ASST. COMMISSOINER OF INCOME TAX, MUMBAI vs. JANGID PROPERTIES, MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the Revenue is directed against the order of ld. CIT(A)/ NFAC dated 27.11.2025 for Assessment Year (AY) 2010-11. The Revenue has raised following grounds of appeal: “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance on account of bogus/non- genuine purchases to 5% of the total disputed purchases, instead of upholding the addition made by the Assessing Officer of Rs.2,07,45,375/-, as the purchases were found to be nongenuine/ unverifiable. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the assessee could not prove the genuineness of purchases by producing the parties, confirmations, delivery evidence, transportation details, or other supporting documents, despite opportunities provided during assessment proceedings. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the assessee has not maintained the stock record and thus failed to establish the consumption of material/goods for the business purpose of the assessee. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief merely by estimating profit element, without appreciating that in the case of purchases from M/s. Mahadespura Enterprise, the party was identified as a hawala/bogus billing entity by the Sales Tax Department, and therefore the purchase itself was not genuine. 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in adopting an ad-hoc rate of 5% without giving any cogent basis, comparable cases, or any reasoning to justify such a low estimation of profit element in a case involving non-genuine purchases.” 2. Rival submissions of both the parties have been heard and record perused. The learned Senior Departmental Representative (ld. Sr. DR) for the Revenue submits that the assessee is a beneficiary of bogus purchases provided by entry providers, which were identified by the Sales Tax Department, Government of Maharashtra. The Assessing Officer also verified other purchases shown by the assessee and, in order to verify the genuineness of the purchases, notice under Section 133(6) was issued to such parties. All the parties did not respond to such notices. Therefore, the Assessing Officer disallowed aggregate purchases of Rs. 2.07 crore. The learned CIT(A) restricted the disallowance to the extent of 5.00% of the disputed purchases. The learned CIT(A) restricted the addition only on the basis of the submissions made by the assessee. The purchases were not proved by the assessee beyond reasonable doubt. The assessee has shown such purchases only to inflate the expenses. The entire addition made by Assessing Officer may be sustained by reversing the order of ld CIT(A).

During assessment, the assessee furnished copies of purchase bills / invoices from all these parties, bank statements of the assessee reflecting payments made through banking channels, and bank certificates with regard to payments credited to the accounts of the respective parties. The assessee also furnished complete details of all such purchases. The purchases (building material) were consumed in the business of the assessee. The details and nature of material are mentioned on the bills and invoices. The AO has not examined the information based on which he held that purchases from Mahadespura Enterprises of Rs. 15,04,464/- are not genuine. The said party supplied rubble and held a valid VAT/CST number at the time of purchase of the material. The material was supplied and received at site, and the lorry number is recorded in the tax invoices. The material was consumed in the construction activities of the real estate project. For other purchases, the Assessing Officer has not considered the documentary evidence furnished by the assessee. He merely relied upon the report of the postal authorities on the notices issued under Section 133(6). Notices under Section 133(6) was served on Gurudev Enterprise, Balaji Enterprise, and Sam Enterprises. No further inquiry or investigation was carried out by the AO. Non-response to a notice under Section 133(6) will not automatically lead to the conclusion that the said purchases are not genuine. To support his submission, the learned AR of the assessee relied upon the decision of the Hon'ble Supreme Court in Anis Ahmed and Sons v. CIT, 297 ITR 441 (SC), and PCIT v. Chawla Interbild Construction Private Limited, 412 ITR 152 (Bombay). All the purchases of the assessee are duly supported by documentary evidence. The assessee also furnished details of material consumed in the project carried out by the assessee during the relevant financial year. Consumption of material is also certified by the architect. The learned AR for the assessee also furnished a short- written synopsis in support of his submissions. 4. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We find that the assessee is a builder and developer. The assessee filed its return of income on 25.09.2010, showing total income of Rs. 85,03,559/-. The case was selected for scrutiny. During assessment, the Assessing Officer noted that the assessee has debited expenses against the purchases of different kinds of building material and other required construction material, including steel and other items. The AO issued notices to various parties under Section 133(6). The AO recorded the names of the parties, nature of transaction, amount of purchases, and the remarks of the postal authorities in paragraph 4 of his order. On the basis of the report of the said department, i.e., the Sales Tax Department, the Assessing Officer also identified one more party, Mahadespura Enterprises, from whom the assessee has shown purchases of Rs. 15,04,464/-. Notice sent to the said party was also returned back by the postal authorities with the remark “Not known”. On the basis of the adverse report of the postal authorities, the Assessing Officer issued a show-cause notice for seeking the reply of the assessee in a given format. In response to the show-cause notice, the assessee filed its reply dated 18-02-2013. The AO recorded that purchase bills were produced, but no supporting documents, such as proof of delivery of goods or transport receipts, were furnished. No reply was given with respect to the report of the postal authorities. The AO issued another show-cause notice dated 22-02-2013, as recorded in para 4.3 of the assessment order. In para 4.4 of the assessment order, the AO recorded that the assessee reiterated its earlier reply. The assessee further stated that it was a builder and developer and has to purchase sand, bricks and rubble from various parties, totalling the goods required by the site supervisor. The assessee received building material, as confirmed by the supervisor on the face of the bill itself. The reply of the assessee was not accepted by the Assessing Officer. The Assessing Officer recorded that notices under Section 133(6) were issued to a few purchase parties. Those notices were returned unserved. The assessee has filed copies of bills, vouchers and payment details. The Assessing Officer, by referring to the decisions of Hon’ble Supreme Court in Sumati Dayal vs. CIT, 214 ITR 801, and CIT vs. Durga Prasad More, (1971) 62 ITR 540, held that laws does not prescribe any quantitative test to find out of the onus is discharged or not, rather it depend on the facts of each case. And human probabilities is to be seen. On the basis of such observation the AO held that the assessee failed to discharge his onus and aggregate purchases from six parties amounting to Rs. 2.07 crore treated as bogus purchases and added the same to the total income of the Assessee in the assessment order dated 08-03-2013. 5. Aggrieved by the addition made in the assessment order, the Assessee filed an appeal before the learned CIT(A). Before the learned CIT(A), the assessee filed a statement of facts narrating that the AO treated purchases of Rs. 15,04,464/- from Mahadespura Enterprises as bogus on the basis of the report on the website of the Sales Tax authorities, and purchases from five other parties on the ground that notices under Section 133(6) could not be served and the parties has not responded. The assessee also furnished detailed written submissions, as recorded in para 5 of the impugned order. Before learned CIT(A), the assessee explained the nature of purchases, details of each item and the quantity of consumption of material purchases. The assessee also relied on various case laws. The learned CIT(A), after considering the submissions of the assessee and the assessment order restricted the addition to the extent of 5.00%. The ld CIT(A) held that assessee cannot said to have explained the purchases in an incomplete and unsatisfactory manner. Notices issued under Section 133(6) have not been complied with by the parties. If the assessee has not been able to produce the suppliers, despite making efforts, and the name of one of the parties was found in the list of bill providers, the learned CIT(A) also concluded that, in such a situation, it is reasonable to infer that the assessee had routed some of its genuine purchases through accommodation parties or obtained bills from those parties to regularise purchases made from the open market and inflate the purchase price, thereby saving the purchase cost, which has not been offered to tax. The learned CIT(A) held that, to meet the ends of justice, only the profit element embedded in such purchases was to be brought to tax instead of the entire amount, as per various judicial pronouncements. On the basis of the aforesaid observations, the learned CIT(A) restricted the disallowance to 5.00% of the total purchases from six parties, thereby restricting the addition to the extent of Rs. 10,37,269/- and deleted the balance addition. 6. Before us, the learned Sr DR for the Revenue vehemently argued that the assessee was a beneficiary of bogus purchases and the disallowances of expenses of entire purchases should have been confirmed by ld CIT(A). We find that the Assessing Officer solely relied upon the information on the website of the Sales Tax Department with regard to Mahadespura Enterprises. Similarly, with regard to the other five parties, the AO relied on the reports of the postal authorities. No comments were made on the various documentary evidence furnished by the assessee, including the bank statement furnished by the Assessee. We find that the Hon’ble Jurisdictional High Court in PCIT vs. Chawla Interbild Construction Private Limited (supra) held that expenditure disallowance cannot be made solely because a third party failed to appear before the AO. We find that the assessee has no legal authority or mechanism to force an independent vendor to appear in person before the AO. The AO has not initiated proceedings for issuing summons under Section 131 to the assessee. We find that the learned CIT(A), on considering the various documentary evidence, including the bank statement, has taken a reasonable view that only the profit element embedded in such transactions can be disallowed and not the entire transaction. Thus, we affirm the order of the learned CIT(A). No contrary facts or law is brought to our notice to take other view. Thus, the grounds of appeal raised by the Revenue are dismissed. 7. In result, the appeal of Revenue is dismissed. Order pronounced on 02.09.2026 as per Rule 34 of Income Tax (Appellate Tribunal) Rule, 1963. Sd/- S- S Sd/- /-SS/ -Sd/-SSS Sd/- MANOJ KUMAR AGGARWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 02/09/2026 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT and (5) Guard file. By Order

Assistant Registrar ITAT, Mumbai