ITO 19 1 1 , MUMBAI vs. BABULAL HARJIRAM CHOUDHARY, MUMBAI

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ITA 8322/MUM/2025Status: DisposedITAT Mumbai30 June 2026AY 2019-209 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the deletion of the addition, finding that the AO's addition was based on borrowed findings without independent inquiry or corroborative material. The Tribunal noted that the assessee had provided comprehensive documentary evidence, and no adverse report was submitted during remand proceedings.

What were the facts?

The Revenue appealed against the deletion of an addition of Rs. 59,57,195/- made by the AO on account of bogus purchases. The AO had treated these purchases as unexplained expenditure based on information from the Investigation wing regarding a supplier being a paper company. The assessee had provided confirmations, ledger, bank statements, and GST-related documents to support the genuineness of the purchases.

What were the issues?

Whether the addition for bogus purchases was justified when the assessee provided documentary evidence and the AO relied on general investigation reports without independent inquiry. Whether the CIT(A) was justified in deleting the addition based on the assessee's evidence and lack of controverting material from the AO.

Which sections of the Income-tax Act were involved?

Section 147,Section 144,Section 144B,Section 37,Section 69C,Section 68,Section 145(3)

AI-generated summary — verify with the full judgment below

Before: SHRI AMIT SHUKLA & SHRI PRABHASH SHANKAR

For Appellant: Shri Vimal Punmiya, AR
For Respondent: Shri Swapnil Choudhari, (Sr. DR)
Hearing: 11.05.2026Pronounced: 30.06.2026

PER PRABHASH SHANKAR [A.M.] :-

The instant appeal emanating from the appellate order dated 25.09.2025 is preferred by the Revenue against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 147 r.w.s. 144 r.w.s. 144B of the Income-

P a g e | 2 A.Y. 2019-20 Babulal Harjiram Choudhary tax Act, 1961 [hereinafter referred to as “Act”] dated 21.03.2025 for the Assessment Year [A.Y.] 2019-20. 2. The grounds of appeal are as under:- 1. “Whether in the facts and circumstances of the case and in law, the Learned CIT(A) was justified in deleting the addition of Rs. 59,57,195/- on account of bogus purchases from M/s. Bristal Tube Industries, though there was no dispute that the bogus purchases were made and so act of infraction of law was committed in violation of section 74(1A) of the Maharashtra Value Added Tax Act. 2022 and therefore such expenses is not allowed as per express provision u/s 37 of the Act.” 2. “Whether in the facts and circumstances of the case and in law, the Learned CIT(A) was justified in deleting the addition of Rs. 59,57,195/ on account of bogus purchases from M/s. Bristal Tube Industries, without considering the facts as mentioned in the remand report dated 12.09.2025 that a letter were issued to the assessee on 5.8.2025 giving the opportunity of natural justice with regard to his additional evidences submission during the appellate proceedings, but the assessee didn't respond to the letter.” 3. “Whether in the facts and circumstances of the case and in law, the Learned CIT(A) erred in overlooking the undisputed facts and material evidence on record, including credible information and investigation findings from the Directorate of Income Tax (Investigation), Mumbai, revealing that the suppliers were paper companies engaged in providing accommodation entries.”

4.

Whether in the facts and circumstances of the case and in law, the Learned CITIA) failed to appreciate that the reassessment proceedings were rightly initiated under Section 147 of the Income Tax Act on the basis of specific und reliable information obtained during search and survey operations, and the reopening was validly done with sufficient reason to believe”. 5. “Whether in the facts and circumstances of the case and in law, the Learned CIT(A) erred in accepting the mere documentary evidence filed by the assessee without considering the broader context of the transactions, including the nature of the suppliers, non-verification of the goods movement, and absence of cross-examination of the suppliers.” 6. “Whether in the facts and circumstances of the case and in law, the Learned. CIT(A) erred in holding that the addition was based on mere suspicion, surmises, and conjectures, ignoring the fact that the addition was founded on credible investigation inputs and corroborative evidence of bogus accommodation entries.” 7. “The Ld.CIT(A) is erred in not considering the view expressed in the decision of the Hon'ble High Court Mumbai, in the case of Pr. Commissioner

P a g e | 3 A.Y. 2019-20 Babulal Harjiram Choudhary of Income-Tax 5,Mumbai Vs. Kanak Impex (India) Ltd(2025)172 Taxmann.com 283 (Bombay ) Dated. 03.03.2025, wherein the decision of 100% addition made by AO has been allowed, by rejecting the ITAT's decision of estimating the profit rate @12.5% on bogus purchases and thereby impliedly granting deduction of such unexplained expenditure incurred u/s. 69C of the Act, even though the assessee failed to discharge its onus to prove the genuineness of alleged purchases and has not explained the sources of expenditure incurred on account of such purchases.” 8. “The Ld. CIT(A) has erred in restricting the restricting the GP rate to the extent of 8%, without appreciating the decision of the Hon'ble Supreme Court in the case of M/s. N. K. Proteins Ltd. Va. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, wherein the Hon'ble Court has held that once a findings of act has been given that entire purchases shown on the basis of fictitious invoices and debited in the P&L account ore established as bogus, then restricting the addition to a curtained percentage goes against the principles of section 68 and 69C of the Income Tax Act, 1961.” 9. “The Ld. CIT(A) has erred in restricting the addition without appreciating the fact that in the case of M/s. Swetamber Steels Ltd. (Supra), the Hon'ble ITAT, Ahmadabad had conformed the disallowance of the bogus purchase, by stating that the purchases shown from respective parties were found non genuine and the decision of the ITAT wan upheld by Hon'ble Gujrat High Court and also by the Hon'ble Supreme Court.” 10.“The date for filing 2 appeal before Hon'ble ITAT in this case was 30% of November, 2025 however, due to technical problem the appeal is not filed before due date and after resolving the technical issue the said appeal order is re-uploaded to system. Therefore, the appeal in this case is filed delay by 2 days. The appellant prays that the delay in filing of appeal due to technical glitch, which may kindly be condoned”

3.

As per the registry, there is delay of 2 days in filing of this appeal. Considering the delay being negligible, the same is condoned.

4.

Relevant facts of the case are that the assessee filed the return of income declaring income of Rs.9,74,760/- which was reopened u/s 148 of the Act, based on the information revealing that the Investigation wing of the Department had conducted a search on 06.11.2019 on the M/s. One World Group of entities, which was a group

P a g e | 4 A.Y. 2019-20 Babulal Harjiram Choudhary providing bogus invoices to various entities. The entity namely M/s. Bristal Tube Industries was also pointed out as bogus. Further, the DGGI & CGST Commissionerate had carried out independent investigation against various entities and they had proven that the transactions were bogus entered into by these entities having the sole purpose of providing fake invoices. Further, all of those entities did not file any response to the summons issued by the Investigation wing. In addition to this, it was noticed that either these entities had not filed return of income in the year of transaction, or they had filed income declaring meager income. All these factors clearly indicated that they were not carrying out any business activities, and were bogus entities. It was found that the assessee had made transactions with M/s. Bristal Tube Industries. Though the assessee had furnished the confirmation letter and ledger but genuineness of the said concern was not established. Based on such discussion the transaction of Rs. 59,57,195/- was treated by the AO as unexplained expenditure u/s. 69C of the Act.

5.

Before the ld.CIT(A),the assessee contested the addition claiming that as per GSTR1 filed by the supplier all invoices related to the assessee were properly reflecting in its GSTR2A which itself was a P a g e | 5 A.Y. 2019-20 Babulal Harjiram Choudhary proof that the supplier had rightly uploaded and discharged its GST liability. As per the ledger confirmation, the supplier had declared that they paid all due GST on the invoices as issued by them and issued certificate for the same as declaration. The assessee had submitted stock statement showing the corresponding sales of the goods purchased from the above supplier as also all documents related to GST invoices as issued by supplier with delivery challans and E-way bills for. It had also submitted Bank statement highlighting payments made to supplier through banking channel only.

6.

The ld.CIT(A) on perusal of the confirmation of account, Bank statement of the assessee and bills/vouchers submitted in support of the transactions, noted that the assessee had purchased materials from the said concern. He also forwarded certain other additional documents were also submitted by the assessee to the AO who in the report stated that the case may be decided on merits. However, nowhere he took any objections to the said additional documents / evidences or their acceptance. He further observed that the AO had not provided any list/evidence or such statements recorded or any other documentary wherein the name of the assessee was mentioned. He

P a g e | 6 A.Y. 2019-20 Babulal Harjiram Choudhary made the addition based on very vague Investigation Report on presumptions and conjecture and surmises. The sales had not been disputed and the books of accounts of the assessee had not been rejected within the meaning of section 145(3) of the Act. The proof and evidences provided by the assessee were not controverted by the AO in its assessment order and also the payments/ expenditure were made towards the said purchases through banking channels itself. The AO did make any independent inquiries or findings of its own and had merely relied on the report concerned as the gospel truth. He had not brought on record any such complementary or supplementary facts and was therefore, not justified in making the addition amounting to Rs. 59,57,195/-.The ld.CIT(A) in this regard placed reliance on the decisions of Hon'ble Supreme Court in CIT v. P.V. Kalyanasundaram [(2007) 294 ITR 49 (SC)] and the Bombay High Court in Alpha Impex (P.) Ltd. v. CIT [2014] 45 taxmann.com 205 (Bom) which have held that additions cannot be made merely on suspicion or surmise when the assessee has produced the books. In CIT vs. Dhanraj Mills [(2005) 273 ITR 266 (Bom)], the Bombay High Court ruled that additions under section 69C could not be sustained merely on presumption without any tangible evidence suggesting that the expenditure is P a g e | 7 A.Y. 2019-20 Babulal Harjiram Choudhary unexplained. Accordingly, in the light of above discussed facts, the submission made by the assessee, the remand report of the AO, the ld.CIT(A)finally held that on merits of the issue the assessee had been able to prove its contentions in support of its grounds of appeal and also provided necessary documentary evidences. Consequently, the addition made disallowing such expenses of Rs.59,57,195/- u/s 69C of the Act treating it as bogus expenditure, was deleted.

7.

The ld.DR. relied on the assessment order and the grounds of appeal. On the other hand, the ld.AR relied on the appellate order and the submissions made before him claiming that the impugned was genuine and the AO to bring on necessary evidences on record to prove otherwise. The ld.AR has also submitted a Paper Book containing 313 pages enclosing various communications with the lower authorities and also the details submitted before them to prove the genuineness of the transaction. It is demonstrated that the assessee duly submitted ledger confirmation, Purchase bills, bank statements, stock details, copy of stock register etc. Various orders of coordinate benches of ITAT, including ITAT Mumbai were submitted where on identical facts similar additions were deleted i.e M. Kitvat in ITA No.7049 and P a g e | 8 A.Y. 2019-20 Babulal Harjiram Choudhary 7050/Mum/2016, Ronak Gems P. Ltd in ITA No.3118/Mum/2017, Choron Diamond India P.Ltd in ITA No. 4449/Mum/2016 etc.

8.

We have carefully considered the factual matrix of the case and find no infirmity in the appellate order. It is apparent that the entire addition was based on these borrowed findings without any iota independent inquiry or any corroborative material specifically disproving the claim of the assessee. Even during the Remand proceedings, no adverse report has been submitted as mentioned by the ld.CIT(A).In light of these facts and the comprehensive documentary evidences submitted by the assessee before the lower authorities, we conclude that the addition was not justified and had been rightly deleted by the ld.CIT(A). The appellate order is, therefore, upheld dismissing the grounds of appeal.

9.

In the result, appeal of the Revenue stands dismissed.

Order pronounced in the open court on 30/06/2026. AMIT SHUKLA PRABHASH SHANKAR (न्यातयक सदस्य/JUDICIAL MEMBER) ((लेखाकार सदस्य/ACCOUNTANT MEMBER)

P a g e | 9 A.Y. 2019-20 Babulal Harjiram Choudhary

Place: म ुंबई/Mumbai दिनाुंक /Date 30.06.2026 Lubhna Shaikh / Steno

आदेश की प्रतितलतप अग्रेतिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त / CIT 4. दिभागीय प्रदिदनदि, आयकर अपीलीय अदिकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यादपि प्रदि //// आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt.

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