Loading judgment…
Facts
The assessee, Bholenath Foods Limited, engaged in food grain trading, filed its ITR for AY 2012-13. The case was selected for scrutiny based on information from a survey conducted on Shri Ram Prakash Bhatia, who admitted to providing accommodation entries through various proprietorship concerns, including Jai Bharat Foods. It was alleged that the assessee paid Rs. 81,50,586/- to Jai Bharat Foods for bogus purchases during FY 2011-12.
Held
The CIT(A) dismissed the assessee's appeal, confirming the addition made by the AO. The CIT(A) noted that the reopening was based on cogent evidence and that the assessee failed to provide sufficient details to prove the genuineness of the transactions. The ITAT found that the CIT(A)'s order was not passed in accordance with Section 250(6) of the Act, as it did not state the points for determination and the reasons for the decision independently. Therefore, the ITAT set aside the order and restored the matter to the CIT(A) for a fresh decision.
Key Issues
Whether the addition of Rs. 1,35,19,962/- made on account of alleged bogus purchases is sustainable given the alleged lack of opportunity for cross-examination and the CIT(A)'s order not being in accordance with procedural requirements.
Sections Cited
133A, 147, 148, 143(2), 142(1), 68, 151, 271(1)(c), 234B, 234C, 250(6)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES: A : NEW DELHI
Before: SHRI RAJ KUMAR CHAUHAN & SHRI MANISH AGARWAL
(Appellant) (Respondent) Assessee by : Shri Shivam Yadav, Advocate & Ms Ananya Kapoor, Advocate Revenue by : Shri Ajay Kumar Arora, Sr. DR Date of Hearing : 18.12.2025 Date of Pronouncement : 07.01.2025 ORDER
PER RAJ KUMAR CHAUHAN, JM:
This appeal is directed against the order dated 15th October, 2024 passed by the NFAC, Delhi [hereinafter referred to as the Ld. CIT(A)] u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) wherein the Addition of Rs.1,35,19,962/- made by the AO allegedly on account of bogus purchase and accommodation entries was confirmed and the appeal of the assessee was dismissed.
The facts in brief as culled out from the proceedings of the authorities below are that the assessee is a private limited company and doing the business of trading in food grains. The assessee has filed its ITR for AY 2012-13 declaring the returned income at Rs.1,31,83,635/- on 13th September, 2012. The case of the assessee was selected for scrutiny on the basis of the information received that a survey u/s 133A of the Act was conducted in the case of Shri Ram Prakash Bhatia on 08.08.2014 by the Investigation Wing, Faridabad, whereby statement of Shri Ram Prakash Bhatia was recorded. During the search proceedings, Shri Ram Prakash Bhatia accepted in his statement recorded on oath that he was in the business of providing accommodation entries for the purpose of which he has floated various proprietorship concerns. In his statement, he has confirmed that Jai Bharat Foods was one of such proprietorship concerns formed by him for providing accommodation entries. It is alleged that the assessee M/s Bholenath Foods Ltd. has paid Rs.81,50,586/- to Jai Bharat Foods which is a bogus proprietorship concern of Ram Prakash Bhatia during the FY 2011-12 as per the following details: S.No. Date Amount 1. 03.02.2012 20,00,000 2. 3. 07.02.2012 30,00,000 4. 08.02.2012 25,00,000 5. 13.03.2012 6,50,586 81,50,586 3. Subsequent to the receipt of the information, reasons were recorded by the AO for reopening of the case of the assessee u/s147 of the Act by issuing notice 2 u/s 148 dated 29th March, 2019 after taking approval of the PCIT. The assessee filed ITR in response to notice u/s 148 and asked for the copy of the reasons recorded which was provided to the assessee. Subsequently, notices u/s 143(2) dated 12.11.2019 was issued and a notice u/s 142(1) was also issued from time to time. In his reply to the said notices the assessee had stated that they had purchased food grains from Jai Bharat Foods for which payment of Rs.1,35,19,962/- was made to Jai Bharat Foods and the assessee has furnished ledger of M/s Jai Bharat Foods in support of his contention. The AO noted that the assessee had made the alleged purchases from Jai Bharat Foods for the month of December, 2011 onwards, but, the payments for the same was made only on 30.01.2012 onwards. However, the assessee, during the assessment, has claimed that the purchases were genuine, but, the contention of the assessee was not accepted in the light of the inquiry conducted by the Investigation Wing and also on the basis of the statement of Shri Ram Prakash Bhatia recorded on oath. The AO, therefore, made an addition of Rs.1,35,19,962/- of the Act.
4. Aggrieved by the assessment order, the assessee filed appeal before the CIT(A) who has observed that notices were issued on five occasions as detailed in para 6 of the impugned order, but, the assessee has made partial submissions in response to the notice dated 26.08.2024. The CIT(A) dismissed the ground No.1 and 3 with respect to the illegal reopening of the assessment u/s 147 of the Act on the ground that in response to the notices issued u/s 142(1) by the AO, the appellant has furnished partial details. It was further noted that the AO granted ample opportunities for providing supporting documents, however, the appellant has furnished partial reply to the notices issued. The Ld. CIT(A) concluded that: “After careful perusal of the assessment order, it is seen that the reopening is based on cogent evidences and clear facts brought out by the AO while recording satisfaction for issuance of notice u/s 148. Accordingly, I do not see any reason to interfere at this juncture as I do not see any……….in initiation of assessment proceedings u/s 148 issued by the AO.”
5. The ground No.3 and 9 with respect to the alleged addition made by the AO u/s 68, the ld. CIT(A) observed that the appellant has not provided any details to prove the genuineness of the business transaction till date observing as under: “that it is very clearly evident that the appellant has facilitated bogus purchases from the said vendor and was documented. Hence, the ground are noted as dismissed.”
6. Aggrieved by the impugned order, the assessee is in appeal before us and has raised the following grounds of appeal:-
1. That, on the facts and circumstances jurisdiction and in law the assumption of jurisdiction and issuance of notice dated 29.03.2019 under section 148 Income Tax Act, ('the Act') by the Assessing officer ('AO') and the Assessment Order dated 27.12.2019 passed under Section 147 r.w.s.143(3) Act as upheld by of the National Faceless Appeal Centre ('NFAC') vide order dated 15.10.2024 are illegal, bad in law, barred by limitation and without jurisdiction. The AO/NFAC has erred in making/confirming made under the addition of Rs. 1,35,19,962/- made under Section 68 of the Act, purportedlyon account of alleged bogus purchases. The addition made is unjust, illegal, and arbitrary. Hence, the same is liable to be deleted.
2. That, on the facts and circumstances of the case and in law the AO/NFAC erred in not appreciating that the original assessment proceedings of the assessee were concluded under Section 143(3) of the Act and the re-opening is beyond four years and hence, in light of first proviso to the Section 147 of the Act, the proceeding is barred by limitation as the Assessee had truly and fully disclosed all material facts.
That, on the facts and circumstances of the case and in law, the proceedings initiated under Section 147/148 of the Act are invalid for want of jurisdiction as the pre-conditions for initiation of the said proceedings as stipulated in Section 147 of the Act not satisfied.
4. That, on the facts and circumstance of the case and in law the AO/NFAC had erred in not considering the fact that during the original assessment proceedings the books of accounts of the Assessee were thoroughly examined, and thus in the instant case the addition on account of alleged bogus purchases is not permitted in law.
5. That, on the facts and circumstances of the case and in law, the AO/NFAC had erred in not appreciating that change of opinion is not permitted in law. Hence,the re-assessment proceedings are liable to be quashed.
That the alleged approval under Section 151 of the Act is illegal and bad in law as same is given without application of mind and is also against the mandatory requirements of law as stated under Section 151 of the Act.
7. That, on the facts and circumstances of the case and in law, the AO has erred in invoking the provisions of Section 147/148 of the Act merely on the basis of the statement recorded during the course of the survey on the third party.
8. That the notice under section 148 of the Act is issued only on the basis of the statement of Shri. Ram Prakash Bhatia, without any independent application of mind by the AO. There is no independent application of mind and reasons have been recorded in a routine manner and also vague in nature. The same amounts to 'borrowed satisfaction' which is not permitted in law. 9. That, on the facts and circumstances of the case and in law, AO/NFAC has erred in making addition of Rs.1,35,19,962/- on account of alleged bogus purchases under Section 68 of the Act. The addition made by the AO/NFAC is unjust, illegal, arbitrary, bad in law, highly excessive, and based on surmise and conjecture. 10. That, it is trite law, that an addition cannot be made merely on the basis of a statement recorded of a third party and thus in the absence of 5 corroborative evidence, the addition of Rs.1,35,19,962/- on account of alleged bogus purchases cannot be sustained.
11. That, on the facts and circumstances of the case and in law, the necessary ingredients for invocation of Section 68 of the Act are not present in the instant case and as such the assessment framed under the said section is illegal and bad in law.
That, on the facts and circumstances of the case and in law, the AO/NFAC erred in not appreciating that the books of accounts have been accepted and sales are not doubted and sales of the Appellant have been offered to tax and thus the addition on alleged bogus purchases cannot be sustained in law.
13. That in view of the facts and circumstances of the case and in law, the addition made is liable to be deleted as no opportunity has been given to cross-examine the third party on whose statement reliance has been placed by the AO.
That in view of the facts and circumstances of the case and in law, the NFAC has grossly erred in not providing a reasonable and sufficient opportunity to the Appellant to present its case and the order has been passed in undue haste and in violation of principles of natural justicе.
That in the view of the facts and circumstances of the case, the documents, explanations filed by the Appellant, and the material available on record have not been properly considered and judicially interpreted by the AO/NFAC and the same has been wrongly ignored.
That in view of the facts and circumstances charging of the case, the AO has erred in the interest under Sections 234B and 234C of the Act.
That in view of the facts and circumstances of the case and in law, the AO has erred in initiating the penalty proceedings under Sections 271(1)(c) of the Act The Assessee craves leave to add to, alter, amend, and/or withdraw any ground or of appeal either before or during the course of hearing the appeal.
7. We have heard the ld. AR and the Ld. DR. The Ld. AR, at the very outset, submitted that the ld. CIT(A) has dismissed the appeal without affording sufficient opportunity of hearing as the assessee could not file the details/documents. It was contended by the Ld. AR for the assessee that the impugned reassessment has been done in violation of the provisions of law as the alleged additions were made on the basis of statement of third party and no opportunity of cross-examination was given to the assessee. It is, therefore, submitted that the matter may be restored to the file of the Ld.CIT(A) for deciding the same afresh after giving proper opportunity of hearing to the assessee/appellant.
8. The ld. DR, on the other hand, while supporting the impugned order, has left it to the discretion of the court to restore the matter to the file of the CIT(A) stating that it was the assessee who has failed to avail the opportunities though ample opportunities were given by the ld. AO as well as the ld.CIT(A).
We have considered the rival submissions and examined the record. On perusal of the impugned order at page 11, we have noted that the ld. CIT(A) has observed as under:- “In case where an assessee is called upon to establish the genuineness of purchase transactions recorded in its books of account, requisite evidences have to be brought on record to establish authenticity of purchases. Whether a transaction of purchase is proved or not is a question of fact and the primary onus is on the assessee to prove the genuineness of purchases. The assessee may have to furnish the below mentioned documentary evidences to establish the factum of purchases:
1. 1. Purchase invoices, purchase order, E-way bill, along with photographic evidence of the goods acquired.
2. Confirmation from the seller of goods stating that the goods are sold by him.
3. An inward register and outward register maintained at register premises, containing details such as dates, supplier name, GST numbers, taxable values, GST amounts, weighing receipts, the time of goods receipt in the sites, signatures of transporters, vehicle numbers and other pertinent information.
Certified invoice by site manager such as date and time of goods receipt in the sites, signature of manager.
Goods receipts notes issued by the transporting party for the goods 6. Freight charges made.
Detailed stock register displaying the quantities of materials purchased.
The movement of goods from vendor’s destination to particular sites destination along with substantial supporting evidences.
9. Project wise details as per accounting standard.
Tallying the Purchase Value and Purchase Quantity as per books of account with the GST returns filed with the authority.
11. Quality check reports for any discount claimed due to qualitydifferences, records of cash discounts, if any, availed etc Thus, when Vendors make payments to these suppliers through Banking Channels then the suppliers retain the GST amount, charge some commission and give the balance amount back in cash to him. In respect of the same, the supplier provides the GST invoice and generates E-way bill. However, no actual exchange of goods takes place. During the course of survey proceedings, Mr. Ram Prakash given the statement on 08.08.2014 and stated that he was in the business of accommodation entries for the purpose of which he had floated various proprietorship concern. It was also stated by him that the appellant is engaged in the business of foods grains and involved in providing accommodation entries of sales and purchases to various parties without delivered any goods and getting Rs. 1 per bag of food grain as commission. Investigation wing proved that Jai Bharat Foods was a proprietorship firm of accommodation entry operator Shri Ram Prakash Bhatia who had accepted during his statement given under Oath that he used to provide accommodation entry of bogus purchase bills to owners to Mills showing sale of food grains even though he did not have any stock of food grains and that the payment received from owners of the Mills received through cheque were returned to the Mill owner in cash either directly by Shri Ram Prakash Bhatia or through RTGS operators. It is evident that the appellant has facilitated the bogus purchase without delivered any goods which is clearly mentioned in assessment order in para no. 2 to 9. The appellant has not provided any details to prove the genuinity of business transactions till date. Thus, it is very clearly evident that the appellant has facilitated bogus purchases from the said vendors and was unable to provide any relevant documentary proof sought. Hence, the Grounds are noted as dismissed.” 8
10. It is, thus, evident from the above extracts of the impugned order that the Ld. CIT(A) has dismissed the appeal despite noting that the appellant has not furnished various information as numbered by the Ld. CIT(A) from No.1 to 11(supra) in order to prove the genuineness of the business transactions.
Section 250, sub-section (6) read as under:-
“250(6) The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.”
12. We have noted from the material on record that while passing the impugned order, the ld. CIT(A) has not decided the matter as per the provisions of section 250(6) as the impugned order has been passed merely on the basis of the discussion made by the Ld. AO and further observing that the assessee has failed to file requisite details in order to prove the genuineness of the business transactions carried out by it with M/s Jai Bharat Foods. In these facts and circumstances, we are of the considered opinion that the impugned order has not been passed as per section 250(6) of the Act and the assessee/appellant needs to be given effective opportunity of hearing by affording opportunity to file the complete details as enumerated by the Ld.CIT(A) himself in the impugned order and also noted by us (supra). For these reasons, the impugned order is not sustainable and is accordingly set aside and the matter is restored to the file of the Ld.CIT(A) for deciding afresh after giving opportunity to the assessee/appellant for filing complete details to show the genuineness of the business transactions carried out by it in the present matter. The assessee/appellant is directed to file the complete details before the ld.CIT(A) within a period of 60 days from this order.
The appeal of the assessee is disposed of in above terms. Order pronounced in the open court on 07.01.2026.