincurred by the assessee for\npurchase of 4580 Qtls. of ZIL\nMOP. We, thus, direct the A.O.\nto delete the addition of Rs.\n23,31,273/- made by him u/s\n69C of the Act.\n1. The A.O., mistakenly,\nconsidered RCF MOP and MOP\nas two different products,\nwhereas RCF MOP is a brand of\nthe MOP product (parent\nproduct). Thus, the A.O lost\nsight of the fact that as the\n"Opening stock” on 01.04.2016\nof 3020 bags of RCF MOP was\nalready included in the “Opening\nStock" of 12030 bags of MOP\n(parent product) on 01.04.2016,\ntherefore, the “Sales” (8337\nbags) of RCF MOP by the\nassessee was sourced out of the\n"Opening stock" (3020 bags))\nand “Purchases” (5317 bags) for\nthe subject year.\n2. The A.O. had based on his wrong\nobservation, concluded that the\nassessee\nhad\nincurred\nunexplained expenditure for the\npurchase of 4580 bags of RCF\nMOP and thus, on the said count\nhad made an addition of Rs.\n14,86,418/-.\n3. We find that as the A.O had lost\nsight of the “Opening stock” of\n3020 bags of RCF MOP [that\nformed part of “Opening Stock"\nof 12030 bags MOP (parent\nproduct) (as can be gathered\nfrom the “Fertilizer trading A/c\"\nand the reconciliation filed by\nthe assessee), there is no\nunaccounted\nexpenditure\nincurred by the assessee for\npurchase of 3020 bags of RCF\nMOP. We, thus, direct the A.O.\nto delete the addition of Rs.\n14,86,418/- made by him u/s\n69C of the Act.\n1. The A.O., mistakenly, considered\nIFFCO 10.26.26 and 10.26.26 as\ntwo different products, whereas\nIFFCO 10.26.26 is a brand of the\n10.26.26 product (parent\nproduct). Thus, the A.O lost sight\nof the fact that as the “Opening\nstock\" on 01.04.2016 of 2560\nbags of IFFCO 10.26.26 was\nalready included in the “Opening\nStock\" of 13506 bags. of\n10.26.26 (parent product) on\n01.04.2016, therefore, the\n“Sales” (2560 bags) and “Closing\nStock" (1000 bags) of IFFCO\n10.26.26 were sourced out of the\n“Opening Stock” (2560 bags) and\n\"Purchases” (1000 bags).\n2. The A.O. had based on his wrong\nobservation, concluded that the\nassessee\nhad\nincurred\nunexplained expenditure of Rs.\n24,57,600/- for purchase of\n2560 bags of IFFCO 10.26.26\n(disclosed by him as Sales (2560\nbags) and Closing Stock (1000\nbags] and thus, on the said\ncount had made an addition of\nRs.24,57,600/- u/s 69C of the\nAct.\n3. We find that as the A.O had lost\nsight of the “Opening stock" of\n2560 Qtl of IFFCO 10.26.26 that\nformed part of “Opening Stock"\nof 13506 bags of 10.26.26\n(parent product) (as can be\ngathered from the “Fertilizer\ntrading A/c" and the\nreconciliation filed by the\nassessee), there is no\nunaccounted purchases of\nIFFCO 10.

26. 26. We, thus,\ndirect the A.O. to delete the\naddition of Rs.24,57,000/-.\nmade by him u/s 69C of the\nAct.\n4. The A.O., mistakenly, considered\nCIL 10.26.26 and 10.26.26 as\ntwo different products, whereas\nCIL 10.26.26 is a brand of the\n10.26.26 product (parent\nproduct). Thus, the A.O lost sight\nof the fact that as the “Opening\nstock" on 01.04.2016 of 1780\nbags of CIL 10.26.26 was already\nincluded in the “Opening Stock\" of\n13506 bags. of 10.26.26\n(parent product) on 01.04.2016,\ntherefore, the “Sales” (1780 bags)\nand “Closing Stock” (200 bags) of\nCIL 10.26.26 were sourced out of\nthe "Opening Stock” (1780 bags)\nand “Purchases” (200 bags).\n5. The A.O. had based on his wrong\nobservations, concluded that the\nassessee\nhad\nincurred\nunexplained expenditure of Rs.\n17,08,800/- for purchase of\n1780 bags of CIL 10.26.26 and\nthus, on the said count had\nmade an addition of Rs.\n17,08,800/- u/s 69C of the Act.\n6. We find that as the A.O had lost\nsight of the “Opening stock” of\n1780 bags of CIL 10.26.26 [that\nformed part of “Opening Stock\"\nof 13506 bags of 10.26.26\n(parent product) (as can be\ngathered from the “Fertilizer\ntrading A/c" and the\nreconciliation filed by the\nassessee), there is\nunaccounted purchases of CIL\n10.

26. 26. We, thus, direct the\nA.O. to delete the addition of\nRs.17,08,800/- made by him\nu/s 69C of the Act.\nno\n1. The A.O., mistakenly, considered\nDeepak MOP (DFPCL) and MOP\nas two different products,\nwhereas DFPCL MOP is a brand\nof the MOP product (parent\nproduct). Thus, the A.O had lost\nsight of the fact that as the\n"Opening stock” on 01.04.2016\nof 1200 bags of DFPCL MOP was\nalready included in the “Opening\nStock\" of 12030 bags of MOP\n(parent product) on 01.04.2016,\ntherefore, the “Sales” (1200 bags)\nof DFPCL MOP by the assessee\nwas sourced out of the “Opening\nstock\" (1200 bags) for the subject\nyear.\n2. The A.O. had based on his wrong\nobservation, concluded that the\nassessee\nhad\nincurred\nunexplained expenditure for the\npurchase of 1200 bags of DFPCL\nMOP and thus, on the said count\nhad made an addition of Rs.\n6,04,000/-.\n3. We find that as the A.O had lost\nsight of the “Opening stock" of\n1200 bags of DFPCL MOP that\nformed part of “Opening Stock\" of\n12030 bags MOP (parent\nproduct) (as can be gathered\nfrom the \"Fertilizer trading A/c\"\nand the reconciliation filed by\nthe assessee), there is no\nunaccounted\nexpenditure\nincurred by the assessee for\npurchase of 1200 bags of DFPCL\nMOP. We, thus, direct the A.O.\nto delete the addition of Rs.\n6,04,000/- made by him u/s\n69C of the Act.\n4. The A.O., mistakenly,\nconsidered KRIBCCO MOP and\nMOP as two different products,\nwhereas KRIBHCO MOP is a\nbrand of the MOP product\n(parent product). Thus, the A.O\nhad lost sight of the fact that as\nthe “Opening stock\" on\n01.04.2016 of 20 bags of\nKRIBHCO MOP was already\nincluded in the “Opening Stock”\nof 12030 bags of MOP (parent\nproduct) on 01.04.2016,\ntherefore, the “Sales” (20 bags) of\nKRIBHCO MOP by the assessee\nwas sourced out of the “Opening\nstock\" (20 bags) for the subject\nyear.\n5. The A.O. had based on his wrong\nobservation, concluded that the\nassessee\nhad\nincurred\nunexplained expenditure for\npurchase of 20 bags of\nKRIBHCO MOP and thus, on the\nsaid count made an addition of\nRs.14,000/-.\n6. We find that as the A.O had lost\nsight of the “Opening stock” of\n20 bags of KRIBHCO MOP that\nformed part of the “Opening\nStock\" of 12030 bags MOP\n(parent product) (as can be\ngathered from the “Fertilizer\ntrading A/c\" and the\nreconciliation filed by the\nassessee), there is no\nunaccounted\nexpenditure\nincurred by him for purchase of\n20 bags of KRIBHCO MOP. We,\nthus, direct the A.O. to delete\nthe addition of Rs.14,000/-\nmade by him u/s 69C of the\nAct.\n1. The A.O., mistakenly,\nconsidered ZIL 12.32.16 and\n12.32.16 as two different\nproducts, whereas ZIL 12.32.16\nMOP is a brand of the 12.32.16\nproduct (parent product). Thus,\nthe A.O lost sight of the fact that\nas the “Opening stock\" on\n01.04.2016 of 5270 bags of ZIL\n12.32.16 was already included\nin the “Opening Stock” of 14390\nbags of 12.32.16 (parent\nproduct) on 01.04.2016,\ntherefore, the “Sales” (3700\nbags) and "Closing Stock” (1570\nbags) of ZIL 12.32.16 were\nsourced out of the “Opening\nstock\" (5270 bags) for the\nsubject year.\n2. The A.O. had based on his wrong\nobservations, concluded that the\nassessee\nhad\nincurred\nunexplained expenditure for\npurchase of 5270 bags of ZIL\n12.32.16 and thus, on the said\ncount made an addition of Rs.\n50,04,821/-.\n3. We find that as the A.O had lost\nsight of the “Opening stock" of\n5270 bags of ZIL 12.32.16 that\nformed part of “Opening Stock\"\nof 14390 bags of 12.32.16\n(parent product) (as can be\ngathered from the “Fertilizer\ntrading A/c and the\nreconciliation filed by the\nassessee), there is no\nunaccounted\nexpenditure\nincurred by him for purchase of\n5270 bags of ZIL 12.

32. 16. We,\nthus, direct the A.O. to delete\nthe addition of Rs.\n50,04,821/- made by him u/s\n69C of the Act.\nAccordingly, we not being able to persuade ourselves to concur with\nthe view taken by the A.O., herein set aside the order passed by the\nCIT(A) and vacate the addition of Rs.5.19 crore (supra) made in the\nhands of the assessee.\n28. Resultantly, the appeal filed by the assessee is allowed in\nterms of our aforesaid observations.\nOrder pronounced in the Open Court on 3rd September, 2025.\nSd/-\n(मंजूनाथ जी)\n(MANJUNATHA G.)\nलेखा सदस्य/ACCOUNTANT MEMBER\nSd/-\n(श्री रवीश सूद)\n(RAVISH SOOD)\nन्यायिक सदस्य/JUDICIAL MEMBER\nHyderabad, dated 03.09.2025.\n**TYNM/sps\nआदेशकी प्रतिलिपि अग्रेषित/

GANGADHAR AGARWAL,NIZAMABAD vs. ITO., WARD-1, NIZAMABAD