Documentary Evidence Overrides ‘Human Probabilities’ in Rs. 27.20 Crore Purchase Dispute: ITAT

The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that documentary evidence overrides ‘human probabilities’ in Rs. 27.20 crore purchase dispute. The bench of Vimal Kumar (Judicial Member) and S. Rifaur Rahman (Accountant Member) has upheld the deletion of Rs. 27.20 crore addition made on account of alleged bogus and inflated purchases from a Hong Kong-based entity, while also addressing objections relating to approval under Section 153D of the Income Tax Act. The appellant/assessee, Panacea Biotec Limited, had originally filed its return for AY 2005-06 declaring income of ₹17.57 crore. The case was later reopened under Section 148 on the allegation that purchases made from M/s Central Plus Overseas Ltd., Hong Kong, were not genuine. The Assessing Officer (AO) ultimately made an addition of ₹27.20 crore for AY 2005-06, treating the purchases as bogus and unaccounted. Similar additions were made for subsequent years. The AO’s case was based on multiple factors, including alleged non-existence of Central Plus Overseas in Hong Kong, direct shipment of goods from the Indonesian manufacturer to India, stock records mentioning only the manufacturer, mismatch in customs documentation chronology, delay in payments without interest, and non-production of the core agreement with the intermediary. The department argued that the intermediary was a sham entity introduced to inflate purchase costs and siphon profits. On appeal, the Commissioner of Income Tax (Appeals) deleted the additions, holding that the purchases were genuine and supported by documentary evidence. The CIT(A) recorded that the assessee had been procuring vaccines through Central Plus Overseas since 2001. Customs documentation discrepancies were satisfactorily explained, particularly considering the perishable nature of vaccines transported in cold-chain conditions. Advance filing of bills of entry was permissible under customs law to ensure immediate clearance. A remand report confirmed that the Indonesian manufacturer, PT Bio Farma, exported goods to Central Plus Overseas, with delivery made to the assessee. Purchases from the same entity had been accepted in earlier assessment years under Section 143(3), invoking the principle of consistency. The appellate authority concluded that the AO’s conclusions were based on suspicion and cumulative inference rather than concrete evidence disproving the genuineness of the transactions. The Department contended that the transaction failed the “test of human probabilities” and represented a colourable device. It argued that mere existence of customs documents or banking transactions could not override commercial improbability and lack of corporate substance in the intermediary. The department placed reliance on official communications obtained through FT&TR channels indicating that the Hong Kong entity was not traceable at its registered address. The assessee, while supporting the CIT(A)’s order, raised additional grounds under Rule 27 of the ITAT Rules, challenging the absence of incriminating material for concluded years under Section 153A. The validity of approval under Section 153D, alleging that a common approval for multiple years was mechanical and without application of mind. The department opposed the admission of these grounds, arguing that they were neither raised before nor decided by the CIT(A), and therefore barred under Rule 27. The Tribunal examined the rival submissions and noted that the CIT(A) had granted relief after detailed examination of documentary evidence and remand reports. The department failed to produce conclusive material to dislodge the factual findings recorded by the first appellate authority. The burden to prove that the transactions were sham lay with the Department once primary documentation was produced by the assessee. On the issue of Section 153D approval, the Tribunal considered the legal position that the approval must reflect application of mind. It referred to recent coordinate bench rulings dealing with similar challenges. The Tribunal emphasized that Rule 27 permits a respondent to support the order appealed against on grounds decided against it. The maintainability of additional grounds depends on whether they were raised and adjudicated earlier. Case Details Case Title: DCIT Versus M/s Panacea Boitec Limited Citation: JURISHOUR-220-ITA-2026(Del) Case No.: ITA Nos.5615 to 5622/Del/2015 Date: 27.02.2026 Counsel For Appellant: Salil Agarwal, Adv. Counsel For Respondent: Monika Singh, CIT-DR Click Here To Read Order Read More: Centre Expands Mandatory Gold Hallmarking to More Districts; Issues 2026 Amendment Order

Documentary Evidence Overrides ‘Human Probabilities’ in Rs. 27.20 Crore Purchase Dispute: ITAT

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