INCOME TAX OFFICER 19(1)(1), , MUMBAI vs. BADAMIDEVI TEJRAJ MUTHA, MUMBAI

3. Whether on the fact and circumstances of 3. Whether on the fact and circumstances of the case, the Ld. the case, the Ld. CIT(A) has erred in restricting the addition to the extent upto CIT(A) has erred in restricting the addition to the extent upto CIT(A) has erred in restricting the addition to the extent upto 12.5% as against 100% addition made by the AO, by ignoring the 12.5% as against 100% addition made by the AO, by ignoring the 12.5% as against 100% addition made by the AO, by ignoring the fact that during the Re fact that during the Re-assessment Proceedings, the assessee assessment Proceedings, the assessee could neither produce the quantity tally of day to could neither produce the quantity tally of day to day purchases, day purchases, Sales, Stocka, Delivery Challans and corresponding values nor Sales, Stocka, Delivery Challans and corresponding values nor Sales, Stocka, Delivery Challans and corresponding values nor could produce the parties for verification, in could produce the parties for verification, in-spite of opportunity spite of opportunity provided by the Assessing Officer?" provided by the Assessing Officer?" 4. ⁠4. Whether on the fact and circumstances of the case, the Ld. . Whether on the fact and circumstances of the case, the Ld. . Whether on the fact and circumstances of the case, the Ld. CIT(A) has erred in restricting the addition to the extent upto has erred in restricting the addition to the extent upto has erred in restricting the addition to the extent upto 12.5%, by ignoring the fact that the assessee has availed 12.5%, by ignoring the fact that the assessee has availed 12.5%, by ignoring the fact that the assessee has availed accommodation entries, but failed to prove the genuineness & accommodation entries, but failed to prove the genuineness & accommodation entries, but failed to prove the genuineness & creditworthiness of th transaction and of parties also and the creditworthiness of th transaction and of parties also and the creditworthiness of th transaction and of parties also and the notices issued u/ notices issued u/s 133 (6) of the Act, to verify the hawala traders s 133 (6) of the Act, to verify the hawala traders on the given addresses, has been returned back with the on the given addresses, has been returned back with the on the given addresses, has been returned back with the remarks " Non Known or Left, which proves that such remarks " Non Known or Left, which proves that such remarks " Non Known or Left, which proves that such transactions with all hawala traders were not a genuine one but transactions with all hawala traders were not a genuine one but transactions with all hawala traders were not a genuine one but were purportedly made?" were purportedly made?" 5." Whether on the facts and circumstances of the case and in er on the facts and circumstances of the case and in er on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition by law, the Ld. CIT(A) has erred in restricting the addition by law, the Ld. CIT(A) has erred in restricting the addition by ignoring that though there was no dispute that the bogus ignoring that though there was no dispute that the bogus ignoring that though there was no dispute that the bogus purchases were made and so act of infraction of law was purchases were made and so act of infraction of law was purchases were made and so act of infraction of law was committed in violation of sec committed in violation of section 74(1A) of the Maharashtra Value tion 74(1A) of the Maharashtra Value Added Tax Act, 2022 and therefore, such expenses is not Added Tax Act, 2022 and therefore, such expenses is not Added Tax Act, 2022 and therefore, such expenses is not allowed as per express provisions u/s. 37 of the Act?" allowed as per express provisions u/s. 37 of the Act?"

6. Whether on the facts and circumstances of the case and in 6. Whether on the facts and circumstances of the case and in 6. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciati law, the Ld. CIT(A) has erred in not appreciating the decision of ng the decision of the Hon'ble Supreme Court in the case of M/s. N. K. Proteins Ltd. the Hon'ble Supreme Court in the case of M/s. N. K. Proteins Ltd. the Hon'ble Supreme Court in the case of M/s. N. K. Proteins Ltd.

Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, wherein Hon'ble Supreme Court has dismissed the appeal and wherein Hon'ble Supreme Court has dismissed the appeal and wherein Hon'ble Supreme Court has dismissed the appeal and held that once a findings of act has been given that e held that once a findings of act has been given that e held that once a findings of act has been given that entire purchases shown on the basis of fictitious invoices and debited purchases shown on the basis of fictitious invoices and debited purchases shown on the basis of fictitious invoices and debited in the P & L account are established as bogus, then restricting in the P & L account are established as bogus, then restricting in the P & L account are established as bogus, then restricting the addition to a curtained percentage goes against the principles the addition to a curtained percentage goes against the principles the addition to a curtained percentage goes against the principles of section 68 and 69C of the Income of section 68 and 69C of the Income-Tax Act, 1961?" 7. " Whether on the facts and circumstances of the case and in " Whether on the facts and circumstances of the case and in " Whether on the facts and circumstances of the case and in law, the decision of Ld. CIT(A) is right, in view of the decision of law, the decision of Ld. CIT(A) is right, in view of the decision of law, the decision of Ld. CIT(A) is right, in view of the decision of the Hon'ble High Court Mumbai, in the case of Pr. Commissioner the Hon'ble High Court Mumbai, in the case of Pr. Commissioner the Hon'ble High Court Mumbai, in the case of Pr. Commissioner of Income-Tax Tax-5, Mumbai Vs. Kanak Impex (India) Ltd ((2025)172 5, Mumbai Vs. Kanak Impex (India) Ltd ((2025)172 Taxmann.com 283 (Bombay) Dated. 03.03.2025, wherein the axmann.com 283 (Bombay) Dated. 03.03.2025, wherein the axmann.com 283 (Bombay) Dated. 03.03.2025, wherein the decision of 100% addition made by AO has been allowed, by decision of 100% addition made by AO has been allowed, by decision of 100% addition made by AO has been allowed, by rejecting the ITAT's decision of estimating the profit rate @12.5% rejecting the ITAT's decision of estimating the profit rate @12.5% rejecting the ITAT's decision of estimating the profit rate @12.5% on bogus purchases and thereby impliedly grant deduction of on bogus purchases and thereby impliedly grant deduction of on bogus purchases and thereby impliedly grant deduction of such unexplained such unexplained expenditure incurred u/s. 69C of the Act, even expenditure incurred u/s. 69C of the Act, even though the assessee failed to discharge its onus to prove the though the assessee failed to discharge its onus to prove the though the assessee failed to discharge its onus to prove the genuineness genuineness genuineness of of of alleged alleged alleged purchases purchases purchases and and and has has has offered offered offered no no no explanation of the sources of expenditure incurred on account of explanation of the sources of expenditure incurred on account of explanation of the sources of expenditure incurred on account of such purchases ?" such purchases ?" 8. " Whether on the facts and circumstances of the case and in r on the facts and circumstances of the case and in r on the facts and circumstances of the case and in law, the Ld. CIT(A) is perverse in not considering the decision of law, the Ld. CIT(A) is perverse in not considering the decision of law, the Ld. CIT(A) is perverse in not considering the decision of the order of Hon'ble Supreme Court in the case of M/s. N. K. the order of Hon'ble Supreme Court in the case of M/s. N. K. the order of Hon'ble Supreme Court in the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, SLP (CC) of Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, SLP (CC) of Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, SLP (CC) of 963/2017, Dated. 16.01.2017, which is on the similar issue of 963/2017, Dated. 16.01.2017, which is on the similar issue of ated. 16.01.2017, which is on the similar issue of bogus purchases, which has been confirmed and was already bogus purchases, which has been confirmed and was already bogus purchases, which has been confirmed and was already the law of the land, when the Ld. CIT(A) has pronounced its order the law of the land, when the Ld. CIT(A) has pronounced its order the law of the land, when the Ld. CIT(A) has pronounced its order on 06.01.2025?" on 06.01.2025?" 9. ⁠9. "Whether on the facts and circumstances of the case and . "Whether on the facts and circumstances of the case and . "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that n law, the Ld. CIT(A) has erred in not appreciating the fact that n law, the Ld. CIT(A) has erred in not appreciating the fact that in the case of M/s. Swetamber Steels Ltd. (Supra), the Hon'ble in the case of M/s. Swetamber Steels Ltd. (Supra), the Hon'ble in the case of M/s. Swetamber Steels Ltd. (Supra), the Hon'ble ITAT Ahmadabad, had confirmed the disallowance of the bogus ITAT Ahmadabad, had confirmed the disallowance of the bogus ITAT Ahmadabad, had confirmed the disallowance of the bogus purchases, by stating that the purchases shown from respective purchases, by stating that the purchases shown from respective purchases, by stating that the purchases shown from respective parties were found non ies were found non-genuine and the decision of the ITAT was genuine and the decision of the ITAT was upheld by Hon'ble Gujrat High Court and also by the Hon'ble upheld by Hon'ble Gujrat High Court and also by the Hon'ble upheld by Hon'ble Gujrat High Court and also by the Hon'ble Supreme Court?" Supreme Court?"

2.1 During the course of the scrutiny assessment, the Learned During the course of the scrutiny assessment, the Learned During the course of the scrutiny assessment, the Learned Assessing Officer (hereinafter “Ld. AO”) observed that the assessee Assessing Officer (hereinafter “Ld. AO”) observed that the assessee Assessing Officer (hereinafter “Ld. AO”) observed that the assessee had effected purchases from certain entities which had been had effected purchases from certain entities which had been had effected purchases from certain entities which had been identified identified identified by by by the the the Sales Sales Sales Tax Tax Tax Department, Department, Department, Government Government Government of of of Maharashtra, as being non being non-genuine or hawala dealers engaged in dealers engaged in issuing accommodation bills without actual delivery of goods. issuing accommodation bills without actual delivery of goods. issuing accommodation bills without actual delivery of goods.

2.2 The Ld. AO, in order to verify the genuineness of such The Ld. AO, in order to verify the genuineness of such The Ld. AO, in order to verify the genuineness of such purchases, issued notices under Section 133(6) of the Act to purchases, issued notices under Section 133(6) of the Act to purchases, issued notices under Section 133(6) of the Act to thirteen (13) of the said thirteen (13) of the said parties. However, all such notices were parties. However, all such notices were returned unserved with postal remarks such as “not known” or returned unserved with postal remarks such as “not known” or returned unserved with postal remarks such as “not known” or “left”. Consequently, the Ld. AO issued notice under Section 142(1) “left”. Consequently, the Ld. AO issued notice under Section 142(1) “left”. Consequently, the Ld. AO issued notice under Section 142(1) calling upon the assessee to substantiate the genuineness of the calling upon the assessee to substantiate the genuineness of the calling upon the assessee to substantiate the genuineness of the purchases by producing purchases by producing the concerned parties and furnishing the concerned parties and furnishing supporting supporting supporting evidences evidences evidences such such such as as as delivery delivery delivery challans, challans, challans, proof proof proof of of of transportation, and payment details. transportation, and payment details. The Assessing Officer also The Assessing Officer also informed the fact of observation made by the Sales Tax Department informed the fact of observation made by the Sales Tax Department informed the fact of observation made by the Sales Tax Department of the Maharashtra Government r of the Maharashtra Government regarding those parties. egarding those parties.

2.3 In response, the assessee produced copies of invoices, In response, the assessee produced copies of invoices, In response, the assessee produced copies of invoices, payment vouchers reflecting payments through banking channels, payment vouchers reflecting payments through banking channels, payment vouchers reflecting payments through banking channels, and delivery challans. Nonetheless, she failed to furnish proof of and delivery challans. Nonetheless, she failed to furnish proof of and delivery challans. Nonetheless, she failed to furnish proof of transportation of goods or payment of frei transportation of goods or payment of freight charges, nor could she ght charges, nor could she produce the suppliers for verification. The Ld. AO observed that produce the suppliers for verification. The Ld. AO observed that produce the suppliers for verification. The Ld. AO observed that while the sales corresponding to the impugned purchases were duly while the sales corresponding to the impugned purchases were duly while the sales corresponding to the impugned purchases were duly recorded and accepted, the failure to establish the identity, recorded and accepted, the failure to establish the identity, recorded and accepted, the failure to establish the identity, existence, and delivery of goods fro existence, and delivery of goods from the said suppliers rendered m the said suppliers rendered the purchases unverifiable. He therefore concluded that the the purchases unverifiable. He therefore concluded that the the purchases unverifiable. He therefore concluded that the assessee had merely procured accommodation bills to regularise assessee had merely procured accommodation bills to regularise assessee had merely procured accommodation bills to regularise purchases actually made from unaccounted sources. Accordingly, purchases actually made from unaccounted sources. Accordingly, purchases actually made from unaccounted sources. Accordingly, he disallowed the entire amount of ₹2,39,19,729/ he disallowed the entire amount of ,19,729/- representing purchases from the said parties. purchases from the said parties.

5.1 We, therefore, set aside the findings of the Ld. CIT(A) on this We, therefore, set aside the findings of the Ld. CIT(A) on this We, therefore, set aside the findings of the Ld. CIT(A) on this issue and remit the matter back to the file of the Ld. Assessing issue and remit the matter back to the file of the Ld. Assessing issue and remit the matter back to the file of the Ld. Assessing Officer for a de novo adjudication in accordance with law and in the Officer for a de novo adjudication in accordance with law and in the Officer for a de novo adjudication in accordance with law and in the light of the principles laid down by the Hon’ble Bombay High Court ciples laid down by the Hon’ble Bombay High Court ciples laid down by the Hon’ble Bombay High Court in Kanak Impex (India) Ltd. (supra) Kanak Impex (India) Ltd. (supra). The assessee shall be afforded . The assessee shall be afforded due opportunity to substantiate her claim before the Assessing due opportunity to substantiate her claim before the Assessing due opportunity to substantiate her claim before the Assessing Officer.The grounds of appeal are merit accordingly allowed for The grounds of appeal are merit accordingly allowed for The grounds of appeal are merit accordingly allowed for statistical purposes.