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Facts
The assessee, engaged in commodity trading (open market and exchanges), faced an addition of INR 3,34,87,077 under Section 69C for alleged bogus purchases. The AO and CIT(A) upheld the addition due to the assessee's failure to provide full details like supplier confirmations and transportation proofs for purchases from 13 suppliers, despite providing PANs, invoices, and explaining its business model of goods delivered to designated warehouses or traded virtually.
Held
The Tribunal found that the lower authorities failed to appreciate the unique business model of the assessee, which does not always involve physical delivery to the assessee or traditional transportation proofs. The case was remanded to the jurisdictional AO for de novo adjudication, with directions to properly examine all furnished details and the specific nature of the assessee's transactions.
Key Issues
Whether the addition under Section 69C for unexplained expenditure on purchases was justified when the assessee's business model (commodity trading, virtual exchanges, designated warehouses) was not adequately considered, leading to a demand for traditional physical delivery proofs.
Sections Cited
250, 69C, 143(2), 142(1), 143(3), 144B
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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Sandeep Singh Karhail
:Asst.Year 2018-2019 Inditrade Business Consultants The Deputy Commissioner of Limited, Second Floor v. Income-tax, Corp.Cir.1(1) MES Building, Kaloor SO Kochi. Ernakulam – 682 017. PAN : AACCJ0756F. (Appellant) (Respondent) Appellant by : Sri.Aneesh Vishwanthan, CA Respondent by : Sri.Sanjit Kumar Das, CIT-DR Date of Date of Hearing :24.03.2025 Pronouncement : 28.03.2025 O R D E R
Per Sandeep Singh Karhail, JM :
The assessee has filed the present appeal challenging the impugned order dated 31/03/2024, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“learned CIT(A)”], for the assessment year 2018-19.
The present appeal is delayed by 56 days. Along with the appeal, the assessee has filed an application seeking condonation of delay which is duly supported by an affidavit signed by the director of the assessee company. In the affidavit, it is submitted that the copy of the . Inditrade Business Consultants Ltd. impugned order was not received by the assessee either on the email address as provided in Form 35 or in the income tax return. It is submitted that since certain email communications were received on an email ID of an employee who has been relived from the company, the assessee understands that the impugned order was also sent at the same email ID. Accordingly, it is submitted that the assessee did not receive the order passed by the learned CIT(A) nor received the same through post. Subsequently, on verification of the Income Tax e-filing account, the assessee came to know about the impugned order passed on 31/03/2024, and thereafter, the necessary steps were taken for filing the present appeal. Accordingly, the assessee prayed for the condonation of the delay in filing the present appeal. Having considered the submissions of the assessee in its application seeking condonation of delay, we are of the considered view that there was sufficient cause for not filing the appeal by the assessee within the prescribed limitation period. Accordingly, we condone the delay and decide the appeal on merits.
In this appeal, the assessee has raised the following grounds:
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1. Incorrect addition made under section 69C of the Income tax Act, 1961 ("the Act") in relation to purchases made totalling to Rs. 3,34,87,077. 1.1. On the facts and circumstances of the case, the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi ("CIT (A)") has erred in treating the purchases made by the Company totalling to Rs. 3,34,87,077 as unexplained expenditure and making addition under section 69C . Inditrade Business Consultants Ltd. of the Act without considering the fact that, the Company had furnished all supporting details and had provided explanation with regard to the genuineness of purchase transactions totalling to Rs. 3,34,87,077. 1.2. On the facts and circumstances of the case, the CIT(A) has erred in stating that the genuineness of the purchase transaction could not be ascertained. The CIT(A) has completely disregarded the detailed explanations provided and the supporting documents furnished by the Company to prove the genuineness of the purchase transaction and the details furnished in relation to the source of purchase expenditure. The purchases were made by the Company from accounted money as the payment for the purchase transactions are made by the Company through banking channels. 1.3. On the facts and circumstances of the case, the CIT(A) has on the basis of mere conjecture and without any basis, deemed the Company's purchases totalling Rs. 3,34,87,077 to be non- genuine transactions. The CIT(A) has completely disregarded the fact that the purchases of commodities made by the Company are subsequently sold. The sale of commodities made by the Company is based on the said purchases and without the stock available of purchases made, the Company would not have made the sale transaction. The CIT(A) has completely disregarded the fact that, sales cannot be executed without having the corresponding purchases. The Appellant craves leave to add, alter, amend, or withdraw all or any of the Grounds of Appeal herein and to submit such statements, documents and papers as may be considered necessary either at or before the appeal hearing.”
4. The solitary grievance of the assessee is against the addition amounting to INR 3,24,87,077 made under section 69C of the Act.
5. The brief facts of the case are that the assessee is engaged in the business of buying and selling or otherwise dealing in various stocks and commodities, including Agro commodities, metals, energy, etc., directly or otherwise through stock or commodity exchanges. For . Inditrade Business Consultants Ltd. the year under consideration, the assessee filed its return of income on 27/09/2018, declaring a total income of INR 83,34,740. The return filed by the assessee was selected for scrutiny, and statutory notices under section 143(2) and section 142(1) the assessee was asked to furnish the details (name, PAN, address, etc.) of suppliers from whom it has made purchases above INR 1 lakh. In response, the assessee furnished the list of 170 suppliers. Upon verification of the list of suppliers submitted by the assessee, it was noted that the assessee has not furnished PAN with respect to 17 suppliers. Subsequently, the assessee furnished PAN details along with documentary evidence with respect to purchases made from these suppliers.However, the assessee failed to provide requisite details such as PAN/invoice/proof of transportation in respect of 13 suppliers, with whom the transaction total amounting to INR 3,34,87,077 was made by the assessee. Accordingly, the assessee was issued a show cause notice along with a draft assessment order requesting to furnish the details of PAN, along with proof of delivery of goods in respect of these purchases. In response, the assessee provided only the PAN and invoice copy in respect of the purchases made. However, no confirmation from the suppliers, as well as any proof of delivery such as delivery challans, lorry receipts, etc., were provided by the assessee, and even it was noticed that the invoices do not bear the mode of transport, vehicle no., delivery details, etc. Accordingly, the Assessing Officer (“AO”), vide . Inditrade Business Consultants Ltd. order dated 25/05/2021 passed under section 143(3) read with section 144B of the Act, held that the genuineness of the transaction could not be ascertained in respect of these 13 parties. Accordingly, the purchases total amounting to INR 3,34,87,077 were treated as bogus purchases, and accordingly amount of INR 3,34,87,077 was treated as an unexplained expenditure under section 69C of the Act.
The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee and upheld the addition made by the AO. Being aggrieved, the assessee is in appeal before us.
We have considered the submissions of both sides and perused the material available on record. As per the assessee, it is engaged in the business of purchase and sale of agricultural commodities like rubber, cardamom, Castor seed, soya bean, etc. through open market and commodity exchanges including Multi-Commodity Exchange (“MCX”), National Commodity and Derivative Exchange (“NCDEX”), National Multi-Commodity Exchange of India (“NMCE”). Thus, as per the assessee in open market transactions, it purchases agricultural commodities from various vendors and the same gets delivered at the designated warehouses by the respective vendors, where the commodities are stored for further sale. Further, in transactions through commodity exchanges, the same are done on a virtual space, where one can buy, sell or trade various commodities at current or . Inditrade Business Consultants Ltd. future date and once the commodities are purchased the ownership gets transferred in the name of the buyer and the commodities are stored at the designated warehouses in the name of the buyer until it is sold. Therefore, as per the assessee in the purchase transactions entered through the open market as well as through recognised commodity exchanges, the commodities purchased get delivered at the designated warehouses by the respective vendors, where the commodities are stored for further sale. We find that in support of the aforesaid submission, the assessee, during the assessment proceedings, furnished warehouse commodity deposit receipts and sample warehouse invoices, which form part of the paper book furnished by the assessee. The assessee submitted that since the vendor is responsible for the delivery of the goods to the warehouse, it is not in possession of the details with regard to transportation supporting documents. It is further undisputed that the assessee furnished the details, including the PAN of the suppliers and a complete set of invoices in relation to the purchase transaction undertaken from these suppliers. However, as is evident from the record, the lower authorities, merely on the basis that the assessee did not furnish any confirmation from the supplier as well as any proof of delivery such as delivery challans, lorry receipts, mode of transportation, etc., have treated the entire impugned purchase as bogus.
. Inditrade Business Consultants Ltd.
We are of the considered view that the lower authorities did not correctly appreciate the business model of the assessee, wherein there is no physical delivery of goods from the seller to the assessee and thereafter from the assessee to the purchaser. As noted above, in the open market transaction the commodities after purchase gets delivered at the designated warehouse for further sale, while in transactions through commodity exchange market, the same are entirely traded on virtual space where various commodities can be bought and sold at current or future date by anyone and is a regulated market allowing the trading transaction at a central location. Therefore, we are of the considered view that the transactions entered into by the assessee cannot be compared with any other trading transaction where there is a physical delivery of goods to the assessee, and in such a mode of transaction, the details sought by the lower authorities become relevant. However, in the present case, the assessee’s business model is completely different, which has not been examined by any of the lower authorities.
We further find that the AO made the impugned addition under section 69C of the Act, which deals with unexplained expenditure and provides that where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount . Inditrade Business Consultants Ltd. covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. However, in the present case, it is evident from the record that the lower authorities have not disputed the source of expenditure incurred by the assessee while purchasing the commodities and have only disputed the genuineness of the purchase transaction in the absence of necessary details being furnished by the assessee.
Therefore, having considered the facts and circumstances of the present case and perusal of the material placed on record, we are of the considered view that the normal yardsticks applicable for determining the genuineness of the transaction cannot be applied in the present case and this case needs to be examined in its own facts, which as noted above has not been done by any of the lower authorities. Therefore, we deem it appropriate to restore this matter to the file of the jurisdictional AO for de novo adjudication after the necessary examination of the details/documents furnished by the assessee. We further direct that the AO shall be at liberty to seek any other information from the assessee, such as open market transaction details, commodity exchange transaction records, etc. We further direct the assessee to duly corporate in the assessment proceedings and furnish the details as sought by the AO. Needless to mention, no order shall be passed without affording reasonable and adequate opportunity of hearing to the assessee. With the above directions, the impugned
In the result, the appeal by the assessee is allowed for statistical purposes.
Order pronounced on this 28th day of March, 2025.