JAGRUTI JATIN SHAH (DECEASED ),MUMBAI vs. INCOME TAX OFFICER WARD 27(1)(5), MUMBAI

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ITA 9078/MUM/2025Status: DisposedITAT Mumbai08 June 2026AY 2009-1010 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal found that the reassessment was initiated on fresh information and rejected the assessee's contention regarding borrowed satisfaction. However, considering that the sales were not disputed and payments were made through cheques, the Tribunal set aside the matter to the AO for fresh adjudication, following the ratio of Mohommad Haji Adam (supra) to estimate profit on alleged bogus purchases.

What were the facts?

The assessee's case was reopened based on information from the Sales Tax Department regarding alleged bogus purchases. The Assessing Officer (AO) disallowed purchases of Rs. 36,51,012/- as unexplained expenditure under Section 69C, which was confirmed by the CIT(A) but reclassified as business income. The assessee challenged the validity of reassessment and the disallowance.

What were the issues?

Whether the reassessment proceedings were validly initiated and whether the disallowance of purchases was justified without disputing the corresponding sales.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 69C,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI

Before: SHRI ANIKESH BANERJEE, JM & SHRI ARUN KHODPIA, AM

Hearing: 08.06.2026

आयकरअपीलीयअिधकरण�ायपीठमुंबईम�। IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JM & SHRI ARUN KHODPIA, AM I.T.A. No.9078/Mum/2025 (Assessment Year: 2009-10) Jagruti Jatin Shah (Deceased) Income-tax Officer – Ward 27(1)(5), 303, Parshwanath Building, Mumbai Vs. Sudha Park, Ghatkopar (East), Vashi Railway Station Complex, Mumbai-400077 Vashi, Navi Mumbai-400703 PAN: AQOPS7260C Assessee- अपीलाथ� / Appellant Revenue-��थ�/ Respondent :

Assesseeby : Shri Ketan Vajani Revenueby : Shri Pasale Naganath Bhimrao – Sr. DR : 21.05.2026 Date of Hearing : 08.06.2026 Date of Pronouncement

O R D E R Per Arun Khodpia, AM: This present appeal of assessee is arising against the order of the Commissioner of Income Tax Appeals, ADDL/JCIT(A), Bhubaneswar [in short, “the Ld. CIT(A)”], dated 27.10.2025 for the Assessment Year (AY) 2009-10, resulted from the assessment order under section 143(3) r.w.s 147 of the Income Tax Act, 1961 [in short, “the Act”] dated 25.03.2015, passed by Income Tax Officer Ward-27(1)(5) [in short, “the Ld.AO”].The grounds of appeal raised by the assessee, are as under:

ITA No. 9078/Mum/2025 Jagruti Jatin Shah (Deceased) “1. Objection against confirming validity of reassessment. (a) On the facts and in the circumstances of the case, the Jt. Commissioner of Income- tax (Appeals), hereinafter referred to as the "JCIT (A)", has erred in confirming the validity of reassessment in the case of the appellant. (b) Your appellant respectfully submits that the reassessment had been initiated merely on borrowed satisfaction and the same suffers from non-application of mind on the part of the assessing officer. The appellant further submits that the reassessment is initiated merely on conjectures, surmises and suspicions and hence the same deserves to be quashed. (c) Your appellant, therefore, prays that the reassessment in its case may please be quashed. П. Objection against confirming disallowance of Rs. 36,51,012/- on account of alleged suspicious purchases (a) Without prejudice to Ground - I above, the JCIT (A) has erred in confirming the disallowance of Rs. 36,51,012/- on account of purchases by treating the same as bogus purchases. (b) Your appellant respectfully submits that the impugned disallowance is merely on conjectures, surmises and suspicions and the same is not supported by any evidence against the appellant. (c) The assessing officer has erred in ignoring various documentary evidences furnished by the appellant and making addition for the same u/s. 69C of the Act. The JCIT (A) has erred in disallowing the said amount out of business expenses and thereby confirming the income of the appellant wrongly computed. (d) Without prejudice to the above, both the lower authorities have failed to appreciate that the sales of the appellant has not been disputed and accordingly it is certainly not permissible to make the disallowance of purchases for the entire amount of purchases. (e) The appellant, therefore, prays that the impugned disallowance of Rs. 36,51,012/- may please be deleted or any other relief as deemed fit on the facts of the case may please be allowed to the appellant.”

2.

Brief facts of the case are that the ITR for AY 2009-10 was filed by the assessee on 12.05.2010 declaring total income at Rs.7,02,290/-. Subsequently, the case of assessee was re-opened u/s 147 and accordingly, a notice u/s 148 was issued on 30.07.2014. In response, the assessee vide letter dated 15.04.2014

ITA No. 9078/Mum/2025 Jagruti Jatin Shah (Deceased) stated that the RI filed on 12.05.2010 may be treated as return filed in response to addition u/s 148.

3.

The assessment proceedings thereafter were continued; the Authorized Representative of assessee attended the Assessing Officer’s Office and filed details/submissions. During the course of assessment proceedings, the Ld. AO doubted the transaction of purchased made by the assessee, accordingly, had issued notice u/s 133(6) of the Act calling for necessary information from the alleged hawala parties. The notice u/s 133(6) were not responded by the concerned entities, therefore, the assessee was show-caused that since the parties have not responded and it appears that such parties are involved in providing accommodation entries as published by Sales Tax Department on its website. Therefore, it is clear that the assessee is one of the parties who have taken accommodation/bogus purchase bills from such parties. In response to such show-cause, the assessee furnished ledger extract of the alleged parties stating that the payments to the parties have been made through account pay cheques only. Copies of bills were also produced before the Ld. AO but the assessee was unable to produce the said party before the Ld. AO. The Ld. AO accordingly concluded that the amount shown as paid to the bogus parties has come back to the assessee as no purchase was made by the assessee from them.

ITA No. 9078/Mum/2025 Jagruti Jatin Shah (Deceased) 4. Accordingly, the cash so received back was treated as unexplained bogus expenditure u/s 69C of the Act and added back to the income of the assessee to the tune of Rs.36,51,012/-. The taxable income of the assessee, thereby has been recomputed by the Ld. AO.

5.

Being aggrieved with the aforesaid addition, assessee preferred an appeal before the Ld. CIT(A) wherein the assessee challenged the validity of re-opening assessment as well as the issue of alleged bogus purchases on merits. The Ld. CIT(A) in his order observed that, while the assessee was provided with opportunity to represent its case on various dates almost five times but the assessee has not made any submission or written explanation. Therefore, the Ld. CIT(A) confirmed the addition made by Ld. AO, however, has noted that section 69C is wrongly invoked by the Ld. AO and the expenses are booked in the books hence the addition is confirmed but under the business income as the same has been debited against the businesses.

6.

Regarding assessee’s contention challenging the validity of assessment, Ld. CIT(A) had noted that the Ld. AO was in possession of information regarding bogus purchase, which was provided by the Sales Tax Department hence, it cannot be treated as mere change of opinion and the re-opening is held as good in law. The appeal of assessee thereby has been partly allowed by the Ld. CIT(A).

ITA No. 9078/Mum/2025 Jagruti Jatin Shah (Deceased) 7. Since the contentions raised by the assessee regarding validity of assessment as well as addition on merits were not found good by the Ld. CIT(A) and had dismissed such contentions, the assessee is in appeal before us in the present case.

8.

At the outset, Ld. AR of the assessee submitted that the re-opening was done only on the basis of certain information received from the Sales Tax Department, which is apparent from the reasons for re-opening recorded by the Ld. AO, wherein it is categorically mentioned that as per information received from the Office of DDIT, Mumbai, the Sales Tax Department has exercised due diligence which revealed that the assessee Smt. Jagruti Jatin Shah, who is proprietor of M/s. Jasmine Electronics & Electricals is involved in taking accommodation entries of bogus purchase during the financial year 2008-09. It is submitted that as per decision of Hon’ble Bombay High Court in the case of CIT vs. Shodiman Investments Pvt.Ltd. 424 ITR 337 (Bom.), where the Assessing Officer has initiated a re-assessment on the basis of information from DDIT about a particular entity entering into suspicious transactions, which was clearly in breach of settled position in law that re-opening notice has to be issued by Assessing Officer on his own satisfaction and not on borrowed satisfaction.

9.

Further, the Ld. AR relied on the decision of CIT vs. Nikunj Eximp Enterprises Pvt. Ltd.[2013]35 taxmann.com 384 (Bombay.)wherein the Hon’ble Bombay High Court has held that where sales supported purchases and 5

ITA No. 9078/Mum/2025 Jagruti Jatin Shah (Deceased) payment were made through banks, merely because purchasers had not appeared before AO, purchase could not be rejected as bogus. Ld. AR also relied on the decision of PCIT vs. Mohommad Haji Adam & Co. [2019] 103 taxmann.com 459 (Bombay) wherein the Hon’ble Bombay High Court has held that where there was no discrepancy between purchase shown by assessee and sales declared, no question of law or on from Tribunal order restricting addition made by AO on account of bogus purchases by bringing gross profit rate on purchases at the same rate as applied in other genuine purchases. It was the submission that the order passed by Ld. CIT(A) was an ex parte order, wherein it is alleged that the assessee could not represent its case, was a wrong perception and a finding contrary to the facts on record, as the assessee had furnished a response before the Ld. CIT(A), copy of acknowledgment is furnished before us at page no.59 of the assessee’s paper book, according to which the assessee has furnished a response along with annexures on 26.09.2023 before the Ld. CIT(A). However, such response was not taken into cognizance by the Ld. CIT(A), therefore the findings of Ld. CIT(A) are not in accordance with the facts on record. It was the submission that the order of Ld. CIT(A) is liable to be set aside and the addition made by Ld. AO be deleted. 10. Further, alternatively the Ld. AR had submitted that, in case the Bench is not convinced with the assessee’s submission regarding validity of assessment or on merits, since the sales of the assessee are not disputed by the Ld. AO, at the

ITA No. 9078/Mum/2025 Jagruti Jatin Shah (Deceased) most an estimation of profit embedded in the alleged bogus purchase can be added to the income of assessee.

11.

Per contra, Ld. DR submitted that the Ld. AO has tried at his best to make necessary effort to find out the actual nature of the transaction by way of issuing notices u/s 133(6), since the parties are bogus and accommodation entry providers, they chose not to appear before the Ld. AO. The assessee has only furnished a copy of ledger account and copy of bills, however, the details of transportation for bulky supply of material could not be furnished by the assessee, which shows that the entries of purchase are accommodation transactions only and there was no actual purchase. Therefore, the Ld. AO has rightly made addition which is upheld by the Ld. CIT(A). Under such circumstances, orders of both the Revenue Authorities deserve to be upheld.

12.

We have considered the rival submissions, perused the material available on record and the case laws relied upon by the assessee. Admittedly, in the present case, the assessee had furnished the ledger copy of the accounts of the alleged bogus parties in assessee’s paper books also certain bills were produced, however, the nature of transactions could not be conclusively decided by the Ld. AO, in absence of appearance of the parties alleged and also the information regarding transportation of such goods could not be furnished by the assessee. It is also a fact that the Ld. AO had not rejected the books of the assessee and had taken the business income of the assessee, as declared by the assessee in his ITR. 7

ITA No. 9078/Mum/2025 Jagruti Jatin Shah (Deceased) Therefore, there was no denial of the quantities being purchased by the assessee; however, it might be the case that the accommodation bills are obtained by the assessee from the alleged parties, however, corresponding quantities are purchased from some other sources / open market.

13.

Under such circumstances, the applicability of decision of Hon’ble Bombay High Court in the case of Mohommad Haji Adam (supra)shall come into play.

14.

In backdrop of such facts and circumstances, we have two options, one to set aside the matter back to the file of Ld. CIT(A) for fresh adjudication considering the submissions made by the assessee or alternatively direct the Revenue Authorities to decide the case of assessee in accordance with the ratio of law laid down by Hon’ble Bombay High Court in the case of Mohommad Haji Adam (supra). Since, the Ld. AR of the assessee had alternatively requested to decide the issue by estimating the gross profit on the alleged bogus sales following the ratio of analogy drawn by Hon’ble Bombay High Court in the case of Mohommad Haji Adam (supra), in the interest of justice, we deem it appropriate to set aside this matter to the file of Ld. AO to adjudicate afresh following the decision of Mohommad Haji Adam (supra)after affording reasonable opportunity of being heard to the assessee. 15. Ld. AR has produced a chart showing GP ratios of previous 3 AY’s and for the year under consideration, which is subject to factual verification, so the 8

ITA No. 9078/Mum/2025 Jagruti Jatin Shah (Deceased) assessee is directed to produce necessary details / corroborative evidence regarding GP ratios, on genuine as well as bogus purchases to assist the Ld. AO in set aside assessment proceedings so as to arrive at a logical conclusion. 16. Regarding legal contentions raised by the Ld. AR, we do not find any substance, as there was a fresh information before the Ld. AO toinvoke the reopening provisions. Regarding 133(6), the alleged parties could not be traced, also the assessee was failed in submitting the details to substantiate the actual delivery of goods purchased. We thus reject such grounds.

17.

In result, the appeal of assessee is allowed for statistical purposes in above terms. Order pronounced in the open court on 08-06-2026.

Sd/- Sd/- (ARUN KHODPIA) (ANIKESH BANERJEE) JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai, Dated : 08-06-2026. Ankit K., Sr. PS

Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. DR, ITAT, Mumbai 4. Guard File 5. CIT

ITA No. 9078/Mum/2025 Jagruti Jatin Shah (Deceased)

BY ORDER,

(Dy./Asstt. Registrar) ITAT, Mumbai

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