VIRDEV INTERMEDIATES PVT LTD,SURAT vs. DCIT, CIRCLE-2(1)(1), SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT Before: Shri T. R. Senthil Kumar, Judicial Member & Shri Ratnesh Nandan Sahay, Accountant Member

ITA No: 1340/SRT/2025 Assessment Year: 2019-20

Virdev Intermediates (P) Ltd., Vs D.C.I.T., S. No. 33-1-A, Plot No. 1, B/h Circle 2(1)(1), Sub Jail, Khatodara, Surat. Surat-395002 (Gujarat). PAN: AAACV 8038 L (Appellant) (Respondent)

Assessee Represented by : Shri Kiran K Shah, C.A. Revenue Represented by : Ms. Neerja Sharma, Sr.DR Date of hearing : 05/05/2026 Date of pronouncement : 21/07/2026 आदेश/ORDER PER: RATNESH NANDAN SAHAY, AM: 1. This is an appeal filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi [In short, ‘the ld. CIT(A)’] dated 25/11/2025 for the assessment year (AY) 2019-20 wherein the assessee has raised following grounds of appeal: "1. The learned CIT(A) grossly erred in dismissing the ground relating to reopening of proceedings u/s 147 of the Act. 2. The learned. CIT(A) grossly erred in confirming addition of ₹ 29.00 lacs on account of alleged bogus purchases from M/s White Feather Overseas invoking Section 69C r.w.s 115BBE of the Act. 3. The learned CIT(A) grossly erred in not considering the issue of confrontation of statement of the parties relied upon or the evidence

2 ITA No. 1340/Srt/2025 Virdev Intermediates (P) Ltd. Vs DCIT found thereof in the case of third party and also did not provide an opportunity of cross examination. 4. The learned CIT(A) grossly erred in dismissing the application of provisions of Section 115BBE of the Act. 5. The appellant reserve right to add, alter and withdraw any grounds of appeal." 2. Facts of the case in brief, are that in this case, the Assessing Officer has received information flagged by the CBDT on the Insight Portal under Risk Management Strategy for the A.Y. 2019- 20 that the assessee has made a purchase of ₹ 29.00 lacs from M/s White Feather Overseas (Prop.- Uday Dineshbhai Dholakia) and also availed ITC without receiving goods from the said entity. Further, it was found that the office of the Commissioner of GST & CX, Bhiwandi had investigated the office premises of M/s White Feather Overseas and found that there is no actual office or warehouse for operating business activities. Therefore, the said entity was a shell company without doing any business activity and involved in providing accommodation entry by issuing fake GST bills. The Assessing Officer, therefore, issued notice under Section 148A of the Income Tax Act, 1961 (in short, the Act) and finally, the notice under Section 148 of the Act dated 19/04/2023 was issued after passing of order under Section 148A(d) of the Act and served on the assessee for the escapement of income. During the assessment proceedings, the assessee was given opportunity

3 ITA No. 1340/Srt/2025 Virdev Intermediates (P) Ltd. Vs DCIT to explain its case. The Assessing Officer finally held that the assessee has failed to prove the genuineness of the transaction and also the identity of the parties and their creditworthiness and thus, the purchases made from M/s White Feather Overseas amounting to ₹29.00 lacs remained unexplained expenditure within the meaning of Section 69C of the Act and added the same to the total income of the assessee and taxed the same at the rate as provided under Section 115BBE of the Act. 3. Aggrieved by the order of the Assessing Officer, the assessee preferred appeal before the ld. CIT(A), who vide the impugned order, dismissed the appeal of the assessee on the ground that the assessee has not discharged its onus to prove the genuineness of transactions. The ld. CIT(A) also did not agree to the assessee's submission that the opportunity to cross examination was not given to the assessee, on the ground that before cross examination, the assessee has to discharge its onus to prove the genuineness of the transaction which the assessee has failed to do so. The ld. CIT(A) also placed reliance on the various case laws to justify his findings that the entire purchases were bogus e.g. PCIT Vs Swati Bajaj & ors. 446 ITR 56 (Kol), Sanjay Bimalchand Jain Vs PCIT (2018) 89 taxmann.com 196

4 ITA No. 1340/Srt/2025 Virdev Intermediates (P) Ltd. Vs DCIT (Bom), Hitendra C Ghadia Vs DCIT ITA No. 621/Mum/2021 and ITA No. 619/Mum/2021 dated 20/03/2023, Suman Poddar Vs ITO (2019) 112 taxmann.com 330 (SC), CIT Vs Bholanath Poly Fab (P) Ltd. (2013) 355 ITR 290 (Guj), CIT Vs Sathyanarayan P. Rathi 351 ITR 150 (Guj) and Kanak Impex India Ltd 474 ITR 175 (Bom). 4. Further aggrieved by the order of the ld. CIT(A), the assessee is in appeal before this Tribunal. 5. During the appellate proceedings before us, the assessee made a written submission which is given as under: "1.1 The appellant urges that, provisions of section 147 are not applicable it three years but not more than ten years have elapsed from end of the relevant assessment year unless the AO has in his possession books of accounts or other documents or evidence which revealed that the income chargeable to fax has escaped assessment and the amount is likely to amount to fifty lacs rupees or more. 1.2 The appellant urges that, notice u/s. 148 was issued on 06.04.2023 Le, after three years from the end of the relevant assessment year (three years completes on 31.03.2023) and the alleged escapement was less than Rs. 50,00,000/-

5 ITA No. 1340/Srt/2025 Virdev Intermediates (P) Ltd. Vs DCIT 1.3 The appellant therefore, urges that the 147 proceedings are time barred as per section 149 of the Act and, therefore, 147 ought not to be invoked. 2.1 The learned A made additions of Rs. 29/- lacs on account of purchase transactions from M/s. White Feather Overseas during the year assuming that the said purchases were not genuine and accordingly addition was made invoking section 69C of the Act. 2.2 The appellant strongly urges that the purchases are supported by bills and the payments were made by account payee cheques. The appellant also strongly urges that the purchase bills were subject to E-way bills under GST. The appellant urges that, when the goods are purchased through E-way bills, it is proved that there is transportation of goods also. The appellant strongly urges that, merely because the seller party had some issue of GST, the same ought not to be assumed as non-genuine purchase. 2.3 The appellant strongly urges that the learned AO did not make any inquiry with the concerned party and he disallowed the said purchases were not genuine merely on information from the GST Department. 2.4 Provisions of section 69C are not applicable: The appellant further urges that, in order to prove genuineness of expenditure, the appellant had filed copy of bills, copy of E-way bills and copy of bank statement in the reassessment proceedings. The appellant had also explained the source of payment which was out of

6 ITA No. 1340/Srt/2025 Virdev Intermediates (P) Ltd. Vs DCIT business funds of the current year and the transactions were duly accounted for. The appellant therefore, urges that, provisions of section 69C ought not to be invoked. Provisions of section 69C is reproduced for ready reference. "Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, no the opinion of the [Assessing) Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year Provided that, notwithstanding anything contained in any other provision of this Act. such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income." The appellant strongly urges that the purchases are duly accounted for, payments were made by account payee cheques and the source was also explained and, therefore, provisions of section 69C ought not to be invoked. 2.5 The appellant strongly urges that its books of accounts are duly audited and there is no qualification in the audit report. The appellant urges that, the learned AO has not rejected the book result u/s 145 of the Act. The appellant therefore, urges that addition for disallowance

7 ITA No. 1340/Srt/2025 Virdev Intermediates (P) Ltd. Vs DCIT of purchases invoking section 69C of the Act is uncalled for, unwarranted and bad in law. 2.6 Cross examination - The learned AO did not confront any material or statement or even report of GST Department before relying the alleged information. The appellant urges that, since no statement was confronted, no cross examination could be sought. The appellant therefore, urges that, making addition without confronting such documents is bad in law and addition made is required to be deleted. The appellant relies on decision of Hon'ble Supreme Court in the case of Kishanchand Chelaram V/s. CIT (125 ITR 713) (SC). The ld. CIT (A) relied upon various decision where the facts are entirely different. 2.7 The Ld. CIT (A) relied upon decision of Hon'ble Calcutta High Court in Swati Bajaj v/s, POT (2022) 139 taxmann.com 352 (Cal.). The appellant urges that the said decision is not applicable as the facts and circumstances of that case are entirely different. It is submitted that the said decision was on account of capital gain on sale of penny scripts and application of section 68 of the Act. The Ld. CIT also relied upon in following decisions. a) Sanjay Bimalchand Jain V/s. PCIT (2018) 89 taxmann.com 196 b) Hitendra C. Ghadia V/s DCIT (ITA No. 621/Mum./2021)

8 ITA No. 1340/Srt/2025 Virdev Intermediates (P) Ltd. Vs DCIT c) Suman Poddar V/s. ITO (2019) 112 taxmann.com 330 (SC) All the abovesaid judgements are relating to LTCG/STCG on sale of penny scripts and application of section 68 of the Act. 2.8 Without prejudice to the above and in alternative The appellant urges that, in similar circumstances of cases, Hon'ble Gujarat High Court has restricted the addition to the extent of profit on such purchases. The appellant relies on following decisions. The appellant further urges that the Hon'ble Gujarat High Court has adopted 12.5% profit on unverifiable purchases in the following cases. a) CIT V/s. Bholanath Poly Fab (P) Ltd. (2013) 355 ITR 290 (Guj.) b) CIT V/s. Sathyanarayan P. Rathi (351 ITR 150 (Guj. HC) 4.1 The appellant urges that, since the source of expenditure was explained and was duly accounted in the books of accounts and, therefore, section 6PC is not applicable. The appellant urges that, any addition on account of estimate of income in the course of business, the provisions of section 115888 ought not to be invoked. 4.2. The appellant relies on following decisions: DCIT V/s. Ramnarayn Birla (ITA No. 482 / JP/2015) ACIT Vs. Sanjay Bairathi Gems Ltd (ITA No. 157/JP/2017) Fashion World V/s. ACIT (ITA No. 1634/Ahd. /2006)

9 ITA No. 1340/Srt/2025 Virdev Intermediates (P) Ltd. Vs DCIT Dagina Jewellers (ITA No. 30 / SRT/2022) The appellant's counsel further submitted a comparative chart of gross profit/net profit declared by the appellant in last three years and submitted that all the transactions are through banking channels and therefore, the genuineness of the transactions cannot be doubted. It was further submitted by the ld. Counsel of the assessee that opportunity for the cross examination of the party was not given to the appellant to confront any material or statement or even report of GST before relying on the alleged allegation that the purchases were bogus. The appellant also placed reliance on the various case laws to support its submission. The appellant submitted that the Hon'ble Gujarat High Court has restricted the addition on account of alleged bogus purchases to the extent of profit on such purchases. 6. The ld. Sr.DR, on the other hand, vehemently supported the orders of the lower authorities. 7. We have carefully considered the facts of the case and the submissions made by both the parties and it is found that the appellant has failed to establish the genuineness of the transaction both before the Assessing Officer and the ld. CIT(A). Even before us, the appellant is harping mainly that the opportunity for cross examination to rebut the report filed by the

10 ITA No. 1340/Srt/2025 Virdev Intermediates (P) Ltd. Vs DCIT GST Department and secondly if the entire transaction is treated as bogus, the appellant should get benefit of application of net profit and since it has disclosed in the net profit of 5.4% which is higher in comparison to last two years, the same should be accepted. We have considered this submission and we do not find any merit in the submission made by the appellant. Since the appellant has failed to substantiate the purchases made by it amounting to ₹ 29.00 lacs, there is no reason to accept that as genuine and since the purchases are treated as bogus, there is no reason to accept the net profit declared by the assessee. Thus, the order passed by the ld. CIT(A) is confirmed and there is no infirmity found in that order. 8. In the result, this appeal of the assessee stands dismissed. Order is pronounced under the provisions of Rule 34 of IT(AT) Rules, 1963 on 21/07/2026.

Sd/- Sd/- (T. R. SENTHIL KUMAR) (RATNESH NANDAN SAHAY) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Dated 21/07/2026 *Ranjan आदेश�ȧĤǓ�ͧ �ͪ �\ Ē ȯͪ�त/ Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A)

11 ITA No. 1340/Srt/2025 Virdev Intermediates (P) Ltd. Vs DCIT 5. DR, ITAT 6. Guard file. By order/आदेशसे,

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