TaxTMI 
TaxTMI 
2026 (9) TMI 1969
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....al With reference to above it is to submit that the Ld. CIT(A), NFAC vide order dt. 07.10.2025 has upheld the order passed by AO assessing the total income at Rs. 9,44,60,438/-. The appeal was to be filed on or before 31.12.2025. However, for the reasons stated hereunder, the appeal could not be filed in time:- 1. I am Partner of M/s Ziyauddin Traders which is engaged in the business of supply of live animals stock (buffalo) to the different slaughter houses & dealers after procuring the same from local markets/ persons 2. AO passed the assessment order of the firm for AY 2022-23 on 27.03.2024 making addition of Rs. 21.21 crore by disallowing 20% of the purchases of Rs. 106.05 crore. This order was challenged by way of writ in the Allahabad High Court. The Hon'ble High Court vide order dt. 08.05.2024 set aside the order to the AO to pass appropriate order by considering the assessment order dt. 27.03.2024 as the show cause notice. 3. In pursuance to the direction of Hon'ble High Court, we filed our reply on 25.05.2024. However, the AO without considering the said reply, issued show cause notice dt. 09.05.2025 proposing addition of Rs. 31,48,60,13....
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....ause for the delay in filing the appeal. Accordingly, the delay of 121 days in filing the appeal before us is condoned and the appeal is admitted for hearing. 3. Brief facts of the case: The assessee is a partnership firm and during the year the AO noted that the assessee was engaged in the business of supply of live animal stock (Buffalo) to the different slaughter houses and dealers after being procured from the local village markets, individual agriculturist and dairies. The AO noted that during the year under consideration, the assessee had shown substantial payments to the entities which were not registered under GST and the case of the assessee was selected through CASS to verify the same. 3.1 The AO in this case passed an assessment order u/s 143(3) r.w.s 144B of the Act on 27.03.2024 in which the AO disallowed an amount of Rs. 21,20,93,812/- being 20% of the total purchases of Rs. 106,04,69,062/- as unexplained expenditure u/s 69C of the Act. Against this order, the assessee filed a Writ Tax number 709 of 2024 before the Hon'ble Allahabad High Court wherein the Hon'ble Court in para no. 12 of its order dated 08.05.2024 set aside the impugned assessment order and direc....
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....ade. In the earlier assessment proceedings, the AO had issued notices to the above purchasers and had noted that the replies were received only from 2 suppliers. In the present assessment proceedings, the AO taking note of the above fact and upon the perusal of the reply of the assessee which stated that the confirmation of the suppliers could not be submitted in compliance to notice u/s 133(6) of the Act on IT portal as very short time was provided and some of the suppliers were not filing their income tax return as their income was below the taxable limit for AY. 2022- 23 and they were all agriculturist commented that the said reply was self-contradictory. The AO also took note of the fact that in respect of 133(6) notices issued to the purchasers reply from only 2 were received and hence the genuineness and the credit worthiness of the suppliers could not be proved. The AO also noted that on perusal of the invoices submitted by the assessee in respect of purchases that the same were only computer generated invoices, not having any Sales Tax No and GST no on those invoices and the transaction of each invoice in lakhs with each supplier without GST no. was not acceptable 3.6 Th....
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....anking channels and filed a reconciliation statement with the copies of bank statements as an attachment before the AO. It was further submitted that in respect of purchases amounting to Rs. 50,95,42,276/- the same were made from different individual agriculturists/ suppliers to whom payments were made through banking channels and also filed a reconciliation statement with the copies of bank statements as an attachment before the AO. It was further submitted that in respect of these purchases the volume and value of purchases from these individual suppliers was not large and therefore, these transactions did not come under the preview of TDS u/s 194Q of the Act. Regarding the purchases amounting to Rs. 1,67,10,500/- in cash it was submitted that these sellers were individual agriculturist not being their regular suppliers who required immediate payments and, therefore, it was made in cash. It was also submitted that the cash purchases were mere 1.57% of the total purchases which was even below the standard limit set out in first proviso to section 44AB(a) of the Act. The assessee also submitted that entire sales were made through banking channel and all though the assessee was deal....
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....nciled with the copies of bank statements of the assessee in a separate attachment. The assessee has been able to secure confirmation from these suppliers. Copies of confirmations from suppliers along with copies of their Income Tax Returns and Bank statements (wherever received) are being furnished. The confirmation also mentions PAN of the supplier. The assessee has been able to secure confirmation from these suppliers. Copies of confirmations from suppliers along with copies of their Income Tax Returns and Bank statements (wherever received) are being furnished. The confirmation also mentions PAN of the supplier. f) Further, purchases amounting to Rs. 50,95,42,276.90 were made during the year from different individual agriculturists/suppliers to whom payments were made directly into their bank accounts. As the volume and value of purchases from these individual suppliers was not large, these transactions did not come under the purview of TDS u/s 194Q of the Act. The entire payments made to these suppliers are only through banking channel and the same are being reconciled with the copies of bank statements of the assessee in a separate attachment. g) Fu....
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....norganized sector and exempt from GST, one would not expect a formal agreement or other formal documentation from these suppliers. The assessee as a prudent business practice has maintained purchase invoices and the same are being furnished. n) As desired in para 3.4.1 of the show cause notice, the assessee is furnishing the following: Confirmations from suppliers to whom notices u/s 133(6) were sent during the earlier assessment proceedings. Details of transactions of purchase in the following format- Name of the Party Amount Date Payment of Mode of Payment (By Cheque/Bank Transfer/Cash) If payment is done through bank, the entry has been specified as such and the same has been reconciled/numbered in the bank statement. Voucher and bills for the transactions are being submitted and the serial number of the entry has been marked on the voucher. However the assessee calculated the total purchase vouchers which came to approximately more than 8000. Scanning each one of them appears to be extremely voluminous and time taking process. The assessee is furnishing about 250 purchase invoices as a representative sample to expediate the review....
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....d such sales have been duly recorded in the books of accounts and reported in the audited financial statements and income tax return. These transactions are also supported by proper banking channels. Accordingly, while these entries confirm the genuineness of the assessee's sales, it may be noted that the TDS under Section 194Q in 26AS does not relate to the assessee's own purchases. Rather, it evidences that buyers who crossed the specified threshold deducted TDS while making payments to the assessee. Furthermore, the existence of genuine sales in such substantial volume strongly supports the fact that corresponding purchases have actually taken place. The assessee has already submitted complete details and reconciliation of purchases, payments, and sales, including stock register and supplier confirmations wherever available. Therefore, there is no basis to question the genuineness of any part of the purchases, and no adverse inference is warranted under Section 69C or any other provision on this part of purchases made by the Assessee. However for the rest of almost 31crore plus of purchases made by the Assessee the Assessee is saying that the purchases have been made from sm....
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....hout proper justification. The disallowance is based merely on the allegation that invoices were computer-generated without sales tax or GST numbers and that certain cash purchases bore thumb impressions, ignoring that livestock transactions are not subject to GST and all invoices in this trade are computer-generated. The appellant had duly maintained audited books of accounts, stock registers, and provided all details sought, none of which were rejected by the AO. While the gross profit of 2.22% was accepted on purchases of Rs. 74.56 crores, the AO disallowed 30% of the balance purchases without clarifying whether such disallowance implied that livestock was never purchased or that purchases were inflated. 8.2 On perusal, it is evident that the variation of Rs. 9,44,60,438/- made by the learned AO in respect of business income is fully justified and does not merit interference. The AO has clearly brought out that the balance purchases of Rs. 31.49 crores were supported only by computer-generated invoices without sales tax or GST numbers, and in respect of cash purchases of Rs. 1.67 crores, the invoices merely bore thumb impressions, thereby rendering their genuineness hig....
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....der in Hon'ble Allahabad High Court who vide order dt.08.05.2024 (PB 28-31) after reproducing para 17 of the petition set aside the assessment order dt.27.03.2024 with the direction that the petitioner may treat the adverse finding in the said order as points on which he may show cause and file the reply within a period of 3 weeks from the date of the order. 4. In view of the above direction of Hon'ble High Court, assessee filed the reply on 25.05.2024 (PB 32-37) where he explained in detail as to why the addition of 20% of the cash purchases of Rs. 1,67,10,500/- as proposed in the show cause notice is unjustified and uncalled for and why the addition of 20% of total purchases made by the AO in the assessment order is unjustified and uncalled for. 5. The AO, thereafter, for the first time issued notice u/s 142(1) dt.07.04.2025 which was replied on 28.04.2025. Thereafter, notice u/s 142(1) dt.01.05.2025 (PB 38-44) was issued against which adjournment was sought. Finally, AO issued show cause notice dt.09.05.2025 (PB 45-58) against which reply was filed on 13.05.2025 (PB 59-67). 6. The AO after considering the reply of the assessee, at para 3.4.1, p....
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.... declared in the last year. 3. The total purchases of the assessee is Rs. 106,04,69,063/-, breakup of which is as under: - Particulars Amount (in Rs. ) Purchases subject to TDS and payment made by bank 53,42,16,286 Purchases not subject to TDS but payment made by bank 50,95,42,277 Purchases made in cash 1,67,10,500 Total 106,04,69,063 To verify the authenticity and genuineness of the purchases, the assessee vide reply dt. 13.05.2025 (PB 5-67) furnished the copies of the bank statement to evidence that payment against purchases is through banking channel to the extent mentioned above. Confirmation of the suppliers and copy of their income tax return, wherever received were furnished. Tax is deducted at source u/s 194Q on the purchases amounting to Rs. 53,42,16,286/- where the payment to individual supplier exceeded Rs. 50 lacs. In respect of purchases amount to Rs. 50,95,42,277/- made from different individual agriculturist/suppliers, tax was not deducted at source since the payment to the individual supplier was less than Rs. 50 lacs but payment to all these suppliers are through banking channel. The remaining purchase of Rs. 1,67,10,....
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....f the total purchases in order dt.27.03.2024. Hon'ble High Court has therefore set aside the original assessment order. Now in the present order, AO has disallowed 30% of the purchases of Rs. 31,48,68,129/-. On what basis the disallowance is increased to 30% and on what basis purchases of Rs. 31,48,68,129/- was identified for disallowance is not ascertainable. Hence, such adhoc disallowance do not stand the test of judicial scrutiny as held in the following cases: - ACIT Vs. Ajit Ramakant Phatarpekar (2015) 119 DTR 27 (Panaji) (Trib.) AO having not disputed the quantitative details of opening stock, sales and closing stock as given in the tax audit report and also accepted the sales, the disallowance of cash purchases made by the AO on the ground that the assessee has not proved the identity of the sellers has no justification. ACIT Vs. Inlay Marketing Pvt. Ltd. (2015) 113 DTR 121 (Del.) (Trib.) AO having not pointed out any defect, infirmity or ambiguity in the assessee's books of accounts and accepted the opening stock in the beginning of the year and the sales, and the sales tax authorities having made no adverse remark in the sales tax assessm....
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.... generated invoices, not having any sales tax number and GST number. (b) For cash purchases of Rs. 1.67 Crores there is only thumb impression given on these invoices and therefore in his opinion the same cannot be considered genuine. (Please refer to Para 5 and 6 on page 20 of the Assessment Order) Your honour would appreciate that this is no reason for disallowing 30% of balance purchases without considering the facts of the case and thereafter reaching to the conclusion as to why disallowance is needed. 4. According to the records of the appellant the breakup of purchases is as under: Total Purchases 1,06,04,69,063 Purchases subject to TDS and payment made by bank 53,42,16,286 Purchases where payments made by bank 50,95,42,277 Purchases where cash payment is made 1,67,10,500 5. Quantity wise details are as under: Purchases of Live Stock 49,546 Numbers Sales of Live Stock 49,546 Numbers 6. The trading results of the appellant are as under: Sales 1,08,45,87,590 Purchases 1,06,04,69,063 Gross Profit 2,41,18,527 Net Profit before partner remuneration 9.95.217 Net Profi....
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....w of the above it is humbly prayed that the variation of Rs. 9,44,60,438/- may please be deleted." 7. On the other hand, the Ld. CIT DR supported the orders of the authorities below. 8. We have heard both the parties and perused the material available on record. The assessee is a partnership firm and during the year the assessee was engaged in supply of live animal stock (Buffalo) to the different slaughter houses and dealers after being procured from the local village markets, individual agriculturist and dairies. The AO noted that during the year under consideration, the assessee had shown substantial payments to entities which were not registered under GST and the case of the assessee was selected though CASS to verify this issue. During the year the assessee had total purchases of live stock amounting to Rs. 106,04,69,063/- and total sales was 108,45,87,590/- on which the gross profit was Rs. 2,41,18,527/-. Further, as submitted by the assessee the total purchases quantity wise was 49,546/- and total sales of live stock was also 49,546/-. The details of purchases as summarised of the assessee is reproduced as under: Total Purchases 1,06,04,69,063 Purchases subjec....
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.... the details before us it was noticed that the details as claimed by the assessee to have been filed before the AO and the details in respect of the transportation expenses were not filed by the assessee before us. Therefore, a clarification hearing in this case was fixed on 01.09.2026 vide order sheet noting dated 21.08.2026 which is reproduced as under: "During dictation it emerged that certain details as submitted by the assessee before the AO vide reply dated Nil (placed at page no. 59 to 67 of the paper book) in response to the show cause notice dated 09.05.2025 (placed at page no. 45 to 58 of the paper book) have not been submitted before us in the paper book filed before us. The assessee is directed to furnish the followings documents as mentioned in para no. 1(c), 1(f) and 1(n) the said reply, which are as under: (i) reconciliation statement with the copies of the bank statement in respect of purchases amounting to Rs. 53,42,16,286/- in which TDS under section 194Q was deducted. (ii) reconciliation statement with the copies of the bank statement in respect of purchases amounting to Rs. 50,95,42,276.90 in which TDS under section 194Q was not deduct....
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....nks statement in respect of purchases amounting to Rs 50,95,42,277 In which TDS under section 194Q was not deducted. Out of total purchases of Rs 106,04,69,063, purchases of Rs 50,95,42,277 were made from various parties to whom payment was made through banking channel. TDS u/s 194Q of the Act was not done as the aggregate purchases from these parties was below the threshold of Rs 50 lakhs as provided in section 194Q of the Act. Complete party wise purchase list of entire purchases of Rs 106,04,69,063 along with copy of bank statement is enclosed at PB 115-555. Further, the purchases bills in respect of purchases of Rs 50,95,42,277 is enclosed at PB 556- 805, on sample basis 3. Confirmation from suppliers to whom notices under section 133(6) were sent during the earlier assessment proceedings. Confirmation from suppliers to whom notices under section 133(6) were sent during the earlier assessment proceedings is enclosed at PB 6-114. 4. The details submitted in respect of the following query along with the reconciliation statement of wheel fofods Furchases amounting to Rs 1,67.10.550. Complete party wise purchase list of entire purchases of Rs 106....
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....850 8. Ledger account of transportation expenditure 851-856 It is certified that the documents at S. No. 2 to 7 were filed before the Ld. AO vide submission dated 12 may 2025 and at S. No. 8 was filed before the Ld. AO vide submission dated 26 December 2023 -sd/- Yogesh Parwal Authorized Representative 8.7 As noted above, the AO stated that the assessee did not file the relevant documentary evidence in support of the claims made by the assessee but the AO did not specify any such document which was not filed. (as highlighted by us in the relevant extracts of the order of the AO reproduced in para no.3.8 on page no. 15 of this order). On the other hand, during the course of above clarification hearing the assessee filed the necessary details (placed at page no. 5 to 856) along with the screenshot of E-filing portal evidencing filing of response by the Appellant (placed at page no. 1 to 4 of the paper book) along with a certificate that the above documents were filed by the assessee before the AO as requisitioned by the AO as per the various notices u/s 142 (1) of the Act issued by the AO from time to time. Further, we notice that despite such documents filed ....
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....he total purchases. 8.10 Thus, considering the above facts and the details submitted by the assessee before the AO during the assessment proceedings and as per our observations regarding the non-acceptance about the defects pointed by the AO and further the fact that out of the total purchases of Rs. 106,04,69,063/-, purchases subjected to TDS and payments through bank amounted to Rs. 53,42,16,286/-, purchases where payments were made through bank amounted to 50,95,42,277/- and the cash payment purchases amounted to Rs. 1,67,10,500/- which is only 1.57% of the total purchases for which 45 bills for cash purchase (placed at page no. 806 - 850 of the paper book) was filed by the assessee and further, the details of transportation expenses amounting to Rs. 1,77,41,507/- which was purchased from M/s Fuel Point, Aligarh where the entire payment was made through banking channel on which due TDS was deducted u/s 194Q of the Act (ledger account of transportation expenditure placed at PB 851-856 of the paper book), the ad hoc disallowance being 30% of the purchases (Rs.31,48,68,129/-) which came to Rs. 9,44,60,438/- and considered as business income is not justified and the same is delet....
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....ATXPK1344R Purchase Voucher Attached 1.01,51,500.00 NA Attached BANK Ne NIE 20 R.A Traders, Mathura (Up) BEWPA43760 Purchase Voucher Attached 4,92,61,600.00 NA Attached BANK No Nil 21 Ram Harshan, Badi Dhauipur (Raj) AKCP87890H Purchase Voucher Attached 97,19,050.00 NA Attached BANK Nc Nl 22 Sadik kureshi, Gram Jhonkar, Disti.Lijain (Mp) ESIPX9196N Purchase Voucher Attached 58,38,568.00 NA Attached BANK No Nd 23 Salını Khan, Fure Dist. Shopuri (Mp) EUBPK0138L Purchase Voucher Attached 51.61,161.00 NA Attached BANK Ne NA 24 Shahid Qureshi, Dhalspur | Rajl IZYPKD179R Purchase Voucher Attached 54,00,400.00 NA Attached BANK No NA 25 Shahjad Traders Sarnagpur (Mp) HKWPS26710 Purchase Voucher Attached 5.34,68,835.00 NA Attached BANK No NA 26 Shakil Qureshi, Samnagpur (Mp) DLXP50289E Purchase Voucher Attached 56,08,561.00 NA Attached BANK No Nil 27 Shakir , Dhaulpur MOQPS9527G Purchase Voucher Attached 93,04,300.00 NA Attached BANK No Nil 28 Sherad Qureshi, Sarnagpur (Mp) ETPPK3166K Purchase Vouches Attached 87,42,772.00 NA Attached BANK No Nil 29 Sından Beno, Dhaulpur EXQP86368M Purchase Voucher Attached 70,04,500.00 NA Attached BANK No - 30 Taj Trading Company, Dhaul....