BHAVESH VIRJI GALA,MUMBAI vs. INCOME TAX OFFICER WARD 42(1)(1), BANDRA EAST

ITA 3698/MUM/2026Status: DisposedITAT Mumbai09 October 2026AY 2019-207 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 29,50,001/- as unexplained expenditure under Section 69C could not be sustained solely on the grounds that the supplier and transporter did not respond to notices, were untraceable, or that the supplier's GST registration was cancelled. The Tribunal noted that the assessee had furnished primary documentary evidence, including purchase invoices, e-way bills, and transportation receipts. It relied on the jurisdictional Bombay High Court's decisions in CIT v. Nikunj Eximp Enterprises (P.) Ltd. and Ashok Kumar Rungta v. ITO, which held that the inability to produce suppliers or their subsequent non-response does not automatically invalidate purchases, especially in the absence of cogent evidence demonstrating the transactions were bogus or that the goods were not received. The Court emphasized that general information cannot substitute transaction-specific inquiry. The Tribunal found no specific material disproving the genuineness of the documents or the receipt of goods by the assessee. The addition was deleted, and the assessee's appeal was allowed.

What were the facts?

The assessee, Bhavesh Virji Gala, engaged in wholesale trading of knitted fabrics, filed his return for AY 2019-20. The case was reopened based on information suggesting bogus purchase invoices of Rs. 29,50,001/- from M/s. Shefali Enterprises. The assessee accepted the purchase but explained the goods were of inferior quality, the liability remained unpaid, and was written back and offered to tax in AY 2022-23. The Assessing Officer treated the purchases as unexplained expenditure under Section 69C, citing non-response from the supplier and transporter to notices, their untraceability, lack of agent/stock details, no direct banking payment, and information from GST authorities about the supplier issuing invoices without actual supply. The CIT(A) sustained the addition, noting the supplier's GST registration cancellation and inability to verify the supplier/transporter.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Tribunal could sustain the addition of Rs. 29,50,001/- as unexplained expenditure under Section 69C of the Income Tax Act, 1961, merely because the supplier and transporter did not respond to notices under Section 133(6), were not traceable, and the supplier's GST registration was cancelled, despite the assessee furnishing primary documentary evidence for the purchases? Assessee's contentions: The purchases were supported by contemporaneous tax invoices, e-way bills, transportation receipts, ledger accounts, and GST records. The assessee cannot be penalized for the subsequent non-response or untraceability of the supplier and transporter. The cancellation of the supplier's GST registration does not, by itself, prove the purchases were fictitious. The assessee did not press legal/jurisdictional grounds challenging the reopening. Revenue's contentions: The orders of the authorities below were justified based on information from GST/Investigation authorities, non-response of the supplier and transporter, and the assessee's inability to furnish complete stock and agent-related details.

Which sections of the Income-tax Act were involved?

Section 69C,Section 147,Section 144B,Section 133(6)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “E (SMC

Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI BIJAYANANDA PRUSETH

For Respondent: Smt. Sujatha Iyyanger, SR DR
Pronounced: 09.10.2026

Per : Narender Kumar Choudhry, Judicial Member

This appeal has been preferred by the Assessee against the order dated 23.03.2026, impugned herein, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [“Ld. Commissioner”], for the A.Y. 2019-20, arising out of the assessment order dated 06.03.2025 passed under section 147 r.w.s. 144B of the Income Tax Act, 1961 (“the Act”).

2.

The Assessee is an individual engaged in the business of wholesale trading in knitted fabrics under the name and style of M/s.

The order continues below.

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