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Facts
The assessee, a gold and bullion trader, declared an income of Rs. 8,87,380/- but faced an addition of Rs. 30,76,08,006/- for purchases from M/s. Yoro Bullion Pvt. Ltd. The Assessing Officer treated these purchases as bogus because the supplier was untraceable, its GSTIN was cancelled retrospectively, and it did not respond to notices. The CIT(A) confirmed this addition.
Held
The Tribunal found that lower authorities failed to examine the Input Tax Credit (ITC) implications under GST law related to the disputed purchases and the commercial rationale for the assessee potentially bearing ITC loss. The matter is remanded to the Assessing Officer to verify ITC claims, GST returns, and the supplier's bank accounts, and to allow the assessee a fresh opportunity to prove the genuineness of the transactions.
Key Issues
The genuineness of purchases from an untraceable supplier with a retrospectively cancelled GST registration and the proper examination of the related Input Tax Credit (ITC) implications under GST law.
Sections Cited
143(3), 133(6), 144, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “D” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI NARENDRA PRASAD SINHA
O R D E R
PER SHRI NARENDRA PRASAD SINHA, AM:
This appeal is filed by the assessee against the order of the National Faceless Appeal Centre (NFAC), Delhi (in short “the CIT(A)”) dated 12.03.2025 for the Assessment Year (A.Y.) 2021-22 in the proceeding under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
The brief facts of the case are that the assessee had filed his return of income for the A.Y. 2021-22 on 15.01.2022 declaring total income of Rs.8,87,380/-. The case was selected for scrutiny under CASS. The assessee is proprietor of M/s. Anand Corporation and engaged in business of trading of gold and bullions. In the course of assessment, the (Assessment Year: 2021-22) Ashvinbhai Keshvlala Patel vs. ITO Page 2 of 7 Assessing Officer found that the assessee had made purchases of Rs.30,76,08,006/- from M/s. Yoro Bullion Pvt. Ltd. who had not filed its return of income. The Assessing Officer had made enquiries by issue of notice under section 133(6) of the Act to the said party which was not complied. The assessee had, however, submitted that all the purchases from M/s. Yoro Bullion Pvt. Ltd. were supported with proper invoice wherein GST number was duly mentioned. On further verification, the Assessing Officer found that the GST number 24AABCY1725C1ZT, as mentioned in the invoices, was cancelled on 25.11.2019; whereas all the bills brought on record by the assessee were subsequent to that date. Thereafter, the Assessing Officer had referred the matter to the verification unit for making physical verification in the case of M/s. Yoro Bullion Pvt. Ltd. On verification, it transpired that at the given address there was no such company M/s. Yoro Bullion Pvt. Ltd, found to be in existence and the digital proof of the said company was also not available. Thus, this party was found to be non-traceable and in view of this fact, the Assessing Officer had treated the entire purchases of Rs.30,76,08,006/- made from M/s. Yoro Bullion Pvt. Ltd. as bogus purchase. Accordingly, the entire purchase from M/s. Yoro Bullion Pvt. Ltd was held as only billing entries and added to his income. The assessment was completed under Section 143(3) of the Act on 29.12.2022 at a total income of Rs.30,90,02,186/-.
3. Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the first appellate authority which was decided by the Ld. CIT(A) vide the impugned order and the addition of Rs.30,76,08,006/- on account of bogus purchase was confirmed.
(Assessment Year: 2021-22) Ashvinbhai Keshvlala Patel vs. ITO Page 3 of 7 4. Now the assessee is in second appeal before us. The following grounds have been taken in this appeal: -
“1. The assessment order passed u/s.144 of Income Tax Act by the Assessing Officer and confirmed by the first appellate authority u/s.250 is bad in law and deserved to be uncalled for.
2. The appellate authority has erred in law and on facts in making and confirming respectively the addition of Rs.30,81,14,806/-. sustained by the first appellate authority u/s.250. The same deserves to be deleted.
The appellant craves to reserve his right to add, alter, amend, or delete any ground of appeal during the course of hearing.”
5. Shri Chirag Shah, Ld. AR of the assessee, submitted that the GST number of M/s. Yoro Bullion Pvt. Ltd. was active when the assessee had entered into transactions with this party. Further that M/s. Yoro Bullion Pvt. Ltd. has also filed its GST return for the concerned period, a copy of which was brought on record. He submitted that the GST registration number of M/s. Yoro Bullion Pvt. Ltd. was not cancelled when the assessee had made transactions with the said party, rather cancellation was made afterwards with retrospective effect from 25.11.2019. The Ld. AR submitted that the assessee had maintained stock summary and all the purchases made from M/s. Yoro Bullion Pvt. Ltd. were sold to different parties whose confirmation/copy of account was also brought on record. Further, all the payments were made to M/s. Yoro Bullion Pvt. Ltd. through account payee cheques which was not disputed by the Assessing Officer. Considering these facts, the Assessing Officer was not correct in treating the entire purchase made from M/s. Yoro Bullion Pvt. Ltd. as bogus, as the assessee had brought on record all evidences in support of the purchases. As an alternative argument, the Ld. AR submitted that even if (Assessment Year: 2021-22) Ashvinbhai Keshvlala Patel vs. ITO Page 4 of 7 the purchases were held as bogus, additions was required to be made only on account of gross profit and no addition can be made for the entire purchases. In this regard, he relied upon the decision of Hon’ble Gujarat High Court in the case of Vijay Trading Company vs. ITO, 388 ITR 377 and in the case of Surya Impex vs. PCIT, 148 taxamann.com 154. He further submitted that gross profit of the assessee for the last three years was in the range of 0.07% to 0.04% and considering the margin of profit, the addition for the entire purchase made from M/s. Yoro Bullion Pvt. Ltd. was not justified.
Per contra, Shri Praveen Verma, Ld. CIT DR submitted that the Assessing Officer had made enquiries and the party M/s. Yoro Bullion Pvt. Ltd. was not found traceable at the given address and the notice sent u/sn 136(6) of the Act to the said party also remained un-compiled. He further submitted that GST registration of M/s. Yoro Bullion Pvt. Ltd. was cancelled w.e.f. 25.11.2019 and all purchases made by the assessee was after that date only. Ld. CIT DR submitted that in the nature of trading carried on by the assessee, it was not possible to make one to one correlation between the purchases and the sales. Therefore, the contention of the assessee that all the purchases made from M/s. Yoro Bullion Pvt. Ltd. were sold to different parties was un-verifiable. He, therefore, strongly supported the order of the lower authorities.
We have considered the rival submissions. The core issue involved in this case is assessee’s failure to substantiate the genuineness of the purchases aggregating to Rs. 30,76,08,006/- made from M/s. Yoro Bullion Pvt. Ltd. It is found that the addition of bogus purchase was made in the present case due to non-compliance of M/s. Yoro Bullion Pvt. Ltd. to the (Assessment Year: 2021-22) Ashvinbhai Keshvlala Patel vs. ITO Page 5 of 7 notice u/s 133(6) of the Act issued by the AO and also the enquiry report of the verification unit, as per which the party was not found traceable at the given address. Further, the Assessing Officer also discovered that GST number of M/s. Yoro Bullion Pvt. Ltd., as appearing in the invoices brought on record, was cancelled by GST authorities with effect from 25.11.2019. It is also relevant to consider here that all the bills of M/s. Yoro Bullion Pvt. Ltd. were subsequent to the cancellation of GST number. Once the GST number of M/s. Yoro Bullion Pvt. Ltd. was found to be cancelled, the Assessing Officer should have enquired about the status of Input Tax Credit (ITC) claimed under GST regime in respect of the purchases made from M/s. Yoro Bullion Pvt. Ltd. The Ld. AR was also unable to elucidate about the ITC under the GST regime, in respect of the purchase transactions from M/s. Yoro Bullion Pvt. Ltd. On the purchase of Rs.30,76,08,006/-, the GST component of Rs.92,28,240/- at the rate of 3% was involved. It remained un-examined whether this GST credit was claimed and, if so, whether it was accepted or rejected by the GST authorities. This is a material aspect which has a direct bearing on the genuineness of the underlying transactions. This aspect was neither examined by the Assessing Officer nor by the Ld. CIT(A). From the stand point of commercial rationality, it was required to be examined as to how the assessee had reconciled or sustained the economic burden of ITC loss, if the transaction to the extent of Rs.30,76,08,006/- was fictitious.
In view of the above facts, we deem it fit and proper to restore the matter to the file of Assessing Officer with a direction to reconcile the ITC claimed under the GST law in respect of bogus purchase of Rs. 30,76,08,006/- from M/s. Yoro Bullion Pvt. Ltd. which was held as non- genuine in the course of assessment. For this purpose, the AO may obtain (Assessment Year: 2021-22) Ashvinbhai Keshvlala Patel vs. ITO Page 6 of 7 the information from the GST authorities about the GST returns and the status of ITC claims, if so required. Further, correlation with the assessment or proceedings, if any, of the supplier M/s. Yoro Bullion Pvt. Ltd. may also be made in order to examine the genuineness and correctness of the transactions. Further, the bank account of M/s. Yoro Bullion Pvt. Ltd. may also be called for and examined, to find out the ultimate destination of the funds transferred by the assessee to this party on account of purchases. The Assessing Officer is also directed to provide a reasonable opportunity of being heard to the assessee and to file the evidences and explanations, as required. The assessee is also directed to appear before the AO in the course of set aside proceeding and provide the required documents and clarifications, in order to establish the genuineness of the purchase transactions. Thereafter, the Assessing Officer shall pass a speaking and reasoned order in accordance with law.
In the result, the appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open Court on this 2nd December, 2025.