GVA INDUSTRIES PRIVATE LIMITED,CHHATTISGARH V. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, VISAKHAPATNAM

ITA 137/VIZ/2025

AI Insights

The case involves M/s. GVA Industries Pvt Ltd., which appealed against the orders of the Learned Commissioner of Income Tax (Appeals) for the assessment years 2015-16, 2016-17, and 2017-18. The appeals were consolidated due to identical issues involved. The primary contention was regarding the disallowance of purchases deemed as bogus by the Assessing Officer (AO) based on supplier statements during survey operations. The CIT(A) had restricted the disallowance to 8% of the bogus purchases. However, the Tribunal found that the AO had not provided concrete evidence to prove the purchases were bogus, relying solely on supplier statements which lacked evidentiary value. Consequently, the Tribunal allowed the appeals, setting aside the CIT(A)'s order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315500 (ITAT-VISAKHAPATNAM)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Other Referred Cases: Pr.Commissioner of Income Tax vs. M/s. Drisha Impex Pvt Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APARNA VILLURI
• Assessee Lawyers: MV PRASAD
• Keywords: Rejection of books of accounts; Bogus purchase; Accommodation entries; Competent authority; Bogus
• Section: 147; 148

Judgement Text

"आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM “DIVN” BENCH, VISAKHAPATNAM श्री िी. दुर्ाा राि, न्याधयक सदस्य एिं श्री एस बालाकृष्णन, लेखा सदस्य के समक्ष BEFORE SHRI V. DURGA RAO, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./ I.T.A. No. 137, 138 & 139/Viz/2025 (धनिाारणिर्ा/ Assessment Years : 2015-16, 2016-17 & 2017-18) M/s. GVA Industries Pvt Ltd., Industrial Ward, Dhamtri, Chhatisgarh-493773. PAN: AACCG5360Q Vs. The Assistant Commissioner of Income Tax, Central Circle-1, Visakhapatnam. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) अपीलार्थी की ओर से/ Assessee by : Shri MV Prasad, CA प्रत्यार्थी की ओर से/ Revenue by : Dr. Aparna Villuri, Sr. AR सुनिाई की तारीख/ Date of Hearing : 08/04/2025 घोर्णाकी तारीख/Date of Pronouncement : 13/05/2025 O R D E R PER Bench: These appeals filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)-3, Visakhapatnam in DIN & Order No ITBA/APL/S/250/2024-25/1073269071(1) for the A.Y2015-16, DIN & Order No ITBA/APL/S/250/2024-25/1073269975(1) for the A.Y.2016-17, DIN & Order No. ITBA/APL/S/250/2024- 25/1073269503(1) for the AY 2017-18 arising out of the orders passed U/s. 147 of the Income Tax Act, 1961 (“the Act”) dated 14/02/2025. 2 Since all these appeals pertain to the same assessee and the issue involved in these appeals is identical, for the sake of convenience, these appeals are clubbed, heard together and disposed of in this consolidated order. We shall take up ITA No. 137/Viz/2025 for the AY 2015-16 as a lead appeal and the facts are extracted herein below. 2. Briefly stated the facts of the case are that the assessee being a company, which is engaged in trading of steel bars, TMT etc., filed its return of income for the AY 2015-16 on 24/02/2016 declaring a total income of Rs. 44,51,000/-. It was noticed by the Ld. AO based on the information received, that the assessee has availed accommodation entries towards purchase of steel from the suppliers namely (1) M/s.Rajendra Ispat; (2) M/s. Pratyush Steels; and (3) M/s. Abhishek Enterprises. The information also contain the copies of statements given by the suppliers recorded at the time of survey operations conducted in their cases on 24/01/2019. Thereafter, the case was reopened by issuing a notice U/s. 148 of the Act dated 31/3/2021 with the prior approval of the competent authority. The assessee admitted the same income while filing the return of income in response to notice U/s. 148 of the Act. Subsequently, notice U/s. 143(2) of the Act was issued on 22/11/2021. In the statement recorded during the survey proceedings, the three suppliers have stated that they have never supplied any material and have provided only accommodation entries. The assessee was requested 3 to furnish information regarding alleged purchases vide notice U/s.142(1) of the Act dated 22/11/2021. In response, the assessee company has furnished the ledger account copies of the alleged suppliers in their books of accounts along with copies of invoices and supporting copies of E-Way bills. It was noticed that the assessee has not furnished any proof of delivery of material at their premises except the copies of E-Way bills. The Ld. AO noticed certain discrepancies in the vehicle registration numbers mentioned in the E-Way bills and thereafter, issued a showcause notice dated 2/3/2022 requiring the assessee as to show cause why the alleged purchases from the above alleged suppliers should not be considered for disallowance. The Ld. AO after considering the replies filed by the alleged suppliers observed that the assessee company was provided accommodation entries where there was no actual supply of material to the assessee company. The Ld. AO therefore, considered the entire purchases as bogus and accordingly added an amount of Rs.1,55,36,109/- towards alleged purchases and Rs. 5,19,852/- towards alleged transportation charges. On being aggrieved by the order of the Ld. AO, the assessee filed an appeal before the Ld. CIT(A). 3. The Ld. CIT(A), considering the submissions of the assessee and by relying on various judicial pronouncements, partly allowed the appeal of the assessee by restricting the disallowance to 8% on the bogus purchases which worked out to Rs. 12,76,445/-. On being aggrieved by 4 the order of the Ld. CIT(A), the assessee is in appeal before us by raising the following grounds of appeal: “1. On the facts and circumstances of the case, Ld. CIT(A) is not justified in estimating the profit @ 8% on bogus purchases. 2. On facts and circumstances of the case, the Ld. CIT(A) has not considered that in trading of Iron and Steel business the profit will be only between 1% to 2% while adjudicating the appeal. 3. On the facts and circumstances of the case, the Ld. CIT(A) has not considered the gross profits shown by the appellant which is @ 1.46%. 4. Any other ground that may be raised at the time of hearing of the appeal.” 4. The Learned Authorized Representative (“Ld. AR”) filed written submissions before the Tribunal by stating that the details of purchases including the books of accounts, purchase ledger copies of invoices and the bank account statement showing the particulars of such purchases. The Ld. AR also submitted that the assessee is not a manufacturer but only a trader and the profit margin will be ranging from 1% to 1.75% and not 8% as estimated by the Ld. CIT(A). Ld. AR further also argued that the Ld. AO has not brought any material on record evidencing that the purchases are bogus and only relied upon the statements made by the suppliers at the time of survey proceedings U/s.133A of the Act which do not have any evidentiary value. He also submitted that the assessee has filed VAT returns for the supplies made by the various suppliers. The Ld.AR also submitted that the Ld. AO has not brought on record any material showing that the money paid by the assessee has been taken 5 back by way of cash. Ld. AR also submitted that the assessee has already declared profits as per the return of income and hence the estimated addition made by the Ld. CIT(A) be deleted. 5. Per contra, the Learned Departmental Representative (“Ld. DR”) argued that the Ld. CIT(A) has given substantial relief to the assessee by restricting the addition to 8% of the bogus purchases and therefore, pleaded that the order of the Ld. CIT(A) be upheld. He relied on the decision of the Hon’ble Bombay High Court in the case of Pr.Commissioner of Income Tax vs. M/s. Drisha Impex Pvt Ltd., in Income Tax Appeal No. 2087 of 2018, dated 07/04/2025. Countering the argument of the Ld. DR, the Ld. AR submitted that the case referred to by the Ld. DR is distinguishable on facts and hence cannot be applied to the instant case. 6. We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. It is an admitted fact that the assessee has made certain purchases from the following parties suppliers namely (1) M/s. Rajendra Ispat; (2) M/s.Pratyush Steels; and (3) M/s. Abhishek Enterprises which was considered as bogus by the Ld. AO. The Ld. AO while arriving at the conclusion observed that the suppliers in their sworn recorded statements during the survey operations of their entities have admitted that no material has been supplied to the assessee but has provided only 6 accommodation entries. Further, the Ld. AO’s contention was also that the assessee has not provided any documentary evidence with respect to invoices, E-Way bills and the payments made to the suppliers. We find that the Ld. CIT(A) has accepted the purchases made by the assessee company by estimating to disallow 8% of the bogus purchases. We also observed that no material has been brought on record by the Ld. AO to prove that the material was not supplied to the assessee company. The Ld. AO has not made any categorical findings with respect to the bogus purchases but only relied on the statements recorded during the survey operations of the relevant supplier companies. The Ld.AO has also not doubted the profits declared by the assessee and has not rejected the books of accounts. In the absence of any material evidence on record to substantiate the purchases as bogus, we find that the Ld. CIT(A) erred in estimating the disallowance to 8% and therefore, we are inclined to set-aside the order of the Ld. CIT(A) by allowing the grounds raised by the assessee. 7. In the result, appeal of the assessee is allowed. ITA Nos.138 & 139/Viz/2025 (AY: 2016-17 & 2017-18) 8. In these appeals, the assessee has raised the similar grounds involving the identical issues with that of the assessee’s appeal in ITA No. 137/Viz/2025 for the AY 2015-16, which is adjudicated in 7 the foregoing paragraphs of this order. Considering the identicalness of the issues involved in all these appeals, our decision rendered while adjudicating the ITA No. 137/Viz/2025 (supra) mutatis mutandis applies to the assessee’s appeals in ITA No. 138 & 139/Viz/2025 also. Accordingly, by applying the same analogy, we allow the grounds raised by the assessee in its appeals for the AY 2016-17 and 2017-18. 9. In the result, three appeals filed by the assessee are allowed. Pronounced in the open Court on 13th May, 2025. Sd/- Sd/- (V. DURGA RAO) (S. BALAKRISHNAN ) न्याधयक सदस्य/JUDICIAL MEMBER लेखा सदस्य/ACCOUNTANT MEMBER Dated :13/05/2025 OKK - SPS आदेश की प्रधतधलधप अग्रेधर्त/Copy of the order forwarded to:- 1. धनिााररती/ The Assessee –M/s. GVA Industries Pvt Ltd C/o. CA M.V. Prasad, D.No. 60-7-13, Ground Floor, Siddhartha Nagar, 4th Lane, Vijayawada, Andhra Pradesh-520010. 2. राजस्ि/The Revenue – the Assistant Commissioner of Income Tax, Central Circle-1, Pratyakshakar Bhavan, MVP Double Road, Visakhapatnam- 530020. 3. The Principal Commissioner of Income Tax, 4. आयकर आयुक्त (अपील)/ The Commissioner of Income Tax 5. धिभार्ीयप्रधतधनधि, आयकरअपीलीयअधिकरण, धिशाखापटणम/ DR,ITAT, Visakhapatnam 6. र्ार्ाफ़ाईल / Guard file आदेशानुसार / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam "