ITO-19.3.1, MUMBAI vs. SHEMON JEWELS, MUMBAI

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ITA 1401/MUM/2025Status: DisposedITAT Mumbai19 August 2026AY 2014-156 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the CIT(A) had not recorded independent findings and had relied on an irrelevant case. Therefore, the matter was restored back to the CIT(A) for a fresh order.

What were the facts?

The Assessing Officer (AO) made an addition of Rs. 1,03,38,076/- on account of bogus purchases from a fictitious firm. The CIT(A) restricted this addition to 10%. The Department appealed this decision.

What were the issues?

Whether the CIT(A) erred in restricting the addition for bogus purchases without independent findings, and whether the AO's action was justified based on investigation reports.

Which sections of the Income-tax Act were involved?

Section 68,Section 69C,Section 37

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR

Pronounced: 19.08.2026

PER SHRI SANDEEP GOSAIN, JUDICIAL MEMBER:

This appeal is filed by the Department against the order of Ld. CIT(A) vide DIN: ITBA/NFAC/S/250/2024-25/1071574574(1) dated 27-Feb-2025 for the Assessment Year 2014-15. The Department has raised the following grounds of appeal:

1) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition TO THE EXTENT OF 10% AS AGAINST 100% made by the AO on account of bogus purchases of Rs. 1,03,38,076/- made by the assesse firm from M/s. Impex Gems, which is found to be a fictitious firm, managed & controlled by Mr. Bhawarlalal Jain & his Groups; 2) Whether on the facts and circumstances of the case and in law, the Ld. CITIA) erred in restricting the addition to the extent of 10% as against 100% addition of bogus purchases of Rs 1,03,38,076 made by the assessee firm from M/s impex Gems, a factitious supplier, by ignoring the fact that action of the AO was based on the Information/Report received from the DGIT (Investigation Wing Mumbai, post search & seizure operation on Mr. Bhanwarlal Jain's Groups, that their groups were involved in providing only accommodation entries in the form of issuing bogus Sales/Purchase bills without supplying any goods/materials and the assessee firm was found to be one of the beneficiaries, who had obtained accommodation entries for bogus purchases from M/s Impex Gems, to inflate it's expenses and thereby suppress it;s true profit ?; 3) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition by ignoring the fact that during the Re- assessment Proceedings, the assessee could neither produce the quantity tally of day to day purchases/Sales/Stocks and corresponding values, Delivery Challans, lorry receipts etc. nor could prove the genuineness of alleged transactions and creditworthiness of parties for verification, in spite of ample opportunities provided by the Assessing Officer?" 4) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) hits erved in restricting the addition, by not justified in estimating the income of bogus purchases on the basis of comparing of the bogus purchases with the purchases in the regular books of accounts, ignoring that the fact of procuring bogus voices leads to the unverified inflation of purchase price by the assessee which cannot be compared with the regular GP of the books of accounts?" 5) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition by ignoring the element of reasons for procuring of bogus invoices, when it is observed that the GP on these bogus invoices are almost matching with the GP as per genuine invoices and therefore such estimation of income out of bogus purchases with the GP as per regular books of accounts is not justified?" 6) "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition by ignoring that though there was no dispute that the bogus purchases were made and so act of infraction of law was committed in violation of section 74(1A) of the Maharashtra Value Added Tax Act, 2022 and therefore, such expenses is not allowed as per express provisions u/s 37 of the Act?"

7) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the decision of the Hon'ble Supreme Court in the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Gul) 354, Dated. 16.01.2017, wherein Hon'ble Supreme Court has dismissed the appeal and held that once a findings of act has been given that entire purchases shown on the basis of fictitious invoices and debited in the P & L account are established as bogus, then restricting the addition to a curtained percentage goes against the principles of section 68 and 69C of the Income- Tax Act, 1961 and when the purchases mode are from bogus suppliers or concerns, the entire purchases are liable to disallowed ?" 8) Whether on the facts and circumstances of the case and in 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. 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 bogus purchases, which has been confirmed and was already the law of the land, when the Ld. CIT(A) has pronounced it's order on 26.12.2024?" 9) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in erred in not appreciating the fact that in the case of M/s. Swetamber Steels Ltd. (Supra), the Hon'ble ITAT Ahmadabad had conformed the disallowance of the bogus purchase, by stating that the purchases shown from respective parties were found non-genuine and the decision of the ITAT was upheld by Hon'ble Gujrat High Court and also by the Hon ble Supreme Court ?!" 10) The appeal u/s. 253 of the Income-Tax Act, 1961, is being filed, in view of Tax- Effect involved in the instant case is Rs. 36,28,400/-, which is below the prescribed limit mentioned in the CBDT's Circular F.No.279/Misc. 142/2007-ITJ(Pt) amended vide No. 09/2024 dated 17.09.2024 and this case also falls under one of the exceptions specified in paragraph 3.1(c) of the of the CBDT's Circular No 05/2024 Dated. 15.03.2024, wherein it is stated that in cases involving "Organized Tax Evasion" including cases of accommodation entry of bogus purchases, the decision to file appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit.

2.

None appeared on behalf of the assessee when the case was called repeatedly. From the records, we notice that the assessee did not appear on the last date of hearing; therefore, the matter was adjourned to 23.06.2026 with a direction to the Department to get the summons served upon the assessee with regard to the present appeal.

3.

In this regard, the service report was placed on record by the learned DR, which shows that the summons was served upon the assessee. Thus, considering these facts, we proceed to hear the appeal ex parte qua the assessee. On the other hand, the learned DR is present in the Court and is ready with arguments; therefore, we have decided to proceed with the hearing of the case on merits.

4.

From the records, we notice that the AO, in the present case, received information that during the course of search proceedings in the Bhanwarlal Jain group dated 03/10/2013, it was revealed that the group provided accommodation entries in the form of bogus purchases/sales, etc. Concerns of the above group, i.e., M/s Impact Gems, showed bogus sales to the assessee in the books of account, and thus it was concluded that the assessee had taken accommodation entries for bogus purchases from the concern, M/s Impact Gems. Therefore, after providing an opportunity of hearing to the assessee, an order under Section 144 read with Section 144B was passed, making additions.

5.

The learned CIT(A) deleted the said addition by relying upon the decision of the Coordinate Bench of the ITAT in the case of Meera Ben Kantilal Parekh vs. ITO, whereas the learned CIT(A) has not recorded any basis or reasons for deleting the addition except by relying upon the decision of the Coordinate Bench of the ITAT, which does not even arise from the same search. The CIT(A) was under a statutory obligation to record independent findings by discussing the facts of the present case; whereas the learned CIT(A) has not controverted or rebutted the detailed facts recorded by the AO in the assessment order.

6.

Be that as it may, we are of the view that the impugned order passed by the learned CIT(A) needs to be set aside and the matter restored back to the file of the learned CIT(A) with a view to passing a fresh order in accordance with law, after duly considering the facts and circumstances of the present case and recording independent findings with regard to the assessment order.

7.

Before parting, we want to make it clear that our decision to restore the matter back to the file of the CIT(A) shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the CIT(A) independently in accordance with law.

8.

Needless to mention that the learned CIT(A) shall provide adequate opportunity of hearing to the assessee. The assessee shall not seek any adjournment on frivolous grounds and shall remain cooperative during the course of the proceedings.

9.

In the result, the appeal filed by the Department stands allowed for statistical purposes.

Order pronounced in the open court on 19.08.2026.

Sd/- Sd/- PRABHASH SHANKAR SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 19.08.2026 RY-SrPS Copy to: ITO-19.3.1, , 405, 4TH FLOOR, PIRAMAL CHAMBERS, 1 PAREL, MUMBAI-400012, MAHARASHTRA

SHEMON JEWELS, EC-2083, 2ND FLOOR, BHARAT DIAMOND 2 BOURSE, MUMBAI-400051, MAHARASHTRA

3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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