INCOME TAX OFFIER, MUMBAI vs. JAGDISH UDHAVDAS BAJAJ, THANA

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.

The grounds raised by the Revenue in its appeal are reproduced as under:

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.

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.

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 4 & CO No. 82/MUM/2025 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.

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 5 & CO No. 82/MUM/2025 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.”

Before us, the Ld. counsel for the assessee has filed a paper book containing pages of 1-139.

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: