PARAS RICE PRODUCTS PRIVATE LIMITED,DELHI V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 19(1), DELHI, DELHI

ITA 6044/DEL/2025

AI Insights

The case involves Paras Rice Products Pvt. Ltd., which appealed against the order of the Ld. Addl. Joint Commissioner of Income Tax (Appeals)-2, Chennai, concerning the assessment year 2012-13. The primary contention was the validity of reassessment proceedings under sections 147/148/151 of the Income Tax Act, 1961, and the subsequent addition of Rs. 11,31,282 as bogus purchases from Shubham Agro India. The Tribunal examined the merits of the addition and the legal challenges to the reassessment, ultimately deciding in favor of the assessee based on the evidence provided and the lack of rejection of the books of accounts.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 841054 (ITAT-DELHI)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 26-09-2025
• Other Referred Cases: CIT Vs Pashupati Nath Agro Food Products Pvt. Ltd., Sargam Cinema vs CIT, Vikram Plastics & Others, CIT Vs Rajni Kant Dave, Vatika Landbase Pvt Ltd, PCIT vs R.G. Buildwell Engineers Ltd, Yunus Haji Ibrahim Fazalwala vs ITO, Pr CIT vs Forum Sales P Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ARVIND KUMAR TRIVEDI
• Assessee Lawyers: S.K. GUPTA
• Keywords: Reassessment proceedings; Unexplained expenditure; Bogus purchase; Accommodation entries; Borrowed satisfaction; Bogus
• Section: 148; 143(3); 132; 69C

Judgement Text

"6044_DEL_2025_PARAS RICE PRODUCTS PVT LTD 1 | P a g e IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI BEFORE SHRI YOGESH KUMAR US, HON’BLE JUDICIAL MEMBER & MRS. RENU JAUHRI, HON’BLE ACCOUNTANT MEMBER ITA No. 6044/DEL/2025; A.Y.: 2012-13 Paras Rice Products Pvt. Ltd. 2726, Naya Bazar Delhi- 110006 ACIT, CIRCLE 19(1) (APPELLANT) (RESPONDENT) PAN No. AAECA1780F Assessee by : Shri S.K. Gupta, CA Revenue by : Shri Arvind Kumar Trivedi, Sr. DR Date of Hearing: 17.02.2026 Date of Pronouncement: 26.02.2026 ORDER PER RENU JAUHRI : The above captioned appeal is preferred against the order dated 28.07.2025, passed by Ld. Addl. Joint Commissioner of Income Tax (Appeals)- 2 [for short, Ld. Addl. JCIT(A)], Chennai u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as, “Act”), in Appeal No. CIT(A), Delhi-7/10387/2019- 20 for A.Y. 2012-13. The assessment was framed by the Assessing Officer [for shot, “AO”] vide its order dated 14.11.2019 u/s 143(3) r.w.s 147 of the Act. 2. The assessee has raised following grounds of appeal: “ 1.On facts and circumstances of the case, the authorities below have erred in upholding the reassessment proceedings ignoring the fact that impugned assessment is invalid and without jurisdiction as the said assessment is completed without complying with legal requirements of the provisions of section 147/148/151 of the Income Tax Act therefore such assessment is void ab initio and liable to be quashed. Printed from counselvise.com 6044_DEL_2025_PARAS RICE PRODUCTS PVT LTD 2 | P a g e 2. On facts and circumstances of the case, the authorities below have erred in upholding the reassessment proceedings ignoring the fact that reassessment proceedings-initiated u/s 147 of the IT Act ignoring the contention of appellant that the proceedings have been initiated by the AO without application of independent mind on the material, if any, provided by the Inv. Wing of the department. Therefore, such reassessment is void ab initio and liable to be quashed. 3. On facts and circumstances of the case, the authorities below have erred in upholding the reassessment proceedings ignoring the fact that the case is covered by first proviso to sec 147 and there is no allegation in the reason recorded that there is failure of the appellant in disclosing fully and truly all material facts having bearing on the computation of taxable income therefore, reassessment is in defiance of first proviso to sec 147. 4. On facts and circumstances of the case, the authorities below have erred in upholding the reassessment proceedings ignoring the fact that sanction u/s 151 of IT Act as provided with the copy of the reason recorded shows mechanical satisfaction by the approving authority. 5. The Ld. CIT(A) has erred both in law and on facts in the case in upholding the addition on account of purchases of Rs.11,31,282/- made from Shubham Agro India treating the same as bogus purchase in terms of provisions of sec 69C of the Act ignoring the fact that the above provision has no applicability as the purchases are duly accounted in books of account and above addition has been made without rejecting books of account u/s 145(3) of IT Act. 6. The Ld. CIT(A) has erred both in law and on facts in the case in upholding the addition on account of purchases of Rs.11,31,282/- made from Shubham Agro India treating the same as bogus purchase in terms of provisions of sec 69C of the Act ignoring the fact that the appellant has submitted all relevant documents in evidence of purchase and the AO has not made any adverse inference on the documents submitted by the appellant. The additions made by the AO are based on mere suspicion, surmises and conjectures which are unsustainable, arbitrary and unjustified. 7. The appellant craves leave to add, DLEETE, modify / amend the above grounds of appeal with the permission of the Hon’ble appellate authority.” 3. Brief facts of the case are that the assessee had filed its return for A.Y. 2012-13 on 11.09.2012, declaring total income of Rs. 1,50,20,940/-. Printed from counselvise.com 6044_DEL_2025_PARAS RICE PRODUCTS PVT LTD 3 | P a g e Subsequently, information was received from the Investigation Wing that during the course of search u/s 132 conducted on Shri Hitesh Jain, it was found that he was involved in providing accommodation entries through paper concerns. The assessee M/s Paras Rice Products Pvt Ltd. was found to be recipient of such entries. Accordingly, a notice u/s 148 was issued as it was seen that the assessee had shown purchases of rice amounting to Rs. 11,31,282/- from M/s Shubham Agro India [SAI, in short], a concerned managed by Shri Hitesh Jain. Assessment was completed vide order dated 24.12.2019 making an addition of Rs. 11,31,282/- on account of bogus purchases. 3.1 Aggrieved, the assessee preferred an appeal before Ld. CIT(A), raising several legal grounds besides challenging the addition on merits. Vide order dated 28.07.2025, appeal of the assessee was dismissed by Ld. CIT(A). Further aggrieved, the assessee had filed present appeal before the Tribunal. 4. Before us, Ld. AR has argued at length challenging the validity of reassessment proceedings on various counts i.e., non-application of mind borrowed satisfaction, reopening being based on incorrect facts and non-supply of approval granted by PCIT u/s 151 of the Act. He has further argued that the impugned addition was not justified on merits. 4.1 We first take up the Ground Nos. 5 & 6 relating to merits of the addition. Ld. AR has made the following written submissions in this regard: “Ground Nos.5 and 6 Merits of addition of Rs. 11,31.282/- u/s 69C of IT Act. Printed from counselvise.com 6044_DEL_2025_PARAS RICE PRODUCTS PVT LTD 4 | P a g e The appellant is in business of processing/resale of rice and in its regular course of business activity, it makes purchases from various parties directly or through brokers. The purchases from M/s SAI has also been made as a part of core activity of purchasing rice. The appellant in support of above purchases has submitted following evidences: a. Ledger account of SAI; b. Relevant period bank statement; c. Purchase invoices ; d. Stock Register; e. Party wise and month wise purchase details; f. Month wise purchase/sale details; g. VAT returns; h. Comparative rate chart along with specific day chart when purchases from entity in question has been made and comparative purchase/sale bills (PB 95-211). The AO has not disputed the sales of appellant company and also the submission that whatever material is claimed to have been purchased from SAI has been duly accounted in stock register and the purchase rate is lesser by 8 to 15% from the rates paid to other parties whose transaction have not been questioned by the assessing office which fact is evident from comparative chart. The Ld AO has rejected the above explanation on the ground that if the rates of SAI were cheaper then why there has been purchase of just Rs. 11,31.282/- on the total turnover of Rs.114.13 Crore. In this connection, the above presumption of the AO, self contradicts itself as if the intention was to suppress income then there is no reason why an assessee will book purchases at lower rate which amounts going against the logic of suppression of profit rather it is a case of so-called increase of profit. The appellant is showing profit of Rs. 1.50 Crore on turnover of Rs. 116.21 Crore and there has been tax audit conducted u/s 44AB of IT Act and there is no adverse remarks given in tax audit report ruling out any discrepancy in stock records. Further, the GP Ratio has been increased from 2.10% in AY 2011-12 10 2.62% in AY 2012-13. There has been increase in turnover in corresponding years from Rs.100.80 Crore to Rs.116.21 Crore. There is overall increase in net profit from Rs.73 Lakh to Rs.1.88 Crore in the above comparable periods. The AO did not find any instance of either the purchases not entered in the books of accounts and actual sales not booked therein. It is a settled law that If the books of account are not rejected by the AO u/s 145(3) of IT Act, the AO is not within his power to make trading additions contrary to the mechanism placed in the Act u/s 145(1) of the it Act. Reliance is placed on the following authorities: Printed from counselvise.com 6044_DEL_2025_PARAS RICE PRODUCTS PVT LTD 5 | P a g e  CIT Vs Pashupati Nath Agro Food Products Pvt. Ltd. (Allahabad High Court) ITA No. 165 of 2010 dated 04.05.2017  Sargam Cinema vs CIT 328 ITR 513(SC)  Vikram Plastics & Others [239 ITR 161] (Guj)  CIT Vs Rajni Kant Dave 281 ITR 6 (All);  Vatika Landbase Pvt Ltd 383 IT 320 dated 26.02.2016 (Del);  PCIT vs R.G. Buildwell Engineers Ltd (2018) 259 Taxman 371 (Del) approved by Hon'ble Apex Court in (2018) 259 Taxman 370 (SC);  Yunus Haji Ibrahim Fazalwala vs ITO 2016 (2) TMI 1204 (Guj):  Pr CIT vs Forum Sales P Ltd 466 ITR 392 (Del) Further, So far as the issue of invocation of provision of sec 69C is concerned. there is no reason for invocation of deeming provision. The said addition cannot be made under sec 69C as the basic precondition for invoking the section 69C is that the expenditure incurred by the appellant should be out of books of account. Here, the payments to the suppliers, as stated earlier, have been made by banking channels. So, it cannot be held that expenses were incurred by the assessee outside the books of accounts. Section 69C was introduced in to the statute with a specific purpose. A bare reading of the section makes it clear that if the assessee incurred any expenditure, but offered no explanation about the source of such expenditure or part thereof, or the explanation so offered is not satisfactory, such expenditure may be deemed to be the income of the assessee. To support the above view, reliance is placed in the case of jurisdictional Delhi High Court in the case of CIT vs Radhika Creation ITA No.692/2009 (Del) dated 30.04.2010 wherein it was held that as the expenditure was accounted in the regular books, the source is obviously explained. The provisions of Section 69C are not applicable as there was no unaccounted expenditure. Further, reliance is placed in following decisions:  Parekh Corporation UI Building (32 CCH 129) the Mumbai Tribunal:  M/s Fancy wear vs ITO ITA No.1596/Mum/2017 dt: 20.09.2017;  ACIT vs S.K. Integrated Consultants and ors ITA No.4862/Del/2024;  ITO vs Ritu Bhandula ITA No.2750/Del/2025 dated 11.02.2026.” 4.2 On the other hand, Ld. DR has strongly relied on the orders of the lower authorities. He has pointed out the basis of addition was the statement of Sh. Printed from counselvise.com 6044_DEL_2025_PARAS RICE PRODUCTS PVT LTD 6 | P a g e Hitesh Jain, recorded during the course of search, wherein he admitted that accommodation entries were provided by him through M/s Shubham Agro India by issuing bogus bills and no actual sale/purchase took place. 5. We have heard the rival submissions and perused the material placed on record as well as the relevant judicial pronouncements on the issue. We note that the assessee has furnished all relevant details regarding impugned purchases such as confirmation of account, purchase invoices mentioning mode and details of transportation, stock register, party wise and month-wise details of purchases/ sales etc. before lower authorities. These have also been placed before us in the form of a paper book. Ld. AO has not disputed the sales shown by the assessee company. It is worth noting that the assessee has declared turnover of Rs. 116.21 cr. on which profit of Rs. 1.50 cr. has been declared. There has been an increase in turnover and Gross Profit rate as well as net profit in the last three years. Ld. AO has not pointed out any defect in the documents submitted by the assessee and has simply relied on the fact that purchases made from SAI were at cheaper rates than purchases made from other parties. 5.1 Considering the entire factual matrix, we are of the considered view that there was no justification for doubting the purchases of Rs. 11,31,282/- when the remaining purchases out of total of Rs. 1,14,13,11,744/- and the corresponding sales of Rs. 1,17,32,34,299/- have not been doubted. Further, the books of accounts of the assessee have also not been rejected. We, therefore, delete the addition of Rs. 11,31,282/- made on account of bogus purchases by the Ld. AO Printed from counselvise.com 6044_DEL_2025_PARAS RICE PRODUCTS PVT LTD 7 | P a g e and confirmed by Ld. CIT(A). These two grounds of appeal are accordingly allowed. 6. Since the appeal has been allowed on merits, the remaining legal grounds at Sl. No. 1 to 4 are rendered academic and hence are not being adjudicated upon. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the Open Court on 26.02.2026. Sd/- Sd/- (YOGESH KUMAR US) (RENU JAUHRI) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 26.02.2026 Pooja Mittal, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asstt. Registrar, ITAT, New Delhi Printed from counselvise.com "