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Facts
The Revenue appealed against the order of the CIT(A) which restricted the addition for bogus purchases to 3% of the total purchases, deleting the remaining 97%. The Assessee had provided various documents like bills, ledger accounts, and confirmations to substantiate the purchases.
Held
The Tribunal held that while the Assessee had discharged its onus by producing documentary evidence, to meet the ends of justice and litigation, and to plug revenue leakage, the addition restricted by the CIT(A) to 3% of the purchases is upheld. The Revenue's appeal and the Assessee's cross-objection were dismissed.
Key Issues
Whether the addition restricted to 3% of alleged bogus purchases by the CIT(A) is sustainable, considering the Assessee's evidence and the need to curb revenue leakage.
Sections Cited
250, 1961, 2013-14, 68, 133(6), 143(3), 147, 2012-13, 2019, 4444/Mum/2018, 2025
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Before: SHRI NARENDER KUMAR CHOUDHRY
आदेश / O R D E R PER: NARENDER KUMAR CHOUDHRY [J.M.] :-
The instant appeals preferred by the Revenue and Cross Objection of the Assessee emanates from the order dated 21-08- 2025impugned herein passed by the Learned Commissioner of Income-tax, Appeal, CIT(A) - 51, Mumbai [hereinafter referred to as “Ld. Commissioner”] u/s 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2013-14.
For brevity, we will decide Revenue’s appeal in first. In the instant case, it is not in dispute that the Assessee before the authorities below has submitted all documents such as vouchers and bills relating to purchases made, ledger accounts etc. and also established that the payments were made through Account payee cheques, however, still the Ld. commissioner held that the contentions of the Assessee as devoid of merit by holding “that since, it is a normal practice in case of accommodation entries that bills and vouchers and Ledger Accounts are up to date. The detailed inquiry conducted by the Investigation Wing has brought out that the entities from whom these purchases have been done are only providing accommodation entries. And these are indicators that these purchases requires to be checked and therefore, there is no infirmity in the action of AO in treating the purchases as bogus”.
However, with regard to the quantum of addition, the Ld. Commissioner concurred with the submission of the Assessee that the Ld. AO has not disputed the sales made by it and since there can be no sales without purchase, only the profit element embedded in the purchases may be added back.
The Ld. Commissioner, therefore, by considering that the order of the Task Force constituted by the Ministry of Commerce and Industry, estimating the gross profit margin in the trade ranging from 1 – 3%, affirmed the addition to the extent of 3% of the alleged bogus purchases, just and fair to plug the leakage of revenue on account of bogus purchases having been made by the Assessee. And accordingly, addition to the extent of Rs. 82,510/- being 3% of the bogus purchase has been affirmed by the Ld. commissioner and rest of amount of Rs. 26,67,832/- has been deleted.
Thus, both the parties being aggrieved have preferred their respective appeals, challenging the order of the Commissioner. The Ld. DR mainly focused that the Ld. Commissioner erred in restricting the addition to 3% of bogus purchases, as against 100% of bogus purchases added by Ld. AO, without appreciating the fact that Assessee is one of the beneficiary of bogus purchases from Aadi & Sparsh, the concerns of Rajendra Jain/ Sanjay Choudhry / Dharmi Chand Jain group, Indore in providing accommodation entries in the name of bogus purchases and bogus loans to various beneficiaries.
This court observes that the Assessee before the authorities below with regard to the purchases made from the aforesaid parties, has filed the following documents.
Aadi Impex Sparsh Exports Private limited i. Acknowledgment of return of income of (i) Acknowledgement of return of Anup Jain (Proprietor) for A.Y. 2013-14 income for A.Υ. 2013-14 and and 2014-15 2014-15 ii. Bills issued to the assessee (ii) Bill issued to the assessee iii. Ledger account of party in the books of (iii) Ledger account of party in the the assessee evidencing purchases and books of the assessee evidencing payment thereof payment made thereof iv. Confirmation of accounts duly signed by (iv) Confirmation of accounts duly both the parties evidencing amount signed by both the parties payable as on 01.04.2013 evidencing amount payable as on 01.04.2013 v. Confirmation of accounts duly signed by both the parties evidencing payments (v) Confirmation of accounts duly made by the assessee signed by both the parties evidencing payment made by the vi. Affidavit of the Mr. Anup Jain assessee (Proprietor) confirming sales made to the assessee (vi) Affidavit of Mr. Rajendra S. Jain (Director) confirming sales vii. Reply filed by the party in response to made to the assessee notice issued u/s. 133(6) of the Act for A.Y. 2012-13. (vii) Reply filed by the party in response to notice issued u/s. Assessment order passed u/s. 143(3) r.w.s. 133(6) of the Act for A.Y. 2012-13. 147 of the Act for Α.Υ. 2012-13 Audited financials for the year Item wise details of stock for the year Party wise details of stock for A.Y. 2013-14 & Α.Υ. 2014-15 alongwith chart showing nexus of purchase with corresponding sales Corresponding sale bills VAT return of the assessee for F.Y. 2012-13 VAT return of the assessee for F.Y. 2013-14 Written submission filed before the learned CIT(A)
And therefore, the Assessee by producing above documents has duly discharged its prima facie onus cast u/s 68 of the Act. This court, further, observe that Hon’ble co-ordinate bench of the tribunal at Mumbai in the case of Chandra Exports vs. ITO (ITA No.4444/Mum/2018) decided on 28th Feb, 2019 has also considered the identical purchases made from Aadi & Sparsh and ultimately deleted the addition restricted by the Ld. commissioner to the extent of 3% of purchases.
From the aforesaid analyzations, it goes to show that the Assessee has been able to establish its prima facie onus and also claimed before the authorities below that persons who made the statements qua accommodation entry, in fact have retracted their statements subsequently.
Further the judgment as relied on by the Revenue, in the case of Drisha Impex (P) Ltd. Vs. Principal Commissioner of Income Tax (2025) 177 taxmann.com 808(SC), wherein, the Hon’ble Apex court affirmed the judgment of the Hon’ble High Court, in fact, dealt with a case, where no proof of any documentary evidence was filed and there was no correlation between the purchase and sales. And the Assessee expressed its inability to furnish purchase confirmations and addresses of suppliers and therefore, it was held that the Assessing Officer was justified in making the addition to income of the Assessee on account of disallowance of peak purchases made from the parties and therefore said case is factually dissimilar to the instant case, as in this case, the Assessee, has duly produced all the relevant documents referred to above and therefore discharged its onus cast, under the relevant provisions of law.
Thus, this court on the aforesaid reasons, though inclined not to sustain the addition but for substantial justice and ends of litigation and to preserve the leakage of revenue, if any, as the Assessee also agreed to, affirming the order of the Ld. Commissioner in restricting the addition to the tune of 3% of the purchases as the same. Thus, the impugned order is upheld.
Coming to the Cross Objection filed by the Assessee, the Ld. Counsel, at the outset, for the ends of litigation submitted that in this case if the order of the Ld. Commissioner is upheld, then he will not press the CO. Thus, in view of the judgment in Revenue’s appeal the cross objection stands dismissed.
In the result, the Revenue’s appeal and the Assessee’s cross- objections stands dismissed.