INCOME TAX OFFICER, PIRAMAL CHAMBERS MUMBAI vs. BHARAT HIRALAL SHAH, MUMBAI

PER OM PRAKASH KANT, AM

This appeal by the Revenue is directed against order dated
31.01.2025 passed by the Ld. Additional/Joint Commissioner of Income-tax (Appeals) – 2, Barodra [hereinafter shall be referred as ‘the Ld. CIT(A)’] for assessment year 2010-11, raising following grounds:
1. Whether on the facts and circumstances of the case, the Ld.
CIT(A) has erred in deleting the addition of Rs. 14,60,201/ being
12.5% of total purchases of Rs. 1,16,81,604/- made on account of bogus purchases from 11 bogus hawala traders by ignoring the fact that the asse bogus purcha
2. Whether o
CIT(A) has er
12.5% of tota accourit of bo appreciating based on th through DGIT parties were form of issu actual deliver the beneficia from hawala
1,16,81,604/
3. Whether o
CIT(A) has er
12.5% of tota account of bo the fact that could neither
Sales, Stocks could produc provided by th
4. ⁠4. Wheth
CIT(A) has er
12.5% of tota account of bo the fact that failed to prov as creditworth purchases we
5. Whether o
CIT(A) has er
12.5% of tota account of b without appre the case of M/
354, Dated. 1
when the pur entire purchas
IT essee has availed accommodation entrie ases ?"
on the facts and circumstances of the rred in deleting the addition of Rs. 14,6
al purchases of Rs. 1,16,81,604/ made ogus purchases from 11 bogus hawala tr the fact that the action of the assessin he information received from Sales Tax
T (Investigation Wing) Mumbai, that thes involved in providing accommodation uing bogus sales/purchases invoices/
ry of goods and the assessee was found ary who have obtained such accommod a traders against the non-genuine purc
- to suppress the true profit ?"
on the facts and circumstances of the rred in deleting the addition of Rs. 14,6
al purchases of Rs. 1,16,81,604/- made ogus purchases from 11 hawala traders during the Re-assessment Proceedings, r produce the quantity tally of day to da s, Delivery Challans and correspondin ce the parties for verification, in spite o he Assessing Officer?"
her on the facts and circumstances of the rred in deleting the addition of Rs. 14,6
al purchases of Rs. 1,16,81,604/ made ogus purchases from 11 hawala traders the assessee has availed accommodatio ve the genuineness of the alleged transa hiness of hawala traders from whom the ere purportedly made?"
on the facts and circumstances of the rred in deleting the addition of Rs. 14,6
al purchases of Rs. 1,16,81,604/ made bogus purchases from 11 hawala tr eciating the decision of the Hon'ble Sup
/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016)
16.01.2017, wherein the Hon'ble Court rchases mode are from bogus suppliers or ses are liable to disallowed ?"
Bharat Hiralal Shah
2
TA No. 729/MUM/2025
es for alleged case, the Ld.
60,201/ being by the AO on raders without ng officer was x Department se 11 hawala entries in the bills, without d to be one of dation entries chases of Rs.
case, the Ld.
60,201/- being by the AO on s, by ignoring the assessee ay purchases, ng values nor of opportunity e case, the Ld.
60,201/ being by the AO on s, by ignoring on entries, but actions as well alleged bogus case, the Ld.
60,201/ being by the AO on raders/parties reme Court in 292 CTR (Gul) has held that r concerns, the 6. Whether on the order of th of Hon'ble Sup
Dy. CIT (2016
the similar is land when the 7. Whether o
CIT(A) has er
12.5% of tota bogus purch appreciating t
(Supra), the disallowance shown from decision of th also by the Ho
8. Whether o
CIT(A) has er
12.5% of tota bogus purcha ratio of the d
Hon'ble Gujar the Court up
Ahmadabad made by the as profit elem to 12.5% of th
9. 9. Whethe
CIT(A) has er
12.5% of tota bogus purcha after invocati
Assessing Of amount of pu assessee and Mills Vs. CIT purchases, fr upheld ?"
10. The tax-e which is belo
279/Misc. 14
17.09.2024. H
IT n the facts and circumstances of the cas he Ld. CIT(A), perverse in not considering preme Court in the case of M/s. N. Κ. Pro
6) 292 CTR (Guj.) 354, Dated. 16.01.201
ssue of bogus purchases, was already t e Ld. CIT(A) has pronounced it's order on on the facts and circumstances of the rred in deleting the addition of Rs. 14,6
al purchases of Rs. 1,16,81,604/ made hases from 11
hawala traders/par the fact that in the case of M/s. Swetamb
Hon'ble ITAT, Ahmadabad it had c of the bogus purchase, by stating that t respective parties were found non- gen he ITAT was upheld by Hon'ble Gujrat H
Hon'ble Supreme Court?"
on the facts and circumstances of the rred in deleting the addition of Rs. 14,6
al purchases of Rs. 1,16,81,604/- made ases from 11 hawala traders, without ap decision of the Hon'ble Bombay High Co
V. Jiwani (2022) 145 taxmann.com (B rat High Court in case of CIT Vs Simit S pheld the decision of the Hon'ble ITAT, respectively, which had held that ent assessee could not be added back as inc ment embedded therein and had restricted he purchases ?"
r on the facts and circumstances of the rred in deleting the addition of Rs. 14,6
al purchases of Rs. 1,16,81,604/- made ases from 11 hawala traders, without co ion of provisions of section 145(3) of fficer acquired the mandate even to ad urchases found as bogus to the total i d without considering the decision in Sri
294 ITR 316 (All), wherein the entire am rom five parties, was disallowed and sa effect involved in the instant case is R ow the prescribed limit as per CBDT's
42/2007-ITJ(Pt) amended vide No. 09/
However, this case falls under one of t
Bharat Hiralal Shah
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TA No. 729/MUM/2025
se and in low, that the order oteins Ltd. Vs.
7, which is on the law of the 27.11.2024?"
case, the Ld.
60,201/-being on account of rties without ber Steels Ltd.
onformed the the purchases nuine and the High Court and case, the Ld.
60,201/- being on account of ppreciating the ourt in case of (Bombay) and Sheth, wherein
Mumbai and tire purchases come, but only d the addition case, the Ld.
60,201/- being on account of nsidering that f the Act, the dd the whole income of the . Ganesh Rice mount of bogus ame was also Rs. 4,64,343/,
Circular F.No.
/2024 dated.
the exceptions specified in p it is stated including cas decision to file the tax effect
2. Briefly stated, individual, was engag ferrous metal and iro namely M/s Paradis assessee filed its orig total income at Rs.2
assessee was process short ‘the Act’). Subs
Assessing Officer from tax (Investigation), accepting bogus purc
In view of informat reasons to believe tha issued notice u/s 14
served upon the ass issued and reassessm the Assessing Officer the assessee, which i
Sr. No.
Name
1
CHAM
2
SHUB
IT paragraph 3.1 (c) of the above stated Circ that in cases involving "Organized T ses of accommodation entries of bogus p e appeal/SLP shall be taken on merit wit and the monetary limit.
facts of the case are that th ged in the business of trading in on & steel alloys through a prop e Steel. For the year under con ginal return of income on 27.09
2,21,476/-. The return of inco sed u/s 143(1) of the Income-ta sequently, an information was m the office of the Director Gen
Mumbai that the assessee w chases bills from bogus ‘hawala tion received, the Assessing O at income escaped assessment
48 of the Act on 10.02.2015, w sessee. Thereafter, the statuto ment was commenced. During r provided a list of the purchas is extracted as under:
of the party
Amoun
MPION STEEL ( INDIA)
44,510
HAM METAL CORP
91,912
Bharat Hiralal Shah
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TA No. 729/MUM/2025
cular, wherein
Tax Evasion", purchases, the thout regard to he assessee an n ferrous & non- prietary concern nsideration, the 9.2010 declaring me filed by the ax Act, 1961 (in received by the neral on Income- was engaged in a’ bill providers.
Officer recorded and accordingly which was duly ry notices were reassessment , es in dispute to nt (Rs.)
0/-
2/-

3
CHI R
4
RELIA
5
JINAL
6
AVION
7
RAJES
8
SIDDH
9
NAKO
10
NAVKA
TOTAL
4. The Assessing O the genuineness of produce the aforeme books of accounts. T the Assessing Office issue in dispute mad of Rs.1,16,81,604/- w
5. On further appe for the two reasons, f any independent veri the Act, secondly, documentary eviden assessee. The releva under:
IT AG STEEL CENTRE
15,27,
ABLE METAL ( INDIA)
12,10,
LAY TRADING
17,95,
N SALES
26,18,3
SHWATI TRADING
1,97,4
HIVINAYAK CORP
4,992/
DA TUBES
18,72,8
AR METAL
23,18,4
1,16,8
Officer accordingly asked the as those purchases and specifi ntioned parties for verification
The assessee failed in doing so er keeping in view judicial pre de addition @ 12.5% of the purch which was worked out to Rs.14, eal, the Ld. CIT(A) deleted the firstly, the Assessing Officer fail ification including issue of notic the Assessing Officer did n nces in support of purchase ant finding of the Ld. CIT(A) is Bharat Hiralal Shah
5
TA No. 729/MUM/2025
196/-
112/-
781/-
303/-
93/-
/-
837/-
468/-
1,604/- sessee to justify fically asked to along with their o and therefore, ecedents on the hases in dispute
60,201/-.
addition mainly led to undertake ce u/s 133(6) of not dispute the s filed by the s reproduced as “7.1 The sole learned Asses being 12.5 p purchases. Th reviewed, and her order und the appellant included an a of the appella impugned pu the purchase non-genuine department a Investigation.
7.2 It is also proceedings, substantiate t the stock reg registers, an appellant pro parties, copie suppliers, wh invoices and these supplie information r verification.
7.3:
These during the as were acknow order. As per recorded:
"The explana evidence prod and considere purchases are item-wise sal that the paym cheque. He a numbers, cou the identity of 7.4. Upon exa
AO’s decisio predominantly
IT ground of appeal taken by the appellant ssing Officer has made an addition of Rs.
percent of Rs 1,16,81,604 on account of he appellant’s submissions have been m d it is observed that the Assessing Offic der section 143(3) read with section 147
t's total income at Rs. 16,81,680/-. Th addition of Rs. 14,60,201/-, which repre ant’s total purchases of Rs. 1,16,81,604
urchase parties. The AO attributed this s made from certain parties, which we and identified as "tainted" by the and the Directorate General of Income observed that the appellant, during the a has submitted comprehensive docume the genuineness of the transactions. The gister, purchase bills/registers, lorry rec d other supporting documents. Furthe vided PAN/TAN number of the alleged n s of purchase invoices from the alleged n hich were cross-referenced with correspo bank statements to demonstrate paymen rs via account payee cheques. Additional regarding the creditors was also sub documents were also presented to ssessment proceedings and the appella wledged and accepted by the AO in the a para 6.3 of the assessment order, the A tion offered by the assessee and the do duced by the assessee has been carefu ed. He has reiterated in his explanation e recorded in the books of account and es of the goods purchased. He has also ments have been invariably made by acc also submitted that the availability of TA upled with bank account details, conclusi f the supplier beyond doubt.
amining the assessment order, it is evide on to treat these purchases as b y based on the information provided by Bharat Hiralal Shah
6
TA No. 729/MUM/2025
t is that the . 14,60,201
of unproved meticulously cer (AO), in 7, assessed his amount esent 12.5%
4/- from the addition to ere deemed sales tax
Tax (DGIT) assessment entation to se included ceipts, sale ermore, the non-genuine non-genuine onding sale nts made to lly, detailed bmitted for o the AO ant’s claims assessment
AO explicitly ocumentary ully perused that all the subsequent highlighted count payee
AN and VAT ively proves ent that the bogus was y the sales tax departme suppliers as undertake a substantiate t did not invok information d crucial step in oversight in c regarding the 7.5 Further, evidence pro concluded tha because the before him.
purchases w sales were n should, by im decision to rej produce the acceptance of 5.1 Further, the Ld provide opportunity
Assessing Officer pr inability of the asses part of his decision is “7.7 Therefor onus of prov purchases. T
PAN/TAN of invoices, and the legitimacy purchases we
AO’s failure t evidence is a refusal to sup
Tax authoritie formed and a appellant’s ex constitutes a IT ent and the DGIT (Investigation), which potentially fraudulent. However, the A an independent investigation or verif the allegations of bogus purchases. Nota ke section 133(6) of the Income Tax Act directly from the suppliers, which would h n verifying the authenticity of the transac conducting due diligence raises significan thoroughness of the assessment process the AO did not dispute any of the do ovided by the appellant. Despite this at the purchases should be treated as b appellant was unable to produce the This conclusion is problematic becau ere recorded in the books and the cor not challenged, the authenticity of the mplication, have been accepted. Therefor eject the purchases as bogus based on th suppliers directly contradicts the fin f the documentary evidence.”
. CIT(A) held that the Assessing of cross-examination of the su roceeded to make the addition ssee to produce those supplier s reproduced as under:
re, the appellant has successfully disc ing the identity and genuineness of th
The documentary evidence presented —
the parties, stock registers, purchase bank payment records — adequately de y of the transactions. It is important to no ere made approximately seven years ag to account for this temporal gap when as another significant oversight. Moreover pply the copy of statements recorded by es on the basis of which the reason to b allow cross-examination of the suppliers, xplicit request during the assessment p violation of the principles of natural jus
Bharat Hiralal Shah
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TA No. 729/MUM/2025
h listed the O failed to ification to ably, the AO t to request have been a ctions. This nt concerns s.
ocumentary s, the AO bogus solely e suppliers use, if the rresponding ese records re, the AO’s he failure to ndings and g Officer did not uppliers and the n solely of the rs. The relevant charged the he disputed
— including e and sale emonstrates ote that the go, and the sessing the r, the AO’s y the Sales believe was despite the proceedings, stice, which demand a fa allegations.
7.7 At this p provided sub by the AO, y solely on the This action documentary judicial prece bogus withou erroneous.
Given the com the lack of established ju
14,60,201 ma
For the reason hereby delete
6. We have heard carefully perused th advanced on behalf that the assessee ha purchases in questi registered purchase payment through b learned CIT(A) has r before the Assessing no reference to the pr
6.1 Be that as it ma or accommodation p existence of invoices
IT air opportunity for the appellant to cha point it is beyond doubt that the app bstantial documentary evidence that wa yet the AO proceeded to make the add inability of the appellant to produce the was not only inconsistent with the evidence but also contrary to the edents. The AO’s decision to treat the pu ut any concrete basis or independent ve mprehensive evidence presented by the cross- examination of the suppliers udicial guidelines, it is clear that the add ade by the AO was without merit.
ns outlined above, the addition of Rs. 14, ed, and the appeal is "Allowed".”
d the learned counsel for th he material placed on record. T of the assessee are twofold. F ad furnished all documents in ion, including purchase bills, e register, stock register, an banking channels. It is subm recorded that such documents
Officer, though the assessment roduction of such records.
ay, the core issue in matters inv purchase bills does not turn
, purchase registers, stock reco
Bharat Hiralal Shah
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TA No. 729/MUM/2025
allenge the pellant has as accepted ition based e suppliers.
e accepted established urchases as erification is e appellant, s, and the dition of Rs.
60,201/- is he parties and The contentions
First, it is urged support of the entries in the nd evidence of mitted that the were produced t order contains volving “hawala”
upon the mere ords, or proof of payment by cheque supplier parties had assessee. The statut establish the genuin evidence of actual d recorded in the books
6.2 In the present c any expenditure rela placed on record, eit learned CIT(A). In the addition by the le documentary records and that the assess sustained in law.
6.3 The second rea the Assessing Officer relied upon informat issuing notices unde equally untenable. Th
Officer specifically ca parties, along with assessee expressed parties were not tra
IT e. The real question is wheth
, in fact, effected delivery of th tory onus rests squarely upon neness of the purchases by pro elivery of goods corresponding s of account.
case, no documentary proof of tr atable to the movement of the ther before the Assessing Office e absence of such evidence, the earned CIT(A) merely on the s such as invoices and registers see had thus discharged his o asoning advanced by the learne r conducted no independent inq tion from the Sales Tax Depar er section 133(6) of the Act. Th he assessment order records tha alled upon the assessee to produ their books of account, for v his inability to do so, stating aceable at their known address
Bharat Hiralal Shah
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TA No. 729/MUM/2025
her the alleged he goods to the the assessee to oducing credible to the invoices ransportation or goods has been er or before the e deletion of the e premise that s were available, nus, cannot be ed CIT(A) is that quiry and merely rtment, without his contention is at the Assessing uce the supplier verification. The g that the said ses. Even when called upon to furni assessee failed to do
6.4 In such circums for not issuing notice assessee himself adm provide any current a an exercise in futility whom the assessee witnesses, and the p them for verification.
been provided is equ arise where the ass examination in the Assessing Officer viol provided cross-exami this reasoning of th therefore, of the con relied upon by the unsustainable in law
6.5 Further, the Ld out investigations or the assessee or pr
Assessing Officer but Hon’ble
Delhi
Hig
IT ish the latest addresses of the so.
stances, the Assessing Officer ca es under section 133(6) of the A mits that the parties are untrace address, the issuance of such n y. The law is well-settled that t claims to have made purchas rimary onus lies upon the asse
The plea that cross-examinatio ually misconceived, for such a sessee fails to produce his ow first instance. Therefore, to lating principle of natural justic ination is contrary to the law. In he Ld. CIT(A) is also not ju nsidered view that both the pr learned CIT(A) for deleting th w d. CIT(A) himself was having au r provide opportunity of cross- roviding relevant material ga t he failed in doing so. Further, gh
Court in the case of Bharat Hiralal Shah
10
TA No. 729/MUM/2025
ese parties, the annot be faulted
Act, for when the able and fails to notices would be the parties from ses are his own essee to produce on ought to have a right does not wn suppliers for hold that the ce by way of not n view of above, ustified We are, rincipal grounds he addition are uthority to carry
-examination to athered by the we find that the f
Jansampark

Advertising and ma if the assessing office required in the matt carry out such enqu the either of party. T under:
42. The AO here ma proper inquiry to tak having noticed wan simply by allowing also the obligation o have ensured that face of the allegatio a uniform pattern o accounts preceding detailed scrutiny of the notice under S submitted at the sta causing to be ma under Section 250
impugned order of I be approved or uphe
6.6 Further, the lear the judgment of the (India) Ltd in ITA 7
squarely applies to IT arketing P Ltd in ITA 525/201
er fails in carrying out the enqu ter, then the Ld. CIT(A) is und ires and he cannot sit ideal an The relevant part of decision is ay have failed to discharge his obliga ke the matter to logical conclusion. Bu nt of proper inquiry, could not have clo the appeal and deleting the addition of the first appellate authority, as in effective inquiry was carried out, pa ns of the Revenue that the account st of cash deposits of equal amounts i g the transactions in question. This the material submitted by the assesse ection 148 issued by the AO, as a age of appeals, if deemed proper by w ade a "further inquiry" in exercise
(4). This approach not having bee
ITAT, and consequently that of CIT (A eld.
rned Departmental Representat
Hon’ble Bombay High Court i
91 of 2021 contending that th the facts of the present cas
Bharat Hiralal Shah
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TA No. 729/MUM/2025
14 has held that uiries which are der obligation to nd allow relief to s reproduced as ation to conduct a ut CIT (Appeals), osed the chapter ns made. It was ndeed of ITAT, to articularly in the tatements reveal in the respective s necessitated a ee in response to also the material way of making or e of the power en adopted, the Appeals), cannot tive relied upon in Kanak Impex he ratio thereof se. The learned counsel for the asse decision by submi documentary evidenc whereas in the pre documents such as register and proof of p
6.7 In our conside documents like purc were filed is not, by i judgment of the Ho
(supra) lies in the pr accepted that the b unsupported by act doubted, it must nec goods from unrecorde effecting such sales purchased in cash fro
6.8 When the asses delivery of goods cor the books of accoun invoices, ledger ent purpose. Absent cred weighment slips or IT essee, however, sought to distin itting that in Kanak
Impe ce in support of the purchases esent case, the assessee has purchase bills, sales register payment through banking chan red opinion, the fact whether chase bills, sales bills or stock itself, a determinative factor. Th on’ble Bombay High Court in rinciple that where the appellat ills in dispute are merely pap tual delivery of goods, yet the cessarily follow that the assesse ed sources—typically from the g s. In such a case, the source om the grey market remains un ssee fails to adduce cogent e rresponding to the purchase b nt, the mere production of docu tries, or stock register detai dible proof of transportation, de similar evidence, the so-called
Bharat Hiralal Shah
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TA No. 729/MUM/2025
nguish the said ex (supra), no had been filed, s produced all r entries, stock nnels.
or not certain register entries he essence of the n Kanak Impex te authority has per transactions e sales are not ee had procured grey market—for e of the goods explained.
evidence of the bills recorded in uments such as ils serves little elivery challans, d purchase bills assume the characte physical movement o
6.9 In light of the fo
Kanak Impex (supra) the findings of the aside the impugned
Assessing Officer for after affording due grounds raised by the 7. In the result, statistical purposes.
Order pronoun (SANDEEP G
JUDICIAL M
Mumbai;
Dated: 12/08/2025
Rahul Sharma, Sr. P.S.

Copy of the Order forward
1. The Appellant
2. The Respondent.
3. CIT
4. DR, ITAT, Mumbai
5. Guard file.

////

IT er of mere book entries withou of goods.
oregoing discussion, and apply to the facts at hand, we are un lower appellate authority. We orders and restore the matter t de novo adjudication in accord opportunity of hearing to the e Revenue are accordingly stand the appeal of the Revenue ced in the open Court on 12/0
/- GOSAIN)
(OM PRAK
MEMBER
ACCOUNTA ded to :

BY ORDER

(Assistant Re

ITAT, Mu
Bharat Hiralal Shah
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TA No. 729/MUM/2025
t corresponding ying the ratio of nable to sustain accordingly set to the file of the dance with law, e assessee. The d allowed.
is allowed for 08/2025. d/-
KASH KANT)
ANT MEMBER
R, gistrar) umbai