ABHISHEK SUSHIL KUMAR JAIN,MUMBAI vs. INCOME TAX OFFICER-4(2)(1), MUMBAI, MUMBAI

The Assessee has raised the following grounds of appeal:

The brief facts of the case are that the assessee, Abhishek Sushil Kumar Jain, is engaged in the business of import, export and trading of fabrics and fabric pieces through his proprietary concern, M/s Gazzelle Fashions. For A.Y. 2021-22, the assessee filed his return of income declaring total income of ₹48,69,750/-.

The case was selected for scrutiny to examine purchases made from certain suppliers who were non-filers or had been identified as high-risk billers. In the case of Jay Enterprises, from whom the assessee had shown purchases of ₹4,46,17,359/-, the person whose PAN and GST registration were used denied that he was having any transaction with the assessee and furnished an affidavit and FIR stating that his GST registration had been misused. In respect of some other suppliers also, the Assessing Officer could not verify the parties at the addresses given by the assessee. However, Nymphaea Trademart Pvt. Ltd. responded to notice under section 133(6) of the Act and confirmed the transaction, though the Assessing Officer observed that there were certain deficiencies.

The Assessing Officer observed that the assessee had declared sales of ₹25,88,41,247/- and such sales could not have been made without corresponding purchases. He therefore did not disallow the entire purchases but inferred that the goods had been procured from other sources at a lower cost. The assessee had disclosed a gross profit rate of about 5%. The Assessing Officer estimated the gross profit at 8% and made an addition of ₹77,65,237/-, being the difference of 3% on the total turnover. The Assessing Officer assessed the total income at ₹1,26,34,987/-.

The assessee carried the matter in appeal before the learned CIT(Appeals).

During the appellate proceedings, the assessee sought adjournments in response to the notices dated 09.06.2025 and 13.10.2025. However, the assessee did not make compliance with the later notices dated 23.01.2026 and 09.03.2026 issued by CIT(Appeals). The learned CIT(Appeals), therefore, decided the appeal on the basis of the material available on record.

The learned CIT(Appeals) observed that the assessee had not filed any written submissions or supporting evidence during the appellate proceedings and found no reason to interfere with the order of the Assessing Officer. On merits also, CIT(Appeals) agreed that the purchases shown from Jay Enterprises were not genuine and upheld the estimation of gross profit at 8%. The CIT(Appeals) accordingly dismissed the appeal of the assessee.

The assessee is in appeal before us against the order passed by the learned CIT(Appeals) dismissing the appeal of the assessee.

We have considered the material available on record. The assessee has challenged the validity and jurisdiction of the assessment has alleged violation of principles of natural justice and challenged the addition of ₹77,65,237/- made by estimating the gross profit at 8%.

There is no dispute that the assessee did not diligently pursue the appeal before the learned CIT(Appeals). At the same time, the learned CIT(Appeals), being the first appellate authority, is required to independently examine the grounds raised and decide the issues on merits.

In the present case, the Assessing Officer himself accepted that the sales of ₹25,88,41,247/- could not have been made without corresponding purchases. The Assessing Officer therefore did not disallow the entire purchase. The the Assessing Officer made the addition was by estimating the profit element on the assumption that the goods were procured from sources other than those shown in the books.

Once the income is estimated on this basis, the rate of profit has to be supported by relevant material. The past gross profit rate of the assessee, the nature of the business, the margin normally earned in the trade and any comparable material are relevant. We do not find any discussion in the assessment order regarding the assessee's past profit rate or any comparable case why the Assessing Officer took the rate of 8%. The learned CIT(Appeals) has also confirmed the said rate without independently examining its basis.

We also find that the evidence relating to different suppliers was not identical. In the case of Jay Enterprises there was a specific denial, whereas in certain other cases the suppliers could not be located. In the case of Nymphaea Trademart Pvt. Ltd., the transaction was confirmed in response to notice under section 133(6) of the Act. Therefore, the material relating to each supplier requires proper examination before drawing a conclusion regarding the extent of purchases which could not be verified and the profit element arising therefrom. The assessee has also raised a grievance that the Assessing Officer relied on third-party material. We further find that the assessee has raised legal grounds in which the assessee has challenged the jurisdiction and validity of the assessment. Since these grounds go to the root of the assessment, they also require independent adjudication by the learned CIT(Appeals).

In these circumstances, and considering that the appeal before the learned CIT(Appeals) was decided without any real representation from the assessee, we are of the view that one final opportunity should be granted in the interest of justice.

We therefore hereby restore the appeal to the file of the learned CIT(Appeals) for de-novo consideration. The learned CIT(Appeals) shall first adjudicate the legal grounds relating to jurisdiction and validity of the assessment. He shall thereafter, if required, examine the merits of the addition after considering the material relating to the individual suppliers, the Verification Unit reports, the third-party replies and the documents furnished by the assessee.

In the result, the appeal of the assessee is allowed for statistical purposes.