KRBL Ltd. Vs Dcit Itat Delhi

IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH ‘C’, NEW DELHI

Before Sh. A.D. Jain, Vice President
Dr. B. R. R. Kumar, Accountant Member
ITA No. 1196/Del/2020 : Asstt. Year: 2010-11
KRBL Ltd., Vs DCIT,
5190, Lahori Gate, Central Circle-07,
Delhi-110006 New Delhi-110055
(APPELLANT) (RESPONDENT)
PAN No. AAACK4644H

DCIT, Vs KRBL Ltd.,
Central Circle-19, 5190, Lahori Gate,
New Delhi-110055 Delhi-110006
(APPELLANT) (RESPONDENT)
PAN No. AAACK4644H
Assessee by : Sh. Ajay Vohra, Sr. Adv.,

Sh. Aditya Vohra, Adv. &
Sh. Arpit Goyal, CA
Revenue by : Ms. Meenakshi J. Goswami, CIT DR
Date of Hearing: 09.02.2022 Date of Pronouncement: 09.05.2022
2 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
ORDER
Per Bench:
The assessee as well as the Revenue have been filed these
cross appeals against the separate orders of the ld. CIT(A)-24,
New Delhi, dated 11.03.2020.
2. In ITA No.1196/Del/2020, the assessee has raised

following grounds of appeal:
“Ground 1: General
1.1 On the facts and circumstances of the case and in

law, the Ld. CIT(A) has erred in confirming additions/
disallowances aggregating to INR 15,20,51,511
(detailed in grounds of appeal at Sl.no.2 to 4 below)
made by the Learned Deputy Commissioner of Income
Tax, Central Circle-07, New Delhi (‘Ld. AO’) in the
impugned order dated 31.12.2018 passed under
section 153A read with section 143(3) of the Act
(‘Impugned Assessment Order’) for the subject year.
1.2 On the facts and circumstances of the case and

in law, the Ld. CIT(A) has failed to appreciate that
the above referred additions/disallowances were made
by Ld. AO merely on conjecture, surmises without due
application of mind and/or affording reasonable
opportunity of being heard to the Appellant, and in
complete violation of the principles of natural justice.
Ground 2: No incriminating material was unearthed

during search
2.1 On the facts and circumstance of the case and in

law, the Ld. CIT(A) has erred in affirming the
additions made by the Ld. AO in the Impugned
Assessment Order completed under section 153A of
the Act for the subject year, without appreciating that
no incriminating material/ information was unearthed
3 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
during the course of search operations at Appellant’s

premises, and therefore the additions made in
absence of any incriminating material/ information
are liable to be deleted.

in law, the Ld. CIT(A) has erred in confirming
additions/ disallowances made in the Impugned
Assessment Order for subject year by ignoring the
factual and legal position that these issues were
accepted/ considered in assessment proceeding for
subject year completed under section 143(3) of the
Act, and hence the additions made by Ld. AO and
affirmed by Ld. CIT(A) are illegal and liable to be
deleted.
Ground 3: Impugned addition of INR 4,76,843/- on

account of alleged difference between purchase/sales
made to certain parties treating these as
ungenuine/bogus transactions and commission paid to
such parties for arranging such alleged bogus bills
3.1 On the facts and circumstance of the case and

in law, the Ld. CIT(A) has erred in affirming the
impugned addition of INR 4,76,843/- made by the Ld.
AO by alleging that the Appellant has failed to
discharge its onus to prove the genuineness of the
transactions without appreciating evidences/records/
information/ submissions furnished before the Ld. AO
& Ld. CIT(A) that clearly proves that these
transactions were genuine and undertaken through
normal banking channel and trading results of the
Appellant for subject year have been duly accepted by
the Income-tax Department.
3.2 On facts and circumstances of the case and in

law, the Ld. CIT(A) has erred in confirming the above
addition without appreciating that the Impugned
Assessment Order was passed without confronting the
Appellant in respect of alleged evidences/ information
collected by the Ld. AO and without allowing cross
examination of the witnesses whose statements/
4 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
letters were used against the Appellant, even after

specific and repeated request of the Appellant.
Ground 4: Addition of INR 15,15,74,668/- in respect

of the income earned by M/s KRBL DMCC, Dubai, a
wholly owned subsidiary of the Appellant by alleging
it as the income of the Appellant

in law, the Ld. CIT(A) has erred in affirming an
addition of INR 15,15,74,668/- in respect of the
income received by M/s KRBL DMCC, Dubai, a wholly
owned subsidiary of the Appellant in Dubai from M/s
Interdev Aviation Services Pte. Ltd. by alleging that
the same belongs to the Appellant. The Ld. CIT(A)
has erred in not appreciating that this income accrued
to/ and was received by KRBL DMCC entirely outside
India, and duly accounted in its books of account, and
consolidated with financial results of Appellant for the
subject year as available in public domain.

law, the Ld. CIT(A) has erred in not appreciating that
KRBL DMCC is an independent legal entity
incorporated in Dubai, and beyond the jurisdiction of
Ld. AO, and hence transactions undertaken by it
during the subject year with other non-resident
entities are outside the scope of tax assessment in
India.

in law, the Ld. CIT(A) has failed to appreciate that no
incriminating material was found during the course of
search nor brought on record by the Ld. AO which
may demonstrate that the said income belongs to the
Appellant, and thus this addition made merely on
conjecture and surmises should be deleted.

the transactions detailed in the Impugned Assessment
Order for subject year between KRBL DMCC, Dubai
5 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
and certain overseas entities and between Appellant

and these overseas entities were bonafide
commercial/ business transaction undertaken by the
Appellant in its normal course of business through
normal banking channels, in compliance with
applicable Indian laws and duly accounted in the
books of account of the Appellant.

the above income earned by KRBL DMCC Dubai, a
wholly owned subsidiary of the Appellant was
subsequently declared and distributed as divided to
the Appellant, and duly offered to tax in India by the
Appellant under section 115BBD of the Act in its
return of income for the respective year of receipt.
4.6 Without prejudice to the above, even for the

sake of argument, if it is presumed that the said
income belongs to the Appellant, the necessary relief
of the taxes already paid and discharged under
section 115BBD of the Act should be granted to the
Appellant, as the same income cannot be taxed twice
under two different heads of income.
Ground 5: The impugned order passed by the Ld.AO is

time barred in accordance with the provisions of
section 153A/153B of the Act

in law, the Ld. CIT(A) has erred in holding that the
Impugned Assessment Order passed by the Ld.AO for
subject year is within the extended time limit
prescribed under the provisions of the Act, and in not
appreciating that the Impugned Assessment Order
was passed on 31.12.2018 as against limitation
period of on or before 31.12.2017, and consequently
the same is bad-in-law, void and liable to be
annulled.
Ground 6: Levy of interest under section 234A of the

Act
6 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
6.1 That on the facts and circumstance of the case

and in law, the Ld. CIT(A) has erred in dismissing the
ground raised by the Appellant with respect to levy of
interest under section 234A of the Act, and has failed
to appreciate that there was no delay in filing the
return of income on part of the Appellant for the
subject year. Thus, the interest levied under section
234A of the Act is unlawful/incorrect and liable to be
deleted.”


disallowances aggregating to INR 29,98,74,335


during search

7 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.


deleted.
Ground 3: Impugned addition of INR 29,98,74,335/-

on account of alleged difference between
purchase/sales made to certain parties treating these
as ungenuine/bogus transactions and commission paid
to such parties for arranging such alleged bogus bills

impugned addition of INR 29,98,74,335/- made by the
Ld. AO by alleging that the Appellant has failed to

8 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.



annulled.

Act

deleted.”


disallowances aggregating to INR 5,27,159 (detailed
in grounds of appeal at Sl.no.2 to 3 below) made by
9 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
the Learned Deputy Commissioner of Income Tax,

Central Circle-07, New Delhi (‘Ld. AO’) in the


during search


deleted.
Ground 3: Impugned addition of INR 5,27,159/- on

account of alleged difference between purchase/sales
made to certain parties treating these as
10 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
ungenuine/bogus transactions and commission paid to

such parties for arranging such alleged bogus bills

impugned addition of INR 5,27,159/- made by the Ld.
AO by alleging that the Appellant has failed to



annulled.
11 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.

Act

deleted.”


disallowances aggregating to INR 14,07,06,177/-


during search

12 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.


deleted.



13 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.



annulled.

Act

deleted.”
14 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.




during search


15 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.

deleted.





16 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.

annulled.

Act

deleted.”



17 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.


during search


deleted.


18 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.




annulled.

Act

interest under section 234A of the Act, and has failed to
appreciate that there was no delay in filing the return
of income on part of the Appellant for the subject year.
Thus, the interest levied under section 234A of the Act
is unlawful/incorrect and liable to be deleted.”
19 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.


(separately dealt in grounds of appeal at Sl.no.2 to 5
below) made by the Learned Deputy Commissioner of
Income Tax, Central Circle-07, New Delhi (‘Ld. AO’) in
the impugned order dated 31.12.2018 passed under


during search


20 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.


Ground 4: Impugned addition of INR 2,07,72,796/- on

account of stock difference in rice during physical
verification

in law, the Ld. CIT(A) has erred in confirming addition
of INR 2,07,72,796/- on account of alleged difference
in value of stock-in-trade and has failed to appreciate
the details/documents/stock reconciliation laced on
record that clearly reflects that there was no
difference in stock-in-trade as per books of account
and as per physical verification. The ld. CIT(A) has
failed to appreciate that the impugned difference
determined by the Ld. AO was entirely on account of
incorrect/estimated counting of stock-in-trade by
officials of Income-tax Department without actual
measurement thereof, and hence such estimation
21 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
cannot be relied upon for purpose of making the

impugned addition. The Appellant prays that the
impugned addition made by the Ld. AO and affirmed
by ld. CIT(A) is illegal/unjustified and liable to be
deleted.
Ground 5: The impugned addition of INR

2,05,94,826/- alleging the same as unaccounted
money of the Appellant

law, the ld. CIT(A) has erred in affirming
addition/disallowance to the extent of INR
2,05,94,826/- on account of alleged unexplained
credit in books of account of the Appellant. The Ld.
AO and ld. CIT(A) have erred in not appreciating the
details/information/submissions furnished by the
Appellant during assessment and appellate
proceedings that clearly explains and depicts the
source and genuineness of the underlining
transactions.

Act

deleted.”
9. In ITA No.1338/Del/2020, the Revenue has raised

“1. Whether in the circumstances of the case, the

Ld.CIT(A) has erred on facts and in law in deleting the
addition of Rs. 182,02,93,457/- by holding that no
22 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
incriminating material was found during search without

appreciating the fact that incriminating material in the
form of Annexures A-7, LP-1 & LP-2 was available on
record.
2. Whether in the circumstances of the case, the Ld.

CIT(A) has erred on facts and in law in holding that no
addition can be made in completed assessments
without incriminating material without appreciating
that no such condition is stipulated by the provisions
of section 153A of the Income Tax Act, 1961.

CIT(A) has erred on facts and in law in deleting the
addition of Rs. 182,02,93,457/- by relying upon the
decision of Hon’ble Delhi High Court in the case of CIT
vs. Meeta Gutgutia without appreciating that the issue
has been challenged by the department in various SLPs
filed before the Hon’ble Supreme Court which is
pending for adjudication.

addition of Rs. 182,02,93,457/- by holding that in view
of Rules of Mandi Samiti and form 6 issued by the
assessee company, it is clear that the purchases were
made from producers without appreciating that the
Mandi Samiti has no system of identifying a particular
seller as producer or agent/middleman.

addition of Rs. 182,02,93,457/- without appreciating
that in the light of incriminating material seized during
search, the assessee has failed to discharge its onus
to prove that the cash purchases were made from
farmers and the benefit of Rule 6DD(e) is available to
it.

CIT(A) has erred on facts and in law in propounding
the theory of consistency without appreciating that
every assessment under Income Tax Act is separate
23 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
assessment and the fact that no such addition was

made in any earlier year cannot become the ground for
holding that no such addition can be made in the
present assessment year.”


record.



24 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.

it.



record.


25 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.



it.



record.
26 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.


Vs. Kabul Chawla and PCIT vs. Meeta Gutgutia without
appreciating that the issue has been challenged by the
department in various SLPs filed before the Hon’ble
Supreme Court which is pending for adjudication.


it.

27 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.


addition of Rs. 443,67,45,973/- by holding that in case
of paddy purchases benefit of Rule 6DD(e) should be
given to assessee.

CIT(A) has erred on facts and in law in relying upon
case laws without appreciating that the facts of
present case are distinguished from the facts of relied
upon cases.

made from producers/farmers without appreciating
that the Mandi Samiti has no system of identifying a
particular seller as producer/farmer or
agent/middleman.
4. Whether in the circumstances of the case, the

Ld. CIT(A) has erred on facts and in law in deleting the
search, the assessee has failed to discharge its onus to
prove that the cash purchases were made from farmers
and the benefit of Rule 6DD(e) is available to it.

Ld. CIT(A) has erred on facts and in law in
propounding the theory of consistency without
appreciating that every assessment under Income Tax
Act is separate assessment and the fact that no such
addition was made in any earlier year cannot become
the ground for holding that no such addition can be
made in the present assessment year.”
28 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.


given to assessee.

upon cases.

made from producers/farmers without appreciating
that the Mandi Samiti has no system of identifying a
particular seller as producer/farmer or
agent/middleman.

Ld. CIT(A) has erred on facts and in law in deleting the
search, the assessee has failed to discharge its onus to
prove that the cash purchases were made from farmers
and the benefit of Rule 6DD(e) is available to it.

Ld. CIT(A) has erred on facts and in law in
propounding the theory of consistency without
appreciating that every assessment under Income Tax
Act is separate assessment and the fact that no such
addition was made in any earlier year cannot become
the ground for holding that no such addition can be
made in the present assessment year.”
29 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.


given to assessee.

upon cases.

addition of Rs.200,70,05,333/- by holding that in view
Marini Samiti has no system of identifying a particular

addition of Rs.200,70,05,333/- without appreciating
that in the light of incriminating material the assessee
has failed to discharge its onus to prove that the cash
purchases were made from the farmers and the benefit
of Rule 6DD(e) is available to it.

present assessment year.
30 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
6. Whether in the circumstances of the case, the ld.

CIT(A) has erred on facts and in law in restricting the
addition of Rs.31,06,44,235/- to Rs.2,05,94,826/-
without appreciating that the addition was based on
seized document and the same was correctly made by
the A.O.

addition of Rs. 31,06,44,235/- to Rs. 2,05,94,826/- on
the basis of peak balance by giving benefit of
telescoping without appreciating that the seized cash
book was not part of the regular cash book and
therefore no benefit of telescoping should be given to
the assessee.

addition of Rs. 31,06,44,235/- to Rs. 2,05,94,826/-
without appreciating that cash withdrawals mentioned
in the seized cash book were unexplained and
unrecorded income of assessee company which was
used for meeting out unexplained expenses and for re-
depositing the same and hence benefit of telescoping
should not be given to assessee.
A.Y. 2010-11 (Departmental Appeal)

1. Addition u/s 40A(3)
A.Y. 2010-11 (Assessee’s appeal)
1. Difference between Purchase & Sale
2. Earnings of subsidiary
A.Y. 2011-12
A.Y. 2012-13 and
A.Y. 2013-14
Issues involved are same as above.
31 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
16. The assessee is a rice miller and engaged in milling paddy

and manufacturing and dealing in rice. During the year, the
assessee purchased paddy from various Mandi Samitis all over
India where payments were made through cheques and cash.
Addition u/s 40A(3):
17. The AO made addition u/s 40A(3) of the Income Tax Act,
1961 pertaining to purchase of paddy and Difference between
Purchase & Sale – Rs.4,76,843/-, earning of Dubai subsidiary.
18. The ld. CIT(A) deleted the addition u/s 40A(3) holding that
since the search has been carried on 30.03.2016, the
Assessment for the Assessment Year 2010-11 being unabated
assessment, no addition can be made u/s 153A in the absence
of any incriminating material found and seized during the
search. The ld. CIT(A) confirmed the additions on account of
Difference between Purchase & Sale, earning of Dubai
subsidiary.
19. We find that the addition is not based on seizure of any

incriminating material. The fact is not in dispute, hence, we
decline to interfere with the order of the ld. CIT(A) in deleting
the addition u/s 40A(3) and decline to affirm the addition
confirmed by the ld. CIT(A). The only reason, the revenue filed
appeal before us is that the decision of the Hon’ble Delhi High
Court in the case of CIT Vs. Meeta Gutgutia relied upon by the
ld. CIT(A) has been challenged by the department before the
Hon’ble Supreme Court which is pending for adjudication.
32 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
20. Since, the A.Y. 2010-11, A.Y. 2011-12, A.Y. 2012-13 and
A.Y. 2013-14 are being unabated assessments, the additions
made in the absence of any incriminating material are not
legally justifiable.

Disallowance under Rule 6DD(e):
21. In para 5 of the assessment order, the AO has discussed

the payments made in violation of Section 40A(3) of the Act. In
respect of this issue, the AO in para 5.1 of the assessment
order noted the relevant material i.e. Annexure A-7, Annexure
LP-1 and Annexure LP-2 seized from the appellant’s premises at
village Achheja, Bulandshahar Road, Dadri, Gautam Budh Nagar
UP. It was noted by the AO that such documents are related to
the purchases made in cash by the appellant. It was found by
the A.0 that during the course of the search, statement of Shri
Govind Mittal, Sr. Manager was recorded however, he could not
provide any explanation with regard to the discrepancies in
respect of the same. During the course of assessment
proceedings the appellant was asked to provide the details of
purchases made in cash in excess of Rs. 20,000/- and further
explain as to why the said purchases were not hit by the
provisions of Section 40A(3) of the Act.
22. During the course of assessment proceedings, the

appellant submitted that the cash purchases were made by it
33 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
from Mandi Samitis located across UP from farmers and hence

did not fall under the ambit of the provisions of section 40A(3)
of the Act, as the same were covered by Rule 6DD of the
Income Tax Rules, 1962. As per the AO, in order to claim
benefit of Rule 6DD, it is the primary onus of the appellant to
prove that cash purchases were made from bonafide
agriculturists/cultivators, however, the appellant only relied
upon the submission that purchases were made from Mandi
where only agriculturist sell their produce which was not found
correct by the AO. It was found by the AO that as per the UP
Krishi Uppadhan Niyamavali, 1965, traders (village traders,
wholesale traders), commission agents etc., are authorized to
sell their produce in the Mandi areas and even the agriculturists
can sell their produce through commission agents. The AO also
made the analysis of the details filed by the appellant during
proceedings and found that no evidence in respect of any of the
persons claimed to be producer agriculturists has been filed. It
was found by the AO that the appellant had shown to have
made purchasers from 13062, 13208, 16647, 13441, 15002,
18398 & 13113 no of farmers during the AYs 2010-11, 2011-12,
2012-13, 2013-14, 2014-15, 2015-16 & 2016-17 respectively,
but the complete address of not even one farmer had been
provided and the only evidence relied upon by the appellant is a
document called Form 6R which is issued by the appellant to the
seller at the time of making purchase in Grain Mandis across
UP. The appellant has claimed that Form 6R is given only to
such persons who are cultivator producers/agriculturists.
34 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
23. The AO in para 5.6 of the assessment order tabulated the

list of top 50 persons from whom the appellant has made
purchases in cash in excess of Rs. 20,000/-, and it was noticed
by the AO that quantum of purchases are quite huge purchases,
however, the appellant could not provide the address of such
persons and has merely claimed that such persons are
agriculturists. In para 5.7 of the assessment order, the AO also
made analysis of the purchases made in cash from the alleged
farmers and it was found that in most of the cases the
purchases were made in huge quantity from the alleged
farmers. On the basis of the analysis, it was noticed by the AO
that huge purchases running into crores have been claimed to
have been made from agriculturists which is quite unusual. The
AO in paras 5.9-5.11 of the assessment order brought out
analysis of the average production per acre and average land
holding per person, and on that basis it was found that in
normal circumstances average yield of Basmati paddy per
farmer will be around 44.5 Quintals per farmer, however, as per
the details of the appellant it was found that average purchase
made by the appellant per farmer from AY 2010-11 to 2016-17
was ranging between approx. 82 quintals to 102 quintals, which
shows that the appellant has not made purchases from the
farmers.
24. In respect of the contention of the appellant that

purchases were duly entered into the Mandi Shulk Register
maintained by the Mandi Samiti, it was found by the AO that as
per the Rules governing the Mandi transactions, Mandi Shulk
Register is simply maintained for record of tax paid by the
35 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
buyers in respect of transactions made by them in the Mandi

premises and the entry of transactions in this register in no
manner establishes that purchases were made from
cultivators/producers only. In respect of the assessment orders
passed by the Mandi Authorities in respect of the purchases
made by the appellant within the Mandi premises it was found
by the AO that such orders nowhere state that the purchases
had been made only from the agriculturists. The details of the
analysis were intimated to the appellant vide letter dated
20.11.2018 the appellant was also show caused as why the
above purchases may not be disallowed u/s 40A(3) of the Act.
25. The AO also deputed Inspectors to Grain Mandi, Dadri,

Greater Noida, UP to find out the procedure regarding the
purchases being made in the Mandi premises, and the reportj of
the Inspectors in respect of the procedure in the Mandi Samiti
has been reproduced in para 5.16 of the assessment order. The
AO made analysis of such report in para 5.17 of the assessment
order. In response to show' cause notice on 20.11.2018 the
appellant filed reply vide letter dated 27.11.2018 which has
been reproduced in para 5.18 of the assessment order. The AO
considered the reply of the appellant and found it unacceptable.
It was found by the AO that in the reply the appellant itself has
admitted that while making purchases the appellant cannot
identify the fanner and that the appellant only ascertains the
quality & quantity of paddy and the name of such person is
either told to them by such person or by Mandi Samiti
representative and the appellant simply accepts the statement
of the seller that he is the producer of the agricultural produce.
36 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
The AO also found that the appellant itself has admitted that on
various occasions some leader of farmer in the village collects
the produce of many farmers and sells in a bigger lot in a mandi
in his own name so as to procure a better price, which shows
that the appellant has not made purchases directly from the
farmers or producers but from their agents or village leaders or
village traders.
26. In view of the same, it was found by the AO that the

appellant has violated the provisions of section 40A(3) of the
Act, as such, he issued a show cause notice on 03.12.2018
which has been reproduced in para 5.21 of the assessment
order. In response to the show cause notice, the appellant filed
its reply, which is extracted in para 5.22 of the assessment
order. From the reply of the appellant, it was found by the AO
that the appellant has again admitted that it does not have any
power and method to verify that the seller in the mandi samiti
campus is not a farmer. The AO also wrote to the Secretary
Mandi Samiti, Dadri on 04.12.2018 with regard to the procedure
followed by them regarding the verification of seller being
actual farmers and such letter written has been extracted in
para 5.24 of the assessment order. The reply of the Secretary
Mandi Samiti has been received by the AO on 07.12.2018 and
the same has also been extracted in para 5.25 of the
assessment order. On the basis of the reply of the Secretary,
Mandi Samiti, it was found that Mandi Samiti does not maintain
any record of the persons selling their produce if they are
actual farmers and there is no check of the persons selling their
produce being actual farmers as the identity of such persons
37 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
being farmers is not recorded in records of the Mandi Simiti. It

was also stated that the particulars in From No. 6R is filled by
the buyer/trader and the Mandi Simiti has no role while
particulars in Form No. 6R are filled in. The AO held that since
Form No. 6R was filled in by the appellant as such the primary
onus was on the appellant to ensure that it is issued to the
actual producer and not his agent, group leader or a village
trader. It was therefore held that while making purchases from
the persons in the Mandi premises, the appellant has only
believed that such persons are farmers and that there is no
evidence in its possession that they are actual producers of
paddy and hence the appellant has violated the provisions of
Rule 6DD of the Income Tax Rules, 1962. In view thereof, the
AO again issued a show cause notice on 11.12.2018 which was
replied by the appellant which has been reproduced in para 5.27
of the assessment order.
27. The AO considered the reply of the appellant and recorded

his finding in paras 5.28 to 5.36 of the assessment order. The
AO held that since the appellant has made purchase in excess of
Rs. 20,000/- in cash as such onus was on the appellant to prove
that purchases made by the appellant was from persons who
actual farmers and the appellant has failed to produce any
evidence with regard to the purchases having been made from
the actual producers. It was held that belief cannot override
evidence when a particular provision explicitly provides for
irrefutable evidence to claim the benefit provided by provision.
The AO also noted that the appellant has filed a copy of letter
dated 06.12.2018 written by Secretary, Mandi Samiti, Dhankaur
38 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
to DCIT, Central Circle-7, which was not received by the AO. It

was found by the AO that Mandi Samiti officials as well as the
appellant only believe that that person declaring himself a
farmer is actually a farmer and therefore on this belief the
appellant issues Form 6R and purchases the produce in cash
without satisfying itself that it is actually purchasing such
produce from an actual farmer. It was found that purchase
made by appellant is not a single off transaction where a person
came to him and sold his produce and walked off with his
payment as the appellant has made several trades with most of
these persons claimed to be farmers who had brought huge
quantities of produce which is unlikely to be in the case of a
farmer. The AO also illustrated the same when he found that
from one Love Singh S/O Jagat Singh- J Bad, the appellant
made 42 trades from 08.10.2013 to 28.12.2013, and purchased
a huge quantity of 4645.70 quintal from this person. It was
therefore stated that if a person who is like a permanent seller
of his produce to the appellant and he is selling such huge
quantities of paddy to the appellant frequently, in the first
instance only the appellant should come to know that the
person from whom purchase are being made cannot be a
farmer. The appellant cannot just rely upon the statement or
declaration given by such person that he is a farmer and make
payments in cash. Similar analysis was also done by the AO in
respect of few other sellers in para 5.33 of the assessment
order. On the basis of the aforesaid analysis, the AO held that
entire purchase made by the appellant from the persons claimed
to be farmers shows similar pattern. Accordingly, the AO held
that since the appellant has acted in belief without any
39 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
satisfaction by obtaining relevant evidences from such persons

before making cash payments to such persons and hence the
appellant has not been able to prove that the purchase made in
cash in violation of section 40A(3) of the Act were made from
the actual cultivators of produce and therefore, payments made
by the appellant in excess of Rs. 20,000/- in making such
purchases amounting to Rs.443,67,45,973/- were disallowed
and added back to the income of the appellant.
28. Before the ld. CIT(A), the assessee submitted as under:
“…………. that its entire purchases of paddy in the state of UP is

governed by the UP Krishi Utpadan Mandi Adhiniyam, 1964 and
UP Krishi Utpadan Niyamavali, 1965. In terms of the said j
Adhiniyam, no farmer can sell his agricultural produce other
than for home consumption except in a Mandi Samili Campus, if
the said producer is located within 20 kms radius from the
Mandi Samiti Campus. Similarly no person can buy agricultural
produce directly from any farmer and has to purchase the same
at the Mandi Samiti Campus if the buyer is located within 20
kms radius of the Mandi Samiti. For the said purpose section 9
of the Adhiniyam need to be seen which has been filed by the
assessee vide Paper Book Pages No. j 4523 to 4583. Niyamavali
is at page nos. 4584 to 4634. The assessee has stated that its
factory at Bulandsher Road, Ghaziabad is located within 20 kms
radius from Dadri Mandi Campus Hence, it could not procure any
paddy from any fanner directly outside the Mandi Samiti
Campus. The quantity of paddy purchased by the assessee from
the farmers as per its books of account in the Mandi Samiti
40 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
Campuses have also been certified by the Mandi Samiti officials

as from the farmers only.
2. The assessee has also stated that as per the Rule 48 of the
UP Krishi Uipadan Mandi Niyamvali, 1965 every Mandi Samiti
has to maintain statutory records in respect of agricultural
produce brought in a Mandi Samiti Campus and sold thereafter
as per list placed at PB page nos. 4594 to 4596.
3. The assessee has also stated that sale of paddy in the

Mandi Samiti Campus is subject levy of Mandi Cess which is
recovered by the Secretary of the Mandi Samiti who is a
government employee as Government Revenue and anybody
who purchases paddy from the farmers in the Mandi Samiti
Campus has to pay Mandi Cess thereon to the Mandi Samiti
whose officials verify the transactions from beginning to end
before issuing a gate pass for removal of the goods from the
Mandi Samiti compound.
4. The entire purchases of paddy or any agricultural produce

in the Mandi Samiti Campus is through auction regulated by the
Mandi Samiti Officials.
5. Then Mandi Samiti Officials issue gate pass for removal of

agricultural produce from Mandi Samiti Campus only after
complete verification of quantity of agriculture produce brought
in and which have been subjected to levy of Mandi Cess.
6. In case a person in the Mandi Samiti Campus who has

purchased the goods from the farmer on the strength of the
Form No 6 and has paid the Mandi Samiti Cess thereon, sells
41 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
the agriculture produce to anybody else in the Mandi Samiti

Campus then he sells the same by issuing a Form no. 9 which
certifies that the agricultural produce in the said sates has
already been subjected to levy of Mandi Cess.
7. The assessee has also slated that all purchases in the

Mandi Samiti Campus from other ahartiyas and not from the
farmers were certified by the sellers on the strength of Form 9
issued by them and for the entire purchases made by assessee
in the Mandi Samiti Campus from farmers has been subject to
Mandi Cess paid by the assessee on the strength of Form 6
which is the only basis for recovery of Mandi Cess by the
revenue and the same is always correct except for minor clerical
errors which are rectified on learning. The said form is basically
a treasury receipt for payment of Mandi Cess to the government
on first purchases from the farmers in a Mandi Samiti campus.
8. The assessee has not purchased any paddy in UP from a

place which is not located in the Mandi Samiti Campus and
where farmers also compulsorily have to sell their agricultural
produce as is statutory required for various purposes. In
absence of proper record of receipts of agricultural produce in
the Mandi Samiti campus, its Secretary cannot keep proper
control of the agricultural produce brought and sold therein.
9. The Assessing Officer has accepted the purchases and has

not disturbed the manufacturing results. The addition has
primarily been made only because the assessee could not
produce record of the farmers.
42 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
10. It is also the law that anybody who is undertaking a

business activity in the Mandi Samiti Campus even as ‘Palledaar’
has to get license and register himself with the Mandi Samiti
but a farmer is not required to have a license to sell his
agricultural produce therein.
11. The assessee has also contended that a letter dated

06/12/2018 (placed at PB page 2350) was received by assessing
officer from the Secretary Dankaur Mandi Samiti which has
stated that complete record of receipts of the agricultural
produce farmer-wise till its exit from the Mandi Samiti campus
is to be maintained statutorily. The letter dated 07/12/2018
from the Secretary Dadri Mandi Samiti is also very clear and
supports the contentions of the assessee in respect of the
records maintained there. The assessee also stated that no
cross examination of any material gathered at the back of the
assessee or of the Mandi Officials whose statements were relied
on was allowed to the assessee though specifically demanded by
the assessee.
12. The assessing officer has also not addressed the

submissions of the assessee that in absence of complete record
of farmers and their sales to the assessee in their campuses,
the Mandi Samiti official could not give complete details of
purchases made from the farmers by the assessee which tallied
with the books of account of the assessee. It is mandatory for
the Secretary Mandi Samiti to not only to keep proper records in
the prescribed register of the agricultural produce brought in
the Mandi Campus for which requisite dale pass in the
43 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
prescribed form is issued but also to ensure proper safe custody

and storage of the unsold stocks in the evening by maintaining
proper records of the same.
13. It has also been stated that any delinquency in

maintaining the statutory records by the Mandi Samiti officials
would have caused revenue loss and which has not been
reported by the State Government and this fact has not been
denied by the assessing officer who made the addition merely
on surmise and conjectures. The law has not prescribed any
rules to take any evidence of agriculturist while making
purchases from them by an assessee on the platform of Mandi
Samitis. The circumstantial and direct evidence clearly
demonstrate that the said purchases were from the
agriculturists.
14. The assessee has also contended that wherever the

subject is of the Stale exchequer proper rules are framed and
scrupulously followed by every and all as otherwise the same is
a crime and accordingly punishable.
15. No incriminating material was found during the course of

search in respect of the said cash purchases duly recorded in
the regular books of account and which were very much
accepted in the assessment orders passed u/s 143(3) of the Act
till the AY 2013-14.
16. The assessee has also stated that no cross examination of

any material or statement taken by the revenue in respect of
rice purchases and sold in Delhi market by the assessee except
44 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
of Mr. Ashok Kumar Gupta, who was completely vague and

evasive besides was avoiding the same for the best reason. It
has also been stated that all the said purchases and sales are
properly recorded in the books of account of the assessee and
no discrepancy in the quantity and its value has been pointed
out in the assessment order.
17. The assessee has also stated that to controvert the false
averments of Mr. Ashok Kumar Gupta in his statement / cross
examination, affidavits of Mr. Praveen Mittal broker and Mr.
Surender Sharma were filed which have not been controverted
in the assessment order and they were not even examined by
the Assessing Officer during the assessment proceedings
resulting into acceptance of the said two affidavits as per the
judgment of the Hon'ble Supreme Court.
18. The assessing officer must be directed to confirm the

above facts on law and if he has on his record any information
of deviation by the assessee from the settled law as above
which is punishable and prosecutable or by any Mandi Samiti
Official or farmer for which any of them has been punished for
breach of any law as above, the same may be reported as the
assessee has stated that no such breach has been reported by
the state authorities. For above verification, necessary
assistance of the assessee may be taken.”
45 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
29. The explanation of the assessee was remanded to the

Assessing Officer. The remand report submitted by the
Assessing Officer vide letter dated 17.10.2019 is as under:
Brief facts of the case:
“Search & seizure operations under section 132 of the Income

Tax Act, 1961 was carried out on KRBL Group on 30.03.2016
including the Assessee Company. This case was centralized to
Central Circle-7, New Delhi as per the order passed u/s 127 of
the I.T. Act, 1961 by the Pr. CIT-(C)-3, New Delhi. The
assessment proceedings in the case of Assessee Company for
A.Y.s 2010-11 to 2015-16 were completed u/s 153A/143(3) and
for A. Y. 2016-17 the same was completed u/s 143(3) of the Act
vide orders dated 31.12.2018 after making various
additions/disallowances on account of non-genuine loss shown
by the Assessee, commission paid on accommodation entry,
amount paid in violation of section 40A(3) and undisclosed
income.
Now, during the appellate proceedings before your goodself the

Assessee Company has filed synopsis dated 11.09.2019 of
written submissions for A.Y.s 2010-11 to 2016-17 and the under
signed is directed to send comments on points 1 to 18 raised by
the applicant in the synopsis. The requisite point wise
comments are as under:-
1. In points no. 1 to 14 of the submissions, the Assessee

Company has contended that its entire purchases of paddy in
the slate of UP is governed by UP Krishi Utpadan Mandi
46 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
Adhiniyam, 1964 and UP Krishi Utpadan Niyamawali, 1965 which

prohibits farmers & purchases from selling/purchasing of
agricultural produce except in a Mandi Samiti Campus, if the
producer/purchaser is located within 20 kms radius from Mandi
Samiti Campus The Assessee Company has filed the copies of
relevant section and niyamawali of above Act and Rules as
pages 4523 to 4634 of paper book The Assessee Company has
further stated that its factory is located within 20 Kms radius
from Dadri Maridi Samiti Campus and hence it could not procure
any paddy from any farmer directly outside the Mandi Samiti
Campus. The Assessee Company has also alleged that quantity
of paddy purchased by it from fanners as per books of accounts
has also been certified by the Mandi Samiti officials as
purchased from farmers only.
In this regard, it is submitted that the Assessee Company

without bringing any cogent evidence on record has simply
contended that certain rules and regulations as to purchase of
paddy in the Mandi Samiti exists and that the same should have
been followed by it. Just because the provisions of UP Krishi
Utpadan Mandi Adhiniyam, 1964 and UP Krishi Utpadan
Niyamawali, 1965 prohibits the Assessee Company from
procuring the paddy from open market does not mean that the
Assessee Company has followed the same and has procured all
of its purchases within the Mandi Samiti from farmers only.
During the course of search proceedings in the case of assessee
certain documents showing purchases of paddy by Assessee
Company in cash were found and seized. During the course of
assessment proceedings, the assessee failed to prove that the
47 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
purchase of paddy was made within the Mandi Samiti and the
same was made from farmers and therefore the same are not
covered by the provisions of Section 40A(3) of the Act as
provided in Rule 6DD of the I. T. Rules, 1962. The Assessee
Company was unable to produce any evidence to prove that
purchases were made from bonafide farmers and not from
traders. The enquiries made by the AO through Inspectors and
from Mandi Samiti officials shows that no record as to a
particular person being a farmer is kept by the Mandi Samiti.
Further, the Assessee Company in its reply has itself admitted
that it has to believe that the seller itself is the producer of the
agricultural produce and that sometimes the leader of the
farmers collects the produce from many farmers and sell it in
the Mandi in their own name to procure a better price which
clearly prove that the Assessee Company has not made
purchases directly from the farmers or producers but from their
agents or village leaders or village traders. To sum up, the
Assessee Company has not filed any evidence either during the
assessment proceedings or during appellate proceedings to
prove that it has made all of its purchases from persons
mentioned in Rules 6DD and that the provisions of Section
40A(3) are not applicable in its case.
2. In point 15 to 17 of the submission, the Assessee Company

has contended that no incriminating material was found during
the course of Search in respect of cash purchases which were
duly recorded in books of accounts and accepted in the
assessment order passed u/s 143(3) of the Act. It has been
further contended that no cross examination of any material or
48 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
statement except Sh. Ashok Kumar Gupta was done by the

Assessee and that to controvert the averments of Sh. Ashok
Kumar Gupta made in his statement, the Assessee Company has
filed affidavits of Sh. Praveen Mittal, broker and Sh. Surender
Sharma which have not been controverted and examined by the
AO in the assessment order and therefore the same are deemed
to be accepted.
In this regard, it is submitted that during the course of Search

proceedings in the case of Assessee Company certain documents
related to cash purchases made by Assessee Company such as
purchase invoices and vouchers for sellers, addresses of
persons from whom rice/paddy was purchased were found with
certain discrepancies and the same were seized. The same has
been mentioned by the AO in assessment order passed u/s 153A
of the Act. Hence, the contention of the Assessee Company that
no incriminating material related to cash purchases was found
during the course of Search is not acceptable and liable to be
rejected. Further, the contention of the Assessee Company that
no cross examination of any material or statement except Sh.
Ashok Kumar Gupta was allowed to be done by the Assessee is
also wrong and liable to be rejected. The cross examination of
Sh. Ashok Kumar Gupta and Sh. Anuj Kumar Gupta was
undertaken by the Assessee on 24.12.2018 and even during
cross examination Sh. Ashok Kumar Gupta has stated that he
had not made any genuine sale/purchase and that the
transactions were in the nature of accommodation entries.
Further, during assessment proceedings, the assessee has been
intimated that the other persons whose statements were
49 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
recorded during the course of Search are not available at the

addresses given by them and even the Inspectors deputed to
find these persons were unable to trace them. The Assessee was
further intimated that since it has conducted sales/purchases
transactions with these persons therefore the primary onus of
proving the same as genuine is upon the Assessee Company and
it cannot absolve from its onus by just alleging that no cross
examination of such persons is allowed to it. Further, the
revenue has not solely relied on the statements of these
persons and apart from it there are other evidences proving
accommodation entries being taken by Assessee Company. The
last contention of Assessee Company that affidavits of Sh.
Praveen Mittal, broker and Sh. Surender Sharma field by it have
not been controverted and examined by the AO in the
assessment order and therefore the same are deemed to be
accepted is also wrong and liable to be rejected as the same
have been duly discussed and considered by the AO while
passing the assessment order.
3. In point 18 of the of the submission, the Assessee

Company has contended that the AO may be directed to report
any deviation by it from the settled law of UP Mandi Adhiniyam.
In this regard, it is submitted that detailed necessary
verifications has already been made by the AO during
assessment proceedings and therefore there is no need to do
the same again at this point.
4. In view of above, it is submitted that the contentions of

the Assessee Company made in the written submissions may
50 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
kindly be rejected and the additions/disallowance made by the

AO may kindly be sustained.’’
30. The rejoinder of the assessee against the remand report

dated 17.10.2019 was submitted before the ld. CIT(A) on
02.11.2019 which is as under:
“The assessing officer has raised the following averments in his

remand report:
a) During the search, certain documents showing purchase of

paddy in cash were found and seized though as per the
assessment order only for the period relevant to AY 2016-17
and duly very much recorded in the regular books of account of
the appellant.
b) The assessing officer has averred that the appellant

company without bringing any cogent evidence on record has
simply contended that certain rules and regulations as to
purchase of paddy in the Mandi Samiti exist and that the same
were followed in real spirit by it.
c) The rules prohibits the appellant from procuring paddy

from a place outside the Mandi Samiti Compound does not mean
that the appellant company followed the same and procured all
its purchases within the Mandi Samiti from farmers only.
d) The appellant failed to prove that the purchase of paddy

was made within Mandi Samiti and the same was made from
farmers and therefore not covered u/s 40A(3) as provided by
the Rule 6 of the IT Rules.
51 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
e) The enquiries made by the AO through Inspectors from

the Mandi Samiti Officials show that no record as to a particular
person being a farmer is kept by the Mandi Samiti.
f) The appellant admitted that it has to believe the seller

itself that he is a producer of the agricultural produce and that
sometimes the leader of the farmer collects the produce from
many farmers and sells it in the Mandi in his own name to
procure a better price for all which clearly proves that the
appellant company has not made purchases directly from the
farmers or producers but their agents/village leaders or traders.
g) To sum up, the appellant company has not filed any

evidence during the assessment proceedings or during the
appellate proceedings to prove that it has made all of its
purchases from the farmers.
h) Certain documents related to cash purchases made by the

appellant such as purchase invoices, vouchers for sellers,
addresses etc. with certain discrepancies were found and were
seized as mentioned in the assessment order. Thus, the
contention of the appellant company that no incriminating
material was found during search is not acceptable.
i) The cross-examination of Mr. Ashok Kumar Gupta and Mr.

Anuj Kumar Gupta was undertaken by the appellant wherein
they stated that they have not made any genuine sale /
purchase and that their transactions with the appellant were in
the nature of accommodation entries.
52 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
j) The appellant was intimated that the other persons whose

statements were recorded during the course of search were not
available at their given addresses. Since, the appellant has
conducted sales and purchases from these parties, the onus of
proving the same as genuine is upon the appellant and it cannot
absolve from its onus by alleging that no cross-examination of
such persons has been allowed.
k) The revenue has not solely relied on the statements of

these persons but there are other evidences proving the
accommodation entries being taken by the appellant.
l) The affidavits of Mr. Praveen Mittal and Mr. Surender

Sharma cannot be deemed to be accepted as the same have
been duly discussed and considered by the AO while passing the
assessment order.
m) As regards the contention of the appellant that the AO may

be directed to report any deviation by it from the settled law of
UP Mandi Adhiniyam, it is submitted that detailed necessary
verification has been made by AO during assessment
proceedings and therefore, there is no need to do the same
again.
Submissions of the appellant
31. On perusal of the remand report, it would be seen that the

assessing officer has not mentioned anything about the
commission received from Inter dev and thus, no comments on
the said ground are required. Moreover, this amount has
53 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
already been received by the appellant as dividend from KRBL

DMCC in its books of account and declared as income.
Purchases from farmers:

No incriminating material at all was found during the
course of search:
32. No material pertaining to the AYs 2010-11 to 2015-16 was

seized during the course of search to suggest that the appellant
did not purchase the paddy from fanners. Thus, no adverse
cognizance can be taken for the said years at all.
33. Some documents evidencing the cash purchases were

seized from Dadri office for the FY 2015-16 i.e. AY 2016-17
(refer para 5.1 of the assessment order) but those were not at
all incriminating as those documents did not show that
purchases were not genuine rather the said documents formed
part of the primary record of the appellant and the books of
account. Detailed submission explaining the nature of the said
seized material has been made on pages no. 46-47 of the letter
dated 14/03/2019. The assessing officer has not controverted
the same or referred to any other seized material in the remand
report to show that the same was incriminating in any manner.
Thus, no adverse cognizance can be taken for the same even for
the A Y 2016-17.
34. The assessing officer has stated that some discrepancies

were found in the seized material showing the cash purchases
but has not specifically mentioned about the same in the
remand report. The issues pointed out in the assessment order
54 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
have already been explained in detail in the written submissions

and do not require any fresh comments. The appellant relies on
the written / oral submissions already made challenging the
additions /disallowances made in the assessment orders.
Mandi Samiti Officials are public servants and

presumption is that they have acted in good faith and
bonafide manner:
35. As has been submitted earlier also the section 26 of the UP

Krishi Utpadan Adhiniyam 1964 provides that every officer or
servant of a Committee is equivalent to a public servant within
the meaning of section 21 of the Indian Penal Code. A public
servant is supposed to act only as per law while undertaking his
official duties. Wherever a government official undertakes
action in good faith, his action has to be understood with no
malafide against anybody including the officials of other
government departments as has also been provided in the
income-tax provisions and CrPC.
36. Thus, any error or negligence by the Mandi Samiti officials

in maintaining statutory records as per the law cannot be
considered against the appellant in any manner in this
proceeding as there was no fault of the appellant for the same.
The purchases were made as per rules and regulations

unless adverse evidence is brought on record:
37. As per settled law of the land, law abiding actions of every
person are presumed unless proved otherwise. There is no
55 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
presumption in favour of illegality of a transaction; in fact the

presumption is the other way round. When a particular
transaction is subjected to a law, then intention of the parties is
always to follow law. If one does not follow the law, then the
government / concerned department / officials will definitely
take action against the defaulters.
38. The appellant has explained in detail the rules and

regulations regarding the working of the Mandi Samiti,
documents to be kept by the Mandi Samiti Officials regarding
the transactions undertaken in their Campus which included
register showing primary arrival, register showing secondary
arrival, Arrival register in the form no. 51 and entry slip in the
form no. 53 at the entry gate containing details of all persons
bringing material in the campus, farm no. 44A i.e. Krishi
Utpadan Krya and Vikrya Register where the arrival is recorded
by the Mandi official and form no. 44B i.e. daily arrival and sale
register by the arahatiya. Form VIII i.e. Auction Register, gate
pass in form V-A and many more. As explained in the above
paragraphs and earlier, the presumption is that the Mandi
officials have acted in good faith and in bonafide manner and
must have maintained all the registers as required by the
relevant Act, Rules and Regulations.
39. The Mandi Samiti is required to maintain the said

documents statutorily which have evidentiary value. The record
of purchases, calculation of Mandi Cess to be paid thereon have
the same evidentiary value as the assessment order
determining the assessable income as both these documents
56 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
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have been maintained by the government officials as per the

powers provided to them as, per the relevant statutes.
40. Thus, form 6R is not the only document to prove that the
purchases were made from farmers but the above mentioned
documents and registers which are maintained on day-to-day
basis by the Mandi Samiti Officials are there to show that the
purchases made by the appellant were from the farmers. The
Dadri and Dankaur Mandi Samitis have confirmed the quantities
purchased by the appellant from the farmers on the basis of the
said official and statutory record maintained by them otherwise
they could not give the said figures. It must be appreciated that
the form 6R is filled by the buyer but these registers are filled
by the Mandi officials and buyer has no control over them.
Further the particulars mentioned in the 6R are verified by the
Mandi official from their records before issuing a gate pass to
remove the agricultural produce from the Mandi Campus and
verify the amount of Mandi Cess to be paid thereon before exit
from the Mandi Campus. Thus, it is not a case where the
particulars filled in by the appellant are considered correct
without verification by the Mandi officials.
41. As regards the averment of the Assessing Officer that it is

not necessary that the appellant has followed all the rules, it is
submitted that if the appellant had not followed the same, then
some adverse action would have been taken by the Mandi
officials / state government against the appellant. However,
there is no such report on the record nor found during the
search. Thus, the only and only presumption which can be
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drawn is that the appellant has followed all the rules and
regulations and which is a fact.
42. Presuming but without admitting, even if the appellant had

not followed the rules, the Mandi Samitis officials must have
followed the same as per the presumption applicable for the
public servants unless there is some evidence to the contrary.
However, if the assessing officer was not satisfied, he could
have summoned the officials and recorded their statements, he
could have made further inquiries but the assessing officer
chose to keep quite because somewhere he was satisfied that
the Mandi officials are working as per rules and regulation.
However, just for the sake of making additions, the assessing
officer reiterated the averments made in the assessment order.
Letters issued by the Mandi Samiti Vs. Enquiry made by

the Inspectors:
43. The appellant has made a detailed analysis of the

Inspectors' report in para 1.49 to 1.51 of the letter dated
14/03/2019 and explained the inconsistencies therein. The
assessing officer has not mentioned anything about the said
inconsistencies in his remand report. In view of the same, the
inspectors' report is not at all a reliable evidence.
44. Even as per para (it) of the said report, the Mandi Samiti
officials have admitted that the Form no. VI is issued to the
farmers only. As per the Inspector report, the Secretary stated
that Farmer's record is not maintained by the Mandi Samiti but
by the arhatiya / trader. However, the same secretary in his
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ITA Nos.1338 to 1344/Del/2020
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letter dated 0 7/1 Z'2018, (reproduced at page 75 of the

assessment order) submitted in reply to the letter issued by the
assessing officer confirmed the claim that the 87862.44
Quintals of paddy were purchased from the farmers by the
appellant and the information is entered into Register 44A by
the Samiti official in addition to the Form 6R. Detailed
discussion about the said letter has been made in para 1.53-
1.54 of the letter dated 14/03/2019 which has not been
controverted by the assessing officer.
45. Undisputedly, the secretary of the Mandi Samiti is a public

servant. The letter given in writing by the Secretary of the
Mandi Samiti is a direct evidence and has more evidentiary
value than the report of the Inspector which is purely based on
some verbal and unauthenticated conversation with the officials
who never signed the same However, the said letter of the
Mandi Official is duly signed by the Mandi Samiti officials on the
basis of statutory record maintained by them whereas there is
nothing to prove the authenticity of the verbal conversation^
between Inspectors and Mandi Samiti Officials as neither their
statements were recorded in writing nor the said report contain
the signatures of any such persons.
46. The said letter was placed in the paper book and was
available before the assessing officer. However, the assessing
officer ignored the said third party direct evidence filed in
response to the notice issued by him to the Mandi Samiti and
placed reliance on the Inspectors report which is not based on
any evidence. The said letter has been issued by the Mandi
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Samiti on the basis of documentary evidences kept by them. It

must be appreciated that once the said letter of Mandi Samiti
confirming the facts stated by the appellant was placed on
record then the onus cast on the appellant got discharged and
the onus shifted on the assessing officer to bring evidences on
record to prove otherwise. The assessing officer did not bring
any evidence on record except reiterating the facts staled in the
assessment order.
47. The assessing officer did not take any cognizance of the
letter issued by Dankaur Samiti slating that the said letter has
not been directly placed on his record by the Samiti. Though the
assessing office had paucity of time while completing the
assessment proceedings, however, the assessing officer had
sufficient time during the remand proceedings to carry out
verification of the same if required.
48. The assessing officer has not mentioned single word about
the letter issued by Dankaur Samiti either in the assessment
order or in the remand report. This shows that either the
assessing officer was satisfied with the facts staled in the said
letter or did not get anything adverse in the verification done
by him. Thus, the cognizance of the said letter has to be taken
in these proceedings. The said letter has been discussed in
detail in para 1.57 and 1.58 of the letter dated 14/03/2019.
49. The assessing officer made enquiries from two Mandi

Samitis who confirmed the fact that the appellant had
purchased the agricultural produce from the farmers. The Mandi
Samitis also staled about the documents maintained by them
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regarding the first arrival (form no. 44A, 44B, 51 and 53).
Thus, it has been confirmed by the Samiti that the Form 6R
filled in by the appellant is not the only evidence to prove that
the sellers were farmers but there are various other records
required to be maintained by the samiti mandatorily which
prove that the sales were made by the farmers.
50. The assessing officer has neither brought anything adverse

on record in support of his averments, nor controverted the
facts stated in the letters issued by Mandi Samiti Officials but
has merely reiterated his averments made in the assessment
order for which detailed submissions have already been made.
Provisions of Mandi Samiti Act:
51. The only question for consideration of the addition is

whether the sellers of the agricultural produce were farmers or
not and which authority and documents will determine their
status as farmers. However, the Form 6R and the documents
maintained by the Mandi Samiti officials are sufficient to prove
their status as farmers. However, in case of any dispute, the
Rule 131 of the UP Krishi Mandi Niyamavali 1965 provides as
under:
“131. Dispute regarding a person being a producer [Section

2(p)]
(1) When any question arises as to whether any person is a

producer or not for the purposes of the Act, the Director on
receipt of a complaint in this behalf, shall make enquiries from
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the Tahsildar concerned, whether the person against whom

complaint has been made, either cultivates the land himself or
holds any lien in the land in any capacity under the U.P.
Zamindari Abolition and Land Reforms Act, 1950, or is engaged
in producing, rearing or catching any produce of agriculture,
horticulture, apiculture, sericulture, animal husbandry or of
forest in the Market Area.
(2) The Director shall also make enquiries whether the person
against whom complaint has been made carries on any business
of sale or purchase or storage or processing, or works as a
trader or broker nr commission agent in respect of agricultural
produce."
52. On perusal of the same, it would be seen that the Director

on receipt of a complaint in this behalf shall make enquiries
from the Tehsildar regarding the producer as to whether he
cultivates the land himself or engaged in producing agriculture
in the market area or he carries on the business as a trader etc.
Thus, the Director will made all the requisite enquiries
regarding land holding and other activities of the said cultivator
to determine his status. This clearly shows that the appellant
was not required to collect the said documents at the time of
purchase. Such documentary evidences are to be collected by
the director only when he enquires into the complaint regarding
a particular cultivator. If the Mandi officials were required to
obtain all these documents at the time of entry in the Mandi or
the buyer was required to obtain the same before issuing form
6R, then the Director would not need to make such inquiries
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ITA Nos.1338 to 1344/Del/2020
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from the Tehsildar but would have verified the documents held
by the Mandi Samili or the buyer. Thus this rule supports the
contention of the appellant that the appellant was not required
to obtain any documentary evidences regarding land area,
cultivation etc. about the, seller. Thus, the assessing officer
cannot ask the appellant to produce the said evidences to prove
that the sellers were farmers. However, in case he was not
satisfied then he was to make a reference, in the form of a
complaint that the appellant had purchased agricultural produce
from non-farmers in the Mandi Samiti Campus on the strength
of Form no. 6R. However, the same was not done by him, a duty
which he should have performed while discharging his official
function. He, thus, now cannot allege infraction of the legal
provisions merely on his surmises.
53. The Section 2(p) of the U.P. Krishi Utpadan Mandi

Adhiniyam, 1964 is as under:
“Producer means a person who, whether by himself or through

hired labour, produces, rears or catches, any agricultural
produce, not being a producer who also works as a trader,
broker or Dalai, commission agent or Arhatiya or who is
otherwise ordinarily engaged in the business of storage of
agricultural produce:
Provided that if a question arises as to whether any person is a

producer or not for the purposes of this Act, the decision of the
Director, made after an enquiry conducted in such manner as
may be prescribed, shall be final.”
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54. Thus, there exist specific provisions in the said Statute to

resolve this debate but for the reasons best known to the AO,
he refrained from those despite the fact that complete Act and
Rules were placed on his record.
55. The certificate of the Mandi Officials is sacrosanct for the

purpose of income-tax assessment and has to be accepted by
the appellate authority because the AO failed to make further
enquires and reference is prescribed by the Statute itself. The
Mandi Officials have also not commented that any of the farmer
selling paddy to the appellant was ever declared as non-farmer
by the Director. In fact, had there been any such instance the
same would have found mention in the certificate whose
quantity matches the purchases as per the books of account of
the appellant.
56. Exception is provided for purchase of agricultural produce

from the producer and many more exceptions have been provide
in the CBDT vide CIRCULAR NO 08/2006, Dated: October 06,
2006 besides a specific mechanism regarding the produce of
animal husbandry; but no such mechanism is provided for
agricultural produce. It was provided '4. The benefit of rule 6DD
of the I.T. Rules, 1962 shall be available to the person referred
to at para 3 above subject to furnishing of the following:
“(i) A declaration from the person receiving the payment that

he is a producer of meat;
(ii) A confirmation that the payment, otherwise than by an
account payee cheque or account payee bank draft, was made
on his insistence; and
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ITA Nos.1338 to 1344/Del/2020
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(iii) A further confirmation from a veterinary doctor certifying

that the person specified in the certificate is a producer of meal
and that slaughtering was done under his supervision."
57. However, no mechanism has been provided in respect of an

agricultural produce and therefore, it is submitted compliance
be examined on general legal principles and considering the
facts and circumstances in view. It is only lately that the
section 269 ST has been inserted to place specified
requirements when cash payment exceeds Rs 200000/-. The AO
cannot impose same burden of proof which is required for
claiming exempt agricultural income u/s 10(1) and expect an
assessee to produce land& revenue records, purchase of seeds/
fertilizer etc. of the seller. Manner and methodology of
establishing applicability of the exception would always vary on
the basis of purposes and characteristics of exception It was
held by Supreme Court in ITC Ltd /2004j 2004 taxmann.com
349 (SC) that "It has been correctly submitted on behalf of the
appellant that declarations required under diverse statutes have
different characteristics and consequences depending upon the
nature of the declaration. A declaration may be (1) an
assurance of an existing state of affairs or (2) an assurance of a
future course of conduct by the declarant himself or (3) a
statement of required conduct by a third party. In the first two
kinds of declarations the onus is on the declarant to make good
the declaration. In other words the truth of the declaration may
be verified. But when all that is stated in the declaration is a
requirement to be fulfilled by another, what is to be enquired
65 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
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into is the compliance with the requirement and not be

correctness of the declaration itself. ....Declaration to be
furnished in Form 'C' by registered purchasing dealers under
Section 8(1) of the Central Sales Tax Act, 1956 which certify
that the purchasing dealer is a registered dealer in respect of
commodities mentioned in the declaration, are illustrative of the
first kind of declaration. Thus it was held in the State of Madras
v. M/s. Radio and Electricals Ltd. (1966) Suppl. SCR 198 that
the Sales Tax Authority was competent to scrutinize the
certificate to find out whether it is genuine. He could also made
an enquiry about the contents of the certificate of registration
to satisfy himself whether the goods purchased were covered by
the certificate or not. But once he was satisfied that the
certificate is genuine and that it Covers the goods being
purchased, the Sales Tax Officer was incompetent to hold an
enquiry whether the goods so specified could be used for any of
the purposes mentioned in Form 'C' or whether the goods
purchasing were in fact not used for the purposes declared in
the certificate. M/s. Chuni Lai Parshadi Lal v. Commissioner of
Sales Tax, 1986 SCC 501 followed the decision in State of
Madras v. Radio and Electricals Ltd. (supra) and held that for
the purpose of the U.P. Sales Tax Act, 1948, the Sales Tax
Authorities could only look into the question whether the
certificate was forged or fabricated and the Sales Tax Officer
could not hold an enquiry whether the purchasing dealer,
notwithstanding the declaration, was likely to use the goods
purchased for purposes other than that mentioned in the Form
'C'. If the certificate was valid and covered the goods
purchased, the Court held that it raised an irrebuttable
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ITA Nos.1338 to 1344/Del/2020
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presumption that the goods would be used for the purposes

mentioned, since the purpose of the rule was to make the
object of the provision of the act workable which was realization
of tax at one single point, i.e. at the point of sale to the
consumer, (p.511)...”
58. It is submitted that the present case falls under third

category. The Uttar Pradesh Krishi Utpadan Mandi Adhiniyam,
1964 imposes legal prohibition upon everyone not to buy paddy
directly from the farmers within the Mandi Samiti specified
controlled area other than in the Mandi Samiti Campus. All
purchases were undisputedly in the Mandi Samiti campus and
delivery of goods received in the Mandi campus as purchased
paddy have been taken outside the Mandi campus through
proper gale passes issued by the Mandi Samiti officials on the
basis of Form no. VI issued to the farmers. Proof of transport of
goods to the factory / warehouse from the Mandi Campus is on
record. Mandi Samiti Officials have collected Mandi Samiti tax
on the purchases of paddy by the assessee directly from the
farmers in the Mandi Samiti Campus and this receipt of lax is
recorded / authenticated by officials in the Form No. VI issued
by the assessee. Thus, the revenue cannot allege that these
forms were bogus as the Mandi Samiti officials have accepted
those forms and collected tax from the assessee. Further, the
assessee has also purchased paddy from various ahartiyas from
the Mandi for which tax was paid by aharliyas to the Mandi
Samiti. It is utmost important to note that only the farmers and
the Ahartiyas registered u/s 9 of the Uttar Pradesh Krishi
Utpadan Mandi Adhiniyam, 1964 can sell paddy in the Mandi
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Samiti Campus. Kind reference is invited to section 50 of this

Adhiniyam “PROVIDING THAT all carts / sellers shall assemble
at a fixed place and at fixed time etc., when Samiti officials
permit sellers to enter and sell their paddy in campus. Any
purchaser is entitled to believe that those who are not
registered ahartiyas are farmers as there is no reason to guess
otherwise. Employees / staff of the Assessee being involved in
astronomical amount purchases of paddy year after year do
recognise the registered ahartiyas well. It is pertinent to note
that there is no advantage to the assessee to purchase paddy in
cash as mandi tax is to be borne by the assessee in respect of
the purchases from the farmers. As far as cash is concerned,
the assessee maintained bank accounts with branches nearby to
the Mandis and its purchasing staff transmit payments for all
purchases from farmers there from and the head office transfers
money to the bank accounts near Mandi. Request is made to the
bank to arrange cash and such requests have always been
fulfilled since the bank branches know the system and their
substantial business, if not 100%, is related to mandi sales. All
these correlated transactions i.e. cash purchases, payments,
transfer of funds to bank, cash withdrawal and then cash
payment is all part of record. NOT ONLY THIS, GOODS CAN BE
SOLD IN CAMPUS ONLY AND ONLY THROUGH AUCTIONS AND
NOT THROUGH PRIVATE NEGOTIATIONS. IT IS NOT POSSIBLE
TO FAKE FARMER AS A TRADER OR VICE VERSA IN AN OPEN
AUCTION. When one acts bonafide as per the procedure laid
down by a statutory authority, he cannot be asked to establish
that particular statutory authority was acting in accordance with
the statute in question. The Hon’ble Supreme Court in State of
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ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
Maharashtra v. Suresh Trading Co. [1998] 109 STC 439 (SC)

has held that "5. In our view, the High Court was right. A
purchasing dealer is entitled by law to rely upon the certificate
of registration of the selling dealer and to act upon it. Whatever
may be the effect of a retrospective cancellation upon the
selling dealer, it can have no effect upon any person who has
acted upon the strength of a registration certificate when the
registration was current. The argument on behalf of the
department that it was the duty of persons dealing with
registered dealers to find out whether a state of facts exists
which would justify the cancellation of registration must be
rejected. To accept it would be to nullify the provisions of the
statute which entitle persons dealing with registered dealers to
act upon the strength of registration certificates". Thus, it is
settled issue that everyone except the farmer has to take a
license from the local Mandi Samiti to transaction about an
agricultural produce in the Mandi Samiti area and also to pay
Mandi Samiti tax on such purchases from farmers. Since, here
the sellers of paddy to the assessee did not have any license to
trade / sell their agricultural produce in the Mandi Samiti
controlled area and were allowed to sell their produce by the
Mandi Samiti in its complex as a farmer as they did not pay any
Mandi Samiti tax on their sales, they were none but the farmers
as otherwise the Mandi Samiti would have subjected them to the
levy of tax on their sales as per the law. Reliance for such rule
is supported by the judgment of the Apex Court in Virendra
Kumar & others vs Krishi Utpadan Mandi Samiti and others 1987
SCC (4) 454. It is submitted that Madras High Court decision in
Lakshminarayana Reddy vs Subhadri Ammal (1903) 13 MLJ 7
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ITA Nos.1338 to 1344/Del/2020
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holding that “I may also refer to the case of the Hire Purchase
Furnishing Co v. Rishens L.R. 20 Q. B.D. 387 in the Court of
Appeal, in which Bowen L.J., stated the law in the following
terms: "There, is a broad principle that where a defendant is
attempting to set aside a transaction for illegality and the facts
connected with it are equally consistent with the transaction
being legal or illegal, it lies on the defendant to prove the
illegality. The law presumes against illegality and this
presumption holds in all civil and other proceedings for
whatever purposes originated." Applies in full force to present
case.
59. In this regard if the averment of the AO is accepted then it

will tantamount to attribute unlawful acts and illegality at least
to following:
“A] The farmer / producers who sell paddy to trader outside

the campus
B] The traders who purchase paddy outside campus
C] The Mandi officials who allow paddy to enter campus
unauthorizedly as paddy is always received in campus or in
issuing bogus form to show taking out of paddy by the assessee
D] The salaried staff of the assessee who actually buys from
trader but show as purchased from farmer and prepare bogus
documents for this purpose and
E] All those who sign on cash payment receipts without
receiving cash.”
60. It must be appreciated that the farmers in India are poor

and uneducated and had no access to the banking facilities at
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ITA Nos.1338 to 1344/Del/2020
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least till Jan Dhan bank accounts were opened in the year 2016
In fact in many villages, there was no bank branch or even if
there was one, then it would have taken many weeks to collect
a cheque of the buyer with a risk of bouncing the same also.
Thus, the farmers were only accepting cask against their sale
proceeds. Recently, an amendment in the Act has been made by
which on withdrawal of more than Rs. one crore from a bank
account in a particular financial year, 2% TDS has to be made
by the bank. However, to avoid such problems to payments to
the farmers in Mandi Samiti complexes, a Notification no.
70/2019 has been issued by the CBDT on 20/09/2019 on the
same for Income-tax Deduction at Source u/s 194N of the Act
for cash withdrawals from the bank accounts by assessee which
is as below:
"S.O.3427(E).- In exercise of the powers conferred by clause(v)

of the proviso to section 194N of the Income-tax Act, 1961 (43
of 1961), the Central Government after consultation with the
Reserve Bank of India, hereby specifies the commission agent
or trader, operating under Agriculture Produce Market
Committee (APMC), and registered under any Law relating to
Agriculture Produce Market of the concerned State, who has
intimated to the banking company or co-operative society or
post office his account number through which he wishes to
withdraw cash in excess of rupees one crore in the previous
year along with his Permanent Account Number (PAN) and the
details of the previous year and has certified to the banking
company or co-operative society or post office that the
withdrawal of cash from the account in excess of rupees one
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crore during the previous year is for the purpose of making

payments to the farmers on account of purchase of agriculture
produce and the banking company or co-operative society or
post office has ensured that the PAN quoted is correct and the
commission agent or trader is registered with the APMC, and for
this purpose necessary evidences have been collected and
placed on record.”
61. In the above circular also, the CBDT has not directed a
payer to collect any information and evidence of the payee
farmer as a farmer while making payment to him in cash for his
agricultural produce in the Mandi Samiti campus and has
accepted that the Mandi Samitis work as per the legal
framework prescribed for them by the Statute. Factually also,
there is no scope of any infraction of the same as the same is a
big source of revenue collection of the Stale Government on
agricultural produce which is normally not subject to VAT etc.
The State Government is very conscious in regulating the same,
particularly, the form 6R which is basis of collecting Mandi Cess
on the sale value mentioned therein.
Cross-examination of the parties has to be allowed:
62. No incriminating seized material was found during the

course of search to suggest that the purchases or sales of rice
made from / to the said 35 parties are not genuine. The
assessing officer made some post search enquiries which
included the recording of statements of various parties to allege
that the said transactions were not genuine. Thus, the assessing
officer made the said allegation mainly on the basis of the
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ITA Nos.1338 to 1344/Del/2020
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statements of the said parties which were collected at the back

of the appellant and thus, now the said parties are department
witnesses and thus, the cross-examination of the same was a
pre-requisite for placing reliance on the same.
63. It must be appreciated that the said parties were found at

their given addresses by the department when the revenue
recorded their statements after the search operation on the
appellant which shows that the said parties were existent on the
said addresses and the entire purchase / sales money was
routed through proper banking channels No incriminating
material in any manner was found during the course of search
and any post search enquiries not based on any incriminating
material cannot be used in the assessment proceedings u/s
153A of the Act. CIT Vs. Dr. Shiv Kant Mishra (2016) 97 CCH
0119 All HC All these transactions were properly recorded in the
books of account and were accepted in the assessment orders
passed u/s 143(3) of the Act upto the A Y 2013-14. The entire
impugned addition is based on surmises. Thus, the appellant
has discharged its onus as it provided the copies of bills, bank
accounts of the parties and their addresses where they were
found located. However, it appears that since the said parties
have not recorded these transactions in their books of account
properly, they have absconded. However, no adverse view of
the same can be taken against the appellant who has
discharged its onus. Moreover, since those were the witnesses
of the revenue, it was incumbent on the revenue to produce
them not only for cross examination but also for testifying the
authenticity of the statements and deponents therein.
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64. The assessing officer has stated in the remand report that
he has not solely relied upon the statements but also on the
other evidences. However, no such evidences have been
mentioned in the remand report nor in the assessment orders.
The appellant has filed detailed submissions as regards to the
averments made in the assessment order and thus does not
require any comments. As regards the cross examination of Mr.
Ashok Kumar Gupta and his son Mr. Anuj Kumar Gupta, the
appellant has already made detailed submissions on which no
comment to controvert those has been made by the AO in the
report.
65. At the outset, we are taking up the issue of assessment

u/s 153A and validity thereof.
66. The AR of the appellant submitted their arguments in

writing dated 26.08.2019 before the ld. CIT(A) which have been
reiterated before us.
• The AYs 2010-11 to 2014-15 were completed assessments

and were not pending on the date of search since either
the assessment orders u/s 143(2) were passed or the time
to issue notice u/s 143(2) was passed much before the
date of search on 30/03/2016.
• On perusal of the assessment order for the AY 2011-12, it

would be seen that the additions have been made on the
following issues:
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a) Addition for the commission received from M/s Interdev

Aviation Services Pte Ltd. by KRBL DMCC, a subsidiary
company of the assessee in the hands of the assessee
though the said income was duly declared in the
balance sheet of the said company.
b) Disallowance of purchases u/s 40A(3) for the cash
purchases of paddy from farmers in Mandi duly recorded
in the books of account.
c) Disallowance for alleged bogus purchases in excess of

sales and commission paid on such purchase bills
• All these additions have been made on merely on surmises

and conjectures and not on the basis of any incriminating
material seized during the course of search. No
documentary evidence was found during the course of
search to show that
a) the commission was actually received by the assessee

or it was actually the income of the assessee.
b) the purchases made in cash were not made from

farmers.
c) The purchases made from some parties were bogus as

the assessing officer has not referred to any such
incriminating seized material in the assessment order
and the additions have been made without any
reference to any seized material but on the basis of
post search enquiries. The assessing officer has referred
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ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
to some seized material which was a part of the record

and books of account on the basis of which transactions
were recorded in the books and were not incriminating
at all. This clearly shows that no incriminating material
was found during the course of search regarding the
said additions. The scope of assessments made u/s
153A of the Act is limited. No cognizance of any
material gathered or statements recorded after
conclusion of the search in these proceedings can
legally be taken.
• It is a settled law that in case of completed assessments,

additions can be made only on the basis of incriminating
seized material found during the course of search as has
been held in the undernoted authorities. Copies of all
these judgments can be submitted, if desired.
a) CIT vs Kabul Chawla 2015-TIOL-2006-HC-DEL-IT

b) Pr CIT vs Meeta Gutgutia 2017-TIOL-1000-HC-DEL-IT
c) Pr CIT vs Kurele Paper Mills Pvt. Ltd. (2016) 380 ITR
571 (Delhi) (SLP dismissed by the Apex Court)
d) Pr CIT vs Dharampal Premchand Ltd. 2017-TIOL-1649-
HC-DEL-IT
e) Pr CIT vs Lata Jain 2016-TIOL-886-HC-DEL-IT
• Thus, in absence of any incriminating material found from

the premises of the appellant during the course of search,
no addition can be made u/s 153A of the Act in case of
completed but not abated assessments and thus the
additions made should be deleted.”
76 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
67. The ld. CIT(A) held with regard to provisions of Section

153A and the additions made, the ld. CIT(A) dismissed the
contentions of the assessee.
68. The facts are as under:
• In A.Y. 2014-15, notice u/s 143(2) was issued before the

search on 31.08.2015 and assessment proceedings u/s
143(3) were pending on the date of search i.e.
30.03.2016. In view of these facts, the assessment did not
stand completed on the date of search and hence addition
could be made even in the absence of incriminating
material as held by Hon’ble Delhi High Court in the case of
CIT vs Kabul Chawla [2016] 380 ITR 573 (Delhi).
• In A.Y. 2015-16, the appellant had not filed return of

income upto date of search i.e. 30.03.2016. Return of
income was filed on 25.08.2017 in response to notice u/s
153A of Income Tax Act. Hence, assessment proceedings
did not stand completed on the date of search i.e.
30.03.2016. Since the appellant had not filed return of
income for A.Y. 2015-16 upto the date of search, the
assessment did not stand completed on the date of search
and hence addition could be made even in the absence of
incriminating material as held by Hon’ble Delhi High Court
in the case of CIT vs Kabul Chawla [2016] 380 ITR 573
(Delhi).
• In A.Y. 2016-17, the appellant had not filed return of

income upto date of search i.e. 30.03.2016. Return of
77 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
income was filed on 25.08.2017 in response to notice u/s

153A of Income Tax Act. Hence, assessment proceedings
did not stand completed on the date of search i.e.
30.03.2016. Since the appellant had not filed return of
income for A.Y. 2016-17 upto the date of search, the
assessment did not stand completed on the date of search
and hence addition could be made even in the absence of
incriminating material as held by Hon’ble Delhi High Court
in the case of CIT vs Kabul Chawla [2016] 380 ITR 573
(Delhi).
69. In view of above facts, the Assessing Officer was justified

in making additions u/s 153A and u/s 143(3) of Income Tax Act
in A.Ys. 2014-15 to 2016-17 even in the absence of
incriminating material. Hence, we affirmed the order of the ld.
CIT(A).
Adjudication on the issue of disallowance u/s 40A(3):
70. With regard to disallowance u/s 40A(3), the ld. CIT(A) held
that the factum of purchase has been confirmed by the Mandi
Samiti Officials.
71. In this regard, relevant part of Rule 6DD of Income Tax

Rules is reproduced below:
“6DD. No disallowance under sub-section (3) of section 40A

shall be made and no payment shall be deemed to be the profits
and gains of business or profession under sub-section (3A) of
section 40A where a payment or aggregate of payments made to
78 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
a person in a day, otherwise than by an account payee cheque

drawn on a bank or account [account payee bank draft or use of
electronic clearing system through a bank account or through
such other electronic mode as prescribed under rule 6ABBA,
exceeds ten thousand rupees] in the cases and circumstances
specified hereunder, namely:—
(a) ………………………….
(b) …………………………
(e) where the payment is made for the purchase of—
i. agricultural or forest produce; or
ii. the produce of animal husbandry (including livestock,
meat, hides and skins) or dairy or poultry farming; or
iii. fish or fish products; or
iv. the products of horticulture or apiculture, to the cultivator,
grower or producer of such articles, produce or products;
72. Rule 6DD (e) states that the provisions of section 40A(3)
will not apply where the payment is made for the purchase of
agricultural produce, animal husbandry or dairy or poultry
farming, fish or fish products to the cultivator, grower or
producer of such articles. CBDT vide Circular no. 08/2006 dated
06 October, 2006 has provided for specific mechanism for
verification of sellers in case of the produce of animal
husbandry but no such circular has been issued in case of
agricultural produce for fulfillment of condition under Rule 6DD.
No specific rule or provision of law as per the Income-tax has
been brought on record by the assessing officer which required
the assessee to collect any evidences to prove that the sellers
79 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
were producer or cultivators. On perusal of Rule 6DD, specific

Circular for animal husbandry and in the absence of any such
conditions in case of agricultural produce and failure of the
assessing officer to bring the relevant provision or rule
requiring collection of evidences regarding sellers on record, I
agree with the contention of the appellant that there is no
specific requirement under the Income-tax Act or Rules to
collect any evidences regarding the sellers in case of
agricultural produce and furnishing of documentary evidence to
show that paddy was purchased through Form No. 6 of Mandi
Samiti would suffice as evidence to show that the appellant had
purchased agricultural produce from cultivator, grower or
producer of paddy.
73. Further, on perusal of the Mandi Samiti Act and rules, it

was observed that these did not require the buyer to obtain any
evidence from the seller for his verification as producer /
farmer. On perusal of section 2(p) of the Mandi Act and Rule
131 of the Mandi Rules, it was observed that the Director of the
Mandi shall make enquiries from the Tehsildar regarding the
produce/ (as to whether he cultivates the land himself or
engaged in producing agriculture produce or carrying on
business as trader etc) to determine his status on receipt of a
complaint in this behalf. Thus, it is evident from the provisions
of Mandi Act that the appellant or the Mandi officials were not
required to obtain all these documents at the time of
transactions in the Mandi because then the Director would not
need to make such inquiries from the Tehsildar but there would
be a provision to verify the documents held by the Mandi Samiti
80 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
or the buyer. This shows that the appellant was not required to
obtain any documentary evidences regarding land area,
cultivation etc. about the seller even under the provisions of
Mandi Act.
74. In view of discussion above, it is observed that the

assessee is not required to collect any evidence from the seller
to show that he is a farmer or producer once paddy has been
purchased through Form No. 6. The status of the seller as
farmer or trader is determined by the Mandi Samiti at the time
of his entry and the assessee undertakes transactions on the
basis of said determination. It is also clear from the provisions
of Mandi Act that the authority to decide whether the seller is a
farmer or not is solely in the domain of Director of the Mandi
Samiti as per the relevant Act and not the Assessing Officer. It
is also a settled law that when an authority has been designated
for the purpose, then none else can decide the said issue. The
assessing officer has not brought on record any case where any
person claimed as farmer by the assessee has been declared
otherwise by the Director of Mandi Samiti. In the absence of the
any such adjudication, no adverse cognizance can be taken and
the sellers declared as farmers by the assessee and confirmed
by the Mandi Samiti officials has to be considered as conclusive
proof of the fact that the purchases were made from farmers.
75. The ld. CIT(A) deleted the addition made u/s 40A(3)
considering the various judgments including PCIT Vs
Keerthi Agro Mills (P.) Ltd. [2018] 95 taxmann.com 282 (SC)
and CIT Vs Sunil Kumar Agrawal [2013] 38 taxmann.com 386
81 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
(Allahabad) have upheld applicability of Rule 6DD of Income Tax

Rules for purchase of paddy.
76. Principle of consistency is applicable considering the fact

that the case of the appellant was completed u/s 143(3) of
Income Tax Act in earlier years prior to search where similar
cash purchases had been made but no disallowance was made.
Even in assessment order u/s 143(3) for A.Y.2017-18, similar
cash purchases have been accepted by the Assessing Officer. In
view of Mandi Samiti rules, all agricultural produce sold through
Form No.6 constituted sale from producers and appellant was
entitled to exception to Section 40A(3) provided in Rule 6DD(e)
of Income Tax Rules.
77. Before us, the ld. DR relied on the Assessment Order and
the ld. AR relied on the order of the ld. CIT(A).
78. Heard the arguments of both the parties and perused the
material available on record.
79. Taking into consideration, the undisputed fact of purchases

being made from Mandi Samiti, provisions of Mandi Samiti Act,
1964, provisions of Rule 6DD, Circular No. 8 of 2006 of CBDT
and the judgments of various Hon’ble High Courts on the issue
of disallowance u/s 40A(3), applicability of the provisions of
Rules 6DD for purchase of paddy, we decline to interfere with
the order of the ld. CIT(A) on this issue.
80. The appeals of the Revenue on this ground for the A.Y.
2014-15, A.Y. 2015-16 and A.Y. 2016-17 stands dismissed.
82 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.

Restriction of addition of Rs.31.06 Crores to Rs.2.05
Crores:
81. The assessee challenged the addition of Rs.31,06,44,235/-

as unexplained credits on the basis of seized material. The facts
of the case are that a cash book for the period from 31.12.2015
to 31.03.2016 was found and seized as Annexure A-2 from the
Lahori Gate Office of the appellant. The assessee was asked to
explain whether the transactions mentioned in the cash book
were recorded in the regular books of accounts of the assessee.
The assessee filed a reply and a chart which is reiterated at 93-
95 of the assessment order. It was found that some of the
entries were verifiable from the cash book of the appellant but
certain other entries under the category “I owe you” were not
found recorded in the cash book. The credit of the said amount
was Rs.30,53,58,167/- and the debit side was short by
Rs.52,86,068/- and thus, an addition of Rs.31,06,44,235/- was
made.
82. A copy of the said Annexure A-2 along with the chart
explaining the transaction placed on record is reproduced
below:
83 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
84 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
83. It was submitted by the appellant that this cash book was
maintained by one Mr. Shyam Lal who was not an employee of
the appellant therefore, there could be many transactions which
could not pertain to the appellant.
84. The appellant submitted that ‘I owe you’ is never recorded

in the books of account in the business circle. It is an amount
given to an employee or connected person as imprest for short
period for expenses to be incurred by him for the appellant.
Many times, no expenses are incurred for which the money and
amounts are refunded but whenever expenses are incurred
against the ‘I owe you’, those are directly recorded in the cash
85 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
book and I owe you slip is tom or cancelled and taken out from
the cash box. The appellant also submitted that as per the
chart, the balance as per cash book was always higher and
sufficient to meet the all the ‘I owe you’ and there was never
any short fall in the funds to meet the expenses. The appellant
further submitted that even if any addition to be made, it
should be of the peak cash balance and benefit of telescoping
should be allowed.
85. The ld. CIT(A) has perused the seized cash book and the
chart placed on record and held that some entries were found
recorded in the regular books of account whereas some entries
were not. It was held that the said cash book is not part of
regular books of account but contained some undisclosed and
unrecorded transactions of cash receipts and payments. Since
the source of the said receipts and payment has not been
explained by the assessee during the assessment proceedings or
the appellate proceedings, the same cannot be considered as
explained and are held as undisclosed income of the appellant.
However, the assessing officer has made addition for the entire
amount received by the appellant without giving any benefit of
telescoping for the payments made. The seized day book was
maintained by one person i.e. Shyam Lal and it contained
transactions from 01.01.2016 to 31.03.2016. Since there are
regular cash deposits and withdrawals during the period, it is
logical to conclude that withdrawals were available for
subsequent deposits.
86 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
86. Hence, benefit of telescoping has to be allowed for

undisclosed cash receipts and cash payments and addition can
be made only for the peak balance. The assessee was asked by
the Ld.CIT(A) to submit the working of the peak balance. The
appellant submitted peak balance of cash as per the said chart
was computed at Rs. 1,67,95,639/-. However, from perusal of
above chart, Ld. CIT(A) held that highest peak cumulative
balance on 22.02.2016 was Rs.2,05,94,826/-. Hence,
addition on account of peak balance of Rs. 2,05,94,826/-
was confirmed and balance addition of Rs.29,00,49,409/-
was deleted.
A.Y. 2016-17: (Assessee’s Appeal): Ground No. 4
87. The has assessee filed appeal before the Tribunal

against the confirmation of Rs.2,05,94,826/-
89. Heard the arguments of both the parties and perused the
material available on record.
90. We have perused the paper book page nos. 571 to 628
consisting of details pertaining to Cash Book – Ghaziabad Plant
with reconciliation of cash-in-hand, Cash Book – H.O. with
reconciliation of cash-in-hand, Cash Book – Alipur plant with
reconciliation of cash-in-hand, unpaid dividend, other non
operating income, farmers purchases of paddy through bearer
cheque/cash (in excess of Rs.20,000/- for each transaction),
account statement of KRBL (amalgamated company), additional
depreciation u/s 32(1)(iia) and reconciliation of income/TDS as
per Form 26AS.
87 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
91. Further, at page no. 651 to 683 of the Paper Book Vol.-II,
the details pertaining to copy of cash book of assessee
maintained at head office at C-32, Sector-62, Noida-201301
from 31.12.2015 to 31.03.2016, copy of ledger a/c and voucher
of Shri Arun Kumar Gupta in the books of Khushi Ram Behari
Lal, copy of voucher of cash deposited and relevant page of
bank statement of HDFC bank of Khushi Ram Behari Lal, Details
of cash withdrawal from banks by Shri Anil Kumar Mittal & Shri
Arun Kumar Gupta alognwith the relevant pages of bank
statement and copy of voucher of cash deposited and relevant
page of bank statement of HDFC bank of KRBL Foods Ltd.
92. The assessee submitted that peak balance of the cash as

per the chart would be Rs.1.67 Crores. The ld. CIT(A) observed
that the peak cumulative balance was Rs.2.05 Crores. While the
remission of Rs.29.00 crores is not being interfered by us, we
deem it proper to remand the matter to the file of the Assessing
Officer for the purpose of re-computation and determine the
peak balance.

Difference between Purchase/sale-Bogus Bills:
93. The Assessing Officer made an addition of Rs.

49,72,24,635/- for A.Y. 2014-15, Rs. 31,36,47,795/- for A.Y.
2015-16, Rs. 36,54,70,992/- for A.Y. 2016-17 on account of
commission paid to the parties for arranging bogus purchase/
88 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
sale bills of rice. On perusal of the Annexures A1-A3, it was

observed that these registers contain the detail of the arrival of
rice in the factory. On the basis of examination of these
registers, the assessing officer became suspicious for certain
arrivals as the entries were with different handwriting and their
particulars were written in a different way. Further, bills of
Aastha overseas were found during the course of search which
did not contain transport bill, dharamkanta parchi and fake
truck numbers were mentioned thereon. The AO held that these
seized material indicated that the appellant was involved in
some bogus purchases / sale. The JMD of the appellant company
and VP (accounts) could not explain the nature of these
documents and the discrepancy therein. Though the
transactions mentioned in these registers were recorded in the
books of account but the seized material along with post search
inquiries clearly revealed the true nature of transaction that the
purchases from these parties were nothing but accommodation
bills. Thus, it cannot be said that 110 incriminating material
was found during the course of search. The post search
enquiries were undertaken to collect more evidences to prove
that these bills were bogus bills. These parties stated in their
statements recorded during the course of survey proceedings
that they were engaged in giving bogus bills and thus the fact
that the appellant was making bogus purchases stood
established.
94. The AO held that the purchases / sales transactions were

made by the appellant from these parties and thus the onus was
on the appellant to prove the genuineness of the purchase and
89 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
sale from these parties. The appellant submitted various

evidences like bills, PAN, VAT particulars of these parties and
showed that all the transactions were undertaken through
banking channel.
95. The AO held that the cases where the statement of the
parties have been recorded by the department where they have
accepted that they were not doing genuine business
transactions and copies of the same were provided to the
appellant for rebuttal and the cases where the Assessing Officer
has issued notices u/s 133(6) of the Act and the same were
either not served and returned back or were not complied with
and the same was confronted with the appellant, then the onus
cannot be said to be discharged merely on the submission of
such evidences which can be given by paper entities as no
entity can carry out the even the accommodation transactions
without PAN, VAT registration and bank account.
96. The ld. CIT(A) while confirming the addition made by the
AO held as under:
“5.4.64 As regards the statement of other parties, it is

submitted that even if no cognizance is given to their
statements and the same are ignored for the purpose of
assessment, even then it is a fact that the notices u/s 133(6) of
the Act issued to the said parties remained uncomplied with and
the inspector report showed that the said parties were found
non-existent at the given addresses. Once the issue of non-
compliance of notice u/s 133(6) of the Act was brought to the
notice of the appellant then the appellant was duty bound to
90 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
bring confirmations from the parties and produce them before

the assessing officer to prove the authenticity of the
transactions as the onus again shifted on the appellant.
Similarly, when the inspector report was brought to the notice
of the appellant that the companies were found non-existent,
then the onus shifted on the appellant to prove the physical
existence of the said parties. However, the appellant merely
filed replies stating that the inspector report is not reliable or
that the appellant cannot force the parties to comply with the
notices or that the parties may have left or changed their
business premises but did not make any effort to file
confirmations or reply to notices u/s 133(6) of the Act or to
produce any one of them before the assessing officer. Thus, due
to inquiries made in the inspector report and non- compliance of
notices u/s 133(6) of the Act, the onus shifted back on the
assessee which was not discharged by the appellant.
5.4.65 The appellant alleged that the report of the inspector

was false and was prepared in the office of the income-tax
department without visiting any of the premises as nothing
about the enquiries from the neighbourhood, bank, person
available at the time of visit etc. has been mentioned. Every
inspector has its own way of writing the reports and he cannot
be asked to write a report in a particular manner. The appellant
could have produced some parties if not all to substantiate its
allegation that the inspectors did not visit their premises. Thus,
this allegation of the assessee is merely on presumption and
without any basis.
91 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
5.4.66 The assessing officer has made detailed enquiries

into the transactions of the appellant and how the money has
been routed in case of transactions with these 36 parties. On
perusal of the ledger accounts of various parties mentioned in
the assessment order, the flow of funds from the appellant to
these parties and then transferring back to the appellant
through layering of funds was clearly apparent. The appellant
did not bring any evidence on record to rebut that the said
amount was not received back by it.
5.4.67 The appellant submitted that transport department

have not uploaded complete and correct information and further
enquiries from the transport authority and owners of vehicles
should have been made and no adverse cognizance can be taken
for the fake truck number. What enquiries are to be conducted
is the prerogative of the assessing officer who conducted
enquiries through the official website of transport department
and found the truck numbers to be fake. The appellant did not
bring any evidence to controvert the allegation of the assessing
officer. The appellant made mere allegation that the information
on the website is not correct and complete that too without
producing a single evidence to show how this vague
presumption has been drawn. The fake number of trucks on the
bills proves that the said goods have actually not been
transported and the truck numbers have been mentioned to
fulfill the particulars in the bills. The appellant could not explain
the reason beyond the fake truck numbers during the course of
search as well as during the appellate proceedings but made
submissions merely on presumptions.
92 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
5.4.68 The appellant argued that the bogus purchases are of

two categories and the case of the assessee falls in the
category where the actual purchases have been made from one
party but the bills are provided by the other party and even in
that case no addition should be made in the hands of the
appellant as the appellant has undertaken the transactions on
the prevalent market price and declared high gross profit on
these transactions. This shows that the appellant has itself
accepted this fact that these 36 parties gave only bills on
commission basis and goods were not actually purchased from
them. If this is the case, then requisite addition is required to
be made in the hands of the appellant.
5.4.69 In view of the above facts, it is established that

appellant booked bogus sale / purchase transaction with these
said 36 parties to claim non-genuine loss and to set off profit
and reduce payment of taxes. The assessing officer has made
addition for the excess of purchases over sales and no addition
has been made where the sale value was more than purchases.
Thus, the assessing officer has correctly made the addition only
in those years where more bogus purchases were made to book
loss.
5.4.70 Broadly, the following evidences were collected by

the Department to show that the appellant was making bogus
purchases:
(i) Statement on oath of Shri Arun Gupta, JMD of M/s

KRBL Ltd., recorded u/s 132(4) of Income Tax Act in
which he could not explain about the reason as to how
93 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
a firm M/s Aastha Overseas with which M/s KRBL Ltd is

doing business doesn’t exist at the address. He was
confronted with the fake/bogus truck numbers (verified
from govt., portal “VAAHAN” and Haryana Govt.’s
website https://haryanatransport.gov.in
/SRReports/vahan/report/jsp/ SearchDetails.jsp)
written on some of the bills issued by M/s Aastha
Overseas such as Page 30 of Annexure A-6 seized from
KRBL Ltd’s corporate office (Premise Code-K02). He
was again evasive and said that he had nothing to say.
(ii) Statement of Sh. Vipul Goel, VP(Accounts) of KRBL Ltd.

was also recorded u/s 132(4) of I T Act, 1961. Sh.
Vipul Goel stated that in case of purchases from
suppliers transporters LR or GR may not be available
with the bills. However, transporters details, truck
numbers are mentioned on the bills. In case of FOR
purchases, transporters LR/GR may be missing. When
he was confronted with the fact that truck number
written on many bills were found to be fake/non-
genuine on being verified from the official application
of transport dept. “VAHAN”, he said that he has no
knowledge about it.
(iii) Statement on oath of Sh. Dinesh Jain and Shri Rajpal

Sharma
(iv) Statement on oath of Sh. Vijay Kumar, Sh. Amit Goel,

Sh. Vinod Kumar Goel, Sh. Yogender Kumar, Sh.
94 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
Manoj Kumar, Sh. Tejpal, Sh. Vikas Bansal, Sh. Rajesh

Kumar and Sh. Data Ram
(v) Funds of some firms being routed back to the appellant
(vi) Non compliance to notices u/s 133(6) notices
(vii) Inspectors report stating parties were non-existent at

the given addresses
5.4.71 The above evidences were duly confronted to the

appellant. In view of above evidences, onus had shifted to the
appellant to prove that the purchases from 36 parties were
genuine. The appellant has failed to discharge this onus. Hence,
addition of Rs. 49,72,24,635/- for A.Y. 2014-15, Rs.
31,36,47,795/- for A.Y. 2015-16, Rs. 36,54,70,992/- for A.Y.
2016-17 on account of non- genuine losses as well as
commission paid to the parties for arranging bogus purchase/
sale bills of rice is hereby confirmed and Ground No. 3 for A.Y.
2014-15 to 2016-17 are dismissed.
97. Aggrieved the assessee filed appeal before us.
98. During the arguments before us, the ld. AR argued mainly
on three legal points and relied on various judicial
pronouncements.
99. The first being, Books of accounts have been accepted as

correct and complete then purchases cannot be disallowed.
 CIT vs. Paradise Holidays: 325 ITR 13 (Del)

95 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
 Pr. CIT vs. Santha Build-Tech India Pvt. Ltd.: TCA Nos.
161 to 164 of 2017 (Madras HC)
 ACIT vs. Ravi Agricultural Industries: 117 ITD 338 (Agra)
100. The second being, where sales in quantity and value have
been accepted, corresponding purchase could not be disallowed.
 Ashok Nanda vs. DCIT: 54 ITR(T) 54 (Indore Trib.)
 ACIT vs. Mahesh Shah: 184 TTJ 702 (Mum)
 Ganesh Dass Piara Lai Jain vs. ITO: 49 ITR(T)
 Fancy Wear vs. ITO: 194 TTJ 125 (Mum)
 ITO vs. Pushpal Kumar Das: ITA No. 1442/Kol./2012
101. The third argument being, transactions with parties cannot

be doubted and adjustment thereof cannot be made to the
income of the assessee, merely because the parties fail to
appear or respond to notices issued by the Assessing Officer.
 CIT vs. Fancy International: 166 Taxman 183 (Delhi)

 CIT vs. Nikunj Eximpt Enterprises P Ltd: ITA No.5604 of
2010 (Bombay HC)
 M/s Lalsons Jewellers Ltd vs. ACIT: ITA No.5726/Del/2010
(Del Trib.)
 M/s Lalsons Jewellers Ltd vs. ACIT: ITA No.5241/Del/2004
(Del Trib.)
102. Further, the assessee submitted details of sales and

purchase which are as under:
96 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
97 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
98 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
99 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
103. As per the table reproduced above, page no. 827, the total
weight as per the books was 3,56,194 Quintals amounting to
Rs.109,45,62,503/- which tallies with the chart prepared by the
Income Tax Department and there is no difference between the
purchases as per the books and as per material before the
revenue.
104. Page no. 828, the total weight as per the books was 7931
Quintals amounting to Rs.1,86,30,839/- which tallies with the
chart prepared by the Income Tax Department on gross terms
and there is no difference between the purchases as per the
books and as per material before the revenue.
105. Further, page no. 829, the total weight as per the books
was 298 Quintals amounting to Rs.10,43,561/-.
106. Similarly, page nos. 830 & 831, the total weight as per the
books was 337899 Quintals amounting to Rs.96,64,94,516/-
which tallies with the chart prepared by the Income Tax
Department on gross terms and there is no difference between
the purchases as per the books and as per material before the
revenue.
107. Since, there is no qualitative, quantitative difference or

any difference in the value of the sales & purchases, no addition
is called for on this account.
Stock Difference:
108. Vide ground no. 4, the assessee has contended that the
Assessing Officer making an addition of Rs. 2,07,72,796/- on
100 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
account of stock difference in rice where there was no

difference as explained during the course of assessment
proceedings that the same was on account of estimated
counting of rice stocks at some locations by the revenue
officials. Thus, the addition must be deleted.
109. The submission of the assessee before the revenue

authorities is as under:
“2. The fourth ground of appeal is to challenge the addition of

Rs 2,07,72,796/- made on account of value of alleged extra
stock of rice found at the time of search on 6 locations of the
appellant, rejecting the explanation given as per the
assessment order mentioned in para 7.2, 7.3 and 7.4 alongwith
a reconciliation of stocks available as per the books of account
and physically inventorized at the time of search. The Assessing
Officer ignored that at the time of search the assessee had
3,32,339 metric tons i.e. 33,23,390 quintals of rice as per
books of account duly mentioned in its audited books of account
us on 31.03.2016 when the search was continuing. This
quantity’ was equivalent to 33,200 truck load and could not be
actually physically verified in such a short period. Further, as
per the said balance sheet, the assessee handled a total
quantity of 9,24,081 metric tons i.e. 92,40,810 quintals during
the relevant period as is mentioned in its audited balance sheet.
A photocopy of the Annexure XV part of the tax audit report for
the relevant period showing quantitative details of the quantity
Imndled Juis heen, placed at page no. 5351 of the common
paper book. Thus, as per an established fact, the weight of any
101 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
agricultural produce increases or decreases seasonally due to

dampness / dryness etc. even if there is no pilferage or theft /
consumption by the labour. Further, it is physically impossible
to weigh the actual quantity lying at a particular place in a day
or two without putting each rice bag on the weighing scale as
quantity in each bag varies but which at the time of receipt /
recording in the books of account is based on actual
measurement on scales. The entire stock is maintained on SAP
with full control for inwards and outwards. Any laxity therein
will doom the company as the workers /staff will loot the same
as the management is not there. The difference was because
the Revenue Officials estimated the physical quantity of rice
without any actual measurement. Further, the assessee also
submitted that the excess stock found varied from 300 quintals
to 2,400 quintals at a site. In fact, on perusal of the chart in
the assessment order, it would be seen that the quantity of rice
available in those premises was 5,50,358 quintals in which an
excess stock of 6,180 quintals was determined which is little
over 1%. The books of account of the assessee have not been
rejected. No evidence of any purchases outside the regular
books of account was found from any premises at the time of
search so as to suggest that unaccounted stock could be there
in any manner. The assessee has valued its closing stock on the
basis of quantity available in its stocks. The value of rice
including stock as on 31.03.2016 as per the balance sheet of
the assessee was Rs 995,52,85,000/- (almost Rs 1000 crores)
and the impugned difference is just 0.20%. The difference is
only due to human error in estimating the quantity which was in
the said 6 locations almost 5,500 trucks of 100 quintals each.
102 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
Admittedly, no actual weighment was undertaken by the

Revenue Officers. Thus, the addition of Rs 1,88,14,912/- made
on this account on surmises should be deleted.
4.1 Further, the Assessing Officer made another addition of Rs

19,57,884/- alleging undisclosed gross profit on quantity of rice
valued at Rs 84,28,258/- which was allegedly found short in
other locations. The appellant submitted that this shortage was
due to estimation and partly due to evaporation in sorting etc.
which is accounted at the yearend in the books of account. No
evidence was found at the time of search of any sale of rice
outside books of account. On perusal of the said chart in the
assessment order it would be seen that the quantity of rice as
per the books was 16,60,622 quintals and the percentage of
shortage is negligible at 0.167%. The quantity in stock was
almost 16,240 trucks and it could not be physically measured by
the Revenue Officers. Thus, the said addition has to be deleted.
Presuming but without admitting that the figures of the Revenue
are correct then telescoping has to be made for the extra stock
found against the shortage and the addition could only be made
for the net quantity found excess.”
110. As per the revenue a total quantity of 6,180.98 quintals of

rice was found excess and therefore the addition of Rs.
1,88,14,912/ was made by applying the rate of Rs. 3,044/- per
quintal. As regards the quantity of 2,768.81 quintals of rice
found short, the addition of Rs. 19,57,884/- was made @
23.23% being the gross profit shown by the assessee. Thus,
total addition of Rs. 2,07,72,796/- was made.
103 ITA Nos.1196 to 1202/Del/2020 &
ITA Nos.1338 to 1344/Del/2020
KRBL Ltd.
111. We find that the assessee has handled a total quantity of

92,40,810 Quintals and had 33,23,290 Quintals as on
31.03.2016 which is equal to approximately 33,200 truck loads.
The excess stock of 6,180 Quintals of excess stock is just little
over 1% of the total quantity at the premises. Similarly, the
shortage of quantity of 2,768 Quintals was 0.16% of 16,60,600
Quintals of the rice as per the books. While dealing with such
high volume, there could be error of computation of
quintals/sacks/bags of price. It is also an undisputed fact that
no actual weighment was undertaken during the process of
stock taking at the time of search. Hence, keeping in view the
peculiar facts of the business of the instant case, we hold that
no addition on account of stock difference is called for.
112. In the result, the appeal of the assessee on this ground is

allowed.
113. In the result, the appeals of the assessee are allowed and
the appeals of the Revenue are dismissed.
Order Pronounced in the Open Court on 09/05/2022.
Sd/- Sd/-
(A.D. Jain) (Dr. B. R. R. Kumar)
Vice President Accountant Member
Dated: 09/05/2022
*Subodh Kumar, Sr. PS*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR

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IN THE INCOME TAX APPELLATE TRIBUNAL

DELHI BENCH ‘C’, NEW DELHI

ITA No. 1338/Del/2020 : Asstt. Year: 2010-11

Assessee by : Sh. Ajay Vohra, Sr. Adv.,

2. In ITA No.1196/Del/2020, the assessee has raised

1.1 On the facts and circumstances of the case and in

1.2 On the facts and circumstances of the case and

Ground 2: No incriminating material was unearthed

2.1 On the facts and circumstance of the case and in

during the course of search operations at Appellant’s

2.2 On the facts and circumstances of the case and

Ground 3: Impugned addition of INR 4,76,843/- on

3.1 On the facts and circumstance of the case and

3.2 On facts and circumstances of the case and in

letters were used against the Appellant, even after

Ground 4: Addition of INR 15,15,74,668/- in respect

4.1 On the facts and circumstance of the case and

4.2 On facts and circumstances of the case and in

4.3 On the facts and circumstance of the case and

4.4 On the facts and circumstance of the case and

and certain overseas entities and between Appellant

4.5 On the facts and circumstance of the case and

4.6 Without prejudice to the above, even for the

Ground 5: The impugned order passed by the Ld.AO is

5.1 On the facts and circumstance of the case and

Ground 6: Levy of interest under section 234A of the

6.1 That on the facts and circumstance of the case

3. In ITA No.1197/Del/2020, the assessee has raised

1.1 On the facts and circumstances of the case and in

1.2 On the facts and circumstances of the case and

Ground 2: No incriminating material was unearthed

2.1 On the facts and circumstance of the case and in

no incriminating material/ information was unearthed

2.2 On the facts and circumstances of the case and

Ground 3: Impugned addition of INR 29,98,74,335/-

3.1 On the facts and circumstance of the case and

3.2 On facts and circumstances of the case and in

examination of the witnesses whose statements/

Ground 4: The impugned order passed by the Ld.AO is

4.1 On the facts and circumstance of the case and

Ground 5: Levy of interest under section 234A of the

5.1 That on the facts and circumstance of the case

4. In ITA No.1198/Del/2020, the assessee has raised

1.1 On the facts and circumstances of the case and in

the Learned Deputy Commissioner of Income Tax,

1.2 On the facts and circumstances of the case and

Ground 2: No incriminating material was unearthed

2.1 On the facts and circumstance of the case and in

2.2 On the facts and circumstances of the case and

Ground 3: Impugned addition of INR 5,27,159/- on

ungenuine/bogus transactions and commission paid to

3.1 On the facts and circumstance of the case and

3.2 On facts and circumstances of the case and in

Ground 4: The impugned order passed by the Ld.AO is

4.1 On the facts and circumstance of the case and

Ground 5: Levy of interest under section 234A of the

5.1 That on the facts and circumstance of the case

5. In ITA No.1199/Del/2020, the assessee has raised

1.1 On the facts and circumstances of the case and in