Delhi ITAT Deletes ₹175.03 Crore Tax Addition, Holds Livestock Supplier's Deals With HMA Agro Genuine

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed the Revenue's appeals and upheld deletion of a protective addition of Rs.175.03 crore and an estimated commission addition of about Rs.1.75 crore made against a livestock supplier on allegations of providing accommodation entries to HMA Agro Industries Ltd.

The Bench of Judicial Member Vimal Kumar and Accountant Member S. Rifaur Rahman held that once the transactions were found to be genuine business transactions, the additions could not be sustained.

The case arose from search and post-search proceedings in the HMA group. The Assessing Officer alleged that the assessee, an individual engaged in supplying she-buffaloes, was not carrying on genuine business activity but was providing accommodation entries in the form of bogus purchases.

On that basis, total bank credits of Rs. 175.03 crore were treated as unexplained under Section 68 on a protective basis in the hands of the assessee. Substantive addition was proposed in the hands of HMA Agro Industries Ltd. The Assessing Officer also estimated commission income at 1 percent of total credits.

The Commissioner of Income Tax (Appeals), Kanpur-4, by order dated March 25, 2025, deleted the protective addition of ₹175.03 crore and the commission addition of approximately Rs. 1.75 crore. The Revenue challenged that order before the Tribunal.

The Tribunal noted that in HMA Agro's case, the appellate authority had deleted the substantive addition of ₹109.94 crore for AY 2019-20. It further recorded that no substantive addition had ultimately survived on the allegation of bogus purchases.

Examining the record, the tribunal observed that the assessee supplied livestock based on indents raised by HMA Agro and received trade advances. Statements were recorded during search proceedings and the transactions were examined in detail.

The Bench held, "The transactions were cross verified with HMA Agro Industries Ltd. books of account and therefore, the transactions cannot be treated as accommodation entries.”

The tribunal also noted that no material had been brought on record to establish that cash withdrawn by the assessee was handed back to HMA Agro. It agreed that the protective addition had been made without there being any substantive addition in the hands of HMA Agro and also recorded independent findings that the transactions were genuine.

On the 1 percent commission addition, the tribunal found that the assessee had already declared commission income in his audited books and that the commission payments matched HMA Agro's books.

Rejecting the ad hoc estimation, the Bench observed: “the estimation of income without there being any basis at estimating the commission at the rate of 1% are not justified.” It added that the assessing officer should have undertaken a comparative analysis before estimating income at 1 percent of total credits.

Finding no infirmity in the order of the Commissioner (Appeals), the tribunal dismissed the Revenue's appeals for both assessment years.