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Before: SHRI RAHUL CHAUDHARY & SMT.RENU JAUHRI
Date of Hearing 14.10.2025 Date of Pronouncement 11.11.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :-
This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 04.08.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2019-20.
The grounds of appeal are as follows:
“Ground 1: On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals)-NFAC erred in confirming the addition of Rs. 32,75,050/- U/s. 69C of the Income Tax Act, 1961 made by Ld. Assessing officer treating the genuine purchases as bogus transaction as unexplained expenditure.
Provisions of the Act ought to have been properly construed and regard being had to the facts of the case, no such addition should have been made. Reasons assigned are wrong, totally unreasonable and illogical to justify the addition made.
Ground 2: The Ld. Commissioner of Income Tax Appeals-NFAC erred in confirming the order made under section u/s 147 r.w.s. 144 of the Income Tax Act, 1961 by the learned Assessing Officer is bad-in-law, ultra virus and without appreciating the facts and law in their proper perspective and is liable to be annulled.
The appellant craves leave to add, amend, alter and/or vary any of the grounds of appeal before or at the time of hearing.”
The brief fact of the case are that the assessee filed his return for A.Y. 2019-20 on 16.09.2019 declaring total income of Rs. 9,14,490/-from his proprietary concern, M/s. Honesty Tube Industries. On the basis of information made available by the Directorate General of GST Intelligence (DGGI) and CBIC, according to which the assessee had taken accommodation entries of Rs. 32,75,050/-, the Investigation Wing conducted enquiries during which the assessee was required to file the requisite documents relating to these transactions. No compliance was made by the assessee before the Investigation Wing. Thereafter, in view the information received from the investigation wing, ld. AO issued a notice u/s. 148 on 24.04.2023 after following the prescribed procedure for reopening. The assessee did not file his return in response to this notice. Thereafter, several notices were issued to which partial response was filed by the assessee.
Ld. AO examined the evidences relating to transportation of goods and found the assessee‘s explanation of transporting goods by handcart, to be doubtful. Hence, he held the purchases made from M/s. Bristal Tube Industries amounting to Rs. 32,75,050/- as bogus and disallowed the same u/s. 69C of the Act. Aggrieved, the assessee preferred an appeal before ld. CIT(A). Ld. CIT(A) dismissed the assessee’s appeal vide order dated 04.08.2025, against which assessee is in appeal before us.
Before us ld. AR has pointed out that the assessee has filed appeal raising several factual and legal grounds relating to the sole substantive addition made on account of bogus purchases of Rs. 32,75,000/- u/s. 69C of the Act.
4.2 i. Firstly, on merits, ld. AR has submitted as under the that the ld. AO has only doubted the purchases due to the fact that transportation of goods from its supplier having factory in Ahmedabad, to the assessee’s address in Mumbai is not established. It has been pointed out by ld. AR that though the supplier is from Ahmedabad, but he has a godown in Mumbai which is located at about 500 metres, distance from the assessee’s address. Accordingly, the goods were transported by hand carts and supporting evidences in the form of delivery challans have been produced before the ld. AO. ii. Further, the assessee was not provided an opportunity to cross examine the party based on whose inputs the impugned addition has been made, even though a specific request was made during the assessment proceedings. iii. The assessee has made an alternate prayer that, if at all, the addition should be restricted to the extent of GP rate declared at 11.54% on the impugned purchases. 4.3 In the light of above, ld. AR has argued at the reliance placed by the ld. AO on the decision of the Hon’ble Jurisdictional High Court in the case of M/s. Kanak Impex (India) Ltd. [2025] 474 ITR 175 is misplaced. He has instead placed reliance on another decision of the Hon’ble Jurisdictional High Court in the case of PCIT V Mohommed Haji Adam & Co. [2019]103 taxmann.com 459 wherein it has been held that even if the purchases are bogus, entire purchase amount cannot be added as the department had not disputed the assessee’s sales and, therefore, the addition has to be restricted to the extent of GP rate. Ld. AR distinguished the case of Kanak Impex pointing out that no evidence whatsoever had been produced in the case of Kanak Impex and no compliance had been made before the ld. AO whereas, in the present case, the assessee has made due compliance and has produced requisite supporting documents like purchase bills, bank statements, delivery challans etc.
On the other hand, ld. DR has strongly relied on the orders of the lower authorities. He has pointed out that proof of transportation was sought from the assessee in response to which delivery challans showing delivery by hand carts were filed. Ld. AO has examined these and rejected the same vide detailed reasons mentioned in the assessment order.
Considering these facts in the back drop of the report of the CGST authorities received alongwith enquiry report of the Investigation Wing stating that the entity M/s. Bristal Tube Industries is engaged in providing accommodation entries, Ld. AO has rightly rejected the assessee’s claim with the following observations:
“3.3 It is evident from the enquiry made by the Investigation wing and incident report of the CGST Authority that the entity Bristal Tube Industries is engaged in providing accommodation entries by way of issuing bogus sales/purchase invoices. Therefore, although the assessee has submitted the tax invoices, disclosed transactions in books and returns, made transactions through banking channel, all of these does not make the accommodation entry genuine as the both the parties on purchase side and sales sides are engaged in planned conspiracy of providing accommodation entries to each other and camouflaged/ designed these transactions to look genuine, however the same is not genuine. Further, it is seen from the tax invoice of M/s Bristal Tube Industries that the said entity has supplied the goods (4395 Kgs on 06/04/2018, 4246 Kgs on 29/09/2018, 5150 kgs on 06/11/2018 respectively) to the assessee from handcart. It is pertinent to mention here that the factory premises of the Bristal Tube Industries is in Ahmedabad and goods were delivered at Kumbarwadi Lane, Mumbai. As per assessee's submission the goods were transported through Handcart and loading charges were paid in Mumbai, in old market area. No payment was made to transporter as goods were transported through Handcart. Supply of goods of thousands of kilogram via handcart covering a distance of almost 550km does not seem usual in business and therefore raises a doubt.”
Ld. DR has also placed reliance on the recent decisions of the Hon’ble jurisdictional High Court in the cases of Kanak Impex (supra) and Drisha Impex [2025] 173 taxmann.com 571 wherein 100% of disallowance of bogus purchases has been upheld when the assessee failed to establish the genuineness of purchases.
We have heard the rival submissions and perused the material placed on record. The issue relates to purchases amounting to Rs. 37,75,050/- shown by the assessee from M/s. Bristal Tube Industries and ld. AO has doubted the delivery challans stating that such voluminous consignments could not have been transported by hand cart from Ahmedabad. The assessee has furnished the following other documents as mentioned in the assessment order: i. Copy of GST returns ii. Details of goods purchased iii. Details of products purchased iv. Details of payment made against purchasers v. Delivery Challans vi. Stock vouchers Out of all the documents, Ld. AO doubted the delivery challans stating that such voluminous consignment cannot be transported from the factory in Ahmedabad to the assessee’s premises in Mumbai through hand carts. He did not accept the assessee’s contention that the supplier had a godown in Mumbai, and its address was printed on the invoices, from where these goods were supplied to the assessee. Further, the supplier also has the GST registration of Mumbai (Maharashtra state) even though its factory is located in Ahmedabad. 6.2 We have considered the facts and circumstances of the case. We find merit in the arguments of ld. AR that the case is distinguishable on facts, from M/s. Kanak Impex and M/s. Drisha Impex wherein 100% disallowance was confirmed by te Hon’ble jurisdictional High Court under different set of facts. However, in the present case, all the requisite documents and details have been filed by the assessee and the only doubt raised by ld. AO pertains to the delivery challans showing delivery by hand carts.
6.3 Under these facts and circumstances, we are inclined to consider the alternate prayer of the assessee to restrict the disallowance only to the amount computed at the declared GP rate of 11.54% on genuine purchases. Accordingly, we direct the ld. AO to reduce the disallowance to the amount computed @ 11.54% of Rs. 32,75,050/-.
Since alternate plea of the assessee has been considered, the other legal grounds have been rendered academic and hence are not being adjudicated upon.
In the result, assessee’s appeal is allowed.
Order Pronounced in Open Court on 11.11.2025.