Gopal Rice Industries Vs ITO (ITAT Raipur)
The Income Tax Appellate Tribunal (ITAT), Raipur Bench, has partly allowed cross-appeals filed by Gopal Rice Industries and the Income Tax Officer (ITO), significantly modifying an addition made on account of alleged bogus purchases. The Tribunal, in its order dated July 16, 2025, upheld the finding that the purchases were not genuine but directed the Assessing Officer (AO) to restrict the addition to a profit element, rather than the entire purchase value, aligning with a Bombay High Court precedent.
The case pertains to the assessment year 2014-15. Gopal Rice Industries, a firm engaged in the manufacturing of flour and rice, had originally filed its return declaring an income of ₹1,35,190. An initial assessment under Section 143(3) of the Income-tax Act, 1961, completed on August 8, 2016, determined the income at ₹4,35,450.
The matter was reopened under Section 147 of the Act on March 27, 2018, based on information suggesting that the assessee was a beneficiary of bogus purchase bills. The AO identified purchases totaling ₹2,97,75,000 from eight specific parties.
Investigation Uncovers Discrepancies
During reassessment proceedings, the AO attempted to verify these purchases. Notices issued under Section 133(6) to the eight parties were returned unserved. The assessee then provided new addresses, but summons issued under Section 131 to these new addresses also failed to establish contact. The Inspector of the Income Tax Department, Dhamtari, deputed for service, reported that owners were untraceable, rice mills were non-operational for years, or individuals at the addresses denied knowledge of the concerns. For instance, M/s. Eadan Rice Mill was reported non-operational since 2011-12, and individuals at the addresses for Shri Ganpati Paddy, Zin Mata Rice Mill, Shri Krishna Processor, Maa Sharda Processor, Shri Veshno Devi Exim, Shri Samleshwari Foods, and Shri Shyam Trading Company either denied association or stated that the firms were not found.
