DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), CHENNAI, CHENNAI V. SOUTHERN AGRIFURANE INDUSTRIES PVT LTD, CHENNAI

ITA 1615/CHNY/2025

AI Insights

The case involves multiple appeals by the assessee, Southern Agrifurane Industries Pvt. Ltd., and the Revenue against the orders of the Commissioner of Income Tax (Appeals) - 19, Chennai, concerning the assessment years 2018-19 and 2019-20. The primary issues revolved around the validity of notices issued under section 153C of the Income Tax Act, 1961, and the subsequent additions made by the AO on account of alleged bogus purchases. The Tribunal examined the satisfaction note recorded by the AO, the incriminating material seized during the search, and the statements of various individuals, including employees of the assessee and third-party vendors. The Tribunal found that the AO had sufficient material to justify the additions made but also noted the discrepancies in the assessee's books of accounts, leading to the estimation of profits at a lower rate.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 792226 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-12-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2019-2020
• Appeal Filed On: 31-05-2025
• Other Referred Cases: Singhad Technical Education Society, Empee Distilleries Ltd Vs. ACIT, CIT Vs Harjeev Aggarwal, CIT Vs Best Infrastructure (I) Pvt Ltd, Kumar Roy Vs. CIT, Shri Venkteshwar Sugar Mills Vs. CIT(A), CIT Vs. Marg Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C. YAMUNA; BIPIN
• Assessee Lawyers: N. ARJUN RAJ; PROVIDING BOGUS INVOICES OF; PROVIDING BOGUS INVOICES OF; PROVIDING BOGUS INVOICES OF; DEBITING BOGUS PURCHASES FROM; DEBITING BOGUS PURCHASES FROM; DEBITING BOGUS PURCHASES FROM
• Keywords: Business income; Question of law; Unexplained expenditure; Unexplained investment; Rejection of books of accounts; Income from undisclosed sources; Bogus purchase; Charitable institution; Bogus
• Section: 144; 142(1); 132; 139; 14A; 80G

Judgement Text

"आयकर अपीलीय अिधकरण, ’सी’ \u0001यायपीठ, चे ई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH: CHENNAI \u0001ी एबी टी. वक , ाियक सद\u0011 एवं एवं एवं एवं \u0001ी अिमताभ शु\u0018ा, लेखा सद क े सम\u001b BEFORE SHRI ABY T. VARKEY, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकरअपीलसं./ITA Nos. 1613 to 1615/Chny/2025 िनधा\u000eरणवष\u000e/Assessment Years: 2018-19 & 2019-20 The DCIT, Central Circle-2(2), Chennai. v. M/s. Southern Agrifurane – Industries Pvt. Ltd., MGM Centre No.1, 9th Cross Street, Dr. Radhakrishnan Salai, Mylapore, Chennai – 600 004. [PAN: AAGCS 9705 F] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) आयकरअपीलसं./ITA Nos. 1547 & 1548/Chny/2025 िनधा\u000eरणवष\u000e/Assessment Years: 2018-19 & 2019-20 M/s. Southern Agrifurane- Industries Pvt. Ltd., MGM Centre No.1, 9th Cross Street, Dr. Radhakrishnan Salai, Mylapore, Chennai – 600 004. v. The DCIT, Central Circle-2(2), Chennai. [PAN: AAGCS 9705 F] (अपीलाथ\u0016/Appellant) (\u0017\u0018यथ\u0016/Respondent) Department by : Mrs. C. Yamuna, CIT & Mr. Bipin, CIT Assessee by : Mr. N. Arjun Raj, Advocate सुनवाईक तारीख/Date of Hearing : 08.10.2025 घोषणाक तारीख /Date of Pronouncement : 01.12.2025 Printed from counselvise.com PER BENCH: These appeals preferred by the assessee and the Revenue are against the orders of the 19, (hereinafter referred to as ‘Ld.CIT(A)‘), Chennai, all dated 29.03.2025 for the Assessment Year 2019-20 u/s. 250 of the ‘the Act‘). 2. Before we advert to the grounds t first be relevant to cull out the basic facts o brief in respect of these AYs. the assessee is a private limited business of manufacturing and sale of Indian made foreign liquor. A search u/s 132 of the 06.08.2019, i.e., AY 2020 premises of one M/s. Crystal Bottles located at Coimbatore was also subjected to search. According to the Revenue, was found in the course of search information relating to the Bottles had facilitated inflation of expenses raising bogus invoices for supply ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 2 :: आदेश / O R D E R These appeals preferred by the assessee and the Revenue are of the Learned Commissioner of Income Tax (Appeals) 19, (hereinafter referred to as ‘Ld.CIT(A)‘), Chennai, all dated 29.03.2025 Assessment Years(hereinafter referred to as ‘AY‘) 2014 20 u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as Before we advert to the grounds taken in these appeals, it would first be relevant to cull out the basic facts of the case and effect of law in brief in respect of these AYs. Briefly stated, the facts of the case are that, the assessee is a private limited company which is engaged in the business of manufacturing and sale of Indian made foreign liquor. A earch u/s 132 of the Act was conducted against SNJ Group on i.e., AY 2020-21. As a sequel to this search M/s. Crystal Bottles located at Coimbatore was also According to the Revenue, the seized material which found in the course of search at M/s Crystal Bottles information relating to the assessee and it was deduced that facilitated inflation of expenses debited by the assessee, raising bogus invoices for supply of old empty bottles 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. These appeals preferred by the assessee and the Revenue are Commissioner of Income Tax (Appeals)- 19, (hereinafter referred to as ‘Ld.CIT(A)‘), Chennai, all dated 29.03.2025 s(hereinafter referred to as ‘AY‘) 2014-15 to Income Tax Act, 1961 (hereinafter referred to as aken in these appeals, it would and effect of law in the facts of the case are that, company which is engaged in the business of manufacturing and sale of Indian made foreign liquor. A SNJ Group on 21. As a sequel to this search, the business M/s. Crystal Bottles located at Coimbatore was also the seized material which at M/s Crystal Bottles contained and it was deduced that M/s. Crystal debited by the assessee, by old empty bottles and that the Printed from counselvise.com payments received by was returned back to the assessee commission @ 6% on the bogus bill value the seized material was handed over to the AO of the assessee on 18 2021 and that the satisfaction note was recorded by the 2021 i.e., AY 2022-23; and on the same date, notice Act was issued upon the assessee for AYs to the AO, ordinarily having regard to the date of search he was within his jurisdiction to issue notices u/s 153C of respect of six assessment years preceding the assessment year i.e. in the present case search empowered u/s. 153C of the Act to reopen six preceding assessment years preceding the searched assessment year and those AY's were AYs2014-15 to 2019-20. It is not in dispute that, the income assessments of the assessee for the impugned AYs 2018 were either completed u/s 143(1)/143(3) of the Act and/or the time limit for issue of notice u/s 143(2) of the Act had expired. Accordingly, the income-tax assessments for AYs before AO on the date of search, therefore, those years didn’t abate consequent to the search. Post the issue of notice u/s 153C of the Act for these unabated AYs 2018 ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 3 :: M/s. Crystal Bottles against such bogus invoices was returned back to the assessee in cash after deducting commission @ 6% on the bogus bill value. The Ld. CIT(A) had noted l was handed over to the AO of the assessee on 18 satisfaction note was recorded by the 23; and on the same date, notice(s) u/s issued upon the assessee for AYs 2018-19 to 2019 to the AO, ordinarily having regard to the date of search i.e. he was within his jurisdiction to issue notices u/s 153C of respect of six assessment years preceding the assessment year i.e. in the present case search took place, so, ordinarily the AO empowered u/s. 153C of the Act to reopen six preceding assessment years preceding the searched assessment year and those AY's were 20. It is not in dispute that, the income sessee for the impugned AYs 2018- completed u/s 143(1)/143(3) of the Act and/or the time limit notice u/s 143(2) of the Act had expired. Accordingly, the assessments for AYs 2018-19 to 2019-20 weren’t pendin date of search, therefore, those years didn’t abate search. Post the issue of notice u/s 153C of the Act for 2018-19 to 2019-20, the AO is noted to have 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. against such bogus invoices in cash after deducting their . The Ld. CIT(A) had noted that, l was handed over to the AO of the assessee on 18-06- satisfaction note was recorded by the AO on 24-06- u/s 153C of the 19 to 2019-20. According i.e. 06-08-2019, he was within his jurisdiction to issue notices u/s 153C of the Act in respect of six assessment years preceding the assessment year of search took place, so, ordinarily the AO was empowered u/s. 153C of the Act to reopen six preceding assessment years preceding the searched assessment year and those AY's were 20. It is not in dispute that, the income-tax -19 to 2019-20 completed u/s 143(1)/143(3) of the Act and/or the time limit notice u/s 143(2) of the Act had expired. Accordingly, the weren’t pending date of search, therefore, those years didn’t abate search. Post the issue of notice u/s 153C of the Act for , the AO is noted to have Printed from counselvise.com completed both the income by orders dated 28.03.2023 purchases. Apart from the foregoing, the AO is also noted to have made addition(s)/disallowance(s) on account of deduction(s) claimed u/s 80G / 80GGB, disallowance u/s 14A of the Act and disallowance of certain items of expenses. 3. Aggrieved by the above order(s) of the AO, the assessee preferred appeal before the Ld. CIT(A). The assessee is noted to have challenged the validity of the notice issued u/s 153C of th CIT(A) had upheld the validity of satisfaction note recorded by the AO prior to issuance of notice u/s 153C of the Act by observing as under: “6.7.3 The undersigned has carefully examined the issue under consideration. As e that the AO based upon the findings of the search in the case of m/s. SNJ Group of concerns has recorded reasons that the appellant company has made bogus purchases by inflating the purchase expenses related t vendors. The satisfaction arrived by the AO is only a prima facie satisfaction. The AO on the basis of the incriminating materials found and seized at the third party premise and on receipt of the satisfaction recorded by reasons to believe that the seized material has a bearing in the determination of the total income of the appellant company for the years under consideration. 6.7.4 Therefore, the AO has rightly assumed jurisdiction u/ of the Act for the years under consideration…” ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 4 :: the income-tax assessments u/s 153C/143(3) of the Act 28.03.2023 after making addition(s) on account of bogus purchases. Apart from the foregoing, the AO is also noted to have made addition(s)/disallowance(s) on account of deduction(s) claimed u/s 80G / e u/s 14A of the Act and disallowance of certain items Aggrieved by the above order(s) of the AO, the assessee preferred appeal before the Ld. CIT(A). The assessee is noted to have challenged the validity of the notice issued u/s 153C of the Act. It is seen that the Ld. CIT(A) had upheld the validity of satisfaction note recorded by the AO prior to issuance of notice u/s 153C of the Act by observing as under: The undersigned has carefully examined the issue under consideration. As evident in the assessment order, it can be seen that the AO based upon the findings of the search in the case of m/s. SNJ Group of concerns has recorded reasons that the appellant company has made bogus purchases by inflating the purchase expenses related to purchase of old bottles from its vendors. The satisfaction arrived by the AO is only a prima facie satisfaction. The AO on the basis of the incriminating materials found and seized at the third party premise and on receipt of the satisfaction recorded by the AO of the searched party formed reasons to believe that the seized material has a bearing in the determination of the total income of the appellant company for the years under consideration. 6.7.4 Therefore, the AO has rightly assumed jurisdiction u/ of the Act for the years under consideration…” 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. 53C/143(3) of the Act after making addition(s) on account of bogus purchases. Apart from the foregoing, the AO is also noted to have made addition(s)/disallowance(s) on account of deduction(s) claimed u/s 80G / e u/s 14A of the Act and disallowance of certain items Aggrieved by the above order(s) of the AO, the assessee preferred appeal before the Ld. CIT(A). The assessee is noted to have challenged e Act. It is seen that the Ld. CIT(A) had upheld the validity of satisfaction note recorded by the AO prior to issuance of notice u/s 153C of the Act by observing as under: - The undersigned has carefully examined the issue under vident in the assessment order, it can be seen that the AO based upon the findings of the search in the case of m/s. SNJ Group of concerns has recorded reasons that the appellant company has made bogus purchases by inflating the o purchase of old bottles from its vendors. The satisfaction arrived by the AO is only a prima facie satisfaction. The AO on the basis of the incriminating materials found and seized at the third party premise and on receipt of the the AO of the searched party formed reasons to believe that the seized material has a bearing in the determination of the total income of the appellant company for 6.7.4 Therefore, the AO has rightly assumed jurisdiction u/s 153C Printed from counselvise.com 4. Thereafter, the Ld. CIT(A) proceeded to adjudicate the appeals for these AYs 2018-19 & 2019 view that the AO’s action of making addition of the entire value of purchases alleged to be bogus, was not justified. After considering the submissions of the assessee along with the gamut of given facts of the case, the Ld. CIT(A) is noted t invoking provisions of Section 145(3) of the Act and estimated the overall profit of the assessee at 10% of the turnover. The Ld. CIT(A) thus partly sustained the addition made by the AO on account of bogus purchase Consequent to the rejection of books of accounts and estimation of profits, the Ld. CIT(A) deleted all other separate disallowance(s)/ addition(s) on account of Section 14A & sales promotion expenses made by the AO. Further, in AY 2018 account of deduction claimed u/s 80G of the Act was deleted and the claim made u/s 80GGB of the Act was dismissed. 5. Being aggrieved by the above order(s) of the Ld. CIT(A), both the Revenue and the assessee are in appeal before us. satisfaction note recorded by the AO and the making addition(s) on account of bogus purchases were identical in both the AYs 2018-19 & 2019 also argued these appeals together. ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 5 :: Thereafter, the Ld. CIT(A) proceeded to adjudicate the appeals for 19 & 2019-20 on their merits. The Ld. CIT( view that the AO’s action of making addition of the entire value of purchases alleged to be bogus, was not justified. After considering the submissions of the assessee along with the gamut of given facts of the case, the Ld. CIT(A) is noted to have rejected the books of accounts by invoking provisions of Section 145(3) of the Act and estimated the overall profit of the assessee at 10% of the turnover. The Ld. CIT(A) thus partly sustained the addition made by the AO on account of bogus purchase Consequent to the rejection of books of accounts and estimation of profits, the Ld. CIT(A) deleted all other separate disallowance(s)/ addition(s) on account of Section 14A & sales promotion expenses made by the AO. Further, in AY 2018-19, the disallowance made by the AO on account of deduction claimed u/s 80G of the Act was deleted and the claim made u/s 80GGB of the Act was dismissed. Being aggrieved by the above order(s) of the Ld. CIT(A), both the Revenue and the assessee are in appeal before us. It is noted that satisfaction note recorded by the AO and the reasoning given by making addition(s) on account of bogus purchases were identical in both 19 & 2019-20 impugned before us. Both the parties have eals together. Hence, for the sake of convenience, 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. Thereafter, the Ld. CIT(A) proceeded to adjudicate the appeals for 20 on their merits. The Ld. CIT(A) was of the view that the AO’s action of making addition of the entire value of purchases alleged to be bogus, was not justified. After considering the submissions of the assessee along with the gamut of given facts of the o have rejected the books of accounts by invoking provisions of Section 145(3) of the Act and estimated the overall profit of the assessee at 10% of the turnover. The Ld. CIT(A) thus partly sustained the addition made by the AO on account of bogus purchases. Consequent to the rejection of books of accounts and estimation of profits, the Ld. CIT(A) deleted all other separate disallowance(s)/ addition(s) on account of Section 14A & sales promotion expenses made nce made by the AO on account of deduction claimed u/s 80G of the Act was deleted and the Being aggrieved by the above order(s) of the Ld. CIT(A), both the It is noted that, the reasoning given by him for making addition(s) on account of bogus purchases were identical in both Both the parties have Hence, for the sake of convenience, Printed from counselvise.com and to avoid repetition of facts; we common issues across these 6. Since the grounds raised in the assessee’s appeal inter alia involve legal challenge to the validity of initiation proceedings u/s 153C of the Act, we consider it prudent to take this up first. 7. The Ld. AR has contended that, and did not meet the pre frame assessment under satisfaction note(s), he pointed out that, the AO had recorded a common satisfaction note for both the years and that such action had been disapproved by the Hon’ble Supreme Court Singhad Technical Education Society ( submitted that, the ‘seized material’ relied upon by the AO in the satisfaction note that, the assessee had of bogus purchases from M/s Crystal bottles nature. The Ld. AR claimed that satisfaction to issue notice u/s.153C of the Act was absent in the present case. He thus urged that, the usurp jurisdiction by the AO u/s 153C of the Act suffered from fundamental ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 6 :: and to avoid repetition of facts; we deem it fit to adjudicate each common issues across these AYs before us together. Since the grounds raised in the assessee’s appeal inter alia involve hallenge to the validity of initiation proceedings u/s 153C of the Act, we consider it prudent to take this up first. The Ld. AR has contended that, the ‘satisfaction note’ not meet the pre-requisite of section153C to usurp jurisdicti frame assessment under Section 153C of the Act. Taking us through the satisfaction note(s), he pointed out that, the AO had recorded a common satisfaction note for both the years and that such action had been disapproved by the Hon’ble Supreme Court in the case of Singhad Technical Education Society (397 ITR 344 submitted that, the ‘seized material’ relied upon by the AO in the satisfaction note that, the assessee had inflated their expenses by means from M/s Crystal bottles, was not incriminating in nature. The Ld. AR claimed that the law requires a high threshold of satisfaction to issue notice u/s.153C of the Act, which according to him, was absent in the present case. He thus urged that, the usurp jurisdiction by the AO u/s 153C of the Act suffered from fundamental 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. deem it fit to adjudicate each of the Since the grounds raised in the assessee’s appeal inter alia involve hallenge to the validity of initiation proceedings u/s 153C of the the ‘satisfaction note’ was vague requisite of section153C to usurp jurisdiction to . Taking us through the satisfaction note(s), he pointed out that, the AO had recorded a common satisfaction note for both the years and that such action had been in the case of CIT Vs 397 ITR 344). The Ld. AR submitted that, the ‘seized material’ relied upon by the AO in the inflated their expenses by means , was not incriminating in the law requires a high threshold of , which according to him, was absent in the present case. He thus urged that, the usurpation of jurisdiction by the AO u/s 153C of the Act suffered from fundamental Printed from counselvise.com infirmity on account of failure to record a valid satisfaction note and he wants us to quash the order(s) for these AYs 2018 8. Per contra, the Ld. CIT, DR appeari that, the AO had elaborately discussed the specific details of the incriminating material handed over by the AO of the searched person to the AO of the assessee and thereafter also quantified the amounts which in his view had a bearing on the total income for AYs 2018 According to her therefore, the AO had validly before assuming jurisdiction u/s 153Cof the Act attention the notice issued by the AO u/s 142(1) of the A 2023 in the course of assessment proceedings conducted u/s 153C of the Act and pointed out that, the AO had identified the specific seized material was found from the premises of M/s Crystal Bottles which contained information relating to th that, the AO had also elucidated in that notice, the inference which was sought to be drawn from such seized material against the assessee. She further pointed out that, later on, a search action was conducted upon the assessee on 15-06-2022 when the impugned assessment(s) were pending and that the findings / material seized in the course of direct search on the assessee corroborated the information unearthed in the course of search at M/s Crystal Bottles. According to ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 7 :: infirmity on account of failure to record a valid satisfaction note and he wants us to quash the order(s) for these AYs 2018-19 to 2019 Per contra, the Ld. CIT, DR appearing for the Revenue submitted that, the AO had elaborately discussed the specific details of the incriminating material handed over by the AO of the searched person to the AO of the assessee and thereafter also quantified the amounts which bearing on the total income for AYs 2018- According to her therefore, the AO had validly recorded the satisfaction jurisdiction u/s 153Cof the Act. She also invited our attention the notice issued by the AO u/s 142(1) of the Act dated 14 2023 in the course of assessment proceedings conducted u/s 153C of the Act and pointed out that, the AO had identified the specific seized material was found from the premises of M/s Crystal Bottles which contained information relating to the assessee. The Ld. CIT, DR submitted that, the AO had also elucidated in that notice, the inference which was sought to be drawn from such seized material against the assessee. She further pointed out that, later on, a search action was conducted upon the 2022 when the impugned assessment(s) were pending and that the findings / material seized in the course of direct search on the assessee corroborated the information unearthed in the course of search at M/s Crystal Bottles. According to her all these facts considered 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. infirmity on account of failure to record a valid satisfaction note and he 19 to 2019-20. ng for the Revenue submitted that, the AO had elaborately discussed the specific details of the incriminating material handed over by the AO of the searched person to the AO of the assessee and thereafter also quantified the amounts which -19 & 2019-20. ed the satisfaction . She also invited our ct dated 14-01- 2023 in the course of assessment proceedings conducted u/s 153C of the Act and pointed out that, the AO had identified the specific seized material was found from the premises of M/s Crystal Bottles which e assessee. The Ld. CIT, DR submitted that, the AO had also elucidated in that notice, the inference which was sought to be drawn from such seized material against the assessee. She further pointed out that, later on, a search action was conducted upon the 2022 when the impugned assessment(s) were pending and that the findings / material seized in the course of direct search on the assessee corroborated the information unearthed in the course of her all these facts considered Printed from counselvise.com cumulatively showed that, there was sufficient seized possession of the AO demonstrating income of the assessee u/s 153C of the Act. She thus vehemently supported the Ld. CIT(A)’s order dismissing this legal plea of the assessee. 9. The Ld. AR in his rejoinder submitted that, the assessee had repelled the purported seized material found from the premises of M/s Crystal Bottles, in the course of assessment proceedings and it was shown that neither was such material of incriminating nature nor did it have any bearing on their total income. According to him, the AO while impugned orders did not refer to or rely upon any of from the premises of M/s Crystal Bottles to justify the addition(s) made on account of bogus purchases. Instead, the addition of bogus purchases was made by relying on the material seized and statement(s) recorded in the direct search conducted at the premises of the much later to the date of recording of satisfaction. The Ld. AR submitted that, the fact that the AO did not rely on any material which was seized from the premises of M/s SNJ Distilleries or M/s Crystal course of their search conducted on 06 the impugned assessment order(s), bolstered the assessee’s case that, the satisfaction note was recorded by the AO in a scanty, vague and ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 8 :: cumulatively showed that, there was sufficient seized possession of the AO demonstrating impact on the determination of the income of the assessee and thus the AO had validly usurped jurisdiction ct. She thus vehemently supported the Ld. CIT(A)’s order dismissing this legal plea of the assessee. The Ld. AR in his rejoinder submitted that, the assessee had repelled the purported seized material found from the premises of M/s the course of assessment proceedings and it was shown that neither was such material of incriminating nature nor did it have any bearing on their total income. According to him, the AO while orders did not refer to or rely upon any of the material seized from the premises of M/s Crystal Bottles to justify the addition(s) made on account of bogus purchases. Instead, the addition of bogus purchases was made by relying on the material seized and statement(s) recorded in onducted at the premises of the assessee, which was much later to the date of recording of satisfaction. The Ld. AR submitted that, the fact that the AO did not rely on any material which was seized from the premises of M/s SNJ Distilleries or M/s Crystal course of their search conducted on 06-08-2019, for making addition(s) in the impugned assessment order(s), bolstered the assessee’s case that, the satisfaction note was recorded by the AO in a scanty, vague and 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. cumulatively showed that, there was sufficient seized material in impact on the determination of the and thus the AO had validly usurped jurisdiction ct. She thus vehemently supported the Ld. CIT(A)’s The Ld. AR in his rejoinder submitted that, the assessee had repelled the purported seized material found from the premises of M/s the course of assessment proceedings and it was shown that neither was such material of incriminating nature nor did it have any bearing on their total income. According to him, the AO while passing the the material seized from the premises of M/s Crystal Bottles to justify the addition(s) made on account of bogus purchases. Instead, the addition of bogus purchases was made by relying on the material seized and statement(s) recorded in assessee, which was much later to the date of recording of satisfaction. The Ld. AR submitted that, the fact that the AO did not rely on any material which was seized from the premises of M/s SNJ Distilleries or M/s Crystal Bottles in the 2019, for making addition(s) in the impugned assessment order(s), bolstered the assessee’s case that, the satisfaction note was recorded by the AO in a scanty, vague and Printed from counselvise.com mechanical manner without dem material seized from the premises of third party with the quantum of income alleged to be escaping tax in these AYs. 10. We have heard both the parties and perused the material placed before us. It is well settled in satisfaction note constitute no notice u/s 153C of the Act can be validly issued. ‘satisfaction note’ forms the foundational basis to assume jurisdiction u/s 153C of the Act. The law ‘satisfaction’ that the seized material searched person belongs to or pertains to or relates to the other person [assessee, in this case] nature leading to the conclusion of contemporaneous recording of satisfaction by the AO linking the seized material to the assessee. live nexus ascertained upon examination of the seized material which contained information relating to the assessee which has a bearing on its total income. Having perused the ‘satisfaction note’ for AYs 2018 2019-20, it is seen that, the AO had demonstrated a linkage between the material seized from the premises of M/s Crystal Bottles with the assessee and has also set out document ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 9 :: mechanical manner without demonstrating any live link between the material seized from the premises of third party with the quantum of income alleged to be escaping tax in these AYs. We have heard both the parties and perused the material placed before us. It is well settled in law by now that, the satisfaction note constitutes a jurisdictional fact, in the absence of which no notice u/s 153C of the Act can be validly issued. Accordingly, t forms the foundational basis to assume jurisdiction u/s 153C of the Act. The law requires the AO of the assessee to arrive at a the seized material handed over by the AO of the belongs to or pertains to or relates to the other person [assessee, in this case] and further, that such material is incriminating in nature leading to the conclusion of undisclosed income. There has to be a contemporaneous recording of satisfaction by the AO linking the seized material to the assessee. The satisfaction note should demonstrate the live nexus ascertained upon examination of the seized material which contained information relating to the assessee which has a bearing on its perused the ‘satisfaction note’ for AYs 2018 20, it is seen that, the AO had demonstrated a linkage between the material seized from the premises of M/s Crystal Bottles with the assessee and has also set out document-wise correlation with the specific 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. onstrating any live link between the material seized from the premises of third party with the quantum of We have heard both the parties and perused the material placed law by now that, the recording of a jurisdictional fact, in the absence of which Accordingly, the forms the foundational basis to assume jurisdiction u/s assessee to arrive at a handed over by the AO of the belongs to or pertains to or relates to the other person t such material is incriminating in here has to be a contemporaneous recording of satisfaction by the AO linking the seized The satisfaction note should demonstrate the live nexus ascertained upon examination of the seized material which contained information relating to the assessee which has a bearing on its perused the ‘satisfaction note’ for AYs 2018-19 & 20, it is seen that, the AO had demonstrated a linkage between the material seized from the premises of M/s Crystal Bottles with the wise correlation with the specific Printed from counselvise.com assessment year and also quantified the escaping tax in AYs 2018 contents of certain loose sheets containing details of invoices vis filling status pertaining to the old bottle purchases made by the assessee. The AO is found to have also referred to specific excel sheets, ledger etc. seized from the premises of M/s Crystal Bottles, which contained information relating to the assessee. The AO has also pointed out that, the key person of M/s Crystal Bottles in his statemen 132(4) of the Act had admitted to bogus purchases facilitated for the assessee. We thus note that, the AO of the assessee has objectively analyze and compartmentali received from the AO of the searc determination as to the year to which the incriminating material relates and issue notices only for those years satisfaction note recorded by the AO in these AYs meets the requirement laid down by the Hon’ble Supreme Court in the case of Technical Education Society (supra) 11. The requirement of law for a valid assumption of jurisdiction is the satisfaction of the AO of the assessee him by the AO of the searched person impacts the determination of income of the assessee. ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 10 :: assessment year and also quantified the amount(s) believed to be escaping tax in AYs 2018-19 & 2019-20. The AO had set out the specific contents of certain loose sheets containing details of invoices vis filling status pertaining to the old bottle purchases made by the assessee. found to have also referred to specific excel sheets, ledger etc. seized from the premises of M/s Crystal Bottles, which contained information relating to the assessee. The AO has also pointed out that, the key person of M/s Crystal Bottles in his statement recorded u/s 132(4) of the Act had admitted to bogus purchases facilitated for the assessee. We thus note that, the AO of the assessee has objectively e and compartmentalize the incriminating material year received from the AO of the searched person, and arrive at a categoric determination as to the year to which the incriminating material relates and issue notices only for those years. In our opinion therefore, the satisfaction note recorded by the AO in these AYs meets the requirement d down by the Hon’ble Supreme Court in the case of CIT Vs Singhad Technical Education Society (supra). The requirement of law for a valid assumption of jurisdiction is the of the assessee that the material handed over to he AO of the searched person impacts the determination of income of the assessee. In the facts of the present case, there is no doubt 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. amount(s) believed to be 20. The AO had set out the specific contents of certain loose sheets containing details of invoices vis-a-vis filling status pertaining to the old bottle purchases made by the assessee. found to have also referred to specific excel sheets, ledger etc. seized from the premises of M/s Crystal Bottles, which contained information relating to the assessee. The AO has also pointed out that, t recorded u/s 132(4) of the Act had admitted to bogus purchases facilitated for the assessee. We thus note that, the AO of the assessee has objectively e the incriminating material year-wise, as arrive at a categoric determination as to the year to which the incriminating material relates . In our opinion therefore, the satisfaction note recorded by the AO in these AYs meets the requirement CIT Vs Singhad The requirement of law for a valid assumption of jurisdiction is the that the material handed over to he AO of the searched person impacts the determination of there is no doubt Printed from counselvise.com that the material in possession of the AO sufficiently demonstrat impact on the determination of the income of the a impugned AYs before us. The argument of the assessee the satisfaction recorded being vague and th received from the AO of the searched person [M/s Crystal Bottles, in the present case] was not ultimate the assessment order(s) our finding that, the satisfaction recorded the seized material and statements in the possession of the AO admittedly prima facie were adverse to the assessee. on a direct search was conducted upon the assessee which led to discovery of additional material & evidence basis which the AO primarily justified the addition, cannot be fatal According to us, there material which could have led to no other satisfaction but that of the material impacting the determination of income of the assessee laws relied upon by the Ld. AR of the assessee on facts, since in the facts of the present case the satisfaction of the AO is evident from the material gathered during search Crystal Bottles. In view of the legal grounds raised by the assessee challenging the validity of ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 11 :: the material in possession of the AO sufficiently demonstrat impact on the determination of the income of the assessee impugned AYs before us. The argument of the assessee to the effect of the satisfaction recorded being vague and that the seized material received from the AO of the searched person [M/s Crystal Bottles, in the present case] was not ultimately relied upon to make the addition(s) in the assessment order(s) are, we find, of no consequence in the light of the satisfaction recorded was to be considered material and statements in the possession of the AO admittedly prima facie were adverse to the assessee. The fact that, later on a direct search was conducted upon the assessee which led to discovery of additional material & evidence basis which the AO primarily justified the addition, cannot be fatal to the recording of satisfaction note. here is no doubt that the AO was in possession of material which could have led to no other satisfaction but that of the material impacting the determination of income of the assessee relied upon by the Ld. AR of the assessee are clearly distinguishable on facts, since in the facts of the present case the satisfaction of the AO is evident from the material gathered during search conducted upon M/s In view of the foregoing, we do not find any merit in the grounds raised by the assessee challenging the validity of 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. the material in possession of the AO sufficiently demonstrated the ssessee for the to the effect of seized material received from the AO of the searched person [M/s Crystal Bottles, in the ly relied upon to make the addition(s) in we find, of no consequence in the light of to be considered in light of material and statements in the possession of the AO, which The fact that, later on a direct search was conducted upon the assessee which led to discovery of additional material & evidence basis which the AO primarily to the recording of satisfaction note. no doubt that the AO was in possession of material which could have led to no other satisfaction but that of the material impacting the determination of income of the assessee. The case are clearly distinguishable on facts, since in the facts of the present case the satisfaction of the AO is conducted upon M/s , we do not find any merit in the grounds raised by the assessee challenging the validity of Printed from counselvise.com jurisdiction assumed by the AO u/s 153C of the Act the same. 12. We now turn our attention to the merits of the addition(s) made in the impugned AYs 2018 these appeals relates to the addition(s) made by the AO on account of bogus old bottle purchases. The facts as noted are that, a search action was conducted upon SNJ Group on 06 same, the business premises of M/s Crystal Bottles was also searched where incriminating material relating to the assessee was seized. On analysis of the seized material found from the premises of M/s Crystal Bottles along with the statement given by the key person of M/s Crystal Bottles u/s 132(4) of the Act, it was inferred that, they had facilitated inflation of expenses of the assessee by providing bogus invoices of purchase of old bottles. Relying upon the material seized from premises of M/s Crystal Bottles which contained information relating to the assessee, the AO had reopened the assessment(s) of the assessee u/s 153C of the Act for AYs 2018 assessment proceedings which was initi u/s 132 of the Act was conducted upon the assessee on 15 the course of which several material viz., books of accounts, documents & electronic data, loose sheets, note books etc. was found and seized. ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 12 :: jurisdiction assumed by the AO u/s 153C of the Act and therefore dismiss We now turn our attention to the merits of the addition(s) made in he impugned AYs 2018-19 & 2019-20. The first issue involved in both these appeals relates to the addition(s) made by the AO on account of bogus old bottle purchases. The facts as noted are that, a search action was conducted upon SNJ Group on 06-08-2019 and in connection with the same, the business premises of M/s Crystal Bottles was also searched where incriminating material relating to the assessee was seized. On analysis of the seized material found from the premises of M/s Crystal statement given by the key person of M/s Crystal Bottles u/s 132(4) of the Act, it was inferred that, they had facilitated inflation of expenses of the assessee by providing bogus invoices of purchase of old bottles. Relying upon the material seized from premises of M/s Crystal Bottles which contained information relating to the assessee, the AO had reopened the assessment(s) of the assessee u/s 153C of the Act for AYs 2018-19 & 2019-20. During the pendency of the assessment proceedings which was initiated u/s 153C of the Act, a search u/s 132 of the Act was conducted upon the assessee on 15 the course of which several material viz., books of accounts, documents & electronic data, loose sheets, note books etc. was found and seized. 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. and therefore dismiss We now turn our attention to the merits of the addition(s) made in 20. The first issue involved in both these appeals relates to the addition(s) made by the AO on account of bogus old bottle purchases. The facts as noted are that, a search action d in connection with the same, the business premises of M/s Crystal Bottles was also searched where incriminating material relating to the assessee was seized. On analysis of the seized material found from the premises of M/s Crystal statement given by the key person of M/s Crystal Bottles u/s 132(4) of the Act, it was inferred that, they had facilitated inflation of expenses of the assessee by providing bogus invoices of purchase of old bottles. Relying upon the material seized from the premises of M/s Crystal Bottles which contained information relating to the assessee, the AO had reopened the assessment(s) of the assessee u/s 20. During the pendency of the ated u/s 153C of the Act, a search u/s 132 of the Act was conducted upon the assessee on 15-06-2022, in the course of which several material viz., books of accounts, documents & electronic data, loose sheets, note books etc. was found and seized. Printed from counselvise.com According to the AO, the seized material inter alia contained details of suppression of income by the assessee by debiting bogus purchases from several vendors of old liquor bottles including M/s Crystal Bottles. Consequent to the completion of direct search, the a have also filed a letter with the AO, in the course of assessment proceedings, admitting additional income in the impugned AYs 2018 2019-20. It is noted from the assessment order(s) that, the AO had initially referred to the materi M/s Crystal Bottles at the beginning of the assessment order but thereafter he primarily based his findings on the material unearthed in the course of direct search upon the assessee, which took place during the pendency of the assessment proceedings. 13. The AO is noted to have relied upon the contents of a silver color pen drive seized from the residential premises of Shri S Varatharaj, Deputy Manager of the assessee company which contained an Excel File comprising of several excel sheets titled ‘ENA Schedule’. These excel sheets were printed and seized as Annexure ANN/ARS/SAFL/Loose Sheets/S-1, Pages 1 to 66. It is noted that, this five(5) Sheets which comprised of data relating to purchase for three-month period in the year 2020 tabulated sample data from this excel file in this assessment order. It is ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 13 :: to the AO, the seized material inter alia contained details of suppression of income by the assessee by debiting bogus purchases from several vendors of old liquor bottles including M/s Crystal Bottles. Consequent to the completion of direct search, the assessee is found to have also filed a letter with the AO, in the course of assessment proceedings, admitting additional income in the impugned AYs 2018 20. It is noted from the assessment order(s) that, the AO had initially referred to the material which was seized from the premises of M/s Crystal Bottles at the beginning of the assessment order but thereafter he primarily based his findings on the material unearthed in the course of direct search upon the assessee, which took place during the dency of the assessment proceedings. The AO is noted to have relied upon the contents of a silver color pen drive seized from the residential premises of Shri S Varatharaj, Deputy Manager of the assessee company which contained an Excel File g of several excel sheets titled ‘ENA Schedule’. These excel sheets were printed and seized as Annexure ANN/ARS/SAFL/Loose 1, Pages 1 to 66. It is noted that, this excel file which comprised of data relating to purchase month period in the year 2020. The AO is noted to have tabulated sample data from this excel file in this assessment order. It is 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. to the AO, the seized material inter alia contained details of suppression of income by the assessee by debiting bogus purchases from several vendors of old liquor bottles including M/s Crystal Bottles. ssessee is found to have also filed a letter with the AO, in the course of assessment proceedings, admitting additional income in the impugned AYs 2018-19 & 20. It is noted from the assessment order(s) that, the AO had al which was seized from the premises of M/s Crystal Bottles at the beginning of the assessment order but thereafter he primarily based his findings on the material unearthed in the course of direct search upon the assessee, which took place during the The AO is noted to have relied upon the contents of a silver color pen drive seized from the residential premises of Shri S Varatharaj, Deputy Manager of the assessee company which contained an Excel File g of several excel sheets titled ‘ENA Schedule’. These excel sheets were printed and seized as Annexure ANN/ARS/SAFL/Loose excel file comprised of which comprised of data relating to purchase of old bottles . The AO is noted to have tabulated sample data from this excel file in this assessment order. It is Printed from counselvise.com seen that, this data comprised of month wise details of the old bottles purchased from certain vendo invoice, manner of payment, date of cheque, invoice amount, GST, other charges & total. Another excel sheet, is noted to contain date column-wise notings of several figures against five vendors. According to the AO, these excel files were actually a summary of the bogus invoices obtained by the assessee from these vendors inter alia including M/s Crystal Bottles and that the date amounts due from them. It is observed that thi based on the statement(s) obtained from key employees of the assessee i.e., Shri S Varatharaj [from whose possession the pen drive was found] and Shri Austine Paulraj. These employees had explained that, the column ‘Others’ in the e the vendors for facilitating bogus invoices and that the column ‘Total’ denoted the cash which was to be returned back by the vendors against the cheques paid to them in lieu of bogus invoices. The AO therea extracted the data of old SAP software along with their off According to the AO, these vendors were not only supplying old bottles for which genuine invoices were bei also providing bogus invoices to facilitate inflation of expenses of the ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 14 :: seen that, this data comprised of month wise details of the old bottles purchased from certain vendors. It inter alia contained the date of invoice, manner of payment, date of cheque, invoice amount, GST, other charges & total. Another excel sheet, is noted to contain date wise notings of several figures against five vendors. According to AO, these excel files were actually a summary of the bogus invoices obtained by the assessee from these vendors inter alia including M/s Crystal Bottles and that the date-wise details were the notings of cash amounts due from them. It is observed that this analogy of the AO was based on the statement(s) obtained from key employees of the assessee i.e., Shri S Varatharaj [from whose possession the pen drive was found] and Shri Austine Paulraj. These employees had explained that, the column ‘Others’ in the excel file represented the commission retained by the vendors for facilitating bogus invoices and that the column ‘Total’ denoted the cash which was to be returned back by the vendors against the cheques paid to them in lieu of bogus invoices. The AO therea extracted the data of old-bottle supplier-wise purchase ledgers from the SAP software along with their off-set accounts of old bottle purchases. According to the AO, these vendors were not only supplying old bottles for which genuine invoices were being raised, but these same vendors were also providing bogus invoices to facilitate inflation of expenses of the 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. seen that, this data comprised of month wise details of the old bottles rs. It inter alia contained the date of invoice, manner of payment, date of cheque, invoice amount, GST, other charges & total. Another excel sheet, is noted to contain date-wise wise notings of several figures against five vendors. According to AO, these excel files were actually a summary of the bogus invoices obtained by the assessee from these vendors inter alia including M/s wise details were the notings of cash s analogy of the AO was based on the statement(s) obtained from key employees of the assessee i.e., Shri S Varatharaj [from whose possession the pen drive was found] and Shri Austine Paulraj. These employees had explained that, the xcel file represented the commission retained by the vendors for facilitating bogus invoices and that the column ‘Total’ denoted the cash which was to be returned back by the vendors against the cheques paid to them in lieu of bogus invoices. The AO thereafter wise purchase ledgers from the set accounts of old bottle purchases. According to the AO, these vendors were not only supplying old bottles for ng raised, but these same vendors were also providing bogus invoices to facilitate inflation of expenses of the Printed from counselvise.com assessee. This inference was drawn from the purchase ledgers, which according to the AO, contained entries both for genuine old bottle purchases and bogus old bottle purchases. In the AO’s opinion, the actual old bottles purchased were accompanied by GRNs whereas the same was lacking in old bottle purchases. The AO accordingly deduced that, in case of bogus purchases, the bills were processed with thereafter elaborately discussed the accounting processes followed by the assessee upon purchase of old bottles with screenshots of SAP system, invoices in light of the statements obtained from the accounts & audit staff. The AO inferred that wherever the purchases invoices were bogus, there was no movement from top to bottom for accounting and payment. According to AO, the assessee would simply collect cash from the old bottle suppliers in lieu of payments made towards bogus purchase invoices after deducting commission retained by these suppliers for facilitating such bogus bills. The AO is noted to have extensively reproduced the statements of several employees of the assessee viz., Shri S Varatharaj, Shri Austine Paulraj etc., record the assessment order, wherein they had admitted that, the invoices which did not carry seal or GRN details were bogus purchases. It is observed that, Shri Austine Paulraj had identified eight (8) regular suppliers including M/s Crystal Bottles who were inter alia providing these bogus ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 15 :: assessee. This inference was drawn from the purchase ledgers, which according to the AO, contained entries both for genuine old bottle and bogus old bottle purchases. In the AO’s opinion, the actual old bottles purchased were accompanied by GRNs whereas the same was lacking in old bottle purchases. The AO accordingly deduced that, in case of bogus purchases, the bills were processed without GRN entry. The AO thereafter elaborately discussed the accounting processes followed by the assessee upon purchase of old bottles with screenshots of SAP system, invoices in light of the statements obtained from the accounts & audit red that wherever the purchases invoices were bogus, there was no movement from top to bottom for accounting and payment. According to AO, the assessee would simply collect cash from the old bottle suppliers in lieu of payments made towards bogus purchase invoices after deducting commission retained by these suppliers for facilitating such bogus bills. The AO is noted to have extensively reproduced the statements of several employees of the assessee viz., Shri S Varatharaj, Shri Austine Paulraj etc., recorded across several dates in the assessment order, wherein they had admitted that, the invoices which did not carry seal or GRN details were bogus purchases. It is observed that, Shri Austine Paulraj had identified eight (8) regular suppliers rystal Bottles who were inter alia providing these bogus 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. assessee. This inference was drawn from the purchase ledgers, which according to the AO, contained entries both for genuine old bottle and bogus old bottle purchases. In the AO’s opinion, the actual old bottles purchased were accompanied by GRNs whereas the same was lacking in old bottle purchases. The AO accordingly deduced that, in case out GRN entry. The AO thereafter elaborately discussed the accounting processes followed by the assessee upon purchase of old bottles with screenshots of SAP system, invoices in light of the statements obtained from the accounts & audit red that wherever the purchases invoices were bogus, there was no movement from top to bottom for accounting and payment. According to AO, the assessee would simply collect cash from the old bottle suppliers in lieu of payments made towards bogus purchase invoices after deducting commission retained by these suppliers for facilitating such bogus bills. The AO is noted to have extensively reproduced the statements of several employees of the assessee viz., Shri ed across several dates in the assessment order, wherein they had admitted that, the invoices which did not carry seal or GRN details were bogus purchases. It is observed that, Shri Austine Paulraj had identified eight (8) regular suppliers rystal Bottles who were inter alia providing these bogus Printed from counselvise.com invoices. According to the employees, the vendors would return back the cash in lieu of the payments made against such bogus invoices after deducting their commission and that such cash was utilized cash expenses of the assessee. The AO also reproduced the statement of the Managing Director of the assessee, Shri M Anand who had confirmed the statements given by Shri S Varatharaj & Shri Austine Paulraj. Thereafter, the AO at Para 6 of his unearthed upon conducting search and examination of these suppliers including M/s Crystal Bottles. To sum up, according to the AO, these suppliers had also corroborated the statements of the employee(s) that they had facilitated inflation of expenses by providing bogus invoices. The AO is thus noted to have added the entire value of the bogus old bottle purchases, as quantified by him in the Table at Para 8.1.2 of his assessment order, in both the impugned AYs 2018 14. Aggrieved by the order of the AO, the assessee preferred appeal before the Ld. CIT(A). It is seen that, the Ld. CIT(A) after considering the submissions of the assessee in light of the findings of the AO, had ultimately rejected the books o the profits at 10% of the turnover. Being aggrieved by the order of the Ld. CIT(A), both the assessee and Revenue are in appeal before us. ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 16 :: invoices. According to the employees, the vendors would return back the cash in lieu of the payments made against such bogus invoices after deducting their commission and that such cash was utilized cash expenses of the assessee. The AO also reproduced the statement of the Managing Director of the assessee, Shri M Anand who had confirmed the statements given by Shri S Varatharaj & Shri Austine Paulraj. Thereafter, the AO at Para 6 of his order elaborately set out the findings unearthed upon conducting search and examination of these suppliers including M/s Crystal Bottles. To sum up, according to the AO, these suppliers had also corroborated the statements of the employee(s) that facilitated inflation of expenses by providing bogus invoices. The AO is thus noted to have added the entire value of the bogus old bottle purchases, as quantified by him in the Table at Para 8.1.2 of his assessment order, in both the impugned AYs 2018-19 & 2019 Aggrieved by the order of the AO, the assessee preferred appeal before the Ld. CIT(A). It is seen that, the Ld. CIT(A) after considering the submissions of the assessee in light of the findings of the AO, had ultimately rejected the books of accounts of the assessee and estimated the profits at 10% of the turnover. Being aggrieved by the order of the Ld. CIT(A), both the assessee and Revenue are in appeal before us. 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. invoices. According to the employees, the vendors would return back the cash in lieu of the payments made against such bogus invoices after deducting their commission and that such cash was utilized to meet other cash expenses of the assessee. The AO also reproduced the statement of the Managing Director of the assessee, Shri M Anand who had confirmed the statements given by Shri S Varatharaj & Shri Austine Paulraj. order elaborately set out the findings unearthed upon conducting search and examination of these suppliers including M/s Crystal Bottles. To sum up, according to the AO, these suppliers had also corroborated the statements of the employee(s) that facilitated inflation of expenses by providing bogus invoices. The AO is thus noted to have added the entire value of the bogus old bottle purchases, as quantified by him in the Table at Para 8.1.2 of his & 2019-20. Aggrieved by the order of the AO, the assessee preferred appeal before the Ld. CIT(A). It is seen that, the Ld. CIT(A) after considering the submissions of the assessee in light of the findings of the AO, had f accounts of the assessee and estimated the profits at 10% of the turnover. Being aggrieved by the order of the Ld. CIT(A), both the assessee and Revenue are in appeal before us. Printed from counselvise.com 15. Heard both the parties. It is seen that the reasons given by the AO for making the impugned addition(s) and the findings rendered by the Ld. CIT(A) for rejecting the books of accounts and estimating the profit at 10% is verbatim same to that of the orders passed by the lower authorities in assessee’s own case for AYs 2020 adjudicating the cross appeals of the assessee and Revenue in ITA Nos. 1550-1552 &1817-1819 sustained the Ld. CIT(A)’s order rejecting the books of accounts u/s 145(3) and the action of estimat under:- 12. Overall therefore, we are in agreement with the Ld. CIT( that, there are indeed discrepancies in the books of accounts as rightly highlighted by the lower authorities, but it cannot be alleged that the entire value of purchases lacking GRNs, made from these genuine suppliers were bogus. The Ld. AR for the ass acknowledged before us that, there were accounting anomalies in maintaining the books of accounts, but he contended that, these accounting anomalies cannot be ipso facto assumed to be falsification of entries, which requires strict p pointed out that the AO in the assessment order erroneously treated these accounting deficiencies to tantamount to false entries and thereby initiated penal action u/s 271AAD of the Act. At this juncture, it is imperative for us to clarify that the accounting deficiencies seen in the ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 17 :: Heard both the parties. It is seen that the reasons given by the AO making the impugned addition(s) and the findings rendered by the Ld. CIT(A) for rejecting the books of accounts and estimating the profit at 10% is verbatim same to that of the orders passed by the lower authorities in assessee’s own case for AYs 2020-21 to 2022 adjudicating the cross appeals of the assessee and Revenue in ITA Nos. 1819/Chny/2025 for AYs 2020-21 to 2022 sustained the Ld. CIT(A)’s order rejecting the books of accounts u/s 145(3) and the action of estimation of profits at 10%, by observing as Overall therefore, we are in agreement with the Ld. CIT( that, there are indeed discrepancies in the books of accounts as rightly highlighted by the lower authorities, but it cannot be alleged that the entire value of purchases lacking GRNs, made from these genuine suppliers were bogus. The Ld. AR for the assessee has also tacitly acknowledged before us that, there were accounting anomalies in maintaining the books of accounts, but he contended that, these accounting anomalies cannot be ipso facto assumed to be falsification of entries, which requires strict proof of mens-rea, which is absent. He pointed out that the AO in the assessment order erroneously treated these accounting deficiencies to tantamount to false entries and thereby initiated penal action u/s 271AAD of the Act. At this juncture, it is ive for us to clarify that the accounting deficiencies seen in the 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. Heard both the parties. It is seen that the reasons given by the AO making the impugned addition(s) and the findings rendered by the Ld. CIT(A) for rejecting the books of accounts and estimating the profit at 10% is verbatim same to that of the orders passed by the lower o 2022-23. While adjudicating the cross appeals of the assessee and Revenue in ITA Nos. 21 to 2022-23, we have sustained the Ld. CIT(A)’s order rejecting the books of accounts u/s ion of profits at 10%, by observing as Overall therefore, we are in agreement with the Ld. CIT(A) that, there are indeed discrepancies in the books of accounts as rightly highlighted by the lower authorities, but it cannot be alleged that the entire value of purchases lacking GRNs, made from these genuine essee has also tacitly acknowledged before us that, there were accounting anomalies in maintaining the books of accounts, but he contended that, these accounting anomalies cannot be ipso facto assumed to be falsification of , which is absent. He pointed out that the AO in the assessment order erroneously treated these accounting deficiencies to tantamount to false entries and thereby initiated penal action u/s 271AAD of the Act. At this juncture, it is ive for us to clarify that the accounting deficiencies seen in the Printed from counselvise.com books of accounts cannot be equated with falsification of entries in the books of accounts. In our opinion, in a given case, if corroborated, the statements recorded during the course of th make addition(s) in the hands of the assessee, but it cannot alone be taken as conclusive proof to allege falsification of entries in the books of accounts. In our view, the case of falsification of entries sought to be made out by the AO in the assessment order cannot be said to be established from the seized records. Hence, it is observed in the given facts discussed supra that such conclusions drawn by the Assessing Officer on falsification of entries in books of accounts is unten Having said so, we maintain that, there are deficiencies in the books of accounts maintained by the Assessee leading to the difficulties in determining the correct assessable income considering the complex nature of the business carried out by the as similar aspect was considered by the jurisdictional High Court in the case of Empee Distilleries Ltd Vs. ACIT (187 Taxman 188) was also involved in the same line of business as that of the assessee and similar allegation wa purchases. It is seen that, the Hon’ble High Court had denounced the AO’s action of adding the entire value of purchases and instead estimated the disallowance at 10%. Following the decision (supra), we countenance the Ld CIT(A) action to the extent that there were accounting deficiencies in the books of accounts viz (i) SAP entries were not properly handled, (ii) standard accounting procedures were not fully followed and ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 18 :: books of accounts cannot be equated with falsification of entries in the books of accounts. In our opinion, in a given case, if corroborated, the statements recorded during the course of the search can be used to make addition(s) in the hands of the assessee, but it cannot alone be taken as conclusive proof to allege falsification of entries in the books of accounts. In our view, the case of falsification of entries sought to be the AO in the assessment order cannot be said to be established from the seized records. Hence, it is observed in the given facts discussed supra that such conclusions drawn by the Assessing Officer on falsification of entries in books of accounts is unten Having said so, we maintain that, there are deficiencies in the books of accounts maintained by the Assessee leading to the difficulties in determining the correct assessable income considering the complex nature of the business carried out by the assessee. We find that this similar aspect was considered by the jurisdictional High Court in the Empee Distilleries Ltd Vs. ACIT (187 Taxman 188) was also involved in the same line of business as that of the assessee and similar allegation was levelled in relation to their old bottle purchases. It is seen that, the Hon’ble High Court had denounced the AO’s action of adding the entire value of purchases and instead estimated the disallowance at 10%. Following the decision (supra), we e the Ld CIT(A) action to the extent that there were accounting deficiencies in the books of accounts viz (i) SAP entries were not properly handled, (ii) standard accounting procedures were not fully (iii) the purchases without GRNs lacked 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. books of accounts cannot be equated with falsification of entries in the books of accounts. In our opinion, in a given case, if corroborated, the e search can be used to make addition(s) in the hands of the assessee, but it cannot alone be taken as conclusive proof to allege falsification of entries in the books of accounts. In our view, the case of falsification of entries sought to be the AO in the assessment order cannot be said to be established from the seized records. Hence, it is observed in the given facts discussed supra that such conclusions drawn by the Assessing Officer on falsification of entries in books of accounts is untenable. Having said so, we maintain that, there are deficiencies in the books of accounts maintained by the Assessee leading to the difficulties in determining the correct assessable income considering the complex sessee. We find that this similar aspect was considered by the jurisdictional High Court in the Empee Distilleries Ltd Vs. ACIT (187 Taxman 188), which was also involved in the same line of business as that of the assessee s levelled in relation to their old bottle purchases. It is seen that, the Hon’ble High Court had denounced the AO’s action of adding the entire value of purchases and instead estimated the disallowance at 10%. Following the decision (supra), we e the Ld CIT(A) action to the extent that there were accounting deficiencies in the books of accounts viz (i) SAP entries were not properly handled, (ii) standard accounting procedures were not fully lacked proper Printed from counselvise.com documentation, and therefore on these counts sustain the action of the Ld. CIT(A) in rejecting the books of accounts and estimating the profits of the assessee. The relevant findings of Ld.CIT(A) as partly countenanced by us supra, a “6.2.19 During the course of the appellate proceedings, the AR, along with the representatives of the appellant company, provided an explanation of the actual events and the accounting process related to the purchase of old bottles from the vendors. The old bottles are purchased routinely in the regular course of business. The use of these bottle undergo reconditioning for reuse, involves several steps to ensure that the bottles meet industry standards for hygiene, safety, and regulatory com are still in good condition from those that are damaged and cannot be reused. The bottles undergo an inspection process to assess their condition. Bottles with cracks, chips, or other defects are disca cleaned and sanitized before re substances or contamination inside the bottles. remove any remaining liquids, labels, or external dirt. This is through a mechanical washing process. The bottles are then sanitized to remove any bacteria or contaminants. This is typically done using high water, steam, or chemical sanitizers that are safe for food After cleaning and sanitizing, the bottles are thoroughly dried to avoid any moisture retention that could affect the new contents. 6.2.20 In this process, there are instances where the bottles, being fragile, break, resulting in a significant reduction in the numb refilling. This, in turn, impacts the overall production estimates. In such situations, to meet the marketing demand, the appellant company is compelled to replace the rejected bottles by sourcing additional old bottles from the vendors on emergency situations. This was done by overlooking the usual purchase procedures to fulfil the daily production requirements. In view of this recurrent event happening in this line of business, the AR has contended that emergency purchases ef business requirements. Therefore, it has been claimed that these kinds of purchases cannot be termed as “bogus” and further claimed that the disallowance of Rs. 3,13,75,315/ Rs.56,41,82,236/- hands of the appellant company alleged Old Bottle purchases were properly debited to stock account and issues for production were credited. Also, the AR stated that, the bottles that were said to be bogus were also consumed in productio even though the bottles were purchased without following the regular procedures which are said to be bogus, whereas in reality, these were consumed in production requiring no disallowance. 6.2.21 The undersigned has caref supporting documents and arguments advanced by the AR during the course of ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 19 :: documentation, and therefore on these counts sustain the action of the Ld. CIT(A) in rejecting the books of accounts and estimating the profits of the assessee. The relevant findings of Ld.CIT(A) as partly countenanced by us supra, are as under: During the course of the appellate proceedings, the AR, along with the representatives of the appellant company, provided an explanation of the actual events and the accounting process related to the purchase of old bottles vendors. The old bottles are purchased routinely in the regular course of business. The use of these bottle undergo reconditioning for reuse, involves several steps to ensure that the bottles meet industry standards for hygiene, safety, and regulatory compliance. The bottles are sorted to separate those that are still in good condition from those that are damaged and cannot be reused. The bottles undergo an inspection process to assess their condition. Bottles with cracks, chips, or other defects are discarded. Bottles that pass the inspection are cleaned and sanitized before re-use. This ensures that there are no foreign substances or contamination inside the bottles. The bottles are washed to remove any remaining liquids, labels, or external dirt. This is through a mechanical washing process. The bottles are then sanitized to remove any bacteria or contaminants. This is typically done using high water, steam, or chemical sanitizers that are safe for food-grade packaging. ing and sanitizing, the bottles are thoroughly dried to avoid any moisture retention that could affect the new contents. In this process, there are instances where the bottles, being fragile, break, resulting in a significant reduction in the number of bottles available for refilling. This, in turn, impacts the overall production estimates. In such situations, to meet the marketing demand, the appellant company is compelled to replace the rejected bottles by sourcing additional old bottles from the vendors on emergency situations. This was done by overlooking the usual purchase procedures to fulfil the daily production requirements. In view of this recurrent event happening in this line of business, the AR has contended that emergency purchases effected by the appellant company was only to meet its business requirements. Therefore, it has been claimed that these kinds of purchases cannot be termed as “bogus” and further claimed that the Rs. 3,13,75,315/- & Rs. 37,97,84,300/- for the AY 2020 & Rs. 58,23,45,992/-for the AY(s) 2021-22 & 2022 hands of the appellant company is not justified. Further, the AR stated that, the alleged Old Bottle purchases were properly debited to stock account and issues for production were credited. Also, the AR stated that, the bottles that were said to be bogus were also consumed in production. Further, the AR submitted that even though the bottles were purchased without following the regular procedures which are said to be bogus, whereas in reality, these were consumed in production requiring no disallowance. The undersigned has carefully considered the written submission, supporting documents and arguments advanced by the AR during the course of 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. documentation, and therefore on these counts sustain the action of the Ld. CIT(A) in rejecting the books of accounts and estimating the profits of the assessee. The relevant re as under:- During the course of the appellate proceedings, the AR, along with the representatives of the appellant company, provided an explanation of the actual events and the accounting process related to the purchase of old bottles vendors. The old bottles are purchased routinely in the regular course of business. The use of these bottle undergo reconditioning for reuse, involves several steps to ensure that the bottles meet industry standards for hygiene, pliance. The bottles are sorted to separate those that are still in good condition from those that are damaged and cannot be reused. The bottles undergo an inspection process to assess their condition. Bottles with rded. Bottles that pass the inspection are use. This ensures that there are no foreign The bottles are washed to remove any remaining liquids, labels, or external dirt. This is usually done through a mechanical washing process. The bottles are then sanitized to remove any bacteria or contaminants. This is typically done using high-pressure grade packaging. ing and sanitizing, the bottles are thoroughly dried to avoid any In this process, there are instances where the bottles, being fragile, er of bottles available for refilling. This, in turn, impacts the overall production estimates. In such situations, to meet the marketing demand, the appellant company is compelled to replace the rejected bottles by sourcing additional old bottles from their vendors on emergency situations. This was done by overlooking the usual purchase procedures to fulfil the daily production requirements. In view of this recurrent event happening in this line of business, the AR has contended that fected by the appellant company was only to meet its business requirements. Therefore, it has been claimed that these kinds of purchases cannot be termed as “bogus” and further claimed that the AY 2020-21 and 22 & 2022-23 in the is not justified. Further, the AR stated that, the alleged Old Bottle purchases were properly debited to stock account and issues for production were credited. Also, the AR stated that, the bottles that were said n. Further, the AR submitted that even though the bottles were purchased without following the regular procedures which are said to be bogus, whereas in reality, these were consumed ully considered the written submission, supporting documents and arguments advanced by the AR during the course of Printed from counselvise.com appellate proceedings, with respect to the process involved in the bottle purchase in the regular course as well as sourced on emergency basi from the documents presented before the undersigned that the purchase of bottles either following the normal process or sourced on emergency basis without GRN, both were reflected as debit entry in stock in the SAP Software, although it was a ma purchased without GRN numbers. The appellant’s contention is that the stock debits were made for both kind of purchases in the SAP, evidences that the same were consumed in the production and hence cann the other hand, there seems to be accounting anomalies in as much as classification of incorrect offset account such as “Stock_PackMtrl Bottle”, “Consumption-Bottles\" and \"Cost of Goods Sold accounting anomalies, it can be reasonable construed that the books does not reflect the true affairs of the appellant company. 6.2.22 Further, t Officer nor the AO has made any specific findings that the appellant has utilised the unaccounted income generated through alleged bogus purchases of old bottles in the form of unaccounted application of such income. During the course of the search conducted in the case of the appellant company and all other connected entities including the Managing Director and other key persons who were also subjected to search, the search team quantified an approximate amount of Rs. 392 Crores as bogus purchases made by the appellant during the FY(s) 2012-13 to 2022 Investigation officer nor the AO were able to identify the corresponding application of the quantified bogus purchases in the form of any unaccounted asset or unaccounted expenditure or unaccounted investments. assessment order, the AO has treated the purchases being held as bogus and disallowed the same. As per the discussion made supra, the appellant was able to demonstrate the necessity to purchase old bottles by overlooking the regular purchase procedures. Therefore, the purchases made by overlooking the regular procedure also requires to be regularised. As per the evidences found, it cannot be ruled out that, there existed purchases not utilised for business purposes too. 6.2.23 As eviden treated the amount(s) 2020-21 and Rs.56,41,82,236/ 2022-23 being the bogus purchases as income of contended that if the disallowance of alleged bogus purchases made by the AO is considered, the resultant net profit would be an unreasonable net profit which cannot be achieved in the kind of business of the appellant company. The has drawn the attention of the undersigned to the fact that the appellant company had already admitted a higher net profit by comparing with companies in the same line of business. 6.2.24 The undersigned on account of the detailed discussion made supr of the view that as the actual profits cannot be reliably determined due to these discrepancies in the books, the based on the current books of accounts. The non ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 20 :: appellate proceedings, with respect to the process involved in the bottle purchase in the regular course as well as sourced on emergency basi from the documents presented before the undersigned that the purchase of bottles either following the normal process or sourced on emergency basis without GRN, both were reflected as debit entry in stock in the SAP Software, although it was a manual entry in the SAP software in the case of bottles purchased without GRN numbers. The appellant’s contention is that the stock debits were made for both kind of purchases in the SAP, evidences that the same were consumed in the production and hence cannot be rejected in toto. On the other hand, there seems to be accounting anomalies in as much as classification of incorrect offset account such as “Stock_PackMtrl Bottle”, Bottles\" and \"Cost of Goods Sold-FG,\" On observing these omalies, it can be reasonable construed that the books does not reflect the true affairs of the appellant company. Further, the undersigned observes that neither the Investigation Officer nor the AO has made any specific findings that the appellant has utilised the unaccounted income generated through alleged bogus purchases of old bottles in the form of unaccounted application of such income. During the course of the search conducted in the case of the appellant company and all ted entities including the Managing Director and other key persons who were also subjected to search, the search team quantified an approximate amount of Rs. 392 Crores as bogus purchases made by the appellant during the 13 to 2022-23. It is significant to bring on record that neither the Investigation officer nor the AO were able to identify the corresponding application of the quantified bogus purchases in the form of any unaccounted asset or unaccounted expenditure or unaccounted investments. As evident in the assessment order, the AO has treated the purchases being held as bogus and disallowed the same. As per the discussion made supra, the appellant was able to demonstrate the necessity to purchase old bottles by overlooking the regular ase procedures. Therefore, the purchases made by overlooking the regular procedure also requires to be regularised. As per the evidences found, it cannot be ruled out that, there existed purchases not utilised for business purposes too. As evident in the order passed by the AO, it can be seen that the AO treated the amount(s) of Rs. 3, 13,75,315/- & Rs. 37,97,84,300/ 21 and Rs.56,41,82,236/- & Rs. 58,23,45,992/-for the AY(s) 2021 being the bogus purchases as income of the appellant. The AR contended that if the disallowance of alleged bogus purchases made by the AO is considered, the resultant net profit would be an unreasonable net profit which cannot be achieved in the kind of business of the appellant company. The has drawn the attention of the undersigned to the fact that the appellant company had already admitted a higher net profit by comparing with companies in the same line of business. The undersigned on account of the detailed discussion made supr of the view that as the actual profits cannot be reliably determined due to these discrepancies in the books, the taxable income cannot be accurately determined based on the current books of accounts. The non-compliance with basic 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. appellate proceedings, with respect to the process involved in the bottle purchase in the regular course as well as sourced on emergency basis. As seen from the documents presented before the undersigned that the purchase of bottles either following the normal process or sourced on emergency basis without GRN, both were reflected as debit entry in stock in the SAP Software, nual entry in the SAP software in the case of bottles purchased without GRN numbers. The appellant’s contention is that the stock debits were made for both kind of purchases in the SAP, evidences that the ot be rejected in toto. On the other hand, there seems to be accounting anomalies in as much as classification of incorrect offset account such as “Stock_PackMtrl Bottle”, FG,\" On observing these omalies, it can be reasonable construed that the books does not he undersigned observes that neither the Investigation Officer nor the AO has made any specific findings that the appellant company has utilised the unaccounted income generated through alleged bogus purchases of old bottles in the form of unaccounted application of such income. During the course of the search conducted in the case of the appellant company and all ted entities including the Managing Director and other key persons who were also subjected to search, the search team quantified an approximate amount of Rs. 392 Crores as bogus purchases made by the appellant during the nificant to bring on record that neither the Investigation officer nor the AO were able to identify the corresponding application of the quantified bogus purchases in the form of any unaccounted As evident in the assessment order, the AO has treated the purchases being held as bogus and disallowed the same. As per the discussion made supra, the appellant was able to demonstrate the necessity to purchase old bottles by overlooking the regular ase procedures. Therefore, the purchases made by overlooking the regular procedure also requires to be regularised. As per the evidences found, it cannot be ruled out that, there existed purchases not utilised for business purposes too. t in the order passed by the AO, it can be seen that the AO & Rs. 37,97,84,300/- for the AY for the AY(s) 2021-22 & the appellant. The AR contended that if the disallowance of alleged bogus purchases made by the AO is considered, the resultant net profit would be an unreasonable net profit which cannot be achieved in the kind of business of the appellant company. The AR has drawn the attention of the undersigned to the fact that the appellant company had already admitted a higher net profit by comparing with companies The undersigned on account of the detailed discussion made supra, is of the view that as the actual profits cannot be reliably determined due to these taxable income cannot be accurately determined compliance with basic Printed from counselvise.com accounting norms, s further substantiates the claim that the Therefore, the books of accounts in this case should indeed be Section 145(3) for the following reasons:  Inconsistent accounting treatments accounts for bogus transactions.  Handling of SAP entries documentation (e.g., missing GRN, no purchase orders).  Failure to comply with stand purchases.  The inability to substantiate purchases with proper documentation significantly impacts the reliability of the accounts. 6.2.25 Based on the above factors, the undersigned holds that the current books of accounts cannot be considered reliable income for the relevant assessment years. Therefore, as per the provisions of section 145(3) of the Act, the undersigned has the authority to books of accounts taxable income of the appellant company for the year under consideration. undersigned, in order to set right the issues related in determination of the profit element embedded in such purchases rejects th accordance to section 145(3) of the Act. 6.2.26 At this juncture it is appropriate to rely upon the decisions rendered by the Hon’ble Allahabad High Court in the case of v. CIT(A) (2012) 341 ITR 588 (All concurred with the decision of the ITAT in upholding the rejection of books of account maintained by the assessee when the same are not properly maintained. The relevant para of the judgment is extracted below for ready reference: “12. For the assessment year under consideration, the assessee has shown the G.P. rate 16.20 per cent. as against 33.44 per cent. in the previous assessment year. Thus, during the assessment year under consideration, the G.P. rate was low. The Commissioner of Income circumstances pertaining to the manufacturing cost and selling price. The Assessing Officer has taken the G.P. rate at 27 per cent. on the estimated sale, which is lower in comparison to earlier of account were not properly maintained and the vouchers pertaining to the consumable items were not available for verification, then we find justification for rejection of the books of accounts by the Assessing Off account rejected, then there is no option before the Assessing Officer except to estimate the sale and G. P. rate which he determined by taking by comparative figure of the assessee for the previous assessment year. The Tribunal has already given the partial relief and in the facts and circumstances of the case, there is no scope to give any further relief specially when the estimation is a question of fact. The Tribunal is a final fact finding authority as per the ratio laid ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 21 :: accounting norms, such as proper documentation and accurate entry of invoices, further substantiates the claim that the books do not reflect true income Therefore, the books of accounts in this case should indeed be rejected under for the following reasons: nconsistent accounting treatments, such as the use of incorrect offset accounts for bogus transactions. Handling of SAP entries to process invoices without valid supporting documentation (e.g., missing GRN, no purchase orders). Failure to comply with standard accounting procedures The inability to substantiate purchases with proper documentation significantly impacts the reliability of the accounts. Based on the above factors, the undersigned holds that the current of accounts cannot be considered reliable for determining the true taxable income for the relevant assessment years. Therefore, as per the provisions of section 145(3) of the Act, the undersigned has the authority to books of accounts and determine the taxable income to ascertain the true taxable income of the appellant company for the year under consideration. undersigned, in order to set right the issues related in determination of the profit element embedded in such purchases rejects the books of accounts in accordance to section 145(3) of the Act. At this juncture it is appropriate to rely upon the decisions rendered by the Hon’ble Allahabad High Court in the case of Shri Venkteshwar Sugar Mills v. CIT(A) (2012) 341 ITR 588 (All) wherein the Hon’ble High Court has concurred with the decision of the ITAT in upholding the rejection of books of account maintained by the assessee when the same are not properly maintained. The relevant para of the judgment is extracted below for ready For the assessment year under consideration, the assessee has shown the G.P. rate 16.20 per cent. as against 33.44 per cent. in the previous assessment year. Thus, during the assessment year under consideration, the G.P. rate was Commissioner of Income-tax (Appeals) discussed the facts and circumstances pertaining to the manufacturing cost and selling price. The Assessing Officer has taken the G.P. rate at 27 per cent. on the estimated sale, which is lower in comparison to earlier year i.e. 33.44 per cent. When the books of account were not properly maintained and the vouchers pertaining to the consumable items were not available for verification, then we find justification for rejection of the books of accounts by the Assessing Officer Once the books of account rejected, then there is no option before the Assessing Officer except to estimate the sale and G. P. rate which he determined by taking by comparative figure of the assessee for the previous assessment year. The Tribunal has already given the partial relief and in the facts and circumstances of the case, there is no scope to give any further relief specially when the estimation is a question of fact. The Tribunal is a final fact finding authority as per the ratio laid 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. uch as proper documentation and accurate entry of invoices, books do not reflect true income. rejected under , such as the use of incorrect offset to process invoices without valid supporting for genuine The inability to substantiate purchases with proper documentation, which Based on the above factors, the undersigned holds that the current for determining the true taxable income for the relevant assessment years. Therefore, as per the provisions of section 145(3) of the Act, the undersigned has the authority to reject these ermine the taxable income to ascertain the true taxable income of the appellant company for the year under consideration. The undersigned, in order to set right the issues related in determination of the e books of accounts in At this juncture it is appropriate to rely upon the decisions rendered Shri Venkteshwar Sugar Mills wherein the Hon’ble High Court has concurred with the decision of the ITAT in upholding the rejection of books of account maintained by the assessee when the same are not properly maintained. The relevant para of the judgment is extracted below for ready For the assessment year under consideration, the assessee has shown the G.P. rate 16.20 per cent. as against 33.44 per cent. in the previous assessment year. Thus, during the assessment year under consideration, the G.P. rate was tax (Appeals) discussed the facts and circumstances pertaining to the manufacturing cost and selling price. The Assessing Officer has taken the G.P. rate at 27 per cent. on the estimated sale, year i.e. 33.44 per cent. When the books of account were not properly maintained and the vouchers pertaining to the consumable items were not available for verification, then we find justification icer Once the books of account rejected, then there is no option before the Assessing Officer except to estimate the sale and G. P. rate which he determined by taking by comparative figure of the assessee for the previous assessment year. The Tribunal has already given the partial relief and in the facts and circumstances of the case, there is no scope to give any further relief specially when the estimation is a question of fact. The Tribunal is a final fact finding authority as per the ratio laid Printed from counselvise.com down in the case of Duty [2002] 253 ITR 13. In the instant case, the addition is made on the estimate basis, which is a question of fact as per the Lines v. Registrar, ITAT that the application of G.P. rate on estimate basis is a question of fact. The hon'ble Supreme Court in the case of Ltd . [2003] 261 ITR material for the purpose of tax on estimate basis is a question of fact. Similar views were expressed in the following cases : …. 14. In view of the above, no substantial question of law is emerging from the impugned order. Hence, we find no reason to interfere with the impugned order passed by the Tribunal which is hereby sustained along with reasons mentioned therein.” 6.2.27 Further the Hon’ble Punjab & Haryana High Court in the case of Rice Mills v. CIT (2023) 153 taxmann.com 686 (P&H) made, by rejecting the books of account of the assessee in the absence of details of stock. The relevant para of reference: “9. As per above Section, the income has to be computed in accordance with the method of accountancy followed by an assessee method has to be followed keeping in view the the Central Government from time to time. In the absence of qualitative details, it is quite difficult to examine the sales of the assessee. The higher quality of a rice can be shown as sold at a lower rate in the bills. The maintenance of the details. Thus, the addition of Rs. 2,00,000/ sale of rice has rightly been made. 10. Thus, order dated 28 Tribunal, Chandigarh Bench 'F does not require any i 6.2.28 In addition the Hon’ble Calcutta High Court in the case of Kumar Roy v. CIT (1994) 206 ITR 306 (Cal) stock accounts is a substantial defect justifying an inference that the account were maintained in a manner from which the true and correct profits were not deducible. Relevant para of the judgment is extracted below for ready reference: “We would have been impressed with the contentions if the assessee had maintained the stock boo fool proof, no addition could be warranted. There are certain trades, specially in the retail market, where stock tally may be impracticable and the assessee can reasonably advance the plea that the a manner possible in the special circumstances of the case. But such is not the case with the assessee. The assessee deals in wholesale spices. Failure to ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 22 :: the case of Kamala Ganapathy Subramaniam v. Collector of Estate ITR 692/121 Taxman 615 (SC) . In the instant case, the addition is made on the estimate basis, which is a question of fact as per the ratio laid down in the case of Registrar, ITAT [2011] 336 ITR 149 (Orissa) , wherein it was observed that the application of G.P. rate on estimate basis is a question of fact. The hon'ble Supreme Court in the case of CIT v. Indo Nippon Chemicals Co. ITR 275/130 Taxman 179 (SC) observed that valuation of raw material for the purpose of tax on estimate basis is a question of fact. Similar views were expressed in the following cases : In view of the above, no substantial question of law is emerging from the impugned order. Hence, we find no reason to interfere with the impugned order passed by the Tribunal which is hereby sustained along with reasons mentioned her the Hon’ble Punjab & Haryana High Court in the case of Rice Mills v. CIT (2023) 153 taxmann.com 686 (P&H) has upheld the estimation made, by rejecting the books of account of the assessee in the absence of details of stock. The relevant para of the judgment is extracted below for ready As per above Section, the income has to be computed in accordance with the method of accountancy followed by an assessee i.e. cash or mercantile. Such method has to be followed keeping in view the accounting standard notified by the Central Government from time to time. In the absence of qualitative details, it is quite difficult to examine the sales of the assessee. The higher quality of can be shown as sold at a lower rate in the bills. There was flaw in the maintenance of the details. Thus, the addition of Rs. 2,00,000/- has rightly been made. Thus, order dated 28-3-2013 (A-3) passed by Income- Tribunal, Chandigarh Bench 'F does not require any interference by this Court.” In addition the Hon’ble Calcutta High Court in the case of Kumar Roy v. CIT (1994) 206 ITR 306 (Cal) has held that non maintenance of stock accounts is a substantial defect justifying an inference that the account were maintained in a manner from which the true and correct profits were not deducible. Relevant para of the judgment is extracted below for ready reference: “We would have been impressed with the contentions if the assessee had maintained the stock book showing stock tally. In that case, the accounts being fool proof, no addition could be warranted. There are certain trades, specially in the retail market, where stock tally may be impracticable and the assessee can reasonably advance the plea that the accounts have been maintained in the best manner possible in the special circumstances of the case. But such is not the case with the assessee. The assessee deals in wholesale spices. Failure to 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. Collector of Estate In the instant case, the addition is made on the estimate basis, which is a ratio laid down in the case of Utkal Road 149 (Orissa) , wherein it was observed that the application of G.P. rate on estimate basis is a question of fact. The Chemicals Co. observed that valuation of raw material for the purpose of tax on estimate basis is a question of fact. Similar In view of the above, no substantial question of law is emerging from the impugned order. Hence, we find no reason to interfere with the impugned order passed by the Tribunal which is hereby sustained along with reasons mentioned her the Hon’ble Punjab & Haryana High Court in the case of Mahavir has upheld the estimation made, by rejecting the books of account of the assessee in the absence of the judgment is extracted below for ready As per above Section, the income has to be computed in accordance with the cash or mercantile. Such accounting standard notified by the Central Government from time to time. In the absence of qualitative details, it is quite difficult to examine the sales of the assessee. The higher quality of re was flaw in the on account of -tax Appellate nterference by this Court.” In addition the Hon’ble Calcutta High Court in the case of Amiya has held that non maintenance of stock accounts is a substantial defect justifying an inference that the accounts were maintained in a manner from which the true and correct profits were not deducible. Relevant para of the judgment is extracted below for ready reference: “We would have been impressed with the contentions if the assessee had k showing stock tally. In that case, the accounts being fool proof, no addition could be warranted. There are certain trades, specially in the retail market, where stock tally may be impracticable and the assessee can ccounts have been maintained in the best manner possible in the special circumstances of the case. But such is not the case with the assessee. The assessee deals in wholesale spices. Failure to Printed from counselvise.com maintain stock accounts is a substantial defect in the account inference that the accounts are maintained in a manner from which the true and correct profits are not deducible. Nor is it contended at any stage that the gross profit rate shown is the market norm. Therefore, in our view, the Tribunal wa was made in the case and the addition made on such estimate was quite reasonable and fair taking a cumulative view of all the factors the case presents. Moreover, the Tribunal's finding that the assessee's rate of the market rate which is ten per cent. is a finding of fact which the assessee has not challenged.” 6.2.29 The Hon’ble jurisdictional High Court has held in the case of CIT v. Marg Ltd. [2017] 84 taxmann.com 52 (Madras) has held that disallowance of expenses was not justified without rejecting the books of accounts under Section 145(3). 6.2.30 The jurisdictional tribunal vide its order in ITA No 366/Chny/2023 dated 09.08.2023 has upheld the decision of the Commissioner of Income Tax (Appeal) in rejecting the books of accounts in the case of M/s. Beach Mineraals Company. The ratio of the above judgments are squarely applicable to the facts of the Appellant’s case.” 13. In light of our finding rendered at para 12 supra, we now turn our attention to the estimation of the profits. It is seen that the turnover is the only undisputed figure between the parties and therefore in our thoughtful consideration, it would be suitable to adopt and apply reasonable profit ratio to the turnover reported in the audited financials for arriving at the assessable income of the assessee. For this, the Ld. AR urged us to consider the comparative analysis of other similarly placed entities and also the average profits earned by the assessee itself in the comparable years. It is seen that, similarly placed entities such as KALS Distilleries Ltd, Enrica Enterprises Pvt Ltd, Shiva Tillers Pvt Ltd had reported net profit margins in the range of 1% to 6% and the profits reported by the assessee ranged between AYs 2019-20 to 2022-23 ranged from 5.38% to 7.69%. The Ld. AR further pleaded that, there was a significant reduction in profit margins in this industry on account ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 23 :: maintain stock accounts is a substantial defect in the accounts justifying an inference that the accounts are maintained in a manner from which the true and correct profits are not deducible. Nor is it contended at any stage that the gross profit rate shown is the market norm. Therefore, in our view, the Tribunal was right in holding that the estimate which was made in the case and the addition made on such estimate was quite reasonable and fair taking a cumulative view of all the factors the case presents. Moreover, the Tribunal's finding that the assessee's rate of gross profit is below the market rate which is ten per cent. is a finding of fact which the assessee has The Hon’ble jurisdictional High Court has held in the case of CIT v. Ltd. [2017] 84 taxmann.com 52 (Madras) has held that disallowance of expenses was not justified without rejecting the books of accounts under Section 145(3). he jurisdictional tribunal vide its order in ITA No 366/Chny/2023 .2023 has upheld the decision of the Commissioner of Income Tax (Appeal) in rejecting the books of accounts in the case of M/s. Beach Mineraals The ratio of the above judgments are squarely applicable to the facts of the Appellant’s case.” In light of our finding rendered at para 12 supra, we now turn our attention to the estimation of the profits. It is seen that the turnover is the only undisputed figure between the parties and therefore in our thoughtful consideration, it would e to adopt and apply reasonable profit ratio to the turnover reported in the audited financials for arriving at the assessable income of the assessee. For this, the Ld. AR urged us to consider the comparative analysis of other similarly also the average profits earned by the assessee itself in the comparable years. It is seen that, similarly placed entities such as KALS Distilleries Ltd, Enrica Enterprises Pvt Ltd, Shiva Tillers Pvt Ltd had reported net profit margins to 6% and the profits reported by the assessee ranged between 23 ranged from 5.38% to 7.69%. The Ld. AR further pleaded that, there was a significant reduction in profit margins in this industry on account 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. s justifying an inference that the accounts are maintained in a manner from which the true and correct profits are not deducible. Nor is it contended at any stage that the gross s right in holding that the estimate which was made in the case and the addition made on such estimate was quite reasonable and fair taking a cumulative view of all the factors the case presents. gross profit is below the market rate which is ten per cent. is a finding of fact which the assessee has The Hon’ble jurisdictional High Court has held in the case of CIT v. Ltd. [2017] 84 taxmann.com 52 (Madras) has held that the AO's disallowance of expenses was not justified without rejecting the books of he jurisdictional tribunal vide its order in ITA No 366/Chny/2023 .2023 has upheld the decision of the Commissioner of Income Tax (Appeal) in rejecting the books of accounts in the case of M/s. Beach Mineraals The ratio of the above judgments are squarely applicable to the facts In light of our finding rendered at para 12 supra, we now turn our attention to the estimation of the profits. It is seen that the turnover is the only undisputed figure between the parties and therefore in our thoughtful consideration, it would e to adopt and apply reasonable profit ratio to the turnover reported in the audited financials for arriving at the assessable income of the assessee. For this, the Ld. AR urged us to consider the comparative analysis of other similarly also the average profits earned by the assessee itself in the comparable years. It is seen that, similarly placed entities such as KALS Distilleries Ltd, Enrica Enterprises Pvt Ltd, Shiva Tillers Pvt Ltd had reported net profit margins to 6% and the profits reported by the assessee ranged between 23 ranged from 5.38% to 7.69%. The Ld. AR further pleaded that, there was a significant reduction in profit margins in this industry on account Printed from counselvise.com of the nationwide lockdown imp affected both the production as well as sales reduction in the prices of IMFL (Indian Made Foreign Liquor) by the purchasing agency, TASMAC, and therefore wants us to estimate the profits at 8% of the turnov examined the foregoing figures & data along with the contentions of the assessee and having regard to the decision of jurisdictional High Court in the case of Distilleries Ltd Vs. ACIT (supra), relevant findings of the Ld. CIT(A) are noted to be as under: “6.2.31 Now, after having rejected the books of accounts, undersigned is, the next question that arise is what will be the profits that can be attributable as income of the appellant company for the purpose of taxation with respect to the disallowance of bogus expenses relating the purchase of old bottles. 6.2.32 At this juncture, it is significant to rely upon the decision of the jurisdictional tribunal in the case of Distilleries Ltd (a company that is in the same line of business as that of the appellant company) vide its order in 628,686,629,684,630, 688/Mds/2007 dated 29.08.2008 ITAT Chennai has held as under. “Next, we will consider the appeals of the Revenue and the assessee for the assessment year 1999 628/Mds/2007 respectively. Similar to the assessment year common issue raised by the Revenue as well as by the assessee for the impugned assessment year 1999 against the purchase of old bottles. The Assessing Officer has made a disallowance and addition of Rs.3 85,41,680/- by the CIT(Appeals). The CIT(Appeals) has modified disallowance to 10% of the purchase of old bottles, as done for earlier assessment year 1998 Officer in para 5 of his order. The facts and circumstances relating to the issue are just the same considered for the earlier assessment year 1998 On a careful consideration of the issue, we have upheld the order of the CIT(Appeals) for the preceding assessment the disallowance of 10%. Following our findings and order for the said earlier assessment year, we uphold the decision of CIT (Appeals) on the point and reject the grounds raised by the Revenue as well as by the assessee 6.2.33 Further, the Hon’ble Madras High Court in the above case Empee Distilleries Ltd Vs. ACIT, Central Circle1(2) [2010]187 Taxman 188 (Madras) has held as under with respect to the inflation of purchase expenditure as under. ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 24 :: of the nationwide lockdown imposed during the breakout of COVID pandemic which affected both the production as well as sales reduction in the prices of IMFL (Indian Made Foreign Liquor) by the purchasing agency, TASMAC, and therefore wants us to estimate the profits at 8% of the turnover. We find that, the Ld. CIT(A) had examined the foregoing figures & data along with the contentions of the assessee and having regard to the decision of jurisdictional High Court in the case of Distilleries Ltd Vs. ACIT (supra), he had estimated the profit at 10%. The relevant findings of the Ld. CIT(A) are noted to be as under:- Now, after having rejected the books of accounts, the issue before the , the next question that arise is what will be the profits that can utable as income of the appellant company for the purpose of taxation with respect to the disallowance of bogus expenses relating the purchase of old At this juncture, it is significant to rely upon the decision of the tribunal in the case of ACIT Central Circle -1(2) Vs. M/s. Empee (a company that is in the same line of business as that of the appellant company) vide its order in ITA No. 506, 507, 627, 628,686,629,684,630, 688/Mds/2007 dated 29.08.2008 wherein the Hon’ble ITAT Chennai has held as under. Next, we will consider the appeals of the Revenue and the assessee for the assessment year 1999-2000 in I.T.A. No. 507/Mds/2007 and I.T.A. No. 628/Mds/2007 respectively. Similar to the assessment year common issue raised by the Revenue as well as by the assessee for the impugned assessment year 1999-2000 is the addition made and sustained against the purchase of old bottles. The Assessing Officer has made a disallowance and addition of Rs.3,58,19,987/- which is modified to Rs by the CIT(Appeals). The CIT(Appeals) has modified disallowance to 10% of the purchase of old bottles, as done for earlier assessment year 1998-99. The issue is discussed by the IN COME Assessing para 5 of his order. The facts and circumstances relating to the issue are just the same considered for the earlier assessment year 1998 On a careful consideration of the issue, we have upheld the order of the CIT(Appeals) for the preceding assessment year 1998-99, thereby confirming the disallowance of 10%. Following our findings and order for the said earlier assessment year, we uphold the decision of CIT (Appeals) on the point and reject the grounds raised by the Revenue as well as by the assessee Further, the Hon’ble Madras High Court in the above case Empee Distilleries Ltd Vs. ACIT, Central Circle1(2) [2010]187 Taxman 188 has held as under with respect to the inflation of purchase expenditure 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. osed during the breakout of COVID pandemic which affected both the production as well as sales reduction in the prices of IMFL (Indian Made Foreign Liquor) by the purchasing agency, TASMAC, and therefore wants us er. We find that, the Ld. CIT(A) had examined the foregoing figures & data along with the contentions of the assessee and having regard to the decision of jurisdictional High Court in the case of Empee e profit at 10%. The the issue before the , the next question that arise is what will be the profits that can utable as income of the appellant company for the purpose of taxation with respect to the disallowance of bogus expenses relating the purchase of old At this juncture, it is significant to rely upon the decision of the 1(2) Vs. M/s. Empee (a company that is in the same line of business as that of the ITA No. 506, 507, 627, wherein the Hon’ble Next, we will consider the appeals of the Revenue and the assessee for the 2000 in I.T.A. No. 507/Mds/2007 and I.T.A. No. 628/Mds/2007 respectively. Similar to the assessment year 1998-99, the common issue raised by the Revenue as well as by the assessee for the 2000 is the addition made and sustained against the purchase of old bottles. The Assessing Officer has made a which is modified to Rs by the CIT(Appeals). The CIT(Appeals) has modified disallowance to 10% of the purchase of old bottles, as done for earlier 99. The issue is discussed by the IN COME Assessing para 5 of his order. The facts and circumstances relating to the issue are just the same considered for the earlier assessment year 1998-99. On a careful consideration of the issue, we have upheld the order of the 99, thereby confirming the disallowance of 10%. Following our findings and order for the said earlier assessment year, we uphold the decision of CIT (Appeals) on the point and reject the grounds raised by the Revenue as well as by the assessee”. Further, the Hon’ble Madras High Court in the above case M/s. Empee Distilleries Ltd Vs. ACIT, Central Circle1(2) [2010]187 Taxman 188 has held as under with respect to the inflation of purchase expenditure Printed from counselvise.com “In respect of the fi the old bottles, though for the sake of claim the relief was disputed before the authorities, yet the fact remained that such huge inflation had been accepted by the managing director of the compan 74.50 lakhs for taxation. It was also proved by the authorities below that a very huge purchase of old bottles had been made by the assessee through its employees. However, when questioned the employees had categorically admitted before the authorities that they were forced to sign on the dotted lines and, as such, there was no proof for such huge purchase forthcoming from the assessee. The proof adduced had been rejected as stated above. The Commissioner (Appeals) had rejected t cent as on the higher side, however, it was found with the available material that it was not possible to quantify the purchase inflation of old bottles with accurate precision and the disallowance of 10 per cent would meet of justice, and granted the relief in favour of the assessee barring the 10 per cent of disallowance.” 6.2.34 In the light of the decision of the jurisdictional High Court and the consistent decision taken for the earlier years by the undersigned appellate order(s) passed u/s 250 of the Act for the AY(s) 2017 2019-20, the undersigned is of the view that the disallowance to the extent of 10% would meet the ends of justice. business of manufacturing and sale of vary significantly based on several factors, including the type of liquor, brand positioning, production efficiency, distribution strategies, and regulatory conditions. During the course of appellate proceedings, the AR has provided the details of the net profit to turnover ratio as admitted in the financial statements of the appellant company for the AY(s) 2020 same is reproduced here as under. Sl No. Particulars as reported u/s 139 of the Act 1 Gross turnover 2 Gross profit reported 3 Net Profit reported as per books 4 % of net profit Average % of net profit 6.2.35 The AR, during the course of the appellate proceedings, has pleaded that there was a fall in profit for the relevant assessment year(s) more particularly AY 2022 the breakout of COVID pandemic whic sales reduction in the prices of IMFL (Indian Made Foreign Liquor) by the purchasing agency, TASMAC, has led to a significant reduction in the profit margin for the FY 2021 reduction, the AR has requested for consideration of a reduced percentage while ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 25 :: “In respect of the first question, the inflation of the purchase expenditure of the old bottles, though for the sake of claim the relief was disputed before the authorities, yet the fact remained that such huge inflation had been accepted by the managing director of the company, who offered a sum of Rs. 74.50 lakhs for taxation. It was also proved by the authorities below that a very huge purchase of old bottles had been made by the assessee through its employees. However, when questioned the employees had categorically d before the authorities that they were forced to sign on the dotted lines and, as such, there was no proof for such huge purchase forthcoming from the assessee. The proof adduced had been rejected as stated above. The Commissioner (Appeals) had rejected the claim of wastage of 4.50 per cent as on the higher side, however, it was found with the available material that it was not possible to quantify the purchase inflation of old bottles with accurate precision and the disallowance of 10 per cent would meet of justice, and granted the relief in favour of the assessee barring the 10 per cent of disallowance.” In the light of the decision of the jurisdictional High Court and the consistent decision taken for the earlier years by the undersigned appellate order(s) passed u/s 250 of the Act for the AY(s) 2017-18, 2018 20, the undersigned is of the view that the disallowance to the extent of 10% would meet the ends of justice. At the outset, the profit percentage in the manufacturing and sale of Indian Made Foreign Liquor (IMFL) vary significantly based on several factors, including the type of liquor, brand positioning, production efficiency, distribution strategies, and regulatory conditions. During the course of appellate proceedings, the AR has provided the net profit to turnover ratio as admitted in the financial statements of the appellant company for the AY(s) 2020-21 to 2022-23, the extract of the same is reproduced here as under. Particulars as reported u/s 139 2019-20 2020-21 2021-22 4019755197 4948770663/- 4331164415 Gross profit 1018627340 1342904502 1236791836 Net Profit reported as per 216197529 380487732 326693496 5.38 7.69 7.54 Average % of net 6.31 The AR, during the course of the appellate proceedings, has pleaded that there was a fall in profit for the relevant assessment year(s) more particularly AY 2022-23, on account of the nationwide lockdown imposed during the breakout of COVID pandemic which affected both the production as well as sales reduction in the prices of IMFL (Indian Made Foreign Liquor) by the purchasing agency, TASMAC, has led to a significant reduction in the profit margin for the FY 2021-22, relevant to AY 2022-23. On account o reduction, the AR has requested for consideration of a reduced percentage while 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. rst question, the inflation of the purchase expenditure of the old bottles, though for the sake of claim the relief was disputed before the authorities, yet the fact remained that such huge inflation had been y, who offered a sum of Rs. 74.50 lakhs for taxation. It was also proved by the authorities below that a very huge purchase of old bottles had been made by the assessee through its employees. However, when questioned the employees had categorically d before the authorities that they were forced to sign on the dotted lines and, as such, there was no proof for such huge purchase forthcoming from the assessee. The proof adduced had been rejected as stated above. he claim of wastage of 4.50 per cent as on the higher side, however, it was found with the available material that it was not possible to quantify the purchase inflation of old bottles with accurate precision and the disallowance of 10 per cent would meet the ends of justice, and granted the relief in favour of the assessee barring the 10 per In the light of the decision of the jurisdictional High Court and the consistent decision taken for the earlier years by the undersigned in the 18, 2018-19 & 20, the undersigned is of the view that the disallowance to the extent of At the outset, the profit percentage in the Indian Made Foreign Liquor (IMFL) can vary significantly based on several factors, including the type of liquor, brand positioning, production efficiency, distribution strategies, and regulatory conditions. During the course of appellate proceedings, the AR has provided the net profit to turnover ratio as admitted in the financial statements 23, the extract of the 2022-23 4331164415 4339734105 1236791836 1119511678 326693496 200910922 7.54 4.63 The AR, during the course of the appellate proceedings, has pleaded that there was a fall in profit for the relevant assessment year(s) more 23, on account of the nationwide lockdown imposed during h affected both the production as well as sales reduction in the prices of IMFL (Indian Made Foreign Liquor) by the purchasing agency, TASMAC, has led to a significant reduction in the profit 23. On account of this profit reduction, the AR has requested for consideration of a reduced percentage while Printed from counselvise.com estimating the net profit for the AY 2022 the turnover for the earlier years in the appellant company's case. The undersigned, on careful examination of this issue raised, including a review of the appellant's financial statements, observes that the turnover of Rs. 433,97,34,105/- for the year in question is consistent with that of previous years. In light of this, it is held reduction by TASMAC has materially affected the appellant’s income is not substantiated by the financial data and therefore is not considered. 6.2.36 Based on the above, it is observed that the turnover ratio for AYs 2019 the books of accounts, the undersigned by observing the judicial discipline(s) and in order to ensure equity and fairness, is of the view that an 10% of gross turnover Accordingly, the balance that requires to be considered in the hands of the appellant company for the years under consideration are quantified as under: Sl No. Particulars as reported u/s 139 of the Act 1 Gross turnover 2 Gross profit reported 3 Net Profit reported as per books 4 % of net profit 5. Balance that requires to be considered 6. % of turnover to be considered in the hands of the appellant =Rs.11,43,16,602 6.2.37 Thus, for the AY(s) 2020 expenditure to the extent of Rs. 11,43,16,602/ Rs.23,30,43,721/- against the disallowances contemplated by the AO in the assessment order(s) passed by the AO for the years under consideration. Accordingly, all the grounds raised by the appe bogus purchase of old bottles for the years under consideration are hereby treated as partly allowed account of bogus old bottle purchases as ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 26 :: estimating the net profit for the AY 2022-23, rather than the estimated 10 % of the turnover for the earlier years in the appellant company's case. The ed, on careful examination of this issue raised, including a review of the appellant's financial statements, observes that the turnover of Rs. for the year in question is consistent with that of previous years. In light of this, it is held that the plea raised by the AR that the price reduction by TASMAC has materially affected the appellant’s income is not substantiated by the financial data and therefore is not considered. Based on the above, it is observed that the average turnover ratio for AYs 2019-20 to 2022-231 stands at 6.31%. Having rejected the books of accounts, the undersigned by observing the judicial discipline(s) and in order to ensure equity and fairness, is of the view that an average rate of of gross turnover would be appropriate to be considered as the net profit. Accordingly, the balance that requires to be considered in the hands of the appellant company for the years under consideration are quantified as under: 2020-21 2021-22 494,87,70,663/- 433,11,64,415/- 134,29,04,502/- 123,67,91,836/- 38,04,87,732/- 32,66,93,496/- 7.69 7.54 10-7.69= 2.31% 10-7.54=2.46% 2.31% of 494,87,70,663 =Rs.11,43,16,602/- 2.46% of 433,11,64,415 =Rs.10,65,46,645/- =Rs.23,30,43,721 Thus, for the AY(s) 2020-21,2021-22 & 2022-23 the disallowances of expenditure to the extent of Rs. 11,43,16,602/- Rs. 10,65,46,645/ only needs to considered as bogus purchases of old bottles as against the disallowances contemplated by the AO in the assessment order(s) passed by the AO for the years under consideration. Accordingly, all the grounds raised by the appellant upon the issue of disallowance of expenditure towards bogus purchase of old bottles for the years under consideration are hereby partly allowed and the AO is directed to delete the addition made on account of bogus old bottle purchases as under. 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. 23, rather than the estimated 10 % of the turnover for the earlier years in the appellant company's case. The ed, on careful examination of this issue raised, including a review of the appellant's financial statements, observes that the turnover of Rs. for the year in question is consistent with that of previous that the plea raised by the AR that the price reduction by TASMAC has materially affected the appellant’s income is not substantiated by the financial data and therefore is not considered. average net profit-to- 231 stands at 6.31%. Having rejected the books of accounts, the undersigned by observing the judicial discipline(s) average rate of would be appropriate to be considered as the net profit. Accordingly, the balance that requires to be considered in the hands of the appellant company for the years under consideration are quantified as under:- 2022-23 433,97,34,105/- 111,95,11,678/- 20,09,10,922/- 4.63 10-4.63=5.37% 5.37 % of 433,97,34,105 Rs.23,30,43,721/- 23 the disallowances of Rs. 10,65,46,645/- & only needs to considered as bogus purchases of old bottles as against the disallowances contemplated by the AO in the assessment order(s) passed by the AO for the years under consideration. Accordingly, all the grounds llant upon the issue of disallowance of expenditure towards bogus purchase of old bottles for the years under consideration are hereby the addition made on Printed from counselvise.com Sl No. AY Amount added towards bogus old bottle purchases. ( In Rs.) 1 2020-21 Rs. 41,11,59,615 (Rs.37,97,84,300 / + Rs.3,13,75,315/ 2 2021-22 Rs.56,41,82,236/ 3. 2022-23 Rs.58,23,45,992/ 14. In our opinion, the Ld. CIT(A) had rightly followed the ratio decidendi laid down in the above decision (supra) for rejecting the books of accounts and estimating the profits of the assessee at 10%. We therefore see no reason to interfere with the same. Since the facts involved in the lead case of AY 2020-21 is common in AYs shall be followed mutatis mutandis as well. Hence, all the grounds raised by the assessee and the Revenue on this issue in AYs 2020 16. In absence of any change of facts and circumstances or position of law being pointed out by either party, we follow the above order passed by us in assessee’s own case (supra) for AY 2020 accordingly uphold the order of the Ld. CIT(A) on grounds raised by the assessee and Revenue on this issue stands dismissed. ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 27 :: Amount added towards bogus old bottle purchases. ( In Amount sustained as per the discussions ( in Rs.) Amount to be deleted (in Rs.) Rs. 41,11,59,615 (Rs.37,97,84,300 /- Rs.3,13,75,315/-) Rs.11,43,16,602/- Rs. Rs.56,41,82,236/- Rs.10,65,46,645/- Rs. 45,76,35,591/ Rs.58,23,45,992/- Rs.23,30,43,721/- Rs. 34,93,02,271/ In our opinion, the Ld. CIT(A) had rightly followed the ratio decidendi laid down in the above decision (supra) for rejecting the books of accounts and estimating the profits of the assessee at 10%. We therefore see no reason to interfere with the same. Since the facts involved in the lead case 21 is common in AYs 2021-22 & 2022-23, our foregoing findings mutatis mutandis in the appeals for AYs2021-22 & 2022 as well. Hence, all the grounds raised by the assessee and the Revenue on this issue in AYs 2020-21 to 2022-23 stands dismissed.” In absence of any change of facts and circumstances or position of law being pointed out by either party, we follow the above order passed by us in assessee’s own case (supra) for AY 2020-21 to 2022 accordingly uphold the order of the Ld. CIT(A) on this issue. Hence, the grounds raised by the assessee and Revenue on this issue stands 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. Amount to be deleted (in Rs.) Rs. 29,68,43,013/- Rs. 45,76,35,591/- Rs. 34,93,02,271/- In our opinion, the Ld. CIT(A) had rightly followed the ratio decidendi laid down in the above decision (supra) for rejecting the books of accounts and estimating the profits of the assessee at 10%. We therefore see no reason to interfere with the same. Since the facts involved in the lead case 23, our foregoing findings 22 & 2022-23 as well. Hence, all the grounds raised by the assessee and the Revenue on In absence of any change of facts and circumstances or position of law being pointed out by either party, we follow the above order passed 21 to 2022-23 and this issue. Hence, the grounds raised by the assessee and Revenue on this issue stands Printed from counselvise.com 17. In so far as the next two issues raised by the Revenue viz., disallowance of expenses u/s 14A and sales promotion expenses is concerned, the Ld. CIT, DR even if the books of accounts are rejected, the disallowance of items of expenses ought to be as to whether it is to be separately income. According to us however, once by invoking the provisions of section 145of the Act and the income is estimated to the best of judgment as per the the Act, the said estimate is made in that is to be computed in accordance sections 30 to 43D as laid down in section29 of the Act. Consequently, all the deductions which are referred to in deemed to have been taken into account Useful reference in this regard may be Andhra Pradesh High Court in the case of CIT (232 ITR 776) and Hon’ble Allahabad vs Banwari Lal Banshidhar (229 ITR 229) we do not agree with this plea of the Revenue. infirmity in the order of the additions, as the total income of ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 28 :: In so far as the next two issues raised by the Revenue viz., disallowance of expenses u/s 14A and sales promotion expenses is he Ld. CIT, DR assailing the order of Ld. CIT(A) of accounts are rejected, the disallowance of ought to be separately adjudicated and decided upon as to whether it is to be separately added to the estimated business come. According to us however, once the books of account are rejected by invoking the provisions of section 145of the Act and the income is estimated to the best of judgment as per the provisions of section 144 of the Act, the said estimate is made in substitution of the business income that is to be computed in accordance with the provisions contained in sections 30 to 43D as laid down in section29 of the Act. Consequently, all the deductions which are referred to in sections 30 to 43D of the Act are d to have been taken into account while making such an estimate Useful reference in this regard may be made to the decision of Hon’ble Andhra Pradesh High Court in the case of Indwell Constructions Vs. and Hon’ble Allahabad High Court in the case of vs Banwari Lal Banshidhar (229 ITR 229). In view of the foregoing we do not agree with this plea of the Revenue. We thus do not see any infirmity in the order of the Ld. CIT(A) in deleting these separate total income of the assessee had been estimated upon 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. In so far as the next two issues raised by the Revenue viz., disallowance of expenses u/s 14A and sales promotion expenses is ssailing the order of Ld. CIT(A) urged that, of accounts are rejected, the disallowance of these separately adjudicated and decided upon added to the estimated business the books of account are rejected by invoking the provisions of section 145of the Act and the income is provisions of section 144 of titution of the business income with the provisions contained in sections 30 to 43D as laid down in section29 of the Act. Consequently, all sections 30 to 43D of the Act are while making such an estimate. made to the decision of Hon’ble Indwell Constructions Vs. the case of CIT In view of the foregoing, do not see any deleting these separate the assessee had been estimated upon Printed from counselvise.com rejection of the books of accounts. Revenue in this regard stands dismissed. 18. The next issue raised by the Revenue is against the deletion of disallowance of deduction claimed amounting to Rs.62,50,000/ year, the assessee had made donations of Rs.75,00,000/ Rs.50,00,000/- to M/s Prerna Foundation and M/s Radiant Institute of Technology respectively [50% of Rs.1,25,00,000] by way of deduction u/s 80G of the Act. The AO observed that, as a sequel to the search conducted upon the assessee, one Shri Narendra Jain was also searched u/s 132 of the Act and from WhatsApp chats and statement(s) recorded from him, it was gathered that, the assessee had made bogus CSR contribution of Rs. 3 crores to ASIC Trust and Aadhar Foundation in FY 2021 WhatsApp chats of Shri Narendra Jain and his Shri Augustine Paulraj, employee of the assessee who initially averred in his statement u/s 132(4) of the Act that the donations to these two entities were genuine but later on admitted that the CSR contribution made to these two ent statement, Shri Augustine Paulraj is noted to have stated that, the assessee had made donation of Rs.75,00,000/ ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 29 :: books of accounts. Accordingly, the grounds raised by the Revenue in this regard stands dismissed. The next issue raised by the Revenue is against the deletion of disallowance of deduction claimed by the assessee u/s 80G of the Act amounting to Rs.62,50,000/-. The facts as noted are that, during the year, the assessee had made donations of Rs.75,00,000/ to M/s Prerna Foundation and M/s Radiant Institute of Technology respectively, and had claimed deduction of RS.62,50,000/ [50% of Rs.1,25,00,000] by way of deduction u/s 80G of the Act. The AO observed that, as a sequel to the search conducted upon the assessee, one Shri Narendra Jain was also searched u/s 132 of the Act and from WhatsApp chats and statement(s) recorded from him, it was gathered that, the assessee had made bogus CSR contribution of Rs. 3 crores to ASIC Trust and Aadhar Foundation in FY 2021-22. It is noted that, the WhatsApp chats of Shri Narendra Jain and his statement was shown to Shri Augustine Paulraj, employee of the assessee who initially averred in his statement u/s 132(4) of the Act that the donations to these two entities were genuine but later on admitted that the CSR contribution made to these two entities in FY 2021-22 was bogus. In the same statement, Shri Augustine Paulraj is noted to have stated that, the assessee had made donation of Rs.75,00,000/- to M/s Prerna Foundation, 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. Accordingly, the grounds raised by the The next issue raised by the Revenue is against the deletion of by the assessee u/s 80G of the Act . The facts as noted are that, during the year, the assessee had made donations of Rs.75,00,000/- and to M/s Prerna Foundation and M/s Radiant Institute of , and had claimed deduction of RS.62,50,000/- [50% of Rs.1,25,00,000] by way of deduction u/s 80G of the Act. The AO observed that, as a sequel to the search conducted upon the assessee, one Shri Narendra Jain was also searched u/s 132 of the Act and from the WhatsApp chats and statement(s) recorded from him, it was gathered that, the assessee had made bogus CSR contribution of Rs. 3 crores to 22. It is noted that, the statement was shown to Shri Augustine Paulraj, employee of the assessee who initially averred in his statement u/s 132(4) of the Act that the donations to these two entities were genuine but later on admitted that the CSR contribution 22 was bogus. In the same statement, Shri Augustine Paulraj is noted to have stated that, the to M/s Prerna Foundation, Printed from counselvise.com which he averred was received back in cash and that the donation made to M/s Radiant Institute of Technology was only for education purpose. Relying on the statement of Shri Augustine Paulraj, the AO treated both the donations made to registered charitable trusts, aggregating to Rs.1,25,00,000/- to be bogus and accordingly disal claimed u/s 80G of the Act. 19. Aggrieved by the action of the AO, the assessee carried the matter in appeal and the Ld. CIT(A) was pleased to deleted the same. Now the Revenue is in appeal before us. 20. Heard both the parties. Fr noted that, the search conducted upon Shri Narendra Jain led to unearthing of alleged bogus donations made to AISC Trust and Aadhar Foundation. There was no material or any WhatsApp evidences retrieved from the premises of Mr. Narendra Jain which would suggest that the donations made by the assessee to Radiant Institute of Technology made to them was received back in cash. It is also not the Revenue’s that any incriminating material concerning these impugned donations was found at the premises of the assessee. We find that the impugned disallowance was solely based on the statement of Shri Augustine Paulraj. ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 30 :: which he averred was received back in cash and that the donation made /s Radiant Institute of Technology was only for education purpose. Relying on the statement of Shri Augustine Paulraj, the AO treated both the donations made to registered charitable trusts, aggregating to to be bogus and accordingly disallowed the deduction so claimed u/s 80G of the Act. Aggrieved by the action of the AO, the assessee carried the matter in appeal and the Ld. CIT(A) was pleased to deleted the same. Now the Revenue is in appeal before us. Heard both the parties. From the facts as discussed above, it is noted that, the search conducted upon Shri Narendra Jain led to unearthing of alleged bogus donations made to AISC Trust and Aadhar Foundation. There was no material or any WhatsApp evidences retrieved es of Mr. Narendra Jain which would suggest that the donations made by the assessee to M/s Prerna Foundation and M/s Radiant Institute of Technology was not genuine or that the donations made to them was received back in cash. It is also not the Revenue’s that any incriminating material concerning these impugned donations was found at the premises of the assessee. We find that the impugned disallowance was solely based on the statement of Shri Augustine Paulraj. 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. which he averred was received back in cash and that the donation made /s Radiant Institute of Technology was only for education purpose. Relying on the statement of Shri Augustine Paulraj, the AO treated both the donations made to registered charitable trusts, aggregating to lowed the deduction so Aggrieved by the action of the AO, the assessee carried the matter in appeal and the Ld. CIT(A) was pleased to deleted the same. Now the om the facts as discussed above, it is noted that, the search conducted upon Shri Narendra Jain led to unearthing of alleged bogus donations made to AISC Trust and Aadhar Foundation. There was no material or any WhatsApp evidences retrieved es of Mr. Narendra Jain which would suggest that the M/s Prerna Foundation and M/s was not genuine or that the donations made to them was received back in cash. It is also not the Revenue’s case that any incriminating material concerning these impugned donations was found at the premises of the assessee. We find that the impugned disallowance was solely based on the statement of Shri Augustine Paulraj. Printed from counselvise.com Having perused his statement, it is seen Paulraj stated that the donation made to Technology was bogus or that it was returned back in cash. Rather, it is observed that in his answers to Q Nos. 25 & 26, he had categorically stated that, the assessee had paid donation to Technology by cheque and that the donation was for educational purpose under their corporate social responsibility. We thus note that, there was nothing incriminating whatsoever contained in the stat Augustine Paulraj basis which any prudent person could construe the donation made by the assessee to be not genuine. In fact, we find that, his statement supports the veracity of the impugned donation. T M/s Radiant Institute of Technology authority at the time of the donation registration u/s 80G of the Act the Ld. CIT(A) had rightly allowed the deduction claimed by the assessee in relation to the donation given to and deleted the disallowance made by the AO u/s 80G of the Act. 21. In so far as the allowability of the do Foundation is concerned, it is seen that, the impugned disallowance was made by solely relying on the statement of Shri Augustine Paulraj. It is ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 31 :: Having perused his statement, it is seen that nowhere had Shri Augustine Paulraj stated that the donation made to M/s Radiant Institute of was bogus or that it was returned back in cash. Rather, it is observed that in his answers to Q Nos. 25 & 26, he had categorically e assessee had paid donation to M/s Radiant Institute of by cheque and that the donation was for educational purpose under their corporate social responsibility. We thus note that, there was nothing incriminating whatsoever contained in the stat Augustine Paulraj basis which any prudent person could construe the donation made by the assessee to M/s Radiant Institute of Technology be not genuine. In fact, we find that, his statement supports the veracity of the impugned donation. The Ld. AR further brought to our notice that, M/s Radiant Institute of Technology was approved by the authority at the time of the donation had been made, and they held valid u/s 80G of the Act. For the aforesaid reasons, we find tha the Ld. CIT(A) had rightly allowed the deduction claimed by the assessee in relation to the donation given to M/s Radiant Institute of Technology and deleted the disallowance made by the AO u/s 80G of the Act. In so far as the allowability of the donation made to M/s Prerna Foundation is concerned, it is seen that, the impugned disallowance was made by solely relying on the statement of Shri Augustine Paulraj. It is 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. that nowhere had Shri Augustine M/s Radiant Institute of was bogus or that it was returned back in cash. Rather, it is observed that in his answers to Q Nos. 25 & 26, he had categorically M/s Radiant Institute of by cheque and that the donation was for educational purpose under their corporate social responsibility. We thus note that, there was nothing incriminating whatsoever contained in the statement of Shri Augustine Paulraj basis which any prudent person could construe the M/s Radiant Institute of Technology to be not genuine. In fact, we find that, his statement supports the veracity he Ld. AR further brought to our notice that, was approved by the competent , and they held valid . For the aforesaid reasons, we find that, the Ld. CIT(A) had rightly allowed the deduction claimed by the assessee M/s Radiant Institute of Technology and deleted the disallowance made by the AO u/s 80G of the Act. nation made to M/s Prerna Foundation is concerned, it is seen that, the impugned disallowance was made by solely relying on the statement of Shri Augustine Paulraj. It is Printed from counselvise.com crucially observed that, Shri Augustine Paulraj had clearly stated that M/s Prerna Foundation was involved in educational activities and the assessee had donated Rs.75,00,000/ asked him whether such donation was received back in cash, that he stated that, he did not have direct knowledge of the mat understands that the donation may have been received back in cash. It is evident that this assertion made by Shri Paulraj was predicated on surmises and assumptions and that there was no clear admission to receipt of cash in lieu of donatio law that, no addition/disallowance can be made by solely relying on confessions made during the course of search, in absence of any corroborative material found to back the same. We gainfully refer to the CBDT Circular F No. 286/2/2003 decisions of Hon’ble Delhi High Court in the case of Infrastructure (I) Pvt Ltd (397 ITR 82) the case CIT Vs Harjeev Aggarwal (241 Taxmann 199), amongst wherein it was held that statements recorded u/s 132(4) cannot sole basis to make addition(s) in the hands of the assessee. 22. The Ld. AR further brought to our notice that, nothing incriminating was found from the premises of Shri Naren ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 32 :: crucially observed that, Shri Augustine Paulraj had clearly stated that M/s undation was involved in educational activities and the assessee had donated Rs.75,00,000/-. It was when the Investigating authority asked him whether such donation was received back in cash, that he stated that, he did not have direct knowledge of the matter and that he understands that the donation may have been received back in cash. It is evident that this assertion made by Shri Paulraj was predicated on surmises and assumptions and that there was no clear admission to receipt of cash in lieu of donation. Moreover, it is by now well settled in law that, no addition/disallowance can be made by solely relying on confessions made during the course of search, in absence of any corroborative material found to back the same. We gainfully refer to the ular F No. 286/2/2003-IT(Inv) dated 10.03.2003 decisions of Hon’ble Delhi High Court in the case of Pr.CIT Vs Best Infrastructure (I) Pvt Ltd (397 ITR 82) and Hon’ble Bombay High Court in CIT Vs Harjeev Aggarwal (241 Taxmann 199), amongst wherein it was held that statements recorded u/s 132(4) cannot sole basis to make addition(s) in the hands of the assessee. The Ld. AR further brought to our notice that, nothing incriminating was found from the premises of Shri Narendra Jain in this regard nor had 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. crucially observed that, Shri Augustine Paulraj had clearly stated that M/s undation was involved in educational activities and the assessee . It was when the Investigating authority asked him whether such donation was received back in cash, that he ter and that he understands that the donation may have been received back in cash. It is evident that this assertion made by Shri Paulraj was predicated on surmises and assumptions and that there was no clear admission to n. Moreover, it is by now well settled in law that, no addition/disallowance can be made by solely relying on confessions made during the course of search, in absence of any corroborative material found to back the same. We gainfully refer to the IT(Inv) dated 10.03.2003 and the Pr.CIT Vs Best and Hon’ble Bombay High Court in CIT Vs Harjeev Aggarwal (241 Taxmann 199), amongst others, wherein it was held that statements recorded u/s 132(4) cannot be the sole basis to make addition(s) in the hands of the assessee. The Ld. AR further brought to our notice that, nothing incriminating dra Jain in this regard nor had Printed from counselvise.com he admitted that, the donation given by the assessee to M/s Prerna Foundation had been received back in cash. The Ld. CIT(A) has rightly observed that, the conclusion drawn by the AO was not supported by any clear statement(s) and that in absence of any corroborative evidence, the impugned disallowance was unjustified. It is also not in dispute that M/s Prerna Foundation is a registered charitable trust holding valid registration u/s 80G of the Act and therefore, in our consi deduction claimed by the assessee u/s 80G of the Act qua the donation made to this trust cannot be held to be unjustified. 23. Overall therefore, we see no reason to interfere with the order of the Ld. CIT(A) deleting the disallowance of the Act of Rs.62,50,000/ the Revenue in this regard. 24. The last issue has been agitated by the assessee viz., disallowance of deduction claimed u/s 80GGB of the Act for AY 2018 smallness of the amount involved, the Ld. AR appearing for the assessee did not wish to press this ground and the same is t ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 33 :: he admitted that, the donation given by the assessee to M/s Prerna Foundation had been received back in cash. The Ld. CIT(A) has rightly observed that, the conclusion drawn by the AO was not supported by any s) and that in absence of any corroborative evidence, the impugned disallowance was unjustified. It is also not in dispute that M/s Prerna Foundation is a registered charitable trust holding valid registration u/s 80G of the Act and therefore, in our considered view, the deduction claimed by the assessee u/s 80G of the Act qua the donation made to this trust cannot be held to be unjustified. Overall therefore, we see no reason to interfere with the order of the Ld. CIT(A) deleting the disallowance of deduction claimed u/s 80G of the Act of Rs.62,50,000/- and therefore we dismiss the grounds taken by the Revenue in this regard. The last issue has been agitated by the assessee viz., disallowance of deduction claimed u/s 80GGB of the Act for AY 2018 smallness of the amount involved, the Ld. AR appearing for the assessee did not wish to press this ground and the same is thus dismissed. 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. he admitted that, the donation given by the assessee to M/s Prerna Foundation had been received back in cash. The Ld. CIT(A) has rightly observed that, the conclusion drawn by the AO was not supported by any s) and that in absence of any corroborative evidence, the impugned disallowance was unjustified. It is also not in dispute that M/s Prerna Foundation is a registered charitable trust holding valid dered view, the deduction claimed by the assessee u/s 80G of the Act qua the donation Overall therefore, we see no reason to interfere with the order of deduction claimed u/s 80G of and therefore we dismiss the grounds taken by The last issue has been agitated by the assessee viz., disallowance of deduction claimed u/s 80GGB of the Act for AY 2018-19. Due to smallness of the amount involved, the Ld. AR appearing for the assessee hus dismissed. Printed from counselvise.com 25. In the result, both the assessee are dismissed. Order pronounced on the Sd/- (एबी टी. वक ) (ABY T. VARKEY \u0005याियकसद य/JUDICIAL MEMBER चे\u0003ई/Chennai, \u0005दनांक/Dated: 01st December TLN आदेश क \u000eितिलिप अ\u0014ेिषत/Copy to 1. अपीलाथ /Appellant 2. \u000e\u000fथ /Respondent 3. आयकरआयु\u0015/CIT, Chennai / Madurai / Salem / Coimbatore. 4. िवभागीय\u000eितिनिध/DR 5. गाड फाईल/GF ITA Nos.1613 to 1615 ITA Nos.1547 & 1548/Chny/2025 (AYs 2018 M/s. Southern Agrifurane Industries Pvt :: 34 :: both the appeals filed by the Revenue and the assessee are dismissed. Order pronounced on the 01st day of December, 2025 ABY T. VARKEY) /JUDICIAL MEMBER Sd/ (अिमताभ शु\u0018ा (AMITABH SHUKLA लेखासद य/ACCOUNTANT MEMBER December, 2025. Copy to: , Chennai / Madurai / Salem / Coimbatore. 1613 to 1615 /Chny/2025 & ITA Nos.1547 & 1548/Chny/2025 s 2018-19 & 2019-20) Southern Agrifurane Industries Pvt. Ltd. Revenue and the 25, in Chennai. Sd/- शु\u0018ा) AMITABH SHUKLA) /ACCOUNTANT MEMBER , Chennai / Madurai / Salem / Coimbatore. Printed from counselvise.com "