TaxTMI 
TaxTMI 
2025 (12) TMI 1701
X X X X Extracts X X X X
X X X X Extracts X X X X
....ke up ITA No.251/Agr/2025 for AY 2018-19 filed by the assessee against the order of PCIT u/s 263 and the brief facts of the case are as under:- i). The assessee is a Limited Company, engaged in the manufacturing business of Boneless Meat and Meat products and majority of the meat products are exported. ii). The original assessment was framed u/s 143(3) vide order, dated 09.04.2021, wherein, the addition of Rs. 1,08,00,000/- was made on account 'excess salary' paid to two employees u/s 40A(2b) of the Act. The said assessment was then subject matter of reassessment u/s 148 based on the reason to believe of the AO that the assessee had taken bogus purchase thro accommodation entries from one Sh. Md. Irfan. During reassessment proceedings, the AO issued summons to Md. Irfan and his statement was recorded on oath before the AO wherein, he admitted that he is engaged in trading of live animals and also confirmed the sales made to the assessee and even filed the sample copies of the bills for three years. iv). The Assessing Officer also issued a specific query relating to transactions made with Md. Irfan and a reply was also submitted during the course of reasse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....is issue of alleged bogus purchases from Md. Irfan, had examined each and every issue and even the statement of Md. Irfan was also recorded by the AO u/s 131, in which, Md.Irfan confirmed the supply of Alive animals to the assessee and regarding the withdrawal of cash from his bank account, partially he stated that the payment had to be made to suppliers of buffalo and, as such, cash withdrawals were made and it was further stated that the AO has applied his mind to the facts and circumstances of the case and, thus, possible view has been drawn and besides, that the assessee relied on number of case law on the issue that where there is due application of mind and possible view has been taken, the proceedings u/s 263 deserves to be dropped. viii). The Ld PCIT has given his finding from para 6.1 and para 6.2, he came to the conclusion that bogus purchases have been made by the assessee and there being immediate cash withdrawal transactions into various dummy account by Md. Irfan and also cash withdrawals prove the modus operandi of providing the accommodation entries and there is non- application of mind on the part of the AO as necessary verification has not been made and, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder consideration and the first complete scrutiny assessment was framed, wherein addition to the tune of Rs. 1,08,00,000/- was made on assessee relating to excess salary paid to two employees u/s 40A(2)(b) vide order dated 09.04.2021 u/s 143(3) of the Act, 1961. Copy of the order has been placed in Paper Book, as Annexure A. C. Thereafter, SCN notice u/s 148A(b) was issued on assessee dated 15.03.2022, alleging that, the assessee had taken bogus accommodation entries from one Sh. Md. Irfan S/o Sh. Meharban. Copy placed in the paper book as "Annexure C.". In response to that, assessee submitted its reply on 22.03.2022 attached with this brief, wherein assessee submitted that, the assessee had only made purchases of 'Alive animal' from the above said party, which is accounted in audited books of accounts of assessee and copy of ledger account of the said party was also filed. However, the reply filed by the assessee was considered and notice u/s 148A(d) & notice u/s 148 for initiating of reassessment proceedings were issued on assessee dated 31.03.2022 and order copy is placed as "Annexure C" of Paper Book. D. Further, during the course of reassessment proceedings,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....easons for reopening of the assessment u/s 148 and he took all the step to verify the transactions with Md. Irfan and recorded his statement issued questionnaire & looked into the reply of the assessee and, applied his mind and, thus, once the AO has raised specific query with regard to the issue during assessment proceedings, then, the PCIT cannot sit over that the judgment of the Assessing Officer concerned. I. The PCIT, thereafter, issued a Show cause notice, u/s 263, dated 09.04.2024 and copy of the same has been enclosed alongwith these submissions and the same has been raised about the bogus accommodation entries with Md. Irfan and has mentioned that since there is a cash withdrawals from the bank account of Md. Irfan, that is returned back to the company. J. It is submitted that the statement of Md. Irfan as recorded by the AO during assessment proceedings is very much clear where, he had denied that he is engaged in providing accommodation entries and further, furnished ledger copies for the financial year 2016-17, 2017-18 and 2018-19 and stated that, whatever, amount is received on sale of alive animal, the same is paid to farmers from whom alive animals ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e inquiries, order passed by Principal Commissioner under section 263 was rightly quashed by Tribunal - Whether power under section 263 can be exercised by Commissioner, but by going into merits and making an addition, and not by way of a remand, recording that there was failure to investigate - Held, yes - Whether Commissioner must record abject failure and lapse on part of Assessing Officer to establish both error and prejudice caused to revenue - Held, yes - Whether order passed by High Court, which upheld decision of Tribunal was correct on facts and in law and, thus, SLP filed by revenue against impugned order of High Court was to be dismissed - Held, yes [Paras 2, 4, 5 and 6] [In favour of assessee] ii). Reliance is being placed on the judgment of CIT Vs. Nirav Modi, 77 Taxmann.com 15 (SC), in which, it has been held as under:- "Section 68 read with section 263, of the Income-tax Act, 1961 - Cash credit (Gift) Assessment years 2007-08 and 2008-09 - Assessee received certain amount as gifts from his father and sister who were non-residents in India - Assessing Officer after making detailed enquiries, took a view that assessee had duly proved identity, source ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order, dated 04.12.2019, in which, in para 17 of the judgment, it has been held as under:- "17. The ld. CIT made reference to the Explanation-2 to Section 263 and also decision of Hon'ble Supreme Court in the case of CIT Vs. Amitabhachan, 384 ITR 200. It is pertinent to note that Explanation-2 of section 263(1) would help the ld. Commissioner to take cognizance under section 263 of the Act, if no inquiry was conducted by the AO before finalizing the assessment order. No doubt the assessment orders are very brief, and did not have elaborate discussion on these issues, but it is pertinent to bear in mind that assessee's have no control over the AO and cannot persuade him to draft the assessment order in a particular manner. It is the discretion of the AO, how to pass an assessment order. Had an elaborate discussion available, then that would be an ideal situation for the higher appellate authorities to appreciate, what has operated in the mind of the AO while passing the assessment. But in the absence of such discussion, it has to be ascertained from the questionnaire and the replies submitted by the assessee. Explanation-2 can be invoked when no inquiry was conducted by th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... mind. M. The assessee is response to the SCN notice u/s 263 filed his reply dated 02.07.2024 wherein assessee has given his submission that, the assessment being initiated in the case of the assessee is merely on some difference on opinion and also given the reference of statement of MD. Irfan recorded at the time of assessment, wherein he has confirmed that he has sold lives stocks animals to assessee and books of Irfan payment of which have been made through banking channel and recorded in the Audited books of the account of the assessee and also assessee relied upon various case laws of the different Tribunals, wherein it has been clearly held that the revision merely based on change opinion not permitted. N. Further, it is submitted that we are submitting herewith the copy of order of CIT(A) in the case of Mr. Irfan in AY 2018-19 wherein on same issue was there in his case relating to "alleged accommodation entries provided to assessee worth of Rs. 62,11,24,560/-" and your goodself attention in invited towards the page 4 of the order of Md. Irfan, wherein ground no 2 specifically relating to addition of Rs. 62,11,24,560/- and the CIT(A) in the case of the Md.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot followed the due procedure and supposed to have made due verification. He submitted that the Ld PCIT had rightly invoked the provisions of section 263 read with explanation 2(a). Therefore, he supported the detailed findings in revision order. 7. Considered the rival submissions and material available on record. We observed that the assessee is in the business of exporting meat and meat products. It purchases livestock from various suppliers in turn they purchases the same from the local market or directly from the farmers. The assessee being major meat exporter, had to purchase huge livestock, therefore, they utilized the local suppliers, basically to organize/regularize their purchases. Therefore, they engage suppliers like Mr. Irfan who go to the local market and purchase small batches of animals from the market or from the farmers. They supply the same to the assessee as per their requirements or as per their purchase indent. They are being compensated with certain additional margin or commission on top of the market price. We observed that the Ld PCIT failed to understand the nature of business of the assessee. Without their being purchased livestock, it is not possible ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom Mr Irfan independently and the relevant statements matched with the further statements recorded with the personnel of the assessee company and applied his mind, in our view, taken a possible view. Ld PCIT had not given clear finding how the assessment is erroneous and also how it is prejudicial to the interest of revenue. He merely observed that the substantive addition should have been made in the case of assessee, since it was not made, he formed an opinion that the assessment proceedings are bad as well as erroneous. He observed that AO had not applied his mind as well as not verified the issues he is supposed to. It is not the case of Ld PCIT that no verification at all was made. Therefore, relying on the decisions in the case of Shreeji Prints (P) Ltd (supra), G. Housing Projects (supra) and Arora Alloys Ltd, wherein, the Hon'ble P&H High Court held that revenue had not collected any independent material to arrive at conclusion that there were unexplained sales or purchases made by the assessee. In the given case, the AO had made the independent enquiry and recorded the statement of Mr. Irfan and came to the conclusion that the purchases are genuine and is one of the possi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on account of verification u/s 133(6) of the Act, certain parties have denied having made supplies of any 'Raw Boneless Meat' to the assessee and, for which, the letters as issued to the Elahi Trading Co. and Others have been reproduced at pages 5 to 12 of his order. It was further stated that statement of Sh. Zulfiquar Ahmad Qureshi (key person of HMA Group) was also recorded and, in which, he confirmed that it was not usual practice of purchasing 'Raw Boneless Meat and it was done only for some limited time and was stopped and such purchases do not include bones and other by-products. It has further been stated by the AO that purchases are bogus, since the payment made against the purchases of Raw Boneless Meat have been routed through various accounts and there is round tripping of funds as per observation made by the AO at page 12 to 23 of the order and further, it was observed at page 23, that certain parties namely Sh. Shuaib Ahmad has capital only of Rs. 1,92,61,832/- as per audited balance sheet as on 31.03.2023 and it appears that he does not have the 'net worth' to put an investment of Rs. 4 crores and, accordingly, the show cause notice was issued to the assessee, for wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....CIT(A) analyzed the purchases of raw Boneless meat and referred to the reply of the assessee to the show cause notice issued by AO at page 8 & 9 of his order, also considered the detailed written submissions of the assessee from page 9 of the order. In the submissions the assessee referred to the statement of Sh. Zulfiquar Ahmad Qureshi, a key person of HMA Agro Industries Ltd., in which he accepted the purchases of raw boneless meat, and it was argued that the AO has twisted the statement to suit his conclusion. Further, it was argued by the assessee that the Elahi Trading Co. has only supplied raw boneless meat to the tune of Rs. 4,01,173/- only that has been recorded in his books of accounts, beside that he had made sales during the year to the tune of Rs. 17,58,46,131/- of the live animals and confirmed the copy of account of Elahi Trading Co. had been submitted. It was also stated that in the case of Sh. Israr Ahmad, it is a case of mistaken identity as the notice has been issued to Sh. Israr Ahmad instead of Imlak Traders and the assessee had bought the goods from Imlak Traders Prop. Imlak Ahmad, hence the reply of 'Ishrar Ahmad' has no evidentiary value. It was further state....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of alleged bogus purchases from Md. Irfan have been discussed at para 8.1 of the order and he referred to written submissions made before the AO from page 32 to 35 along with basis of reopening of the case u/s 148 and also considered the detailed submissions which have been reproduced by the CIT(A) in para 8.3 of the order, on account of purchases from Md. Irfan and considered at length the reply of the assessee on this issue from page 36 to page 40 of the order of CIT(A), further stated that there was no basis of making the disallowance of 109,94,70,000/- out of the total purchases of alive animals to the tune of Rs. 170,70,52,786/- without pointing out specific purchases to be bogus, and it was only on the basis of doubt and suspicion, the AO has made the addition and there is no basis of making addition of Rs. 109,94,70,000/- on account of cash withdrawals by Md. Irfan. ix). The Ld CIT(A) has given his finding from page 40 onwards after considering various case law and facts and circumstances of the case have given his categorical finding from para 8.11, at page 48 of the order, have held that the assessee company a producer and exporter of frozen meat and when the sa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee nor under APEDA guidelines. He also brought to our notice the statement of Mr. Zulfiquar Ahmed Qureshi. Further submitted that some of the parties have stated that they do not trade in raw boneless meat. Further some of the suppliers stated that RBM was an R&D done at the assessee company. He submitted that the AO had clearly brought on record that the cash transactions are nothing but round tripping of cash back to the assessee company. All these transactions are nothing but bogus purchases. The material clearly indicates that it is only round tripping of cash and objected to the findings of Ld CIT(A) and submitted that Ld CIT(A) had accepted the circumstantial evidences to give benefit to the assessee without proper appreciation of findings of AO. Accordingly, he relied on the findings of AO. 17. On the other hand, ld. AR of the Assessee submitted as under :- I. The assessee is the third largest meat exporters in India and has supplied the Frozen Meat to many countries and no discrepancy or any fault has been noticed by the Assessing Officer, in so far as, supplies of meat by the assessee company, which is exported. However, some of the purchases have been doubt....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of the supplier 'M/s Imlakh Traders', whose Proprietor is Md. Imlak Ahmmed and the reply was received from 'Mr. Ishrar Ahmad' Prop. Imlak Traders, who denied having made any sales to the assessee of 'Raw Boneless Meat' and copy of the letter as filed by Mr. Ishrar Ahmad, dated 05.03.2024, have been reproduced at pages 8 & 9 of the assessment order and, thus, it was held to be a case of mistaken identity. Hence, no adverse view could be drawn in respect of this issue. Reply at page 10 to 11 of the order of the CIT(A). ii). The CIT(A) also referred to the reply filed by the assessee in response to notice issued by the AO u/s 133(6) to M/s Elahi Trading Co., which reply has been reproduced by the AO at pages 6 to 7 of the assessment order, in which, he has stated he has supplied 'live buffaloes' and had not sold any boneless meat to HMA Agro Industries Limited. The assessee had relied upon his reply to show cause notice of the AO and which have been reproduced in para 2, page 10 of CIT(A) order, in which, it was stated that M/s Elahi Trading Co. had made the sales to the tune of Rs. 17,58,46,131/- of Live Animals and he has confirmed his copy of account and it is only on acco....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... No incriminatory material have been brought on record. e). The statements as given by the suppliers have been misinterpreted and rather all the facts having been provided to the AO. f). No case of inflation made out by the AO by taking the alleged accommodation entries in the form of alleged bogus purchases as day to day stock record have been maintained. g). Quantitative records of the Live Animals and Others on the day of arrival has been maintained in day to day register, no defects pointed out. h). No case of bogus sales made out by the AO. i). Allegation of round tripping of funds, no evidence is there, since such screenshots did not relate to assessment year 2019-20. j). Though, the number of case laws have been relied upon by the CIT(A), we are submitting herewith gist of further judgments on the issue of bogus purchases and, thus, the CIT(A) has rightly deleted the addition. V. ADDITION OF BOGUS PURCHASES FROM IRFAN a). This issue has been discussed by the AO in para 7.5, page 46 of the order. This issue is on the basis of order u/s 148A (d) and, thus, it appears that no incriminating material regardin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en, the assessee's submissions before the CIT(A) have been reproduced at pages 35 to page 40 of his order and following submissions were made:- a). Mr. Irfan has stated that he was doing the sale and purchase of Life Animals from Agriculturist and then selling the same to assessee concerned, which were then slaughtered by the assessee and ultimate export of frozen meat as stated during the course of proceedings for Asstt. Year 2018-19. b). Copy of purchase vouchers depicting the number of animals, weight, of animal. c). Copy of purchase summary showing the number of animals their weight and average weight which have been categorized according to the categories of animal like 130 kg below, 130 kg up, 170 kg below, 170 kg up. d). Weight sheet of the animals so supplied depicting the arrival date, time, for each and every animal to prove that the animals were received at our slaughterhouse for the entire year. e) The quantitative tally of animal purchased, meat produced, sales made at Khurja factory. f). The GST summary for the impugned assessment year showing the sale of frozen meat at Khurja unit -1, along with division wise outp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....order that the AO observed from the records that assessee had purchased raw boneless meat (RBM) from certain parties, the list of parties is reproduced at para 7.1 of the assessment order. Since the assessee purchased the above RBM from parties, which are not the regular method of processing the meat and meat products by the assessee, he was of the view that this fact was unearthed only during the search, hence, it is incriminating material. Further, he observed that as per the manual of APEDA, the assessee had to get the certificate from the agency certified by APEDA on the fitness of the meat supplied by the assessee to the overseas customers, which should be fit for human consumption. Since the assessee has procured the RBM from certain suppliers, he doubted the documents relating to pre-shipment certificate issued by the recognized laboratory on the purchases made by the assessee, particularly the supply of RBM from the listed suppliers.AO observed in his order that "if the assessee is purchasing Raw Boneless Meat, how it would ensure that meat derived from only healthy animals is exported". With the above observation, he recorded the statement of Mr. Zulfiquar, who had not den....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d all the transactions vide letter dated 19.03.2024, the same is reproduced in the assessment order. After considering the above submissions, he rejected the same by observing that there is sufficient evidence available on record which suggests that the assessee has shown bogus purchases of RBM. With the above observations, he treated the whole purchase of RBM as bogus purchases. 21. After considering the detailed submissions of the assessee on the issue of purchase of RBM from the suppliers, case law and findings in assessment order, Ld CIT(A) had observed in his order that the assessee had procured RBM for short period of time, which was later discontinued. He also analyzed the findings of AO with respect to the issue of notice u/s 133(6) and various statements of the suppliers, he observed that AO had merely relied on the statement of certain suppliers, which are contrary to the facts on record. He has dealt with the same at para 7.7 of the impugned order. Apart from that he found that the revenue had accepted the corresponding sales declared by the suppliers in their assessments no adverse findings were recorded for the assessment years 2019-20 to 2023-24 of the various supp....