INCOME TAX OFFICER, WARD-20(3)(1), MUMBAI, MUMBAI vs. RASHIDA SHABBIR VAHANVATY, MUMBAI

Heard the parties and perused the material available on record_ 4 Coming to the addition of Rs.12,72,493/- under Section 69C of the Act made by the Assessing Officer mainly on the premise that since the supplier was identified as a bogus bill provider and could not be traced therefore , the entire transaction must be treated as non-genuine expenditure u/s. 69C of the Act: However, the Assessee by producing the relevant documentary evidences, such as purchase and sale register and comparative financial statements for subsequent years, before the Id_ Commissioner demonstrated that business Was still operational and had a continuous flow of production, which strongly suggest that the goods were indeed procured, albeit perhaps directly from the non-traceable party , named in the invoice 5. The Id_ Commissioner by considering the peculiar facts and circumstances and the documents available on record, observed that nuanced and logical distinction must be drawn between the genuineness of the supplier and the genuineness of the purchases and consumption of goods: The Assessee is running a manufacturing business 'Mfg: of Induction Wads and Lidding Foils' . It is a matter of common sense and commercial ITA 1913/MUM/2026 Rashida Shabbir Vahanvaty reality that without actual raw materials, the Assessee could not have achieved the turnover and Gross Profit (GP) , declared in the books of account: The 100% disallowance of raw materials, as if the expenditure was never incurred, would imply that the corresponding sales are entirely unexplained, which is not the case here: The mischief is in utilizing a non- genuine bill to suppress taxable profit rather than fabricating the entire purchase_ 6. The Id. Commissioner, therefore, by considering: (i) the relevant documents on record and the fact and circumstances involved in the light of the decision of the Hon'ble Co- ordinate Bench of the Tribunal dated 24.04.2023, setting aside the appeal to the file of the Id. Commissioner for fresh adjudication on merits; (ii) following the judicial precedents, including in the Case of CIT Vs. Bolanath POLY, 355 ITR 290,t0 the effect that where the purchases themselves are found to be utilized in the business, the disallowance should be restricted to the profit element embedded in the purchases or a reasonable percentage to cover the uncounted cash payment component/tax evasion margin; (iii) the nature of industry. restricted the disallowance to the extent 12.5% of the alleged bogus purchases of Rs.12,72,493/-, as fair and appropriate to cover the profit component or inflation in the purchase price and therefore, in effect, sustained the addition to the tune of Rs.1,59,062/-, being 12.5%/ of the bogus purchases of Rs.12,72,493/-. 7 . As the decision of the Id_ Commissioner is not only based on the peculiar facts and circumstances but in fact also based on the material available on record and the relevant documents, such as purchase and sale register and comparative financial statements for subsequent years and, judgment relevant to the issue involved and therefore, this Court is unable ITA 1913MMUM/2026 Rashida Shabbir Vahanvaty to find out any reason and /or material to contradict the finding of the Id_ Commissioner in restricting the addition to the extent 12.5% of the purchases made_ 8 2nd addition of Rs.1,68,750/- pertains to 'disallowance u/s. 40A (3) of the Act, made by the Assessing Officer on account of payment made to M/s. Anshu Mercantile Pvt: Ltd. clubbing with bogus purchase. 9_ The Assessee, before the Id. Commissioner with regard to aforesaid addition/disallowance claimed that the aforesaid payment has been given in cheque: The Assessee has also furnished evidences, such as proof payment made to Ms. Mercantile Pvt. Ltd_ such as extract of bank statement, which directly substantiate the Assessee's case that the payment was made through banking channel, though, not considered in the assessment proceedings_ 10. The Id. Commissioner, thus considering the aforesaid submissions and documents and perusing the provisions of Section 40A (3) held that provisions of Section 40A (3) applies to the situation, when the payment exceeding the prescribed limit is made in cash. However, in the instant case, the Assessee has provided prima facie evidence of payment by cheque and bank transfer. Therefore , the basis of disallowance has correctly been nullified by the Assessee_ And therefore the Ld_ Commissioner ultimately deleted such disallowance.

We by giving thoughtful consideration to the decision of the Id_ Commissioner on the issue in hand, observe that the decision of the Id_ Commissioner , in deleting the addition under consideration, is not only based on the relevant documents but also based on the legal parameters, as applicable thereto and hence, the decision of the Id. Commissioner in deleting the addition under consideration, is upheld. ITA 1913/MUM/2026 Rashida Shabbir Vahanvaty 9 In the result, the appeal filed by the Revenue Department is dismissed. Order pronounced in the open court on 27.05.2026. Sd] - NARENDER KUMAR CHOUDHRY JUDICIAL MEMBER (Tarun Kushwaha) Sr. Private Secretary Copy to: INCOME TAX OFFICER, ROOM NO: 609, MTNL BLDG , 1 CUMBALLA HILLS, PEDDER ROAD,, MUMBAI-400026, MAHARASHTRA UNITED EDUCATION SOCIETY, 2 OO, QURESHI COMPOUND BEHRAM BAUG, JOGESHWARI WEST) , MUMBAI- 400102, MAHARASHTRA 3 THE PCIT CIT , 4 THE D.R., ITAT, MUMBAIBENCH 5 GUARD FILEASSISTANT REGISTRAR 1 SR. PRIVATE SECRETARY I.T.A.T-, MUMBAI 5