SHRI VIVEK KUMAR GUPTA,DEORIA vs. ASSESSMENT UNIT (NFAC), INCOME TAX DEPARTMENT, VARANASI

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ITA 121/VNS/2023Status: DisposedITAT Varanasi06 July 2026AY 2021-202256 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal noted that the assessee's books of accounts were corrupted. However, the AO had not disputed the sales made by the assessee. Notices issued to the suppliers under Section 133(6) were returned unserved or with remarks like 'Not Known'. The Tribunal, relying on the Gujarat High Court's decision in Bholanath Paper House (P) Ltd. and a coordinate bench decision, held that in cases of alleged bogus purchases, only the profit element embedded in such purchases should be taxed, not the entire amount. Therefore, the Tribunal directed the AO to estimate a net profit of 12.5% on the total purchases made from the identified parties. The Tribunal also noted that the assessee did not appear for the hearing, and the Departmental Representative relied on the lower authorities' orders. No material was presented to persuade interference with the CIT(A)'s order. Consequently, the appeal was partly allowed.

What were the facts?

The assessee, Shri Vivek Kumar Gupta, filed an appeal for Assessment Year 2021-22 against the order dated 25.10.2023 of the CIT(Appeals). The original assessment order dated 30.12.2022, passed by the AO under section 144 read with section 144B of the Income Tax Act, 1961, determined the assessee's total income at Rs. 8,37,13,304/- against a returned income of Rs. 4,42,360/-. This determination included an addition of Rs. 8,32,70,944/- by the AO. The assessee's books of accounts were reportedly corrupted due to a virus. The AO's addition was based on alleged bogus purchases, primarily because the suppliers failed to file their income tax returns. The CIT(A) confirmed an addition of Rs. 2,08,17,736/-, representing 25% of the alleged bogus purchases.

What were the issues?

1. Whether the addition of Rs. 2,08,17,736/- (25% of alleged bogus purchases) made by the AO and confirmed by the CIT(A) is justified, considering the suppliers failed to file returns and the assessee's books were corrupted (Section 144, 144B, 145(3))? 2. Whether the addition was made without pointing out defects in the financial statements or invoking Section 145(3) of the Income Tax Act, 1961? 3. Whether the AO erred in not issuing a draft assessment order under Section 144B(1)(xvi)(b), leading to a jurisdictional error? 4. Whether the addition on alleged bogus purchases was made without disputing or doubting the sales made by the assessee? Assessee's contentions: The addition was made solely because suppliers failed to file returns, which are third parties beyond the assessee's control. The department has their PANs and can take action. No defects were pointed out in financial statements, and Section 145(3) was not invoked. A draft assessment order was not issued, causing a jurisdictional error. The addition was made without disputing the assessee's sales. The audited financial statements should be considered reliable, citing Jay Bharat Engineering Works. The profit element embedded in bogus purchases should be taxed, not the entire amount, citing Bholanath Paper House (P) Ltd. Revenue's contentions: The AO relied on information from the GST portal and Maharashtra Sales Tax Department, indicating non-filers. Notices under Section 133(6) to suppliers were returned as 'Not Known' or 'Unclaimed'. The assessee failed to provide complete details of purchases and supporting documents. The AO's estimation of 25% of purchases as bogus was justified.

Which sections of the Income-tax Act were involved?

Section 144,Section 144B,Section 145(3),Section 133(6),Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, CIRCUIT BENCH (DB

Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA

I.T.A. No.121/VNS/2023 Assessment Year:2021-22 1

IN THE INCOME TAX APPELLATE TRIBUNAL CIRCUIT BENCH (DB), VARANASI BEFORE SHRI KUL BHARAT, VICE PRESIDENT AND SHRI ANADEE NATH MISSHRA, ACCOUNTANT MEMBER I.T.A. No.121/VNS/2023 Assessment Year:2021-22 Shri Vivek Kumar Gupta Vs. Assessment Unit (NFAC) Rudrapur, Deoria, 124, Income Tax Department Mallahtoli Ward, Rudrapur, Deoria- Uttar Pradesh-274204. PAN:BKMPG9782L (Appellant) (Respondent) Appellant by None Respondent by Shri Sanjay Kumar, CIT- D.R. O R D E R PER ANADEE NATH MISSHRA: A.M. (A) This appeal vide I.T.A. No.121/VNS/2023 has been filed by the assessee for assessment year 2021-22 against impugned appellate order dated 25.10.2023 (DIN & Order No.ITBA/NFAC/S/250/2023- 24/1057331131(1) of Ld. Commissioner of Income Tax (Appeals) [“CIT(A)” for short]. The grounds of appeal are as under: -

“1. The Learned Commissioner of Income Tax (Appeals) has erred in confirming an addition of Rs. 2,08,17,736/- being 25% of alleged bogus purchases, with total disregard to the facts and circumstances of the case. 2. The Learned Commissioner of Income Tax (Appeals) failed to appreciate that the addition was made merely because the suppliers had failed to file their returns of Income. 3. The Learned Commissioner of Income Tax (Appeals) and the NeAC failed to appreciate that these were third parties and beyond the control of the assesse. The Learned Commissioner of Income Tax (Appeals) failed to appreciate that the PAN were available with the department and necessary action as per law could be taken in their hands.

I.T.A. No.121/VNS/2023 Assessment Year:2021-22 2

4.

The Learned Commissioner of Income Tax (Appeals) failed to appreciate tha the said addition was made without pointing a single defect in the financial statements and without invoking the provisions of section 145(3) of the Income Tax Act 1961. 5. The Learned Commissioner of Income Tax (Appeals) failed to appreciate that the NeAC erred in law in failing to issue the draft Assessment order u/s I44B(1) (xvi)(b), causing a non-curable jurisdictional error. 6. The Learned Commissioner of Income Tax (Appeals) failed to appreciate that the said addition on alleged bogus purchases was made without disputing or doubting the sales made by the assessee. 7. That the assessee reserves the right to add, alter, delete, and modify any ground of appeal at the time of hearing of the appeal.” (B) In this case, assessment order dated 30.12.2022 was passed by the Assessing Officer (“AO”, for short) u/s 144 read with section 144B of the Income Tax Act, 1961 (“Act”, for short) whereby the assessee’s total income was determined at Rs.8,37,13,304/- as against returned income of Rs.4,42,360/-. In the aforesaid assessment order, an addition of Rs.8,32,70,944/- was made by the Assessing Officer. The relevant portion of the assessment order is reproduced below: -

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(B.1) The assessee’s appeal against the aforesaid assessment order was dismissed by the Ld. CIT(A) vide impugned appellate order dated 22.04.2024 by observing as under: -

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(B.2) The present appeal has been filed by the assessee against the aforesaid impugned appellate order of the Ld. CIT(A). (C) During the course of hearing, none was present on behalf of the assessee. In the past also the appeal was fixed for hearing on 09.12.2025, 20.01.2026, 16.02.2026 and 11.05.2026 but the hearings were either adjourned on the request of the assessee or there was no representation from the assessee’s side. On 09/06/2026 also, when the hearing was last fixed, none was present on behalf of assessee. In the absence of any representation from the side of the assessee, learned Departmental Representative for Revenue was heard, who relied on the orders of the authorities below. On careful perusal of the impugned order of the learned CIT(A), and other materials on record, no infirmity is found in it.

I.T.A. No.121/VNS/2023 Assessment Year:2021-22 56 No material has been presented from either side to persuade us to make any interference with or modification of the impugned order of learned CIT(A). Therefore, the impugned order of learned CIT(A) is upheld and the appeal is dismissed. Grounds of appeal are dismissed accordingly. In the result, appeal filed by the assessee is dismissed.

Order pronounced on 06.07.2026, in open court, in virtual mode.

Sd/. Sd/. (KUL BHARAT) (ANADEE NATH MISSHRA) Vice President Accountant Member Dated: 06.07.2026 Vijay Pal Singh, (Sr. PS) Copy of the order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT(A) 4. CIT 5. D.R., I.T.A.T.

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