PUNEET SYNTEX PVT. LTD.,MUMBAI vs. INCOME TAX OFFICER - CIRCLE4(3)(1), MUMBAI, MUMBAI

The brief facts of the case are that the assessee is a Private Limited Company engaged in the manufacturing and export of cotton and synthetic textiles and readymade garments, operating as a 100% export-oriented unit for nearly 30 years. The return of income was originally filed under Section 139(1) of the Act declaring a total income of Rs. 2,14,720/-. The case was reopened under Section 147 of the Act based on information received from the Investigation Wing, Mumbai. The report alleged that the assessee received accommodation entries/bogus invoices to the tune of Rs. 22,43,521/- from a supplier named M/s. Heli Textiles (Proprietor: Mr. Yatin Suresh Kumar Shah) without the physical movement of goods. During the assessment proceedings, the Ld. AO disregarded the physical and financial document trails, treating the entire purchase transaction of Rs. 22,43,521/- as unexplained expenditure under Section 69C r.w.s. 115BBE of the Act. The primary grounds for addition were that the transport documents lacked receipt signatures, stock registers were unavailable, and the supplier failed to respond to a statutory notice issued under Section 133(6) of the Act. On appeal, the Ld. CIT(A) sustained the action of the AO and dismissed the assessee's appeal on merits. Aggrieved, the assessee is in appeal before this Tribunal.

The Ld. AR appearing on behalf of the assessee forcefully argued against the sustained addition. The AR contended that the purchases were fully genuine, recorded in the regular books of accounts, and utilized in manufacturing operations. The assessee had completely discharged its primary burden of proof by presenting verifiable, contemporaneous tracking documentation. The AR heavily relied on the Assessee Paper Book (APB) comprising pages 1 to 17 filed before the Bench to demonstrate the complete transaction trail. It was strongly contended that a transaction cannot be characterized as a sham merely due to the subsequent non-responsiveness or non-existence of a third-party supplier, which is entirely outside the business control of the assessee. The AR argued that the authorities below erred by relying entirely on the "borrowed satisfaction" of investigation reports from the GST department without any independent, corroborative evidence establishing that the goods did not reach the production units.

To substantiate the genuineness of the trade purchases, the assessee submitted the following continuous chain of physical and financial proofs, enclosed between pages 1 to 12 APB:

The Ld. DR vehemently supported the orders of the Ld. AO and the Ld. CIT(A). The DR argued that the GST investigation conclusively established that M/s. Heli Textiles was a non-existent paper entity created solely to provide accommodation entries. The supplier failed to comply with notices under Section 133(6), which confirms the bogus nature of the operations. In the absence of an acknowledged delivery stamp on transport bills or physical stock/goods inward registers, the identity, creditworthiness, and actual physical movement of goods remain unproven. Hence, the addition under Section 69C is fully justified.

We have heard the rival contentions, perused the material available on record, and closely examined the documentary evidences submitted in the APB. The undisputed facts reveal that the assessee has provided a full audit trail of the purchases, including tax invoices, E-way bills, logistics documentation, and digital reflection of the transaction in GSTR-2B. Most crucially, the entire payment was routed through formal banking channels out of normal operational funds. It is a well-settled judicial precedent that purchases cannot be rejected as bogus or non-genuine simply because a supplier failed to respond to a Section 133(6) notice or was found non- functional post-facto. If the revenue department fails to bring matching material evidence to show that the purchase money flowed back to the assessee in cash, or that the raw materials used for export manufacturing were procured from an alternate source, an addition cannot stand on mere suspicion or "borrowed satisfaction".

The assessee has sufficiently discharged its primary onus. The revenue authorities erred in completely ignoring the comprehensive documentation filed in the paper book. Consequently, we find no legal ground to sustain the addition of Rs. 22,43,521/- under Section 69C of the Act. The addition is hereby directed to be deleted, and the consequential interest/penalty proceedings are set aside.

The legal challenges raised by the assessee regarding the validity of the reopening jurisdiction are kept open, as the appeal is fully accepted and allowed on merits.