PIHU GEMS LLP,SURAT vs. ITO WARD 2(3)(6), SURAT, SURAT

आयकर अपीलीय अिधकरण, सूरत �ायपीठ, सूरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI B.M. BIYANI, ACCOUNTANT MEMBER AND SHRI PARESH M. JOSHI, JUDICIAL MEMBER ITA Nos.1446 & 1447/SRT/2025 (Assessment Years- 2019-20 & 2022-23) Pihu Gems LLP, Income Tax Office, 6/2497, Cabin NO.C, Ward-2(3)(6), 3rd Floor, Balaji Sadan, Anavil Business Centre, बनाम/ Limbu Sheri, Adajan Hazira Road, Mahidharpura, Adajan, Vs. Surat Surat (PAN: AAQFP5437J) (Revenue/Appellant) (Assessee/Respondent) Assessee by Sh. Himanshu Gandhi, CA Revenue by Sh. J.K. Chandnani, CIT-DR along with Shri Om Prakash Jha, Sr. DR Date of Hearing 20-07-2026 Date of Pronouncement 22-07-2026

ORDER Per Paresh M. Joshi, JM:

This is an Appeal filed by the Assessee u/s 253 of the Income tax Act 1961, [hereinafter referred to as the Act for the sake of brevity] as and by way of a second appeal before this Tribunal. The Assessee is aggrieved by the order bearing No:- ITBA/NFAC/S/250/2025-26/1081927947(1) dated 22.10.2025 passed by the Ld. CIT(A) u/s 250 of the Act in the first Appeal which is hereinafter referred as the “Impugned Order”. The relevant Assessment Year is 2019-2020 and the corresponding Previous Year Period is from 01.04.2018 to 31.03.2019.

2.1 That as and by way of an Assessment Order made u/s 147 RWS 144/144B of the Act, the total Income of the Assessee was computed and Assessed at Rs.6,03,39,636/-. That by virtue of the Para 3.4 of the aforesaid order an addition of Rs.6,03,39,636/- was made. The ROI was at Rs.3,60,704/-. That the aforesaid Assessment Order bears Number:- ITBA/AST/S/147/2023- 24/1063225666(1) & that the same is dated 23.03.2024 “Impugned which is hereinafter referred to as the Assessment-Order”.

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2.2 That the Ld. AO in the “Impugned Assessment-Order” has recorded as under which is Reproduced by us as below:- “Certain information was received on Insight Portal that the assessee carried huge transactions totalling to Rs.126,76,96,340/- on account of receipt of interest, import of goods, bogus purchases/sales from M/s Nisarg Exim Pvt. Ltd. etc. It was seen from the records that the assessee did not file its return of income; despite the aforementioned huge financial transactions. Accordingly, recourse to the proceedings U/s 147 of the Act was taken and notice U/s 148A(b) of the Act was issued to the assessee on 07.03.2023. In response, the assessee requested for adjournment and the proceedings were accordingly adjourned to vide notice dated 16.03.2023 for 20.03.2023, but the assessee again sought adjournment. The proceedings were adjourned vide letter 22.03.2023 to 27.03.2023, but the assessee did not furnish any information/documents. Accordingly, notice U/s 1 48 of the Act was issued to the assessee on 31.03.2023, requiring the assessee to file its return of income within 30 days of receipt of this notice. In response, the assessee filed its return declaring an income of Rs.3,60,704/-, claiming a refund of Rs.4,10,250/- Accordingly questionnaire and statutory notices U/s 143(2)/142(1) of the Act were issued from time to time. The details of notices issued and status of compliance thereof is summarised as under :- 2. Details of opportunities given:- Type of Date of Date of Respon Date of Response Rema notice/ notice/ Complian se of response type rks if communic communic ce given the if (Full/part/ any. ation ation assesse received adj.) e receive d/ not receive d Notice 16.03.20 20.03.2 Not - - - 23 023 U/s receiv 148A(b) ed ITR filed - Notice 31.03.20 30.04.2 Recei 27.04.2 U/s 148 23 023 ved 023 - - - Notice 07.09.20 20.09.2 Not 23 023 U/s receiv 142(1) ed - - - Notice 13.09.20 27.09.2 Not 23 023 U/s receiv 143(2) ed - - - Notice 22.09.20 03.10.2 Not U/s 23 023 receiv 142(1) ed - - - 5 Days' 05.10.20 10.10.2 Not 23 023 non- receiv ed responsi ve letter Partly - Notice 25.10.20 02.11.2 Recei 04.11.2 U/s 144 23 023 ved 3 Partly - Notice 08.12.20 14.12.2 Recei 25.12.2 23 023 ved 3 U/s 142(1)

2.3 That during the course of the hearing on 19.03.2024 before the Ld. AO Assessee submitted all the bills of imports & exports. It was contended that all payments have been made through banking channel & that all the goods have been exported through clearance of by the Gov. Agency/Custom Dept. Request was made that few purchase & sale bills will be submitted in a day or two. The Assessee also contended that in view of the documentary evidences submitted by the Assessee who is in the business of trading in gems since long, the books are not required to be rejected as proposed. The Assessee sought statement of person which was relied upon by the Authorities and desired cross examination too of such a person. However, it was pointed out to the Assessee that No such Statement is relied upon by the Department and therefore Request for Cross Examination is not applicable. Proposed NP of 10% was too opposed as exorbitant, by the Assessee.

2.4 The Ld. AO in the “Impugned Assessment-Order” has held as under:- 3.2 Brief facts of the case are that the bank statements & financials of M/s Nisarg Exim Pvt. Ltd. were examined by the Investigation Wing and it was found that the above party is not doing any actual business and majority of its receipts are from two companies i.e. M/s Dhani Enterprises and Yashraj Enterprises and funds received by them are being utilised to make entries of advances, sales etc. to various parties. It was also noticed after examination of bank statements of Nisarg Exim Pvt. Ltd. that the Bank statements of above company that prior to April, 2018, there were no transactions in its bank accounts and the bank even charged non- maintenance charges from this Account. Physical verification made by the Investigation Wing also revealed that the above company is non-existent at the given address. In view of the above, the assessee was once again requested during the course of personal hearing through video conferencing that genuineness of the transactions with this party may be

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established by way of furnishing confirmed copy of account of the party and also copies of the bills issued by the assessee to this party. In response, the assessee has furnished copies of the bills issued by it to M/s Nisarg Exim Pvt. Ltd. 3.3 In response, the assessee furnished copies of sales bills issued by the assessee to Nisarg Exim Pvt. Ltd. and also ledger account of the party. It is seen that the assessee claimed to have made sales of Rs.4,95,00,000/- to this party i.e. Nisarg Exim Pvt. Ltd. On being confronted, the assessee contended that all the sales made to the above party have duly been recorded in the books of account of the assessee and payments of sales consideration has been received through banking channel, hence the same are genuine. However, on verification of the bank statement furnished by the assessee in support of its contention, it is seen from copy of the bank statement of the assessee maintained with the Axis Bank Ltd. that the payments in respect of sales made to Nisarg Exim Pvt. Ltd. have been received in this bank account on 04.07.2017 in 7 chunks in a single day, totalling to Rs.4,95,00,000/-. From copy of ledger of the above party in the books of account of the assessee, it is strange to note that huge payments of Rs.4,95,00,000/- have been received by the assessee from Nisarg Exim Pvt. Ltd. at Rs.4,95,00,000/- on 04.07.2018 and after receipt of the payments for purchases in advance by Nisarg Exim Pvt. Ltd. after long period of around 5 months, sales bills have been issued by the assessee on 29.11.2018, meaning thereby that the alleged purchaser made huge payments to the assessee at Rs.4,95,00,000/- in advance, without charging any interest and the purchases have been made after a long gap of 5 months, which works out around Rs. 16,50,000/- even it it is worked- out at minimum rate of @ 8% p.a. 3.4 Since the above facts cast serious aspersion over genuineness of the transactions with this party, hence notice U/s 133(6) of the Act was issued directly to M/s Nisarg Exim Pvt. Ltd. for confirmation of the transactions with the assessee. However, M/s Nisarg Exim Pvt. Ltd. did not confirm the transactions and did not reply. Accordingly, the matter was referred to the Verification Unit of this office with the requested to please depute the Inspector for physical verification/enquiry in respect of existence of M/s

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Nisarg Exim Pvt. Ltd. The Inspector has made physical verification and has reported that he has personally visited the given address but did not found any premises in the name of M/s Nisarg Exim Pvt. Ltd. or any sign board. Hence, he also tried to collect whereabouts from the neighbourers, but M/s Nisarg Exim Pvt. Ltd. or its present whereabouts could not be located. Similar position was also found by the Investigation Wing while trying to contact M/s Nisarg Exim Pvt. Ltd. The status of his activation of GST number of M/s Nisarg Exim Pvt. Ltd. has also been verified from the GST portal and it is seen that it has been CANCELLED SUO MOTO by the GST w.e.f. 26.11.2019 i.e. prior to showing purchases by the assessee to this company. It may also be added that the GST department cancels the GST numbers of the firms suo moto, when it is found that it is engaged in malpractice of issuing bogus invoices. In view of the above, it is crystal clear that M/s Nisarg Exim Pvt. Ltd. is beyond doubt a non-existent company and the assessee claimed to have made sales of Rs.4,95,00,000/- to this company. Hence, the books of account of the assessee are not giving true & fair view of its actual profit. Therefore, this Unit is not satisfied about correctness & completeness of the book version of the assessee in view of the established facts that the assessee has entered bogus sales in its books. Book version of the assessee is, therefore, rejected invoking provisions of Section 145(3) of the Act and considering the objection over proposing higher NP rate in this line of trade, NP of 5% is hereby applied on the gross turnover shown at Rs.121,17,07,052/-. In this way, NP works out to Rs.6,05,85,353/-, which is slightly higher than the figure of bogus sales shown to the above party at Rs.4,95,00,000/-. However, taking a reasonable view of the matter credit of NP itself shown by the assessee at Rs.2,45,717/- allowed and balance NP of Rs.6,03,39,636/- is hereby added to the income of the assessee under the head Income from Business & Profession.” 2.5 That the Assessee being aggrieved by the aforesaid “Impugned Assessment-Order” prefers the first-appeal u/s 246A of the Act before the Ld. CIT(A) who by “Impugned Order” has dismissed the first-appeal of the Assessee on the grounds of reasons specified therein. The Core grounds & and the reasons are as under :- “Opportunity of hearing 4. During the appeal proceedings hearing notices were issued on 11.06.2025, 24.06.2025, 07.07.2025 and 19.09.2025 to the appellant. The appellant did not file its reply in response to hearing notice. Discussion of the issues involved 5. The appellant is a limited liability partnership firm. The appellant claims to be engaged in the business gems and jewellery. The appellant filed its return of income u/s 139 on 24.10.2019 declaring a total income of Rs.3,60,700. The case of the appellant was flagged on Insight Portal.

5.1 As per the information received from Customs authorities, the appellant had resorted to over invoicing of imports. Goods worth Rs.5,839 (natural Corundum-non gem grade) was imported for Rs.25,84,07,690 classifying it as "rough colour stone-quartz". The over valued amount of Rs. 25,84,07,690 was debited in the books. No form 15CA was filed. 5.2 Physical examination of the premises of the appellant (by investigation wing Surat) 62497, Cabin No.C 3rd Floor, Balaji Sadan Limbu Sheri, Mahidharapura, Surat, Gujarat revealed that no activity was being carried out. Also DRI Surat carried out inquiry at the premises on 16.03.2019. As per the panchanama, premise was rented out by owner to Laxman Amararam Gurjar. It was stated by the owner that Mr. Gurjar never was present at the premise and could be contacted only over phone. Another partner Sh, Kanak told DRI that he merely signed documents as per the direction of the Mr. Gurjar. Therefore it became evident that no business activity was being conducted, and the firm was being used as a conduit to undertake transactions in the disguise of diamond import/purchase and sales. 5.3 The appellant showed a turnover of Rs.121,17,07,052 and profit of only Rs.3,60,704. The investigation wing issued notices to all parties from

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whom purchases in excess of Rs. 50 lakhs were made. However none responded. 5.4 Order u/s 148A(d) was passed on 31.03.2023 and notice u/s 148 was issued on 31.03.2023. The appellant filed its return of income in response to notice u/s 148 declaring a total income of Rs. 3,60,704. 5.4 During the assessment proceedings, the AO examined sales claimed by the appellant. The appellant claimed to have made sales of Rs. 4,95,00,000 to M/s. Nisarg Exim Pvt. Ltd. AO issued Notice u/s 133(6) to M/s. Nisarg Exim Pvt. Ltd. for confirmation of the transactions. The Nisarg Exim Pvt. Ltd. neither confirmed the transaction nor replied. The AO requested the Verification Unit to physically verify the whereabouts of M/s. Nisarg Exim Pvt Ltd. However the party could not be traced. In addition to this, the GST Number of M/s. Nisarg Exim Pvt Ltd was cancelled suo moto by GST Department w.e.f. 26.11.2019 due to its engagement in malpractice of issuing bogus invoices. 5.3 The AO was not satisfied with the correctness and completeness of books and concluded that the appellant had entered bogus sales into its books. In view of this the AO rejected books of account of the appellant u/s 145(3) of the Act. The AO worked out the net profit at Rs. 6,05,85,353 (5% of gross turnover of Rs. 121,17,07,052). After allowing credit for Net Profit shown by the appellant Rs. 6,03,39,636 was added to the total income of the appellant. The assessment u/s.147 r.w.s. 144 r.w.s. 144Bwas completed by assessing total income at Rs. 6,07,00,340. 5.4The appellant did not respond to hearing notices issued from this office. Decision 6. Adequate opportunities (please see paragraph 4) were afforded to the appellant to substantiate the grounds of appeal. However the appellant has not filed any submission or evidence to challenge the findings of the AO. Therefore the grounds raised are dismissed.

2.6 That the Assessee being aggrieved by the “Impugned Order” has preferred the Instant Second Appeal before this Tribunal & has raised the following grounds of Appeal in the form No:-36 before us which are as under:- “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of Ld. AO in charging interest under section 23413 and 234C of the Income Tax Act, 1961. 2. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in confirming the action of Ld AO in initiating penalty proceedings under section 270A of the Income Tax Act, 1961. 3. Appellant craves leave to add further grounds OR to amend OR alter the existing grounds of appeal on OR before the date of hearing. 4. On the facts and circumstances of the case and in law, the learned CIT(A) erred in passing ex-parte order without providing fair opportunity of being heard to the appellant. 5. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in confirming reassessment proceedings u/s 148 of the Income Tax Act, 1961 which is bad in law and required to be quashed. 6. On the facts and circumstances of the case and in law, the Ld CIT(A) erred in confirming the action of Ld AO in initiating reassessment proceedings by issuing notice u/s 148 by JAO in violation of CBDT notification dated 29.03.2022.

Observations, Findings & Conclusions:- 4. 4.1 We now have to decide the legality, validity and the proprietary of the “Impugned Order” basis records of the case & the rival submissions canvassed before us.

4.2 We have carefully perused the records of the case and have heard the submissions.

4.3 We, after carefully perusing the Records of the case and after hearing & further after examining the Rival contentions of the Ld. AR and the Ld. DR canvassed before us are of the considered view that the “Impugned Assessment-Order” is a Biparte one whereas the “Impugned Order” is an ex-parte one. Both the Ld. AR & Ld. DR are at Ad Idem in the final analysis as Recorded aforesaid that “Impugned Order” in the given facts & circumstances should be Set Aside subject to Cost, however, on the Quantum of Cost they have left the issue to the Bench to exercise it’s wisdom. In the circumstances aforesaid, we Set Aside the “Impugned Order” and Remand the case back to the file of Ld. CIT(A) [without Commenting on the Merits of the case] on Denovo basis with a direction to Pass a Reasoned Order on Merits. We direct the Assessee & his Authorised Representative who had appeared before us not to seek any Adjournment & in the very first hearing they should make all the submissions & conclude the hearing before the CIT(A). It will be out of place to mention herein that the Ld. AR has undertaken before us to finish the submissions & hearing at the first available opportunity. We direct the Assessee to Pay Cost of Rs.5000/- to “PM Relief Fund” through a challan & show the necessary proof in this regard to the Ld. CIT(A) & thereafter he should proceed with the Adjudication of the First Appeal.

4.4 In the premises drawn up by us we Set Aside the “Impugned Order” as and by way of Remand back to the file of the Ld. CIT(A) with above directions including on cost.

Order 5

5.1 In the Result, “Impugned Order” is Set Aside back to the file of the Ld. CIT(A) as & by way of Remand On Denovo basis with directions as aforesaid.

5.2 The appeal of the Assessee is allowed for statistical purpose.

ITA No.1447/SRT/2025 – A.Y. 2022-2023 6. The Facts & Circumstances in the present appeal are identical & pari materia save & except the A.Y. and the “Impugned Order”. Accordingly, our finding in ITA No.1446/SRT/2025 - A.Y. 2019-20 [supra] would apply mutatis mutandis to this Appeal too.

Pronounced in open court on 22.07.2026

Sd/- Sd/- (B.M. BIYANI) (PARESH M. JOSHI) ACCOUNTANT MEMBER JUDICIAL MEMBER िदनांक /Dated : 22.07.2026 * Kishore, Sr. P.S.

Copy of the Order forwarded to:

By Order,

Sr. Private Secretary, I.T.A.T., Surat

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