INCOME TAX OFFIER, MUMBAI vs. JAGDISH UDHAVDAS BAJAJ, THANA
Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI OM PRAKASH KANT () & SHRI RAHUL CHAUDHARY () Assessment Year: 2018
PER OM PRAKASH KANT, AM
This appeal by the Revenue and cross-objection by the assessee are directed against order dated 07.10.2024 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless
Appeal Centre, Delhi [in short „the Ld. CIT(A)‟] for assessment year
2018-19. 2. The grounds raised by the Revenue in its appeal are reproduced as under:
1. "On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in restricting the addition to the extent of 12.5% of the bogus purchases of Rs. 1,09,38,553/- from Zephyr
Fabric Trading LLP i.e. one of the entities of One world group."
2. "On the facts and circumstances of the case and in law, the Id CIT (A) has erred in deleting the 87.5% (100-12.5) of the total addition i.e Rs. 95,71,233/- made by the assessing officer without considering the decision of Hon'ble Apex Court in the case of CIT-vs-Durgaprasa 821TR 540 and in the case of N K
Proteins Ltd Vs DCIT SLP CC No 769 of 2017 even when the assessee failed to prove the genuineness of transaction or produce the purchase parties."
3. “The appellant craves leave to amend or alter or add a new ground which may be necessary”
2.1 The grounds raised by the assessee in its cross- objection are reproduced as under:
“1. Ld. Commissioner of Income Tax (Appeals) while passing speaking order U/s. 250 of the Act, did not consider the submission made before him which is related to purchase return amounting to Rs. 1,09,38,552/- which is shown as sales to same party from whom purchase was made of same amount.
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There is no tax evasion as equal of amount of purchase is returned to same party as products does not found as per expectations”
3. At the outset, the Ld. Counsel for the assessee submitted that cross-objection has been filed with a delay of 63 days. The Ld.
counsel for the assessee referred to the affidavit filed by the assessee and submitted that due to some administrative difficulties including non-availability of accountant & tax consultant and non receipt of the grounds of the revenue, delay occurred in filing the present cross-objection. He submitted that delay in filing the cross- objection was neither intentional nor deliberate but due to the bonafide reasons.
4. We have heard rival submissions of the parties on the issue of condonation of delay in filing of cross-objection by the assessee. In view of the sufficient cause explained by the assessee for delay in filing the cross-objection, we condone the delay of 63 days and admit the same for adjudication.
5. Briefly stated, facts of the case are that the assessee had filed his original return of income for the assessment year under consideration on 31.10.2018 declaring total income at Rs.
5,21,000/-. The said return of income filed by the assessee was processed u/s 143(1) of the Income-tax Act, 1961 (in short „the Act‟). Subsequently, a survey and search action was carried out in case of “one word group” entities on 06.11.2019, wherein it was Jagdish Udhavdas Bajaj
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found that assessee received accommodation entries of purchase/sale from the entities of „one word group‟, which were managed and controlled by Shri. Urvil Jani and Shri Manoj Jani.
The information shown that assessee made purchase transaction of Rs. 10938553/- from M/s Zephyr Fabric Trading LLP, which was one of the entity for one of the group. In view of the information,
Assessing Officer recorded reasons to belief that income escaped assessment and issued notice u/s 148 of the Act but, no compliance was made on the part of the assessee of said notice issued u/s 148 of the Act. During reassessment proceeding, the Assessing Officer asked the assessee to justify genuineness of the purchases from the said party namely M/s Zephyr Fabric Trading
LLP and to support the purchases and delivery of goods corresponding to those purchases, but the assessee filed only copy of the ledger account and purchase and sale bills in respect of the said party but copy of the bank transaction statement was not filed.
6. In view of the above, facts and circumstance the Assessing
Officer concluded that genuineness of the purchases from M/s
Zephyr Fabric Trading LLP was not proved by the assessee and accordingly he treated the said amount of Rs. 1,09,38,553/- as unexplained expenditure in terms of section 69C of the Act. On Further appeal, the Ld. CIT(A) recorded that the assessee was required to prove genuineness of purchase by producing the parties from whom the purchases were made but the assessee failed in Jagdish Udhavdas Bajaj
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producing those parties before the assessing officer. The Ld. CIT(A) further noted that the assessee did not produce any documentary evidence of actual delivery of such goods/services i.e.e-way bill, lorry receipt, weighing receipt etc. The Ld. CIT(A) in the impugned order discussed the precedents firstly, whether 100% disallowance of bogus/unverified purchases has been upheld and, secondly, where 25% disallowance of bogus/unverifiable purchases has been made. After considering the fact and circumstance of the case, the Ld. CIT(A) was of the view that sale proceeds of the goods were duly accounted in the books of accounts and therefore the entire purchases cannot be added. The Ld. CIT(A) relied on the decision of the Hon‟ble Bombay High Court in the case PCIT Vs S.V. Jiwani
[2022] 145 taxmann.com 230 (Bombay) wherein addition to the extent of 12.5% of the bogus purchases was found to be fair and reasonable. He accordingly, restricted the disallowance @12.5% of the alleged bogus purchase. The relevant finding of the Ld. CIT(A) is reproduced as under:
“6.11 In view of the matter, considering the factual matrix of the case, I am of the opinion that the ratio of the decision of the Hon'ble High
Court of Bombay in the case of PCIT vs. S.V. Jiwani [2022] 145
taxmann.com 230 (Bombay) (supra), apart from the decision of Hon'ble
High Court of Gujarat in the case of CIT vs. Simit Sheth (supra), is squarely applicable mutatis mutandis to the instant case. Accordingly, the AO is directed to restrict the addition to the extent of 12.5% of the non genuine/suspicious/bogus purchases instead of disallowing 100%
of the purchases in the assessment order. Thus, the appeal is treated as partly allowed.”
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Before us, the Ld. counsel for the assessee has filed a paper book containing pages of 1-139. 8. We have carefully heard the rival submissions advanced by the learned counsel appearing for both parties and have perused the material available on record with due consideration. Insofar as the grounds raised in the cross-objection filed by the assessee are concerned, it has been submitted by the learned counsel for the assessee that the goods purportedly purchased from M/s Zephyr Fabric Trading LLP were, in fact, returned to the said party. It was further submitted that no payment in respect of such purchases has been effected, and consequently, no entry is reflected in the bank statement. It was contended that, as the goods were never consumed by the assessee, the allegation of bogus purchases is unfounded and no disallowance on this count is warranted in the hands of the assessee. In support of the submission, the learned counsel drew our attention to the ledger account of M/s Zephyr Fabric Trading LLP as maintained in the books of accounts of the assessee, which forms part of the paper book at page 127. The relevant extract of the said ledger account is reproduced as under: “Weave and Woven Trade Links Plot No.6, Vardhaman Compound, Karivali Village, Bhiwandi, Dist-Thane
Zephyr Fabric Trading LLP
Ledger Account
Sunmill Compound, Todi Estate,
B-wing, 1st Floor,
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Lower Parel (West)
Mumbai
1-Apr-2017 to 3-May-2019
Date
Particulars Vch Type
Vch No.
Debit
Credit
7-6-2017
To Sales
Account
Sales
ZFT-01
12,27,576.00
16-6-2017
To Sales
Account
Sales
ZFT-02
13,75,500.00
3-8-2017
By GST
Purchase
Purchase
1
18,22,867.00
5-8-2017
By GST
Purchase
Purchase
2
15,09,284.00
9-8-2017
By GST
Purchase
Purchase
3
13,63,485.00
10-8-2017
By GST
Purchase
Purchase
4
12,22,859.00
14-8-2017
By GST
Purchase
Purchase
5
12,16,412.00
16-8-2017
By GST
Purchase
Purchase
6
20,38,44 .00
18-8-2017
By GST
Purchase
Purchase
7
17,65,204.00
28-3-2018
To GST
Sales
Sales
ZFT-03
25,06,644.00
29-3-2018
To GST
Sales
Sales
ZFT-04
26,37,180.00
30-3-2018
To GST
Sales
Sales
ZFT-05
31,91,652.00
1,09,38,552.00
1,09,38,553.00
To closing balance
1.00
1,09,38,552.00
1,09,38,552.00
”
8.1 Upon perusal of the said ledger, it emerges that the assessee recorded sales to M/s Zephyr Fabric Trading LLP in June 2017, followed by purchases from the said entity during August 2017, and again reflected sales transactions with the same entity in March 2018. Although reference was made to cash invoices raised for „PVC fabric‟, the learned counsel for the assessee was Jagdish Udhavdas Bajaj
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unable to produce a cogent reconciliation of the alleged purchases with the corresponding sales, so as to substantiate the claim that the goods were returned. In the absence of such reconciliation, the mere assertion that the purchases were not genuine and that the goods were returned cannot be accepted on the strength of bald averments alone. Nonetheless, the learned counsel for the assessee has prayed for one further opportunity to establish the veracity of these transactions by way of proper reconciliation.
8.2 Per contra, the learned Departmental Representative submitted that the purchases, being bogus in nature, ought to be disallowed in their entirety, placing reliance upon the decision dated 03.03.2025 of the Hon‟ble High Court of Bombay in the case of PCIT v. Kanak Impex (India) Ltd., ITA No. 791 of 2025. We are, however, not inclined to accept this submission in its entirety, as the factual matrix in PCIT v. Kanak Impex (India) Ltd.
(supra) is clearly distinguishable. In that case, it was noted that the sales corresponding to the alleged bogus purchases were not under doubt. In contrast, in the present case, the assessee has contended that the alleged purchases were followed by sales to the very same party, which requires verification. Hence, the ratio of the decision in Kanak Impex cannot be mechanically applied to the facts of the present case.
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3 Having regard to the totality of the facts and circumstances, we are of the considered opinion that it would be just and appropriate to remit the matter to the file of the Assessing Officer. The Assessing Officer shall undertake a thorough examination of the transactions in question, particularly the reconciliation of sales and purchases claimed to have been effected with M/s Zephyr Fabric Trading LLP, and thereafter, adjudicate the matter afresh in accordance with law. 8.4 Accordingly, the grounds raised in the cross-objection of the assessee and the appeal filed by the Revenue are restored to the file of the Assessing Officer for adjudication afresh, and are allowed for statistical purposes. 9. In the result, both, the appeal of the Revenue and cross- objection of the assessee are allowed for statistical purposes. Order pronounced in the open Court on 23/04/2025. (RAHUL CHAUDHARY) ACCOUNTANT MEMBER Mumbai; Dated: 23/04/2025 Disha Raut, Sr. P.S.
Copy of the Order forwarded to :
The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.
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BY ORDER,
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