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Facts
The assessee, a trader in precious stones, was made an addition on account of alleged bogus purchases. The AO disallowed the entire purchases made from one party. The CIT(A) also dismissed the assessee's appeal.
Held
The Tribunal noted that the assessee had provided documentary evidence for the purchases, and the case was similar to a previous ITAT decision where the matter was remitted back to the AO. Therefore, the Tribunal restored the matter back to the AO for de novo assessment.
Key Issues
Whether the additions made on account of purchases from a specific party are justified without examining the evidence and if the matter should be remitted for fresh assessment based on previous ITAT ruling.
Sections Cited
250, 147, 144, 69C, 44AB
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI SANDEEP GOSAIN
Date of Hearing 03.09.2025 Date of Pronouncement 22.09.2025 ORDER Per: SHRI. SANDEEP GOSAIN, J.M.:
The present appeal hs been filed by the revenue challenging the impugned order dt. 13.03.2025 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre (NFAC) / CIT(A) for the assessment year 2010-11.
None appeared on behalf of the assessee when the case was called repeatedly, in spite of the fact that notice of the present appeal was sent and served upon the assessee through RPAD and also through email and in this regard necessary endorsement by the registry has been made on record. On the other hand Ld. DR present in the court is ready with the arguments. Therefore considering the non cooperative conduct of the assessee, I have decided to proceed with the hearing of the case ex-parte.
3. I have heard Ld. DR, perused the material placed on record and also the orders passed by the revenue authorities. I noticed that as per record, the additions were made by AO once of bogus purchases made from bogus parties and thus purchases were treated as unexplained. However on appeal Ld. CIT(A) deleted the same by holding as under:
During the appellate proceedings, the appellant has stated that the hon'ble ITAT, Mumbai passed the order vide order no. dated 10.05.2024 in his case for A.Y. 2011-12 has remitted the matter back to the file of AO for afresh assessment for A.Y. 2011-12. The appellant's grounds of appeal for A.Y. 2011-12 are identical for A.Y. 2010-11. The decision part of the order passed by the hon'ble ITAT, Mumbai in appellant's case for A.Y. 2011-12 is reproduced as under:
Brief facts stated from the records are that assessee is engaged in the business of precious stones as importer, exporter and dealer in the name and style of M/s. Giri Impex. Return of income was filed on Jawahar Pravinchand Sarkar, AY 2011-12 13.09.2011 reporting total income at Rs.8,00,440/-. Case of the assessee was re- opened u/s.147 on the basis of post-search information gathered out of search and seizure action conducted in the case of Shri Gautam Jain and his group concerns whereby it was noted that assessee has taken accommodation entries from one of the bogus parties namely M/s. Rajan Gems towards purchases amounting to Rs.91,61,519/-. Ld. Assessing Officer completed the assessment ex parte by passing an order u/s.144 r.w.s.
147 by making an addition of Rs.91,61,519/- u/s. 69C by holding purchases made from M/s. Rajan Gems as bogus. Aggrieved, assessee went in appeal before the CIT(A).
4. Before the Id. CIT(A), it was submitted that findings arrived at by Id. Assessing Officer are based merely on third party investigation report. According to Id. CIT(A) since the assessee could not substantiate his claim with documentary evidence, the appeal was dismissed. Aggrieved, the assessee is in appeal before the Tribunal.
Before us, the Id. Counsel for the assessee placed on record a paper book containing 71 pages to demonstrate and justify the genuineness of purchase made by him from M/s. Rajan Gems which has been held to be bogus. According to the Id. Counsel, Id. CIT(A) has failed to consider these documentary evidences while dismissing the appeal of the assessee. The documents so furnished included copies of purchase bills, ledger account, purchase register and stock register which evidently demonstrate the genuineness of the purchase made by the assessee. He also submitted that books of accounts of the assessee have been duly audited for which tax audit report u/s.44AB was duly furnished on record reporting all the relevant facts in this regard. He also placed reliance on the decisions of Hon'ble Jurisdictional High Court of Bombay in the case of PCIT vs. Mohammed Haji Adam and Co. [2019] 103 taxmann.com 459 (Bom) whereby principle of taxing income on the non-genuine purchases Jawahar Pravinchand Sarkar, AY 2011-12 rather than adding the entire purchases was upheld. The Hon'ble court in this respect observed that "the tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sale in case of trader. The Tribunal therefore correctly restricted the additions limited to the extent of bringing the GP rate on purchases at the same rate of other genuine purchase." 5.1. Ld. Counsel thus submitted that Id. Assessing Officer has added the entire amount of purchase made from M/s. Rajan Gems which infact are the purchases made in normal course of business recorded in the regular books of accounts maintained by the assessee which has been subjected to audit and not rejected. According to him, Id. CIT(A) has also confirmed the said addition by ignoring the submissions placed on record.
6. Per contra, Id. Sr.DR placed reliance on the orders of the authorities below.
7. We have considered the rival contentions and perused the material placed before us. We note that assessee is a trader in the business of precious stones. Purchases made by the assessee from one party namely, M/s. Rajan Gems has been held to be bogus by the Id. Assessing Officer which has been added in the entirety. Ld. CIT(A) has also sustained the addition despite submissions made by the assessee in support of his claim. We have gone through the documentary evidences placed before us in the paper book. We also take note of the judicial precedent of the Hon'ble Jurisdictional High Court of Bombay in the case of PCIT vs Mohammed Haji Adam and Co. (supra) which has a relevance in the present set of facts. However, since the submissions of the assessee have not been considered by the authorities below, in the interest of justice and fair play, we find it appropriate to remit the matter back to the file of Assessing Officer for denovo assessment by taking into account our aforesaid observations Jawahar Pravinchand Sarkar, AY 2011-12 and findings. Needless to say, that assessee be given reasonable opportunity of being heard to substantiate his claim. We direct the assessee, to be diligent in attending the hearings fixed for the appeal and assist in its expeditious and effective disposal. Assessee should not seek adjournments unless warranted by compelling reasons.
Accordingly, grounds taken by the assessee are allowed for statistical purpose. 7.6. As per above mentioned decision, the Hon'ble ITAT, Mumbai has stated that the appellant is a trader in the business of precious stones. Purchases made by the appellant from one party namely, M/s. Rajan Gems has been held to be bogus by the Id. Assessing Officer which has been added in the entirety despite submissions made by the appellant in support of his claim. They have gone through the documentary evidences placed before them in the paper book. They also relied on decision of the Hon'ble Jurisdictional High Court of Bombay in the case of PCIT vs Mohammed Haji Adam and Co. (supra) which has a relevance in the present set of facts and Jawahar Pravinchand Sarkar., Mumbai. the appellant's appeal for A.Y.2011-12 are allowed for statistical purpose. In view of the above decision of Hon'ble ITAT, Mumbai in the appellant's case for A.Y.2011-12 and as the appellant's grounds of appeal
for A.Y. 2011-12 are identical for A.Y. 2010- 11, the appellant is not liable to addition of Rs. 8,02,948/- made from bogus parties is treated as unexplained expenditure u/s 69C of the I.T. Act. The AO is directed to delete the addition of Rs. 8,02,948/- made u/s 69C. Therefore, the ground no. 1 to 3 of the appeal is allowed.
5. After having gone through the entire facts and circumstances of the present case, I noticed that Ld. CIT(A) taken into consideration that the Coordinate Bench of ITAT in assessee’s own case for the A.Y 2011-12 in dated 10.05.2024 had remitted the matter back to the file of AO for fresh assessment and it was observed by Ld. CIT(A) that the facts of the A.Y 2011-12 are identical to the facts of the year under consideration. However, Ld. CIT(A) committed an error, instead of following the operative portion of order of the Coordinate Bench, had straightaway directed the AO to delete the additions.
5. To my mind the order passed by Ld. CIT(A) is not sustainable in the eyes of law thus I modify the operative portion of the order passed by Ld. CIT(A) and while placing reliance upon the decision of Coordinate Bench of ITAT in assessee’s own case and keeping in view the principle of consistency and judicial discipline restore the matter back to the file of AO for denovo assessment as directed by the Coordinate Bench of ITAT in assessee’s own case for A.Y
Before parting, I make it clear that my decision to restore the matter back to the file of the AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the AO independently in accordance with law.
In the result, the appeal filed by the revenue is allowed for statistical purposes. Order pronounced in the open court on 22/09/2025