DCIT-1(2)1, MUMBAI, MUMBAI vs. PATIL CONSTRUCTION AND INFRASTRUCTURE LIMITED, MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & HON’BLE SHRI JAGADISH, ACCOUNTANT MEMBER ITA No. 5909/Mum/2024 (Assessment Year: 2021-22)

DCIT – 1(2)1, Mumbai Vs. Patil Construction and 535, 5th Floor, Aayakar Infrastructure Limited Bhavan, M.K. Road, Flat No. 2, Swadhin Mumbai - 400020 Sadan, C – Road, Churchgate Mumbai - 400021 PAN/GIR No. AAFCP4151P (Applicant) (Respondent) Assessee by Shri Neelkanth Khandelwal, CA (Virtually appeared) Revenue by Shri Virabhadra, (SR. DR.) Date of Hearing 05.03.2026 Date of Pronouncement 30.04.2026 आदेश / ORDER PER SANDEEP GOSAIN, JM: The present appeal has been filed by the Revenue challenging the impugned order dated 14.08.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi (NFAC) for the assessment year 2018-19. The following grounds are reproduced below:

2 ITA No. 5909/Mum/2024

“(i) "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was right in law in deleting the addition of Rs.80,91,958/-, without appreciating the factual aspect and by ignoring the manifest evidence relied upon by the Assessing Officer during the assessment proceedings?" (ii) "Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in law in deleting the addition, without appreciation the factual aspect and by ignoring the manifest evidence relied upon by the Assessing Officer and overlooking the ratio laid down in the case of Kaveri Rice Mills vs CIT (157 Taxman 376) and Pawanraj B. Bokadia in Tax Appeal No. 2345 of 2009, dated September 239, 2011?" (iⅲ) "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was right in deleting the addition of Rs. 80,91,958/ made by the Assessing Officer on the basis of the additional evidence without giving an opportunity to the AO to examine the same?" (iv) The Appellant prays that the order of the CIT(A) on the above ground be set aside and that of the AO be restored. (v) The Appellant craves leave to amend or alter any grounds or add a new ground which may necessary. ”

URGENT/ITAT MATTER

Sir,

3 ITA No. 5909/Mum/2024

Sub: Submission of application for condonation of delay in filing of appeal in the case of M/s Patil Construction and Infrastructure Ltd. For AY 2017-18, 2018-19 and 2021-22-reg.

Ref: Appeal Nos. ITA/5907, 5908, 5909/MUM/2024 filed by Department

Please refer to the above-mentioned subject.

2 Members of ITAT C Bench, Mumbai. With reference to the above. I am directed to state The above appeals were listed for hearing on 01.01.2025 before the Hon'ble that, it is seen from Form No. 36 and scrutiny report that there is a delay of 32 days in filing of 3 appeals by department for AV 2017-18, 2018-19 and 2021-22 as the due date for filing of appeal was 12.10.2024 however the appeals have been filed on 14.11.2024

3 During the course of hearing, the Hon'ble Members wanted to know the reasons for delay in filing of 3 above said appeals and directed to submit applications for condonation of delay in all the three appeals for AY 2017-18, 2018-19 and 2021-22

4 It is accordingly requested that three separate petitions for condonation of delay for AY 2017-18, 2018-19 and 2021-22 along with reason for delay may be filed at the 4. earliest

5 The matter is now listed for hearing on 05.02.2025, it is therefore requested that the application for condonation of delay for all the above 3 assessment years may be filed lates by 15.01.2025.

Regards

ITO to CIT Bench, Mumbai

4 ITA No. 5909/Mum/2024

2.1 Considering the entire factual position as explained in the application and also keeping in view the principles laid down by Hon’ble Supreme Court in the case of Collector Land Acquisition, Anantnag & ... vs Mst. Katiji & Ors 1987 AIR 1353 (SC) wherein it has been held that where substantial justice is pitted against the technicalities of non-deliberate delay then in that eventuality substantial justice is to be preferred. In our view, the principle of advancing substantial justice is of prime importance, hence, considering the explanation put forth by the Revenue by justifiably and properly explaining the delay which occurred in filing the appeal and considering the expression “sufficient cause” liberally we are inclined to condone the delay in filing the appeal before us. Consequently, the delay is condoned and the appeal is admitted to be heard on ground of merits.

5 ITA No. 5909/Mum/2024

engaged in the business of civil contracting and engineering activities.

7.2 The …….. "3.1 The Id AO he made addition of Rs.80.91,9587-or want of confirmation of accounts and filing relevant bank statement as well as e- way bill/delivery challan in respect of two parties namely Shri. Arunkumar Bhutara and Shri. Baburao Namdeo Rasal. The addition as made is not justified since the payments to these parties have been made through banking channels and details of the same were duly filed by way of account extracts of these parties, specifying bank details and cheque Nos etc. The addition is unjustified. The learned AO made addition merely relying upon the information given by the inspector and VU. stating that the purchases made from the Arun Kumar Bhutra Proprietor of M/s. Savera Electrical Agency and Baburao Namdev Prop, of Shubham Enterprises are bogus. While making the assessment, it is the satisfaction of the AO, which is of prime importance. The same cannot be substituted by the satisfaction of someone else. The

6 ITA No. 5909/Mum/2024

appellant has discharged, the primary onus cast upon him by evidencing the proper entries of the alleged bogus purchases in his books of accounts and also their corresponding use of material/Service purchase; payment by way of account payee cheques and producing vouchers of its corresponding income. The learned A.O. did not make any enquiries on these aspects. The relevant portion of Assessment Order is reproduced is as under:

7 ITA No. 5909/Mum/2024

3.2 During the relevant assessment year the appellant has submit the copy of accounts statements of the aforesaid party as appearing in the appellant books of accounts: In this regard it is respectfully submitted that all the purchases being made by the appellant are duly and fully supported substantiated& corroborated by the corresponding purchases invoices/e-way bill all the payments towards the purchases have been made through proper and authenticated banking channels Both the supplier are registered person under the GST Act. When GST Department issues GST registration certificate to any person, it check many things Like Status, Address, PAN No., Bank Account No. etc. 3.3 The assessee had made the purchases of material/service from the alleged party and material/service has been received, material has been utilized, various government taxes has been paid, payment has been made through "Cross Account Payee Cheques". To establish that the purchases are genuine, the assessee provided the following details:- Sr. SUPPORTING EVIDENCE no. A Ledger Account of parties in Assessee Books of Accounts for the Period of 01 04-2020 to 31-03-2021, B Copy of GSTR-2A (Input Tax Credit) C Bill Copy of Alleged Parties C Copy of E-Way Bill In his case, both the figures of purchase/service are duly reflected in the bank account as well as books of the assessee. Profit generated out of the such transaction has also been part of the returned income, filed u/s 139(1) of the LT. Act, 1961. With these many number of supporting evidences, in support of the purchases/service made by the assessee are genuine and not bogus. We are enclosing herewith the above evidence/documents as per Annexure 3 and Annexure 4 which have already submitted during the relevant assessment proceedings. It is not a case of loan or deposits accepted by the assessee, where he has to establish the identity of the person, genuineness of the transaction. It is purchase and sale, where the goods has been received, goods has been sold, various govemment taxes has been paid, payment has been made through "Cross Account Payee Cheques", quantitative details has been furnished. With these many number of supporting evidences, in support of the various purchases/service made by the assessee, the leaned A.O. has only argument against the assessee, that is the assessee could not produce party before the learned AO. We are enclosing herewith the copy of invoice, Copy of E-Way Bill, Copy of GSTR-2A Copy of Party Ledger. The learned Assessing Officer did not point out any discrepancy in the books of accounts of the applicant assessee. No evidence has been brought on record to show that the books of accounts are incorrect. No such finding has been given by the A.O., No provisions of section 145 of the Income Tax Act, 1961 has been invoked.

8 ITA No. 5909/Mum/2024

3.4 In the absence of these no addition can be made to the financial results. He also accepted the book results. Without rejecting the book results and without invoking the provisions of section 145 no addition of the income of the assessee can be made on account of purchases. Arunkumar Bhutada, Prop. of Savera Electrical Agency (Rs.71,65,173/-) It is respectfully submitted that we have enclosed herewith copy of the account statement of the aforesaid party as appearing in our books of accounts and accordingly, there are credits of Rs.84,54,905/- alongwith GST of 18%, Copy of E-Way Bill, Relevant portion of GSTR-2A are enclosed herewith as per Annexure 3. If this GST is deducted, the amount come to Rs.71,72,788/-, which almost tallies with the figure shown by you. The said party is a proprietor of M/s Saveraa Electrical Agency. The copy of All deta The relevant portion GSTR2A is reproduced is as under:

The above chart it is clear that supplier has collected the GST from Assessee Company and deposited into Govt. Account. The assessee company has also tds deducted on such amounts. When the supplier has issued e-way bill and the GST collected from the Assessee Company has also been deposited in the GST department then how can the supplier is not traceable. Vehcile Number is also appearing on the e-way bill which is issued by the supplier. Baburao Namdeo Rasal (Rs. 9,26,785/-) It is respectfully submitted that during the relevant assessment proceedings we have submitted the copy of Ledger Account, Copy of Bills, Relevant portion of GSTR-2A are enclosed therewith as per Annexure-4. The assessee has also deduct TDS on such amount. The copy of bills and GSTR-2A is reproduced as under:

9 ITA No. 5909/Mum/2024

10 ITA No. 5909/Mum/2024

The above chart it is clear that supplier has collected the GST from Assessee Company and deposited Into Govt. Account. The assessee company has also tds deducted on such amounts. When the supplier has issued e-way bill and the GST collected from the Assessee Company has also been deposited in the GST department then how can the supplier is not traceable. Vehcile Number is also appearing on the e-way bill which is issued by the supplier. 3.5 That on the issue of bogus material/service purchases in the circumstances there are large number of judicial pronouncements of various courts including that of Jurisdictional High Court and in each and every case it has been held that the entire purchases cannot be presumed to be bogus only any element of profit can be estimated and the assessee relies upon the following judicial pronouncements in it support: 1. In the case of PCIT, Surat -1 Vs. Tejua Rohit Kumar Kapadia, reported in 94 taxmann.com 325 [2018], (SC), the Hon'ble Supreme Court of India has dismissed SLP filed by the Department and affirm the order of the Hon'ble Gujarat High Court and stated as under- Section 69C of the Income-tax Act, 1961 Unexplained expenditure (Bogus purchases) Assessing Officer had disallowed some expenditure treating purchases as bogus and made addition- High Court in impugned order noted that purchases made by assessee- trader were duly supported by bills and payments were made by

11 ITA No. 5909/Mum/2024

account payee cheque and seller also confirmed transaction and there was no evidence to show that amount was recycled back to assessee, and held that addition was not called for-Whether, on facts, SLP against said order. was to be dismissed-Held, yes (Paras 2 and 3] [In favour of assessee] 1. CIT V Simit P Sheth (2013) 356 ITR 0451 (GUJ HC) Held :in case of bogus purchases, it is vital to ascertain whether purchases were totally non existent or were actually made but from Grey Market without proper billing instead of from parties whom it was claimed to be purchased. Once it is clear that purchases were actually made, then only the profit embedded in it and not price of bogus purchases could be added in the income of the assesse. 1. CIT V Sunrise Tooling System P Ltd (2014) 361 ITR 206 (Delhi HC) Where A O has not rejected assesses books of accounts and assesse has firmly and conclusively established its claim of purchases of goods, no addition can be made on account of bogus purchase. 1. CIT V Pokhraj P Doshi (2014) 223 Taxman 6 (Gu] HC) Held: On appreciation of evidence and in exercise of discretion vested in it, the learned ITAT has reduced the addition to 20% of the purchases booked in the name of R Rpatel Trading Corpn. The impugned order passed by ITAT is on facts. No question of law arises in the present appeal. 1. CIT V Bholanath Polyfab P Ltd (2013) 355 ITR 0290 (GUJ HC) ARTMENS Held: Where The Tribunal nad examined evidence on record and concluded that assesse did purchase cloth and sell finished goods, only protit element would be subject to tax and not the entire amount. 1. CIT V Sathyanarayan P Rathi (2013) 351 ITR 0150 (Guj) Held: Where the assesse engaged in trading Iron had purchased raw material from undisclosed sources, profit element embodied in such purchase could be added in the income of assesse, Tribunal was justified in estimating profit element at 12.5%. 1. DCIT V Adinath Industries (2001) 252 ITR 0476 (Gul) Held: A O treated purchases made by assesse from G as fake on the ground that G was not a genuine party. Assesse produced all relevant material to show the purchase of material from G and its use in production. Tribunal having accepted the genuineness of the purchases made by the assesse from a certain party, no question of law arises. 1. CIT V JMD Computers & Communications P Ltd (2009) 180 Taxman 485 (Del) Held: Department having accepted purchases made by the assesse, could not have assumed that the assesse had inflated purchases and made addition, more so when the incriminating statement of third party on which addition was based was not put to assesse. 1. DECISIONS OF APPELLATE TRIBUNAL: 1. Shubh Laxmi Exports V ITO (2008) 10 DTR (Jp) (Trib) 0281: Held :assesse having produced sufficient evidence on record in support of its claim of purchase of Goods and their sale (Export), AO was not

12 ITA No. 5909/Mum/2024

justified in making addition under S69C and proviso thereto without disproving such evidence. 1. ITO V. Sunsteel (2005) 92 TTJ (Ahd) 1126 Held: Assessee not being able to prove existence of certain suppliers though material seems to be purchased, addition on account of purchases from unverifiable sources is restricted to Rs 50000/- as AO had no material to prove that payments of purchases came back to the assesse. 1. DCIT V Kirtilal Kalidas Jewellers P Ltd (2012) 33 CCH 543 (Chennai trib) Held: Where the purchases were recorded in the books of accounts of the assesse and also shown in stock, disallowance cannot be made just for the reason that purchases effected from certain parties did not carry full address of sellers. 1. Balaji textile Industries P Ltd V ITO (1994) 49 ITD (BOM) 177 Held: Purchases from untraceable parties Assessee is said to have made entire sales to S. same recorded in books of both the parties. Purchases have to be believed. Deduction allowable. 1. Rajesh P soni V ACIT (2006) 100 TTJ (Ahd) 892 Held: Purchases made by assesse having been properly recorded in books of accounts and supported by authenticated purchase bills/vouchers, for which payments were made through banking channels, and sales against these purchases are not doubted, addition under S 69 was not justified merely because suppliers could not be located and were not produced for examination. 1. YFC Projects P Ltd V DCIT (2010) 134 TTJ (Del) 0167 Held: AO was not justified in making the disallowance of purchases made by the assesse merely due to non filing of confirmation from suppliers especially when assesse has filed certificate from the bank indicating the facts that cheques were cleared and no defect in the books of accounts was pointed out by the AO. The facts mentioned above, therefore, leads to the conclusion that the appellant has made the purchases in question but due to the non availability of such parties and adverse reports from the sales tax authorities, the AO proceeded to treat such purchases from the party in question as bogus and hence as income of the appellant. Such conclusions drawn by the AO are not supported by any other evidence and therefore unacceptable. Simply because the parties are not available for confirmation of sales made by them to the appellant or because the parties were declared as suspicious dealers by the sales Tax Department, will not make the same as bogus purchases, liable to be disallowed in entirety. 1. ACG Arts & Properties Pvt. Ltd. v Deputy CIT Cen. Cir. 42 Mumbai [2018] 93 taxmann.com 486 (Mumbai - Trib.) Section 69C of the Income-tax Act, 1961- Unexplained expenditure (Bogus purchases) - Assessment years 2006-07 and 2007-08-During course of search conducted upon group of concems which included assessee- company, it was revealed that assessee was indulged in accepting bogus purchase bills in respect of paintings and sculptures possessed by it and

13 ITA No. 5909/Mum/2024

that such bills were obtained from persons who were engaged in providing accommodation entries Thus, addition was made to income of assessee - Revenue based its finding on statements of suppliers/sellers of paintings wherein they submitted that they had received cheques from assessee and after clearance withdrew cash and after deducting their commission, balance of cash was handed over to person who came with cheques-it was noted that existence of paintings and same being in possession of assessee, was not in dispute. inasmuch as, all paintings in question, except one (which was sold during year) were available as a part of closing stock of assessee Existence of transaction between assessee and stated suppliers/sellers could not be doubted, as consideration were paid to such sellers/suppliers through account payee cheques which stood credited in bank account of such suppliers - Statements of stated suppliers/sellers did not prove thet consideration going out of assessee's bank account had come back to assessee in form of cash- Quite clearly, statement given by stated suppliers/sellers only conveyed that cash was retumed by them to person who gave them cheques and there was uniformity in statements of all suppliers on aforesaid aspect - Whether since there was not enough material with revenue to treat purchase transaction as bogus or not proved, impugned addition made on Once the quantity of opening stock and purchases on the debit side; and sales and closing stock in the credit side in the books of account has been accepted, then to hold that the some quantity of purchases recorded in the books are unexplained or outside books of account, is very difficult proposition to accept. Because, the quantitative details of stock, purchases, sales have not been discarded or any defect has been found, then purchases as debited in the books of accounts cannot be added u/s 69C. Here in this case, even balaricing figure of the gross profit shown by the assessee has not disturbed. Even if it is to be accepted that the purchases mode from the three parties were in the nature of accommodation entries then it has to be seen, firstly, whether these purchases have been made outside books on does not matches with the quantitative tally; or secondly, whether such bills have been obtained merely to suppress the gross profit. Ostensibly, the first reason is lacking here in this case as discussed above; and in so far as the second reasoning is concerned, one has to examine, if purchases have been made through cheques, the source of which are from the books of account and if later on, cash has been received in lieu of such cheque but no purchases have been made, then clearly there would be a difference in quantitative tally of purchases as well as in the stock and such a discrepancy has been found then purchases can be held to be bogus. But here in this case no such difference in the quantitative tally has been found. Further, if assessee after receiving the cash in lieu of the cheque has made purchases from the grey market for getting the same quantity of material in cash from some different vender, then at the most it could be a case of the suppressing of gross profit. in other words, assessee has debited higher armount for the purchase which in fact has purchased the same material and quantity at a lesser amount, thereby suppressing the gross profit. Under these circumstances any addition at all which could

14 ITA No. 5909/Mum/2024

be made, is by enhancing the Gross Profit on such purchases. Nowhere there is a finding or whisper either by the AO or CIT (A) that the gross profit shown by the assessee during the year was less as compared to earlier or subsequent years or there is any material to show that gross profit has been low during the year. If all the entries in the trading account including the quantitative tally of purchases, opening stock, sales and closing stock are found to be correct and no discrepancy has been found, then no addition on account of unexplained purchases can be made, because nowhere it has been found that assessee has made purchases outside the books. The entire finding of the Ld. CIT (A) hinges upon the fact that there was material indicating purchase under consideration are bogus without even appreciating that if the source of purchases are from the books and through account payee cheque, then how such purchases can be treated as un accounted. Since gross profit rate and gross profit has been accepted including the trading account then no such addition can be made. in the result on merits addition made by the AO is deleted and consequently assessee's appeal is allowed. 1. 1. In the absence of so called statement not fumished to present assesse, what you have in your possession is only a Statement of Urvil Jain and have no other evidence which supports your claim. Hence we submit that merely on the basis of Statement of third parties and furnished by Higher authorities, additions cannot be made in the hands of assesses in IT proceedings. Your attention is also drawn to a recent decision of Mumbai Tribunal in the case of DCIT vs. Rajeev G. Kalathil (ITAT Mumbai) wherein it was held: "S. 68: Fact that alleged supplier is not traceable and has been termed a "hawala dealer" by the VAT authorities is not sufficient to treat the purchases as "bogus". The fact that the supplier is declared as a "Hawala dealer by the VAT department is a good starting point for making further investigation and taking it to its logical end However, suspicion of highest degree cannot take place of evidence. The AO ought to have called for details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account No such exercise was done. There is nothing in the order of the AO about the cash trail Further you will appreciate that since sales have all been accepted and no sales are possible unless manufactured of goods are effected, we submit that entire depreciation/purchases cannot be disallowed reliance is placed on following decisions. 1. CIT V Nangalia Fabrics Pvt Ltd (Gujrat High Court) decision dated 9th Sept 2014.Held -Sec 68: Purchases cannot be held as "Bogus" only on the ground that the suppliers are not traceable.

The AO held that as the parties from whom the purchases were allegedly made by the assessee could not be located, they were bogus and an addition had to be made u/s 68 in the hands of the assessee. The CIT(A)

15 ITA No. 5909/Mum/2024

and Tribunal deleted the addition on the basis that the purchases could not be held to be bogus as corresponding sales had been effected by the assessee and similar purchases in the earlier and subsequent years were not questioned by the AO. On appeal by the department to the High Court HELD dismissing the appeal: "The Tribunal has found that the purchases are genuine because they are supported by bills, entries in the books of account, payment by cheque and quantitative details. The AO did not find any inflation in purchase price or inflation in consumption or suppression the production, The addition had been made only on the ground that the parties are not traceable. The assessee had made payment through crossed cheques and AO did not find that payment made came back to assessee. The ratio of creditors to purchases is normal considering the past records of the assessee. The creditors were outstanding owing to liquidity as assessee is also required to get credit in respect of sales also. Even otherwise, section 68 is not attracted to amounts representing purchases made on credit. This is a finding of fact which does not give rise to a question of law." In view of all the above, we submit that dis-allowance of entire purchase in the hands of assessee is nelther justified nor warranted. We rely on following judicial pronouncements of various judicial authorities. 1. 1. DECISIONS OF HIGH COURTS 2. CIT V Simit P Sheth (2013) 356 ITR 0451 (GUJ HC) Held in case of bogus purchases, it is vital to ascertain whether purchases were totally non existent or were actually made but from Grey Market without proper billing instead of from parties whom it was claimed to be purchased. Once it is clear that purchases were actually made, then only the profit embedded in it and not price of bogus purchases could be added in the income of the assesse. 1. CIT V Sunrise Tooling System P Ltd (2014) 361 ITR 206 (Delhi HC) Where A O has not rejected assesse's books of accounts and assesse has firmly and conclusively established its claim of purchases of goods, no addition can be made on account of bogus purchase. 1. CIT V Pokhraj P Doshi (2014) 223 Taxman 6 (Guj HC) Held: On appreciation of evidence and in exercise of discretion vested in it, the leamed ITAT has reduced the addition to 20% of the purchases booked in the name of R Rpatel Trading Corpn. The impugned order passed by ITAT is on facts: No question of law arises in the present appeal. 1. CIT V Bholanath Polyfab P Ltd (2013) 355 ITR 0290 (GUJ HC) Held: Where The Tribunal had examined evidence on record and concluded that assesse did purchase cloth and sell finished goods, only profit element would be subject to tax and not the entire amount 1. CIT V Sathyanarayan P Rathi (2013), 351 ITR ITR 0150 (Guj) Held: Where the assesse engaged in trading Iron had purchased raw material from undisclosed the income of assesse, Tribunal sources, profit element embodied in such purchase could be added in was justified in estimating profit element at nont at 12,5% DEPART

16 ITA No. 5909/Mum/2024

17 ITA No. 5909/Mum/2024

authorities, the AO proceeded to treat such purchases from the party in question as bogus and hence as income of the appellant. Such conclusions drawn by the AO are not supported by any other evidence and therefore unacceptable. Simply because the parties are not available for confirmation of sales made by them to the appellant or because the parties were declared as suspicious dealers by the sales Tax Department, will not make the same as bogus purchases, liable to be disallowed in entirety. 1. There are many judicial pronouncements on the issue now, wherein the courts have taken a view in the case of non-existent parties from whom the purchases are shown to have been made, only part of such purchases can be disallowed in the cases where corresponding sales are treated as genuine or the profit embedded in such sales can only be brought to tax. There is no question of disallowing the entire purchases made from certain alleged bogus parties. Since the purchases have not been confirmed by the parties concerned, there is possibility that such purchases are over invoiced to reduce profits. Therefore what can be taxed is the profit element embedded and not the entire purchases. 2. In support of this contention, reliance is placed on the decision of ITO vs. Paresh Arvind Gandhi (ITAT Mumbai), dated 13.05.2015, The AO had not doubted the genuineness of the purchase but had made the disallowance of Rs. 1.37 crones invoking the provisions of 69C of the Act. AD made the addition as the supplier was declared a hewale dealer by the VAT Department. It was a good starting point for making further investigation and taken it to logical end. However, the saddition is not sustainable as the purchases had been made through Alc payee cheques that were duly reflected in the bank statement of the assessee, the assessee had produced register of material purchased, copies of VAT returns, IT retums and confirmation of parties from whom the alleged purchases were supposed to have been made alongwith their MVAT reports, the assessee was engaged in the process of manufacturing equipment that required steel, the AO had at no stage countered the ovidences produced by the assessee, he had not conducted any independent enquiry to establish that the purchases were not genuine, absence of delivery challan was not sufficient to prove non-genuineness of transaction. The assessee had produced the evidence of making payments from his bank account, the source of the said money was not doubted by the AC, the expenditure on purchases could not be treated as unexplained, that the assessee was not given any opportunity to cross examine the parties despite the fact that assessee had specifically asked the same. (Rajiv G Kalathil (ITA/6727/Mum/2012, dated 20.08.2014), Milk Food (65 TTJ848), M's. Balaji Textile Ind. (49/TD117): M. K. Brothers (163 ITR 249): Premanand (25 SOT 11) Ponkunnam Traders (102 ITR 366) referred) 1. Hon'ble ITAT 'D' Bench, Mumbal Asstt. Commissioner of Income Tax 25(2) Vs. Shri Ranila Pravin Shah, ITA No. 5246/MUM/2013 AY 2010-11 dated 05.03.2015

18 ITA No. 5909/Mum/2024

19 ITA No. 5909/Mum/2024

the matter of cash credit, the Initial onus lies on the assessee to prove the genuineness of the transaction along with the identity of the lender/Investor and his creditworthiness. Having done so, the appellant in the Instant case has discharged the onus cast upon it. Beyond this, for the charge of unexplained cash credit to stick, the onus lies on the AO to disprove the claim of the assessee by establishing that the evidence filed by the assessee was false and by bringing new material on record and failure to do so Would vitiate the addition made on this count. Reference in this regard can be made the decisions in the case of CIT v. Orissa Corporation Pvt. Ltd. 158 ITR 78 ITA NO.1722/Del/2011 (SC) and CIT v. Rohini Builders 256 ITR 360 (Guj.). It was also held in the case of CIT v. Bedi & Co. P. Ltd. (1998) 230 ITR 580 (SC) that where prima facie the inference on facts is that the assessee's explanation is probable, the onus will shift to the revenue to disprove it and the assessee's explanation in such case cannot be rejected on mere surmises. Further, It was held in Khandelwal Constructions v. CIT (1997) 227 ITR 900 (Gau.) that since the satisfaction of the AO is the basis for invocation of the powers u/S 68, such satisfaction must be derived from relevant factors on the basis of proper Inquiry by the AO and such Inquiry must be reasonable and Just. In view of the above it is requested that the disallowance made by the Ld. AO on this account kindly may be deleted. The Hon'ble Gujrat High Court in the case of CIT vs. Nangalia Fabrics Pvt. Ltd., on 9th September, 2014, has held that "S. 68: Purchases cannot be treated as Phoous only on the ground that the suppliers are not traceable. The Tribunal has found that the purchases are genuine because they are supported by bills, entries in the books of account, payment by cheque and quantitative details. The AO did not find any inflation in purchase price or inflation in consumption or suppression the production. The addition had been made only on the ground that the parties are not traceable. The assessee had made payment through crossed cheques and AO did not find that payment made came back to assessee. The ratio of creditors to purchases is normal considering the past records of the assessee. The creditors were outstanding owing to liquidity as assessee is also required to get credit in respect of sales also. Even otherwise, section 68 is not attracted to amounts representing purchases made on credit. This is a finding of fact which does not give rise to a question of law." In another decision, the Hon'ble Gujarat High Court, in the case of Commissioner of Income Tax vs. Bholanath Ploy FAB Pvt. Ltd. [2013] 355 ITR 290 (Guj), has held:- "Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made were bogus is essentially a question of fact. The Tribunal examined the evidence on record and concluded that the assessee did purchases the cloth and self finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax.” The Hon’ble High Court of Gujarat also relied upon the decision in the case of Sanjay Oilcake Industries v. CIT, 316 ITR 274 (Guj.)

20 ITA No. 5909/Mum/2024

Prabhat Gupta v. ITA No. 277/M/2017 & 797/M2017 Order dated 21.12.2017: Earthmoving Equipment Service Corporation v. DCIT{2017} 84 Taxmann.com 51 (Mumbai-Trib) 3.10 To sum-up all above judicial pronouncements Various judgments where in entire additions where deleted on account of Bogus Purchase in the absence of independent inquiry made by the Ld. Assessing Officer or restricted to GP achieved by assessee in his regular books of accounts.

21 ITA No. 5909/Mum/2024

22 ITA No. 5909/Mum/2024

23 ITA No. 5909/Mum/2024

24 ITA No. 5909/Mum/2024

The above it is clear that the condition precedent for invoking section 69C is absent and the expenditure has been explained by by adducing evidence and other relevant material on record and hence it is not open to Ld. AO to disallow the said expenditure or to treat the same as deemed income u/s 69C of the Act. The lots of Case Law has already submitted in earlier paras in support of Assessee submission. In view of the above facts, the factually misconceived, arbitrary and unlawful dis-allowance of purchases of Rs. 80,91,958/ being made in the impugned reassessment order for the AY 2021-22 are liable to omitted /deleted in its entirety." 1. 1. The appellant in its reply has submitted that the transactions are verifiable from the books of account and the AO has accepted the books of account and not found any defect in books of account and has not rejected the books of accounts of assessee 1. 1. Further, as per reply filed d by the appellant it has explained that the total payment to the parties have been made by crossed cheques, quantitative details of goods are verifiable and parties have charged GST @ 18% and paid taxes to the Government Account. As such, the transactions made with these two parties are fully verified. The copy of accounts, bank statement, challan copy & e way bill of these two parties were submitted as evidence to show the genuineness of these two parties.

7.8 The appellant in support of its submission has filed various case laws and supporting documents. As per the appellant, on the identical facts of the case, the Hon'ble courts have deleted the disallowance / addition made on account of bogus purchases. These cases are as under- 1. PCIT, Surat -1 Vs. Tejua Rohit Kumar Kapadia, reported in 94 taxmann.com 325 [2018], (SC) 2. CIT V Sunrise Tooling System P Ltd (2014) 361 ITR 206 (Delhi HC)

25 ITA No. 5909/Mum/2024

26 ITA No. 5909/Mum/2024

find no reason to interfere with or deviate from the findings of the Ld. CIT(A).

Order pronounced in the open court on 30.04.2026

Sd/- Sd/- (JAGADISH) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 30/04/2026 RY, Sr. PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलार्थी / The Appellant 1. 2. प्रत्यर्थी / The Respondent. संबंधित आयकर आयुक्त / The CIT(A) 3. 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधिधि, आयकर अपीलीय अधिकरण,मुम्बई/ DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy//

उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai