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Facts
The assessee was alleged to have made bogus purchases based on information from the INSIGHT portal, leading the Assessing Officer (AO) to reject the books of accounts and estimate profits. This order was subsequently confirmed by the CIT(A). The assessee, however, demonstrated through evidence that no purchases were made from the alleged parties, a fact the AO eventually admitted.
Held
The Tribunal held that once the AO admitted that the assessee did not make purchases from the identified bogus parties, there was no justifiable basis for rejecting the books of accounts or making the addition. Consequently, the addition of Rs.1,50,07,646/- to the assessee's income was directed to be deleted.
Key Issues
Whether the rejection of books of accounts and estimation of profit is justified when the AO acknowledges that the assessee did not make purchases from the alleged bogus parties identified by the department.
Sections Cited
250, 145, 142(1)
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Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA & SHRI T.R. SENTHIL KUMAR
IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE: SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER AND SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER आयकर अपील सं./I.T.A. No. 345/Ahd/2025 (िनधा�रण वष� / Assessment Year : 2021-22) बनाम/ Sanket Ramniklal Joisar Income Tax Officer B-1, Nirmal Kunj Society, Ward-1(2)(1), Ahmedabad Vs. Behind Navgujarat College, Usmanpura, Ahmedabad – 380014, Gujarat �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : ACYPJ6554C (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri Bhavya Sheth, AR ��यथ� क� ओर से/Respondent by : Shri Rohit Aasudani, Sr.DR 12/08/2025 Date of Hearing Date of Pronouncement 20/08/2025 (आदेश)/ORDER PER SMT. ANNAPURNA GUPTA, AM:
The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), (hereinafter referred to as “CIT(A)”), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi dated 13.01.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2021-22.
Grounds raised by the assessee read as under:
[Sanket Ramniklal Joisar vs. ITO] A.Y. 2021-22 - 2 – “1. The Assessment order is bad in law as well as on facts.
2. The Learned Assessing Officer erred in rejecting Books of Accounts by applying section 145 of Income Tax Act, 1961 due to non-submission of reply for Show Cause Notice (SCN) and the First Appellate Authority erred in confirming the same.
The learned Assessing Officer erred in not following cardinal principle of law that Burden of Proof is on the person who alleges. The Learned Assessing Officer only relied on the data available in departmental data base (Insight Portal).
The learned Assessing Officer erred in proving the transactions between Appellant and Alleged Parties in the Impugned Order and the same is confirmed by the Commissioner of Income Tax (CIT) Appeals.
5. The Learned Assessing Officer erred in computing Income by applying 8% of Turnover wherein all the details of purchase had been produced in reply to notice under sub section 1 of section 142 of Income Tax Act, 1961 and the First Appellate Authority erred in confirming the same.
6. The First Appellate Authority has erred in not granting opportunity of being heard via Virtual Hearing for which specific request was made in submission.
7. The Learned Assessing Officer erred in determining the income of the appellant and the First Appellate Authority erred in confirming the same.
8. The appellant craves leave to add, alter and delete any of the grounds of appeal
stated herein above.”
3. The solitary issue, it was pointed out by the Ld. Counsel for the assessee, related to the assessee found to have claimed bogus purchases, on account of which, the AO rejected the books of accounts of the assessee and estimated the profits earned from his business. The order of the AO was confirmed by the Ld. CIT(A).
4. Ld. Counsel for the assessee contended that the orders passed by the AO and the Ld. CIT(A) were perverse and not sustainable [Sanket Ramniklal Joisar vs. ITO] A.Y. 2021-22 - 3 – on facts alone. He contended that the basis for alleging the assessee to have booked bogus purchases was some information available on the INSIGHT portal of the Department revealing the assessee to have made substantial purchases from suppliers who were either non-filers or had filed non-business ITR or reflected a substantially lower turnover in ITR as compared to turnover shown in GSTR 1 return. On the basis of this information, Ld. Counsel for the assessee pointed out from the assessment order, that the AO noted that there was a possibility of the assessee having booked bogus expenses in order to reduce its profit / taxable income. He pointed out that the INSIGHT portal revealed the assessee to have made purchases from two parties; i. Manan Mayurkumar Raval, Proprietary of Brahmmani Sales Corporation; & ii. Abhishek Harivallabh Suthar, Proprietary of Abhishek Enterprise amounting to Rs.3,43,32,430/- and Rs.1,22,48,970/-; respectively totaling in all to Rs.4,65,81,400/-. He pointed out these facts from Page 7 of the assessment order. Ld. Counsel for the assessee pointed out that during assessment proceedings, the assessee furnished complete details of purchases made by him during the year in his business of wholesale of waste, scrap and materials for re-cycling purposes. The complete books of accounts were furnished to the AO and all supporting documents also were filed to him and it was pointed out to the AO that the assessee had made no purchases from these two parties during the year. Ld. Counsel for the assessee pointed out that after examining the details so submitted by the assessee, the AO agreed that no purchases had been made by the assessee from the [Sanket Ramniklal Joisar vs. ITO] A.Y. 2021-22 - 4 – aforestated two parties. However, he went on to hold that the assessee may have purchased goods from some other parties and since, the assessee has not disclosed the details of those transactions, it could not be ruled out that the assessee might have purchased goods from the grey market at a considerably lower rate, thus, earning more normal profits. In this regard, he drew our attention to the findings of the AO in this regard at page Nos. 15 & 16 of his order as under:
“In view of the above discussion and information available in departmental data base (Insight portal) and GST portal it is evident that the assessee did not make any purchase from the aforesaid two parties. However, since it is a fact there cannot be any sale without purchase it cannot be denied that the assessee had purchased goods from some other party (-ies). The assessee has not disclosed the details of those transactions and the source of the purchases made. It is presumed that the assessee might have purchased the goods from the grey market at a considerably lower rate. There were lower incidental expenses and there by earning a higher profit than the normal profit. Further, on perusal of the audit report for the year under assessment, it is observed that the assessee have declared Gross profit and net profit for the previous year and preceding previous year as follows. Sl. Particulars Previous % Preceding previous % No. Year Year Total turnover of the 203715703/- 126097682/- (a) assessee (in Rs.) (b) Gross profit / Turnover 2874416 1.41 2678976/ 2.12 /203715703 126097682 Net profit / Turnover 1173671 0.58 869959/ 0.69 (c) /203715703 126097682 On examination of the above details it is observed that the assessee declared gross profit & net profit from business not only considerably at lower rate but also at lower rate from last year.”
Ld. Counsel for the assessee contended that the assessee having factually demonstrated no purchases made from the alleged bogus parties and the AO admitting to the said fact, there was no [Sanket Ramniklal Joisar vs. ITO] A.Y. 2021-22 - 5 – case at all for rejecting the books of accounts of the assessee. He pointed out that even the Ld. CIT(A) had unjustly confirmed the order of the AO, which was completely baseless.
The Ld.DR before us was unable to controvert the factual contention of the Ld. Counsel for the assessee as above that the assessee had demonstrated to have made no purchases from the alleged bogus purchases identified in the INSIGHT portal of the Department and the AO had admitted to this fact after verification of all documents and evidence filed by the assessee. He, however, contended that there must have been some basis for the information of bogus purchases made by the assessee from the said parties reflected in the INSIGHT portal which ought to have been investigated by the AO, further, when the assessee demonstrated to have not recorded any purchase from the said two parties.
Having heard the contentions of both the parties, we see no justification in the order passed by the Ld. CIT(A) confirming the addition made to the income of the assessee of Rs.1,50,07,646/- by estimating the profits earned by the asessee from its business after rejecting the books of accounts of the assessee for the reason that the assessee had allegedly booked bogus purchases. The facts on record which have remained uncontroverted before us is that the assessee had not booked any purchases from the parties identified in the INSIGHT portal of the Department. Even the AO has admitted to the said fact. In the light of the same, there was no case at all and no basis with the Department to have held the [Sanket Ramniklal Joisar vs. ITO] A.Y. 2021-22 - 6 – assessee to have booked bogus purchases and gone on to reject the books of accounts of the assessee and estimate its profit. The addition, therefore, made to the income of the assessee is directed to be deleted of Rs.1,50,07,646/-.
In the result, appeal filed by the assessee is allowed in above terms.
This Order pronounced on 20/08/2025 Sd/- Sd/- (T.R. SENTHIL KUMAR) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad; Dated 20/08/2025 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant ��यथ� / The Respondent. 2. 3. संबंिधत आयकर आयु� / Concerned CIT आयकर आयु�(अपील) / The CIT(A)- 4. 5. �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad गाड� फाईल / Guard file. 6. आदेशानुसार/ BY ORDER,