RAJESH KISHANLAL JAIN,SURAT vs. DCIT, CIRCLE-1(1)(1), SURAT

आयकर अपीलीय अिधकरण, सूरत �यायपीठ, सूरत । In The Income Tax Appellate Tribunal, Surat Bench, Surat Before Dr. Arjun Lal Saini, Accountant Member And Shri T. R. Senthil Kumar, Judicial Member I.T.A. No. 573/Srt/2025 [ Assessment Year: 2018-19 ] Rajesh Kishanlal Jain, The DCIT, Circle-1(1)(1), Surat, Block No. A/24, Udhana Vs. Majuragate, Surat, Udhyog Nagar, Udhana, Gujarat 394210. Surat-394210 �थायीलेखासं/.जीआइआरसं/.PAN/GIR No.: ABBPJ5375K (Assessee) (Respondent) I.T.A. No. 574/Srt/2025 [ Assessment Year: 2022-23 ] Rajesh Kishanlal Jain, The DCIT, Circle-1(1)(1), Surat, Vs. Block No. A/24, Udhana Majuragate, Surat, Udhyog Nagar, Udhana, Gujarat 394210. Surat-394210 �थायीलेखासं/.जीआइआरसं/.PAN/GIR No.: ABBPJ5375K (Assessee) (Respondent) I.T.A. No. 665/Srt/2025 [ Assessment Year: 2022-23 ] Deputy Commissioner of Income Rajesh Kishanlal Jain, Tax, Vs. A-24, Udhyognagar, Udhana, Room No.108, Aayakar Bhawank, Surat-394210 Majura Gate, Surat-395001 �थायीलेखासं/.जीआइआरसं/.PAN/GIR No.: ABBPJ5375K (Assessee) (Respondent) Assessee by : Shri Rasesh Shah, CA Respondent by : Shri Mukesh Jain, Ld. CIT (DR) Date of Hearing : 27/04/2026 Date of Pronouncement : 06/07/2026

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT :: O R D E R :: Per, Dr. Arjun Lal Saini, AM: Captioned two appeals filed by the assessee and one appeal filed by the revenue, pertaining to Assessment Years (AY) 2018-19 & 2022-23, are directed against the separate orders passed by the Ld. Commissioner of Income Tax (Appeal) in short “the Ld. CIT(A)”, which in turn arise out of separate assessment orders passed by the assessing officer u/s 143(3) of the Income Tax Act, 1961.

“1. In law and in the facts and circumstances of the assessee's case, the order of the assessing officer is void ab initio and without jurisdiction. 2. In law and in the facts and circumstances of the assessee's case, the order of the CIT(A) is bad in law and liable to be set aside in the interest of justice. 3. In law and in the facts and circumstances of the assessee's case, the Ld. CIT(A) should have deleted the entire addition, appreciating the fact that the Ld. assessing officer has failed to point out any specific discrepancy in the audited books of accounts of the assessee. 4. In law and in the facts and circumstances of the assessee's case, the Ld. CIT(A) has erred in enhancing estimation of the income of the assessee from 10% of unverified purchase made by assessing officer to 12.5% of total turnover of the assessee merely because the notices u/s 133(6) issued by the assessing officer remained unanswered by certain suppliers in spite of the fact that the assessee has proved beyond doubt about:

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT i. Payment through banking channels ii. Quantity records of the purchases iii. Quantity records of the sales iv. Offering of income on the sale of goods v. GST Records, etc. 5. The assessee craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.”

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT regard to purchases vide notice u/s 142(1) dated 24.11.2020. In response, the assessee submitted its reply, party wise. The Party-wise submission of the assessee, was analyzed by the assessing officer, in brief, which is reproduced below: (i) M/s Champion E Com Pvt. Ltd (AACCC2855J) The submissions of the assessee included: Audited Balance Sheet, GST Returns, the Ledger of National Refinery Ltd, the proprietary concern of the assessee and sale invoices and transport challans appears to establish that there was sales amounting to Rs. 6,58,88,582/- made to the assessee concern during the F.Y. 2017-18, as had claimed by the assessee. No deviation has been observed.

(ii)M/s Kimashi India Ltd. (AAECK6686P): The submissions of assessee included: Audited Balance Sheet, GST Returns, the Ledger of National Refinery Ltd, the proprietary concern of the assessee and sale invoices and transport challans, appear to establish that there was sales amounting to Rs. 10,16,03,558/- made to the assessee concern during the F.Y. 2017-18, as had claimed by the assessee. No deviation has been observed.

(iii)Madhav Copper Pvt.Ltd. (AAICM2859A): The submissions that included Audited Balance Sheet, GST Returns, the Ledger of National Refinery Ltd, the proprietary concern of the assessee and sale invoices and transport challans appear to suggest that there was sales amounting to Rs.7,11,80,334/- made to the assessee concern during the F.Y. 2017-18, as against Rs.7,73,60,334/-, claimed by the assessee. Hence a deviation of Rs.61,80,000/-has been observed. (iv) Ratnachintamani Pvt. Ltd. (AAECR0497F): The submissions that included, Audited Balance Sheet, GST Returns, the Ledger of National Refinery Ltd, the proprietary concern of the assessee and sale invoices

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT and Transport challans appear to suggest that there was sales amounting to Rs.5,69,68,965/- made to the assessee concern during the F.Y. 2017-18, as against Rs.5,33,91,205/-claimed by the assessee. Hence a deviation of Rs.35,77,760/-has been observed.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT claimed by you vis-à-vis the details furnished by such persons. You are hereby required to furnish your explanation/response on the above mismatch vis-à-vis claim of purchases made by you along with supporting necessary documentary evidences."

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT 8. A show cause notice dated 18.04.2021 was issued to the assessee along with Draft Assessment Order wherein 10% of the purchases made from above parties were proposed to be disallowed on account of independent non- verification of purchases from such parties. The assessee furnished its reply on 21.01.2021. To support its claim, the assessee again furnished similar documents filed earlier viz. copies of GSTR-2A, GSTR-1, Ledger of the above parties in its books of accounts, bank account, statements showing payment and receipts from amount to above parties, copies of sample purchases invoices, GST Audit Report and VAT audit reports etc. However, the assessee still failed to get independent confirmation filed from above parties. Vide notice u/s 142(1) of the Act dated 01.04.2021, the assessee was already provided the details of above non-responsive parties and requested to get compliance from the above parties. The observations and analysis of the assessing officer in respect of these parties, are as follows: "Notice u/s 133(6) of the Income-tax Act, 1961 were issued to the following persons to provide details required for verification of purchase made during the A.Y.2018-19. However, they have not furnished any response to the above notices. In this regard, it is submitted as under. Vide above referred to notice it is observed that the eight suppliers as referred to in para-1 to whom notice u/s 133(6) were issued have not furnished any details. It is observed that for non-compliance of 133(6), the purchases from the said parties remain unverifiable. It is required by the said notice; (1) to make or cause them to comply the notice u/s 133(6). In this regard it is submitted that they are already requested to comply with the notice u/s 133(6) of the Act." However its notices that no confirmation of accounts and other details sought from above were furnished till date. It is also pertinent to mention here that vide notices issued u/s 133(6), these parties were also required to furnish copy of their ITR for AY 2018-19 along with Audit Report, computation of total income, Balance Sheet, their GST Return, copy of transportation bills for sales made to the assessee, ledger of sales made to assessee and copy of their bank accounts wherein payment against sales were received by them etc. Until and unless these parties furnishes above required documents, their genuineness to make huge sales to the assessee cannot be established. It is needless to mention that assessee was already made aware of non-compliance of above parties and also requested to get compliance from them. However, it is apparent that the same has not been done. Thus, it is not only the question of getting confirmation of accounts but also to establish the genuineness of suppliers as well as their capacity to make supplies of huge amounts to the assessee. Thus, whatever the assessee argued as third party documents in its reply to show cause were not sufficient as evidence to prove the genuineness of the purchases made by him. Whatever the assessee had furnished only pertains to one side of transactions. However, the cross verification of such transactions

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT with respective party is sine qua non of an enquiry. Wherever such independent cross confirmation have been received from such parties, claim of the assessee have been duly allowed as discussed in preceding paras. However, same cannot be held true in cases wherever the other parties have not independently confirmed the sale/purchase transactions and furnished the requisite documents sought from them u/s 133(6). If claim of the assessee is to be always allowed based only on his own submission, then there would be virtually no substance in causing independent enquiries by exercising the powers enshrined u/s 133(6). Thus, argument of the assessee that the proposed addition is based merely on the non-compliance from above parties, is not tenable. In its reply to show cause notice, the assessee also submitted that reply to notice u/s 133(6) have been furnished by two of the above referred non-responsive parties namely- (1) Prashu Minerals & Services Pvt. Ltd. (A.K. Origin Minerals Pvt. Ltd.) and (2) Shri Nilesh Pravin Jain (Maruti Trading Co.). Case of the above parties are discussed below.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT addition of Rs.15,80,66,740/-(being 10% of Rs. 158,06,67,408) was made to the total income of the assessee.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT own case for a different assessment year (AY) viz., (AY) 2022-23, wherein the committee having accepted and confirmed that purchases remained un-verified, opined that if the books need to be rejected then the same should have been made with proper reasoning and estimation should have been determined through a logical and critical analysis, potentially based on the average profit percentages declared in previous years or by similar entities in the industry, while holding that extrapolation of the estimation to legitimate purchases, by applying, an arbitrary GP percentage to the entire turnover, has resulted in an unjustified and high- pitched addition. Relying on the said committee report for AY 2022-23, the assessee contended that in his case the Net Profit for the year under appeal is 0.33% and that the net profit of 0.39% was accepted in earlier assessment made u/s 143(3) of the Act for A.Y. 2012-13 and so, in view of the same there is no justification in enhancing profit of the assessee @ rate of 20% of sales. The Ld.CIT(A) also noted that assessing officer sought to verify the genuineness of the same and his efforts to make an independent ascertainment of the claim of certain purchases yielded adverse result. When a doubt arose in the mind of the Assessing Officer, he rightly attempted to cross check the genuineness of the claim of purchases by issuing notices to the persons whose names were shown suppliers. The result was that certain alleged parties were non-existent even as certain others have not responded. Against these facts and in such circumstance, it was not clear on what ground the assessee could seek for acceptance of books of account which were found to be unworthy of credit. Thus, it is conclusively established that the claim of these purchases remained un-verified and the concomitant corollary is that the trading result remains un-verified. Once the trading result could not be verified, the natural consequence is to reject the book result thus entailing the determination of profits at an estimated basis. Once the books of account get rejected, the only course is to estimate the income of the

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT assessee on the basis of best judgement and the profit rate is considered as one of the proper and reasonable bases for best judgement assessment. For this, the Ld. CIT(A) relied on the decision in the case of ACIT-19 (3), Mumbai vs. Ram Prakash Joukani [2015] 64 taxmann.com 320 (Mumbai), the Hon'ble ITAT, Mumbai upheld the rejection of books of account when substantial quantum of purchases were found to be not verifiable. The Ld. CIT(A) noted that the assessing officer during the course of enquiry had found the purchases un-verifiable, thus resulting in the book result becoming unreliable. However, the assessing officer instead of making an estimate of taxable profits, made an addition @ of 20% on purchases to the book result. This act of the assessing officer contradicts the findings of his enquiry viz., substantial portion of purchases remain un-verified and that such un-verifiable claim invariably calls for rejection of the books of account and the book result. Having now held that book result is not reliable, the consequent action is to determine the taxable profits of the business. A proposal to estimate the taxable profits @ 20% of the purchases was made through the SCN issued u/s 251(1) of the I.T. Act during the course of appeal proceedings.In this regard, the assessee relied upon the report of the high-pitch committee in respect of assessment year (AY) 2022-23 and contended that the observations of the committee are applicable to the instant assessment year (AY) too, i.e., assessment year (AY) 2018-19. In the said report the committee while categorically holding that purchases remained unverifiable, opined that the assessing officer has rejected the books of accounts, and estimated the net profit @ 20%, without proper justification. Thus, the observation of the committee is not with regard to the rejection of the books but with regard profit rate adopted by assessing officer. This aspect of the committee is clearer from its further observation wherein it opined that if the purchases were indeed bogus, the assessing officer should have limited the addition to a reasonable percentage of the bogus or unverified

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT purchases, following judicial precedents. Thus, what transpires from the committee's observation (though for a different AY) is that judicial precedents may be followed in estimation of profit. Stating so, the assessee requested not to enhance income and give relief as per the Grounds of the Appeal.

The Hon'ble Bombay High court in the case of Pr. CIT v. S.V. Jiwani [2022] 145 taxmann.com 230 in similar facts and circumstances found that a disallowance of @ 12.5% was reasonable to safeguard the interest of revenue. In view of the facts and circumstances of the case and in line with the discussion made thus far and keeping with the judicial pronouncements taken note of as above, the Ld.CIT(A) directed the assessing officer to adopt 12.5% of the total sales/turnover as net taxable income and consider the same as assessed income of the assessee.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT 13. Aggrieved by the order of the Ld.CIT(A), the assessee, is in appeal before this Tribunal and revenue has also filed cross appeal in A.Y. 2022-23.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT misdeed / unlawful activity be it civil / criminal / financial there has to be some motive or intention which is absent in assessee's case as explained. According to the assessee, bogus purchase by its logical interpretation means that the said purchase is represented by a mere book entry of purchase and there is no actual delivery of goods or no actual procurement, movement, transfer of ownership of goods. As stated by the assessee, a person's motive behind entering into a bogus purchase transaction would be to suppress his profits and reduce his tax liability or to earn some income as an accommodation entry provider by resorting to bogus purchase and sale transactions. However, assessee made genuine purchases which are supported by stock statement and corresponding sales and sales has been accepted by Assessing Officer. The Ld. Counsel for the assessee also relied upon the following judicial decisions: (i)Hon'ble ITAT Mumbai in case of UNITED METAL & WIRE | NDUSTRIES Vs. ITO, WARD-25(1)(5), MUMBAI AND(VICE-VERSA) in ITA no. 7336 and 7356/Mum/2016 dated 01.03.2019. (ii)Hon'ble ITAT Ahmedabad in case of THE DCIT CENTRAL CIRCLE-1(3) AHMEDABAD Vs. M/S. GANESH PLANTATION LTD., AHMEDABAD in ITA no.472 and 59/AHD/2016 dated 11.12.2020 (iii)Hon'ble ITAT Delhi in case of CONTINENNTAL CARBON INDIA LTD VS. ITO in ITA No.5269,5270,5271,5242 and 5513/DEL/2010 dated 31.10.2011 (iv)Hon'ble Delhi High Court in the case of PCIT vs Adamine Constructions (P.) Ltd. [2018] 99 taxmann.com 44 Hon'ble Gujarat High Court in case of PCIT Vs. D & H Enterprises [2016] 72 taxmann.com 91

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT cases etc, were furnished. According to the assessing officer, the assessee has merely submitted confirmation of accounts from respective sellers in only 16 cases out of total 53 parties from which purchases were made during the year. Also, from the ledger of transport expenses submitted, it was observed that there are only debit entries and no corresponding credit entries of cash/bank. There were lot of infirmity in the documents submitted by the assessee, before the assessing officer. Therefore, addition made by the assessing officer should be confirmed.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT purchases made from the relevant suppliers are genuine. Thus, the assessee contends that non- compliance by 3rd party to notice u/s 133(6) of the Act cannot be a reason for doubting the transaction that too by only one supplier. We note that during the assessment proceedings, the assessee submitted all the confirmations, PAN No, name and address of the parties, all the purchases were made through banking channel and other details which the assessing officer has also acknowledged in the assessment order. The payments were made through account payee cheque and there is no proof that the assessee has any bogus purchases. The sales of the assessee has not been doubted by the assessing officer therefore, Ld. CIT(A) ought not to have enhanced the assessment by rejecting books of accounts. The books of accounts of the assessee are audited and assessee is maintaining stock register and other quantitative details, such as daily stock register. The assessing officer did not find any mistake in the details of the stock register.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT the assessee had filed his return of income on 29.09.2022 declaring total income at Rs. 1,36,42,417/-.The details of the turnover, gross profit and net profit along with gross profit ratio and net profit ratio are as under for various years.

In the course of assessment proceedings for A.Y. 2018-19, the assessing officer issued various notices u/s 142(1) of the Act and the assessee, responded to the said notices vide replies dated 08.12.2020, 30.01.2021, 05.04.2021 and 21.04.2021 wherein he furnished the under mentioned voluminous details / evidences to prove the genuineness of purchases.  Bank Statement of the assessee  Purchase ledger and complete details in required format  VAT/GST returns filed for the period 01.04.2017 to 31.03.2018  GST returns for A.Y. 2017-18  Confirmations from certain parties, namely Parhsu Minerals & Services Pvt. Ltd. (Origin Minerals Pvt. Ltd., Durga Trading Co. and Nilesh Praveen Jain (Prop. Maruti Trading Co.)  Purchase bills of the suppliers  Ledger of accounts regarding transport bills in respect of purchases  Month wise details of purchases made during the year  Ledger accounts of all the suppliers

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT  Bank accounts reflecting the payments made to the sellers through banking channel  PAN of all the suppliers  GST Number of all the suppliers  GST return for the period 01.07.2017 to 31.03.2018 reflecting purchases made during the period  VAT return for the period 01.04.2017 to 30.06.2017 reflecting purchases made during the period  Quantitative details wherein purchases made from the said suppliers were accounted /reflected.  Supplier wise evidences  Copy of form GSTR-2A for the period of 01/07/2017 to 31/03/2018 reflecting purchases made during the period. The GSTR-2A and also reflecting all the details regarding the purchases i.e date of invoice, number of invoice, name of the supplier, GST number of the supplier, GST input, IGST, SGST, CGST on above purchases. The GSTR-2A reflects the purchases made from the above suppliers and the invoices issued by them. The purchases claimed by the assessee vide invoices issued by them exactly matches with the purchases reflected GSTR-2A.  GST audit report and VAT audit report for the relevant period wherein no mismatch /qualification regarding the input credit was reported.  Ledger account of transportation bills in respect of purchases made from suppliers  Acknowledgement of the responses filed u/s. 133(6) by Parhsu Minerals & Services Pvt. Ltd. and Nilesh Praveen Jain.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT 18. During the course of assessment proceedings for A.Y. 2022-23, vide replies dated 08.08.2023 and 11.03.2024 in response to various notices, the assessee provided the under mentioned details/evidences to prove the genuineness of purchases:  Comparative chart of Gross Profit and Net Profit ratios for the year under consideration as well as for earlier two preceding years.  Details of parties from whom purchases were made during the year containing particulars such as date, invoice number, name, address, GST number, PAN and amount.  GST return filed for the year under consideration.  Ledger of Transport expenses  Ledger accounts of sundry creditors for the year  Details of expenses claimed under the Other Expenses Copies of TDS returns  Party wise purchase register showing the details like date of purchase, Tax Invoice number, item purchased, quantity purchased including GST, E-way Bill No. by which the goods were received.  Ledgers of purchase parties  Tax Invoices issued by the parties  E-way Bills  Transport Receipts  Photo of the vehicle / Registration certificate of the vehicle / driving license of the driver of the truck  Relevant bank statement of the assessee evidencing the payments made to the suppliers through banking channel  Copy of form GSTR-2A for the period of 01/07/2017 to 31/03/2018 reflecting purchases made during the period. The GSTR-2A and also

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT reflecting all the details regarding the purchases i.e date of invoice, number of invoice, name of the supplier, GST number of the supplier, GST input, IGST, SGST, CGST on above purchases. GSTR-2A reflects the purchases made from the above suppliers and the invoices issued by them. The purchases claimed by the assessee vide invoices issued by them exactly matches with the purchases reflected GSTR-2A.  GST audit report for the relevant period wherein no mismatch / qualification regarding the input credit was reported.  Day to day quantitative details including the purchases made from the alleged suppliers.  A Chart showing invoice wise details pertaining to delivery of goods such as dispatch number / delivery note number, name of the transporter, motor vehicle number date of dispatch/delivery of goods. 19. We find that for assessment year 2018-19, the Assessing Officer made the addition @ 10% of the unverified purchases of Rs.158,06,67,408/- in respect of 8 parties on the ground that the confirmation of accounts of the parties, were not furnished by the assessee and they had not responded to the notices issued u/s 133(6) of the Act, without rejecting the books of accounts of the assessee. He further observed that in respect of Parshu Minerals & Services Pvt Ltd, although the said company responded to the notice issued u/s 133(6) of the Act, it did not file the confirmation and in respect of Nilesh Praveen Jain (Prop. of Maruti Trading Co.), no response was available as per the ITBA System, although the assessee claimed that the response was given. Further the Assessing Officer had wrongly observed that the transactions have not been confirmed by Parshu Minerals & Services Pvt Ltd. When it had given the reply in response to the notice issued u/s 133(6), the authentication of the transaction was proved in absence of contrary reply. Further, the Assessing Officer has also wrongly observed that Shri

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT Nilesh Pravin Jain had not given reply in response to the notice u/s 133(6) of the Act. The fact of filing the reply was supported by the Acknowledgement of the reply filed by him on the ITBA Portal. Both the parties had confirmed the transactions made with the assessee by authenticating the ledger accounts in the books of the assessee. We note that before the CIT(Appeals), the submissions made before the Assessing Officer for A.Y. 2018-19 were reiterated. It was also submitted that the Assessing Officer had completely ignored crucial thirty-party evidences like purchase bills, details of delivery of goods, payment details to transporters, payment details of suppliers and GST returns filed by the assessee and also the suppliers. The assessee also submitted that the purchases made from the alleged 8 parties were at lesser price than the purchases made from other parties as can be evident from the following table.

In the course of appellate proceedings before the CIT(Appeals), the assessee further filed a Chart showing invoice wise details of delivery of goods such as name of the transporter, date of delivery, delivery challan number / dispatch note, and vehicle numbers.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT A.Y. 2018-19 by estimating the profit @ 12.50% on the total turnover of the assessee. We are not that for A.Y. 2022-23, the Assessing Officer rejected the books of accounts u/s 145(3) of the Act and made the addition of Rs. 77,69,58,168/- by estimating the Net Profit @ 20% on the total sales/turnover of the assessee of Rs. 388,47,90,840/-. While passing the assessment order, the assessing officer observed that as per the report of the Verification Unit, out of 9 cases, in 6 cases the addresses were traced out but the parties were not found at the given address and in case of 3 parties, the addresses were traced out but no confirmations were received from them. He further observed that no confirmation or supporting evidences except Salam Metals LLP and Litardo Scrap Metals Pvt Ltd were furnished by the assessee. Further, in the cases of Salam Metals LLP and Litardo Scrap Metals Pvt Ltd, the copies of tax invoices and E-way Bills were provided but no confirmations were provided from these alleged parties. The Assessing Officer further observed that the assessee failed to provide the copies of invoices/transaction confirmations in respect of these suppliers and therefore, the purchases shown by the assessee were unreliable. Before the CIT(Appeals) it was submitted for A.Y. 2022-23 that the only reason for rejecting the books of accounts and estimating the net profit @ 20% by the Assessing Officer was that in respect of 9 suppliers, no details / evidences were furnished which was factually incorrect. The assessee explained that out of total 11 suppliers, 9 suppliers were carrying on their business in their proprietorship / trade name and evidences like date of purchase, tax invoices, quantity of purchases, E-way bill Nos., ledger accounts of alleged parties, transport receipts, photo of vehicle / registration certificate of vehicles and relevant bank account of the assessee reflecting the payments made through banking channel to these parties were submitted which were totally ignored by the assessing officer.Therefore, for A.Y. 2022-23, the learned CIT(Appeals) confirmed the rejection of the books of accounts of the

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT assessee on the ground that purchases were not proved by the assessee and even independent inquiry of the AU and the VU laid to adverse finding contrary to the provisions of section 145(3) of the Act. He restricted the addition made by the learned Assessing Officer by estimating the profit @ 12.50% on total sales/turnover made by the assessee.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT third parties to respond to departmental notices, especially when the assessee had furnished all possible evidences within his control. Once the assessee has discharged his burden by producing documentary evidence, the onus shifts upon the department to disprove the same with cogent material, which has not been done in the present case. The assessee relied on the judgement of the Honourable High Court in the case of CIT vs. Nikunj Eximp Enterprises (P.) Ltd. [372 ITR 619] wherein it was held that "merely because suppliers had not appeared before Assessing Officer or Commissioner (Appeals), it could not be concluded that purchases were not made by assessee". The Assessing Officer has accepted the sales declared by the assessee and has not found any discrepancy in the stock records or quantitative details. It is a settled principle that there cannot be any sales without corresponding purchases. Once the sales are accepted as genuine, the purchases cannot be treated as non-genuine, as the same would lead to an absurd and contradictory conclusion. The past history of the assessee clearly demonstrates that the gross profit and net profit ratios are significantly lower than the rate adopted by the learned CIT(Appeals). The comparative data of earlier and subsequent years shows that the net profit ratio ranges between approximately 0.27% to 0.67%, which makes the estimation of profit at 12.5% wholly unrealistic and commercially untenable in this line of business. The Gross Profit and the Net Profit in absolute terms for other assessment years are at par or less than the Gross Profit and Net Profit declared in those years as can be verified from Para 4 hereinabove. The books of accounts of the assessee were accepted for other years. The assessment for A.Y. 2023-24 was made under scrutiny and no addition was made. The Gross Profit and net Profit of 1.59% and 0.37% respectively of this year i.e. A.Y. 2023-24 is comparable with A.Y. 2018-19 and A.Y. 2022-23 for which the additions were made, with increased Net Profit in absolute terms. Further, neither the learned Assessing Officer nor the learned CIT(Appeals) has brought on record any comparable case or material to justify estimation of profit at such an exorbitant rate. The estimation has been made purely on adhoc basis without considering the nature of business, turnover, past history and prevailing market conditions. It is a settled principle of law that even after rejection of books of account, estimation of profit must be reasonable and based upon cogent material. Arbitrary estimation cannot be sustained in law. The assessee had provided substantial third-party evidence, including GST returns filed by the assessee, audit reports from independent Chartered Accountants as per I.T. Law /GST Law, transport details, and banking records, all of which support the genuineness of the purchases. In many cases, the confirmation of the suppliers were filed and even otherwise, non-filing of confirmation by the parties cannot be a ground for making the addition, as tax invoices were duly signed by the suppliers and the assessee made the payments by cheque which were credited in the suppliers' bank accounts. Even the GST returns were filed by the suppliers as reflected on the GST Portal. Further, for A.Y. 2022-23, the assessee had also provided E-way Bills which were signed by the suppliers and the Vehicle Number on the E-way Bills and the Transport Receipts were tallied. These documents conclusively established the physical delivery and movement of good. All these evidences have not been controverted by the Assessing Officer, nor has any material been brought on record to establish that the transactions were accommodation entries or that there was any flow of unaccounted cash back to the assessee.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT In the show cause notice issued for A.Y. 2018-19, the Assessing Officer did not ask the details of Transportation of the goods received by the assessee from the alleged parties. However, the assessee filed the ledger account regarding transport bills in respect of the purchases made during the course of assessment proceedings. In the course of appellate proceedings before the CIT(Appeals) for A.Y. 2018-19, the assessee filed the Invoice wise details in a chart showing details of delivery of goods such as name of the transporter, date of delivery, delivery challan number/dispatch note number and vehicle number. During the relevant year, the provisions of E-way bills was not on the statute under the GST Law. Similar addition was made for A.Y. 2022-23 and the assessee filed the E-way bills also in the course of assessment proceedings. The addition was not made by the Assessing Officer on the basis of information from the GST Department. With the aid of PAN / GST Number, the profile of all the parties can be accessed on the GST Portal. Accordingly, all the details of the suppliers are available in the Public Domain. On perusal of these details, it can be seen that all the suppliers have obtained their GST Numbers w.e.f. 01.07.2017 when the relevant Law came into force for the first time or when they started their business. In this profile, it can also be observed that they were regular tax payers and they have sold goods as per the description of the HSN Code. All the suppliers have filed their GSRT-3B Returns and also GSTR-1 when the assessee purchased the goods for both the assessment years. In certain cases, the registration was cancelled retrospectively suo moto by the GST Authorities but, they have filed their GSTR-3B and GSTR-1 during the relevant periods when the assessee purchased the goods, evidencing the payments of taxes made by them. When the assessee purchased the goods, the registration number of the suppliers were in force and the purchases were made by the assessee after checking their Registration Numbers. The assessee was also granted ITC claimed by him on these purchases. The date of cancellation of the registrations Suo Moto by the Revenue, is not reflected on the GST Portal and there is no allegation from the Assessing Officer that the GST Numbers were cancelled when the assessee purchased the goods. Many a times, the GST Number is cancelled retrospectively, even in respect of the period for which the returns were filed as the suppliers stopped filing their GST returns or when they discontinued their business but failed to cancel their GST Number. In any case, the registration cannot be cancelled retrospectively as held by various Courts. (i) The Honourable Madras high court has held in Engineering Tools Corporation vs. Asstt. Commission ST [(2024) 159 taxmann.com 576] that the ITC claimed of the assessee could not be rejected solely on the ground that the supplier's GST registration was cancelled with retrospective effect. (ii) The Honourable Delhi High Court in the case of Anil Soni vs. Superintendent, GST, Delhi [(2024) 161 taxmann.com 180] held that merely because a taxpayer has not filed returns for some period, did not mean that tax payers registration was required to be cancelled with retrospective date also covering period when returns were filed and tax payer was complained. (iii) In the case of Amar Enterprise vs. Commissioner of Delhi Goods and service Tax [163 taxmann.com 468], the Honourable Delhi High Court directed the Commissioner to modify the cancellation to be prospective where the GST registration was

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT retrospectively was cancelled from 2017-18 without such indication in the show cause notice. In the following judgements, the additions were deleted by the Honourable Tribunals in toto, even when the registration was cancelled by the GST authorities retrospectively and the suppliers were non-filers, when the purchases were supported by Tax Invoice, payments had been made through banking channel, quantitative accounts had been maintained, corresponding sales had been made and transport receipts were produced. (i) Prime Steel Industries (P.) Ltd. vs. DCIT [123 ITR (T) 107 (Chandigarh Trib.)] (ii) JCIT vs. Sharmanji Yarns (P.) Ltd. [180 taxmann.com 871 (Chandigarh Trib.)] (iii) ITO vs. The Silk Factory [ITA No. 987/Del/2025 (Del. Trib.)] (iv) Jain Brothers vs. NFAC, New Delhi [ITA No. 5251/Del/2025 (Del. Trib.)] The Assessing Officer has not rejected the books of accounts for A.Y. 2018-19 by invoking the provisions of section 145(3) of the Act. In the absence of rejection of books of accounts, the estimation of profit is impermissible in law. The addition made is thus arbitrary and without any legal foundation. The learned CIT(Appeals) rejected the books of accounts of the assessee for both the assessment years on the ground as narrated at Para No. 9 and Para No. 12 hereinabove. The ground of the learned CIT(Appeals) regarding the purchases being not proved, is not valid as the assessee proved the purchases beyond doubt as per their submission. The Assessing Officer and the CIT(Appeals) have not pointed out any defect or omission in the books of accounts or various records pertaining to the purchases filed by the assessee. Regarding the ground that the notices u/s. 133(6) of the Act were not complied by some of the suppliers, there is no such provision u/s 145(3) of the Act that the books can be rejected only when the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2). None of this condition is satisfied. It is to be noted that no such additions were made in other years except A.Y. 2018-19 and A.Y. 2022-23. The books of accounts were maintained in the same fashion which was accepted by the department. Further A.Y. 2023-24 was under scrutiny and no adverse inference was made in the assessment order.

The purchases made during A.Y. 2018-19 from the alleged 8 suppliers were at lesser price than purchases made from other parties as can be evident from the table reproduced at Para 8. The assessee relied on the judgement of the Honourable Bombay High Court in the case of PCIT vs. Mohommad Haji Adam & Co. [103 taxmann.com 459]. In this case, the Honourable Tribunal restricted the addition limited to the extent of bringing the gross profit rate on purchases at same rate as applied in other genuine purchases. However, in case of the assessee, the Gross Profit on the alleged purchases was more than the Gross profit of other purchases as average cost of purchases was less as narrated at Para 8 hereinabove.The assessee also relied on the under mentioned

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT various judgements of the Honourable Supreme Court and the Honourable Jurisdictional Gujarat High Court.

(i) CIT vs. Odeon Builders (P.) Ltd. [418 ITR 315 (SC)] (ii) CIT vs M.K. Brothers [30 Taxman 547 (Guj HC)] (iii) PCIT, Surat vs Tejua Rohitkumar Jain HUF [R/Tax Appeal No. 574 of 2022 (Guj HC)] (iv) CIT vs. Nagalia Fabrics (P.) Ltd. [40 taxmann.com 206 (Guj HC)] (v) ACIT vs. Akruti Dyeing & Printing Mills Pvt. Ltd. [Tax Appeal No. 997 of 2008 (Guj HC)]

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT margin. The assessee has furnished comparative details of turnover, gross profit and net profit for several years. From such details, it is evident that the net profit ratio of the assessee has ranged approximately between 0.27% and 0.67% in different years. In the year under consideration, the assessee has declared net profit of 0.33% in A.Υ. 2018-19 and 0.36% in A.Y. 2022-23. In subsequent A.Y. 2023-24, the assessee's case was also scrutinized and no such addition was made, though the net profit ratio was 0.37%, which is broadly comparable with the impugned years. For A.Y. 2018-19, the Assessing Officer made addition at 10% of alleged unverified purchases of Rs. 158,06,67,408/- mainly on the ground that confirmations from certain parties were not available or the parties did not respond to notices issued under section 133(6) of the Act. The Assessing Officer, however, did not reject the books of accounts under section 145(3) of the Act. The learned CIT(A), while deciding the appeal, rejected the books and enhanced the addition by estimating profit at 12.5% of the total turnover. For A.Y. 2022-23, the Assessing Officer rejected the books of account and estimated net profit at 20% of the total turnover, resulting into addition of Rs. 77,69,58,168/-. The learned CIT(A) confirmed rejection of books but restricted the estimation to 12.5% of the total turnover.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT It is not the case of the Revenue that the payments made by the assessee to the suppliers came back to the assessee in cash. No such material has been brought on record. It is also not the case that the sales declared by the assessee were rejected. The quantitative details and stock records have also not been shown to be defective. Once the sales are accepted and there is no discrepancy in quantitative records, the corresponding purchases cannot be discarded merely on suspicion or merely because certain suppliers did not respond to notices under section 133(6) of the Act. Therefore, in our considered view, non-compliance by third parties to notices issued under section 133(6) may be a relevant circumstance for further enquiry, but it cannot, by itself, be the sole basis for treating genuine purchases as non-genuine, particularly when the assessee has furnished all primary evidences within his control. The assessee cannot be expected to compel third-party suppliers to appear before the Assessing Officer or to respond to departmental notices. Once the assessee has furnished invoices, ledger accounts, bank payment details, GST details, quantitative records and transport evidence, the initial onus stands discharged. Thereafter, the burden shifts on the Revenue to bring positive material on record to show that the purchases are bogus or that the documentary evidences are false.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT section 145(3), unless the correctness or completeness of the accounts is shown to be defective.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT the profit on other purchases. For this we place our reliance on the judgment of the Hon'ble Bombay High Court in CIT v. Nikunj Eximp Enterprises (P.) Ltd (supra), wherein it has been held that merely because suppliers did not appear before the Assessing Officer, it cannot be concluded that the purchases were not made, when the assessee had furnished invoices and payment details and the sales were not disputed. The reliance is also placed on the judgments of the Hon'ble Supreme Court and Hon'ble Gujarat High Court, including CIT v. Odeon Builders (P) Ltd., CIT v. M.K. Brothers, PCIT v. Tejua Rohitkumar Jain HUF, CIT v. Nagalia Fabrics (P.) Ltd. and ACIT v. Akruti Dyeing & Printing Mills Pvt. Ltd(supra). The broad principle emerging from these decisions is that addition cannot be sustained merely on suspicion, third-party non-appearance, or unverified statements, when the assessee has produced primary evidence and the Revenue has not brought contrary material on record.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT (c) ITO vs. The Silk Factory [ITA No. 987/Del/2025 (Del. Trib.)] (d) Jain Brothers vs. NFAC, New Delhi [ITA No. 5251/Del/2025 (Del. Trib.)] Even assuming for a moment that the books could be rejected, the estimation of net profit at 12.5% of total turnover is wholly excessive and unrealistic having regard to the nature of business and past history of the assessee. The assessee is dealing in copper metal / scrap, where the turnover is very high and the margin is comparatively low. The Revenue has not brought any comparable case to justify net profit estimation at 12.5% or 20%. The past and subsequent years' results show net profit ratio far below the percentage adopted by the Assessing Officer/learned CIT(A). Therefore, such estimation is purely ad hoc, arbitrary and not sustainable.

ITA Nos. 573, 574 & 665/Srt/2025 Rajesh Kishanlal Jain v. DCIT 30. For A.Y. 2022-23, the addition sustained by the learned CIT(A) by estimating profit at 12.5% of the total turnover is also deleted. Consequently, the grounds raised by the assessee for A.Y. 2022-23 are allowed.

Sd/- Sd/- [ Shri T. R. Senthil Kumar ] [ Dr. Arjun Lal Saini ] �याियक सद�य/Judicial Member लेखा सद�य/Accountant Member //True Copy// राजकोट/Rajkot िदनांक/ Date: 06/07/2026 Copy of the order forwarded to : 1. The assessee 2. The Respondent 3. CIT 4. The CIT(A) 5. DR, ITAT, Surat 6. Guard File By order

Sr. Private Secretary ITAT, Surat