INCOME TAX OFFICER, MUMBAI vs. MEGHA NIKUNJ SHAH, MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER:

04.08.2025for Assessment Year (A.Y.) 2020-21 . The Revenue has raised

following grounds of appeal:

“1. On the facts and circumstances of the case and in law, the Ld. CIT(A) is erred in deleting the addition of Rs. 41,62,832 u/s 69C of the IT Act, 1961 as Bogus purchases."

the outset of hearing, the learned Authorised Representative (ld. AR) of the

assessee submits that tax effect involved in the present appeal is only of Rs.

12,73,765/- which is less than the threshold limit of tax effect of Rs.

60,00,000/- for filing appeal before Tribunal. The case does not fall under the

exception clause of Circular No. 5 of 2024 issued by CBDT. The Assessing

Officer (AO) disallowed certain purchases under section 69C on the basis of

alleged information based on search action carried R & B Infra Projects Ltd,

Mumbai. The ld. CIT(A) deleted the entire addition. Even on merit, the

assessee has good case. The assessing officer (AO) made addition of sales toR

& B Infra Projects Ltd, on the basis of information with him that purchases in

the tally accounts of R & B Infra Projects Ltd were not properly recorded. The

basis of addition is absolutely unjustified.

for the revenue submits that the present case falls under clause (j) of para 3.1

of CBDT Circular No. 5 of 2024. On merits, the ld SR DR for revenue submits that on the basis of search action it was proved that R & B Infra Projects Ltd.

were indulging in showing accommodation entry.

filed copy of CBDT Circular No. 5 of 2024 and would submit that clause (h)

specifically says about “cases involved in organised tax evasion including cases

of bogus capital gain / loss through penny stock and cases of accommodation

entry.” The assessee is not involved in such accommodation entry provider.

The ld. CIT(A) allowed relief to the assessee on the basis of evidences filed

during assessment as well as before first appellate authority. The ld. CIT(A)

has given categorical finding that sale of assessee has not been disputed.

There cannot be any sale or any correspondence purchases.

through the orders of lower authorities. The assessee is individual and

proprietor of Bhavya Enterprises. The assessee is engaged in the business of

building material. We find that case of assessee was reopened on the basis of

information available with the AO search action was carried onR & B Infra

Projects Ltd. During search action statement of Suresh Jain and Ratan Singh

Rathod, cashier and director of R & B Infra Projects Ltd was recoded that that

they have accepted that they have shown certain purchases to inflate

expenses and such purchases are not genuine. R & B Infra Projects Ltdhas

shown purchases of Rs. 41,62,832/- from Bhavya Enterprises. The AO issued show cause notice dated 22.01.2025. The contents of show cause notice are

recorded in para 4.2 of assessment order. In the show cause notice, the

assessing officer recorded that on the basis of information available with him,

it emerges that income of Rs. 41,62,832/- had escaped assessment being non-

genuine. The narration in the tally accounts of R & B Infra Projects Ltddo not

contain the details of site at which the material mentioned in the invoice. The

assessee filed reply on 27.11.2025. In the reply, the assessee denied all the

allegation. The assessee in its reply stated that the statement of Suresh Jain

and Ratan Singh Rathod, cashier and director of R & B Infra Projects Ltd. has

not been provided. The list of non-genuine purchases has not been provided.

Such statement and material cannot be used against the assessee which is

about the bogus Input Tax Credit (ITC). The assessee explained that GSTR is

collected and paid. There is no question of claiming ITC on said sales. The

presumption that sales to R & B Infra Projects Ltd. is non-genuine is wrong.

The amount of sales can never by income escaping assessment which is

already included in the nature of sale. No addition on account of non-genuine

sales is required as all sales are genuine. Sales are against the corresponding

purchases. All sales reported in GST return payment is received through

cheques. No evidence is brought on record to show that assessee has received

cash against sale proceeds. The invoices of assessee contained name of site.

Any error or omission on the part of R & B Infra Projects Ltd. cannot be used against the assessee. The list of bills of R & B Infra Projects Ltd. with site was

attached. The reply of assessee was not accepted by AO. The AO held that

Bhavya Enterprises have entered into transaction with R & B Infra Projects

Ltd.. The narration tally accounts do not contain the site at which material /

services mentioned in the invoices have been used which is suspicious. The AO

thereby treated the sale of assessee of Rs. 41,62,832/- as non-genuine and

treated it as unexplained expenditure and added under section 69C. Aggrieved

by the addition in the assessment order, the assessee filed appeal before ld.

CIT(A). Before ld. CIT(A), the assessee filed detailed written submission as

well as statement of fact. In the submission, the assessee stated that

information uploaded by DCIT, Central Circle that assessee has entered into

transaction of Rs. 41,62,832/- with R & B Infra Projects Ltd. wherein

statement of Suresh Jain and Ratan Singh Rathod, cashier and director,

Director was recorded. As per their statement, the case of non-genuine sales

in tally does not contain site at which material in the bills were used. On the

basis of such statement when purchases were checked in tally books of R & B

Infra Projects Ltd. It was noted that in cases of purchases from purchase

party, narration in the tally accounts do not contain the address of site at

which material was used, which was the basis of suspicion of AO. Except the

statements no other evidence was provided to the assessee. The name of

assessee is not mentioned by any one as bogus bill provider. It was only on the basis of accounting entry entered in the books of R & B Infra Projects Ltd.,

the transaction of assessee was suspected. The assessee furnished sample

bills and summary chart of the sales of material. All the sales are genuine. The

assessee has established the genuineness of sales by furnishing complete

evidence. The AO made addition under section 69C against the sales. No

opportunity of cross examination of the accountant or director of R & B Infra

Projects Ltd. was allowed.

case of assessee is that sales are perfectly genuine which is matching with the

corresponding purchases. Even if sale is treated as non-genuine, the addition

under section 69C for unexplained expenditure cannot be made. The

transaction is recorded in the books of account. The ld. CIT(A) held that

assessee has shown sales and sales has been shown in the income. There is

no basis for holding that sales as bogus. It is not expenditure for treating it as

unexplained expenditure when corresponding purchases has been accepted, it

cannot be added in the hand of assessee and allowed the full relief to the

assessee.

not been rejected. The AO made additions merely on the basis of suspicion as

certain transactions were not properly recorded in the tally account of R & B

Infra Projects Ltd. The AO has not recorded anywhere in the assessment either accountant or director of R & B Infra Projects Ltd. has taken the name

of assessee or disclosed the sales of assessee to them is non-genuine. Thus,

with additional observation, the order of ld. CIT(A) is confirmed. Keeping in

view of the fact that we have allowed relief to the assessee, thus, the plea of

ld AR of the assessee on the issue of tax effect have become academic.

Order was pronounced in the open Court on 13/05/2026.

/- S/- /- Sd/- Sd/- GIRISH AGRAWAL PAWAN SINGH ACCOUNTANT MEMBER JUDICIAL MEMBER

Mumbai, Dated: 13/05/2026 Biswajit

Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Nagpur; and (5) Guard file.

By Order

Assistant Registrar / DDO ITAT, Mumbai