DCIT., CIRCLE 3(1), HYDERABAD V. ROHINI MINERALS PRIVATE LIMITED , HYDERABAD

ITA 981/HYD/2024

AI Insights

The case involves the Deputy Commissioner of Income Tax, Circle 3(1), Hyderabad as the appellant and Rohini Minerals Private Limited as the respondent. The dispute centered on the genuineness of purchases made by the assessee from SRHPL, which were questioned by the Assessing Officer due to the lack of e-way bills and delivery challans. The assessee argued that the purchases were genuine and necessary for their business of integrating broiler birds, and that the goods were directly delivered to farmers, exempting them from GST and the need for e-way bills. The CIT(A) agreed with the assessee, leading to the Revenue's appeal to the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472515 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Assessment Year: 2022-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B.BALAKRISHNA
• Assessee Lawyers: S.K. GUPTA
• Keywords: Corroborative evidences; Bogus purchase; TDS; Related party transaction; Bogus
• Section: 115JB

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ में IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES “A” , HYDERABAD BEFORE SHRI LALIET KUMAR, HON’BLE JUDICIAL MEMBER AND SHRI G. MANJUNATHA, HON’BLE ACCOUNTANT MEMBER ITA No.981/Hyd/2024 Assessment Year: 2022-23 The Deputy Commissioner of Income Tax, Circle 3(1), Hyderabad. Vs. Rohini Minerals Private Limited, Hyderabad. PAN : AACCR0773N (Assessee) (Respondent) Assessee by: Shri S.K. Gupta, Advocate. Revenue by: Shri B. Bala Krishna, CIT-DR Date of hearing: 05.02.2025 Date of pronouncement: 24.02.2025 O R D E R PER MANJUNATHA, G. A.M. This appeal filed by the Revenue is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 26.07.2024 pertaining to A.Y. 2022-23. The Revenue has raised the following grounds : 2 ITA No.981/Hyd/2024 “1. The Ld.CIT(A), NFAC erred in law and facts by holding purchase of day old chick from Sri Rajeshwara Hatcheries Pvt. Ltd. (SRHPL) as genuine transaction the authenticity of which was not proven by the assessee during assessment proceedings by way of submission of supporting bills and delivery challans. 2. The Ld.CIT(A), NFAC wrongly accepted the claims of assessee company regarding delivery of chicks by supplier to farmers directly, on behalf of the assessee without discussing expenses related to rearing of chicks and its accounting treatment in the books of accounts.” 2. The brief facts of the case are that the assessee is engaged in the business of production and sale of poultry feed. It is also involved in the integration of broiler birds and the sale of birds. The assessee company has filed its return of income for A.Y. 2022-23 on 31.10.2022, declaring loss of Rs.40,64,646/- under normal provisions of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and declared book profit of Rs.1,93,00,725/- under Section 115JB of the Act, 1961. The case was selected for scrutiny, and during the course of assessment proceedings, the assessee has furnished the details as called for by the Assessing Officer, including relevant financial statements and books of accounts. The Assessing Officer on the basis of details submitted by the assessee, observed that the assessee has reported total purchases of Rs.315,77,33,096/-, which includes purchase of integration of birds from Sri Rajeshwara Hatcheries Pvt. Ltd. (hereinafter referred to as “SRHPL”) for Rs.28,54,59,071/-. The Assessing Officer further noted that although the assessee has disclosed total purchases, which includes purchases from related party, but the related 3 ITA No.981/Hyd/2024 party transactions are not shown separately in Form 3CD, as required under Section 40A(2)(b) of the Act. Therefore, called upon the assessee to furnish relevant evidences, including nature of purchases and other documents like purchase bills, ledger accounts, e-way bills, delivery challans. In response, the assessee has furnished details of purchases, including purchases from SRHPL along with ledger accounts, bills and vouchers for the year under consideration. The assessee further explained that day-old broiler chicks are exempt from tax as per Goods and Services Tax (GST) and, therefore, the requirement of generating e-way bills does not arise. 3. The Assessing Officer, after considering the submissions of assessee and also taking note of various details filed by the assessee, observed that though the assessee has furnished various evidences, including ledger accounts of purchases, confirmations from SRHPL and invoices for purchases, but could not file details of delivery challans, vehicle numbers, and e-way bills to support the invoices. Further, the assessee claimed to have purchased day-old broiler chicks for its integration business, but on perusal of invoices, it was observed that the delivery of goods was recorded at different addresses for which, the assessee could not offer any explanation. Therefore, by taking note of relevant details, concluded that the assessee could not establish genuineness of purchases from SRHPL and, accordingly, rejected the explanation of the assessee and made addition of Rs.28,54,59,071/- to the total income. The 4 ITA No.981/Hyd/2024 Assessing Officer further noted that, in respect of transactions with other related parties like Vahini Poultries Pvt. Ltd. and Sivika Foods Pvt. Ltd., the assessee has stated that they have sold feed to the above two companies and submitted relevant details. However, since the bills submitted by the assessee do not have e-way bills and delivery challans and therefore, doubted the genuineness of the sales made to the above two parties but because the Assessing Officer has already made additions towards purchase as bogus, has not made separate addition towards bogus sales to these related parties. 4. Being aggrieved by the assessment order, the assessee preferred appeal before the LD.CIT(A). Before the LD.CIT(A), the assessee has filed written submissions on the issue of addition of purchases, which were reproduced at para 3 on pages 5 to 8 of LD.CIT(A)’s order. The sum and substance of the submissions before the LD.CIT(A) are that purchase of day-old broiler chicks from SRHPL are genuine and are supported by necessary bills and vouchers and further, the assessee is into two different segments of business, which is evident from the revenue records, where the assessee has reported revenue from sale of poultry feed and revenue from sale of integration of birds. The assessee has made purchases of day-old broiler chicks from SRHPL, which is also in the business of dealing with chicks. For this purpose, the assessee has filed confirmation letters from SRHPL and invoices for the purchases. However, the Assessing Officer, 5 ITA No.981/Hyd/2024 without appreciating the facts, simply made an addition towards genuine purchases, and therefore, requested to delete the addition made by the Assessing Officer. 5. The LD.CIT(A) after considering the relevant submissions of the assessee and also taking note of various submissions made by the assessee, observed that, the assessee has made purchases from a related party and the said transactions are recorded in the books of accounts, for which the copies of ledger accounts and other supporting documents were furnished. The assessee has also furnished invoice copies to support the purchases. The modus operandi of the business is also explained to counter the observations raised by the Assessing Officer in the assessment order about the direct supply of chicks by SRHPL on behalf of the assessee and explained that due to nature of goods, assessee has purchased day-old broiler chicks from SRHPL, a group company, and directly delivered them to farmers for integration. Except for SRHPL, no other purchases are made against the revenue generated from the sale of integrated birds. From the details filed by the assessee, it is absolutely clear that the purchases made from related parties are genuine, which are supported by necessary evidence. Although, the Assessing Officer accepted the fact that the assessee has submitted relevant evidence, but disputed the genuineness of the purchases only on the ground that no declaration was made in Form 3CD, as required under Section 40A(2)(b) of the Act and 6 ITA No.981/Hyd/2024 further, the Assessing Officer objected that the sales bills did not contain e-way bills. However, as per the explanation of the assessee, since the goods are tax exempt as per GST Act, there is no requirement of generating e-way bills. Therefore, after considering the submissions, LD.CIT(A) directed the Assessing Officer to delete the addition made towards disallowance of purchases amounting to Rs.28,54,59,071/-. The LD.CIT(A) has also negated the observation of the Assessing Officer with regard to sales made to related parties i.e., Vahini Poultries Pvt. Ltd. and Sivika Foods Pvt. Ltd., and held that merely because the invoices do not have e-way bills or GST numbers or delivery challans, the genuine sales made to these parties cannot be doubted. Since there is no separate addition on this count, the LD.CIT(A) has not given any specific finding in respect of the bogus sales, as discussed by the Assessing Officer. 6. Aggrieved by the order of LD.CIT(A), the Revenue is now in appeal before the Tribunal. 7. Before us, the Ld. CIT-DR Shri B. Bala Krishna, submitted that the LD.CIT(A)-NFAC erred in deleting the addition made by the Assessing Officer towards purchase of day-old broiler chicks from SRHPL as genuine transactions, without appreciating the fact that, the assessee could not establish the authenticity of purchases with relevant evidence, including e-way bills and delivery challans. Further, the assessee has failed to disclose 7 ITA No.981/Hyd/2024 related party transactions, even though the provisions of Section 40A(2)(b) of the Act mandate the disclosure of such transactions in the financial statements and tax audit report. Although, the Assessing Officer has pointed out various defects, including corresponding bogus sales made to related parties to support the addition made towards bogus purchases from the related party, but the LD.CIT(A) deleted the addition made by the Assessing Officer by accepting the explanation of the assessee. Therefore, he submitted that the addition made by the Assessing Officer should be sustained. 8. The learned counsel for the assessee, Shri S.K. Gupta, Advocate, on the other hand, supporting the order of LD.CIT(A) submitted that, the assessee has furnished all possible evidence including, ledger account in the books of account of the assessee along with supporting evidence such as purchase bills and confirmations from SRHPL. The assessee has also proved delivery of day-old broiler chicks directly to farmers due to the nature of the goods. The assessee, being in the business of integration of birds, has purchased day-old broiler chicks from SRHPL, and the same has been delivered to farmers directly for integration purposes. The assessee has sold integrated broiler birds and generated revenue for about Rs.170 crores from the sale of integrated birds, and against this, the corresponding purchases are only from one party, i.e., SRHPL. Thus, the Assessing Officer, without appreciating the relevant facts, simply 8 ITA No.981/Hyd/2024 made addition only on flimsy grounds, holding that the purchase invoices are not supported by e-way bills or delivery challans and that the goods are delivered to different addresses other than the address of the assessee, ignoring the evidence furnished by the assessee, which establishes the fact that the goods purchased by the assessee are exempt as per GST, and therefore, there is no requirement of generation of e-way bills or delivery challans. The LD.CIT(A), after considering the relevant submissions, has rightly deleted the addition made by the Assessing Officer and therefore, their order should be upheld. 9. We have heard both the parties, perused the material on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee company is into the business of sale of poultry feed and integration of birds, which is evident from the revenue reported from operations, where the assessee has reported substantial revenue from sale of integration of birds for about Rs.170 crores for the financial year relevant to A.Y. 2022-23. It is also an admitted fact that, the assessee has reported total purchases of Rs.315,77,33,096/-, which includes purchase of poultry feed and day-old broiler chicks and has reported the total purchases under one head in the purchases account. The assessee has purchased day-old broiler chicks amounting to Rs.28,54,59,071/- from SRHPL, which is a related party. However, as observed by the Assessing Officer, the assessee has 9 ITA No.981/Hyd/2024 not reported the related party transactions in Form 3CD, as required under Section 40A(2)(b) of the Act. Otherwise, the assessee has furnished all the evidence, including purchase records, ledger account, which includes, purchases from the related party and invoices for purchases and also proved the delivery of day-old broiler chicks purchased from related parties to the farmers for integration purposes. The Assessing Officer never disputed the fact that the assessee has furnished all the evidence, however, he doubted the genuineness of purchases from the related parties, only on the ground that, the purchase invoices are not supported by e-way bills and delivery challans and further, the goods are delivered to different addresses, which is evident from the purchase invoices. Therefore, concluded that the purchases from related party are not genuine. 10. We have given our thoughtful consideration to the reasons given by the Assessing Officer to disallow purchases of day-old broiler chicks from SRHPL, and we ourselves do not subscribe to the reasons given by the Assessing Officer, for the simple reason that the Assessing Officer having noticed the fact that the assessee is into two different segments of business i.e., one from sale of poultry feed and another from the sale of integration of birds, but erred in not accepting the corresponding purchases of day-old broiler chicks from SRHPL. We further noted that the assessee has reported revenue from two segments, which includes revenue from the sale of integrated birds amounting to 10 ITA No.981/Hyd/2024 about Rs.170 crores, and as against this, the only purchase was the purchase of day old broiler chicks from SRHPL. Therefore, there is a huge amount of revenue from sale of integration of bitds, there should be corresponding purchases. It is an admitted common sense that without purchases, there cannot be any sales. Therefore, when the Assessing Officer is accepting sales from the segment of integration of birds, he ought to have accepted the purchases of day-old broiler chicks, which is the only one purchase corresponding to the said sales. Therefore, in our considered view, the Assessing Officer is completely erred in rejecting the evidence filed by the assessee to support the purchases from related party, only on the ground that the assessee has not reported purchases from a related party in Form 3CD and financial statements separately. Further, the Assessing Officer is erred in denying the genuineness of purchases, only on the ground that the purchase bills are not supported by necessary evidence, like e-way bills and delivery challans. In our considered view, non-reporting of related party transactions separately in the financial statements or in Form 3CD is not fatal, if we go by the nature of the purchases of the assessee and the evidence furnished to the Assessing Officer. There may be various reasons for not reporting the related party transactions separately, including the incorrect entries or mistakes made by the persons who prepared the financial statements. Therefore, in our considered view, merely due to 11 ITA No.981/Hyd/2024 non-reporting of related party transactions separately, the genuine purchases cannot be disbelieved. 11. Further, the Assessing Officer has also disbelieved the purchases on the ground that the purchase invoices are not supported by e-way bills and delivery challans and that the assessee has delivered goods to a different address other than the billing address. We find that the assessee has explained the reasons for the non-generation of e-way bills and delivery challans, stating that the goods purchased from the related party are tax-exempt under GST, and therefore, there is no requirement for generating e-way bills, for which the assessee has submitted relevant evidence. Further, the assessee has also explained the reasons for the delivery of goods directly to farmers’ addresses, and according to the method followed by the assessee, in the business segment of integration of birds is that the assessee purchases day-old broiler chicks from SRHPL and delivers the chicks directly to the farmers for rearing, and after the rearing period is over, the assessee receives the goods from farmers and sells them to the customers. Since the goods purchased by the assessee are delicate and require careful handling, being day-old broiler chicks, the assessee has directly delivered them to farmers for convenience. These facts are proved by relevant evidence filed by the assessee. Therefore, in our considered view, once the assessee has explained the reasons to deliver them at different addresses and which is supported by 12 ITA No.981/Hyd/2024 necessary evidence, the Assessing Officer ought not to have disbelieved the purchases, only on the ground that the assessee has delivered at different address. Further, the Assessing Officer has also taken support from sales made to related parties namely, Vahini Poultries Pvt. Ltd and Sivika Foods Pvt. Ltd., and observed that the sales made to relevant parties are not supported by e-way bills and delivery challans. In our considered view, as explained by the assessee, once the goods are exempt from GST and there is no requirement of generation of e- way bills, merely for the reason of non-generating e-way bills, the genuineness of sales made to related parties cannot be doubted especially when said sales is supported by necessary evidence, including, the sale bills. Therefore, in our considered view, the purchases made from SRHPL are genuine purchases, which are supported by necessary evidence, and the assessee has also explained the adverse observations made by the Assessing Officer in the assessment order to disbelieve the purchases. The LD.CIT(A) has rightly deleted the addition made by the Assessing Officer towards purchases made from SRHPL. Therefore, we are inclined to uphold the order passed by the LD.CIT(A) and the appeal of the Revenue is dismissed. 13 ITA No.981/Hyd/2024 12. In the result, the appeal of Revenue is dismissed. Order pronounced in the Open Court on 24th February, 2025. Sd/- Sd/-d/- (LALIET KUMAR) JUDICIAL MEMBER (G. MANJUNATHA) ACCOUNTANT MEMBER Sd/- Hyderabad, dated 24.02.2025. TYNM/sps Sd/- Sd/- Sd/- Copy to: S.No Addresses 1 Rohini Minerals Private Limited, Plot No.59, Image Hospital Lane, Gafoor Nagar, Madhapur – 500081, Hyderabad. 2 The Deputy Commissioner of Income Tax, Circle 3(1), Hyderabad. 3 Prl.CIT, Hyderabad. 4 DR, ITAT Hyderabad Benches 5 Guard File By Order "