RANGEELA EXPORTS,MUMBAI vs. DCIT-26(1), MUMBAI

Since the issues involved in these appeals are common and pertain to the same assessee, they were clubbed together, heard together, and are being disposed of by this consolidated order for the sake of convenience and brevity.

We shall first take up ITA No. 1354/Mum/2026. The assessee has raised the following grounds:

All the grounds raised by the assessee, bearing Ground Nos. 1 to 5, are interrelated and interconnected and relates to challenging the order of the Ld. CIT(A) in confirming the additions made by the AO of Rs. 42,09,160 on account of purchases made by the assessee by treating them as bogus and non-genuine expenditure under section 69C of the Act. Therefore, we have decided to adjudicate these grounds by way of the present consolidated order.

We have heard the learned counsel for both the parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities.

We notice that the assessee is an individual and had filed a revised return of income. We further notice that the entire controversy in the present case revolves around the fact that additions of Rs. 2,80,61,071 were made by the AO under section 69C of the Act on account of purchases made by the assessee from M/s SVG Style and Textile Company Pvt. Ltd.

As per the facts on record, a search was conducted on 06.11.2019 in the case of One Word Group, which revealed that the said group was engaged in providing accommodation entries of bogus purchases and sales transactions through different fake entities maintained by them. During the course of the said search, the statement of Ms. Urvi Jain, one of the key persons managing the One Word Group, was recorded, wherein she stated that the group was providing bogus accommodation entries through different entities maintained by it. Apart from this, the statement of Shri Gopal Bhattar, Director of M/s SVG Style and Textile Company Pvt. Ltd., was also recorded, wherein similar admissions were made to the effect that various paper entities were used for providing bogus bills/accommodation entries to intending beneficiaries.

Thereafter, after providing due opportunity to the assessee and evaluating the material available on record, the AO made the additions, which were challenged before the Ld. CIT(A). The Ld. CIT(A), however, restricted the addition to 15% of the alleged bogus purchases.

Before us, it was specifically argued by the Ld. AR that it is an undisputed fact that the assessee had made purchases as per business requirements. It was submitted that the assessee is engaged in the business of exports and, after making the purchases, the goods were processed, properly packed, and exported to overseas customers.

Our attention was also drawn to the fact that payments towards such purchases were made through account payee cheques. In support thereof, the assessee produced bank statements, ledger accounts maintained in the books of account, purchase bills, acknowledgements of airway bills, sales tax challans, and details of creditors and debtors. It was further submitted that the books of account of the assessee were duly audited and that the audit reports in Forms 3CB and 3CD had been filed before the AO as well as placed before us.

It was further submitted that the purchases were duly reflected in the books of account, supported by confirmations of ledger accounts, and the payments were made through banking channels. In order to establish that the goods were genuinely purchased and subsequently exported, the assessee also relied upon export certificates in Form H, inward and outward registers, item-wise tax invoices, and confirmations of payments as recorded in the books of account. The assessee explained the entire chain of transactions in chronological order.

It was also submitted that the goods were procured through proper channels, all statutory taxes were duly paid, and the conduct of the assessee was beyond doubt. The assessee, being engaged in the business of manufacturing and exporting garments, had maintained proper records of purchases and sales and had duly discharged the burden cast upon it.

Thus, it was submitted that the assessee had fully discharged the onus cast upon it and, on the other hand, the AO could not point out any defect or discrepancy in the documents placed on record. It was further submitted that the entire purchases were utilized in the assessee's business, as the assessee is a 100% Export Oriented Unit, and the goods so purchased were consumed in the course of business. In support thereof, voluminous documentary evidence explaining every stage of the transactions was placed on record.

After considering the documents placed on record, we find that the AO has not pointed out any defect or discrepancy in the documentary evidence produced by the assessee. The AO has also failed to establish that the transactions entered into between the assessee and M/s SVG Style and Textile Pvt. Ltd. were sham transactions, particularly when the Ld. CIT(A), after accepting the existence of purchases, only restricted the addition.

In our considered opinion, the additions have been made merely on the basis of suspicion and on the basis of statements recorded during the course of the search. Admittedly, no opportunity of cross-examination of the persons whose statements were relied upon was ever granted to the assessee. Moreover, even those statements were subsequently retracted. It is a settled proposition of law that no addition can be sustained merely on suspicion, however strong such suspicion may be. Suspicion, howsoever strong, cannot take the place of legal evidence so as to treat the purchases as bogus.

The Ld. AR has also placed on record a copy of the decision of the Coordinate Bench of the ITAT, wherein purchases were made from the same party, namely M/s SVG Style and Textile Company Pvt. Ltd., and additions were made on the basis of the same search and statements recorded during the course of the same search proceedings. The Coordinate Bench of the ITAT, in the case of ACIT, Central Circle-72, Mumbai v. M/s Patodia Filaments Pvt. Ltd., vide order dated 31.12.2024, deleted the additions made under identical facts and circumstances, operative portion of the same is reproduced herein below:

Therefore, considering the totality of the facts and circumstances of the case, the decisions of the Coordinate Benches of the ITAT, and keeping in view the doctrine of binding precedents as well as the need to maintain judicial consistency, we direct the AO to delete the impugned additions. Accordingly, Ground Nos. 1 to 5 raised by the assessee are allowed.

Ground No. 6 raised by the assessee relates to challenging the order of the Ld. CIT(A) in confirming the action of the AO in reopening the assessment.

We have heard the learned counsel for the parties, perused the material placed on record, the judgments cited before us, and the orders passed by the Revenue Authorities. Before adjudicating this ground on merits, it is necessary to examine the findings recorded by the Ld. CIT(A). The operative portion of the order of the Ld. CIT(A) is contained in paragraph 6 and the operative portion of the same is reproduced herein below:

After considering the facts of the case, we find that the reassessment proceedings were reopened on the basis of information emanating from the search conducted in the case of One Word Group, wherein statements of key persons were recorded. Such statements have evidentiary value, and admissions were made regarding the providing of accommodation entries through paper concerns. These facts and circumstances constituted tangible material and provided sufficient reasons for the AO to form a bona fide belief that income chargeable to tax had escaped assessment. Accordingly, we are of the view that the AO rightly initiated the reassessment proceedings on the basis of the information received and the statements recorded during the search proceedings. We, therefore, uphold the validity of the reopening of the assessment and dismiss Ground No. 6 raised by the assessee.

At the very outset, we notice that there is a delay of approximately 8 days in filing the present appeal before us. Considering the entire factual matrix as explained by the Ld. DR and keeping in view the principles laid down by the Hon’ble Supreme Court in Collector, Land Acquisition, Anantnag & Anr. vs. Mst. Katiji & Ors. [(1987) AIR 1353 (SC)], wherein it has been held that when substantial justice is pitted against technical considerations arising from a non-deliberate delay, the cause of substantial justice deserves to be preferred, we are of the considered view that the principle of advancing substantial justice is of paramount importance.

Accordingly, having regard to the explanation furnished by the Revenue, which satisfactorily explains the delay in filing the appeal, and adopting a liberal interpretation of the expression "sufficient cause", we are inclined to condone the delay in filing the present appeal. Consequently, the delay is condoned, and the appeal is admitted for hearing on merits.

Since we have already deleted the additions in the appeal filed by the assessee, the grounds raised by the Revenue have become infructuous and, therefore, do not require any separate adjudication.

Therefore the appeal filed by the Revenue stands dismissed.

As the facts and circumstances in these appeals are identical to ITA No 1354/Mum/2026 for the A.Y 2016-17 and ITA No. 4130/Mum/2026 for AY 2016 (except variance in days of delay, if any) therefore, the decision rendered in above paragraphs would apply mutatis mutandis for theses appeal also.