INCOME TAX OFFICER, WARD-2(3)(6), SURAT, SURAT vs. RAKSHITA GEMS, SURAT

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ITA 1315/SRT/2025Status: DisposedITAT Rajkot13 October 20266 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal first addressed the cross-objection filed by the assessee regarding the applicability of Section 153C instead of Section 148, noting a delay of 290 days. The assessee claimed non-service of the Revenue's appeal memo and delay in receiving Form No. 36. The Tribunal then considered the Revenue's appeal. The primary issue was the deletion of the addition of Rs. 19,05,750/- made by the AO on account of bogus purchases. The Revenue argued that these were sham transactions from paper concerns of the Bhanwarlal Jain group, which provided accommodation entries, and cited the N.K. Industries Ltd. case. The assessee's cross-objection raised a legal ground regarding the AO's proceedings being void due to the applicability of Section 153C and lack of cross-examination. The judgment does not explicitly state the Tribunal's finding on the deletion of addition or the applicability of Section 153C, as the provided text cuts off before the decision is fully articulated. However, the structure indicates these were the core points for adjudication.

What were the facts?

The Revenue is in appeal against the order of the CIT(A) dated 17.09.2025 for Assessment Year 2012. The assessee, M/s. Rakshita Gems, filed its return of income on 06.08.2012 declaring a total income of Rs.97,370/-. Information received from the DDIT(inv.), Unit-9(2), Mumbai, indicated that a search action on Sh. Bhanwarlal Jain Group on 03.10.2013 revealed that this group operated 70 benami concerns providing accommodation entries for unsecured loans and bogus purchases. The assessee's case was reopened under Section 147 of the Income Tax Act, 1961, as it was identified as a beneficiary of non-genuine purchase transactions from M/s Balaji Impex, a concern associated with the Bhanwarlal Jain group. The assessee failed to provide corroborative evidence, leading the Assessing Officer (AO) to complete the assessment under Section 144 r.w.s. 147, adding 100% of the alleged bogus purchases amounting to Rs.19,50,750/-.

What were the issues?

1. Whether the CIT(A) erred in deleting the addition of Rs. 19,05,750/- on account of bogus purchases, considering the transactions were sham and fabricated through paper concerns of the Bhanwarlal Jain Group, which provided accommodation entries. The Revenue argues that the CIT(A) ignored this fact and failed to appreciate that the AO had co-terminus powers to conduct inquiries. The Revenue relies on the Gujarat High Court judgment in N.K. Industries Ltd. vs. DCIT, upheld by the Apex Court, which held that 100% of purchases from bogus parties are liable to be added, contrary to the ITAT's restriction to 25%. 2. Whether the AO's proceedings are bad in law and void because the order dated 14-11-2019 was based on information from the search in the case of Bhanwarlal Jain, making Section 153C applicable instead of Section 148. The assessee contends that the AO did not provide the statement or information collected from Bhanwarlal Jain, nor was cross-examination provided, rendering the proceedings void. 3. Whether the CIT(A) erred in not conducting inquiries with the investigation wing regarding the veracity of the assessee's claim, despite findings from the search action establishing the entity as a paper concern providing accommodation entries.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 144,Section 68,Section 69C,Section 153C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

Before: MS. SUCHITRA KAMBLE & SHRI B.M. BIYANI

For Respondent: Shri Aman K Shah, CA
Pronounced: 13.10.2026

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.1315/SRT/2025 (निर्धारण वर्ा/Assessment Year: 2012) INCOME TAX OFFICER, WARD- RAKSHITA GEMS 2(3)(6), SURAT 104, JAISHREE HARIKRISHNA INCOME TAX OFFICE, 405, COMPLEX, DALGIYA SHERI, ANAVIL BUSINESS CENTER, MAHIDHARPURA, Vs. ADAJAN-HAZIRA ROAD, ADAJAN, (MOB. 9824928361) SURAT-395009, GUJARAT SURAT-395003, GUJARAT अपीलधर्थी Appellant प्रत्यर्थी Respondent

Permanent Account Number of Assessee: AAOFM3553E

अपीलधर्थी द्वारा/Appellant represented by: Shri Ashish Kumar, Sr. DR प्रत्यर्थी द्वारा/Respondent represented by: Shri Aman K Shah, CA सुनवाई की तारीख / Date of conclusion of hearing: 16.07.2026 घोषणा की तारीख / Date of pronouncement: 13.10.2026

CO No.9/SRT/2026 (Arising out of ITA No.1315/SRT/2025) (निर्धारण वर्ा/Assessment Year: 2012) M/s. RAKSHITA GEMS INCOME TAX OFFICER, C/o. KETAN H. SHAH, ADVOCATE, WARD-2(3)(8), 5/12, TIMES SQUARE I, AAYAKAR BHAVAN, NR. RAVIJA PLAZA, SURAT Vs. OPP. RAMBAUG BUNGALOW, GUJARAT THALTEJ SHILAJ ROAD, AHMEDABAD - 380059 अपीलधर्थी Appellant प्रत्यर्थी Respondent Permanent Account Number of Assessee: AAOFM3553E अपीलधर्थी द्वारा/Appellant represented by: Shri Ashish Kumar, Sr. DR प्रत्यर्थी द्वारा/Respondent represented by: Shri Aman K Shah, CA

ITA No.1315/SRT/2025 (A.Y. 2012) & CO No.9/SRT/2026 RAKSHITA GEMS सुनवाई की तारीख / Date of conclusion of hearing: 16.07.2026 घोषणा की तारीख / Date of pronouncement: .10.2026 O R D E R PER : SUCHITRA KAMBLE, J M: The appeal filed by the Revenue is against the order passed by the Commissioner of Income Tax (Appeals), ADDL/JCIT (A), Mumbai [in short “CIT(A)”] dated 17.09.2025 for the Assessment Year (in short “AY”) 2012.

2.

The Revenue has raised the following grounds of appeal: “1. On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in deleting the addition of Rs. 19,05,750/ made on account of bogus purchases ignoring the fact that these purchases are sham transactions fabricated through bogus paper concerns of Shri Bhanwarlal Jain Group entities which were engaged in providing accommodation entries.

2.

On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not considering the judgment of Gujarat High Court in the case of N.K. Industries Ltd. vs. DCIT in TA No. 240 to 242 of 2003 which has been upheld by the Hon'ble Apex Court in Special Leave to Appeal No. 769 of 2017 dated 16.01.2017. wherein the Hon'ble High Court decided that 100% of purchases from bogus parties was liable to be added in the hands of the Assessee, reversing the order passed by the Hon'ble ITAT that restricted addition to 25%, holding that such restriction goes against the principles of Sections 68 and 69C of Income-tax Act.

3.

On the facts and circumstances of the case and law, the Ld. CIT(A) has erred in not appreciating that he is having co-terminus power to conduct enquiries and without conducting any enquiry with the investigation wing with regard to veracity of the claim of the assessee he has accepted the version of the assessee whereas from the finding of search action carried out in the case of Bhanwarlal Jain group it is established that the entity from which the assessee has claimed purchase was merely a paper concern engaged in providing accommodation entry.

4.

On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the Assessing Officer.

5.

It is therefore prayed that the order of the Ld. CIT(A) may kindly be set aside and that of the Assessing Officer be restored.

ITA No.1315/SRT/2025 (A.Y. 2012) & CO No.9/SRT/2026 RAKSHITA GEMS

6.

The appellant craves leave to add, alter, amend and/0R withdraw any grounds of appeal either before OR during the course of hearing of the appeal." 3. The assessee has raised the following grounds in its cross objections: “1. It is prayed that the AO has passed the order dated 14-11-2019 based on information and evidence collected during the course of search in the case of Bhanvarlal Jain and therefore, the provision of Section 153C is applicable and not the provision of Section 148 and therefore, whole proceeding is bad in law and void.

2.

It is further prayed that the learned AO has not provided statement, information collected from Bhanvarlal Jain and no cross examination has been provided and therefore, the proceeding is bad in law and void.” 4. The assessee has filed its return of income for A.Y. 2012-13 on 06.08.2012 declaring total income at Rs.97,370/-. As per the information received from O/o the DDIT(inv.), Unit-9(2), Mumbai, a search & seizure action was carried out in the case of Sh. Bhanwarlal Jain Gorup on 03.10.2013. It was found by the investigation wing that Sh. Bhanwarlal Jain along with his sons Sh. Rajesh Bhanwarlal Jain and Shri Manish Bhanwarlal Jain were operating and managing 70 benami concerns in the name of their employees and indulged in providing accommodation entries of unsecured loans and bogus purchases to various beneficiaries. The case of the assessee was reopened u/s 147 of the Income Tax Act, 1961 (in short “the Act”) as the assessee was one of the beneficiaries of non-genuine purchase transactions and found to have made bogus purchases from bogus concerns of Bhanwarlal Jain group. During the course of assessment proceedings, the assessee failed to produce corroborative documentary evidences to prove the veracity of alleged transactions with concern associated with Bhanwarlal Jain, M/s Balaji Impex. Accordingly, the assessment was completed u/s 144 r.w.s. 147 of the Act by making addition at 100% of alleged transactions of bogus purchases to tune of Rs.19,50,750/- on account of bogus purchases.

ITA No.1315/SRT/2025 (A.Y. 2012) & CO No.9/SRT/2026 RAKSHITA GEMS 5. Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

6.

Firstly, we are taking up the cross objection filed by the assessee thereby taking the legal ground that the reopening u/s 147 is on the basis of search and seizure action in the case of Bhanwarlal Jain and therefore the provisions of section 153C of the Act is applicable and not the provisions of section 148. There is a delay of 290 days in filing the present cross objection. The assessee filed affidavit stating therein that the assessee was never served the memo of appeal filed by the Revenue and the assessee’s authoritised representative vide letter dated 26.02.2026 requested the Revenue Authorities to give Form No.36 along with other enclosers. Once the said form No.36 was received on 27.03.2026 from the registrar of the Tribunal the assessee has filed the cross objection on 20.04.2026, therefore the delay was not deliberate but due to the non- availability of Form 36.

7.

From the perusal of the affidavit, it can be seen that the delay in filing the cross objection is genuine and hence the delay of 290 days is condoned.

8.

As relates to the legal point the Ld. Authoritised Representative (in short “the Ld. AR”) for the assessee submitted that the search and seizure action was carried out by the investigation wing on 03.10.2013 which resulted in collection of evidences in respect of Bhanwarlal Jain and other group cases. The addition made by the Assessing Officer (in short “the AO”) is related to the said search and seizure and therefore section 153C should have been invoked and not section 147/148 of the Act. The Ld. AR relied upon the various decisions in this respect.

9.

The Ld. Departmental Representative (in short “Ld. DR”) submitted that the sole basis of reopening was not the search and seizure material but

ITA No.1315/SRT/2025 (A.Y. 2012) & CO No.9/SRT/2026 RAKSHITA GEMS the non-genuine purchase bills and unsecured loans taken into account by the accommodation entry on behalf of the assessee. Thus, the AO has rightly invoked Section 147 of the Act.

10.

We have heard both the parties and perused all the relevant materials available on record. The AO in para 1 of the assessment order has categorically stated that the information was received from the Investigation Wing. It is not the entire search and seizure material, but the assessee's modus operandi and its information was taken into account by the AO while reopening the case u/s 147 of the Act. When the information is received and not the seized material from the search of the third party, the invocation of Section 153C will not come into picture but Section 147 will be properly invoked. Thus, the reopening is valid. Thus, the cross objection filed by the assessee is dismissed.

11.

As relates to the Revenue's appeal, the Ld. DR relied upon the decision of NK Industries (2017) 250 Taxman 22 (SC) and Anil Ghanshyambhai Kumawat (ITA Nos.1519 & 1520/Ahd/2017 & Ors. order dated 18.07.2022).

12.

The Ld. AR relied upon the order of the CIT(A). 13. We have heard both the parties and perused all the relevant materials available on record. The CIT(A) has observed that the AO has nothing on record to prove that the cash trail with respect to the alleged bogus purchases. But the reliance of the decision in case of Anil Ghanshyambhai Kumawat (supra) wherein the said search of Bhanwarlal Jain Group is involved the modus operandi appears similar in present case. The CIT(A) has not taken into account that the details given by assessee related to bogus purchases were doubted. Therefore, it will be appropriate to take consistent view in present assessee’s case and we restrict the

ITA No.1315/SRT/2025 (A.Y. 2012) & CO No.9/SRT/2026 RAKSHITA GEMS addition of similar bogus/impugned purchase to the extent of 6% of disputed purchases. Thus, the appeal of Revenue is partly allowed.

14.

In result, the appeal of the Revenue is partly allowed and cross objection filed by the assessee is dismissed. Order pronounced in the open court on 13.10.2026

Sd/- Sd/- (B.M. BIYANI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat; Dated: 13.10.2026 * Kishore, Sr. P.S. Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Surat 5. Guard File By order,

Assistant Registrar/Sr.PS/PS ITAT, Surat Bench

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