DCIT, CC-2(4), KOLKATA, KOLKATA V. M/S BALAJI AGRO PVT. LTD., KOLKATA

ITA 842/KOL/2025

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which had deleted the additions made by the Assessing Officer (AO) under sections 68 and 69C of the Income-tax Act, 1961, for the Assessment Year 2019-20. The AO had treated a loan of \\u20b975,00,000 taken by the assessee from Everlight Vincom Private Limited as unexplained and disallowed the interest paid on it. The CIT(A) found that the assessee had proved the identity, creditworthiness, and genuineness of the creditor and the transactions. The Tribunal upheld the CIT(A)'s decision, referencing similar cases and precedents, and dismissed the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 713043 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-07-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2019-2020
• Other Referred Cases: PCIT vs. Ambe Tradecorp (P.) Ltd., Poddar Realtors Vs. ITO
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJA SENGUPTA
• Assessee Lawyers: MIRAJ D SHAH
• Keywords: Unexplained investment; Bogus purchase; TDS; Bogus
• Section: 132; 153A; 68; 133(6); 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRIPRADIP KUMAR CHOUBEY, JM ITA No.842/KOL/2025 (Assessment Year:2019-20) DCIT, Central Circle-2(4), Aaykar Bhavan Poorva, 4th Floor, 110 Shantipally, E.M. Bypass, Kolkata-700107 West Bengal Vs. M/s Balaji Agro Pvt. Ltd. A5-6 Sarkarpool Maheshtala, New Budge Budge Trunk Rd. Gopalpur 24 Paraganas South Kolkata-700143, West Bengal (Appellant) (Respondent) PAN No. AABCB9078M Assessee by : Shri Miraj D Shah, AR Revenue by : Shri Raja Sengupta, DR Date of hearing: 16.07.2025 Date of pronouncement: 30.07.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the revenue against the order of the Commissioner of Income-tax (Appeals), Kolkata-26 (hereinafter referred to as the “Ld. CIT(A)”] dated 25.02.2025 for the AY 2019-20. 2. The first issue raised by the Revenue in Ground no.1 is against the deletion of addition by the ld. CIT (A) of ₹75,00,000/-as made by the AO u/s 68 of the Income-tax Act, 1961 (the Act). 2.1. The facts in brief are that the assessee filed the return of income on 02.12.2021. Thereafter, search u/s 132 of the Act was conducted on 29.01.2021 in the case of Balaji Group, during which various incriminating material were seized. Notice u/s 153A of the Act was issued on 09.10.2021, which was complied with by the assessee by filing the return of income declaring the same Printed from counselvise.com Page | 2 ITA No.842 KOL 2025 Balaji Agro Pvt. Ltd.; A.Y. 2019-20 income as was declared in the return filed u/s 139(1) of the Act. The ld. AO issued questionnaire along with notice u/s 43A of the Act besides, issuing notice u/s 143(2) of the Act. During the course of assessment proceedings, the ld. AO on the basis of incriminating material and perusal of the submission of the assessee observed that the assessee has taken loan of ₹75,00,000/- from Everlight Vincom Private Limited on which interest of ₹2,14,773/- was paid. The ld. AO also noted that the assessee has also raised loan in the earlier financial year on which interest of ₹7,26,448/- was paid and thus, aggregate interest of ₹9,41,221/- was paid. The ld. AO noted that the said loan was not explained by the assessee and therefore, treated the same as unexplained investment u/s 68 of the Act. The ld. AO also issued notice u/s 133(6) of the Act to the lenders namely; Akansha Advisory Services Private Limited, Everlight Vincom Private Limited, Rasili Barter Private Limited, Saraf Company private Limited, no reply was received from Everlight Vincom Private Limited. The ld. AO also disallowed the interest paid on unsecured loan of ₹9,41,221/-. 2.2. In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee by holding that assessee has proved the identity, creditworthiness and genuineness of the creditor by filing the necessary evidences. The ld. CIT (A) noted that genuineness of the transactions was proved as it borrowed the money through banking channel and was carrying on genuine business. The ld. CIT (A) also noted that the loan was repaid on a later date and interest was paid after tax deducted at source. 2.3. After hearing the rival contentions and perusing the materials available on record, we find that in this case the loans Printed from counselvise.com Page | 3 ITA No.842 KOL 2025 Balaji Agro Pvt. Ltd.; A.Y. 2019-20 were received by the assessee from three parties aggregating to ₹100,78,804/- and interest of ₹10,15,049/- was paid thereon. We note that in the case of Everlight Vincom Private Limited from whom loan of ₹75,00,000/- , interest of ₹2,14,773/- was paid after TDS at source though the said party was not found on the address given by the party. Whereas in respect of the other two lenders, the AO has not made any addition as replies were received in response to notice u/s 133(6) of the Act. We note that the loan was also repaid at later date. In our opinion, the provisions of Section 68 of the Act cannot be applied where the repayment of loan has been made even in the subsequent year. The case of the assessee also finds support from the decision of Hon’ble jurisdictional High Court in the case of PCIT vs. Ambe Tradecorp (P.) Ltd. (2022) 145 taxmann.com 27 (Gujarat), in which the Hon'ble High Court has held that once the repayment of loan has been established based on the documentary evidences then the credit entries cannot be looked in isolation after ignoring the debit entries despite the fact that debit entries were carried out in the later years. Even the case of the assessee is squarely covered by the decision of the co-ordinate bench decision in the case of Poddar Realtors Vs. ITO in ITA No. 265/Kol/2023, vide order dated 22.06.2023. Consequently, we do not find any infirmity in the order of the ld. CIT (A) and accordingly we uphold the order of the ld. CIT (A)by dismissing the appeal of the Revenue. 3. The issue raised in second ground of appeal is against the deletion of addition of ₹9,41,221/- u/s 69C of the Act in respect disallowance of interest paid on unsecured loan. Printed from counselvise.com Page | 4 ITA No.842 KOL 2025 Balaji Agro Pvt. Ltd.; A.Y. 2019-20 3.1. The facts qua the said issue have been discussed hereinabove. 3.2. After hearing the rival contentions and perusing the materials available on record, we find that the interest paid comprised payment to two parties (i) Everlight Vincom Private Limited of ₹2,14,773/- and Rasili Barter Private Limited of ₹7,26,448/-. The ld. CIT (A) deleted the addition after treating the loan of ₹75,00,000/- as genuine so far as the loan of Everlight Vincom Private Limited. Since, we have affirmed the order of the ld. CIT (A) on this issue, therefore, the interest paid on the said loan is also rightly deleted by the ld. CIT (A).So far as the interest amount of ₹7,26,448/- paid to Rasili Barter Private Limited is concerned, we note that the ld. CIT (A) has recorded the finding that in A.Y. 2015-16, the assessee has taken the said loan from Rasili Barter Private Limited and AO has not made any reverse finding and no addition as made. Accordingly, we do not find any infirmity in the order of the ld. CIT (A). The ground no.2 is dismissed by upholding the order of the ld. CIT (A) on this issue. 4. The issue raised in ground no.3 and 4 are in support to ground no.1 and 2 and therefore, dismissed. 5. The issue raised in ground no. 5 is against the order of the ld. CIT (A) restricting the disallowance of 5% on account of bogus purchase to the tune of ₹37,46,308/- from Pushpadham Heights (P) Ltd. 5.1. The facts in brief are that in the assessment proceeding, the ld. AO made an addition on account of bogus purchases of ₹37,46,308/- then the assessee failed to substantiate the identity Printed from counselvise.com Page | 5 ITA No.842 KOL 2025 Balaji Agro Pvt. Ltd.; A.Y. 2019-20 and genuineness of the transactions with the supporting vouchers. 5.2. In the appellate proceedings, the ld. CIT (A) uphold the appeal of the assessee by applying the ratio of 5% on the said bogus purchases by observing and holding as under: - “5. After hearing the rival contentions and perusing the material on record, we find that the assessee is in the business of manufacturing of electrical goods and aluminium items. The AO after receiving the information from DDIT (Inv.), Kolkata came to the conclusion that the assessee has purchased goods worth Rs. 7,27,536/-from the concerns controlled and operated by Sri Sanjiw Kumar Singh who is engaged in providing accommodation We note that the assessee has produced evidences, comprising bills vouchers however has not responded to the show cause notice issued by the AO. In our opinion in the case of bogus purchases the entire purchases cannot be added to the income and only profit element embedded in the said purchases can be added. In the similar type of cases, the various Coordinate Benches have held that where the assessee has obtained bogus bills of purchases and the purchases were in fact made from the other suppliers i.e grey market thereby making the savings in respect of VAT and other additional expenses and therefore,the assessee earns more than the normal profits. In the present case the assessee has duly furnished bills and vouchers and the material was consumed in the manufacturing process. However, since the assessee has failed to offer any cogent and convincing reply about the goods being received by the assessee with necessary evidences, we deem it fit to make a reasonable disallowance of 5% on account of profit element. Accordingly, the order of Ld. CIT(A) is modified and the AO is directed to sustain the addition to the extent of 5% of the bogus purchases. 6. In the result, the appeal filed by the assessee is partly allowed. If the entire purchases were wholly bogus and there was a finding of fact on record that no purchases were made at all, then the AO would be justified in adding back the entire purchases to the income of the assessee. In the present case, the assessee has duly furnished bills and vouchers and the material was consumed in the manufacturing process. However, since the assessee has failed to offer any cogent and convincing reply about the goods being received by the assessee with necessary evidences, it is deemed fit to make a reasonable disallowance of 5% on account of profit element. Respectfully, following the decisions cited above, the AO is directed to restrict the disallowance to 5% on account of profit element on the bogus purchase.” 5.3. After hearing the rival contentions and perusing the materials available on record, we note that the ld. CIT (A) has recorded the finding that the assessee has produced all the evidences comprising bills and vouchers. The ld. CIT (A) noted Printed from counselvise.com Page | 6 ITA No.842 KOL 2025 Balaji Agro Pvt. Ltd.; A.Y. 2019-20 that the entire bogus purchases cannot be added to the income of the assessee and it is only the profit element embedded therein can be added. The ld. CIT (A) noted that in case of bogus purchases also they are corresponding sales and therefore, if the purchases are not made then no sales could be affected. The ld. CIT (A) noted that in case of bogus purchases, the purchases are normally made from the grey market where the assessee made saves VAT and other incidental expenses and earn more than normal profit and hence, applied 5% on the bogus purchases over and above the profits declared in the books. Accordingly, we don’t find any infirmity in the order of the ld. CIT (A) and accordingly, we affirm the same. 6. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 30.07.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 30.07.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "