Shubha Prakash Vs ITO (ITAT Bangalore)
No PAN of Farmers? No Problem: ITAT Deletes Ad Hoc Addition on Agricultural Commodity Purchases
The Bangalore ITAT deleted the addition sustained on alleged non-genuine purchases, holding that mere non-availability of PAN of agriculturists cannot justify an ad hoc disallowance when the purchases are recorded in audited books, quantitatively reconciled with sales, and supported by purchase bills. The Tribunal observed that Section 69C cannot be invoked merely on suspicion without demonstrating that the purchases were actually bogus.
The assessee, engaged in the business of trading in copra through the APMC market, had recorded purchases of about ₹30 crore, of which approximately ₹1.39 crore represented purchases made directly from farmers and agriculturists who did not possess PAN. The Assessing Officer treated these purchases as unverifiable and made an ad hoc addition of 20% of such purchases (₹27.73 lakh) under Section 69C. The CIT(A) reduced the disallowance to 12.5% (₹17.33 lakh).
Before the Tribunal, the assessee demonstrated that the books of account were duly audited, quantitative details of purchases and sales were maintained, stock records were available, and the purchases were fully reconciled with corresponding sales. The Revenue did not dispute the quantitative records, sales turnover, stock position, or authenticity of the books. Its only objection was that PAN details of certain agriculturists were not available.
The Tribunal held that the Revenue had neither examined individual purchase transactions nor established that any particular purchase was bogus. In such circumstances, making an ad hoc disallowance of 20% or even 12.5% had no legal basis. It further observed that where expenditure is duly recorded in the books and the source of expenditure is disclosed, Section 69C cannot be invoked merely because PAN details of farmers are unavailable. Accordingly, the entire addition of ₹17.33 lakh sustained by the CIT(A) was deleted.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
