SHRI RAMESH CHANDMAL SALECHA,MUMBAI vs. ITO WARD 18(3)(10, MUMBAI

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ITA 7411/MUM/2025Status: DisposedITAT Mumbai31 August 2026AY 2009-109 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the assessee had raised a legal plea regarding the non-furnishing of recorded reasons for reassessment. In the interest of justice, the matter was set aside to the CIT(A) for fresh adjudication on both legal and merit grounds.

What were the facts?

The assessee filed a return declaring a low income, but the AO received information about bogus purchases from accommodation entry providers. The AO added a portion of these purchases to the assessee's income, which was upheld by the CIT(A).

What were the issues?

Whether the reassessment proceedings were valid without furnishing the recorded reasons to the assessee, and whether the additions made on account of bogus purchases were justified on merits.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 250,Section 69C,Section 133(6),Section 145(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SHRI OM PRAKASH KANT & SHRI ANIKESH BANERJEE

PER SHRI ANIKESH BANERJEE, JUDICIAL MEMBER: The instant appeal of the assessee filed against the order of the Ld. Commissioner of Income Tax (Appeals) ADDL/JCIT (A)-2, Visakhapatnam [for brevity ‘Ld. CIT(A)’], order passed under Section 250 of the Income Tax Act, 1961 (for brevity ‘the Act’) for Assessment Year 2009-10, date of order 29.09.2025. The impugned order emanated from the order of the Ld. Income Tax Officer, Ward 18(3)(1), Mumbai (for brevity ‘Ld. AO’) order passed under Section 143(3) r.w.s. 147 of the Act, date of order 26.02.2015. 2. When the appeal was called for hearing none was present on behalf of the assessee. No adjournment petition was duly filed for seeking adjournment. On verification, we found that the assessee was allowed the number of dates for hearing. Finally, on 10.08.2026, the assessee’s authorized representative filed the later for adjournment dated 10.08.2026 & had sought adjournment. The bench has duly granted the adjournment & fixed the hearing today. Both the parties are informed in open court. But none was present on the date of hearing on behalf of the assessee. Considering the merit of the case, we proceed to dispose of appeal exparte qua for assessee, after considering submission of the Ld. DR. 3. The brief facts of the case are that the assessee is an individual and proprietor of M/s. Reliance Enterprises which is engaged in business of activity of trading in ferrous and non-ferrous metals. The assessee filed the return by declaring total income Rs.70,959/-. Meanwhile, the department has received the information from Mumbai Investigation Wing and reported that the as per the information, from State Sales Tax Department, Mumbai same accommodation entries are identified by the bogus entry provider. Accordingly, the Ld. AO found that the assessee had made a bogus purchase from the following accommodation entry providers. Sr No. Name of the Party F.Y. Amount (Rs.) 1 Parshva & Company 2008-09 52,90,013/- 2008-09 2 M/s Ruchi Impex 19,31,102/- 2008-09 3 Big Trade Agency 31,76,319/- Total 1,03,97,434/-

4.

The Ld. AO carried out the investigation and finally the amount of Rs.20,79,747/- was added back with the total income of the assessee u/sec. 69C and considered that the assessee is a beneficiary of accommodation bills issued by the party mentioned above. The aggrieved assessee filed an appeal before the Ld. CIT(A) by challenging both on legal and on merit. The Ld. CIT(A) rejected both the issues and uphold the impugned addition. Being aggrieved assessee filed an appeal before us. 5. We heard the rival submission and considered the documents available in the record. The assessee has challenged the legal grounds related to the jurisdiction as Ld. AO for completion of assessment without disposing of the objection filed by the assessee, related to the recorded reason u/sec. 147 of the Act. The assessee had submitted the relevant documents and later it was duly incorporated in the impugned appellate order by the Ld. CIT(A). But the assessee’s appeal duly rejected by the Ld. CIT(A) & had passed the impugned appellate order. 6. Consideration on merit the Ld. CIT(A) had noted the observation which are contended in page no.14 and 15 in impugned appellate order, are reproduced as below: “The fourth reason of making impugned addition is on account of non-compliance of statutory provisions by the defaulting dealers under the MVAT Act, 2002. A general reference has been made by the Assessing Officer in regard to inquiries conducted by the Sales Tax Department in defaulting dealers cases, but no specific name of any dealer has been provided. As a matter of practice, when a person applies for registration under VAT/ Sales Tax Act, proof of business address / proof of address of place of residence, proof of identity, proof of ration card/ electricity bill or telephone bill, bank statements, PAN card copy etc are taken on record and followed by a personal visit by the Registering Authority at the place of business to verify the correctness of information. Registration is granted only after all verifications are done and personal visit at the place of business. Thus a person cannot obtain Registration certificate without complying with the aforesaid requirement. The Assessing Officer could have obtained these information's from the Sales Tax Department to conduct inquires and arrive at a judicious conclusion. The parties named, in the assessment order are also assessed to income tax, as evident by mentioning of PAN details. The Assessing Officer could have called for their assessment records to establish facts and issue summons for verification. Nothing of the sort has been done in this case, we are enclosing herewith following details/documents for your honour's kind perusal. The Assessing Officer did not conduct any independent inquiry/investigation and merely rested his convictions on some incomplete / vague information's and saddled the appellant with huge tax liability which cannot be said to be a just and equitable basis for the additions under discussion. It is therefore submitted that, the conclusion of the Assessing Officer is based purely on conjectures and surmises and contrary to the evidence on record, inasmuch as, copies of bank statements were submitted during the course of assessment proceedings, and not a single item of cash payment towards purchases has been pointed out. Thus, the addition in question has been made purely on guess work and unsubstantiated allegation, hence merits no credence and deserves to be ignored. Consequently, the impugned addition should be directed to be deleted. In the context, of the above stated reasoning and judicial propositions, it is submitted that the entire amount of addition at Rs 20,79,500/- is wholly untenable in law, lacks legal and judicial sanctity and contrary to the factual matrix of appellant's case, hence same may please be directed to be deleted.” 7. The Ld. CIT(A) had considered the merit of the case and had noted the observations in the following in para no.6.3.2 to 7, which are reproduced as below:

“6.3.2 I have gone through the assessment order, submissions made by the appellant. From the facts of the case it is noticed that the AO received the information from Investigation Wing, Mumbai that the assessee has obtained bills of bogus purchases from three parties i.e the Parshva & Co, Ruchi Impex and Big Trade Agency. The above three parties from whom the assessee recorded the purchases are appearing in the list of hawala dealers as per the list provided by the sales tax department, Government of Maharashtra. During the scrutiny proceedings, AO asked the assessee to prove the genuineness of the purchases which were claimed to have been purchased from the bogus suppliers/ bogus entry providers. Further the assessee was asked to submit the confirmation from them and produces them for examination under oath. The assessee has failed to do the same. Further, in order to verify the genuineness of the alleged supplies of the assesee, AO issued notices u/s 133(6) of the IT Act to those parties as per addressee given by the assessee. All the notices returned unserved by the postal authority saying that no such addressee. The onus to prove the genuineness of existence of the party lies on the assessee. The assessee failed to discharge this responsibility. No serious efforts were made by the assessee to discharge such burden proving the genuineness of transactions with these parties. In this regard reliance is placed on decision of Calcutta High Court in the case of CIT vs Korlay Trading Co.Ltd reported in 232 ITR 820 where the Hon'ble court has held that the initial burden is on the assessee to prove the genuineness of purchases. Further the action of the AO in treating the bogus purchases also supported by following judgements. i) PCIT Vs Drisha Impex Pvt. Ltd. in ITA No. 1240 of 2018 with ITA No. 2087 of 2018 dated 07.04.2025, The Hon'ble Mumbai High Court, in its decision has set aside the order of ITAT, confirming the Assessing Officer's (AO) decision to add back 100% of alleged bogus purchases to the assessee's income for Assessment Years 2009-10 and 2010-11. ii) Kanak Impex (India) Ltd in ITA No. 791 of 2021 dated 03.03.2025: the Hon'ble High Court has held that the CIT(A) and ITAT misdirected themselves by estimating profits instead of confirming the full addition as the assessee failed to prove the genuineness of purchases and merely provided details of sundry debtors and creditors in the original assessment which did not absolve them from proving the purchases during reassessment. 6.3.2.2 In this case, the assessee has failed to prove the genuineness of the purchases and hence the AO rejected books and book results u/s 145(3) of the IT Act and arrived at the correct income of the assessee. The AO considered the issue of disallowance on expenditure incurred on purchases rather than treating entire purchases as bogus. After considering all facts, trading results of comparative entitiesand the submission made by the assessee, the AO has arrived disallowance at Rs. 20,79,500/- out of the total bogus purchases of Rs. 1,03,97,434/-.In view of the above discussion, I find no reason to interfere with the additions made by the AO in the assessment order. Accordingly, the grounds raised by the appellant on this issue are 'dismissed'. 6.4 The other Ground at sl. No 2 is not pressed by the appellnat and Ground 8 is general/consequential in nature and hence, no separate adjudication is required.

7.

Hence, Subject to the above discussion, the appeal filed by the appellant Shri Ramesh C Salecha (AAUPK1414G) against the order passed u/s 143(3) r.w.s 147 for the AY 2009-10 is "dismissed." 8. On perusal of the record, we find that the assessee had taken plea that the assessment was completed without providing the recorded reason to the assessee. The assessee has submitted a letter dated 17.06.2014 duly submitted in the department of 19.06.2017 and prayed for providing the recorded reason. The relevant letter of the assessee is duly incorporated in the impugned appellate order in page no.24 which is reproduced as below:

9.

The ld. DR argued & relied on the order of the revenue authorities.

10.

We have considered the submissions of the Ld. DR and carefully perused the material available on record. The assessee has specifically raised a legal plea that the reassessment was completed without furnishing the reasons recorded for reopening. The record indicates that the assessee had addressed a letter requesting the Ld. AO to furnish a copy of the reasons recorded along with the material forming the basis of the belief regarding escapement of income. This aspect is also referred to in the impugned appellate order. At the same time, the impugned addition of Rs.20,79,747/- under section 69C arises from alleged accommodation/bogus purchases aggregating to Rs.1,03,97,434/-. The Ld. CIT(A) has sustained the addition, inter alia, on the ground that notices issued under section 133(6) to the concerned parties were returned unserved and that the assessee failed to establish the genuineness of the purchases. The assessee, however, had challenged the assessment before the Ld. CIT(A) both on the legal issue concerning the reassessment proceedings and on merits.

11.

Considering the totality of the facts and circumstances, and particularly the legal objection relating to furnishing of the recorded reasons, we deem it appropriate, in the interest of justice, to set aside the impugned appellate order and restore the entire matter to the file of the Ld. CIT(A) for fresh adjudication in accordance with law. The Ld. CIT(A) shall examine the assessee's legal grounds relating to the validity of the reassessment proceedings as well as the grounds on merits, after considering the material available on record and such further material as may be produced in accordance with law.

12.

The Ld. CIT(A) shall afford a reasonable and effective opportunity of being heard to the assessee as well as the Ld. AO and thereafter pass a reasoned and speaking order in accordance with law. The assessee is also directed to extend due cooperation and not seek unnecessary adjournments. We have not expressed any view on the merits of either the legal grounds or the addition in dispute, and all issues are kept open for adjudication by the Ld. CIT(A).

Accordingly, the grounds raised by the assessee are allowed for statistical purposes. 8

13.

In the result, the appeal of the assessee bearing ITA No. 7411/Mum/2025 is allowed for statistical purposes. Order pronounced in the open court on 31st day of August 2026 Sd/- Sd/- (OM PRAKASH KANT) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,िदनांक/Dated: 31/08/2026 SAUMYA Sr.PS Copy of the Order forwarded to: 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. आयकरआयु� CIT 4. िवभागीय�ितिनिध, आय.अपी.अिध., मुंबई/DR, ITAT, Mumbai 5. गाड�फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, MUMBAI

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