ITO, WARD-1(2),, SILIGURI vs. BINOY AGARWAL, SILIGURI

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ITA 1584/KOL/2024Status: DisposedITAT Kolkata02 January 2026AY 2021-229 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the NFAC, dismissing the Revenue's appeal. Regarding the first issue, the Tribunal noted that the NFAC had found that the goods purchased were sold to a semi-government department, and since the sales were not doubted and the books of accounts were not rejected by the AO, no disallowance for bogus purchases could be made. The assessee had also furnished substantial documentation, including cash book, bank payment evidence, ledger accounts, e-way bills, and supplier lists. The Tribunal found no infirmity in the NFAC's order and upheld it. For the second issue, the Tribunal observed that the assessee had provided all details of recipients, commission, and contractual payments, along with their PAN, balance sheets, ITR confirmations, and bank statements, establishing that these were regular payments incurred wholly for the assessee's business. The AO had failed to produce any material to prove the payments were bogus or unreasonable, and the recipients had offered the income to tax. The Tribunal found the NFAC's reversal of the AO's order to be correct and upheld it. The ratio decidendi is that when an assessee provides substantial evidence of purchases and expenses, and the corresponding sales are not doubted, and recipients have offered income to tax, additions or disallowances made by the AO without sufficient material to disprove the genuineness of transactions are liable to be deleted. The Tribunal dismissed the Revenue's appeal on both grounds.

What were the facts?

The Revenue has appealed against the order of the National Faceless Appeal Centre, Delhi (NFAC), dated 03.06.2024, for Assessment Year 2021-22. The appeal concerns the deletion of additions made by the Assessing Officer (AO) on account of alleged bogus purchases amounting to ₹4,38,61,650. The AO had disallowed these purchases from four parties due to alleged deficiencies in supplier details and PAN data. The assessee, Binoy Agarwal, is in the business of trading in furnishing items. The NFAC deleted the addition, holding that the assessee had provided sufficient documentation, including GST returns, bank payments, and an affidavit for certain parties, and that the sales made from these purchases were not doubted. The appeal also pertains to the deletion of disallowances of contract and commission expenses amounting to ₹93,88,930, which the AO had disallowed as payments to related parties, including the assessee's HUF.

What were the issues?

1. Whether the deletion of the addition of ₹4,38,61,650 on account of alleged bogus purchases by the NFAC is justified, considering the AO's findings and the assessee's submissions? (Question of law and fact, concerning Section 69 of the Income Tax Act, 1961). - Assessee's Contention: The NFAC's deletion is justified as the AO had provided insufficient time to respond to the show cause notice, violating natural justice. The assessee provided GST returns, bank payment proofs, and an affidavit for non-purchase from certain parties. The sales made from these purchases were accepted by the AO, and the AO's approach was contradictory regarding GST portal data. Reliance was placed on judgments like Bhartiya International Ltd. vs. Dy. CIT and Rajat Bhimsen Arora vs. Asstt. CIT. - Revenue's Contention: Not recorded in the judgment. 2. Whether the deletion of disallowances of contract and commission expenses of ₹93,88,930 by the NFAC is justified, despite the AO's contention that the assessee failed to establish the expenditure being incurred wholly and exclusively for business purposes? (Question of law and fact, concerning Section 37 of the Income Tax Act, 1961). - Assessee's Contention: The NFAC's deletion is justified as the assessee provided all necessary details, including ledger accounts, ITRs, balance sheets, TDS computations, and bank statements of recipients, proving the payments were regular and incurred wholly for business. The AO failed to provide material to prove the payments were bogus or unreasonable. The recipients had also offered this income to tax. Reliance was placed on the Bombay High Court's decision in Principal Commissioner of Income-tax v. Max Flex and Imaging Systems Ltd. and Principal Commissioner of Income-tax v. Tirupati Earth Neerprima JV. - Revenue's Contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 69,Section 37

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “B” BENCH, KOLKATA

Before: SHRI RAJESH KUMAR, AM & SHRI PRADIP KUMAR CHOUBEY, JM

For Appellant: Shri Siddharth Agarwal, AR
For Respondent: Shri Pankaj Pandey, DR
Hearing: 12.11.2025Pronounced: 02.01.2026

This is an appeal preferred by the Revenue against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 03.06.2024 for the A.Y. 2021-22.

2.

The issue raised by the Revenue in ground nos. 1 and 2 is against the order of ld. CIT (A) deleting the addition as made by the AO on account of bogus purchases of ₹4,38,61,650/-.

2.1. The facts in brief are that the assessee is in the business of trading in furnishing items and during the year filed the return of income on 01.03.2022, declaring total income of ₹1,33,64,769/-. The case of the assessee was selected for scrutiny and the notice u/s 143(2) and 142(1) of the Act along with questionnaire were duly 2.2. In the appellate proceedings, the ld. CIT (A) deleted the additions by observing and holding as under:-

“5.2.1 The appellant has filed a consolidated reply on the above grounds of appeal. The appellant has submitted that "the AO had given 04 days time to file reply against Show Cause Notice (SCN) which is improper and against the natural justice. The facts that GSTIN Returns of Assessee & dealer reflects purchases a sum of Rs. 2,25,00,000/- from Fast Deal Corporation wherein assessee has also claimed ITC therein and payment to the supplier was made through bank channels and fact that purchases from one Subodh Kumar amounting Rs. 1,94,33,085/- and from Kamal Bajaj amounting Rs. 19,28,565/- do not reflect in the aseessee's GSTIN retums and he did not claimed any ITC therein nor the said purchase was recorded in the books of accounts. Moreover, the fact that the assessee has also filed an affidavit (ANNEXURE-2 ) before the AO for non-purchase of any goods from said Subodh Kumar & Kamal Bajaj, and the fact that the AO has not intimated the assessee the evidences with him for supply of goods by said Subodh Kumar and Kamal Bajaj inspite of request of the assessee, consequently, the addition made for Rs. 4,38,61,650/- is liable to be deleted and the addition so made is without application of judicial mind.

3. The issue raised in ground no.3 is against the order of ld. CIT (A) deleting the disallowances of expenses of contract and commission despite the fact that the assessee has failed to establish the expenditure being incurred wholly and exclusively for the purpose of business.

3.1. The facts in brief are that the ld. AO during the course of assessment proceedings noted that assessee has incurred expenses in respect of commission payments and contract payments which were made to related parties which included assessee’s own HUF. The details whereof are given at page no.13 in Para no.3.4 of the assessment order Accordingly, the assessee was issued show cause notice for disallowance of the same which was replied by the assessee. The assessee submitted before the ld. AO that all the recipients have been filing their returns of income regularly and also furnished their ITRs, balance sheets, statement of affairs, computation of TDS, etc. for the last three years along with bank statements. However, the ld. AO , by rejecting all the pleas of the assessee, disallowed the commission paid to the related party.

3.2. The ld. CIT (A) in the appellate proceedings, allowed the appeal of the assessee by observing and holding as under:-

“5.3.2 The assessing officer has noted in the assessment order that "thus assessee has merely furnished copies of ledger accounts, ITR returns of the above parties. However, these documents are in no way indicative of the discharge of onus u/s 37 of Order pronounced in the open court on 02.01.2026.

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