M/S PSP TRADING PVT LTD,PATNA V. ITO, WARD- 2 (1), PATNA

ITA 121/PAT/2025

AI Insights

The case involves M/s PSP Trading Pvt. Ltd., which appealed against the order of the National Faceless Appeal Centre, Delhi, confirming the Assessing Officer's addition of 49,98,900/- as bogus purchases under section 37 of the Income-tax Act, 1961. The purchases were made from Divine Alloys & Power Co. Ltd., which the tax authorities later deemed non-existent at the given address. The Tribunal noted that the assessee had provided substantial evidence including invoices, transportation receipts, and banking transactions, which were not adequately considered by the lower authorities. The Tribunal also highlighted that the corresponding sales were accepted, thus the purchases should also be accepted.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 791280 (ITAT-PATNA)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Appeal Filed On: 12-03-2025
• Other Referred Cases: DCIT vs Sharp Mint Ltd, PCIT vs Nitin Ramdeoji Lohia, PCIT vs Agson Global (P.) Ltd
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHWANI KR. SINGAL
• Assessee Lawyers: MANISH RASTOGI
• Keywords: Set aside; Bogus purchase; Accommodation entries; Liquidation; Bogus
• Section: 147; 148; 133(6); 139

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “PATNA” BENCH, PATNA BEFORE SHRI DUVVURU RL REDDY, VP AND SHRI RAJESH KUMAR, AM ITA No. 121/PAT/2025 (Assessment Year: 2018-19) M/s PSP Trading Pvt. Ltd. Sudama Palace, Kankarbagh Road, Patna-800020, Bihar Vs. ITO, Ward 2(1) Patna, Bihar (Appellant) (Respondent) PAN No. AABCP3709R Assessee by : Shri Manish Rastogi, AR Revenue by : Shri Ashwani Kr. Singal, DR Date of hearing: 27.11.2025 Date of pronouncement: 09.12.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 12.02.2025 for the AY 2018-19. 2. The assessee pressed only ground no.3, which is against the order of learned CIT (A) confirming the action of the learned AO in disallowing the purchases to the extent of ₹48,13,275/- u/s 37 of the Income-tax Act, 1961 (the Act), which is wrong, illegal and unjustified. 2.1. The facts in brief are that the assessee engaged in the business of wholesale trading of iron and steel mostly on consignment basis. The return o9f income was filed u/s 139 of the Act declaring income of ₹48,13,270. The case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 148 of the Act on 25.03.2022, on the ground that the assessee has made bogus and fictitious purchases worth of Printed from counselvise.com Page | 2 ITA No.121/PAT/2025 M/s PSP Trading Pvt. Ltd.; A.Y. 2018-19 ₹49,98,500/- during the year from Divine Alloys & Power Co. Ltd. without actual supply of materials . The assessee filed the return of income on 07.10.2022, declaring total income of ₹48,13,280/-. The assessee replied the detailed questionnaire issued by the learned AO by furnishing all the evidences in support of the purchases and submitted that the details of all the net purchases which were on consignment basis and back to back supplied to the customers directly. The assessee submitted a copy of ledger account, invoices, transport receipts, etc. The learned AO also issued notice u/s 133(6) of the Act to Divine Alloys & Power Co. Ltd. However, there was no response and compliance. Thereafter, the learned AO referred the issue to the physical verification unit for verification which also found that the said company did not exist at the given address. Finally, the addition was made of ₹49,98,900/-,by the AO by treating the same as bogus purchases in the assessment framed. 2.2. In the appellate proceedings, the learned CIT (A) also confirmed the order of the learned AO on the ground that the notice issued u/s 133(6) of the Act was not responded by the supplier and even the verification unit could not locate the suppler company on the said address and finally, the appeal of the assessee was dismissed. 2.3. We find that in this case the addition was made by the learned AO in respect of purchases from Divine Alloys & Power Co. Ltd., which was also back-to-back supplied to the customer. A copy of the invoices issued by M/s Divine Alloys and Power Co. Ltd. is attached at page no. 7-12 of the Paper Book-I. We note that the assessee has paid the purchase consideration through banking channel and copies of the invoices along with the transportation receipts are available in the paper book. We also find that while disallowing the purchases, the corresponding sales made by the assessee were not disbelieved by the Printed from counselvise.com Page | 3 ITA No.121/PAT/2025 M/s PSP Trading Pvt. Ltd.; A.Y. 2018-19 learned AO nor by the learned CIT (A). We observe from the page no.39 of the paper book that the assessee is a public limited company and was under liquidation and has paid up capital of ₹130.14 crores. We also find that from the perusal of the notice of sale/ e auction by the liquidator that the assets of the said company were put for sale. Therefore, the observation by the AO as well as by the learned CIT (A) are completely unfounded and devoid of merit that the said company is a bogus company giving accommodation entries only. The assessee submitted written submission which are as as under:- “1. On the last date of hearing on 10-09-2025, copy of the order sheet placed at page 54 of the Paper Book-II, ('the PB-II'), Hon'ble Bench had asked the assessee to provide some documents/clarifications, brief explanation of the assessee in respect of each of the items is as under; Sl No. Nature of the documents/ explanation requisitioned by the Hon'ble Bench Explanation in brief of the assessee 1. Details of the vehicles which have transported the goods. Copy of the invoices vide which the goods in question were purchased by the assessee from M/s Divine Alloys & Power Co. Ltd is placed at page 7 to 12 of the Paper Book-1, filed on 30- 06-2025. Kind perusal of which would envisage that the goods have been transported by three trucks. The information about the trucks have been downloaded from the \"NextGen mParivahan\" app, copy of the screen shot of the app is placed at page 55 of the PB-11 and the infromation about the trucks is placed at page 56to58 of PB-II. Kind perusal of the same would envisage that all the trucks had valid registration and the class of vehicle is Heavy Goods Carrier Vehicle, details of which are as under” Sl No. Truck Number Page Number of Paper Book_II where the information placed. a. JH05BS8818 Page 56 of Paper Book-II b. MH48T1682 Page 57 of Paper Book-II & c. MH48AG4648 Page 58 of Paper Book-II 2. Details of the check post crossed. Kind perusal of the invoices placed at page 7 to 12 of the PB-I would envisage that the goods have been transported from Jharkhand to the adjoining state Bihar. It is respectfully submitted that the check posts are normally installed at the entry point of ever state. As such, there ought to have been only one check post in Bihar while transportation of the goods Printed from counselvise.com Page | 4 ITA No.121/PAT/2025 M/s PSP Trading Pvt. Ltd.; A.Y. 2018-19 from Jharkhand to Bihar. 3. Why bills not contain any seal of the check post It is in this regard respectfully submitted that with the rolling out of Goods and Services Tax, ('the GST'), was rolled out from 01-07-2017 and with the rolling out of the GST the border commercial check posts were abolished, in support copy of the printout taken from the website of The Economic Times is enclosed at page 59-60 of the PB-II. It would, thus, gratuitously be appreciated that the bills don't contain the seal of the check post as effect from 01-07-2017 the border check posts have been abolished. 4. Copy of the delivery note As required copy of the delivery note issued by the consignee is enclosed at page 61 of the PB- II. Attention in this regard is again drawn to the invoices, kind perusal of which would envisage that the sales under reference are consignment sales. 2. Reiterating the submission filed on 30-06-2025 it is submitted that the entire purchases of Rs 49,98,500/- made from M/s Divine Alloys and Power Limited was disallowed on the ground that the notice under section 133(6) was not replied, subsequently, physical verification was done by the verification unit. The verification was made by an inspector of the Verification Unit, which reported that the Company could not be found at the given location, relevant portion of the assessment order is reproduced as under; \"4. In order to get the confirmation, notice u/s 133(6) was issued to Divine Alloys And Power Co Limited. However, no response has been received so far. It is pertinent to mention here that since no response was received from Divine Alloys And Power Limited to notice u/s 133(6) of the Act, request for physical verification was made to verification unit of the department. The report of the verification report shows that Divine Alloys And Power Co Limited never existed at the given address. The relevant potion of the report of the inspector of the Verification Unit is given hereunder in verbatim; As directed by the ITO(VU). I went to 139, Regent Estate, 139 14 176 Raipur Road, Regent Estate, Kolkata, West Bengal 700092 to serve the Notice u's 133(6) of the LT. Act. 1961for the A.V. 2018-192 14.02.2023 to Mis Divine Alloys & Power Company Ltd. PAN AACCD133670 en 16.02.2023. On arriving at the given location, the address was verified which is a fully commercial building. However, the concerned company could not be found. 4.1 As per the information available with the departinent, the company Divine Alloys And Power Co Limited indulged in purchase and sale on paper without actual movement of goods. Thus, the transaction done by the assessee with this entity is just on paper for the purposes of bills only without actual purchase of goods so that expenses can be inflated Attention in this regard is drawn to the copy of the invoices issued by M/s Divine Alloys And Power Co Ltd copy placed at page 7-12 of the PB-1, kind perusal of which would Printed from counselvise.com Page | 5 ITA No.121/PAT/2025 M/s PSP Trading Pvt. Ltd.; A.Y. 2018-19 envisage that the address provided in the invoice as well the ledger account copy by the assessee is Village Palgam PS & PO Chowkaa, Seraikela Kharswan, Jharkhand. Kind perusal of the inspector's report would envisage that the inspector has done physical verification at the address at Kolkata. 3. Attention in this regard is drawn to the impugned order passed by the NFAC, kind perusal of which would envisage that on the basis of the inspectors report and the recordings in the assessment order it has been alleged that M/s Divine Alloys And Power Co Ltd is a paper Company which is only engaged in the activity of providing only bogus bills, relevant portion of the order in verbatim is reproduced as under; \"d. In light of the facts mentioned above and after taking into consideration the submission of the appellant and relying upon the verification made the AO during the assessment proceedings, it is evident that M/s Divine Alloys and Power Co. Ltd. is only a paper concern which is only engaged in the activity of providing only bogus bills/vouchers without supplying of goods to the appellant company. Hence, I am constrained to be in agreement with the finding of the Assessing Officer and hold that the appellant is unable to substantiate his claims and is not able to controvert the assessment order. The addition made by the Assessing Officer is therefore confirmed. 4. It is in this regard respectfully submitted that the assessee has in their previous submission submitted printout from various websites, placed at page 39-41 of PB-I to substantiate that M/s Divine Alloys And Power Co Ltd was an existing Company and had huge manufacturing facility. Attention in this regard is further drawn to the invoices placed at page 07-12 of the PB-I, kind perusal, of which would envisage that the sales were consignment sales, as such, it would kindly be appreciated that these purchases cannot be held to have been made for inflation of the expenses. In view of the foregoing it is respectfully submitted that so long as the sales are accepted the corresponding purchases are ought to accepted respectfully following the decision of DCIT vs Sharp Mint Ltd, reported in [2024] 159 taxmann.com 1381 (Delhi - Trib.), PCIT vs Nitin Ramdeoji Lohia, reported in, [2022] 145 taxmann.com 546 (Bombay) and PCIT vs Agson Global (P.) Ltd, reported in [2022] 286 Taxman 519 (Delhi). 5. Kind perusal of the assessment order would envisage that the income as per the intimation issued under section 143(1) of the Act has vaguely been adopted without specifying any reasons for adopting the same. It is in this regard respectfully submitted that the returned income cannot be varied in the intimation passed under section 143(1) of the Act, which is supported by the recent decision of the Coordinate Bench of this Hon'ble Tribunal delivered in the case of Shubhkaran Triveni Foundation, in ITA No.503/KOL/2025, copy of the order placed at page 40-42 of the Paper Book of Case Laws - II. In view of the foregoing it is humbly prayed that necessary direction may kindly be given to the assessing officer to adopt the income as per the return of income and not the income determined in intimation issued under section 143(1) of the Act. Printed from counselvise.com Page | 6 ITA No.121/PAT/2025 M/s PSP Trading Pvt. Ltd.; A.Y. 2018-19 In view of the foregoing it is again humbly prayed that the appeal filed by the assessee may kindly be allowed and the assessment order passed under section 147/1448 of the Act may kindly be quashed. 2.4. The case of the assessee find support from the decision of DCIT Vs. Sharp Mint Ltd. (supra). Considering the facts on record with the available evidences, we find that the learned CIT (A) has wrongly sustained the addition by mis-appreciating the facts on record. One more thing we would like to mention that the address on the invoices was of Jharkhand, where the manufacturing unit of the suppler was located, whereas the notice was served on the Kolkata address by the learned AO. Under these circumstances, we are not in agreement with the conclusion drawn by the learned CIT (A) and consequently, we set aside the order of AO and direct the AO to delete the addition. 3. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 09.12.2025. Sd/- Sd/- (DUVVURU RL REDDY) (RAJESH KUMAR) (VICE PRESIDENT) (ACCOUNTANT MEMBER) Patna, Dated: 09.12.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Patna 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. Printed from counselvise.com "