A R UDYOG,HOWRAH vs. ITO, WARD 46(3), KOLKATA

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ITA 1166/KOL/2025Status: DisposedITAT Kolkata08 October 2025AY 2011-201216 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the addition of Rs. 11,49,794/- is liable to be sustained in part. Regarding purchases from Durga Trading Corporation (Rs. 99,689/-) and Vasukinath Enterprises (Rs. 1,45,758/-), the assessee claimed to have made purchases but was unable to produce verifiable evidence like lorry receipts and challans. The Tribunal noted that the assessee's accounting software was no longer functional, making retrieval of historical data infeasible. Therefore, the addition of Rs. 99,689/- and Rs. 1,45,758/- is sustained. However, to provide an opportunity to the assessee, the matter is remanded to the Ld. AO for fresh adjudication after allowing the assessee to produce all evidence and confronting the AO's evidence. Regarding purchases from Jayshree Sales Corporation (Rs. 4,30,100/-) and Metal and Alloy Syndicate (Rs. 4,74,247/-), where the assessee denied any transactions, the issue is remanded to the Ld. AO to provide necessary evidence to counter the assessee's affidavit. Ground No. 3 is rejected as the addition under a deeming provision like Section 69C loses the concept of gross profit ratio. Ground No. 4 is confirmed as the Ld. CIT(A) addressed it. Grounds 5 and 6 regarding borrowed satisfaction are dismissed, particularly as the assessee did not file a return in response to the notice u/s 148, leaving the AO with no option but to proceed under Section 144. The principle laid down in GKN Driveshafts (India) Ltd. vs. Income-tax Officer is cited. The appeal is partly allowed for statistical purposes.

What were the facts?

The assessee, AR Udyog, filed an appeal against the order of the Ld. CIT(A) for AY 2011-12. The assessment order under challenge was passed by the Ld. AO under section 144 read with section 147 of the Income Tax Act, 1961. The Ld. AO had made an addition of Rs. 11,49,794/- on account of unaccounted income, treating it as bogus purchases. This addition was confirmed by the Ld. CIT(A). The assessment was reopened based on information from the Investigation Wing that Shri Sanjiw Kumar Singh had provided accommodation entries to beneficiaries, including the assessee, through paper concerns. The assessee did not file a reply to the notices issued for reopening, leading to an ex-parte assessment. The total income was assessed at Rs. 11,58,800/-.

What were the issues?

1. Whether the addition of Rs. 11,49,794/- on account of 'unaccounted income' under section 68 of the Income Tax Act, 1961, based on doubt, suspicion, and surmise, is valid when the books of accounts were not rejected? 2. Whether the addition of the entire alleged bogus purchases is justified, particularly when the assessee claims no transactions were carried out with two of the alleged parties (Jayshree Sales Corporation and Metal and Alloy Syndicate)? 3. Whether the addition of Rs. 11,49,794/- as bogus purchases, made under section 68, is valid, considering it represents 73% of total purchases and the gross profit earned by the assessee? 4. Whether the Ld. AO should have estimated the income under section 144, taking into account the gross profit earned in preceding and subsequent years? 5. Whether the modus operandi relied upon by the Ld. AO is correlated to the facts of the case, and if there is any evidence of dubious actions by the assessee? 6. Whether the reopening of assessment is valid, given that the basis of the Ld. AO's findings was suspicion and human probabilities, and if the approval for reopening was mechanically granted? Assessee's contentions: The addition was made under the wrong provision (Section 68) and should have been under Section 69C. No transactions were made with Jayshree Sales Corporation and Metal and Alloy Syndicate. If additions from these two parties are sustained, the gross profit ratio would be commercially unattainable. The Ld. AO did not reject the books of accounts. If purchases were bogus, only the gross profit should have been added. The reopening was based on suspicion and borrowed satisfaction. Revenue's contentions: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 68,Section 144,Section 147,Section 148,Section 69C,Section 250,Section 139

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA

Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA

order

: 08-October-2025 ORDER

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

1.

This appeal filed by the assessee is against the order of the Ld. Addl/JCIT(A)-5, Mumbai [hereinafter referred to as “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2011-12 dated 07.03.2025, which has been passed against the assessment order u/s 144 r.w.s. 147 of the Act, dated 03.12.2018.

2.

The assessee is in appeal before the Bench raising the following grounds of appeal: “Ground-1: That the Ld. CIT(A) erred in law and in facts in considering the assessment order as valid and good in law, in as much as the facts and circumstances of the case, when he confirmed the actions of the Ld. AO the Ld. A.O. in addition of Rs. 11,49,794/- on account of "unaccounted income" u/s 68 of the Income Tax Act, 1961, based on doubt, suspicion and surmise 6.1 We have gone through the decisions relied upon; however, it is also mentioned in the written submission filed that the assessee is a small-scale business enterprise carrying out a limited volume of transactions during the relevant financial year and had engaged a part- time accountant for maintaining its books of account. Consequently, detailed and systematic records such as the stock register and stock statements are not readily available for verification. Hence, these decisions are not applicable to the facts of the case of the assessee as the assessee is not able to produce the required books of account in support of the claim that the purchases were made nor the other details are available. It is further submitted that due to an inadvertent error on the part of the assessee’s accountant, two separate ledger accounts were maintained for M/s. Durga Trading Corporation and M/s. Vasukinath Enterprise and out of these, only one ledger account of both

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