MARVELL NUTEX PVT LTD ,MUMBAI vs. THE INCOME TAX OFFICER-6(3)(1), MUMBAI

INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI BENCH: SMC BEFORE HON’BLESHRI PAWAN SINGH, JUDICIAL MEMBER AND HON’BLE SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA 6473/MUM/2025 निर्धारणवर्ा/Assmt. Year:2011-12) Permanent Account Number: AAACF8107E INCOME TAX OFFICER – MARVELL NUTEX PVT. LTD. 6(3)(1), MUMBAI 35-B, SINDU MUGH, TILAK CIRCLE 6(3)(2), AYAKAR ROAD, GHATKOPAR (EAST), Vs. MUMBAI – 400077, BHAWAN, MUMBAI-400020, MAHARASHTRA MAHARASHTRA (प्रत्यर्थीRespondent) (अपीलार्थीAppellant)

निर्धाऩितीद्वधिध/Assessee represented by: Ms. Ruchi Rathod, CA िधजस्वcद्वधिध/Revenue represented by: Shri Ujjwal Kumar, Sr. DR

सुिवधईकीतधिीख/Date of conclusion of hearing: 09.03.2026 घोषणधकीतधिीख/Date of pronouncement: 01.06.2026 आदेश / ORDER PER GIRISH AGRAWAL, ACCOUNTANT MEMBER: This appeal filed by the assesseeis against the order of ld. Commissioner of Income Tax (Appeal) vide DIN: ITBA/APL/S/250/2025-26/1079587758(1) dated 13.08.2025passed against the assessment order bythe Assessment Unit of the Income-tax Department u/s 143(3) r.w.s. 147 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 22.12.2017 for the Assessment Year 2011-12.

i. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in confirming the addition of Rs. 44,40,398/- on account of alleged bogus purchases. The addition is arbitrary, unjustified, and bad in law as it is based solely on third-party information from the Sales Tax Department without any independent verification. The learned CIT(A) further erred in not considering the documentary evidence furnished by the Appellant, including invoices, bank statements, stock registers, and delivery challans, which substantiate the genuineness of the purchases. ii. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in treating the purchases as bogus merely because the alleged suppliers could not be traced or did not appear in response to notices issued u/s 133(6). The Appellant had no control over their whereabouts and had furnished ample documentary evidence. Hence, mere non-appearance cannot justify disallowance, and the addition is arbitrary and contrary to law. iii. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in relying upon judgments such as N.K. Proteins Ltd. and CIT vs. La Medica, which are factually distinguishable. In those cases, incriminating material and fraudulent practices were found, which are entirely absent in the present case. Hence, the reliance on such cases is therefore misplaced, and therefore the additions made based on them is unsustainable. iv. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming addition of the entire purchase value instead of limiting it to the profit element. It is settled in law, as supported by judgments including Paramshakti Distributors, Mohammad Haji Adam & Co. and S.V. Jiwani, that only the profit element embedded in non-genuine purchases should be taxed. Therefore, the full addition is excessive, arbitrary, and unsustainable.

2.1. The sole issue arising from the above stated grounds of appeal is for addition made towards alleged bogus purchases and sustained by ld. CIT(A).

Sr. No. Name of the parties Hawala PAN F.Y. Amount (Rs.)

Total 44,40,398/-

3.1. Ld. AO noted by giving reference to the website of Maharashtra Sales Tax Department that these parties have been declared as hawala dealers and their TIN have been cancelled. Statutory notice under section 142(1) was issued along with noting made in order sheets on various dates whereby details and explanation were called for in

respect of purchases made by the assessee from these three parties. The details called for included the following:

i. Delivery Challans. ii. Transport receipts. iii. Quantitative details such as opening stock, purchases, consumptions and closing stock of each raw material and production of each of the finished goods. iv. Name, address, TIN and PAN of each party from whom purchases are made. v. Details of corresponding sales made. vi. Copies of purchases bills. vii. Copy of stock register. viii. Copies of bank statements.

3.2. Ld. AO in para 5 acknowledged the attendance of the authorized representative of the assessee and furnishing of details and documents as called for. He further records in para 6.1 about the fact of submissions made by the assessee which includes copies of invoices, copies of receipts, ledger account, copies of bank statement, copies of sales invoices, copies of stock register, copies of delivery challans in respect of purchases made from the alleged three parties. He issued notice under section 133(6) to the three parties on the addresses provided by the assessee which were returned back as un-served. Assessee was asked to produce these parties for verification but could not produce the same. Ld. AO show caused the assessee for holding the said purchase as non-genuine for which it furnished reply stating that these parties are active on the website of Maharashtra Sales Tax Department. It was also submitted that material purchased from these parties has been used for manufacturing of yarn products which has been subsequently sold to various parties. These sales have been duly

accounted for and reported in its financial statements, income of which forms part of the return filed by the assessee.

3.3. After considered the submissions made by the assessee, ld. AO took an adverse view, since assessee had failed to produce the three parties.According to him, assessee has not given any evidence which leads to the conclusion that there were actual purchases. He placed reliance on certain judicial precedents for his adverse view. He concluded based on the findings of the Sales Tax Authorities, Investigation Directorate of the Income-tax Department and enquiry carried out during the course of assessment that the purchases made by the assessee from the three parties is non-genuine and thus, disallowed the relevant purchases amounting to Rs. 44,40,398/-.He further mentioned in this regard that assessee is a manufacturer and it is difficult to establish the matching aspect of number of units purchased with number of units sold and cost sales category thereon.

5.1. In respect of the documentary evidences placed on record, details of which is already listed above, it is strongly contended that no deficiency has been pointed out by the authorities below to disprove the same. Assessee has furnished quantitative details as well as bank statement to establish the movement of goods and payment be made through proper banking channel. Most importantly, both the ld. AO and ld. CIT(A) very categorically observed that no evidences of transportation, delivery challans or proof of actual physical movement of goods has been furnished for which ld. Counsel for the assessee referred to para 6.1 of the impugned assessment order wherein ld. AO himself has taken note of submission of the assessee which includes copies of delivery challans in respect of purchases made from the alleged hawal dealers. Thus, according to her, such a bald allegation is contrary to the factual observations made in para 6.1 by the ld. AO himself. 5.2. Details in respect of GP ratio and NP ratio for preceding and subsequent two assessment years is also furnished which is extracted below for ready reference to demonstrate the profitability of the assessee in the line of business in which it is engaged: Asst Turnover GP NP GP Ratio NP Ratio Year 2009-10 9,23,11,807.39 66,81,589.35 8,01,101.89 7.24 0.87 2010-11 8,18,34,909.00 71,64,421.14 1,82,954.04 8.75 0.22 2011-12 9,25,69,821.00 72,83,953.61 7,14,491.58 7.87 0.77 2012-13 7,99,22,334.00 97,15,900.44 5,26,521.68 12.16 0.66 2013-14 8,65,55,203.00 97,56,656.79 5,13,451.83 11.27 0.59

5.3. From the above table, it was pointed out that in the year under consideration, assessee had reported GP ratio of 7.87% which has gone higher in the subsequent assessment year at 12.16%. The net profit ratio reported by the assessee is at 0.77% in the year under consideration.

5.4. She referred to the decision of Hon’ble jurisdictional High Court of Bombay in the case of PCIT v. Mohammad Haji Adam and Company (2019) 203 taxmann.com 459 (Bom), wherein it was held that disallowance ought to be restricted to the positive difference if any, between gross profit element in the undisputed purchases and that on the alleged bogus purchases.

actual supply by way of physical movement of the goods. It is also noted that books of accounts of the assessee have not been rejected by the ld. AO nor the sales made by the assessee have been doubted. We also find that no discrepancies have been pointed out in the corroborative documentary evidences placed on record by the assessee so as to disprove them.

7.1. In respect of reliance placed by the ld. AO on the information of Maharashtra Sales Tax Department on the enquiries undertaken by them, there is nothing on record from where it can be inferred as to what enquiries were undertaken so as to provide an opportunity of cross verification/examination before taking an adverse view for the assessee.

7.2. Reliance placed by the ld. Sr. DR on the decision of Drisha Impex (supra) is distinguishable as assessee failed to prove the genuineness of purchases by expressing its inability to furnish purchase confirmation and other details of the suppliers because of which additions were made. In the present case before us, ld. AO himself has acknowledged about furnishing of all the details by the assessee as called for by him.

7.3. Further,we take note of the decision of Hon’ble jurisdictional High Court of Bombay in the case of PCIT v. Kanak Impex (India) Ltd. (2025) 172 taxmann.com 283 (Bom.) from where we observe that in para 4, Hon’ble Court noted the factual position that assessee did not appear before the ld.AO during the course ofassessment proceedings and failed to prove the genuineness of the purchase. The said assessment was completed ex-parte u/s 144 r.w.s 147 of the Act. Hon’ble Court also observed in para 17 about the non-appearance of assessee before the Ld.AO for which there is no justification. Again, it noted in para 29 that the assessee chose not to attend the reassessment proceedings even though the notices were sent by post, email and affixture. Accordingly, in para 13, Hon’ble Court concluded that assessee having not joined the reassessment proceedings, the contention raised by the assessee are to be rejected. Observation of the Hon’ble Court while rejecting the contention of the assessee are:

“30. We fail to understand that the respondent-assessee having consciously and intentionally decided not to join the investigation, cannot now contend that the appellant-revenue should have given them all the details before making the addition. In our view, such a conduct of the respondent-assessee cannot be accepted. It was incumbent upon the respondent-assessee to have joined the re- assessment proceedings, discharge the initial onus of proving the purchases and seek details, if any.” 7.4. Hon’ble Court while referring to the decision of Mohammad Haji Adam & Co. [2019] 203 taxmann.com 459 (Bom), noted that in this case, assessee had participated in the assessment proceedings, ld. CIT(A) compared the purchases and sales statement and there was afinding that purchases cannot be rejected since there was correlation between the purchases and sales.

7.5. Based on the above observations and conclusion drawn by the Hon’ble Court in Kanak Impex (supra), the present facts of the case do not warrant its application as it is evidently demonstrated that assessee has diligently participated in the assessment proceedings as well as at the first appellate stage.

“It is an admitted position that during the assessment proceedings, the E assessee filed all necessary documents in support of the returns on which the ledger accounts were prepared, including confirmation of the supplies by the suppliers, purchase bills, delivery bank statements etc, to justify the genuineness of the purchases, however, such documents were doubted by the AO on the basis of general information received by the AO from the Sales Tax Department. In our opinion, to wholly reject these documents merely on a general information received from the Sales Tax Department, would not be a proper approach on the part of the AO, in the absence of strong documentary evidence, including a statement of the Sales Tax Department that qua the actual purchases as undertaken by the assessee from such suppliers the transactions are bogus. Such information, if available, was required to be supplied to the assessee to invite the response on the same and thereafter take an appropriate decision. Unless such specific information was available on record, it is difficult to accept that the AO was correct in his approach to question such purchases, on such general information as may be available from the Sales Tax Department, in making the impugned additions. This for the reason that the same supplier could have acted differently so as to generate bogus purchases qua some parties, whereas this may not be the position qua the others. Thus, unless there is a case to case verification, it would be difficult to paint all transactions of such supplier to all the parties as bogus transactions.” 8.1. From the above, it is worth noting that similar factual position exists in the present case before us. Ld. Assessing Officer has proceeded on the basis of general information received by him from the sales tax department against which assessee has filed all the necessary documents wherein no defect or deficiency has been pointed out. Assessee has furnished delivery challans to demonstrate the actual movement of goods.

8.2. On the above stated observations, Hon'ble Court thus, opined that full addition could be made only on the basis of proper proof of bogus purchases available before the ld. Assessing Officer, as the law would recognize the same and would unequivocally indicate the transactions are wholly bogus. According to the Hon'ble Court, by no stretch of imagination, it cannot be concluded that the entire expenditure claimed by the assessee is to be taxed.

8.3. An important observation has been made by the Hon'ble Court in para-13 of this judgment whereby it opined that “wherever relevant, any confusion in regard to the transaction being bogus, needs to be aligned only after the Assessing Officer consults the sales tax department and a thorough enquiry in regard to such specific transactions being bogus, is also conclusion of the sales tax department.” Thus, the Hon'ble Court held that in absence of such a cohesive and coordinated approach of the Assessing Officer with the sales tax authorities, it would be difficult to come to a concrete conclusion with regard to such purchases/sales transaction being bogus, merely on the basis of general information, so as to discard such expenditure and make the addition thereof.

above. Grounds raised by the assessee in this regard are partly allowed.

Order pronounced in the open court on 01.06.2026

Sd/- Sd/- (Pawan Singh) (Girish Agrawal) Judicial Member Accountant Member Ankit, PS Mumbai Dated: 01.06.2026 Copy to:

MARVELL NUTEX PVT. LTD. 35-B, SINDU MUGH, TILAK ROAD, 1 GHATKOPAR (EAST), MUMBAI – 400077, MAHARASHTRA

INCOME TAX OFFICER – 6(3)(1), MUMBAI 2 CIRCLE 6(3)(2), AYAKAR BHAWAN, MUMBAI-400020, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAIBENCH 5 GUARD FILE