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Facts
The assessee filed a return of income for AY 2017-18. A search operation was conducted, and the Assessing Officer (AO) alleged bogus purchases of Rs. 53,33,856/- from the assessee by PAN group. The AO made an addition to the assessee's income, which was upheld by the CIT(A).
Held
The Tribunal held that the AO erred in treating the sales to M/s Parmanand and Sons food Pvt. Ltd. as bogus. Relying on a coordinate bench's decision, the Tribunal found that the assessee had responded to queries and the AO ignored these. The purchases were held to be genuine, and the addition was deleted.
Key Issues
Whether the addition made by the AO, treating sales as bogus without appreciating the assessee's submissions and relying on a previous Tribunal decision, is sustainable.
Sections Cited
250(6), 147, 144B, 148A, 148, 133(6), 68, 15BBE, 271AAC, 234A, 234B, 234C, 234D, 132
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Income Tax Appellate Tribunal, DELHI
ORDER
PER YOGESH KUMAR, U.S. JM:
The captioned appeal is filed by the Assessee against the order of Ld. Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre (‘Ld. CIT (A)/NFAC’ for short), New Delhi dated 14/06/2024 for the Assessment Year 2017-18.
The grounds of Appeal are as under:-
1. “1. That the order passed by the Ld. CIT(A) u/s 250(6) of the Income Tax Act, 1961 (herein referred as ‘the Act’) is incorrect, bad in law and have been passed without appreciating the submissions made in the facts and circumstances of the present case.
2. That the Ld. CIT (A) has grossly erred while upholding the assessment order passed by Ld. Assessing Officer (‘AO’) u/s 147 r.w.s of 144B of the Income Tax, 1961 which is incorrect, bad in law and have been passed without considering the submission of the Assessee.
3. That the initiation of reassessment proceeding in the present case by way of SCN /s 148A(b) of the Act is wrong in absence of any escapement of income and subsequent notice u/s 148 of the Act for continuation of reassessment proceeding is void ab initio as it is bad in law and also without jurisdiction.
4. That the Ld. Assessing Officer has erred while issuing notice u/s 148 without bringing any tangible material on record which may establish that the sales made by the Appellant herein to PAN group is not a genuine transaction and Ld. CIT (A) has erred in upholding the finding of the AO.
5. That the Ld. CIT (A) has grossly erred in upholding the addition of Rs, 53,33,856/- made by Ld. Assessing officer on account of the fact that M/s. Paramanad& Sons Food Products Pvt. Ltd. (PAN group) has failed to establish the genuineness of purchases with the Assessee wherein the Assessee herein has duly furnished copies of purchase bills, sales bills, stock register, confirmation and copies of ledger extracts and bank statements discharging the onus cast upon it.
6. That the Ld. AO has erred in making an addition of Rs. 53,33,856/- u/s 68 of the Act merely on surmises and conjectures without considering the submissions made during the course of assessment as well as appellate proceeding that the Assessee herein merely works as a Consignment Agent/ Commission agent for Grains and Agri Commodities from Lawrence Road Industrial Area, Delhj to Atta and Daal Mills located in Delhi NCR and Ld. CIT(A) has erred in upholding the finding of the Ld. AO.
7. That the Ld. AO has failed to appreciate the fact that the Assessee herein has very well responded to the summons issued u/s 133(6) of the Act by the Ld. AO of PAN Group establishing the genuineness and Ld. CIT(A) has erred in upholding the same.
8. That the Ld. CIT (A) has grossly erred while upholding the order of Ld. Assessing Officer treating the income as unexplained credit in the books of the Assessee u/ s 68 r.w.s I5BBE of the Act, without perusal of documents and evidence produced during hearing. 9. That the Ld. CIT (A) has grossly erred in upholding the initiation of penalty proceedings by Ld. Assessing Officer u/s 271AAC of the Act. 10.That the Ld. CIT (A) has grossly erred in upholding the charging of interest by Ld. Assessing Officer u/s 234A, 234B, 234C & 234D of the Act.”
Brief facts of the case that assessee filed Return of Income for the assessment year 2017-2018 declaring total income of Rs.4,40,070/-. A Search & Seizure operation u/s.132 of the Income- taх Act, 1961 (Income Tax Act, 1961 ('Act' for short) was conducted in the case of PAN group on 19.12.2017. The PAN group was engaged in the business of purchasing and selling food grains. On perusal of the seized documents and findings during the assessment proceedings, it was seen that though the assessee claimed to have sold food grains to PAN group amounting to Rs.53,33,856/-, neither the assessee nor the PAN group furnished any documents like bill/voucher, bilty number, Kata Slip/Parchi, Border entry receipt or any other evidence in support of the transaction and to establish actual delivery or receipt of the food grains. The genuineness of the transaction of sale of food grains of Rs.53,33,856/- was alleged to be not established. Based on the information available, the case was re-opened by issue of Notice u/s.148 on 19.07.2022. Return of Income has been filed by the Assessee in response to the notice issued u/s.148 on 28.11.2022 declaring total income of Rs.4,40,070/-. An assessment order came to be passed on 16/05/2023 by making an addition of Rs. 53,33,856/-.
It is pertinent to note that very same amount of Rs. 53,33,856/-has been treated as bogus purchase in the hands of Parmanand and Sons
Aggrieved by the assessment order dated 16/05/2023, the Assessee filed the Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 14/06/2024, dismissed the Appeal filed by the Assessee.
As against the order of the Ld. CIT(A), the Assessee preferred the present Appeal on the grounds mentioned above.
The Ld. Counsel for the Assessee submitted that the A.O. in the case of Pan Group search cases made the allegation of bogus purchases from certain suppliers including the Assessee herein to the tune of Rs. 53,33,856/- and the addition was also made in the hands of Parmanand and Sons food Pvt. Ltd. The Ld. Counsel further submitted that the Co-ordinate Bench of the Tribunal in the case of Parmanand and Sons food Pvt. Ltd. in held that certain parties including the Assessee had in-fact replied during the assessment, but the A.O. ignored those replies, therefore, those parties cannot be classified as bogus, further the purchases made from the Assessee has been held to be genuine by the Tribunal. The said findings of the Tribunal has reached finality, therefore, the addition sustained in the hands of this Assessee deserves to be deleted.
The Ld. Department's Representative, though relied on the orders of the Lower Authorities and justified the impugned addition made in the hands of the Assessee, however, has not disputed the above factual aspects.
We have heard both the parties and perused the material available on record. The Ld. A.O. made the addition of Rs. 53,33,856/- treating the sales to M/s Parmanand and Sons food Pvt. Ltd. as bogus. The Co-ordinate Bench of the Tribunal in the case of M/s Parmanand and Sons food Pvt. Ltd., observed that certain parties including the Assessee had in-fact replied during the assessment and the said fact has been ignored by the A.O. and found fault with the A.O. in classifying the Assessee as bogus and accordingly, the purchase made by M/s Parmanand and Sons food Pvt. Ltd. from the Assessee were held to be genuine. Further, the Tribunal also held that two parties namely Singhal Food Products and Rohit Trading Company are bogus as no cogent evidence has been furnished.
Further it was held that, once the books were accepted, quantitative details of purchases/sales tally, entire purchases cannot be disallowed. The Bench also recorded the finding that A.O. himself admitted purchases were indeed made, though alleged that they were from ‘gray market’, therefore, treating whole purchase as bogus and untenable. Accordingly, the Tribunal in the case of M/s Parmanand and Sons Foods Pvt. Ltd. observed that the Department has not disputed the Assessee’s sales and purchase and there was no discrepancy as the sales declared.
Considering the above fact finding and the conclusion of the Co- ordinate Bench of the Tribunal in the case of M/s Parmanand and Sons food Pvt. Ltd., the documents submitted by the Assessee to establish the purchases made by M/s Parmanand and Sons food Pvt. Ltd. from the Assessee cannot be disputed and cannot be held as bogus. In view of the above discussion, we find merits in the Grounds of Appeal of the Assessee, accordingly, we delete the addition of Rs. 53,33,856/- made the A.O. which has been confirmed by the Ld. CIT(A).
In the result, appeal of the Assessee is allowed.
Order pronounced in the open court on 28th August, 2025