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Facts
The assessee claimed an amount of Rs. 31,99,998/- as sundry creditors for purchases from M/s. Kaizer Diamond. The Assessing Officer made an addition of this entire amount as bogus purchases after reopening the assessment, as the assessee failed to prove the genuineness of the purchase. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the Assessing Officer doubted the purchase without substantial finding and that the sale was not doubted. Therefore, adding 100% of the purchase amount as bogus was not justified. The Tribunal directed that the addition be restricted to an estimation of 8% profit on the total purchase.
Key Issues
Whether the entire amount of purchases claimed as sundry creditors can be treated as bogus purchases without a substantial finding, and if not, to what extent can an addition be made?
Sections Cited
148
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Income Tax Appellate Tribunal, SURAT “SMC” BENCH, SURAT
Before: DR. BRR KUMAR & MS. SUCHITRA KAMBLE
IN THE INCOME TAX APPELLATE TRIBUNAL SURAT “SMC” BENCH, SURAT BEFORE DR. BRR KUMAR, VICE PRESIDENT & MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. No.742/Srt/2025 (Assessment Year: 2014-15) Parshottam Jodhabhai Jethava, Vs. Income Tax Officer, 9, Radhaswami Society, Sat Bhai Ni Ward-1(2)(6), Wadi, Mota Varachha, Surat-394101 Surat [PAN No.AILPJ4626L] (Appellant) .. (Respondent) Shri Suresh K Kabra, CA Appellant by : Respondent by: Shri Ashish Kumar, Sr. DR 22.01.2026 Date of Hearing Date of Pronouncement 06.04.2026 O R D E R PER SUCHITRA KAMBLE - JUDICIAL MEMBER: The appeal filed by the assessee is against the order passed by the Ld. Commissioner of Income Tax (Appeals) (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi on 10.12.2024 for A.Y. 2014-15.
The assessee has raised the following grounds of appeal:
“1. The Ld. CIT(A), NFAC has erred and was not just and proper on the facts of the case and in law in confirming the addition of 31,99,998/-.” 3. The assessee is in individual and engaged in the business as trader in cloth and diamonds. The assessee filed original return of income on 29.11.2014 declaring total income of Rs. 2,11,877/-. During the course of assessment proceedings, in the case of Shri Sripalchand Mohanlal Chouhan proprietor of M/s. Kalzar Diamonds, Shri Sripalchand Mohanlal Chouhan has admitted that he was running a hardware and electrical item shop and no business of diamond trading
ITA No. 742/Srt/2025 Parshottam Jodhabhai Jethava vs. ITO Asst. Year –2014-15 - 2– was carried out by him during the F.Y. 2013-14 and earlier years. However, the assessee claimed an amount of Rs. 31,99,998/- in the name of Kaizer Diamond as sundry creditors. After recording reasons and obtaining prior approval for reopening of the assessee’s case, notice under Section 148 was issued on 28.03.2018. In response to notice under Section 148 of the Act the assessee filed his return of income on 17.10.2018 declaring total income of Rs. 2,11,880/-. Copy of reasons recorded for reopening assessment provided to the assessee and in response the assessee furnished details. After taking cognizance of the assessee’s reply / details the Assessing Officer made addition of Rs. 31,9,998/- as the assessee failed to prove genuineness of the purchase from Shri Sripalchand Mohanlal Chouhan and treated the same as bogus purchases.
Being aggrieved by the assessment order, the assessee filed the appeal before the CIT(A), the CIT(A) dismissed the appeal of the assessee.
The Ld. AR submitted that the CIT(A) was not right in making the addition of Rs. 31,99,998/- which is a 100% of purchase amount.
The Ld. DR relied upon the assessment order and the order of the CIT(A).
We have heard both the parties and perused all the relevant material available on record. It is pertinent to note that the Assessing Officer at no point of time given a finding that no purchase was made but only has doubted the purchase without giving any substantial finding to that extent. The sale was accepted and was not doubted by
ITA No. 742/Srt/2025 Parshottam Jodhabhai Jethava vs. ITO Asst. Year –2014-15 - 3–
the Assessing Officer. Thus, addition of 100% explained as bogus purchase is not justified but the estimation of profit at 8% will be justified, therefore, we direct the Assessing Officer is restricted the addition to the extent of 8% of the total purchase and grant the expenditure to that extent.
In result, the appeal of the assessee is partly allowed. Order pronounced under proviso to Rule 34 of ITAT Rules, 1963 on 06/04/2026
Sd/- Sd/- (DR. BRR KUMAR) (SUCHITRA KAMBLE) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 06/04/2026 TANMAY, Sr. PS TRUE COPY आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु�(अपील) / The CIT(A)- 5. िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, सूरत / DR, ITAT, Surat 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,
उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, सूरत / ITAT, Surat
Date of dictation 01.04.2026 2. Date on which the typed draft is placed before the Dictating Member 01.04.2026 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S .04.2026 5. Date on which the fair order is placed before the Dictating Member for pronouncement 06.04.2026 6. Date on which the fair order comes back to the Sr.P.S./P.S 06.04.2026 7. Date on which the file goes to the Bench Clerk 06.04.2026 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order……………………………………