Facts of the Case

The assessee, Espee Pharma Chem Pvt. Ltd., filed its return of income for Assessment Year 2019-20 on 11.10.2019 declaring total income of ₹2,98,50,300. The case was reopened under Section 147 on the basis of information flagged on the Insight Portal alleging that the assessee was a beneficiary of bogus purchases amounting to ₹42,95,000 from M/s Biotavia Labs Pvt. Ltd. Notice under Section 148 was issued on 19.04.2023.

During reassessment proceedings, the assessee produced invoices, transportation documents, e-way bills, bank statements evidencing payment, confirmation from the supplier, and details of corresponding sales. The Assessing Officer, however, treated the purchases as bogus solely on the ground that M/s Biotavia Labs Pvt. Ltd. did not respond to notice under Section 133(6) and based on a general statement recorded during survey in the case of the supplier, and made an addition of ₹42,95,000 under Section 69C. The assessment was completed on 26.03.2025. The CIT(A), NFAC dismissed the assessee’s appeal by a summary order. Aggrieved, the assessee approached the Tribunal.

Issues Involved

Whether the reopening under Section 147 survived when not pressed by the assessee, whether addition of ₹42,95,000 under Section 69C on account of alleged bogus purchases was justified despite documentary evidence establishing genuineness of purchases, and whether purchases could be treated as bogus merely on the basis of non-response to notice under Section 133(6) and a general survey statement of the supplier.

Petitioner’s Arguments

The assessee submitted that complete documentary evidence was placed on record including purchase invoices, e-way bills, transport documents, bank statements evidencing payments through banking channels, confirmation from the supplier, and details of subsequent sales of the same goods. It was contended that the Assessing Officer neither rejected nor disproved any of the evidences produced. The assessee also requested cross-examination of the supplier and verification through inspector, which was not granted. It was argued that a general admission by the supplier during survey cannot render all transactions bogus without specific evidence.

Respondent’s Arguments

The Revenue relied on the assessment order and contended that during survey proceedings in the case of M/s Biotavia Labs Pvt. Ltd., the supplier admitted to providing accommodation entries without actual movement of goods, and therefore purchases made by the assessee from the said concern were rightly treated as bogus. The Revenue also relied on the fact that the supplier did not respond to notice under Section 133(6).

Court Order / Findings

The ITAT Ahmedabad observed that there was no dispute regarding the fact that purchases of ₹42,95,000 were made from M/s Biotavia Labs Pvt. Ltd. The Tribunal noted that the assessee produced invoice dated 21.11.2018 for purchase of Azithromycin IP, e-way bills evidencing transportation from New Delhi to Ahmedabad, transport documents, bank statements showing payment through banking channels, and evidence of subsequent sales of the same goods.

The Tribunal found that the Assessing Officer did not point out any defect in the documentary evidence and did not dispute transportation, payment or sales. The only reason cited by the Assessing Officer was non-response to notice under Section 133(6) and a general survey statement of the supplier. The Tribunal held that merely because a supplier has given a general statement of providing accommodation entries, all transactions of that supplier cannot automatically be treated as bogus. Each case requires specific evidence of accommodation entry.

In the absence of any evidence showing cash back, immediate withdrawal, circular routing or non-movement of goods in the assessee’s case, the Tribunal held that the purchase could not be treated as bogus. Accordingly, the addition of ₹42,95,000 under Section 69C was deleted.

Important Clarification

The Tribunal clarified that genuine purchases supported by invoices, transport evidence, e-way bills, bank payments and corresponding sales cannot be disallowed merely on the basis of third-party survey statements or non-response to notice under Section 133(6). Allegations of accommodation entries must be supported by transaction-specific evidence.

Final Outcome

The appeal filed by the assessee was partly allowed. The addition of ₹42,95,000 made under Section 69C on account of alleged bogus purchases was deleted in full. The reopening grounds not pressed were dismissed.

Link to Download Order-https://www.mytaxexpert.co.in/uploads/1769062587_ESPEEPHARMACHEMPVT.LTD.AHMEDABADVS.THEITOWARD211AHMEDABAD.pdf

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