MERAJ AHMED SHARFUDDIN SIDDIQUE,NAVI MUMBAI vs. INCOME TAX OFFICER 27(2)(1), MUMBAI

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ITA 837/MUM/2026Status: DisposedITAT Bangalore20 May 2026AY 2021-202213 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the AO was justified in treating the purchases as bogus due to the assessee's failure to prove their genuineness. The assessee's books of accounts were deemed unreliable, leading to the addition of unexplained bogus purchases.

What were the facts?

The assessee made substantial purchases from suppliers who were non-filers or had low turnover. The Assessing Officer (AO) made additions for bogus purchases after the assessee failed to provide sufficient documentation and explanations. The CIT(A) upheld the AO's order.

What were the issues?

Whether the purchases made by the assessee were genuine, and if the rejection of the assessee's books of accounts and subsequent additions were justified.

Which sections of the Income-tax Act were involved?

Section 145(3),Section 133(6),Section 270A,Section 272A(1)(d)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCHES, MUMBAI

Before: HON’BLE SANDEEP GOSAIN & HON’BLE BIJAYANANDA PRUSETH

For Respondent: Shri Umashankar Prasad (CIT

आदेश / ORDER

PER SANDEEP GOSAIN, JUDICIAL MEMBER: This appeal is filed by the Assessee against the order of Ld. CIT(A), NFAC vide DIN: ITBA/NFAC/S/250/2025-26/1083091510(1) dated 29- Nov-2025 for the Assessment Year 2021-2022. The Assessee has raised the following grounds of appeal:

1. The Ld. CIT(A) misdirected himself in dismissing the Appellant's appeal without recording/noting any factual findings.

2.

The Ld CIT(A) was not justified in not addressing any of the submissions raised by the Appellant/assessee.

3.

The Ld. CIT(A) erred in not appreciating that the Appellant had no control over the suppliers and hence the Appellant could not be held liable for non-filing of returns by his suppliers.

4.

The Ld. CIT(A) fell in error of law in not appreciating that the non-filing of returns by the Appellant's suppliers cannot, by any stretch of imagination, reason for rejecting the books of the Appellant/assessee.

5.

The Ld. CIT(A) failed to appreciate that the LD. AO had not brought on record the responses/information which he received from the suppliers to whom notices were issued u/s. 133(6) of the Act.

2.

None appeared on behalf of the assessee when the case was called out repeatedly. From the case records, we noticed that summons in this case were sent by the Registry through speed post as well as email. More than one month has passed since the summons were issued at the address provided by the assessee in Form 36, therefore, drawing an inference under the General Clauses Act, it is presumed that service of summons/notice has been duly effected.

3.

On the other hand, the Ld. DR present in the court is ready with the arguments, therefore, we have decided to proceed with the hearing of the appeal ex parte.

4.

All the grounds raised by the assessee are interrelated and interconnected and relate to challenging the order of the Ld. CIT(A) in

upholding the assessment order, wherein an addition of Rs. 3,90,45,418 was made.

5.

We have heard the Ld. DR and perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. From the records, we notice that the assessee had filed the return of income for the year under consideration and had shown income from business, etc. The case of the assessee was selected for scrutiny under CASS for the specific reason that the assessee had made substantial purchases from parties who were either non-filers or had filed non-business ITRs or reflected substantially low turnover. In this regard, we noticed that the AO had carried out a detailed investigation and had afforded sufficient opportunity of hearing to the assessee. The relevant portion of the findings of the AO is contained in Paras 5 to 5.3 of the order of the Ld. CIT(A) and the same is reproduced herein below:

5.

Ground Nos. 1 to 6:

5.1 The Assessing Officer has given the following observation in the assessment order:

“1. The assessee had filed ROI for the AY 2021-22 on 14.03.2022 declaring total income of Rs. 11,33,520/-. The assessee has shown income from business of Rs14,83,581/- in this return, after house property loss of current year set off for Rs.2,00,000/- and deduction under chapter VIA for Rs.1,50,000/-, total income declared for Rs. 11,33,520/-. The case of the assessee was selected for complete scrutiny through CASS for specific reason "assessee has made substantial purchases from suppliers who are either non filler(s) or have filed non- business ITR or reflected a substantially lower turnover in ITR."

During the assessment proceedings, following opportunities was given to the assessee:

During the assessment proceedings, notice u/s 142(1) with detailed questionnaire was issued on 25.07.2022. As per this notice, the assessee was asked for nature of business activities, detailed computation of income, details of all bank accounts, details of purchases for Rs. 18,04,92,989/- alongwith copy of P&L account of sellers and sale bills, confirmation of unsecured loans, clarification regarding expenses debited in P&L account which are not allowable u/s 40 of the Act and documentary evidences for deduction u/s 80C. But, the assessee has not responded to this notice. Later on, a letter was issued to the assessee on 02.08.2022, but the assessee has not responded to this letter. Thereafter, notices u/s 142(1) with annexure were issued on 18.08.2022, 14.10.2022 & 27.10.2022 for submit required details and documents, but the assessee has not responded to these notices also. Thereafter, again a letter was issued to the assessee on 04.11.2022.

In response to this letter, the assessee has filed his response on 09.11.2022 with computation of total income, details of purchases for Rs. 18,04,92,989/- during the year under consideration, details of loans (liability) with repayment schedules, details of bank accounts and details of deduction u/s 80C. In his reply, the assessee has stated that "the assessee is mainly engaged in trading/ dealing/supplying of MS Scrap, Iron Scrap etc. All unsecured loans are taken by the financial institutes and banks."

Later on, notice u/s 142(1) with questionnaire regarding discrepancies of sales and purchases made by the assessee was issued to the assessee on 16.11.2022. In response to this notice, the assessee has filed his response on 23.11.2022. In his reply, the assessee has stated that " Already as informed that your assessee is in the business of dealing/trading in MS Scrap which is the having lowest organization/documentations and in other words is totally unorganized sector where there is no scope of interaction of suppliers with respect to KYC/Taking Details of ITRs, asking for Confirmation or Financials. So its not possible for us to locate the suppliers and asking for their financials is no where the option. Therefore Individual ITR filed by sellers, copy of P&L account of sellers is not feasible. Further we are trying to sale bills issued by sellers are already in custody of GST Department so its not practically possible to provide that now. Some of the suppliers as mentioned for Amazing Enterprises, 2) Arihant Traders, 3) HP Trading, 4) Shandar Enterprises etc have been continuously ignorant for the documentation, timely providing of Invoices, non respondent towards ITC Mismatch cases in 2A followup during the business operation in the year. Only Goods were provided on the payment basis and that too without confirmation of accounts and on followups for mismatch no reply was sought and being in the particular business we have to face this for running the business routines and we cannot resort to close the dealing for non providing of documents or timely reply due to this there may be certain differences in GSTR1 of suppliers and our Purchase accounting for which we have just taken the task in our hand and request you to provide the time of 2 months for reconciling the same.

Accurex Impex (PAN- BSWPM3207J) for Rs. 6,24,456/-, from ESKAY Traders (PAN-AWRPN5293R) for Rs. 23,16,269/-,from Sachin Enterprises (PAN- AKCPP6774C) for 1,05,00,000/- and from Vishwakarma Traders (PAN- AFKPV0993E) for Rs. 1,09,509/- have not filed their Returns or have defaulted in filing the GSTR1 by evading the taxes from the GST revenue for which we cannot have the control over their accounts nor we could coerce them to do so except for requesting for payment of timely GST Returns and GST taxes or else No payment will be made for the supplies maximum. Further as stated above for 2 months time we will make sure to reconcile and find the reasons of same. Mentioned purcahses from suppliers namely Ramdhani Mahanth Kashyap and Mohd. Salim Mohd. Rafiq Shaikh may be wrongly entered in any other supplier's name due to clerical mistake which we need to check".

As per above, the assessee has not furnished valid explanation regarding discrepancies of sales/purchases during the year under consideration. Therefore, again notice u/s 142(1) with questionnaire was issued to the assessee on 24.11.2022. As per above, the assessee was asked for all details of purchases for Rs. 18,04,92,989/- from 33 parties i.e. copy of ledger account of supplier parties with mode of payments, copy of relevant bank statement in which transactions has shown, copy of purchase bills and transport details etc. But, the assessee has failed to submit required details and documents regarding purchases during the year under consideration.

Thereafter, show cause notice for proposed variation was issued to the assessee on 02.12.2022, relevant part of above is as under:-

"During the year under consideration, the assessee has shown purchases from supplier parties as per GSTR-1. As per above, 15 supplier parties have not filed return of income for the A.Y. 2021-22. Details of above supplier parties as under:

Hence, above parties are non-filer and the assessee has not submitted required details and documents regarding purchases from above supplier parties. Hence, it is clear that the assessee has booked bogus expenses by bogus purchases from non genuine supplier parties to reduce its profit/taxable income. Therefore, the books of accounts of the assessee is not reliable and show cause why not the provisions of section 145(3) of the IT Act be invoked and 25% of above purchases from non- genuine and non-filer supplier parties of Rs. 15,61,81,671/- i.e. Rs. 3,90,45,418/- is proposed to be added as unexplained bogus purchases to the total income of the assessee for the A.Y. 2021-22".

In response to above show cause notice, the assessee has filed his response on 05.12.2022, but not filed required details and documents regarding purchases from non- genuine and non-filer 15 supplier parties during the year under consideration. The assessee has not furnished valid explanation regarding purchases from non- genuine and non-filer 15 supplier parties. In his reply, the assessee has requested to avail an opportunity of personal hearing. On his request, the assessee was intimated the schedule date and time for VC i.e. 09.12.2022 at 1.00 PM by this office letter dated 06.12.2022. But, on the schedule date and time, the assessee did not attended.

During the assessment proceedings, sufficient opportunities were given to the assessee for submit details of purchases during the year under consideration, but the assessee has failed to do so. During the assessment proceeding, notices u/s 133(6) of the Act were issued to the 15 supplier parties, who were non-filed return of income for the A.Y. 2021-22. In these supplier parties, 11 parties had never filed return of income for the any A.Y., two supplier parties had not filed return after A.Y. 2020-21, one supplier party had not filed return after A.Y.2019-20 and one supplier party had not filed return of income after A.Y. 2015-16. In notice u/s 133(6), the above supplier parties was asked to furnish copy of ITR for the A.Y. 2021-22 with computation of income, certified copy of account of the assessee Sh. Meraj Ahmed Sharfuddin Siddique, bank statement for the F.Y. 2020-21 in which transaction has been shown, copy of sale bills, transport details and other relevant documents regarding sale of goods to the assessee. But, the above supplier parties have not furnished required details and documents regarding sale to the assessee during the year under consideration. During the assessment proceedings, the assessee has failed to submit required details and documents regarding purchases of Rs. 15,61,81,671/- from above 15 supplier parties. Hence, it is clear that the assessee has booked bogus expenses by bogus purchases from above non- genuine supplier parties to reduce its profit taxable income.

Considering these facts, rejection of books of account is a necessity to estimate the income of the assessee. In this regard, reliance is also placed upon the decision of Hon'ble Supreme Court in the case of British Paints India Limited vs CIT, 188 ITR 44 (SC), in which the judgment was given that the "AO is not bound to accept the system of account regularly employed by the assessee even when he correctness of the same was not questioned in the past. It is not only the right but the duty of the Assessing Officer rejecting to consider whether or not the books disclose the true state of accounts and the correct income can be deduced there from".

In view of the above facts and findings, it is held that the assessee has completely failed to prove genuineness of the said purchases of Rs. 15,61,81,617/-, accordingly have also failed to prove the correctness and completeness of his books of accounts in spite of various opportunities.

In view of the above facts and in view of the decision of Hon'ble Gujarat High Court in the case of Sanjay Oilcake Industries v/s CIT (2008) 10 DTR 153 and ITAT Ahemdabad decision in the case of Vijay Proteins Ltd vs ACIT, 58ITD 428 and in view of judgment of Hon'ble Supreme Court in the case of N. K.Proteins Vs DCIT(2017)292CTR 354(SC), 25% of the said purchases of Rs. 15,61,81,671/- 1.e. Rs.3,90,45,418/- may be treated as bogus purchases, which have been claimed by the assessee to inflate the expenses and to reduce the profit. Accordingly, an addition of Rs.3,90,45,418/- has made as unexplained bogus purchases by treated as non reliable the books of accounts of the assessee as per provisions of section 145(3) of the Act and added to the total income of the assessee for the year under consideration.

(Trading Addition: Rs. 3,90,45,418/-)

As per above discussion, it is seen that the assessee has misrepresented the facts of its income, which has resulted in under-reporting of the income. Therefore, penalty proceedings u/s 270A of the Income-tax Act 1961 for mis-reporting its income is hereby initiated separately.

During the assessment proceedings, the assessee has not filed reply in response to notices u/s 142(1) dated 25.07.2022, 18.08.2022, 14.10.2022, 27.10.2022 and 24.11.2022. Hence, penalty proceedings for non filing reply to above notices are being initiated u/s 272A(1) (d) of the Act separately.

As per above, the assessment of the assessee is completed as under:-

Assessed at Rs 4,01,78,938/- u/s 143(3) r.w.s. 144B of the IT Act 1961. Calculation of tax and interest has been made and charged interest u/s 234A, 2348 and 234C of the Act. Credit of prepaid taxes given as per calculation enclosed. Issued demand notice u/s 156 of the IT Act, 1961. Issued show cause notice for initiation of penalty proceedings u/s 270A of the IT Act, 1961 for mis- reporting of income and u/s 272A(1) (d) for non filing reply of notices u/s 142(1) separately."

5.2 During the appellate proceedings, various notices were issued to the appellant. In response, the appellant filed reply. The written submission filed by the assessee on 19.05.2025 during the appellate proceedings is as follows:- 5.3 Decision: I have carefully examined the assessment order and the written submission filed by the assesse. In view of the findings given by the AO in the assessment order, there is no merit in the contention raised by the appellant.

6.

After considering the findings recorded by the Ld. CIT(A) and the AO, we find that the AO had rightly treated the purchases made by the

assessee from the said suppliers as bogus purchases. Accordingly, the addition was made on account of unexplained bogus purchases by treating the books of account of the assessee as non-reliable under the provisions of Section 145(3) of the Act.

7.

No new facts, circumstances, or documents have been placed on record by the assessee to controvert or rebut the lawful findings recorded by the Ld. CIT(A). Therefore, we see no reason to interfere with or deviate from the findings recorded by the Ld. CIT(A). Accordingly, we dismiss the grounds raised by the assessee and uphold the order of the Ld. CIT(A) sustaining the additions.

8.

In the result, appeal filed by the Assessee is dismissed.

Order pronounced in the open court on 20.05.2026.

Sd/- Sd/- BIJAYANANDA PRUSETH SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 20.05.2026 RY-Sr. PS

Copy to:

MERAJ AHMED SHARFUDDIN SIDDIQUE, SURVEY NO.54/1, K.G.N. MARKET, VALIVALI GAON, BEHIND KALPRUSH 1 LODGE, SHILL-PHATA, NAVI MUMBAI, THANE, NAVI MUMBAI-400612, MAHARASHTRA INCOME TAX OFFICER 27(2)(1), VASHI RAILWAY STATION COMMERCIAL 2 COMPLEX, VASHI, NAVI MUMBAI, NAVI MUMBAI-400703, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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