KIRAN MODES,JAIPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-7, JAIPUR, JAIPUR

ITA 1528/JPR/2026Status: DisposedITAT Jaipur23 October 2026AY 2019-207 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 5,20,490 could not be sustained. The primary reasoning was that the AO and CIT(A) materially relied on the statement of Shri Purshottam Chhipa, recorded under Section 132(4), to conclude that the disputed bills represented purchases without actual delivery of goods. The assessee had specifically raised an objection regarding the lack of opportunity to cross-examine Shri Chhipa, and the orders of the lower authorities did not establish that such an opportunity was provided. The Tribunal cited Andaman Timber Industries v. CCE (2015) and CIT v. Odeon Builders (P.) Ltd. (2019) to emphasize that denial of cross-examination when a third-party statement is the basis for an adverse conclusion vitiates the adjudication. While acknowledging deficiencies in the assessee's documentation, the Tribunal found that the procedural safeguard of cross-examination was crucial and its denial was consequential. The Tribunal also noted that Shri Chhipa stated raising bills in cash, while the assessee recorded payment by cheque, which would explain the source of payment from books of account. Consequently, the addition was deleted. The alternative plea for restricting the addition to the GP rate and the challenge to Section 115BBE did not survive. The grounds challenging the validity of reassessment proceedings were left open as the appeal was allowed on merits.

What were the facts?

The assessee, Kiran Modes, filed an appeal against the order of the National Faceless Appeal Centre (NFAC) for Assessment Year 2019-20. The appeal challenged reassessment proceedings initiated under Section 148A(b) and Section 147/148 of the Income Tax Act, 1961, and an addition of Rs. 5,20,490 made by the Assessing Officer (AO). The addition was on account of alleged bogus purchases from M/s Shree Padmavati Exports. The AO's action was based on information from the Insight portal following a search in the Hyatt Group case, which indicated unrecorded cash purchases by the assessee. The NFAC upheld the reassessment and the addition, citing the assessee's failure to provide adequate evidence of receipt and movement of goods.

What were the issues?

1. Whether the reassessment proceedings initiated under Section 148A(b) and consequent notice under Section 148, leading to an order under Section 147, are wrong and bad in law? (Question of law and fact, concerning Section 148A, 147, 148). 2. Whether the purchase of Rs. 5,20,490 from M/s Padmawati Exports is not genuine and was made to inflate profit, warranting addition under Section 68? (Question of mixed law and fact, concerning Section 68). 3. Whether, in alternative, the addition should have been restricted to the Gross Profit (GP) rate on the declared sales, which were accepted? (Question of mixed law and fact). 4. Whether the addition of Rs. 5,20,490 is liable to be taxed under Section 115BBE? (Question of law, concerning Section 115BBE). 5. Whether the assessee was denied an opportunity to cross-examine the person whose statement was relied upon by the AO, thereby violating principles of natural justice? (Question of law and fact). Assessee's arguments: The assessee contended that the reassessment proceedings were bad in law. They argued that the purchases were genuine and that the addition should have been restricted to the GP rate. The assessee also raised an additional ground that they were denied the opportunity to cross-examine Shri Purshottam Chhipa, whose statement was relied upon by the AO, making the proceedings illegal and against natural justice. The assessee relied on Andaman Timber Industries v. CCE (2015) and NTPC Ltd. Vs. CIT (SC). Revenue's arguments: The revenue, as reflected in the CIT(A)'s order, relied on seized records and the statement of Shri Purshottam Chhipa to treat purchases as bogus. The CIT(A) upheld the addition due to the assessee's failure to furnish adequate evidence regarding the receipt and movement of goods.

Which sections of the Income-tax Act were involved?

Section 148A,Section 147,Section 148,Section 68,Section 115BBE,Section 132(4)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES, “SMC” BENCH, JAIPUR

Hearing: 21.10.2026Pronounced: 23.10.2026

Per Shri Om Prakash Kant, AM :- This appeal by the assessee is directed against order dated 31.03.2026 passed by the National Faceless Appeal Centre [hereinafter referred to as the ld ‘CIT(A)’] for the assessment year 2019-20 raising following grounds:-

2 Asst. Year: 2019-20

1.

That on the facts and in the circumstances of the case the ld. CIT (A), is wrong, unjust and has erred in law in not accepting submission of the appellant that the proceedings initiated by the ld. AO u/s 148A(b) of the Income-Tax Act, 1961 and order passed u/s 147 consequent to notice issued u/s 148 in pursuance to order u/s 148A(d) is wrong and bad in law.

2.

That without prejud

The order continues below.

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