INCOME TAX OFFICER, WARD-1, PANIPAT vs. BIJENDER GARG, PANIPAT

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH: “SMC” NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER ITA No.2975/Del/2026 & C.O.No.176/Del/2026 Assessment Year: 2013-14 Income Tax Officer, Vs. Bijender Garg, Ward-1, H. No. 1, Sector -12, Panipat HUDA, Panipat, Haryana PAN: AGGPG3783J (Appellant) (Respondent/Cross-Objector) Assessee by Sh. J.B. Sharma, Adv. Department by Sh. Manoj Kumar, Sr. DR Date of hearing 30.06.2026 Date of pronouncement 30.06.2026 ORDER The instant Revenue’s appeal ITA No.2975/Del/2026 with assessee’s cross objection C.O. No.176/Del/2026 for assessment year 2013-14, arise against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2025-26/1085012927(1), dated 21.01.2026 involving proceedings under section 147 r.w.s. 144 of the Income- tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.

ITA No.2975/Del/2026 & C.O. No.176/Del/2026

3.2 The reply of the assessee has been duly considered but not acceptable and not tenable. As per information has been received from the Deputy Director of Income Tax (Inv.), Panipat it was noticed that the assessee has entered into bogus transactions to the extent of Rs. 16,40,000/- to reduce his actual income during the financial year 2012-13. The details of bogus transaction amounting to Rs.16,40,000/- made by the assessee from Sh. Rakam Singh, Prop. Jai Mata Enterprises or M/s Ganesh Wooltex is not found genuine as the same remains unexplained. Therefore, bogus transaction made with above referred party amounting to Rs. 16,40,000/- is hereby added to the total income of the assessee. Penalty u/s.271(1)(c) is initiated separately for furnishing inaccurate particulars of income. (Addition: Rs.16,40,000)”

5.2 During the appellate proceedings, the appellant has filed a written submission which is reproduced as under: That the appellant Bijender Garg is running the business of 1. Manufacturing of textiles and Retail of other products under the name of M/s Dev Textile Mills and M/s Garg Brothers and Co. at Panipat(Haryana).The Assessee filed his Income Tax return for the AY 2013-14 on 28/09/2013 2 | P a g e

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declaring total income at Rs. 5,25,350/- vide Ack. No. 796260821280913. The acknowledgement of return is enclosed. 2.Annexure -3 2. That the appellant received notice u/s 148 of Income Tax Act on 30.03.2021 and also received notices u/s 142(1) on 30/06/2021 and on 03/02/2022 and the appellant replied both the notices vide Ack. No. 532023951180921 & 299623241070322 with necessary documents. The Ld. AO also issued a notice u/s 144 of the Income Tax Act on 29/03/2022 12:52:07 and completed the assessment u/s 143(3) as on 30/03/2022. It means the AO given only few hours to the appellant for complying with the Show Cause Notice. It is clear violation of principles of natural justice. In case of Dipak Natwarlal Dholakiya vs Additional/Joint/Deputy /Assistant commissioner of Income tax, reported in (2023) 149 taxmann.coml51 (Gujarat) wherein the time of 12 hours was given to the Petitioner for complying with the Show Cause notice and therefore the court held it to be a gross violation of principles of natural justice as no proper opportunity of being heard to the petitioner and declared the entire action of the completion of assessment not in consonance with the legislative intent. The Hon'ble high court quashed the impugned order. We also rely on the judgment of DineshKumar Chhaganbhai Nandani V. Income Tax Officer (Gujarat High Court) (R/Special Civil Application NO. 7864 of 2022 dated June 19,2023. The copy of SCN & assessment order is enclosed for your kind consideration. Annexure 4-13

ITA No.2975/Del/2026 & C.O. No.176/Del/2026

ITA No.2975/Del/2026 & C.O. No.176/Del/2026

In the case of M/s Ansari Construction vs. Additional Commissioner Central.. 24 Nov. 2020(Allahabad High Court) Hon'ble High Court held that: " In present case along with the application, the petitioner had filed a statement to affect all requisite returns have been filed and dues are cleared and thus it was the incumbent upon the department to have verified the correctness of the averments made in application. I am sorry to observe that the department miserably failed to verify the facts from their own record and proceeded to issue show cause notice. The manner in which the show cause has been issued is wholly unacceptable as it does not record any shortcoming on the part of assessee".

6 . That the assessee replied many times that he does not know Sh. Rakam Singh Prop. M/s Jai Mata Enterprises & Ganesh Woolex and he did not get any entries from the said person. The AA did not provide the proper identity of Rakam Singh not provide the Pan No. and proper address of Rakam Singh and not provide the bifurcation of amount and statement of Rs. 16.40 lac to the assessee. The AA did not provide the opportunity to cross the third party namely Sh. Rakam Singh to the appellant which is mandatory to follow the principle of natural justice. The appellant in his reply dated 18/09/2021 also demanding to provide him the copy of reason recorded by AA before issuance of notice u/s 148, but the AA did not provide the copy of reason recorded by him to the appellant when the AA accepted the Income Tax return filed by the assessee on 28/09/2013. It is well settled law if the authority is considering third party evidence against the assessee then it is the duty of AA to communicate the reasons to believe to the affected person. But he AA did not follow the principle of natutal justice. It is bare minimal requirement of the principle of natural justice is the recording of reason and communicating such reasons to the effected party . Hon'ble Supreme Court of India in the case of CIT vs Odeon Builder Pvt. Ltd. (2019)110 Taxman.com 64(SC) has held that no addition can be made on the basis of third party information gathered by the investigation wing of the department which has not been submitted to further verification by the Assessing Officer and he had not provided copy of such statement to the assessee and thus, denied the opportunity of cross examination and whereas on other hand the assessee had prima facie discharged initial burden of substantiating purchases through cheques, vat returns of seller and their income tax returns. But in our case the authority did not follow the such mandatory conditions. In the aforesaid context we rely on the following judgments: 1. CIT West Bengal vs. Oriental Rubber Works,(1984) ISCC700

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(ii) M/s SS Industries vs. Union of India on 24th Dec (2020) Gujrat High Court. The AO did not deny the sale & purchase of assessee in his order. It 7. is well settled law when the AO accept the sale and purchase of assessee then he can not make any addition u/s 69 of Income Tax Act for bogus transaction. We here submit the certificate from chartered Accountant regarding the total amount of purchase during the FY 2012-13 and copy of purchase ledger duly attested by CA which show that the appellant has not done any transaction with Jai Mata Enterprises & M/s Ganesh Wooltex during the FY 2012-13. We here submit the vat assessment order of FY 2012-13. The turnover declared in the Vat assessment order and returns are same as mentioned in the trading account of audit report. The assessee maintained proper books of accounts and those are duly audited by CA. The state revenue authority assess the case of appellant for the FY 2012-13 on 28/10/2014 with the observation that " The dealer has furnished all the quarterly returns in form Vat R-l and annual return in Vat R-2 along with trading account/balance sheet etc. the returns has been examined and found complete in material particular. No deficiency came in to the notice during examination of returns". 5. Annexure 38-50 The AO did not reject the books of account of assessee. It is well settle 8. law if the AO do not reject the books of account, he cannot make any addition on account of bogus purchases. In the case of Commissioner of Income Tax vs Sunrise Tooling System Pvt. Ltd. Hon'ble High Court of Delhi, ITA 399/2013. Jan 22,2014(2014)88 CCH 0026 Del HC (2014) 361ITR 0206 (Delhi), held that: Where the AO has not rejected Assessee's books of account and assessee has firmly and conclusively established its claim of purchase of goods, no addition can be made on account of bogus purchase.” 5.3 The facts recorded and findings of the AO in the assessment order has been considered. 5.3.1 The facts of the case are that the AO received information from DDIT(Inv) Panipat that Shri Rakkam Singh, Proprietor of M/s Jai Mata Enterprises was maintaining current bank account and saving bank account in name of business concerns and his personal name. Investigation carried out by the Investigation Wing revealed that the address of all the concerns was incomplete and no business activity was carried out by the concerns. Thus, Shri Rakkam Singh was proved to be an accommodation entry provider through his concern. During the F.Y. 2012-13, the appellant received an amount of Rs.16,40,000/- from M/s Jai Mata Enterprises and M/s Ganesh Wooltex, the concerns of Shri Rakam Singh. The AO reopened the assessment on the basis of such information. During the reassessment proceedings, the AO asked the appellant to prove genuineness of transaction with M/s Jai Mata 6 | P a g e

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Enterprises and M/s Ganesh Wooltex by providing documentary evidences. In response to that the appellant filed written submission, along with some evidences. The AO noted that the appellant did not prove the genuineness of purchases from both the concerns by bringing necessary documentary evidences. The AO also noted that Investigation carried out by the Investigation Wing had established that M/s Jai Mata Enterprises and M/s Ganesh Wooltex was merely accommodation entry provider. Thus, the AO made addition of Rs.16,40,000/- in respect of alleged purchases. 5.3.2 During the appellate proceedings, the appellant has submitted that the AO has made addition without providing sufficient opportunity to prove the genuineness of transactions. The appellant also submitted that the AO did not issue notice u/s 143(2) of the Act. Therefore, the assessment was completed without issuing notice u/s 143(2) of the Act. The appellant also submitted that it was stated before the AO that the appellant did not make any transaction with M/s Jai Mata Enterprises and M/s Ganesh Wooltex. The appellant submitted a certificate of CA showing that no purchases were made from M/s Jai Mata Enterprises and M/s Ganesh Wooltex during F.Y. 2012-13. Further, the AO did not reject the books of accounts and made addition in respect of bogus purchases. To support the argument, the appellant has relied upon various decisions. 5.3.3 From the assessment order, it is seen that the AO issued notice u/s 142(1) of the Act on 20-06-2021 and 03-02-2022. Thus, the AO has provided the opportunity of being heard and the appellant replied to queries raised by the AO. Thus, the AO has provided opportunity of being heard before finalizing the assessment order. 5.3.4 Even though the appellant has stated that without issuing notice u/s 143(2) of the Act, the AO passed assessment order u/s 143(3), therefore, the assessment order is invalid. In the case of the appellant, the AO has not passed order u/s 143(3) of the Act but assessment order has been passed u/s 147 of the Act. The appellant has not provided any documentary evidences that the appellant did not receive notice u/s 143(2) of the Act. In absence of documentary evidence, the claim of the appellant that no notice u/s 143(2) of the Act was issued by the AO is not considered. 5.3.5 As far as the challenging of the reopening of assessment is concerned, the AO has followed the procedure laid down under the IT Act. The appellant has not explained how reopening of assessment and assessment order was not in accordance of law. Therefore, the reopening of the assessment and order is valid as well as assessment order in the eyes of law. 5.3.6 During the assessment proceedings as well as the appellate proceedings, the appellant has stated that as per CA certificate he had not carried out any transaction with M/s Jai Mata Enterprises and M/s Ganesh Wooltex. The appellant has provided a copy of CA certificate along with datewise details of purchases made during F.Y. 2012-13 by M/s Dev Textiles and M/s Garg Brothers, Proprietor concerns of the 7 | P a g e

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appellant. From perusal of the purchases made by the appellant during F.Y. 201213, it is seen that name of M/s Jai Mata Enterprises and M/s Ganesh Wooltex does not appear in the list of the parties from the purchases were made. Thus, it is clear that during the year no purchases were made by the appellant from M/s Jai Mata Enterprises and M/s Ganesh Wooltex. Therefore, if no purchases have been made by the appellant from both these concerns, there could not be any disallowance in respect of such purchases. Therefore, the addition of Rs.16,40,000/- in respect of alleged purchases from M/s Jai Mata Enterprises and M/s Ganesh Wooltex is deleted. 5.3.7 As discussed above, the reopening of the assessment and the assessment order u/s 147 of the Act is upheld as valid reopening and valid reassessment order as per the I.T. Act. However, the addition of Rs.16,40,000/- made by the AO in respect of alleged purchases from M/s Jai Mata Enterprises and M/s Ganesh Wooltex is deleted.”

This is what leaves the department aggrieved who has come in appeal before the tribunal. 3. I have given my thoughtful consideration to the Revenue’s and the assessee’s respective vehement submissions. I reiterate that the learned CIT(A) had deleted the impugned bogus purchases disallowance for the reason that during the year under consideration, no purchases were made by the assessee from M/s. Jai Mata Enterprises and M/s Ganesh Wooltex. I hereby conclude in these peculiar facts that learned CIT(A)/NFAC has rightly deleted the assessee’s impugned bogus purchases disallowance of Rs.16,40,000/- which does not warrant any interference. The Revenue’s appeal fails therefore. The assessee’s cross objection C.O. No. 176/Del/2026 stand dismissed as rendered infructuous. 8 | P a g e

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