ASTORIA AGRO AND ALLIED INDUSTRIES PVT LTD,NANDURBAR vs. DCIT-CENTRAL CIRCLE 4(3), MUMBAI

In response to the notice issued under section 148 of the Act, the assessee filed its return of income on 06.04.2021 declaring the same loss as originally returned. Thereafter, the assessee raised objections to the reopening proceedings by filing preliminary objections, which were responded to by the Assessing Officer. Further objections dated 10.12.2021 were also filed and rebutted by the Assessing Officer vide communication

Subsequently, statutory notice under section 143(2) dated 24.06.2021 was issued, followed by notices under section 142(1) along with questionnaires through the ITBA portal on 08.12.2021 and 20.12.2021 calling for various details. It has been recorded by the Assessing Officer that the assessee did not submit the requisite details in response to the said notices, and accordingly proceedings under section 271(1)(b) of the Act were also initiated separately.

The Assessing Officer thereafter proceeded on the premise that the assessee had received funds amounting to Rs. 39,30,300 from a non-genuine entity, namely, M/s Renukamata Multi State Cooperative Urban Credit Society Ltd. In the assessment order, the Assessing Officer has elaborately set out the alleged modus operandi of the said cooperative society, describing the manner in which large-scale cash deposits were claimed to have been accepted from suspicious entities and individuals, followed by layering of transactions and eventual routing of funds through various banking channels to alleged beneficiary concerns, including the assessee. The Assessing Officer has further alleged deficiencies in KYC compliance and physical verification of account holders, and on that basis has sought to draw an adverse inference against the assessee by treating it as a beneficiary of such alleged accommodation entries. The detailed

It was also found that Renukamata Society had allowed huge cash deposits and other credit transactions in the accounts of certain persons/entities whose KYC documentation and physical verification were not properly done.

On spot verification of some of these entities it was seen that most of the entities/individuals were not found on their address. As a result of the action and in view of the various seized/impounded documents and the statements recorded, it was found that the main activity of Renukamata was receiving huge amounts of cash from various persons (who are mostly persons of small means or mere carriers of cash), depositing the same in its Bank accounts and transferring out these funds through RTGS/other banking modes to various nongenuine entities.

On the basis of the aforesaid allegations and reasoning, the Assessing Officer concluded that the assessee had failed to substantiate the genuineness and source of the impugned receipts and accordingly treated the entire amount of Rs. 39,30,300 as unexplained money under section 69A of the Act.

In this case, the information suggests that M/s ASTORIA AGRO & ALLIED INDUSTRIES PVT LTD has received funds as beneficiary from M/s Renukamata Multi State Cooperative Urban Credit

We have heard both the parties at length and have carefully perused the findings recorded in the impugned orders, as well as the entire material placed on record, including the documentary evidences, tabulations and supporting papers filed by the assessee. At the very threshold, it is an admitted and undisputed position that the assessee, Astoria Agro and Allied Industries Pvt. Ltd., is engaged in the business of manufacturing sugar and allied products, and that the receipts under consideration arise in the backdrop of its regular commercial operations. The Revenue has not disputed either the existence of the assessee’s manufacturing activity or the fact that it is a functional sugar manufacturing unit carrying on substantial business during the relevant previous year.

Astoria Agro and Allied Industries Pvt. Ltd., 11. The assessee has placed on record the complete particulars of its turnover for F.Y. 2013–14 relevant to A.Y. 2014–15, which evidences that during the year under assessment it had effected sales of sugar and by-products aggregating to Rs. 1,09,46,60,550, out of which excise duty of Rs. 4,52,78,163 was deducted, resulting in net sales of Rs. 1,04,93,82,387. The break-up of sales, product-wise, is reproduced hereunder and same has not been controverted by the Revenue.

It is, therefore, beyond any pale of doubt that the assessee was carrying on large-scale manufacturing and trading activity in sugar and allied products during the relevant year.

It is in this factual matrix that the Assessing Officer has made the impugned addition of Rs. 39,30,300 by treating the assessee as the “ultimate beneficiary” of funds allegedly received from M/s Renukamata Multi State Urban Cooperative Credit Society Ltd. The consistent and categorical case of the assessee has been that it had no business transaction with the said credit society in the sense of having received any funds from it as a borrower, beneficiary, or recipient of any accommodation entry. The assessee’s specific stand is that it never received any amount from Renukamata as such, and that the impugned receipts represent sale proceeds received from its own customers against actual sales of sugar and allied products.

What the assessee has explained, with reference to contemporaneous business records, is that during the relevant previous year it effected sales to ten identified customers, and against such sales it received advance payments by RTGS in its bank account. It has further been explained that those customers routed their RTGS remittances through, or from accounts maintained with, M/s Renukamata Multi State Urban Cooperative Credit Society Ltd. The assessee’s case has consistently been that merely because a particular cooperative

To substantiate this explanation, the assessee has placed on record following detailed customer-wise correlation in tabular form, linking the date of RTGS, the amount of RTGS, and the corresponding sale bill number and date, along with the amount of each bill. The said tabulation, is reproduced hereunder:-

Thus it can be seen that the aggregate sum of Rs. 39,30,300 comprises receipts from 10 identified parties against specific sale bills, and that there is a one-to-one correlation between the RTGS receipts and the corresponding sale bills.

The assessee has further filed copies of all the aforesaid sale bills, gate passes and delivery notes, together with the ledger accounts of these customers and the relevant extracts of the bank statements reflecting the RTGS credits. It has also been specifically stated, and supported by the bank statements, that the above customers had sent their advance payments against their orders of purchase by RTGS through M/s Renukamata Multi State Urban Cooperative Credit Society Ltd., and the same were received in the assessee’s bank account. Thus, on facts, the immediate payers and the commercial counterparties remain the identified customers, and the receipts stand embedded in the assessee’s sale transactions which are duly recorded in its regular and audited books of account.

On a careful and holistic appreciation of this material, we find substantial force in the assessee’s explanation. Once the assessee demonstrates, through contemporaneous business records, that the impugned sum represents sale proceeds received from identified customers against specific sale bills, the Astoria Agro and Allied Industries Pvt. Ltd., mere circumstance that such customers routed their remittances through a particular cooperative credit society or banking channel cannot, by itself, lead to the conclusion that the credit society itself paid the assessee or that the assessee is the “ultimate beneficiary” of any unexplained funds. A banking channel, by its very nature, is a conduit; it explains the route through which money travels, but it cannot displace the identity of the true commercial source when the source is otherwise evidenced by sale bills, customer ledgers, delivery documents and bank credits matching those bills.

The entire edifice of the impugned addition rests on an incorrect appreciation of facts and a misreading of the evidences brought on record. The Assessing Officer has proceeded on the erroneous premise that because the RTGS remittances originated from, or were routed through, M/s Renukamata Multi State Urban Cooperative Credit Society Ltd., the assessee must be treated as the ultimate beneficiary of funds from that society. This inference is factually untenable and legally unsustainable. It conflates the route of remittance with the substantive source of receipt, and in doing so, overlooks the basic and undisputed fact that the receipts emanated from customers against actual sales.

If the customers of the assessee company had sent their advance payments against their purchase orders by RTGS through M/s Renukamata Multi State Urban Cooperative Credit Society Ltd., and such payments were received in the assessee’s

Viewed thus, the impugned addition of Rs. 39,30,300 is founded on conjectures and surmises, divorced from the commercial realities of the assessee’s business and the documentary trail placed on record. The Assessing Officer has misdirected himself in treating a banking intermediary as the source of funds, ignoring the substantive commercial transactions evidenced by the assessee. Once it is demonstrated that the receipts are embedded in recorded sales and supported by contemporaneous evidences, the superstructure erected on the premise of unexplained money cannot be permitted to remain standing. The addition, therefore, cannot be sustained either on facts or in law.

Similar finding has been given with regard to sales which have been made by the assessee to various parties which are fully supported by sales bills, ledgers of these customers

In the result, all the appeals of the assessee are allowed.