BAHUBALI DIAMONDS PRIVATE LIMITED,SURAT vs. I.T.O WARD 1 (1)(1), SURAT, SURAT

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ITA 113/SRT/2026Status: PendingITAT Surat30 October 20264 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the retraction of Shri Deepak Jain before the Executive Magistrate was not considered by the AO and CIT(A). The assessee had also provided bank statements, confirmations, and ITR acknowledgments of M/s. Abhinandan Diamonds Pvt. Ltd., which the Revenue had not commented upon. Citing the precedent of a similar appeal for AY 2012-13 (ITA No. 915/SRT/2024) being restored to the CIT(A) by the Tribunal, the Bench decided to remand the matter back to the file of the CIT(A). The CIT(A) is directed to properly verify the details filed by the assessee and adjudicate the issues in accordance with the Income Tax Act, ensuring that the assessee is given an opportunity of hearing as per the principles of natural justice. The issue regarding the opportunity of hearing was implicitly addressed by remanding the matter for proper adjudication with natural justice principles.

What were the facts?

The assessee, Bahubali Diamonds Private Limited, filed an appeal against the order of the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2016-17. The Assessing Officer (AO) had issued a notice under Section 148 of the Income Tax Act, 1961, after observing that the assessee received accommodation entries. The AO noted transactions worth Rs. 2,07,50,000/- with M/s. Abhinandan Diamonds Pvt. Ltd. and Rs. 1,71,90,750/- with entities controlled by Shri Shripal Vora, identified as an accommodation provider. Based on information from an entry provider, Shri Deepak Jain, the AO added Rs. 28,53,039/- as commission income, calculated at 0.25% of the turnover reflected in bogus bills, and Rs. 1,69,08,536/- as interest income declared under 'Income from other sources'. The CIT(A) dismissed the assessee's appeal.

What were the issues?

1. Whether the Ld. CIT(A) erred by not providing an opportunity of hearing and not issuing any hearing notice to the appellant, thereby violating principles of natural justice? 2. Whether the Ld. CIT(A) erred in confirming the addition of Rs. 28,53,039/- as business income, calculated at 0.25% of total sales, without proper justification? 3. Whether the Ld. CIT(A) erred in confirming the addition of Rs. 1,69,08,536/- as interest income? Assessee's Contentions: The assessee argued that the AO and CIT(A) failed to consider the basis for applying 0.25% of total sales. They contended that crucial documents, including the ITR acknowledgment of M/s. Abhinandan Diamonds Pvt. Ltd., account confirmations, supporting bank transactions, and a retraction letter from Shri Deepak Jain, were not considered. The assessee also referred to a previous appeal for AY 2012-13 (ITA No. 915/SRT/2024) which was restored to the CIT(A) by the Tribunal. Revenue's Contentions: The Ld. Departmental Representative relied on the assessment order and the order of the CIT(A).

Which sections of the Income-tax Act were involved?

Section 148

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 Ashish Kumar, Sr. DR
Pronounced: 30.10.2026

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No.113/SRT/2026 (निर्धारण वर्ा/Assessment Year: A Y 2016-17) BAHUBALI DIAMONDS PRIVATE I.T.O WARD 1 (1)(1), SURAT LIMITED AAYKAR BHAVAN, INCOME B-404 MILLENIUM TRADE TAX COLONY, ATHWA, Vs. CENTER, THOBHA SHERI SURAT, GUJARAT 395001 MAHIDHARPURA SURAT-395001, GUJARAT SURAT-395003, GUJARAT अपीलधर्थी Appellant प्रत्यर्थी Respondent

Permanent Account Number of Assessee: AADCB9109R

अपीलधर्थी द्वारा/Appellant represented by: Shri Bharat Kumar, AR प्रत्यर्थी द्वारा/Respondent represented by: Shri Ashish Kumar, Sr. DR

सुनवाई की तारीख / Date of conclusion of hearing: 25.08.2026 घोषणा की तारीख / Date of pronouncement: 30.10.2026

O R D E R PER : SUCHITRA KAMBLE, J M:

The appeal filed by the assessee is against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [in short “CIT(A)”] dated 06.11.2025 for the Assessment Year (in short “AY”) 2016-17.

2.

The assessee has raised the following grounds of appeal: “1. The Ld. CIT(A) did not provide the opportunity of the for earing and He did not issue any hearing notice to appellant. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming addition of Rs.28,53,039 as business income being 0.25 percent of total sales. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming addition of Rs.1,69,08,536 /- as interest income.

ITA No.113/SRT/2026 (A.Y. 113/SRT/2026) BAHUBALI DIAMONDS PRIVATE LIMITED

4.

The Appellant craves to add, amend, DLEETE, alter and modify the above ground with prior permission of your honour before OR during the course of hearing of appeal.” 3. The assessee is a company. As per the information the Assessing Officer (in short “the AO”) observed that the assessee received accommodation entries during A.Y. 2016-17. Hence, notice u/s 148 of the Act Income Tax Act, 1961 (in short “the Act”) was issued on 10.05.2021. After issuing statutory notice and considering the assessee’s details and reply, the Assessing Officer (in short “the AO”) observed that the assessee made transaction worth Rs.2,07,50,000/- with M/s. Abhinandan Diamonds Pvt. Ltd. which was providing accommodation entries. The assessee also made transactions amounting to Rs.1,71,90,750/- with the entities operated and controlled by Shri Shripal Vora who is an accommodation provider. As per search and seizure action, the entry provider Shri Deepak Jain accepted that he is providing accommodation entries through five entities namely M/s Surya Diamonds Pvt Ltd, M/s Sanmati Gems Pvt Ltd., M/s Abhinandan Diamonds Pvt Ltd., M/s Marudhar Diamonds Pvt Ltd and M/s Siddhant Gems Pvt Ltd. The AO after taking cognizance of the assessee’s details held that the assessee has declared turnover of Rs.114,12,15,664/- and is proved to be trading in accommodation bills, the normal profit percentage in cases is around 0.25% and applying the same on the turnover reflected in the form of bogus bills, the profit from this was determined at Rs.28,53,039/- and made addition as commission income. The AO further made addition of Rs.1,69,08,536/- towards the interest income declared by the assessee under the head “Income from other sources”.

4.

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

5.

The Ld. Authorised Representative (in short “the Ld. AR”) submitted that the AO as well as the CIT(A) has not considered on what basis 0.25% of total sales were confirmed and added to the income of the assessee. In fact, the details related to the ITR acknowledgment of M/s. Abhinandan 2

ITA No.113/SRT/2026 (A.Y. 113/SRT/2026) BAHUBALI DIAMONDS PRIVATE LIMITED Diamonds Pvt. Ltd., confirmation of the account between M/s. Abhinandan Diamonds Pvt. Ltd. and M/s. Bahubali Diamonds Pvt. Ltd. showing various transactions including transfers including M/s. Bahubali Diamonds Pvt. Ltd., supporting bank transactions for the period from November to December 2015 as well as the retraction letter by Shri Deepak Jain was not at all considered by the AO as well as the CIT(A).

6.

The Ld. Departmental Representative (in short “Ld. DR”) relied upon the assessment order and the order of the CIT(A).

7.

We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the retraction of Shri Deepak Jain before the Executive Magistrate was not taken into account by the AO as well as by the CIT(A). The assessee has also given the details of bank statement, confirmations as well as ITR acknowledgments of M/s. Abhinandan Diamond Pvt. Ltd., which was never commented by the Revenue. It will be appropriate to remand back this matter to the file of the CIT(A), as the Ld. AR at the time of hearing submitted that the appeal of the assessee for AY 2012-13 being ITA No.915/SRT/2024 was restored by the Tribunal before the CIT(A), vide order dated 18.12.2024. It will be appropriate to remand back this issue to the file of the CIT(A) for proper verification of the details filed by the assessee and adjudicate the same as per the Income Tax Act. Needless to say, the assessee be given opportunity of hearing by following principles of natural justice.

8.

In result, appeal of the assessee is partly allowed for statistical purpose. Order pronounced in the open court on 30.10.2026

Sd/- Sd/- (B.M. BIYANI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat; Dated: 30.10.2026 * Kishore, Sr. P.S. 3

ITA No.113/SRT/2026 (A.Y. 113/SRT/2026) BAHUBALI DIAMONDS PRIVATE LIMITED Copy of the Order forwarded to: 1. The Appellant 2. The Respondent 3. CIT- concerned 4. DR, ITAT, Surat 5. Guard File By order, Digitally signed by HEMA KISHORE HEMA KISHORE JAKKA JAKKA Date: 2026.11.02 15:27:43 +05'30' Assistant Registrar/Sr.PS/PS ITAT, Surat Bench

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