ARVIND RATANCHAND JAIN,MUMBAI vs. INCOME TAX OFFICER, WARD 23(1)(6), MUMBAI, MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “A” BENCH, MUMBAI BEFORE SHRI ANIKESH BANERJEE, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.142/Mum/2026 (AYs: 2021-22) Arvind Ratanchand Jain vs. Income Tax Officer, Ward 23(1)(6), 210/214, Bhikashu Sadan, Piramal Chamber, Mumbai-400013. Premkumar Sharma Road, Bhuleshwar, Mumbai-400002. PAN/GIR No: AFHPJ4084P (Appellant) (Respondent) Assessee by Shri Sarju Mehta, CA Revenue by Shri Manoj Kumar (CIT-DR) Date of Hearing 08.07.2026 Date of Pronouncement 06.10.2026 O R D E R PER BIJYANANDA PRUSETH, AM:

This appeal filed by the assessee emanates from the orders passed u/s 250

of the Income-tax Act, 1961 (in short, ‘Act’) by National Faceless Appeal Centre

[in short “CIT(A)”] dated 27.11.2025 for assessment year (AY) 2021-22.

“1. The learned AO has erred in not providing the appellant with the statements, material, evidences and documents and hence denied the appellant the opportunity to rebut the material used to make the additions which is in violation of the principles of natural justice. Moreover, even the opportunity to cross-examine was not afforded to the appellant. 2. The learned AO has erred in law and on facts in making the addition without placing on record any evidence directly pertaining to the appellant and in making the addition merely on the basis of a prima facie view, conjectures, surmises and suspicion. 3. The CIT Appeals has erred in law and on the facts in upholding partial addition of Rs. 15,52,70,766/- out of the total addition of Rs. 31,05,41,532/- made by the Id AO. 1 While upholding the order of Id AO partially, CIT(A) completely failed to recognise that the Id AO's finding about considering the entire purchase of the Appellant as bogus is solely based on only incomplete compliance from only two suppliers of the appellant in respect of notices to section 133(6) out of many such notices sent by Id AO to many suppliers of the Appellant, whereas it is set legal position that incomplete compliance / non compliance to notices send u/s 133(6) can not be the reason of addition in absence of any other corroborative evidences. Further, while upholding the order of Id AO partially, CIT(A) has completely disregarded the fact that Id AO had not doubted the entire purchase of Rs. 1,24,21,66,130/- of the appellant but Id AO has categorically mentioned in the assessment order regarding his objection towards purchases from only two suppliers i.e. 1. Purchase of Rs.15,05,01,748 from SH. VISHAL Rs.6,00,82,236 GANESHBHAI ADESARA and 2. Purchase of (Rs.12,48,10,154 less Rs.6,47,27,918) from MR. MEHUL GHEVARCHAND JAGAWAT Prop. M/s Vardhaman Trading. Hence, if at all any addition was required to be made / upheld as any percentage of purchase that could have been only percentage of the purchase of Rs. 21,05,83,984 (Rs.15,05,01,748 + Rs.6,00,82,236) only and not in relation to the entire purchase of Rs. 1,24,21,66,130/- of the Appellant. Further, CIT(A) while giving his finding have arbitrarily considered subject purchase made from registered dealers as purchase from grey market and have applied some arbitrarily percentage of profit but while doing so CIT(A) has completely disregarded the fact that the appellant is engaged into bullion industry where percentage of profit is always very lower then any other industry and the fact that the income tax department's own presumption is that in such kind of business the percentage of profit remains around 1%.

“1. As the expenditure was accounted in the regular books and the source is therefore explained therefore the provisions of Section 69C are not applicable as there was no unaccounted expenditure.”

ground raised by the appellant. The ground is legal in nature. The Hon’ble Supreme court in case of NTPC Ltd. vs. CIT, 229 ITR 383 (SC) has held that the order

of Tribunal u/s 254 is expressed in the widest possible terms. There is no reason

to restrict the power of the Tribunal u/s 254 only to decide the grounds which arise from the order of the CIT (Appeals). Both the assessee as well as the

Department have a right to file an appeal/cross objection before the Tribunal.

There is no reason why the Tribunal should be prevented from considering a question of law arising in the assessment proceedings although not raised earlier.

Undoubtedly the Tribunal will have the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the

question of law arising from the facts which are on record in the assessment

proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess

the tax liability of the assessee. In the instant case, the additional ground

emanates from the facts on record and no additional facts are needed to decide the issue. Hence, following the decision of the Hon’ble Supreme Court in case of

NTPC Ltd. vs. CIT, 229 ITR 383 (SC) and the decision of the Hon’ble Jurisdictional

High Court in case of CIT vs. Pruthvi Brokers and Shareholders PVt. Ltd., 349 ITR 336 (Bom.), the additional ground is admitted.

for AY 2021-22 declaring total income of Rs.13,41,720/-. The case was selected

for scrutiny under CASS for verification of the genuineness of purchases made

from entities identified by CBIC as high-risk entities in connection with suspected

bogus ITC transactions. The assessee was engaged in the business of trading in

gold and silver bullion through his proprietorship concern, M/s Jay Ambe Bullion.

During the relevant financial year, the assessee reported purchases of bullion

amounting to Rs.124,21,66,130/- and sales of Rs.124,51,25,196/-.During the

course of assessment proceedings, the AO examined the nature and genuineness

of the purchases and observed that the assessee did not maintain any godown or

warehouse or showroom, that he had not incurred expenditure towards

insurance or security of the bullion, and that the settlement of transactions with

certain parties was made on a netting basis after a gap of three to four months.

The AO also noticed that several parties had failed to furnish transportation

details and that there were discrepancies between the transaction figures

reported by the assessee and those confirmed by certain parties in response to

notices issued u/s133(6) of the Act. The AO further observed that substantial

purchases and sales had been undertaken by the assessee from and to the same

entities and treated the pattern of transactions as indicative of circular/bill

trading. The assessee submitted that he was carrying on genuine bullion trading, that transactions with the same parties were a normal feature of the bullion

market and furnished various documents, including purchase details, stock

details, ledgers, bank statements and other supporting records. The AO, however,

was not satisfied with the explanation furnished by the assessee. Consequently, the AO treated 25% of the total purchases of Rs.124,21,66,130/-, amounting to Rs.31,05,41,532/-, as unexplained and unsubstantiated purchases and made an addition of Rs.31,05,41,532/- u/s 69C of the Act.

Before the CIT(A), the assessee challenged the addition on the grounds that the

AO had relied upon third-party information without providing adequate

opportunity for rebuttal and cross-examination, that the transactions were

supported by purchase invoices, ledgers, bank statements and other

documentary evidence, and that purchases and sales with the same parties were

a normal feature of bullion trading. The assessee also disputed the discrepancies

noted by the AO in respect of certain parties and submitted confirmations and

other supporting material. The CIT(A), after considering the assessment order and

submissions of the assessee, observed that there were discrepancies and

concerns regarding the genuineness of certain purchases, including transactions

with certain parties whose GST registration status/traceability was in question.

The CIT(A) also observed that the settlements through banking channels were not commensurate with the volume of transactions and that the transactions with

certain parties had characteristics of circular trading. The CIT(A), however, noted

that the AO had accepted the sales declared by the assessee. Since the

corresponding quantity of goods had been sold and the sales had been accepted,

the CIT(A) held that the entire purchases could not be treated as fictitious and

that the addition was required to be restricted to the profit element embedded

in such purchases. For this purpose, the CIT(A) relied upon, inter alia, the

decisions of the Hon'ble Bombay High Court in Pr. CIT v. S.V. Jiwani and Pr. CIT v.

Mohommad Haji Adam & Co., as well as the decision of the Hon'ble Gujarat High

Court in CIT v. Bholanath Poly Fab Pvt. Ltd. and CIT v. Simit P. Sheth. Considering

the facts of the case and the judicial precedents, the CIT(A) restricted the addition from 25% to 12.5% of the total purchases of Rs.1,24,21,66,130/-, resulting in an addition of Rs.15,52,70,766/-. Accordingly, the balance addition was deleted and

the appeal of the assessee was partly allowed.

stock records, GST returns, supplier particulars, bank statements, invoices and confirmations/responses received from suppliers pursuant to notices issued u/s

133(6) of the Act. He also submitted that the AO initially alleged that none of the

suppliers had responded to notices u/s 133(6), whereas the assessment record subsequently acknowledged receipt of several responses and expressed

dissatisfaction only with respect to two suppliers. It was argued that the AO did

not conduct any independent inquiry or bring direct material establishing that the purchases were bogus. Reliance was placed on the decision of the Hon’ble

Bombay High Court in CIT v. Nikunj Eximp Enterprises (P.) Ltd., 372 ITR 619 (Bom.). He further submitted that the AO had specifically questioned purchases from only

two suppliers aggregating to Rs.21,05,83,984/-, whereas the total purchases were

Rs.1,24,21,66,130/-. Therefore, even if any estimation were considered, it could not be applied to the entire purchases. The Ld. AR submitted that the assessee is

engaged in bullion trading, where profit margins are very thin. The assessee’s

gross-profit margin was stated to be 0.22% for AY 2021-22 and 0.08% for AY 2020- 21. Accordingly, the estimation of profit at 25% by the AO and 12.5% by the CIT(A)

was excessive.

7.1 The Ld. AR also challenged the invocation of section 69C, submitting that

the issue concerned alleged non-substantiation of purchases and did not constitute unexplained expenditure within the meaning of section 69C. It was

therefore prayed that the addition be deleted.

He submitted that in case of bogus purchases, the Hon’ble High Court and

Tribunals have been confirming addition to the extent of about 15% of the bogus

purchase.

also deliberated on the decisions relied upon by both sides. The assessee has made purchases of Rs.1,24,21,66,130/- from different parties. The Ld. AR

submitted that the AO made enquiry during assessment proceedings and as categorically mentioned in the assessment order, the genuineness of the

purchases from only two suppliers namely, Shri Vishal Ganeshbai Adesara of

Rs.15,05,01,748/- and Mr. Mehul Ghevarchand Jagawat of Rs.6,00,82,236/- were doubted. Therefore, if at all any addition was required to be made, only profit

element on purchases of Rs.21,05,83,984/- (Rs.15,05,01,748 + Rs.6,00,82,236)

could have been made. The Ld. Sr. DR has not rebutted the claim of the assessee. Hence, the profit element in respect of entire purchase of Rs.1,24,21,66,130/-

cannot be added because the assessee in the return of income has already

disclosed profit on the above turnover. However, as contended by the Ld. AR in his alternative submission, only the profit element embedded in the impugned

purchase transactions could be added and not on the entire purchase amount.

We find that there are number of decisions in cases of bogus purchases, where

the Hon’ble High Court and Tribunal have sustained addition to the extent of 12.5% to 15% of the bogus purchases. In case of PCIT vs. Ramelex Pvt. Ltd.,

Income-tax Appeal No.14 of 2022 dated 13.10.2025, the Hon’ble jurisdictional

Bombay High Court has upheld addition @15% in respect of bogus purchases. The Hon’ble Gujarat High Court in case of CIT vs. Simit Seth, 356 ITR 451 (Guj.) has

also upheld addition @15% of the impugned purchases. We also find that the co-

ordinate Bench of Mumbai Tribunal has restricted the addition to 15% of the bogus purchase in the case of Amarshi Harakchand Gada vs. ITO in ITA

No.675/Mum/2026 (AY 2011-12) dated 25.05.2026. Therefore, we do not find any infirmity in order of CIT(A) in restricting the addition to 12.5% and direct the

AO to restrict the addition to 12.5% of the bogus purchases of Rs.21,05,83,984/-

and not the entire purchase of Rs.1,24,21,66,130/-. Accordingly, addition of Rs.2,63,22,998/- is confirmed and the remaining addition is deleted. The grounds

are partly allowed.

However, none of the parties has argued on the issue of applicability u/s 69C of

the Act. We have already confirmed the addition of 12.5% of the bogus purchase towards the profit element embedded in the bogus purchases. The sales have not

been doubted by the revenue and in fact the same has been accepted. Since addition of 12.5% on the impugned purchases amounting to Rs.2,63,22,998/- has

already been made, there is no need for further addition u/s 69C of the Act.

Accordingly, ground is allowed.

Order is pronounced on 06.10.2026.

Sd/- Sd/- (ANIKESH BANERJEE) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER

*Aniket Chand; Sr. PS MUMBAI Date: 06.10.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File

By Order ABHINAV Digitally signed by ABHINAV ANANT ANANT GAVANDE Date: 2026.10.13 16:22:35 GAVANDE +05'30' Assistant Registrar ITAT, MUMBAI