Section 68 cannot be invoked for bogus purchases capitalized as work-in-progress, substantiated share application money, or genuine agricultural income.

By | October 28, 2026
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Section 68 cannot be invoked for bogus purchases capitalized as work-in-progress, substantiated share application money, or genuine agricultural income.

Issue

  • Whether Section 68 of the Income-tax Act can be invoked to treat purchases as unexplained cash credits when the material has not been debited to the P&L account but capitalized under work-in-progress.
  • Whether an addition under Section 68 towards share application money is sustainable when the assessee has discharged its initial onus by proving identity, creditworthiness, and genuineness through comprehensive documentary evidence.
  • Whether the Assessing Officer was justified in treating the difference in agricultural income as an unexplained credit under Section 68 by arbitrarily estimating lower yields and sale rates without contrary evidence.

Facts

  • Bogus Purchases Issue:
    • The assessee-company filed its return for A.Y. 2018-19, which was subjected to reassessment based on information regarding alleged bogus purchase bills from M/s Mega City Trade Link (₹2.13 crores) and M/s Goldwright Vyapar Pvt. Ltd. (₹1.79 crores).
    • Despite the assessee furnishing bank statements, ledger books, invoices, confirmations, and affidavits, the Assessing Officer (AO) treated the total purchases of ₹3,91,35,000 as unexplained credits under Section 68.
    • The disputed purchases were not debited to the P&L account but were utilized for constructing a maize plant and shown under work-in-progress, which the AO had accepted. No corresponding sum of money was credited as a cash credit in the books.
  • Share Application Money Issue:
    • The assessee received share application money of ₹20 lakhs from M/s Saloni Buildtech Pvt. Ltd.
    • The AO made an addition under Section 68 based on statements of alleged entry operators, claiming the investor lacked creditworthiness.
    • The assessee produced documentary evidence including certificate of incorporation, audited financials, bank statements, share application forms, and registers, while explaining that existing shareholders renounced rights in favor of the investor. Furthermore, the entry operators never named the assessee as a beneficiary.
  • Agricultural Income Issue:
    • The assessee declared agricultural income of ₹14.56 lakhs (supported by ownership of 12 acres, production of 23,650 kg of maize seeds, sales of ₹20.99 lakhs, and expenses of ₹6.43 lakhs).
    • The AO treated ₹14.15 lakhs as unexplained credit under Section 68 after arbitrarily holding that the yield and sale rates were excessively high.

Decision

  • Inapplicability of Section 68 to Capitalized Purchases: Since the purchase amount was not debited to the P&L account but utilized for construction under work-in-progress, and no sum was credited in the books as a cash credit, Section 68 could not be applied; the addition was rightly deleted.
  • Deletion of Share Application Money Addition: The assessee fully discharged its onus of proving identity, creditworthiness, and genuineness with undisputed documentary evidence, making the addition under Section 68 unsustainable.
  • Acceptance of Agricultural Income: In the absence of any contrary material brought on record by the Revenue to counter the documented landholdings, production records, and higher value of maize seed sales, the deletion of the addition by the Commissioner (Appeals) was upheld.

Key Takeaways

  • Prerequisites of Section 68: Section 68 requires a sum of money to be actually credited in the books of accounts of the assessee; it cannot be arbitrarily invoked for asset-creation or capital work-in-progress expenditures that are not booked as cash credits.
  • Discharge of Burden for Share Capital: When a corporate assessee provides complete KYC documents, audited financial statements, and banking records of share applicants, the burden shifts to the Revenue to disprove them rather than relying on generalized third-party statements.
  • Evidentiary Support for Agricultural Income: Additions on agricultural income cannot be sustained solely on subjective estimates of yield or sale rates when the assessee maintains verifiable records of land ownership, actual output, and specialized crop types (such as seeds).
IN THE ITAT RAIPUR BENCH
Income-tax Officer
v.
Varda Energy and Engineering, (P.) Ltd.
R.K. PANDA, Vice President
and Partha Sarathi Chaudhury, Judicial Member
IT Appeal No. 11 ( RPR) of 2024
[Assessment year 2018-19]
SEPTEMBER  25, 2026
Sunil Kumar Agrawal, CA and Ms. Vidya Verma, Adv. for the Appellant. Rituparna Namdeo, CIT-DR for the Respondent.
ORDER
R.K. Panda, Vice President.- This appeal filed by the Revenue is directed against the order dated 24.11.2023 passed by the Ld.CIT(A)/NFAC, relating to assessment year 2018-19.
2. Facts of the case, in brief, are that the assessee is a private limited company engaged in the business of trading of iron and steels. It filed its original return of income on 29.09.2018 declaring total income at Rs.63,290/-. The return was processed under section 143(1)(a) of the Act. Subsequently, information was received from credible sources that the assessee was in receipt of bogus purchase bill without actual delivery of the goods to the tune of Rs.2,12,85,000/- from M/s Mega City Trade Link and Rs.1,78,50,000/- from M/s Goldwright Vyapar Pvt. Ltd. Further, the assessee was also in receipt of accommodation entry of Rs. 20,00,000/-from Shri J.P. Gupta through a shell company, namely, Saloni Buildtech Pvt. Ltd. The AO, therefore, initiated proceedings under section 147 of the Act and order under section 148A(d) of the Act was passed on 28.03.2022. Accordingly, notice under section 148 of the Act was issued on 30.03.2022. The assessee in response to same filed its return of income on 29.04.2022 declaring total income at Rs.63,290/-.
3. During the course of assessment proceedings, the AO observed that as per information received from the investigation wing of the Income Tax Department, M/s Mega City Trade Link was found indulging in the issuance of fraudulent GST invoices for passing input tax credit to other business entities. In view of this information, summon under section 131 of the Act was issued to M/s Mega City Trade Link. However, the party neither appeared nor made any submission. It was found on enquiry that M/s Mega City Trade Link has filed ITR for AY 2018-19 only, where the revenue from operation were shown at Rs.33,94,65,983/-. The profit before tax declared at Rs.67,672/- was very nominal in comparison to the turnover of the company. Further, the said company stopped filing ITR from AY 2018-19 onwards and had neither fixed assets nor any rental expenses. Therefore, it was concluded that the company did not have any real trading with stock in trade rather it was used to provide accommodation entries in the form of bogus purchase invoices without any physical delivery of goods. The assessee company has made purchase of Rs.2,12,85,000/- from M/s Mega City Trade Link.
4. The AO similarly noted that the assessee has also made purchases of Rs.1,78,50,000/- from alleged shell company M/s Goldwright Vyapar Pvt. Ltd. who has not filed any return of income for FY 2018-19. The AO further noted that the assessee has received share application money of Rs.20,00,000/- from M/s Saloni Buildtech Pvt. Ltd. The AO therefore asked the assessee to substantiate the purchases made from M/s Mega City Trade link and M/s Goldwright Vyapar Pvt. Ltd. and also to explain the identity and creditworthiness of these parties and genuineness of the transactions. The assessee, in response to the same furnished copy of the bank statement, computation of income, bank book, copy of register of members, copy of share application of M/s Saloni Build Tech Pvt. Ltd., copy of invoices from M/s Mega City Trade Link and M/s Goldwright Vyapar Pvt. Ltd. and also affidavits of above two parties. Subsequently, the assessee filed various details to substantiate the purchases made from the above two parties and share application money of Rs.20,00,000/-.
5. However, the AO was not satisfied with the arguments advanced by the assessee and made addition of Rs.3,91,35,000/- under section 68 of the Act on account of bogus purchases. Similarly, in absence of any documentary evidence regarding creditworthiness of the investor M/s Saloni Build Tech Pvt. Ltd. who have invested Rs.20,00,000/- towards share application money in the assessee company, the AO made addition of the same by invoking the provision of section 68 of the Act. While doing so he noted that the share allotment application was signed by Mr. Raju Malik in the capacity of Director of M/s Saloni Buildtech Pvt. Ltd who was a cash handler and in his statement before the Investigation wing has accepted that he was Director in many Shell companies and was in the business of providing accommodation entries. Considering all these facts and circumstance of the case, the AO treated the said amount of Rs. 20,00,000/- as unexplained credit in the books of the assessee and added the same to the total income of the assessee under section 68 of the Act.
6. It was also observed by the AO that the assessee has shown agricultural income of Rs. 14,56,420/- which was claimed as exempt income. The assessee was required to justify the same alongwith supporting documents. In response, the assessee furnished the submission wherein it has claimed to have 12 acres (i.e. 4.85 hectare) of agricultural land with production of 23,650 kg of maize with total sale of Rs.20,99,790/-. The assessee also claimed expenditure of Rs.6,43,370/-. The AO noted that the assessee has claimed yield per hectare at 88.79 quintal and production claimed by the assessee is 4876 kg. The AO noted that the said yield and sale rate claimed was at extremely higher price than the prevailing market rate in the region. Further, as per report on agricultural prices published by the Ministry of Agricultural and Farmers Welfare, the average prices of Maize in F.Y. 2017-18 was Rs.1425/- per quintal which was adopted by the AO and total sale of the assessee was arrived at Rs.1,27,866/-. After analyzing the multiple statistics of the area by the AO, the agricultural income of the assessee was determined at Rs.41,183/-. Also, from the report collected from the site of the Krishi Vigyan Kendra, Raipur, the AO noted that the land of the assessee was not irrigated and being a company, the assessee was not an expert in farming. Therefore, it was concluded by the AO that there is no reason for such higher yields than the average production. Since, the assessee had claimed the agricultural income at Rs.14,56,420/- and had credited the said amount as agricultural income in its books which was claimed as exempt, therefore, the difference of Rs.14,15,237/- was treated as unexplained credit in the books of the assessee and was added to the total income of the assessee for the year under consideration.
7. The AO, accordingly determined the total income of the assessee at Rs.4,26,13,530/-.
8. In appeal, Ld. CIT(A)/NFAC deleted all the additions. So far as the bogus purchases of Rs.3,91,35,000/- made by the AO is concerned, he deleted the same by observing as under:
“Ground No.2:- This ground pertains to addition of Rs.3,91,35,000/-on account of unexplained credits u/s 68 of the Income Tax Act. The appellant has contended that the provision of section 68 of the Act does not apply to the facts of the case as all the transactions are properly recorded and declared in his books of accounts. Further, all the transactions have been routed through his bank accounts.
The Ld. AO in his order as stated that the appellant has received bogus purchases of Rs.2,12,85,000/- from M/s Mega City Tradelinks. Rs.1.78,50,000/- from M/s Goldwright Vyapar Pvt. Ltd.
The same was based on information received from investigation wing of the department survey conducted on these two entities wherein it was admitted that they were business of providing bogus bills, were not filing ITRs regularly and no real incomes. The Ld. AO being not satisfied with reply of the appellant made the said addition of Rs.3,91,35,000/- u/s 68 of the Act.
During the assessment and appellate proceedings, the appellant has furnished his financial statements, VAT returns, copy of ledger of M/s Mega City Tradelinks and M/s Goldwright Vyapar Pvt. Ltd., confirmation from buyers, copy of invoices with details of vehicles. It can be seen that the VAT has been duly paid and has been debited as an expense P&L account, TDS has also been duly deducted. During appellate stage, sample of invoices purchase/sales as well as shipping of goods were submitted which were examined to the extent of being reflected in the bank statements.
From the above, the following points seek to established identity of the party and genuineness of the transactions: –
1. Purchases from M/s Mega City Tradelinks and M/s Goldwright Vyapar Pvt. Ltd. have been made through banking channels
2. VAT has been duly paid.
3. Proper record of purchases, sales etc. have been maintained by the appellant.
4. Stock register has been maintained by the appellant.
5. The accounts have been duly audited by the Auditor
In respect of facts of the case reliance is placed on the judgment of Hon’ble Supreme Court in the case of Commissioner of Income Tax-7, New Delhi v. Odeon Builder Pvt. Limited as reported in 418 ITR 315 (SC) wherein it has been opined by the Apex Court that:-
*Where assessee had submitted purchase bills, transportation bills, confirmed copy of accounts and VAT registration of sellers as also their Income Tax Return and payment was made through cheques, impugned purchases could not be disallowed.”
Further, in the case of Principal Commissioner of Income Tax v. Sanjay Dhokad, as reported in (2023) 456 ITR 77 (Bombay), Hon’ble High Court of Bombay has ruled that:-
“Where assessee, engaged in business of civil construction, made certain purchases in course of its business, since assessee had discharged initial burden of proving genuineness of transactions by providing details of parties, and, further, payments for purchases were made through proper banking channels, no addition under section 69C was to be made on account of such purchases”
In this case, the Hon’ble High Court Bombay had the occasion to follow its own decision in CIT v. Nikunj Exim Enterprises (P) Ltd. (2013)   (Bom) and distinguish the facts from the judgment of Hon’ble Supreme Court in Pr. CIT v. NRA Iron and Steel (P) Ltd. (2019) 103   (SC). The entire facts and discussion centred around the discharge of onus by the Assessing Officer/s in these cases.
In the facts which pertain to the matter at hand, it is evident that Ld. AO had not discharged is onus of disproving the transactions between the M/s Pratyush Steels and and M/s Abhishek Enterprises as a sham arrangement from the documentary evidence at hand. The entire case of the Ld. A.O. rests on the information received from the Investigation Wing without any inquiries. Hence, the addition made by the AO cannot be sustained.
Further, the Ld. AO although made the impugned addition on bogus purchases, no comments have been made on the nature of sales made by the appellant. Neither has the AO rejected the books of the accounts of the appellant nor has he recast the trading results based on gross profit. The additions cannot be sustained on these grounds as well.
In view of the above addition of Rs.3.91.35.000/- made u/s 68 by the Ld. AO is hereby deleted. The ground no.2 is allowed.”
9. So far as the addition of Rs.20,00,000/- made by the AO on account of cash credit under section 68 of the Act is concerned, he deleted the same by observing as under:
“Ground no.3: Pertains to addition of Rs 20.00.000/-on account of cash credits u/s 68 on account of bogus share capital received from M/s Saloni Buildtech Pvt. Ltd. (now NJP Build Tech Pvt. Ltd.). The appellant has submitted that all necessary explanation related to the transactions have been duly proved before the Ld. AO.
The Ld. AO in his order has stated that Sh. JP Gupta in his statement recorded u/s 132(4) had accepted that he is entry operator and is running various paper companies. Once such company M/s Saloni Buildtech Pvt. Ltd. was also being run by him which had given bogus share capital to the appellant.
During the course of assessment and appellate proceedings, the appellant as furnished the following documents:-
1. Copy of Memorandum and Article of association of the captioned company.
2. Copy of the Audited balance sheet of the captioned company.
3. Copy of the certificate of incorporation.
4. Copy of Share application Form and share allotment register.
5. Copy of bank statements.
The appellant has stressed that this transaction is genuine and he has submitted all the necessary documentary evidence. The assessee during the assessment proceedings submitted that Right Shares had being initially offered to the existing share holders and they chose to renounce their rights in favour of other individuals. Consequently, the assessee company issued the Right Shares to other individual in accordance with the provisions stipulated in the Companies Act.
It is pertinent to mention that the Ld. AO has not controverted any of the evidences submitted by the appellant in respect of proving the identity creditworthiness and genuineness of the transactions. In the facts which pertain to the matter at hand, it is evident that Ld. AO had not discharged is onus of disproving the transactions between the appellant and M/s Saloni Buildtech Pvt. Ltd. as a sham arrangement from the documentary evidence at hand. The entire case of the Ld. A.O. rests on the information received from the Investigation Wing without any inquiries.
The Hon’ble Delhi High Court in its order in the case of Commissioner of Income Tax v. Oasis Hospitalities (P) Ltd. , [2011] 9  333 ITR 119 (Delhi) while referring to Hon’ble Supreme Court’s judgement in CIT v. Lovely Exports (P.) Ltd. [2008] 216 CTR (SC) 195 has inter alia opined that –
” ……13. Genuineness of the transaction is to be demonstrated by showing that the assessee had, in fact, received money from the said shareholder and it came from the coffers from that very shareholder. The Division Bench held that when the money is received by cheque and is transmitted through banking or other indisputable channels, genuineness of transaction would be proved. Other documents showing the genuineness of transaction could be the copies of the shareholders register, share application forms, share transfer register, etc.
14. As far as creditworthiness or financial strength of the credit/subscriber is concerned, that can be proved by producing the bank statement of the creditors/subscribers showing that it had sufficient balance in its accounts to enable it to subscribe to the share capital. This judgment further holds that once these documents are produced, the assessee would have satisfactorily discharge the onus cast upon him. Thereafter, it is for the Assessing Officer to scrutinize the same and in matter further. However, to discredit the documents produced by the assessee on the aforesaid aspects, there has to be some cogent reasons and materials for the Assessing Officer and he cannot go into the realm of suspicion.”
In CIT v. Precision Finance Pvt. Ltd. 208 ITR 465 (Cal), the Hon’ble Calcutta High Court has observed that it is for the assessee to prove the identity of the creditor/his creditworthiness and the genuineness of the transactions
The entire facts and discussion cantered around the discharge of onus by the assessee in these cases. By submitting all the documents and explanations, the appellant has discharged the onus cast upon him. Hence, the addition made by the AO cannot be sustained.
In view of the above the addition of Rs.20.00.000/- made by the AO u/s 68 is hereby deleted. The ground no.3 is allowed.”
10. So far as the addition of agricultural income of Rs.14,15,237/- by invoking the provision of section 68 of the Act is concerned, he deleted the same by observing as under:
“Ground no.4: Pertains to addition of agricultural income of Rs.14.15.237/- as unexplained credits u/s 68 of the Act. The appellant has put forth the argument that the basis of findings of the Ld. AO are incorrect and contrary to the material and facts on record.
During the course of assessment proceedings, the Ld. AO observed that the assessee has 12 acres of land on which net agricultural income is Rs. 14.56.420/-During the course of assessment proceedings, the Ld. AO observed that the price of Rs.4876/- per quintal which were extremely high when compared with rates that the assessee claimed yield per hector at Rs.88.79 quintal per hector and sale of Krishi Vigyan Kandra. Raipur. Further, as per Ld. AO the assessee company claimed that it was converting Maize into Maize seeds and selling it at higher rate to farmers and that the land owns by assessee as per records was not irrigated.
During the course of appellate proceedings, the appellant has produced the details of his land holdings (12 Acres) with ownership documents, the sales register has been During the course of appellate proceedings, the appellant has produced the details of produced wherein total production stands at 23650 kilograms and the total sales has been shown at Rs.20,99,790/-. The appellant has also attached the vouchers of expenses including labour charges, tractor rent, seed cost and pesticides & fertilizers. The appellant has explained that irrigation is done by them through public water canals in which no electricity is involved. Further, electricity is free from farmer in the state of Chhattisgarh.
It is pertinent to mentioned that the total produce of agriculture and expenses are commensurate to the land holding of the appellant. The Ld. AO has not brought on record any documentary evidence to substantiate his findings that agricultural income is quite high except for quoting the price from Krishi Vigyan Kandra. His findings are purely based on assumptions and surmises. The price of all the farm lands are different and cannot be taken at average rates. Here it is pertinent to mentioned that the agricultural land of the appellant is near the river. Hence, the production as well as the cost advantage lies with him.
Further the appellant has produced evidences to indicate that he is setting up a starch manufacturing project. In starch manufacturing process, maize is one of the raw materials. Before the manufacturing has to start, the assessee came out with a seed growing centre. The appellant has submitted necessary documentary evidence including environmental clearances, technical advisory and consultancy invoices as well as evidences construction of the said plant. The assessing officer has omitted/forgotten to take into account that the assessee has not grown or sold maize but rather he has grown and sold ‘maize seed’. According to the submissions of the appellant, the seed of any fruit, vegetable or other agricultural produce is much costlier than the crop. The Ld. AO has not got the rates of maize seeds correct.
Further, the accounts of the appellant are audited and the auditor has not found any discrepancy in respect of agriculture income. In view of the above discussion, the addition made by the AO is not sustainable and the same is being directed to be deleted. The ground no.4 is allowed”
11. Aggrieved, the Revenue is in appeal before the Tribunal by raising following grounds:
“”1. “Whether on the facts and in the circumstance of the case the Id. CIT(A) was justified in deleting the addition of Rs. 3,91,35,000/-made) by the AO as unexplained credit in the books of the assessee u/s 68 of the I.T. Act, 1961?”
2. “Whether on the facts and in the circumstance of the case the Id. CIT(A) was justified in deleting the addition of Rs. 20,00,000/- made by the AO by treating the share application money as unexplained credit in the books of the assessee u/s 68 of the I.T. Act, 1961?”
3. “Whether on the facts and in the circumstance of the case the Id. CIT(A) was justified in deleting the addition of Rs. 14,15,237/- made by the AO as unexplained credit in the books of the assessee u/s 68 of the I.T. Act, 1961?”
4. Any other ground which may be adduced at the time of hearing”
12. Ld. CIT-DR heavily relied on the order of the AO and submitted that Ld. CIT(A)/NFAC without considering the allegations made by the AO regarding bogus purchases of Rs.2,12,85,000/- from M/s Mega City Trade Link and Rs.1,78,50,000/- from M/s Goldwright Vyapar Pvt. Ltd. on commission basis and without actual physical delivery of the goods has deleted the same, which is not justified. Similarly, without considering the finding of the investigation wing in the case of Mr. Joginder Pal Gupta where the statement of Mr. Raju Malik was recorded under section 132(4) and where he had admitted to have invested in various companies through his shell companies, Ld. CIT(A)/NFAC deleted the addition of Rs.20,00,000/- invested by M/s Saloni Buildtech Pvt. Ltd in the share of the assessee company, which is not justified. He submitted that since the AO has added the same under section 68 of the Act being accommodation entry, Ld. CIT(A)/NFAC was not justified in deleting the same. So far as deletion of agricultural income is concerned, the Ld. CIT-DR strongly relied on the order of the AO and submitted that despite ample opportunity provided by the AO to justify the amount of agricultural income claimed as exempt, the assessee failed to substantiate the same by producing relevant details. Therefore, the order of Ld. CIT(A)/NFAC being not in accordance with law should be set aside and the ground raised by the revenue be allowed.
13. Ld. Counsel for the assessee on the other hand while heavily relying on the order of the Ld. CIT(A)/NFAC submitted that the purchase of materials i.e. steel items from two parties has been capitalized in work in progress and added to fixed assets. Thus, the purchases are not claimed as an expenditure in the P&L account and the AO has not rejected the books of accounts. He submitted that the work in progress of Maize Plant at Rs.12,21,96,352/- on 31.03.2018 has been accepted by the AO which included the material purchased of Rs.3,91,35,000/- from the above two parties. He submitted that purchases to the tune of Rs.3,91,35,000/-cannot be added under section 68 of the Act. He submitted that since no sum of money of Rs.3,91,35,000/- was found credited in the books of accounts of the assessee company during the FY 2018-19, therefore, addition under section 68 of the Act is not justified. Refereeing to the order of Ld. CIT(A)/NFAC, he submitted that the Ld. CIT(A)/NFAC while deleting the addition has relied on the decision of Hon’ble Supreme Court in the case CIT v. Odeon Builders (P.) Ltd.  418 ITR 315 (SC). Since, the assessee in the instant case has filed the relevant documentary evidences to substantiate the purchases made from M/s Mega Trade Link Pvt ltd and M/s Goldwright Vyapar Pvt. Ltd. by producing VAT return, confirmation from sellers, copy of the invoices with details of vehicles etc. and since the payments have been made through proper banking channels, therefore, Ld. CIT(A)/NFAC was fully justified in deleting the addition.
14. So far as deletion of Rs.20,00,000/- made by the AO on account of cash credit under section 68 of the Act is concerned, he submitted that during the course of assessment proceedings as well as appellate proceedings the assessee has furnished copy of the Memorandum of Association and Article of Association of the company, copy of audited balance sheet, copy of certificate of incorporation, copy of bank statement, copy of share application register etc., which were not doubted by the AO. He has simply made the addition on the basis of statement recorded under section 132(4) of Mr. JP Gupta during the course of search at his premises and the statement of one Mr. Raju Malik. He submitted that since the Ld. CIT(A)/NFAC while deleting the addition has relied on the decision of Hon’ble Delhi High Court in the case of CIT v. Oasis Hospitalities (P.) Ltd.  333 ITR 119 (Delhi), therefore, the order of Ld. CIT(A)/NFAC being in accordance with law should be upheld and the ground raised by the revenue should be dismissed.
15. So far as the addition of agricultural income at Rs.14,15,237/- made by the AO which has been deleted by the Ld. CIT(A)/NFAC is concerned, Ld. Counsel for the assessee submitted that the assessee has produced details of land holding (12 acres) with ownership documents, sale register, details of products, vouchers for expenses etc. Further, the land is irrigated through public water canals for which no electricity is required. He submitted that the assessee has not grown or sold maize but rather he has grown and sold maize seeds, whose prices are much higher than the crop ‘maize’. Since, the Ld. CIT(A)/NFAC after considering the facts of the case has deleted the addition, therefore, the same should be upheld and the ground raised by the revenue on this issue be dismissed.
16. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A)/NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. The first issue raised by the Revenue in the grounds of appeal is regarding the deletion of addition of Rs.3,91,35,000/-made by the AO as unexplained cash credit on account of bogus purchases. A perusal of the record shows that the AO made addition of Rs.3,91,35,000/- by invoking the provision of section 68 of the Act on the ground that the assessee has made bogus purchases of Rs.2,12,85,000/-from M/s Mega City Trade Links and Rs.1,78,50,000/- from M/s Goldwright Vyapar Pvt. Ltd. The reason given by the AO for making the above addition is that M/s Mega City Trade Link did not appear nor made any submission in response to the summon issued under section 131 of the Act. Further, the revenue from operation has been shown at Rs.33,94,65,983/- whereas the profit declared is only at Rs.67,672/-, which is very nominal in comparison to the turnover of the company. Moreover, M/s Mega City Trade Link has stopped filing the return of income from AY 2018-19 onwards. Similar was the case with M/s Goldwright Vyapar Pvt. Ltd. The AO, therefore invoking the provision of section 68 of the Act made the addition. We find the Ld. CIT(A)/NFAC deleted the addition, the reasons of which have already been reproduced in the preceding paragraphs. We do not find any infirmity in the order of the Ld. CIT(A)/NFAC on this issue. As pointed out by the Ld. Counsel for the assessee the purchase of materials at Rs.3,91,35,000/- has not been debited to the P & L account but has been utilized for construction of the maize plant and has been shown in the work in progress which has been accepted by the AO. Further, no sum of money of Rs.3,91,35,000/- has been found credited in the books of account of the assessee and therefore, provision of section 68 of the Act, in our opinion, cannot be applied for purchases. Apart from this, we find the assessee, during the course of assessment proceedings has furnished VAT return, copy of ledger of M/s Mega City Trade Link and M/s Goldwright Vyapar Pvt. Ltd., confirmation from the above two parties, copy of invoices with details of vehicles for transportation etc. The assessee has maintained proper record of purchase and sale etc. and accounts of the assessee have been audited by the auditors who have not pointed out any defects. Under these circumstances and in view of the detailed reasoning given by ld.CIT(A)/NFAC we do not find any infirmity in the order of Ld. CTI(A)/NFAC deleting the addition. We, therefore, uphold the order of the Ld. CIT(A)/NFAC on this issue and the ground raised by the revenue is accordingly dismissed.
17. So far as the second issue is concerned the same relates to the deletion of addition of Rs.20,00,000/- made by the AO under section 68 of the Act. After hearing both the sides, we find the AO made the addition of Rs.20,00,000/- on the basis of statement of Mr. JP Gupta recorded on oath under section 132(4) of the Act, wherein he had stated that he is an entry provider and is running various shell companies. The AO has also relied on the statement of one Mr. Raju Malik, an employee of Mr. J.P. Gupta who is a dummy Director in various shell companies. We find Ld. CIT(A)/NFAC deleted the above addition the reasons of which have already been reproduced in the preceding paragraphs. We do not find any infirmity in the order of Ld. CIT(A)/NFAC on this issue deleting the addition. We find the ld.CIT(A) while deleting the same has noted that the assessee, during the course of assessment proceedings, as well as appellate proceedings has submitted all the necessary documentary evidences. He noted that the assessee during the assessment proceedings had submitted that the rights shares had been initially offered to the existing shareholders and they chose to renounce their rights in favour of other individuals/company. The assessee issued the Right Shares to M/s Saloni Build Tech Pvt. Ltd in the instant case. The various documentary evidences filed during the course of assessment proceedings substantiating the identity and creditworthiness of the share applicant and the genuineness of the transaction has not been proved to be false. Further, the above two persons have never taken the name of the assessee company as a beneficiary of such accommodation entry. Once the assessee fulfilled all the three ingredients of section 68 of the Act, the onus shifts to the AO to disprove the same. However, the AO in the instant case has not discharged the onus cast on him by disapproving the documentary evidences and proving that the transaction between the assessee and M/s Saloni Build Tech Pvt. Ltd. is not genuine and a sham transaction. Since, the assessee in this case has discharged the onus cast on it by producing all the relevant details substantiating the identity and creditworthiness of the share applicant and genuineness of the transaction, therefore, we do not find any infirmity in the order of the Ld. CIT(A)/NFAC deleting the addition. Accordingly, the same is upheld and the ground raised by the revenue on this issue is dismissed.
18. So far as the third issue is concerned, the same relates to the order of Ld. CTI(A) in deleting the addition of Rs.14,15,237/- made by the AO as unexplained cash credit under section 68 of the Act.
19. After hearing both the sides we find the AO made addition of Rs.14,15,237/- on the ground that the agricultural income declared by the assessee is much higher than the actual receipt and therefore, he brought to tax the same under section 68 of the Act. We find the Ld. CIT(A)/NFAC deleted the addition the reasons of which have already been reproduced in the preceding paragraphs. While doing so he had given a finding that the assessee during the course of assessment proceedings as well as appellate proceedings has produced details of land holdings (12 Acres) with ownership documents. The assessee has produced the details of the product wherein total production stands at 23650 kilograms and the total sales has been shown at Rs.20,99,790/-. The assessee has also substantiated the expenses for earning such agricultural income by producing relevant vouchers including expenses towards labour charges, tractor rent, seed cost, pesticides & fertilizers. He has also given a finding that the assessee has not grown or sold maize but has grown and sold maize seed whose price is higher than the crop. Since, the order of the Ld. CIT(A)/NFAC in the instant case is based on the various details submitted by the assessee during the assessment proceedings as well as appellate proceedings, therefore, in absence of any contrary material brought to our notice by the Ld. CTI-DR, we do not find any infirmity in the order of ld.CIT(A)/NFAC. Accordingly, the same is upheld and the ground raised by the revenue on this issue is dismissed.
20. The assessee has also raised certain legal grounds by invoking the provision of Rule 27 of the ITAT, Rules, 1963, However, the Ld. Counsel for the assessee did not press all these grounds. Accordingly, all these grounds are dismissed as not pressed.
21. In the result, appeal of the revenue is dismissed.