Appeal details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 361337 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
22-05-2025
Appeal Filed By
Assessee
Order Result
Allowed
Assessment Year
2021-2022
Judgement Text
" IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.1444/Ahd/2024 (Assessment Year: 2021-22) M/s. Anam Pesticides Pvt. Ltd., 914, Sahajanand Shopping Centre, Opp. Rajasthan High School Shahubaug, Ahmedabad-380004 Vs. Income Tax Officer, Ward-1(1)(1), Ahmedabad [PAN No.AABCA6350R] (Appellant) .. (Respondent) Appellant by : Shri Ummed Kuntal, A.R. Respondent by: Shri Rignesh Das, Sr. DR Date of Hearing 22.04.2025 Date of Pronouncement 22.05.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 20.06.2024 passed for A.Y. 2021-22. 2. The Assessee has taken the following grounds of appeal:- “1. On the facts and in the circumstances of the case the CIT Appeal has erred both on facts and in law in issuing the impugned order illegally, violating the principles of natural justice, without fair and objective application of mind to the facts of the case and the law applicable and without being guided by the binding decisions of courts and tribunals and hence liable to be set aside and quashed and declared non est. in law. 2. On the facts and circumstances of the case, the CIT Appeal has erred, both on facts and in law, in making additions to the returned income of the appellant at income of Rs.30735264/- as against the income of Rs. 4,57,403 /- declared by the appellant. 3. That, on the facts and in the circumstances of the case, the CIT Appeal erred in making the additions for the reason of lack of jurisdiction over the assessee. ITA No. 1444/Ahd/2024 M/s. Anam Pesticides Pvt. Ltd. vs. ITO Asst. Year –2021-22 - 2– 4. On the facts and in the circumstances of the case the CIT Appeal has erred both on facts and in law, in making additions with no error or defect whatsoever was found/unearthed as a result of scrutiny. 5. On the facts and circumstances of the case, the learned CIT APPEAL has erred, both on facts and in law, by making additions to the returned income solely on the basis of test check verification of a single party statement of third party disregarding the documents available. 6. That the CIT Appeal has erred, both on facts and in law, in sustaining the addition of Rs. 30735264/- calculated @12% on unverified/part verified creditors without subjecting the same to cross examination with the assessee. 7. On the facts and circumstances of the case, the learned CIT APPEAL has erred, both on facts and in law, making the additions of Rs.30735264/- despite the fact that the assessee has discharged the onus cast upon him by providing all the information and documents asked for. 8. On the facts and circumstances of the case, the CIT Appeal has erred, both on facts and in law, in making the said addition arbitrarily rejecting the explanation and evidences brought on record by the appellant. 9. On the facts and in the circumstances of the case the CIT Appeal has erred both on facts and in law, by violating the principle of natural justice by not providing opportunity for cross- examination of the person, whose statements have been relied upon by the CIT APPEAL. 10. That, on the facts and in the circumstances of the case, the CIT Appeal was wrong in ignoring the facts, mandatory CBDT instructions and passing the order with pre-conceived notion and non-application of independent mind.” 3. The brief facts of the case are that during the course of assessment proceedings, the Assessing Officer observed that the assessee had shown total purchases of Rs. 25,73,98,240/-, however, out of these purchases total purchases of Rs. 23,48,12,550/- were not verifiable since the assessee failed to produce proper evidences in respect of three parties from whom the above purchases were made. Therefore, the Assessing Officer issued notices under Section 133(6) of the Act to the said three parties to verify the genuineness of the purchases, however, there was no response from the said parties. Therefore, the Assessing Officer carried out physical verification in the case of Mr. Mukesh Kumar, one of the suppliers out of the three parties. On inquiry, the Assessing Officer observed that on the given address, one Mr. Nirmal Kumar was residing for the last 15 years and that the said premises ITA No. 1444/Ahd/2024 M/s. Anam Pesticides Pvt. Ltd. vs. ITO Asst. Year –2021-22 - 3– were owned by Mr. Nirmal Kumar. Further, on inquiry it was found that no one knew Mr. Mukesh Kumar and hence the notice issued by the Assessing Officer could not be served. Based on the above facts, the Assessing Officer invoked the provisions of Section 145(3) of the Act and rejected the book results and estimated the net profit @ 12% of total turnover. Accordingly, the Assessing Officer made addition of Rs. 3,07,35,264/- (after allowing the credit for net profit already disclosed by the assessee of Rs. 4,56,268/-) by estimating the net profit @ 12% of the total turnover, by placing reliance on certain orders passed by Mumbai ITAT. 4. The assessee filed appeal before Ld. CIT(A) and submitted that the details of purchases were submitted to the Assessing Officer, but only due to non-compliance by the said parties, the Assessing Officer made the addition. Further, the assessee submitted that the facts of the case laws relied upon by the Assessing Officer are distinguishable and hence not applicable to the assessee’s set of facts. Further, the assessee placed reliance on the decision of Gujarat High Court and submitted that the Net Profit should be estimated @ 2% instead of 12%. The Ld. CIT(A) was of the view that in the instant case, the assessee failed to prove the genuineness of the purchase transactions. However, the Ld. CIT(A) was of the view that the Assessing Officer should have estimated the Net Profit rate of 12% on the bogus purchases only and not on the entire turnover of the assessee. Accordingly, Ld. CIT(A) restricted the addition to Rs. 2,34,81,255/- (12% of bogus purchases amounting to Rs. 23,48,12,550/- and excluded the Net Profit disclosed by the assessee). Accordingly, the assessee was allowed a relief of Rs. 77,10,277/-. 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A). ITA No. 1444/Ahd/2024 M/s. Anam Pesticides Pvt. Ltd. vs. ITO Asst. Year –2021-22 - 4– 6. Before us, the Counsel for the assessee submitted that Ld. CIT(A) has not given any findings regarding the assessee’s contention on rejection of books of accounts. The Counsel for the assessee drew our attention to Page 12 of the Ld. CIT(A)’s order, wherein the assessee had made a specific contention that in the instant case, there was no default found in the books of accounts maintained by the assessee and accordingly, the basis of rejection of books of accounts maintained by the assessee was arbitrarily. However, the Counsel for the assessee submitted that in the instant case, Ld. CIT(A) did not give any finding regarding the rejection of books of accounts by the Assessing Officer. Secondly, the Counsel for the assessee submitted that when the sales have been accepted as being correct (and the addition has been made by taking a percentage of the total sales / turnover), then due credit of purchases should also be given to the assessee. It was submitted that just because the parties from whom the purchases were made, could not verified does not mean that the assessee had not made the purchases at all, especially in light of the fact that the figure of turnover / sales has not been disturbed by the Revenue Authorities. Thirdly, the Counsel for the assessee drew our attention to Page 15 of the Ld. CIT(A)’s order wherein it was submitted by the assessee that the turnover of the assessee had increased by more than 70 times during the year under consideration as compared to the previous year and hence the profit ratio had also accordingly fallen. The Counsel for the assessee submitted that the assessee is operating on high volume and low profit margin basis. The Counsel for the assessee submitted that against a turnover of 5.5 lakhs in 2018, the assessee’s turnover had increased to 25.99 crores during the year under consideration. Accordingly, it was highly unjustified to have applied a net profit rate at 12% looking into the assessee’s set of facts. Further, the Counsel for the assessee submitted that in the instant facts, no justification has been given as to why the net profit rate of 12% was applicable in the assessee’s particular set of facts. ITA No. 1444/Ahd/2024 M/s. Anam Pesticides Pvt. Ltd. vs. ITO Asst. Year –2021-22 - 5– 7. In response, Ld. D.R. placed reliance on the observations made by Ld. CIT(A) in his appellate order. 8. On going through the facts of the instant case, we observe that while passing the order, Ld. CIT(A) has not given any specific findings on why the books of accounts had been rejected by the Assessing Officer. We observe that during the course of appellate proceedings, detailed submissions were filed by the assessee challenging the rejection of books of accounts by the Assessing Officer. However, while passing the order, Ld. CIT(A) completely omitted to give any finding with respect to the assessee’s contention / challenge to rejection of books of accounts by the Assessing Officer. Secondly, we observe that during the course of appellate proceedings, the assessee has furnished a table stating that in this case the assessee’s turnover had increased almost 70 times from Rs. 35.46 lakhs in the previous Financial Year to Rs. 25.99 crores in the impugned assessment year under consideration. The assessee had also submitted that the assessee was earning a net profit rate in the vicinity of approximately 1% of the total turnover. However, despite the aforesaid table submitted by the assessee, the Ld. CIT(A) estimated the net profit rate of 12% of the bogus purchases, without giving any specific finding as to why the net profit rate of 12% was attracted in the assessee’s set of facts. The assessee had relied on several judicial precedents in which the net profit rate of 1% to 2% had been taken by various Courts / Tribunals. However, while passing the order, Ld. CIT(A) did not give any specific finding on the applicability / non-applicability of the judicial precedents relied upon by the assessee. Further, we also note that it is a well-settled law that just because the parties from whom purchases have been made are unverifiable does not mean that the purchases itself are bogus, specifically when the figure of sale / turnover have not been disputed by the Tax Authorities. Accordingly, in light of the above observations, in the interest of justice, the matter is hereby restored to the file of Ld. CIT(A) ITA No. 1444/Ahd/2024 M/s. Anam Pesticides Pvt. Ltd. vs. ITO Asst. Year –2021-22 - 6– to give a specific finding on assessee’s challenge to rejection of books of accounts under Section 145(3) of the Act and also to give a finding / basis of the correct net profit rate, taking into consideration the assessee’s set of facts and the judicial precedents on the subject. 9. In the result, the appeal of the assessee is allowed for statistical purposes. This Order pronounced in Open Court on 22/05/2025 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 22/05/2025 TANMAY, Sr. PS TRUE COPY आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 16.05.2025 2. Date on which the typed draft is placed before the Dictating Member 19.05.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 19.05.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement .05.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 22.05.2025 7. Date on which the file goes to the Bench Clerk 22.05.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order…………………………………… "
AI Insights
The case involves M/s. Anam Pesticides Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) at the National Faceless Appeal Centre, Delhi. The primary contention was regarding the additions made to the assessee's income based on unverifiable purchases and the subsequent rejection of books of accounts. The Assessing Officer had initially rejected the books and estimated the net profit at 12% of total turnover, citing non-responsiveness of suppliers and discrepancies in purchase verifications. The CIT(A) modified this by applying the 12% rate only to the bogus purchases, not the entire turnover. The Tribunal found that the CIT(A) did not address the rejection of books adequately and did not justify the application of a 12% net profit rate, leading to the restoration of the matter for further examination.
