INCOME TAX OFFICER, WARD-1, JIND, JIND vs. VIKAS JAIN, JIND

5. The Ld. CIT(A) has erred in deleting the addition of Rs.7,67,89,408/- because the initial burden was on the assessee to prove the genuineness of the transactions with necessary documentary evidences, which the assessee had failed to discharge. The assessee merely tried to hide behind the fact that he has recorded these transactions in his books of accounts and payments took place through the banking channel, which are not the sufficient evidence to prove the unreal transactions as real one as such requirements fulfilled by the entry operator with the help of beneficiary to give color to bogus transactions as real one.

1.2 The assessee has filed cross-objection and has taken following grounds: -

The assessee initially filed application u/r 27 of ITAT Rules, 1963 on 14-05-2025 assailing reassessment jurisdiction on legal grounds. Subsequently, the assessee has preferred cross-objections on similar grounds. 1.3 The Ld. CIT-DR advanced arguments supporting the assessment as framed by Ld. AO. The Ld. AR, on the other hand, drew attention to factual finding of Ld. CIT(A) in the impugned order. The Ld. AR also advanced legal arguments as taken in assessee’s cross-objections. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 2.1 In the assessment order, the assessee is alleged to have undertaken bogus purchases of Rs.738.35 Lacs from an entity namely M/s Jai Bhagwati Sales Corp. (prop. Shri Vikas Jain PAN AHQPJ- 3832-L). The Ld. AO alleged that Income Tax Return as filed by the assessee was not commensurate with such transactions. Pursuant to receipt of information of fake claim of input tax credit (ITC) by M/s Jai Bhagwati Sales Corp. (in short ‘JBS’) as per its GST returns wherein it transpired that M/s JBS was not doing any value addition and was involved in fraudulent passing of ITC to the recipients by issuing only invoices / bills without actual movement of goods, such an allegation was made. The proprietor of M/s JBS did not comply with the summons issued by investigation wing of the department. The assessee had undertaken purchases for Rs.738.35 Lacs and accordingly, the case was reopened by issuance of notice u/s 148 on 31-03-2022 which was followed by notices u/s 143(2) and 142(1) wherein the assessee was directed to file the requisite details in support of such purchase transactions. 2.2 The assessee, inter-alia, furnished audited financial statements, computation of income, bank statement, party-wise sales, month-wise purchases and sales. However, as per Ld. AO, the assessee failed to furnish transportation documents, delivery challans etc. for purchases made from M/s JBS. Notices issued u/s 133(6) to M/s JBS did not elicit any response. Going by investigation findings, Ld. AO disallowed said purchases along with estimated unaccounted commission payment by the assessee on these transactions @4% of Rs.738.35 Lacs which translated into another addition of Rs.29.53 Lacs.

2.3 Before Ld. AO, the assessee raised legal objections to reassessment jurisdiction on the ground that it duly filed supporting bills and transport vouchers along with bank statement and accordingly, the notice u/s 148 was issued on mere surmises, suspicion, conjectures and with non-application of mind. It was also stated that it made purchases of Rs.58.97 Crores during the whole year, the complete details of which was placed by the assessee at the time of furnishing of reply to notice issued u/s 148A(b). The purchases were duly supported by purchase invoices, transport documents, bank statements etc. Non- compliance of notice u/s 133(6) by M/s JSB could not lead to rejection of books in the light of documentary evidences as furnished by the assessee. With respect to specific purchases made from M/s JSB, the assessee furnished copies of bills, transportation documents, bank statements, detail of transporter, date of transportation, vehicle no., weight, from and to destination and transport payment details etc. Therefore, these purchases were established to be genuine. 2.4 However, Ld. AO rejected the aforesaid submissions of the assessee in the background of the fact that the proprietor of M/s JSB admitted before DGGI of carrying out bogus sales. Finally, the aggregate amount of Rs.767.89 Lacs was added to the income of the assessee u/s 69C and the assessment was framed which was subjected to further challenge in the first appeal. Appellate Proceedings 3.1 The assessee assailed the reassessment jurisdiction on legal grounds as well as on merits by way of elaborate written submissions which have already been extracted in the impugned order. The Ld. CIT(A) rejected the legal grounds as urged by the assessee by observing that the case was reopened by following due procedure after taking due approval from approving authority. 3.2 On merits, the Ld. CIT(A) noted the various documents furnished by the assessee. It was observed that all transactions were carried out through banking channels which was one of the evident proofs for genuineness of the transactions. The assessee had filed substantial evidences with regard to purchase made from M/s JSB during the course of assessment proceedings which could not be denied / controverted by Ld. AO. The assessee was engaged in trading of steel and iron products under proprietorship concern M/s M.M. Impex which made purchase of Rs.58.97 Crores from various suppliers including M/s JSB. The assessee made sales of Rs.60.19 Crores. The books of accounts were duly audited and the assessee duly filed GST returns for this year. An order was passed under GST by appropriate authorities for this year on 06-10-2022 wherein GST authorities accepted the transactions of the assessee without any discrepancy. The copy of GST order passed in Form GST ASMT-12 was extracted in the impugned order. When the GST department accepted sales and purchases of the assessee, the impugned additions as made by Ld. AO u/s 69C could not be sustained and accordingly, the same was deleted. Aggrieved, the revenue is in further appeal before us assailing deletion of addition on mertis. The assessee, in its cross-objection, is aggrieved by rejection of legal grounds.

Our findings and Adjudication 4. From the facts, it emerges that the assessee is engaged in trading of steel and iron products in proprietorship concern M/s M.M. Impex. This entity is duly registered under GST and an order was passed by GST authorities on 06-10-2022 wherein GST authorities have accepted sales and purchases transactions of the assessee without any discrepancy. No excess claim of Input Tax Credit (ITC) has been noted by the authorities against the assessee. The GST authorities have given a finding that no action was required in assessee’s case. The same contradicts Ld. AO’s claims of alleged bogus purchases against the assessee. Further, the assessee’s books of accounts are duly audited and the assessee has maintained quantitative details of trading stock. No adverse remarks have been made by Tax Auditor on trading transactions. The assessee has made sales of Rs.60.19 Crores during this year. It is quite logical that without purchases, there could be no sales. Rejecting a part of the purchase transactions without disturbing sales turnover is without any logic. The sales turnover of the assessee has not been faulted with. The assessee has furnished sufficient documentary evidences like copies of purchase bills, transportation documents, bank statements, detail of transporter, date of transportation, vehicle numbers, weight, from and to destination and transport payment details etc. to Ld. AO in response to notice issued u/s 148A(b) which has been rejected merely on the fact that notice u/s 133(6) remained unresponsive. However, this fact alone could not be pitied against the assessee without there being any corroborative evidences to support the allegation that the purchases made from M/s JSB were bogus, in any manner. The payments to the supplier have been made through banking channels. On these facts and circumstances, the impugned purchases along with estimated alleged commission could not be considered to be the income of the assessee. The case law of Hon’ble Apex Court in the case of M/s Odeon Builders Pvt. Ltd. (418 ITR 315) duly supports the adjudication of Ld. CIT(A). In that case, it was held by Hon’ble Court that addition based merely on third-party information as gathered by investigation wing could not be sustained for want of cross-examination and in a case where the assessee prima facie discharged the initial burden of substantiating the purchases through various documentations. Considering the totality of factual matrix, we find no reason to interfere in the adjudication of Ld. CIT(A) so far as the merits of the case is concerned. The appeal of the revenue stand dismissed.

This case law has been followed by Hon’ble Court in so many subsequent decisions, the latest being the decision in Om Satya Overseas (178 Taxmann.com 137; dated 29-08-2025). No change in facts has been demonstrated and nothing has been shown that the aforesaid decisions have subsequently been stayed by any higher appellate forums. Respectfully following this binding judicial decisions, we would hold that the impugned notice as issued by JAO u/s 148 on 31-03-2022 is liable to be quashed on this score only. We order so. The re-assessment proceedings as initiated against the assessee stand quashed for this very reason alone.