INCOME TAX OFFICER, WARD-1(8), BHAVNAGAR , BHAVNAGAR vs. SURAJ RAGHUBHAI MADHVANI, BHAVNAGAR

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ITA 829/AHD/2026Status: DisposedITAT Ahmedabad07 May 2026AY 2020-218 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to delete the addition. It found that the AO had not conducted sufficient inquiries to establish the nexus between the bogus sales and the assessee, and there was no evidence of these transactions appearing in the assessee's bank accounts.

What were the facts?

The Assessing Officer (AO) reopened the assessee's case based on information that the assessee had availed input tax credit without supplying goods worth Rs. 25,20,70,060/-. The AO made an addition of Rs. 2,01,65,605/- on account of profit from alleged bogus sales, applying a net profit rate of 8%. The assessee claimed that his PAN was fraudulently misused for GST registration and transactions.

What were the issues?

Whether the addition made by the AO was justified when the assessee claimed fraudulent misuse of his PAN for GST registration and bogus transactions, and whether the AO conducted adequate inquiries to establish the assessee's involvement.

Which sections of the Income-tax Act were involved?

Section 147,Section 144B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA

For Appellant: Shri Tejas K. Andharia, CA
For Respondent: Ms. Ketaki Desai, SR-DR
Hearing: 27.04.2026Pronounced: 07.05.2026

PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:

This appeal is filed by the Revenue against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 28.01.2026 for the Assessment Year (A.Y.) 2020-21 in the proceeding u/s 147 r.w.s. 144B of the Income Tax Act.

2.

The brief facts of the case are that the assessee had filed his return of income for A.Y. 2020-21 on 20.11.2020 declaring total income of Rs.4,63,880/-. The case of the assessee was reopened on the basis of an

ITA No.829/Ahd/2026 ITO Vs Suraj Raghubhai Madhvani, AY- 2020-21 2 information received by the AO that the assessee has availed input tax credit without supply of goods worth Rs. 25,20,70,060/-. An information was shared by CGST & Central Excise Commissionerate, Surat regarding fraudulent ITC/unexplained credit in respect of bogus sales by M/s Anmol Trading, a proprietorship concern of the assessee. Before the AO the assessee had explained that M/s Anmol Trading was not the proprietorship concern of the assessee and someone else had fraudulently taken input credit in the name of this concern, by obtaining a bogus registration certificate. The AO, however, was not convinced with the explanation of the assessee and addition of Rs.2,01,65,605/- was made on account of profit derived from unaccounted sales of Rs.25,20,70,060/-, by applying net profit rate of 8%. The assessment was completed u/s. 147 r.w.s. 144B of the Act, on 17.03.2025 at total income of Rs.2,06,29,485/-

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 allowed. Th

4.

Now the Revenue is in appeal before us. The following grounds have been taken in this appeal:

1.

Whether the Ld. CIT(A) has erred in law and on facts in deleting the addition of Rs. 2,01,65,605/- being 8% of bogus turnover of Rs. 25.20 crores without appreciating the fact that the assessee failed to substantiate the claim that his PAN had been fraudulently misused for obtaining GST registration and for carrying out the alleged bogus transactions, with any cogent documentary evidence and requisite details or confirmations to establish the veracity of his contentions?

ITA No.829/Ahd/2026 ITO Vs Suraj Raghubhai Madhvani, AY- 2020-21 3 2. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 3. It is therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored.

5.

Ms. Ketaki Desai, the Ld. SR-DR submitted that the assessee had failed to substantiate that his PAN was fraudulently misused for obtaining GST registration and for carrying out alleged bogus transaction. Therefore, the AO had rightly treated the total transaction of Rs.25.20 crores in the name of Anmol Trading, registered on GST portal against PAN No. of the assessee, as the unaccounted turnover of the assessee. She submitted that the AO was fair enough to apply profit rate of 8% on this unaccounted turnover. The Ld. SR-DR submitted that the Ld. CIT(A) was not correct in deleting the addition.

6.

Per Contra, Shri Tejas K. Andharia, the Ld. AR of the assessee strongly supported the order of the Ld. CIT(A). He submitted that the GST Department had already cancelled the registration of M/s Anmol Trading on 03.08.2021 with effect from 01.06.2021. Further, the GST department had also acknowledged the fact that the GST registration of M/s Anmol Trading was granted without any Aadhar authentication by way of deemed approval. The Ld. AR submitted that the assessee was not at all involved with the bogus transactions conducted in the name of M/s Anmol Trading and this fact was also brought on record by producing the bank statement before the AO, wherein no such transaction for sales were appearing. Therefore, the Ld. CIT(A) had rightly deleted the additions by taking into consideration the totality of facts.

ITA No.829/Ahd/2026 ITO Vs Suraj Raghubhai Madhvani, AY- 2020-21 4 7. We have carefully considered the rival submissions. It is found from the assessment order that on verification from official website of GST department, it was found that GSTIN: 24BMAPM3842F2ZC in the name of M/s Anmol Trading, was reflecting assessee’s PAN No. The said GSTIN with trade name M/s Anmol Trading was registered on 31.12.2019 and cancelled by the GST Department on 03.08.2021 w.e.f. 01.06.2021. The AO had held that the entire sale of Rs. 25.20 crores made in the name of M/s Anmol Trading was bogus sales of the assessee. However, when the assessee had submitted before the AO that his PAN no. was mis- utilised by someone else, the AO should have made further inquiries to establish the nexus of the bogus of sales of Rs. 25.20 crores under trade name M/s Anmol Trading, with the assessee. No co-relation of the bogus sale of Rs.25.20 crores with the bank account of the assessee was brought on record by the AO in order to establish that this sale was made by the assessee only. The assessee had filed a complaint with GST Department and the AO had held that mere filing of such complaint does not absolve the assessee of the prima facie evidence of ITC fraud. However, the AO did not take up the matter with the GST department to find out the outcome of the investigation carried out by them. It is found that the Ld. CIT(A) had considered the facts of the case in totality and given the following finding:

9.

I have considered the assessment order, submission of appellant and facts available on record. In this case the A. O received information from the Central Excise Commissionerate, Surat that M/S Anmol Trading is non-existent entity and has shown trading with the intention to pass on fake ITC by generating bogus bills. During the year under consideration the turnover carried out by M/S Amol Trading is of Rs 25 20,70.060. It is seen from the assessment order that in the written submission filed during assessment proceedings the appellant has informed A.O that he has not made any application for any registration with the GST Department and has not carried out

ITA No.829/Ahd/2026 ITO Vs Suraj Raghubhai Madhvani, AY- 2020-21 5

any turnover in name of M/S Anmol Trading in fact the appellant's PAN was utilized by some person fraudulently to carry out such turnover The appellant also informed the A O that he has filed a complaint with the GST Department in this regard. However the AO without verifying the factual details from the GST Department, relying on the information received from GST Department held that the turnover carried out by Anmol Trading is the tumover of the appellant and accordingly estimated the profit at the rate of 8% on this turnover Addition of Rs 2.01 65,605 is made on protective basis It is seen that the appellant has filed a police complaint with Bhavnagar Police Station on 07 07 2025 regarding the misuse of his PAN Number and has also filed a CPGRAM complaint with GST department on 09.07 2025 In response to this, the Central GST and Excise Commissionerate Surat vide letter dated 14.07 2025 has dispose of the CPGRAM A copy of the same is incorporated as under- ……….. 10. From the above it is seen that the GST Department has cancelled the registration of M/S Anmol Trading on 03.08 2021 wef 01.06.2021. The GST Department has also acknowledged the fact that the GST registration of M/S Anmol Trading was granted without any Aadhar Authentication by way of deemed approval. It is further seen that the GST department has not denied the contention of the appellant that his PAN has been misused for GST registration. The GST Department has not taken any action against the appellant and has not given any finding against the appellant which shows that the GST Department has also agreed that contentions raised by the appellant are not incorrect.

11.

From the above it is evident that the GST Department has not confirmed the appellant's involvement in carrying out bogus turnover in the name of M/S Anmol Trading with the intention of passing on fake ITC It is seen that the AO has not carried out any enquiries with the GST department on the written submission made during the assessment proceedings The AO merely relied on the preliminary investigation report of the GST Department In the facts of the case the appellant cannot be penalized for the fraud committed by some other person/entity by mis-utilizing the appellant's credentials There is no evidence on record which shows that the contention of the appellant is factually incorrect and the appellant is involved in GST registration in the name of Anmol Trading and carrying out bogus turnover in the name of this concern Therefore no addition can be made in the appellants case The reliance is placed on the decision of Hon. Bombay High Court in case of Shri Vilas Prabhakar Lad vs Chief Commissioner of Gujarat State GST and others (Writ Petition No. 3586 of 2021, order dated 21.07.2025). The Hon. Court has held as under-

“33. We have no doubt in our mind that as and when such incidents are brought to the notice of Respondent No. 1-UIDAI and Respondent No 4-UOI they would take proactive steps to not only prevent such incidents from happening but

ITA No.829/Ahd/2026 ITO Vs Suraj Raghubhai Madhvani, AY- 2020-21 6

would also take appropriate, timely and deterrent measures to prevent anyone from committing such a fraud

34.

In the instant case also the fraud could have been detected at an early stage had all the Respondents been diligent enough to authenticate the Aadhaar number However, inaction on the part of the Respondents after having falled in their duty has aggravated the situation even more We sincerely hope that in the future all concemed authorities would take prompt action when such instances of fraud are brought to their notice. We pray that common citizens of this nation do not suffer agony like the Petitioner

35.

In our view Respondent No 1 should take steps to make the public aware of the authorities/entities who can insist on Aadhaar number and these authorites/entities who are permitted to use Aadhaar number for authentication should be equipped with necessary technology for authentication and such authentication should be done in accordance with the Aadhaar (Authentication) Regulations of 2021 including the authentication by matching the photograph of the person appearing on the system and comparing the same with the physical presence of the person whose Aadhaar number is being used This procedure should be adopted by all the authonties/entities who are Sayyed 1-WP 3586 2021 (J) docx entitled to use Aadhaar number for verification Respondent No 1 should also make public aware as to likely frauds which can be carried out by misuse of the Aadhaar card and the way certain frauds are committed so that the general public can take appropriate measures For example the Reserve Bank of india is regularly using electronic and social media for making public aware of various cyber frauds Such action can also be adopted by Respondent No 1 for public awareness

36.

We may conclude by observing and hoping that when such frauds are brought to the notice of the authorities and law enforcement agencies by common citizens of this country then the authorities and law enforcement agencies would immediately take steps for finding the people behind such fraud and bringing them to justice and to take steps to prevent occurrence of the same in the near future. Delay in responding to such complaints and inaction in not initiating any criminal proceedings on discovery of such fraud and more so when fraud is committed on the very statutory and regulatory authorities of this country then in such a scenario a higher degree of responsibility is required to be discharged by the officers of the regulatory authorities and enforcement agencies"

ITA No.829/Ahd/2026 ITO Vs Suraj Raghubhai Madhvani, AY- 2020-21 7 11.2 In view of the above discussion the addition made of Rs. 2,01,65,605/- is hereby deleted. Appeal on this ground is thus ALLOWED.

8.

We do not find anything wrong with the findings of the Ld. CIT(A) and the Revenue has been unable to controvert his findings. In the absence of any corroborative evidence that the transactions in the name of M/s Anmol Trading was carried out by the assessee, the addition made by the AO was not justified. In fact, the AO was also not convinced about these transaction being carried out by the assessee and he had made the addition only on protective basis. There was no iota of evidence that the sale transactions carried out in the name of M/s Anmol Trading were appearing in the bank accounts of the assessee. Under the circumstances, the Ld. CIT(A) had rightly deleted the addition. Accordingly, the decision of the Ld. CIT(A) is upheld and the ground taken by the Revenue is dismissed.

9.

In the result, the appeal of the Revenue is dismissed.

Order pronounced in the Court on 07/05/2026 at Ahmedabad.

Sd/- Sd/- (SAJAY GARG) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Dated – 07th May, 2026 Neelesh, Sr. PS (True Copy) आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)

ITA No.829/Ahd/2026 ITO Vs Suraj Raghubhai Madhvani, AY- 2020-21

5.

िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड� फाईल /Guard file. आदेशानुसार/BY ORDER, आदेशानुसार आदेशानुसार आदेशानुसार पंजीकार (Dy./Asstt.Registrar) उप उप/सहायक उप उप सहायक सहायक पंजीकार सहायक पंजीकार पंजीकार आयकर अपीलीय आयकर अपीलीय अिधकरण अिधकरण, अहमदाबाद अहमदाबाद / ITAT, Ahmedabad आयकर आयकर अपीलीय अपीलीय अिधकरण अिधकरण अहमदाबाद अहमदाबाद

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