ASGARALI YUSUFALI PORBANDARWALA,MUMBAI vs. ASST. CIT, CENTRAL CIRCLE 4(3), MUMBAI

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: A BEFORE HON’BLESHRI PAWAN SINGH, JUDICIAL MEMBER AND HON’BLE SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA 1417/MUM/2026 निर्धारणवर्ा/Assmt. Year:2019-20) Permanent Account Number: AADPP6000A ASST. CIT, CENTRAL ASGARALI YUSUFALI CIRCLE 4(3) PORBANDARWALA KAUTILYA BHAVAN, C-41 MEZZANIN FLOOR, PATIANI TO C-43, G BLOCK, HOUSE, PLOT NO. 427, Vs. BANDRA KURLA COMPLEX, KALBADEVI ROAD, MUMBAI, BANDRA (EAST), MUMBAI, MAHARASHTRA 400002 MAHARASHTRA 400051 (प्रत्यर्थीRespondent) (अपीलार्थीAppellant)

निर्धाऩितीद्वधिध/Assessee represented by: Shri. Abdulla Bharmal, Adv. िधजस्वAद्वधिध/Revenue represented Shri Surendra Mohan, Sr. by: DR.

सुिवधईकीतधिीख/Date of conclusion of hearing: 29.04.2026 घोषणधकीतधिीख/Date of pronouncement: 21.07.2026 आदेश / ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal is filed by the assessee against the order of ld. Commissioner of Income Tax (Appeal)-54, Mumbai vide DIN: ITBA/APL/S/250/2025-26/1083643527(1) dated 12.12.2025,passed against the assessment order by the Assistant Commissioner of Income-tax, Central Circle 4(3), Mumbai u/s 147 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 31.03.2024 for the Assessment Year 2019-20.

i. The Ld. Commissioner of Income Tax (Appeals) – 54, on the facts and in the circumstances of the case and in law, erred in sustaining the disallowance solely on the appellant‟s conditional acceptance made to avoid litigation, which did not constitute an admission, and in upholding the addition without any independent verification by the Assessing Officer. ii. The Ld. Commissioner of Income Tax (Appeals) – 54, on the facts and in the circumstances of the case and in law, erred in sustaining the disallowance of 12.5% of purchases alleged to have been made from non-genuine parties. iii. The Ld. Commissioner of Income Tax (Appeals) – 54, on the facts and in the circumstances of the case and in law, erred in holding the creditors to be non-genuine merely on the ground that they were non- filers of income-tax returns, without establishing any nexus between such non-compliance and the alleged bogus nature of the transactions. iv. The Ld. Commissioner of Income Tax (Appeals) – 54, on the facts and in the circumstances of the case and in law, failed to appreciate that the Assessing Officer did not invoke or specify any provision of the Income-tax Act, 1961, under which the alleged bogus purchases were disallowed. v. The Ld. Commissioner of Income Tax (Appeals) – 54, on the facts and in the circumstances of the case and in law, erred in sustaining the addition on the basis of partial information allegedly received from the DDIT (Investigation), Unit 4(3), Mumbai, which was neither supplied to the principles of natural justice. vi. The Ld. Commissioner of Income Tax (Appeals) – 54, on the facts and in the circumstances of the case and in law, failed to appreciate that once the corresponding sales have been accepted, no addition on account of alleged bogus purchases is permissible, as the same results in taxation of the same income twice, which is impermissible in law. vii. The Ld. Commissioner of Income Tax (Appeals) – 54, on the facts and in the circumstances of the case and in law, erred in sustaining the impugned addition without ensuring compliance with the statutory procedure, as no independent verification was carried out by issuance of notice under section 133(6) of the Income tax Act, 1961, and the addition was upheld solely on third-party information, contrary to the settled legal position governing reassessment proceedings under section 148 of the Act. viii. The Ld. Commissioner of Income Tax (Appeals) – 54, on the facts and in the circumstances of the case and in law, erred in disregarding the documentary evidence furnished by the appellant, including purchase invoices, payment through banking channels and corresponding sales, which conclusively established the genuineness of the transactions. 2.1. The issue involved in the present appeal is in respect of disallowance made by the ld. AO of Rs. 31,99,507/- by treating 12.50% of the purchases made from four parties as bogus purchases.

3.1. Further a survey under section 133A was conducted in the case of proprietary concern of the assessee on 11.01.2023 wherein it was found that assessee had made purchases from two such non-genuine entities i.e. Vijaybhai Mohanbhai Muchhadiya for Rs. 13,50,000/- and from Akbar Valimohmmad Sipai of Rs. 42,05,250/-. Thus, total purchases from the four parties, details of which is tabulated below, were alleged to be bogus purchases made by the assessee by availing benefit of accommodation entries. Show cause notice was issued by the ld. AO seeking explanation along with documentary evidences in this regard. Assessee furnished a detailed reply dated 29.03.2024, copy of which is placed on record. From the perusal of the same, it is noted that assessee had made a detailed submission in three parts.In his letter with part one, he dealt with the two parties for which the findings were arrived through survey conducted in assessee’s proprietary concern. In part two, assessee made detailed submissions in respect of the other two parties for whom the details were found during the course of conduct of search in the case One World Group. In part three, assessee replied to the proposal made by the ld. AO as to why addition of 12.5% of the alleged bogus purchases should not be made in the hands of the assessee. All the three parts of these submissions are extracted below for ready reference:

I. Point no 1 "Based on the findings of the survey conducted on M/s Family Clothing Company it is understood that there are purchases made from non-genuine entities during AY 2019-20.

Vijay bhai Mohanbhai Muchhadiya - Rs. 13,50,000;

Akbar Vali mohmmad Sipai - Rs. 42,05,250"

Name of PAN No. GST No. Trade Purchas Assessme the Person Name e (Rs.) nt Year Net of Tax

Vijaybhai DIKPM483 24DIKPM4835E M/s 13,50,0 2019-20 Mohanbhai 5E 1Z8 Aradhn 00 Muchhadiy a a Enterpri se

Akbar FUBPS138 24FUBPS1389Q M/s M 42,05,2 2019-20 Valimohm 9Q 1ZT R 50 mad Sipai Enterpri se

With respect to the above point no.1 it is submitted that the Assessee cannot be made to suffer for non-compliance of third parties. That the Assessee, in furtherance of his business had purchased goods from the above-mentioned entities and had later sold the goods so purchased to other retailers in furtherance of his business. That the Assessee had made payments to the said entities through various banking channels. That the above-mentioned entities are registered under the Goods and Services Tax Act, 2017 (hereinafter referred to as "said GST Act") and have their respective GST registration numbers under the said GST Act. That the above-mentioned entities filed their respective GSTR-1 returns which reflect in the Assessee's GSTR-2A which further supports the Assessee's contention with respect to genuine purchase and sale. That just because these entities have not filed their Income Tax Returns, an action which is beyond the control of the Assessee, it cannot be said that these entities do not exist, and the purchases so made from these entities are bogus and moreover, the said entities had filed their respective GSTR-1s. That the Assessee cannot be made to suffer/be punished for the wrong/non- compliance of others. That an overall view has to be taken, to state that the purchases made by the Assessee are bogus based on non-filing of income tax returns by these entities without considering filing of relevant returns under the said GST Act, would be pushing the Assessee under the bus without any fault of his own.

That the Assessee submits the Ledgers, E-way Bills, Transport Receipt, Stock Statement (Movement of Goods) And Other Documents which are in possession of the Assessee as some documents were seized by the department during the search conducted on 11.01.2023. We are submitting herewith following documents hereto as under:

i. Bill wise details of Purchase from Vijaybhai Mohanbhai Muchhadiya (PAN NO. DIKPM4835E) Trade Name M/S Aaradhna Enterprise. ii. Bill wise details of Purchase from Akbar Valimohmmad Sipai (PAN: FUBPS1389Q) Trade Name :M/S M R Enterprise iii. Ledger accounts of M/s. Aaradhana Enterprise and M/s. M R Enterprise in the books of the Assessee. iv. Stock Statement of movement of goods purchased from M/s. Aaradhana Enterprise and M/s. MR Enterprise and sold to various customers v. GSTR2A of M/s. Aaradhana Enterprise and M/s. MR Enterprise vi. Bank statement of payment made to M/s. Aaradhana Enterprise and M/s. M R Enterprise. vii. Eway bill and Transport Receipt of M/s. Aaradhana Enterprise and M/s. M R Enterprise. II. Point on2: "As per information available on insight portal the details of purchases from non-genuine parties: M/s Rathi Style and Textile Private Limited - Rs. 88,20,486; SVG Style and Textile Company - Rs. 1,12,20,321

Reply:

Clarification regarding Purchase from Rathi Style and Textile Pvt. Ltd. and M/s. SVG Style And Textile Company Pvt. Ltd.:

a. Table No.1: M/s. Rathi Style and Textile Pvt. Ltd. with details of purchase along with Bill Number, Quantity, and Description of Goods along with Net Purchase Value, Applicable Taxes and Gross Total. b. Table No.2: M/s. SVG Style And Textile Company Pvt. Ltd. with details of purchase along with Bill Number, Quantity, and Description of Goods along with Net Purchase Value, Applicable Taxes and Gross Total. c. Statement of stock register of knitted goods along with quantity of goods purchased and sold. Clarification statement of closing stock quantity if the purchases from Rathi Style and Textile Pvt. Ltd. and M/s. SVG Style And Textile Company Pvt. Ltd. were bogus whereby as per the statement and working, the closing stock came to be (negative)-16256.60kg. d. Stock statement of knitted goods with respect to value of purchase and corresponding sales. e. Statement of calculation of gross profit with respect to goods purchased and sold from M/s. Rathi Style and Textile Pvt. Ltd. and M/s. SVG Style And Textile Company Pvt. Ltd.: Particulars Amount (Rs.) Opening Stock NIL Add: Purchase 1,90,86,480 Less: Closing Stock 54,30,936 Cost of Goods Sold (A) 1,36,55,544 Sales 1,47,16,806 Less: Discount 1,10,376 Net Sales (B) 1,46,06,430 Gross Profit (B-A) 9,50,886 Gross Profit Ratio 6.51%

Gross Profit Ratios as 5.20% per Profit/Loss Account f. Copy of Purchase Invoice, E-way Bills, Transport Receipts and Ledger Accounts. g. GSTR2A for the month of August 2018. It is submitted that with respect to the goods purchased and sold from Rathi Style and Textile Pvt. Ltd. and M/s. SVG Style And Textile Company Pvt. Ltd. and the gross profit ratio arrived from thereupon, it is clear that the gross profit ratio with respect to goods purchased and sold from Rathi Style and Textile Pvt. Ltd. and M/s. SVG Style And Textile Company Pvt. Ltd. is higher compared to the overall gross profit ratio arrived upon in the Profit/Loss Account. It is submitted that the purchases made by the Assessee are genuine and in furtherance of business. That the purchase of stock made by the Assessee was then sold in smaller quantities to other retailers as can be seen in through various documents and statements submitted by the Assessee. That in furtherance of his contentions, the Assessee states that Rathi Style and Textile Pvt. Ltd. and M/s. SVG Style And Textile Company Pvt. Ltd. have filed their respective returns pertaining to sale in GSTR-1 and the same is reflecting in GSTR-2A of the Assessee herein basis on which the Assessee filed his GSTR-3B. Details of corresponding Sales made to various parties against purchases from Rathi Style and Textile Pvt. Ltd. and M/s. SVG Style And Textile Company Pvt. Ltd.: a. Stock Register of Knitted Fabric showing quantity and value of purchase and sales. b. Party wise ledger accounts to whom the goods purchased from Rathi Style and Textile Pvt. Ltd. and M/s. SVG Style And Textile Company Pvt. Ltd. were sold to in smaller quantities: i. M.S. DN Jogani & xiv. Tirupati Textile Sons. xv. Anisha Textile ii. Pony Collection xvi. Nitin Synthetics iii. Matoshree Enterprise xvii. Bhanu Tex iv. Naveenchand xviii. Crown Impex Sampatraj xix. Raj Traders v. Maa Padmavati xx. C.J Fashions Traders xxi. N. Babulal vi. Siddh Shree Textiles xxii. Narsingh Hosiery vii. Jain Collection Textile Mills Mills xxiii. S.S. Enterprise viii. Guru Traders xxiv. New Point Trader ix. Manson Creation xxv. Lunia Synthetics x. Richman Shirts xxvi. Nice Way Collection xi. R.Y. Enterprise xii. Padmavati Apparels xiii. Jainam Hosiery

"Point No.4: You are hereby show caused as to why addition at 12.5% III. of the bogus purchase amount of Rs.31,99,507 [12.5% of Rs.2,55,96,057] should not be made in your case". REPLY: The Assessee submits that the purchases made by the Assessee were genuine. That the purchases were made in furtherance and in due course of business of the Assessee. That the Assessee has provided all documentary evidence to substantiate the stand of the Assessee. That to avoid further litigation and for peace of mind. and without prejudice, the Assessee accepts the addition of Rs.31,99,507 (12.5% of Rs.2,55,96,057). That the Assessee has only accepted the addition as stated above but in no way has accepted that the purchases made by the Assessee were non- genuine. [emphasis supplied by us by bold]

4.1. Assessee went in appeal before the ld. CIT(A), raising the grounds on disallowance made by the ld. AO at the rate of 12.5% of the alleged bogus purchases to which he himself had given his acceptance. Before the ld. CIT(A),assessee disagreed with the addition of 12.5% of purchases alleged as bogus. According to him, he never admitted to the allegations that the purchase made from the four parties were bogus. He referred to the submissions made by him in the course of assessment proceedings as required by the ld. AO. List of documents so submitted is reproduced as under:

Copy of Tax Audit Report for AY 2019-20. a. Copy of Statement of Income for AY 2019-20. b. Copy of Income Tax Return Acknowledgement for AY 2019-20. c. Copy of Financial Statements with Annexures for AY 2019-20. d. Copy of Form 26AS for AY 2019-20 e. Copies of Bank Statement for the AY 2019-20 in: f. i. Canara Bank being a Current Account havingAccount No. 0102201020983. ii. Canara Bank being a Savings Account having Savings Account No. 0102101032246. Statement of Purchases for the AY 2019-20. g. Copies of Invoices for Import Purchases and Local Purchases h. including Inter-State Purchases for AY 2019-20. Copy of monthly GSTR-3B filed for AY 2019-20 and Annual Summary i. for GSTR-3B for AY 2019-20. Copy of GSTR-2A filed for AY 2019-20. j.

4.2. According to the assessee, ld. AO never doubted the sales nor rejected the books of accounts. Ld. AO never considered the submissions made by him though all the documentary evidences and their explanations were placed on record.Assessee discharged his onus. According to him, ld. AO had not made any independent enquiry in this regard but is influenced by the information received from the Investigation Wing and the search action under taken by the department for which he mechanically relied upon. Assessee further asserted that ld. AO proceeded with a pre-determined notion which is reflected in the preposition made by him in the show cause notice of disallowing 12.5% of the alleged bogus purchases. There are no evidences on record corroborating the information received by the ld. AO. He has proceeded on estimates and conjunctures to make the addition. Assessee further made submissions, demonstrating the gross profit actually earned by him during the year of 5.20% on various products dealt by him as well as details of annual gross profit earned for three preceding assessment years. Details in this regard are tabulated below for ready reference:

Descript Opening Purchase Direct Closing Cost of Sales (Rs.) Disc/G Gross Gross ion of Stock (Rs.) Expens Stock Goods r. (Rs.) Profit Profit Goods (Rs.) es (Rs.) (Rs.) (Rs.) (Rs.) Perce nt

5515 4,84,77, 34,23,38 4,50,54,2 4,93,32,08 3,72,95 39,04,88 7.97 Viscose 635 5 50 2 1 1 % Poly Fabrics

Fabric 78,28,79 1,92,139 76,36,657 86,78,718 65,090 9,76,971 11.34 Import 6 %

Fabrics 38,91,47 37,50,39 1,41,078 - 0 % 2 4 1,41,078

Knitted 1,90,86,4 54,30,93 1,36,55,5 1,47,16,80 1,10,37 9,50,886 6.51 Fabrics 80 6 44 6 6 %

Knitted 9,73,350 0 9,73,350 10,64,282 7,982 82,950 7.85 Fabrics % (Mtrs.)

Polyeste 43,82,38 4,92,75,9 12,18,8 92,18,90 4,56,58,2 4,53,26,18 3,39,94 (671964. (1.49) r Fabric 2 25 04 8 03 3.5 6 50) % – 5407

Polyeste 5,78,26,7 29,29,19 5,48,97,5 5,94,54,11 4,49,06 5,90,05, 6.96 r Fabric 67 4 73 7 7 050 %

Total 6,45,80, 12,71,62, 12,18,8 2,49,44, 16,80,16, 17,85,72,1 13,45,4 9210122 5.20 285 522 04 956 655 89 12 .50 %

Financia Opening Purchase Direct Closing Cost of Sales Gross Gros l Year Stock expense Stock Goods Sold Profit s Profit Ratio

2016-17 NIL 7,47,57,345 11,65,37 1,71,22,32 5,88,00,394 6,11,72,993 23,72,599 3.88 2 3 %

2017-18 1712232 17,38,31,60 8,95,944 6,45,80,28 12,72,69,58 13,83,66,45 1,10,96,86 8.02 3 5 5 7 2 5 %

2018-19 6458028 12,71,62,52 12,18,80 2,49,44,95 16,80,16,65 17,72,26,77 92,10,124 5.20 5 2 4 8 3 7 %

5.1. Relevant para from the first appeal in this regard is extracted below for ready reference:

“Having accepted for disallowance of 12.5% of purchases, the assessee prevented the Ld AO from making further inquiries into the entire bogus purchases. The AO also, in good faith of the assessee's acceptance for the disallowance, did not make further inquiries which would have otherwise revealed more truth about the entire purchase transactions. That means doctrine of estoppel has bound both the parties i.e., AO and assessee from going back from the agreement for disallowance @12.5% of the purchases identified as bogus transactions. When the AO did not break the agreement reached with the assessee, the assessee too should not break the agreement, more so after having obtained the benefit of freedom from further inquiries into the matter. Time is the essence for any inquiry. After a lapse of long period of time the assessee cannot rake up the matter which was honorably settled and cannot break his own word. Therefore, all the grounds of appeal raised by the assessee are rejected as unethical and immoral.

Hon'ble ITAT Bombay held in the P. G. Ramachandran vs. Income-tax Officer (sixth) [1983] 15 TTJ 476 that where ITO made certain additions with consent of the assessee's representatives and there was no material to prove that the assessee's representative had acted against instruction of assessee in agreeing to such additions, no appeal would lie to AAC. Respectfully following the above decision I hold that appeal against agreed disallowance is not maintainable. Accordingly, all the grounds of appeal are dismissed.” 6. Aggrieved, assessee is in appeal before the Tribunal. We have heard both the parties and perused the material on record. According to the assessee, the acceptance on the preposition of ld. AO in the course of assessment proceedings stands retracted by the fact of assessee filing the appeal. To put it differently, filing of appeal itself is to be considered as retraction of the acceptance of assessee, made before the ld. AO. It was further submitted before us that no specific section has been mentioned while making the impugned disallowance out of the alleged bogus purchases and therefore, it is not sustainable. Before us another case was referred to wherein assessment order of similar factual matrix has been passed in the same assessment year wherein two of the parties namely Rathi Style and Textile Private Limited and SVG Style and Company Private Limited were involved with similar nature of transaction.

assessee were found to be satisfactory and no adverse inference was drawn, assessment was completed by the ld. AO by accepting the returned income of the assessee.

8.1. There is no equity in tax laws, however, in certain ways, promissory estoppel acts as an equalizer and is one of the powerful instruments to enforce equity when the other measures fail. But this does not operate in a vacuum. One of the most persistent questions that has time and again come up for consideration before the courts is whether fairness towards an individual gain primacy over the proper expertise of authority of law. Article 265 of the Constitution of India maintains that „no tax shall be levied or collected except by the authority of law‟. It is a fundamental safeguard which protect

taxpayers from arbitrary taxation, ensuring that taxes are imposed and collected through strictly legislated rules, reinforcing rule of law. It would be preposterous to think that something that is specifically barred by law would be allowed under the umbrella of equity by invoking contours of promissory estoppel. It is consistently maintained by various courts that promissory estoppels would not apply when an authority acts in a way that transcends its jurisdictional or legitimates action. With great power comes great responsibilities. The authority must demonstrate genuine application of statutory principles which could not be presumed.

8.2. On the part of the assessee having accepted the preposition of the ld. AO, observation of the ld. CIT(A) is rightfully justified that assessee prevented the ld. AO from making further enquiries into the transaction of purchases made from the four parties alleged to be bogus.

8.3. Now in the appeal proceedings, assessee transgressing his own acceptance and alleging the stance/approach of the ld. AO, more particularly, when there is no basis of adopting the rate of 12.5% by the ld. AO for making the disallowance, we find it appropriate to remit the matter back to the file of ld. AO to disregard the preposition originally made and the acceptance given by the assessee on making ad hoc disallowance at the rate of 12.5% so as to make denovo meritorious assessment by taking into account documentary evidences placed on record and the explanation furnished by the assessee. It is also directed to take into consideration the historical data furnished by the assessee of GP ratio and as well as profit earned during the year of different products dealt by him. Further, the decision of Hon’ble High Court of Bombay in the case of PCIT v. Mohammad Haji Adam and Company (2019) 203 taxmann.com 459 (Bom.) need to be kept in

perspective which held that disallowance ought to be restricted to the positive difference itself, if any, on gross profit element in the undisputed purchases and that on the alleged bogus purchases.

8.4. Also to be kept in perspective, the judgment of Hon’ble High Court of Bombay in the case of PCIT v. SVD Resins and Plastic Private Limited (2024) 166 taxmann.com 242(Bom.) wherein an important observation has been made by the Hon'ble Court in para-13 of this judgment whereby it opined that “wherever relevant, any confusion in regard to the transaction being bogus, needs to be aligned only after the Assessing Officer consults the sales tax department and a thorough enquiry in regard to such specific transactions being bogus, is also conclusion of the sales tax department.” Thus, the Hon'ble Court held that in absence of such a cohesive and coordinated approach of the Assessing Officer with the sales tax authorities, it would be difficult to come to a concrete conclusion with regard to such purchases/sales transaction being bogus, merely on the basis of general information, so as to discard such expenditure and make the addition thereof.

8.5. This above stated judgment was subsequently followed by the same Court in the case of Ashok Kumar Rungta vs. ITO [2024] 167 taxmann.com 429 (Bom) and also in the case of PCIT vs. Ramelex Pvt. Ltd. [2025] 179 taxmann.com 374 (Bom).

8.6. One must also not miss to consider the assessment completed by the Assessing Officer in the case of Hakimuddin Saleh Porbunderwala on identical factual matrix involving the same assessment year and the same two parties for which no addition has been made, as discussed in the above paragraph.

8.7. Also, needless to say that assessee be given reasonable opportunity of being heard to make any further submissions, if required in support of his claim. Ld. AO is accordingly directed to pass a speaking order after taking into consideration the aforesaid directions. Grounds raised by the assessee are allowed for statistical purposes.

Order pronounced in the open court on 21 July, 2026

Sd/- Sd/- (Pawan Singh) (Girish Agrawal) Judicial Member Accountant Member ANKIT, PS Mumbai Dated: 21.07.2026

Copy to:

ASGARALI YUSUFALI PORBANDARWALA MEZZANIN FLOOR, PATIANI 1 HOUSE, PLOT NO. 427, KALBADEVI ROAD, MUMBAI, MAHARASHTRA 400002 ASST. CIT, CENTRAL CIRCLE 4(3) KAUTILYA BHAVAN, C-41 TO C-43, 2 G BLOCK, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI, MAHARASHTRA 400051 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAIBENCH 5 GUARD FILE