MAHAVIR INDUSTRIES,SURAT vs. ITO, WARD-1(2)(1), SURAT

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ITA 1461/SRT/2025Status: DisposedITAT Surat01 June 2026AY 2018-198 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the issue was covered by the jurisdictional High Court and co-ordinate benches, which allowed for a Gross Profit (GP) estimation of 2.5% in similar cases. Consequently, the additions were restricted to this rate.

What were the facts?

The appeals involved scrap traders whose assessment orders were passed under section 143(3) r.w.s. 147 of the Income Tax Act. The core issue revolved around additions made by the Assessing Officer concerning purchases from unregistered dealers and cash received back.

What were the issues?

Whether the estimation of Gross Profit at 2.5% for scrap traders is justified, following the precedent of the jurisdictional High Court and ITAT benches.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 69C,Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SMC,

Before: Dr. Arjun Lal Saini

For Appellant: Shri P M Jagasheth, CA
For Respondent: Shri Ajay Uke, Sr. DR
Hearing: 13/05/2026

Heard together (3 matters)

ITA No. 411/Srt/2026
ITA No. 1261/Srt/2025
ITA No. 1482/Srt/2025

Read from the judgment's own cause title. This page is filed under one of them.

आयकर अपीलीय अिधकरण, सूरत �यायपीठ, सूरत । In The Income Tax Appellate Tribunal, SMC, Surat Bench, Surat Before Dr. Arjun Lal Saini, Accountant Member आयकरअपीलसं./ITA No. 411/Srt/2026 �नधा�रणवष�/Assessment Year: 2019-20 Ishwarbhai Shantilal Patel, Assessment Unit Vs. Plot No.AA-15/A, Sachin Udhyog Income tax Department, Nagar, At-Vanz Sachin, Tal- Jurisdictional AO, Income Tax Choryasi, Surat 394230, Gujarat Officer, Ward-1(2)(1), Aayakar Bhawan, Surat-395001. �थायीलेखासं./जीआइआरसं./PAN/GIR No.: ANZPP1558L (अपीलाथ�/Appellant) (��यथ�/Respondent) Date of Hearing : 13/05/2026 आयकरअपीलसं./ITA No. 1261/Srt/2025 �नधा�रणवष�/Assessment Year: 2018-19 Saddam Hussain, Assessment Unit Vs. Room No.3, Jasvanbhai Ki Chal, Income tax Department, Dungra, Vapi, Jurisdictional AO, Income Tax Gujarat – 396195, Officer, Ward-7, Vapi - 396191 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AGCPH7905H (अपीलाथ�/Appellant) (��यथ�/Respondent) Date of Hearing : 14/05/2026 आयकरअपीलसं./ITA No. 1461 & 1462/Srt/2025 �नधा�रणवष�/Assessment Year: 2018-19 & 2019-20 Mahavir Industries, Assessment Unit, Vs. C/28-10-11, Sachin Income Tax Department, Udhyognagar, Sachin, Surat, Jurisdictional AO, Income Tax Officer, Gujarat-394230, Ward-1(2)(1), Aaykar Bhawan, Majura Gate, Surat, Gujarat-395001 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AATFM7631C (अपीलाथ�/Appellant) (��यथ�/Respondent)

ITA No.411/Srt/2026, 1261, 1459, 1460, 1461, 1462 & 1482/Srt/2025 Ishwarbhai Shantilal Patel and others v. ITO आयकरअपीलसं./ITA No. 1459 & 1460/Srt/2025 �नधा�रणवष�/Assessment Year: 2018-19 & 2019-20 Chandan Timber N Ply, Assessment Unit Vs. Plot No. AA/75 Hojiwala, Income Tax Department Industrial Estate, Road No. 11 Jurisdictional AO Village – Vanz, Surat, Income Tax Officer, Ward-1(2)(1), Gujarat-394230 Aayakar Bhawan, Majura Gate, Surat, Gujarat-395001 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAJFC1393D (अपीलाथ�/Appellant) (��यथ�/Respondent) आयकर अपील सं./ITA No. 1482/Srt/2025 �नधा�रणवष�/Assessment Year: 2019-20 Bajarang Industries, Assessment Unit Vs. B-7/1, Sachin Udhyog Nagar, Income Tax Department Villiage Vanz, Sachin, Surat Jurisdictional AO Gujarat-394230. Income Tax Officer, Ward-1(1)(1), Aayakar Bhawan, Majura Gate, Surat, Gujarat-395001 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAIFB5960C (अपीलाथ�/Appellant) (��यथ�/Respondent) Appellant by : Shri P M Jagasheth, CA Respondent by : Shri Ajay Uke, Sr. DR Date of Hearing : 19/05/2026, 13.05.2026 & 14.05.2026 : 01/06/2026 Date of Pronouncement

ORDER Per, Dr. Arjun Lal Saini, AM:

Captioned seven appeals filed by the different assessees, pertaining to Assessment Years 2018-19 & 2019-20, are directed against the separate orders, passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by Commissioner of Income-tax (Appeals), National Faceless Appeal

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ITA No.411/Srt/2026, 1261, 1459, 1460, 1461, 1462 & 1482/Srt/2025 Ishwarbhai Shantilal Patel and others v. ITO Centre (NFAC) Delhi, which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 143(3) r.w.s. 147 of the Income Tax Act 1961.

2.

Since, all these assessees’ are scrap traders, and issue involved in these appeals are squarely covered in favour of these assessees’ by the judgment of jurisdictional High Court of Gujarat as well as jurisdictional Co-ordinate Benches of ITAT Rajkot and Surat and the facts and grounds of appeal of these different assessees, are similar and identical, therefore, these seven appeals, have been clubbed and heard together and a consolidated order is being passed for the sake convenience and brevity.

3.

The appeal filed by the assessee, in ITA No. 1261/SRT/2025, for assessment year (AY) 2018-19, is barred by limitation by 178 days. The assessee moved a petition requesting Bench to condone the delay. The learned Counsel adverted my attention to the affidavit filed in this regard citing reasons for condonation of delay and urged for a benign view and sought condonation of delay of 178 days in filing the appeal, in ITA No. 1261/SRT/2025, before this Tribunal. Learned Counsel for the assessee submitted that because of the mistake of the tax consultant of the assessee, the appeal could not be filed, on time, before this Tribunal. On the other hand, learned DR for the Revenue, opposed the prayer of the assessee for condonation of delay and stated that assessee has failed to furnish the sufficient cause to condone the delay, therefore, delay should not be condoned. A perusal of the affidavit, submitted before me, gives me an impression of existence of mitigating circumstances to enable me to exercise my discretion in favour of the assessee. Accordingly, the delay in filing the appeal, in assessee’s appeal in ITA No.1261/SRT/2025 for assessment year 2018-19, is condoned.

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ITA No.411/Srt/2026, 1261, 1459, 1460, 1461, 1462 & 1482/Srt/2025 Ishwarbhai Shantilal Patel and others v. ITO 4. When these appeals were called out for hearing, learned Counsel for the assessee invited my attention to the order dated 15.04.2026, passed by the Division Bench of this Tribunal in assessee’s own case in ITA No.679/SRT/2025 for the Assessment Year 2018-19, whereby the issue relating to purchases from M/s Mirza Traders ( scrap dealer) received cash back in the guise of purchases, has been discussed in detail and has been adjudicated in favour of assessee, where addition at the rate of 2.5%, as gross profit (GP) was upheld in the hands of the assessee, and therefore, appeal was partly allowed. Learned Counsel for the assessee submitted that the present appeal is squarely covered by the aforesaid order of the Tribunal, a copy of which was also placed before the Bench.

5.

Learned Departmental Representative, nevertheless, relied upon the orders of the authorities below.

6.

I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. I note that issue under consideration is squarely covered in favour of the assessee, by the judgement of the Co-ordinate Bench of ITAT, Surat Bench, in the case of one of the assessee’s, namely, Ishwarbhai Shantilal Patel, in ITA No. 679/SRT/2025 for assessment year (AY) 2018-19, vide order dated 15.04.2026, wherein it was held as follows: “3. The Assessing Officer has made addition on account of unexplained expenditure u/s. 69C of the Act amounting to Rs. 10,17,870/- being expenditure incurred on the purchase from M/s. Mirza Traders amounting to 19,78,032/- and cash was received from said party. From the perusal of the records, the A.O. has observed that the said expenditure of Rs. 10,17,870/- in A.Y. 2018-19, incurred on purchases from M/s Mirza Traders which is engaged in giving accommodation entries of bogus payments and the assessee made adjustment by giving payments through cheques to M/s Mirza Traders and in turn received back cash under the guise of purchase and the explanation offered by the assessee is not Page 4 of 8

ITA No.411/Srt/2026, 1261, 1459, 1460, 1461, 1462 & 1482/Srt/2025 Ishwarbhai Shantilal Patel and others v. ITO satisfactory. Thus, the Assessing Officer made addition of Rs. 10,17,870 u/s 69C as unexplained expenditure to that extent. The Assessing Officer also made addition of Rs. 9,60,162 which is remaining amount aggregating to Rs. 9,60,162/- used by the assessee, for purchase from M./s Mirza Traders as unexplained money u/s 69A of the Act. 4. We have heard both the parties and perused all the relevant material available on record. As regards Ground No. 1 the same is merely academic hence not adjudicated. The addition related to the expenditure on purchase, the Ld. AR submitted that the purchase was accepted by the Assessing Officer. But the fact remains that the Assessing Officer has made addition of Rs. 10,17,870/- towards expenditure incurred for those purchase as the Assessing Officer has categorically mentioned that the said party from whom the purchase made, return back the cash component incurred on the purchase to the assessee. But to that extent nothing was brought on record by the Assessee that these expenditures were actually incurred. It is pertinent to note that if the purchase was accepted by the Assessing Officer, then the expenditure incurred should be taken into account by the Assessing Officer. Therefore, the addition under Section 69C of the Act as unexplained expenditure does not sustain. As regards addition on account of unexplained money u/s. 69A of the Act amounting to Rs. 9,60,162/- being money used to purchase scrap in cash, the assessee has given certain details thereof which was before the authorities. The ld. A.R. relied upon the decision of Hon’ble Gujarat High Court in the case of Pushkar Raj J Kabra vs. ITO order dated 02-04-2024 wherein the Hon’ble High Court has confirmed the order of the Tribunal wherein in estimated GP at 2.5% was taken in case where the assessee did not produce evidence regarding the unregistered dealers purchase. Therefore, in present case as well where the assessee could not produced the details it will be appropriate to direct the Assessing Officer to take G.P. at 2.5% of the Rs. 9,60,162/-.”

7.

I find that issue under consideration is also covered in favour of assessees, by the jurisdictional High Court of Gujarat in the case of Pushkar Raj J Kabra Vs. ITO order dated 02-04-2024, R/Civil Application No.1437/2023, the findings of the Hon’ble Court is reproduced below: In order to condone the Delay, the merits of the matter were also considered so as to find out whether the following substantial question of law would arise as proposed by the appellant or not:- (1) Whether, in the facts and circumstances of the case, the order passed by the Income Tax Appellate Tribunal was perverse in as much as the entire order is based on incorrect factual reasons, without considering the correct facts of the case, contrary to the documents available on record and accepted by the Respondent in later assessment year 2006-07. 3. Considering the facts of the case, the Tribunal has held as under:

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ITA No.411/Srt/2026, 1261, 1459, 1460, 1461, 1462 & 1482/Srt/2025 Ishwarbhai Shantilal Patel and others v. ITO "4. Facts of the case are that the Assessee is engaged in the business of trading in non-ferrous metal and is a commission agent in the said line of trade. During the course of assessment proceedings the assessee has shown the sales and of Rs. 23, 74, 10,300/-declared loss at Rs.7,78085/- under the head business income and net profit is declared at Rs.2, 21, 574/-. It was noticed that the assesee has shown purchaser of brass scrap from the local market from unregistered dealers (URD) by making cash payment below Rs.20,000/-. Therefore, the Assessing Officer called upon the assessee to produce complete details of sellers, names and address and transaction therewith. The Assessing Office noticed that though the details for purchases from URD hav been furnished, details like address, rate and copy of purchase bills have not been furnished or mentioned therein. Therefore, the Assessing Officer estimated 5% sale of GP of such URD trading and made addition of Rs. 1,03,11,593/-. 5. The matter carried to CIT(A) and CIT(A) estimated the GP rate at 1.25%. 6. The assessee is in appeal against the said estimation by the CIT(A), on the contrary the revenue is in appeal against the deletion of Rs.7733965/-. 7. We have heard the rival contentions. Looking into the facts and circumstances of the case, we find that during the course of assessment proceedings the was specifically asked to produce the evidence of transactions, names of seller and addresses thereof and bills of scrap material purchased from local URD and cash payment made below Rs.20,000/-. The assessee could not produce any evidence before the Assessing Officer even before first appellate authority no evidence is produced. Therefore, one has to estimate the net profit rate/GP rate. Looking into the past history of the assessee regarding GP rate, we find that the CIT(A) has estimated 1.25% GP on URD purchased. During the course of assessment proceedings the assessee did not produce any evidence relating to this URD purchases. Therefore, the ASO has taken 5% GP but the CIT(A) has restricted 1.25% GP without mentioning the pasts record 0 the GP of the assessee during the course assessment proceedings. The assessee did not produce any evidence before us also regarding pasts GP. In view of such factual and legal position, we have no other alternative except to estimate the GP at 2.5% instead of 1.25% taken by the CIT(A). Accordingly, we direct the Assessing Officer to take GP at 2.5% of 23,74,10,300/-. 8. In the result, the appeal by the revenue is partly allowed. 9. With respect to the 20% of expenses out of telephone and traveling expenses, after looking into facts of the case, we direct the Assessing Officer to take 1/5 telephone and traveling expenses.

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ITA No.411/Srt/2026, 1261, 1459, 1460, 1461, 1462 & 1482/Srt/2025 Ishwarbhai Shantilal Patel and others v. ITO 10. In the result, the appeal of the assessee is partly allowed as indicated above. 11 Resultantly, the appeal of the revenue is partly allowed and appeal by the assessee is also partly allowed." 4. Thus, the Tribunal, after considering the facts of the case, directed the Assessing Officer to take Gross Profit at 2.5% of Rs.23, 74, 10,300/- and also directed to take 1/5 of Telephone and travelling expenses. 5. For the foregoing reasons, we are of the view that the findings of fact recorded by the CIT(A) and Tribunal in the impugned order cannot be termed as perverse or contrary to the evidence on record. In the overall view of the matter, we are convinced that the decision of the Tribunal is correct and requires no interference.”

8.

Therefore, as per the binding precedent of the Co-ordinate Bench of Jurisdictional ITAT Surat, Bench in the case of Ishwarbhai Shantilal Patel (supra), I find that issue under consideration in these all appeals are covered in favour of the assessee, wherein 2.5%, addition was made in the hands of the assessee.

9.

I note that issue is also covered by the judgement of the jurisdictional High Court of Gujarat, in the case of Pushkar Raj J Kabra (supra), wherein the Hon’ble Court held that in case of scrap trader, gross profit, at the rate of 2.5% is sufficient. Therefore, respectfully following the binding precedent of the jurisdictional High Court of Gujarat, in the case of Pushkar Raj J Kabra (supra), I partly allow, all these appeals of the assessees. Therefore, I direct the assessing officer to make the addition @2.5% in the hands of the following assessees:

(i) In the case of Ishwarbhai Shantilal Patel, in ITA No. 411/Srt/2026 on Rs.10,07,243/- which comes to Rs. 25,181/-,

(ii) In the case of Saddam Hussain in ITA No.1261/Srt/2025 on Rs.06,49,383/- (Rs.6,01,281 + Rs.48,102/-), which comes to Rs.16,234/-

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ITA No.411/Srt/2026, 1261, 1459, 1460, 1461, 1462 & 1482/Srt/2025 Ishwarbhai Shantilal Patel and others v. ITO (iii) In the case of Chandan Timber N Ply, in ITA No.1459/Srt/2025 on Rs.15,93,951/-, which comes to Rs.39,848/-,

(iv) In the case of Chandan Timber N Ply, in ITA No.1460/Srt/2025 on Rs.7,39,572/-, which comes to Rs.18,489/-,

(v) In the case of Mahavir Industries, in ITA No. 1461/Srt/2025 on Rs.7,71,951/- which comes to Rs.19,298/-,

(vi) In the case of Mahavir Industries, in ITA No.1462/Srt/2025 on Rs.15,15,414/- which comes to Rs.37,885/-

(vii) In the case of Bajarang Industries, in ITA No.1482/Srt/2025 on Rs.3,48,912/-, which comes to Rs.8,722/-

10.

Therefore, all these appeals filed by the different assessees are partly allowed in above terms.

Order is pronounced in the open Court on 01/06/2026.

Sd/-Sd/- [ Dr. Arjun Lal Saini ] लेखा सद�य/Accountant Member //True Copy// Surat Date: 01/06/2026 Copy of the order forwarded to :  The assessee  The Respondent  CIT  The CIT(A)  DR, ITAT, Surat  By order Guard File

Sr. Private Secretary ITAT, Surat

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