DCIT CC 4(2), MUMBAI, MUMBAI vs. SHRI GANESH JAGAJI MODI, MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL“G” BENCH,
MUMBAI
BEFORE SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER
&
SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER
Shri Ganesh Jagaji Modi
115/28 J K Building, Dr. M.G.
Mahimtura
Marg,
3rd
Khumbharwada, Mumbai – 400
004, Maharashtra v/s.
बनाम
Assessing
Officer,
Central
Circle 4(2)
Kautilya
Bhavan,
BKC,
Mumbai
–
400
051,
Maharashtra
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AACPM0690C
Appellant/अपीलाथी
..
Respondent/प्रतिवादी
Deputy
Commissioner of Income Tax, CC – 4(2)
Room
No.
420,
Kautilya
Bhavan, BKC, Mumbai – 400
051, Maharashtra v/s.
बनाम
Shri Ganesh Jagaji Modi
115/28 J K Building, Dr. M.G.
Mahimtura
Marg,
3rd
Khumbharwada,
Mumbai
–
400004, Maharashtra
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AACPM0690C
Appellant/अपीलाथी
..
Respondent/प्रतिवादी

For Assessee :
Dr. Prayag Jha, Advocate
For Revenue :
Shri Swapnil Choudhary, (Sr. DR)

Date of Hearing
06.10.2025
Date of Pronouncement
08.12.2025

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ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai

आदेश / O R D E R

PER PRABHASH SHANKAR [A.M.] :-

The above captioned appeals emanating from the appellate orders of even date in ITA No. 76 and 77/MUM/2025 have been preferred by the assessee and ITA No. 78 and 79/MUM/2025 are cross appeals filed by the Revenue pertaining to assessment orders passed u/s. 143(3) r.w.s 254 of the Income-tax Act, 1961 [hereinafter referred to as “Act”]as passed by the Learned Commissioner of Income-tax, Appeal, CIT(A)-52, Mumbai
[hereinafter referred to as “CIT(A)”] for the Assessment Years 2009-10 and 2010-11.Since the issues involved are common, the facts being identical, barring figurative variations and also that appeals were heard together, they are being taken up for adjudication vide this composite order for the sake of brevity. We take up assessee’s appeal in ITA No.76/Mum/2025
first.

ITA No. 76 /MUM/2025 (AYs 2009-10)

(1) On the facts and in law, the learned CIT(A) erred in sustaining addition of Rs. 27,97,902/- being 12.50% of the alleged bogus purchases, without appreciating the fact that the learned AO passed assessment order without properly following the directions of the Hon ITAT of examining the concerned parties and giving opportunity of cross examination to the assessee.
(2) On the facts and in law and without prejudice to ground no 1
above, the learned CIT(A) erred in restricting addition to 12.50%

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ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai of alleged bogus purchases and not to the extent of overall GP rate at the entity level, which is 4.79% in case of appellant.

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ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai parties and reply was not received in the case of balance three parties.
The AO asked the assessee to produce the above parties for examination but it failed to comply. As the assessee failed to establish the genuineness of the purchases, the assessment was completed making an addition of Peak credit of Rs.2,15,09,510/- determining total income of Rs. 2,34,15,740/-.
4.1
Aggrieved, the assessee filed appeal before ld.CIT(A) following the ratio laid down by certain High Courts and ITAT sustained the addition to the extent of 12.5% of the purchases made as profit element embedded in it. The assessee went in further appeal before the Hon'ble ITAT which vide order no. ITA No. 1968/Mum/2016 dated
08.09.2017 set aside the order passed by the Ld.CIT(A) and remitted the file back to the AO to pass the assessment order afresh after examining the concerned parties and giving opportunity of cross examination to the assessee.
5. Accordingly, in the second round of assessment proceedings, following the above directions of ITAT to allow cross examination, the assessee was granted opportunity to present the case in person or through authorized representative. Summons u/s 131 of the Act to the concerned entry providers in question were also issued. However, none

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ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai of them attended the office and filed any details. The assessee was also asked to produce the parties in person as the purchases were made by him which it failed stating that the parties could not be traced as they might have changed their address. Accordingly, the AO repeated the same additions made earlier by observing that it is a settled position in law that when an expenditure is claimed to have been incurred and debited to the Trading/ profit & loss Account, onus is on the assessee to substantiate and prove the genuineness of the claim and the commercial expediency of incurring such expenditure. Furthermore, the sales tax of the Maharashtra
Government has been involved in detailed investigation in the affairs of the dealers who have been issuing bogus purchase bills and as a result thereof, publically displayed a list of nearly
2000 persons/ dealers on the website of the sales tax department, who had admitted to issuing bogus purchase bills. The assessee even after giving reasonable opportunities had not pointed out or produced any material evidence or fact that could prove the genuineness of the purchases. As the assessee had claimed the expenditure on account of purchases, it had to prove their genuineness of their by way of bilateral acts rebutting the circumstantial evidences going against the assessee..
In the instant case as the assessee failed to do so, the preponderance of probability entirely went against it. Therefore, it was held that the books

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ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai of accounts maintained by the assessee were manipulated and unreliable and accordingly claim of the assessee was rejected and the accommodation entry of Rs 2,23,83,218/- in the net profit declared by the assessee was added to the returned income.
5.1
Aggrieved by the same, the assessee filed appeal before
CIT(A) who observed that in this case vide ITA No. 1968/Mum/2016
and ITA No. 2771/Mum/2016 dated 08.09.2017 the hon'ble ITAT had clearly held that the primary facts had not been produced before the AO during the course of original assessment proceedings. The findings and directions of the ITAT were reproduced herein as under:
“13.1 We find that the assessee had not disclosed the primary facts regarding purchases from the above six parties during the course of original assessment proceedings made u/s 143(3) by the AO on 30.11.2011. The AO had issued notice to the assessee to prove the genuineness of transaction with the above six parties. The assessee filed a reply to it, which has been extracted by the AO at para 5.6 of the assessment order dated 21.03.2014. A copy of the said reply was filed before us which is at page 37-39 of the P/B. A perusal of it indicates that the assessee did not file the details regarding the above six parties before the AO during the course of original assessment proceedings.” After discussing the issue on merit, the Hon'ble ITAT eventually held as under:
14.1 In view of the above position of law, we set aside the order of the Ld.
CIT(A) and restore the matter to the file of the AO to make a fresh assessment after examining the concerned parties and giving opportunity of cross- examination to the assessee. We direct the assessee to file the relevant details before the AO. Needless to say, the AO would give reasonable opportunity of being heard to the assessee before finalizing the assessment order. As we have restored the matter to the file of the AO, we are not adverting to the case-laws referred by the Ld. counsel of the assessee and Ld. DR on the merit of the additions.”

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ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai

ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai

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ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai

Timber Industries Vs. Commissioner of Central Excise, Kolkata-II,
C.A No.4228 of 2006 (SC) dated 02.09.2015. In the aforesaid case, the Tribunal had upheld the rejection by the lower authorities of the assessee's request for allowing a cross-examination of the dealers whose statements were relied upon by the adjudicating authority while passing its order by observing that the plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring out any material which would not be in the possession of the appellant themselves to explain as to why their ex- factory prices remain static. It observed that since we are not upholding and applying the ex -factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioner’s orders. On appeal, the Hon'ble Apex Court was of the view that the failure on the part of the adjudicating authority to allow to the assessee an opportunity to cross- examine the aforementioned persons whose statements were made the very basis of the impugned order was a serious flaw which rendered the order as nullity inasmuch as it amounted to violation of the principles of natural justice. It was observed by the Hon'ble Apex Court that though the assessee had requested for an opportunity to cross-examine the aforementioned persons but the said requests were turned down by the P a g e | 10

ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai adjudicating authority. Considering the fact that the Tribunal had upheld the orders of the lower authorities which had turned down the assessee's request for a cross-examination, the Hon'ble Apex Court held the order of the Tribunal as totally untenable. Referring to the observations of the Tribunal that cross-examination of the persons concerned would not serve any purpose, the Hon'ble Apex Court was of the view that it was not for the Tribunal to have taken recourse to any guess work as to for what purposes would have been served by the assessee appellant by carrying out cross- examination. For the sake of clarity, the observations of the Hon'ble Apex Court are culled out as under:
"We have heard Mr. Kavin Gulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue.
According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating
Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating
Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross examination of the said dealers could not have brought out any material which would not be in P a g e | 11

ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them.
As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross- examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions.
In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice.
We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal."
7.1 Considering the aforesaid judgment of the Hon'ble Apex
Court, we are of the view that the AO remained under a statutory obligation to facilitate cross-examination. The assessee could have dispelled the material that the AO acted upon to disprove the authenticity of the purchase transaction only if it was provided an opportunity to cross-examine the entry providers which had allegedly referred the name of the assessee as a beneficiary of accommodation

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ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai entry. The assessee was vested with a statutory right to dispel the same by seeking cross-examination of the said person, which had wrongly been declined by the A.O. As the very declining of the assessee's request for seeking cross-examination clearly militates against the mandate of law, the adverse inferences as regards the authenticity of the transaction, as had been drawn by the A.O cannot be summarily accepted. Accordingly, in all fairness, the matter requires to be restored to the file of the AO with a direction to facilitate the cross examination of the person/persons on whose statements adverse inferences as regards the authenticity of the purchase transaction in question have been drawn in the case of the assessee.
8. We also find that the assessee did not comply with the direction of the ITAT in producing relevant details so as to prove the genuineness of the purchases. Evidently, the onus in this regard which lies heavily on the assessee has not been discharged.
9. Accordingly, we consider it appropriate to set aside the appellate order and send back the entire matter to the file of the AO to frame de novo assessment after allowing adequate opportunity of hearing to the assessee to prove the genuineness of the impugned purchases. The assessee would also be allowed to cross examine the P a g e | 13

ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai alleged entry providers directly linked to the above named purchasers.
Thus, the grounds of the assessee in this regard are allowed for statistical purposes.
10. ITA No. 77/MUM/2025 (A.Y. 2010-11)
(1) On the facts and in law, the learned CIT(A) erred in sustaining addition of Rs. 33,51,728/- being 12.50% of the alleged bogus purchases, without appreciating the fact that the learned AO passed assessment order without properly following the directions of the Hon ITAT of examining the concerned parties and giving opportunity of cross examination to the assessee.

(2) On the facts and in law and without prejudice to ground no 1
above, the learned CIT(A) erred in restricting addition to 12.50%
of alleged bogus purchases and not to the extent of overall GP rate at the entity level, which is 4.25% in case of app ellant.
11. The decision rendered in para 9 above applies to above appeal as well which is also allowed for statistical purposes.
12. In the result, both the appeals of the assessee are allowed for statistical purposes.
13. ITA No. 78/Mum/2025 (AY 2009-10) (Revenue)

(1) "On the facts and in circumstances of the case, the Ld.CIT(A) erred in appreciating the fact that the onus of proving the expenses claimed is on assessee."
(2) "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in not appreciating the fact that impugned parties have not responded to notices u/s.133(6) of the Income Tax Act, 1961 nor attended in response to summon issued u/s.131 of the Income Tax
Act, 1961."
(3) "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in not appreciating the fact that the assessee failed to P a g e | 14

ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai produce the parties before AO from whom he had claimed to make purchases."
(4) "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in not appreciating the decision of Apex Court in the case of N.K. Protein Ltd vs DCIT wherein it was held that once a finding of fact has been given that entire purchases shown on the basis of fictitious invoices and debited in the P & L account are established as bogus, restricting the addition to a certain percentag e goes against the principle of section 68 and 69 C of the Income Tax Act,
1961."
(5) "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in directing that the addition as made by the A.O. be restricted to 12.5% of the alleged purchases.

(1) "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in appreciating the fact that the onus of proving the expenses claimed is on assessee."
(2) "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in not appreciating the fact that impugned parties have not responded to notices u/s.133(6) of the Income Tax Act, 1961 nor attended in response to summon issued u/s.131 of the Income Tax
Act, 1961."
(3) "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in not appreciating the fact that the assessee failed to produce the parties before AO from whom he had claimed to make purchases."
(4) "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in not appreciating the decision of Apex Court in the case of N.K. Protein Ltd vs DCIT wherein it was held that once a finding of fact has been given that entire purchases shown on the basis of fictitious invoices and debited in the P & L account are established as bogus, restricting the addition to a certain percentage goes against the principle of section 68 and 69 C of the Income Tax Act, 1961."
(5) "On the facts and in the circumstances of the case, the Ld.CIT(A) erred in directing that the addition as made by the A .O. be restricted to 12.5% of the alleged purchases."

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ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai

Place: म ुंबई/Mumbai
दिन ुंक /Date 08.12.2025
Lubhna Shaikh / Steno

आदेश की प्रतितलतप अग्रेतिि/Copy of the Order forwarded to :

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ITA No. 76 77 78 & 79 Mum 2025
A.Y. 2009-10, 2010-11

Ganesh Jagaji Modi, Mumbai

सत्यावपि प्रवि ////
आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.