M/S. BHAVANA ASSOCIATES ,MUMBAI vs. INCOME TAX OFFICER WARD 19(1)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH MUMBAI BEFORE SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 559/Mum/2026 (Assessment Year: 2009-10) M/s Bhavana ITO Ward 19(1)(1) Associates Piramal Chambers, 5th 13 Vijay Chambers, Vs. Floor, Parel Lalbaug, 1140 Tribhuvan Road, Mumbai-400 012 Opp. Dreamland Cinema, Mumbai – 400 004 PAN/GIR No. AAAFB0303R (Applicant) (Respondent) Assessee by Shri Shashi Bekal & Shri Dinesh Shah, Ld. ARs Revenue by Shree Kumar C., Ld. DR Date of Hearing 17.06.2026 Date of Pronouncement 19.06.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: This appeal is directed against the order dated 18.11.2025 passed by the National Faceless Appeal Centre, Delhi [hereinafter referred to as "the learned CIT(A)"] under section 250 of the Income-tax Act, 1961 [hereinafter referred to as"the Act"] for

2 ITA No. 559/Mum/2026 M/s Bhavana Associates Assessment Year 2009-10, arising out of the assessment order dated 25.03.2015 passed by the Income Tax Officer, Ward 19(1)(2), Mumbai [hereinafter referred to as “Assessing Officer”] under section 144 read with section 147 of the Act. 2. Briefly stated, the assessee is a partnership firm engaged in the business of trading in window frames, rubber gloves, door locks, seat covers and other items used in the automobile industry. The assessee filed its return of income on 29.09.2009 declaring total income of Rs.77,892/-. Subsequently, based on information received from the Investigation Wing, Mumbai, alleging that the assessee had obtained accommodation entries from certain parties identified by the Sales Tax Department as hawala dealers, the assessment was reopened under section 147 of the Act. 3. The assessment was ultimately completed under section 144 read with section 147 of the Act vide order dated 25.03.2015, wherein the Assessing Officer, inter alia, made the following additions/disallowances: i. Disallowance of alleged bogus purchases - Rs.62,01,037/-; ii. Packing and forwarding expenses - Rs.89,768/-; iii. Salary and bonus expenses - Rs.30,500/-; iv. Addition on account of sundry creditors - Rs.8,21,522/-.

3 ITA No. 559/Mum/2026 M/s Bhavana Associates 4. Aggrieved, the assessee preferred an appeal before the learned CIT(A). The learned CIT(A), vide order dated 18.11.2025 passed under section 250 of the Act, confirmed the addition of Rs.62,01,037/- relating to alleged bogus purchases, the disallowance of packing and forwarding expenses of Rs.89,768/-, the disallowance of salary and bonus expenses of Rs.30,500/- and the addition of Rs.8,21,522/- relating to sundry creditors. While sustaining the addition on account of purchases, the learned CIT(A) relied upon the decision of the Hon'ble Bombay High Court in the case of PCIT v. Kanak Impex (India) Ltd. reported in 172 taxmann.com 283 (Bom).

4 ITA No. 559/Mum/2026 M/s Bhavana Associates fourteen parties were conclusively held to be bogus or merely listed as suspicious, and no categorical finding has been brought on record that the purchases made by the appellant were non-genuine. 1.5 The Learned AO erred in not making any independent enquiry either from the Sales Tax Department or from the alleged suppliers to establish that the purchases amounting to Rs. 62,01,037/- were non- genuine or that any adverse finding existed against the appellant in their record or assessment order etc. etc. 1.6 In the appellant's case, the Sales Tax Department, while passing its order, has not made any adverse remarks against the appellant. In spite of this, the AO has mechanically relied upon general modus operandi reported by the Investigation Wing in other cases and blindly applied the same to the appellant without establishing any direct nexus. 1.7 The Learned AO erred in making addition on account of alleged suspicious purchases without carrying out a detailed and independent investigation, and without considering binding judicial precedents of the Hon'ble Bombay High Court and various decisions of the Hon'ble Mumbai Tribunal. 1.8 The Learned CIT(A), NFAC erred in mechanically applying the ratio of PCIT v. Kanak Impex (India) Ltd. (2025) 172 taxmann.com 283 (Bom.), without appreciating the material factual distinctions, namely: a) In that case, there was non-attendance before the AO and CIT(A) and acceptance of bogus purchases, and addition was made under section 69C i.e. sources of purchases were not established. b) In the appellant's case, the appellant duly attended the proceedings before the AO and CIT(A), NFAC; sources of purchases is fully established. c) The appellant's sales have been accepted, and books of account are regularly maintained and audited under section 44AB of the Income-tax Act, 1961; if sales are there must be purchases. 2. Disallowance of Expenses 2.1 The Learned AO and CIT(A), NFAC erred in disallowing legitimate business expenses without any basis or finding, namely:

5 ITA No. 559/Mum/2026 M/s Bhavana Associates i) Disallowance of Packing and Forwarding Expenses of Rs. 89,768/- ii) Ad-hoc disallowance of Rs. 30,500/- (being 10% of total salary and bonus of Rs. 3,05,000/-) without pointing out any specific defect or non- business use. 3. Violation of Principles of Natural Justice 3.1 The assessment order is bad in law as it has been passed in gross violation of the principles of natural justice and equity, based on borrowed satisfaction, without conducting independent enquiry, investigation, or bringing any concrete and positive evidence on record. 4. Levy of Interest 4.1 The Learned AO erred in levying interest under sections 234B and 234C of the Income-tax Act, 1961, which is consequential and without prejudice to the appellant's contention that the additions themselves are unsustainable. 5. Independent and Without Prejudice 5.1 The above grounds of appeal are independent of and without prejudice to one another. 6. Right to Amend Grounds 6.1 The appellant craves leave to add, alter, amend, modify or withdraw any of the above grounds of appeal at the time of hearing or thereafter, as may be deemed fit. 6. The assessee has also raised following additional legal grounds:

6 ITA No. 559/Mum/2026 M/s Bhavana Associates Muhammad Haji Adam & Co. v. ITO (2019) 103 Taxmann.com 459 (Bombay HC). 2. Arbitrary Addition of 100% of Alleged Bogus Purchases The Learned AO has erred in making an addition of 100% of the alleged suspicious purchases, which is highly excessive and contrary to settled judicial precedents. • The Learned AO has not rejected the books of accounts u/s 145(3) of IT Act 1961. • No defects in the books of A/c is pointed out by the AO. In absence of rejection of books, such an addition is unjustified and unsustainable. 2.1 Incorrect Invocation of Section 69C by CIT(A) Without Opportunity The Learned CIT(A), NFAC has further erred in invoking provisions of Section 69C of the Income Tax Act, 1961 without: • Providing any show cause notice, and • Granting the Appellant an opportunity to rebut the same. This action is in blatant violation of the principles of natural justice. 2.2Without prejudice, it is submitted that Section 69C is not applicable in the present case since: • The purchases are duly recorded in the books of accounts. • Source of payments have been made through from known banking channels. • The source of such purchases is fully explained, being out of business receipts/sales. Hence, the preconditions for invoking Section 69C are not satisfied. 3. Violation of Principles of Natural Justice – Non-consideration of Evidence

7 ITA No. 559/Mum/2026 M/s Bhavana Associates The Learned CIT(A), NFAC has grossly erred in not considering the additional evidences duly submitted during the appellate proceedings dated 26/08/2024. Such non-consideration of material evidence amounts to a clear violation of the principles of natural justice and equity, rendering the impugned order bad in law and liable to be quashed. 7. The assessee further raised following additional grounds before us: 1.The Ld. CIT(A) erred in passing an order without calling for a remand report or considering the additional evidence filed before it. 2.The Ld. CIT(A) erred in changing the character of business disallowance of Rs. 62,01,037 to an addition under section 69C of the Act. 3.The Appellant craves leave to add, amend, alter or delete any or all the above grounds of appeal. 8. During the course of hearing, the learned Authorised Representative (AR) submitted that substantial documentary evidence was furnished before the Assessing Officer vide letter dated 26.08.2014 through the assessee's Chartered Accountant. It was submitted that the documents included bank statements, purchase details containing names, addresses and TIN numbers of suppliers, sales details, VAT returns, VAT payment challans and other supporting evidences. It was further submitted that the said material was not considered while framing the assessment order.

8 ITA No. 559/Mum/2026 M/s Bhavana Associates 9. The learned AR further invited our attention to the application for admission of additional evidence filed along with the affidavit of Shri Dhawal V. Mehta, Partner of the assessee- firm. It was submitted that additional evidences comprising sales and purchase registers, VAT assessment order, specimen sales bills, creditors' ledger accounts, bank statements, details of packing and forwarding expenses, salary and wages records and details relating to suppliers were also furnished before the learned CIT(A), but the same were not considered while passing the appellate order. It was contended that these evidences have a direct bearing on all the disputed additions and go to the root of the matter. 10. The learned AR submitted that the assessee's sales have never been doubted by the Revenue authorities. It was contended that the evidences sought to be placed on record would establish the genuineness of purchases, source of payments, existence of suppliers, maintenance of books of account and justification of the expenditure claimed. It was accordingly prayed that the additional evidences be admitted and the matter be restored to the file of the Assessing Officer for fresh adjudication. 11. The learned Departmental Representative did not raise any objection to the admission of the additional evidence and fairly submitted that if the evidences are admitted, the issues may be restored to the file of the Assessing Officer for proper verification and fresh adjudication.

9 ITA No. 559/Mum/2026 M/s Bhavana Associates 12. We have heard the rival submissions and perused the material available on record. We have also carefully examined the application for admission of additional evidence, the affidavit filed in support thereof and the documents referred to therein. 13. From the record before us, it is evident that the assessee has sought to place on record extensive documentary evidence including bank statements, purchase and sales registers, VAT assessment order, details of suppliers containing names, addresses and TIN numbers, creditors' ledger accounts and supporting documents relating to packing and forwarding expenses and salary payments. The assessee has specifically contended that substantial part of the said material had already been furnished before the Assessing Officer and was again produced before the learned CIT(A), but was not duly considered while adjudicating the disputed additions. 14. We further note that the additional evidences sought to be produced have a direct nexus with the additions sustained by the learned CIT(A). The documents are relevant for examining the genuineness of purchases, source of payments, existence of creditors and allowability of expenditure. In our considered opinion, these evidences are necessary for proper and effective adjudication of the controversy involved in the present appeal. 15. We also find that the learned Departmental Representative has not objected to the admission of the additional evidence. Considering the nature of the documents and their relevance to

10 ITA No. 559/Mum/2026 M/s Bhavana Associates the issues in dispute, we are satisfied that the ends of justice would be met by admitting the additional evidence and restoring the matter to the file of the Assessing Officer for examination thereof. 16. Accordingly, in exercise of powers under Rule 29 of the Income Tax (Appellate Tribunal) Rules, 1963, we admit the additional evidence placed before us. 17. Since the evidences now produced require factual verification and examination by the Assessing Officer, we deem it appropriate to set aside the impugned order of the learned CIT(A) and restore all the disputed issuesto the file of the Assessing Officer for fresh adjudication. 18. The Assessing Officer shall examine all the evidences filed by the assessee, including the additional evidences admitted by us, make such enquiries as may be considered necessary and thereafter pass a fresh order in accordance with law after affording adequate opportunity of being heard to the assessee. The assessee is also directed to extend full cooperation and furnish all details and explanations as may be called for by the Assessing Officer. 19. Since we have restored the matter to the file of the Assessing Officer for fresh adjudication, all contentions of both parties on merits are left open and no opinion is expressed thereon.

11 ITA No. 559/Mum/2026 M/s Bhavana Associates 20. In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open court on 19.06.2026.

Sd/- Sd/- (CHALLA NAGENDRA PRASAD) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 19/06/2026 Dhananjay, Sr.PS आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. प्रत्यथी / The Respondent. 2. 3. संबंधधत आयकर आयुक्त / The CIT(A) आयकर आयुक्त(अपील) / Concerned CIT 4. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai