INCOME-TAX OFFICER, WARD-2(3)(6), SURAT, SURAT vs. MOHIT POKHARANA, SURAT

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ITA 43/SRT/2025Status: DisposedITAT Surat29 October 2026AY 2012-20136 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the CIT(A). The Tribunal noted that the assessee had raised an objection regarding the quantum of purchases, claiming only Rs. 15,150/- was purchased from M/s. Look at Me Retail Pvt. Ltd. The CIT(A) had called for a remand report, but the AO failed to submit it. The CIT(A) observed that the AO had not provided a finding on the discrepancy in the purchase amount and that the information from the Investigation Wing did not confirm purchases of Rs. 4,35,68,678/- appearing in the assessee's books. The CIT(A) concluded that the AO's finding that the appellant took bills of the said amount from the Bhanwarlal Jain group remained unverified. Due to the non-receipt of the remand report and the unverified nature of the AO's finding, the CIT(A) accepted the assessee's claim and deleted the addition. The CIT(A) also noted that in similar cases involving beneficiaries of accommodation entries from the Bhanwarlal Jain group, the ITAT Surat and Mumbai Benches had restricted the addition to 6% of purchases, a practice followed in the assessee's own case for AY 2014-15. The Tribunal found no distinguishing facts from these decisions and therefore did not interfere with the CIT(A)'s findings.

What were the facts?

The Revenue filed an appeal against the order of the CIT(A) for Assessment Year 2012-13. The assessee initially filed a return declaring total income of Rs. 2,41,780/-, which was accepted under scrutiny. Subsequently, information from the Directorate of Investigation indicated that the Bhanwarlal Jain Group, a known provider of accommodation entries, was involved in providing bogus purchase bills. The assessee was identified as a beneficiary, having allegedly received bogus purchase bills from M/s. Look at Me Retail Pvt. Ltd., an entity linked to the Bhanwarlal Jain Group, for Rs. 4,35,68,678/-. The Assessing Officer reopened the assessment and, after the assessee failed to prove the genuineness of the transactions, rejected the books of account and added the entire purchase amount to the assessee's income.

What were the issues?

1. Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in deleting the addition of Rs. 4,35,68,678/- made on account of bogus purchases, ignoring that these were sham transactions fabricated through bogus paper concerns of the Shri Bhanwarlal Jain Group entities providing accommodation entries. 2. Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in not considering that the amount claimed as payment to hawala dealers was in effect a suppression of profits by obtaining bogus purchase bills, which was liable to be added to the assessee's income. 3. Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in not considering the judgments of the Gujarat High Court in N.K. Industries Ltd. vs. DCIT and the Calcutta High Court in FCIT vs. Premlata Tekriwal, which held that 100% of purchases from bogus parties should be added to the assessee's income. 4. Whether, on the facts and circumstances of the case and in law, the CIT(A) erred in not appreciating that he had co-terminus powers to conduct enquiries and accepted the assessee's version without conducting an enquiry with the investigation wing. Revenue's Contentions: The Ld. DR argued that the CIT(A) erred in deleting the addition as the purchases were sham and provided by accommodation entry providers. The Ld. DR relied on the judgments of N.K. Industries Ltd. and Premlata Tekriwal to support the addition of the entire purchase amount. It was also argued that the CIT(A) failed to conduct necessary enquiries. Assessee's Contentions: The Ld. AR relied on the order of the CIT(A). The assessee had contended before the CIT(A) that only purchases of Rs. 15,150/- were made from M/s. Look at Me Retail Pvt. Ltd.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 132,Section 147,Section 145(3),Section 68,Section 69C

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, SURAT BENCH, SURAT

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

Pronounced: 29.10.2026

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.43/SRT/2025 (िनधा�रण वष�/Assessment Year: 2012-2013) INCOME-TAX OFFICER, MOHIT POKHARANA WARD-2(3)(6), SURAT 103, SANT KRUPA, HAWDA SHERI, ROOM NO. 405, 4TH FLOOR, MAHIDHARPURA, Vs. ANAVIL BUSINESS CENTRE, SURAT-395003 ADAJAN HAZIRA ROAD, GUJARAT SURAT-395009, GUJARAT अपीलाथ� Appellant ��थ� Respondent

Permanent Account Number of Assessee: ARKPP9680N

अपीलाथ� �ारा/Appellant represented by: Shri Pushpendra Chaudhary, CIT DR ��थ� �ारा/Respondent represented by: Shri Aman Shah, CA सुनवाई की तारीख / Date of conclusion of hearing: 24.08.2026 घोषणा की तारीख / Date of pronouncement: 29.10.2026 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), National Faceless Appeal Centre (NFAC), Delhi [in short “CIT(A)”] dated 11.11.2024 for the Assessment Year (in short “AY”) 2012-13. 2. The Revenue has raised the following grounds of appeal: “a) On the facts and circumstances of the case and law, the Id. CIT(A) has erred in deleting the addition of Rs.4,35,68,678/- 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 b) On the facts and circumstances of the case and law, the Id. CIT(A) is correct in not considering that the amount claimed as payment to hawala dealers was in effect suppression of profits by obtaining bogus purchase bills which was liable to be added to the income of the Assessee. c) Whether 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. d) Whether on the facts and circumstances of the case and law, the ld. CIT(A) has erred in not appreciating that the judgment of Calcutta High Court of in the case of FCIT vs. Premlata Tekriwal (143) taxmann.com 173) involving similar issue of purchase of bogus concern to suppress profits wherein the court held that "since it was established that expenditure was unexplained/bogus, entire amount of bogus expenditure was to be added to income of Assessee". e) Whether on the facts and circumstances of the case and law, the id. CM(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. f) On the basis of the facts and circumstances of the case and in law. the Ld. CT(A) ought to have upheld the order of the Assessing Officer. g) 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. h) The appellant craves leave to add, alter, amend and/or withdraw any grounds of appeal either before or during the course of hearing of the appeal.” 3. The assessee filed original return of income on 29.08.2012 for A.Y. 2012-13 declaring total income at Rs. 2,41,780/-. Scrutiny assessment u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”) was completed on 24.03.2015 accepting returned total income. Subsequently, information was received from DIT(Inv.), Mumbai that search and seizure action u/s 132 of the Act was carried out in the group cases of Shri Bhanwarlal Jain Group, one of the leading accommodation entry providers on 03.10.2013 which resulted in collection of evidences and other findings which conclusively proved that they were operating benami concerns in name of their employees through which they provided accommodation entries of unsecured loan and bogus purchases to various beneficiaries. The assessee was one of the beneficiaries who had received bogus bills for purchase from following entities which were bogus concern of Bhanwarlal Jain Group:

Sr. No. Name of the entity Amount (Rs.) 1 Look at Me Retail Pvt. Ltd. 4,35,68,678/- In view of the above the case of the assessee was re-opened within the meaning of section 147 of the Act. During the course of assessment proceedings, the Assessing Officer noticed that the assessee had made transaction with M/s. Look at Me Retail Pvt. Ltd of Rs.4,35,68,678/- concerns associated with Bhanwarlal Jain Group. The AO has discussed the case in detail regarding modus operandi of the Group as well as the genuineness of all transactions in books of account and has concluded that the purchases of diamonds from above party/entity were found to be non- genuine. A show cause notice was issued to the assessee. The assessee has submitted his reply alongwith copy of tax invoice of purchases from above party concerned, copies of extract of stock register, copies of Bank statements, confirmatory statement of account in the books of above party concerned. The assessee had also submitted that he had purchased from the above party to extent of Rs.15,150/- only. The submission of the assessee had been examined by the Assessing Officer (in short the “AO”). Further, the AO had submitted that the onus lies upon the assessee company to prove the genuineness of the transactions shown in its books of accounts. During the assessment proceedings, the company failed to furnish the details regarding the purchase, expenses claimed etc. As the assessee failed to furnish the details and establish the genuineness of the transactions, the transactions shown by the assessee remained unverifiable, hence the book result shown by the assessee was not accepted and the books of accounts were rejected u/s 145(3) of the Act. Further, the AO has completed the assessment proceeding u/s 143(3) r.w.s. 147 of the Act by determining total assessed income of Rs.4,38,10,458/- after making addition of Rs.4,35,68,678/- on account of bogus purchases made from the above party/entity linked with Bhanwarlal Jain Group.

4.

Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

5.

The Ld. Departmental Representative (in short “Ld. DR”) submitted that the CIT(A) has erred in deleting the addition of Rs.4,35,68,678/- 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. The CIT(A) is correct in not considering that the amount claimed as payment to hawala dealers was in effect suppression of profits by obtaining bogus purchase bills which was liable to be added to the income of the assessee. The 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 ITAT that restricted addition to 25% holding that such restriction goes against the principles of Sections 68 and 69C of Act. The CIT(A) has erred in not appreciating that the judgment of Calcutta High Court of in the case of FCIT vs. Premlata Tekriwal (143) taxmann.com 173) involving similar issue of purchase of bogus concern to suppress profits wherein the court held that "since it was established that expenditure was unexplained/bogus, entire amount of bogus expenditure was to be added to income of Assessee". The 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.

6.

The Ld. Authorised Representative (in short “the Ld. AR”) relied upon the order of the CIT(A).

7.

We have heard both the parties and perused all the relevant materials available on record. It is pertinent to note that the assessee raised objection for only purchase of Rs.15,150/- was made from M/s. Look at Me Retail Pvt. Ltd. The CIT(A) has called for remand report while taking into account the assessee’s details. The CIT(A) has categorically given finding in para 7.2 as follows: “7.2 A remand report was called for from the AO on this issue. As per details mentioned in para 5 above, the AO has not submitted report in spite of sufficient time. No comments on the issue of discrepancy in purchase amount are thus made by the AO. During assessment proceedings also, similar claim was made. The AO has referred the same in para 7.3, but has not given a finding whether the claim of the appellant is correct. In the case of accommodation entry, purchases of diamonds are made from the grey market and bogus purchase bills is taken to regularize the corresponding sale. Therefore, the entry of transaction with M/s Look At Me Retail P. Ltd. would be available in the books of accounts. The AO has not given any finding in the assessment order on the issue confirming that purchases of Rs. 4,35,68,678/- are reflected in the books of accounts of the appellant and not Rs. 15,150/- as claimed by the appellant. The AO has not referred to any evidence regarding transactions of this amount appearing in the information shared by the Investigation Wing. This was crucial since the appellant has objected to the quantum of purchases allegedly made from the concern of Shri Bhanwarlal Jain & group during the assessment proceedings itself. The finding of the AO that appellant took bill of said amount from Shri Bhanwarlal Jain and group therefore remains unverified. Considering the same and due to non receipt of remand report, the claim of the appellant has to be accepted and the addition of Rs. 4,35,68,678/- cannot be sustained. In cases of beneficiaries of accommodation entries from Shri Bhanwarlal Jain & group, the Hon'ble Surat Bench of ITAT and Mumbai Bench of ITAT has restricted the addition to 6% of purchases. This has been followed in first appeal order in appellant's own case for AY 2014-15. However, the purchases of Rs. 15,150/- for the present year cannot be said to be bogus purchases considering that it is petty and small amount in diamond business. Accordingly, entire addition is directed to be deleted. Ground Nos. 3 & 4 are allowed.”

8.

Thus, the CIT(A) has followed the decisions of the ITAT Surat Bench & Mumbai Bench in the cases of Shri Bhanwarlal Jain & group and has restricted the addition to 6% of purchases. Since in the present case the Ld. DR could not point out any distinguishing facts from the said decisions in the said case of Shri Bhanwarlal Jain & group. Therefore, there is no need to interfere with the findings of the CIT(A).

9.

In result, appeal of the Department/Revenue is dismissed.

Order pronounced in the open court on 29.10.2026

Sd/- Sd/- (B.M. BIYANI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat; Dated: 29.10.2026 //True Copy// * 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, HEMA KISHORE Digitally signed by HEMA KISHORE JAKKA JAKKA Date: 2026.10.29 18:03:12 +05'30' Assistant Registrar/Sr.PS/PS ITAT, Surat Bench

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