INCOME TAX OFFICER WARD 1(1) KALYAN, KALYAN vs. DIXIT PROCESSORS, BHIWANDI

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI NARENDER KUMAR CHOUDHRY, JM & SHRI ARUN KHODPIA, AM I.T.A. No.9515/Mum/2025 (Assessment Year: 2009-10) Income Tax Officer Ward 1(1), Dixit Processors 158, Near Jain Compound, Kalyan Kalyan 1st floor, Mohan Plaza, Wayle Vs. Road, New Kaneri Bhiwandi, Thane- Nagar, Khadakpada, Kalyan 421302 (West), Thane-421301 PAN: AAEFD1227G Revenue- अपीलाथ� / Appellant Assessee-��थ�/ Respondent :

Assesseeby : Shri Vijay Parmar Revenueby : Shri Yaduraj Singh – SR. DR. Date of Hearing : 09.04.2026 Date of Pronouncement : 07.05.2026

O R D E R Per Arun Khodpia, AM: The captioned appeal is preferred by the revenue against the order of Commissioner of Income Tax Appeals ADDL/JCIT (A) – 2, Noida [“the Ld. CIT(A)] dated 27.10.2025 for the assessment year 2009-10 arises from assessment order u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (“the Act”) dated 27.12.2019 passed by Income Tax Officer Ward – 1(1), Kalyan. The grounds raised by the revenue of appeal are as under: “1. On the facts and in the circumstances of the case Ld CIT(A) has failed to note that assessee has failed to produce material evidence as well as the purchase parties before the Assessing Officer during the first round of assessment proceedings/survey

ITA No. 9515/Mum/2025 Dixit Processors conducted in the case of assessee. In the second round also these parties have not responded to notices under section 133(6) issued by the Assessing Officer. 2. On the facts and in circumstances of the case, the CIT(A) erred in restricting the disallowance of purchases to Rs. 1,06,113/- out of total bogus purchases completely ignoring the line of argument taken by Ld CIT(A) in its order dated 31.12.2015 passed in the first round of appeal. 3. On the facts and in circumstances of the case, the CIT(A) erred in restricting the disallowance of purchases to Rs. 1,06,113/ out of total bogus purchases of Rs. 21,22,255/- from non-existent vendors by ignoring the decision of the Hon'ble Gujarat High Court in N.K. Industries Ltd. vs. Deputy Commissioner of Income-tax [2016] 72 taxmann.com 289 (Gujarat) and decision of jurisdictional High Court in the case of Principal Commissioner of Income-tax vs. Kanak Impex (India) Ltd. [2025] 172 taxmann.com 283 (Bombay), whereas SLP filed against both these cases have been dismissed by Hon'ble Supreme Court of India. 4. The appellant craves leave to add, amend or alter or alter any ground/grounds, which may be necessary That present appeal is being filed as per an exception given in Para 3.1h of CBDT's Circular No.5/2024 dated 15.03.2024.”

ITA No. 9515/Mum/2025 Dixit Processors assessee has been dismissed. Therefore, in order to take remedial actions, assessee preferred an appeal before the Income Tax Appellate Tribunal (ITAT), wherein the matter was set aside to the file of ld. AO with direction to examine the concerned parties. opportunity of cross-examination was given to the assessee. As the matter was set aside to the file of AO for giving an opportunity to assessee for cross-examination of the concerned parties, the notices u/s 133(6) of the Act were issued to the parties, however, all such notices were returned back unserved by the postal authorities except in a particular case of Shri Nirav Dedhia, proprietor of K.C. Enterprises, who denied any business with the assessee. In absence of response from the concerned parties, the Inspector of IT Department was directed to trace such parties, however, the Inspector of IT Department was also unable to locate the concerned parties at their given addresses. The assessee was show-caused to respond in aforesaid situation towards which a reply was submitted by the assessee, however, the contentions of assessee are not found sustainable on merits. Therefore, the AO observed, despite sufficient opportunities right from the survey proceedings to fresh assessment as directed by the Hon’ble ITAT, the assessee squarely failed to prove the genuineness of transactions. Therefore, the purchase amounting to Rs. 21,22,255/- is found to be bogus and non-genuine and, therefore, added back to the income of the assessee. 3. Being aggrieved with the consequential assessment order passed by the Ld. AO u/s 143(3) r.w.s 254 of the Act, assessee preferred an appeal before the Ld. 3

ITA No. 9515/Mum/2025 Dixit Processors CIT(A). The Ld. CIT(A) in appellate proceedings have considered the contention of the assessee and have decided the issue with the following findings and decision: “5. Findings and decision: 5.1 The AO made the addition by observing as under: 9. As discussed in detail in above paras, it is established that the assessee has obtained the bogus bills from the above-mentioned parties and despite given sufficient opportunities, right from survey proceedings to the OF Tesh assessment IN as directed by Hon'ble ITAT, failed to prove the genuineness of the transactions. Therefore, in view of the same, purchase amounting to Rs.21,22,255/- is found to be bogus and non-genuine and therefore, added to the income of the assessee as by debiting the said amount the assessee has reduced its profit. Since, the assessee has furnished inaccurate particulars of income and thereby concealed its income, penalty proceedings penalty u/s 271(1)(c) is initiated separately. 5.2 I have considered the assessment order and the submissions of the appellant including the case laws cited. The AO observed in the assessment order that the appellant produced the details. He also filed sale bills for the corresponding purchases disputed by the AO. It is noticed that on account of non-availability of the suppliers at the given address and non-production of delivery challans, octroi bills, the AO rejected the books and added the entire amount of alleged bogus purchases. In this regard it is found that many Benches of ITAT and Hon'ble High Courts have held that when purchases are supported by sufficient documentary evidences then merely because of non-appearance before the AO, one cannot conclude that the purchases were not made by the appellant. 5.3 Though, it may be a fact that appellant was not able to produce the concerned parties before the AO, fact remains that the appellant produced bank account statement, purchase bills etc., to prove the genuineness of purchases. It is also a fact on record that the AO has not doubted the sales affected by the appellant. Thus, it is logical to conclude that without corresponding purchases being affected, the appellant could not have made the sales. Merely relying upon the information from the Sales Tax Department the AO could not have treated the total purchases as bogus. The appellant has brought documentary evidences on record to prove genuineness of transactions, the action of the AO in ignoring them cannot be accepted. When the payment to concerned parties is through banking channel and also because that there is no evidence before the AO that the payments made were again routed back to assessee, the addition of Rs.21,22,255/- being bogus purchases is not sustainable in law and facts. Only corollary that follows in such situation is that the appellant could have obtained the accommodation bills to lieu of the material purchased locally. Therefore, the saving on account of VAT and other incidental charges made by the appellant on the said bogus purchases can be brought to tax as additional profit. Keeping in view the totality of facts and circumstances of the case, the disallowance made by the AO is restricted to 5% of such purchases of Rs. 21,22,255/- which comes to Rs. 1,06,113/-. The JAO is 4

ITA No. 9515/Mum/2025 Dixit Processors directed to modify the addition accordingly and the appellant gets part relief. The appeal is partly allowed.” 4. Since the Ld. CIT(A) had granted relief to the assessee by estimating the profit embedded in the alleged bogus purchases by restricting the disallowance to 5% of Rs.21,22,255/-, which comes to Rs.1,06,113/-, the revenue felt aggrieved and has filed the present appeal before us. 5. At the outset, Ld. Sr. DR representing the revenue submitted that since the assessee was unable to prove anything by way of corroborative evidences or by bringing the concerned parties before the AO, even after the request of cross- examination in the second round of proceedings, therefore, the AO was right in making the addition at 100% of the bogus purchases whereas the Ld. CIT(A) has concluded that even if the assessee was not able to produce the concerned parties before the AO and the transactions of purchases are established to be bogus in nature, in absence of any doubt on the sales made by the assessee, which are accepted in totality by the AO, logically only the additional profit embedded on the bogus purchases by the assessee can be brought to tax and not the entire purchases. It was the submission that the aforesaid observation of Ld. CIT(A) is not in accordance with the settled principle of law as per decisions of Hon’ble Gujarat High Court in the case of NK Industries Ltd. vs. DCIT (2016)72 taxmann.com 289 (Gujarat) and the decision of jurisdictional High Court in the case of PCIT vs. Kanak Impex India Limited (2025) 172 taxmann.com 283 (Bombay). It was the prayer that the case of assessee is totally identical to the

ITA No. 9515/Mum/2025 Dixit Processors aforesaid two cases, therefore, the relief granted by Ld. CIT(A) is under ignorance of law legal principles laid down and is liable to be set aside. 6. Per contra, Ld. Authorized Representative of the assessee submitted that the assessee had furnished various details before the AO as well as before the Ld. Appellate Authority such as item wise stock statement, statement of purchase and payment, party wise ledger, financial facts and profit element, etc. It was the submission that the case of assessee is factually different from the casesrelied by the revenues, as in those cases the assessee concerned did not furnish any response, reply or submissions before the authorities. Therefore, the addition was made for 100%. In the present case, the assessee had furnished all the necessary corroborative evidences and further the profit which is embedded in the sale of assessee had impliedly offered for taxation which is accepted by the AO by not disturbing the sales of the assessee, neither have found any default in the accounting nor quantitative details of the assessee. Therefore, the Ld. CIT(A) has rightly adjudicated the issue by directing the Jurisdictional Assessing Officer to restrict the disallowance at 5% of estimated purchases. 7. We have considered the rival submissions, perused the material available on record and the case laws relied upon by the parties. We found that in the present case, in first round of litigation the assessee had not made any substantive submissions before the AO, even before the First Appellate Authority the assessee was found to be persistent non-compliant. However, in the interest of justice, the Tribunal has given one more chance to assessee to furnish all the 6

ITA No. 9515/Mum/2025 Dixit Processors information and to cross-examine the parties concerned. In the course of set aside assessment proceedings, the concerned parties were called for verification and submission of documents, but most of them have not responded. However necessary documents to corroborate the sale and purchase, the assessee have furnished evidences like bank statement and other documents referred to (supra). Therefore, the Ld. CIT(A) has restricted the estimated profit on bogus purchases at 5% of such bogus purchases. 8. On perusal of documents furnished by the assessee, we found that the assessee’s gross profit ranges between 14.26% and 14.49% in the assessment year 2009-10, 2010-11 and 2011-12 and the net profit is 3.38% to 4.30%. As Ld. CIT(A) had already restricted the addition to 5% of bogus purchases which is higher than the net profit of the assessee embedded in the total sales made by the assessee during the relevant assessment year which is 3.38% (or avg. % which is below 5%).The CIT(A) had already directed to tax the profits of the assessee at a rate higher than the net profit declared by the assessee on normal sales. Under such circumstances, the order of Ld. CIT(A) restricting the addition is found to be reasonable and justifiable.For aforesaid reasons, we do not see any infirmity in the order of Ld. CIT(A), so as to interfere with the same. We, thus, approve the findings of Ld. CIT(A). Consequently, the grounds of appeal raised by the revenue cannot be allowed, as the case laws (supra) which are not identical in terms of facts of the present case are of no help to the revenue.

ITA No. 9515/Mum/2025 Dixit Processors 9. Accordingly, the grounds of appeal raised by the revenue being bereft of merit and devoid of substance stands rejected. 10. In result, appeal of revenue is dismissed, in terms of our aforesaid observations. Order pronounced in the open court on 07-05-2026.

Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (ARUN KHODPIA) Judicial Member Accountant Member

Mumbai, Dated : 07-05-2026. Ankit, Sr. PS

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai