Bogus Rice Mill Purchase Additions Linked to VAT Non‑Payment: ITAT Remands ₹72.78 Lakh Case Pending HC Outcome [Read Order]

In a recent ruling, the Income Tax Appellate Tribunal (ITAT), Raipur Bench, has sent back a ₹72.78‑lakh addition case involving alleged bogus rice mill purchases linked to unpaid Value Added Tax (VAT) for fresh consideration. The Tribunal observed that the issue, part of a wider investigation into rice millers’ fictitious purchase bills, is already pending before the Chhattisgarh High Court.

The appellant Vinod Kumar Agarwal, who manufactures and sells rice and its by-products and also trades in iron and steel, had reported purchases worth ₹3.04 crore during the assessment year 2011–12. The Income Tax Department, acting on information from the Commercial Tax Department, found that no VAT had been paid on goods worth ₹2.91 crore and that several suppliers were non-existent at their registered addresses.

The Assessing Officer (AO) treated 25% of these purchases, ₹72.78 lakh, as bogus and added it to Agrawal’s taxable income.

On appeal, the CIT(A)/NFAC reduced the addition, applying a profit rate of 4.95% on the disputed purchases, restricting the addition to ₹14.41 lakh and deleting the balance ₹58.37 lakh. Both the assessee and the Revenue challenged this order before the Tribunal.

During the hearing, the Bench noted that the issue of bogus purchase bills by rice millers was already under judicial scrutiny before the Chhattisgarh High Court, with several similar cases pending, including Keshari Rice Industries, Kishore Kumar Panjwani, and Gurunanak Rice Industries. In light of judicial consistency, both parties agreed that the matter should be remanded.

Citing its earlier rulings in Shankar Rice Mill v. ITO, Mahasamund and Vinod Kumar Agrawal v. ITO, Raipur (A.Y. 2016–17), the Tribunal observed that it would be inappropriate to adjudicate the merits while the broader issue remained sub judice.

The bench, judicial member Partha Sarathi Choudhary and accountant member Avdhesh Kumar Mishra noted that “on same parity of reasoning and while maintaining rule of consistency as per similar terms, we set aside the order of the Ld. CIT(Appeals)/NFAC and remand the matters back to its file with similar direction as recorded in ITA No.628/RPR/2025 (supra)”.

Accordingly,l the appeals of both the assessee and the Revenue, along with the cross-objection, were allowed for statistical purposes.

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