VIRANI EXPORTS,SURAT vs. ITO WARD 2(3)(8),SURAT CURRENT JURISDICTION ITO WARD 2(3)(6), SURAT, SURAT

PDF · subscribers
ITA 1288/SRT/2025Status: DisposedITAT Surat09 June 2026AY 2011-124 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that only the profit element embedded in bogus purchases should be taxed, not the entire amount. The addition was restricted to 5% higher than the assessee's normal net profit rate for the year.

What were the facts?

The assessee's case was reopened to examine bogus accommodation entries. An addition of Rs. 5,95,728/- was made for bogus purchases from M/s. Ankita Exports. The CIT(A) dismissed the assessee's appeal.

What were the issues?

Whether the entire amount of bogus purchases should be added to the income, or only the profit element embedded therein.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, BENCH

Before: SHRI T.R. SENTHIL KUMAR & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Hiren Vepari, A.R, Shri Ajay Uke, Sr. DR
For Respondent: Shri Ajay Uke, Sr. DR
Pronounced: 09/06/2026

PER SHRI NARENDRA PRASAD SINHA, AM:

This appeal is filed by the assessee against the order of the Commissioner of Income Tax, Appeal, ADDL/JCIT (A)-1, Delhi, (in short ‘the CIT(A)’), dated 29.09.2025 for the Assessment Year 2011-12 in the proceedings under Section 147 read with Section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’).

2.

The brief facts of the case are that the assessee had filed return of income for A.Y. 2011-12 on 22.09.2011 declaring total

ITA No.1288/SRT/2025 [Virani Exports vs. ITO] A.Y. 2011-12 - 2 – income of Rs.19,115/-. The case of the assessee was reopened to examine bogus accommodation entry taken from one Shri Bhanvarlal Jain Group. In the course of assessment, an addition of Rs.5,95,728/- was made in respect of bogus purchase made from M/s. Ankita Exports, an entity of Shri Bhanvarlal Jain Group. The assessment was completed u/s.147 r.w.s. 143(3) of the Act on 21.12.2018 at total income of Rs.6,14,818/-.

3.

Aggrieved with the order of the AO, the assessee had filed an appeal before the First Appellate Authority, which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was dismissed.

4.

Now, the assessee is second appeal before us.

5.

Shri Hiren Vepari, Ld. AR appearing for the assessee submitted that the Ld. CIT(A) was not correct in confirming the addition of entire purchase of Rs.5,95,728/- made from M/s. Ankita Exports, alleged to have been operated by Shri Bhanvarlal Jain Group. He submitted that the disallowance in the case of unexplained purchases should have been restricted to 6% only, as held by Hon’ble Gujarat High Court in the case of PCIT vs. Surya Impex, [2023] 451 ITR 395 (Gujarat).

6.

Per contra, Shri Ajay Uke, Ld. Sr. DR supported the orders of lower authorities.

ITA No.1288/SRT/2025 [Virani Exports vs. ITO] A.Y. 2011-12 - 3 – 7. We have considered the rival contentions. The AO had treated the entire purchase of Rs.5,95,728/- made from M/s. Ankita Exports as income of the assessee. Apart from the case law relied upon by the assessee, in the case of Premkumar B. Rathi (59 taxmaznn.com 203 (Guj.)), Hon’ble Gujarat High Court had upheld the disallowance of 10% of bogus purchases, as confirmed by the Tribunal. Similarly, in the case of Simit P. Sheth (38 taxmann.com 385 (Guj)), the Hon’ble Gujarat High Court had held that only profit element embedded in purchases made from accommodation entry providers could be added and upheld the addition of 12.5% sustained by the Tribunal. In the case of Bholanath Poly Fab P. Ltd. (40 taxmann.com 494 (Guj,)) also, the Hon’ble Gujarat High Court had reiterated that only profit margin embedded in bogus purchases could be subjected to tax and not the entire purchases. Similarly, Hon’ble Gujarat High Court in the case of Kesari Exports, (174 taxmann.com 162) had upheld the addition of 6% of bogus purchases made from accommodation entry provider.

8.

Considering the consistent view of the Hon’ble Jurisdictional High Court that only profit margin embedded in the bogus purchases are required to be taxed, it will be reasonable to restrict the addition in respect of purchases made from M/s. Ankita Exports, @ 5% higher than the GP disclosed by the assessee in the current year. Accordingly, the Assessing Officer is directed to estimate the profit out of the purchase of Rs. 5,95,728/- made from M/s. Ankita Exports by applying the net profit rate

ITA No.1288/SRT/2025 [Virani Exports vs. ITO] A.Y. 2011-12 - 4 –

of 5% higher than the normal net profit rate of the assessee for the current year.

9.

In the result, the appeal of the assessee is partly allowed.

This Order pronounced on 09/06/2026

Sd/- Sd/- (T.R. SENTHIL KUMAR) (NARENDRA PRASAD SINHA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 09/06/2026 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : अपीलाथ� / The Appellant 1. 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / सूरत / ITAT, Ahmedabad / Surat

More judgments on Section 147

All 49,210 judgments and leading authorities on Section 147 →

Recent GST High Court judgments

Search GST case law →