INCOME TAX OFFICER - 15(2)(1), MUMBAI, MUMBAI vs. MARK BANGLES PVT. LTD., MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the Revenue is directed against order dated 27/03/2026 passed by the learned National Faceless Appeal Centre, Delhi [hereinafter shall be referred to as "the Ld. CIT(A)"] for A.Y. 2016-17, raising following grounds:

1 On the facts and in the circumstances of the case and in law, the Ld. CIT Appeal erred in deleting the addition of Rs. 8,84,00,000 made under Section 68 of the Income Tax Act, 1961, failing to appreciate that the assessee did not

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discharge the statutory onus to prove the identity and creditworthiness of the creditors and the genuineness of the transactions. 2. The Ld. CIT Appeal erred in law by concluding that the transactions were genuine merely because they were routed through banking channels, disregarding the settled legal position that the onus of proof under Section 68 is not discharged by the mere production of bank statements in the absence of financial capacity of the lenders. 3. The Ld. CIT Appeal erred in holding that the AO acted mechanically, while failing to consider that the AOs findings were rooted in specific intelligence from the Investigation Wing and the Insight Portal, which identified the creditors as known entry providers belonging to the Himanshu Verma and Shilpi Groups. 4. The Ld. CIT Appeal erred in accepting the additional evidence, explanations, labor bills and ledgers without providing the Assessing Officer a fair opportunity to examine the same, thereby violating the principles of natural justice and the provisions of Rule 46A of the Income Tax Rules. 5. On the facts and in the circumstances of the case, the Ld. CIT Appeal failed to appreciate the ratio laid down by the Honble Supreme Court in CIT Vs. P. Mohanakala and Vatika Township, WHARE it was held that the Revenue is entitled to look behind the facade of a transaction to determine its true nature. 6. The appellant craves leave to add, amend, alter, OR withdraw 6 any grounds of appeal either before OR at the time of hearing of the appeal.” 2. Despite notifying, none attended on behalf of the assessee. It is also noticed that none had appeared on the earlier date of hearing, i.e., 05.08.2026. Further, the notice issued on 09.06.2026 was returned by the postal authority with the remark “party left”. The appeal was, therefore, heard ex parte qua the assessee, after hearing the learned Departmental Representative and on the basis of the material available on record.

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It is seen that the appellant filed details of transactions it had with M/s Shilpi Jewelers Pvt. Ltd. The appellant furnished copies of labour bills and copies of ledger account with cross reference to the bank statements, in order to demonstrate the transactions between the two parties. The business transactions of purchase and sale and labor charges have not been disproved by the AO by way of any independent inquiry whatsoever. The AO has acted mechanically on the basis of input from investigation wing and he detected nothing adverse by way of inquiry and investigation and made an addition concluding that the appellant company has failed to prove the vital ingredients of creditworthiness of the creditors and the genuineness of the transactions. Such an addition cannot survive on factual grounds as also from the view point of law. The AO obtained information from the investigation wing which he was supposed to develop and convert into evidence. Instead, the AO has just quoted about information obtained through Insight Portal from the ACIT Central Circle-8(2), Mumbai and the DCIT Central Circle-29, New Delhi and receipt of these information seems to be his only logic for making the addition. The AO is, therefore, directed to delete the addition of Rs. 4,08,00,000/- in respect of Shilpi Group because the addition is not backed up with any fact finding and adverse documentary evidence. The grounds raised by the appellant are allowed. In the result, the appeal is allowed. 4. We have carefully considered the impugned order and the submissions of the learned Departmental Representative. The Revenue, inter alia, has specifically challenged the action of the learned CIT(A) in admitting and considering additional evidence, including labour bills and ledger accounts, without affording the Assessing Officer an effective opportunity to examine the same.

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the Assessing Officer during the assessment proceedings and was subsequently furnished before the learned CIT(A), the statutory procedure governing admission and examination of additional evidence assumes significance. Rule 46A of the Income-tax Rules, 1962 embodies the requirement that, where additional evidence is admitted, the Assessing Officer must be afforded a reasonable opportunity to examine the evidence or document and to rebut the same or to produce evidence in controversion thereof. The requirement is not a mere procedural formality. It is founded upon the basic principle of natural justice that a party against whom material is relied upon, or whose assessment is sought to be disturbed on the basis of material not examined by it, must have a fair opportunity to examine and rebut such material.

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not expressing any opinion on the merits of the addition under section 68 of the Act, including the questions relating to the identity and creditworthiness of the creditors, genuineness of the transactions, the information received from the Investigation Wing or the Insight Portal, or the evidentiary value thereof. All such issues are left open for consideration by the learned CIT(A) in accordance with law.

In view of the foregoing, Ground No. 4 raised by the Revenue 8. is allowed for statistical purposes. The impugned order of the learned CIT(A), to the extent it relates to the addition in dispute, is set aside and the matter is restored to his file for fresh adjudication. The learned CIT(A) shall afford the Assessing Officer a reasonable opportunity to examine and rebut the additional evidence relied upon by the assessee and shall thereafter adjudicate the appeal afresh, in accordance with law and after affording both parties adequate opportunity of being heard.

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Order pronounced in the open Court on 29/09/2026.

Sd/- Sd/- (SIDDHARTHA NAUTIYAL) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 29/09/2026 Kunal Kr. P.S. Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai