ITO-19(3)(1), MUMBAI vs. RAMNIKLAL SHIVJI SAVLA, MUMBAI

5. Whether on the facts and circumstances of the case and in law, 5. Whether on the facts and circumstances of the case and in law, 5. Whether on the facts and circumstances of the case and in law, Ld. CITIA) has erred in restricting the addition to Ld. CITIA) has erred in restricting the addition to the extent of 8% the extent of 8% without appreciating the decision of the Hon'ble. Supreme Court in without appreciating the decision of the Hon'ble. Supreme Court in without appreciating the decision of the Hon'ble. Supreme Court in the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, wherein the Hon'bLd. Court has (Guj.) 354, Dated. 16.01.2017, wherein the Hon'bLd. Court has (Guj.) 354, Dated. 16.01.2017, wherein the Hon'bLd. Court has held that once a findings of act has been give held that once a findings of act has been given that entire n that entire purchases shown on the basis of fictitious invoices and debited in purchases shown on the basis of fictitious invoices and debited in purchases shown on the basis of fictitious invoices and debited in Ramniklala Shivji Savla the P & L account are established as bogus, then restricting the the P & L account are established as bogus, then restricting the the P & L account are established as bogus, then restricting the addition to a curtained percentage goes against the principle of addition to a curtained percentage goes against the principle of addition to a curtained percentage goes against the principle of section 68 and 69C of the Income Tax Act, 196 section 68 and 69C of the Income Tax Act, 1961 ?" 6. "Whether on the facts and circumstances of the case and in law, 6. "Whether on the facts and circumstances of the case and in law, 6. "Whether on the facts and circumstances of the case and in law, the order of the Ld. CIT(A) perverse in not considering that the the order of the Ld. CIT(A) perverse in not considering that the the order of the Ld. CIT(A) perverse in not considering that the order of Hon'bLd. Supreme Court in the case of M/s. N. K. Proteins order of Hon'bLd. Supreme Court in the case of M/s. N. K. Proteins order of Hon'bLd. Supreme Court in the case of M/s. N. K. Proteins Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, which is on the similar issue of bogus purchases, was already the law of is on the similar issue of bogus purchases, was already the law of is on the similar issue of bogus purchases, was already the law of the land when the Ld. CIT(A) has pronounced it's order on the land when the Ld. CIT(A) has pronounced it's order on the land when the Ld. CIT(A) has pronounced it's order on 06.03.2025 ?" Ltd. 06.03.2025 ?" Ltd. 7. " Whether on the facts and circumstances of the case and in 7. " Whether on the facts and circumstances of the case and in 7. " Whether on the facts and circumstances of the case and in law, the decision of the Ld. CIT(A), law, the decision of the Ld. CIT(A), is right in view of the decision is right in view of the decision of the Hon'bLd. High Court Mumbai, in the case of Pr. of the Hon'bLd. High Court Mumbai, in the case of Pr. of the Hon'bLd. High Court Mumbai, in the case of Pr. Commissioner of Income Commissioner of Income-Tax-5, Mumbai Vs. Kanak Impex (India) 5, Mumbai Vs. Kanak Impex (India) Ltd(2025)172 Taxmann.com 283 (Bombay) Dated. 03.03.2025, Ltd(2025)172 Taxmann.com 283 (Bombay) Dated. 03.03.2025, Ltd(2025)172 Taxmann.com 283 (Bombay) Dated. 03.03.2025, wherein the decision of 100% addition made by AO ha wherein the decision of 100% addition made by AO ha wherein the decision of 100% addition made by AO has been allowed, by rejecting the ITAT's decision of estimating the profit allowed, by rejecting the ITAT's decision of estimating the profit allowed, by rejecting the ITAT's decision of estimating the profit rate @12.5% on bogus purchases and thereby impliedly grant rate @12.5% on bogus purchases and thereby impliedly grant rate @12.5% on bogus purchases and thereby impliedly grant deduction of such unexplained expenditure incurred u/s. 69C of deduction of such unexplained expenditure incurred u/s. 69C of deduction of such unexplained expenditure incurred u/s. 69C of the Act, eventhough the assessee faild.d to discharge its on the Act, eventhough the assessee faild.d to discharge its on the Act, eventhough the assessee faild.d to discharge its onus to prove the genuineness of alLd.ged purchases and has offered no prove the genuineness of alLd.ged purchases and has offered no prove the genuineness of alLd.ged purchases and has offered no explanation of the sources of expenditure incurred on account of explanation of the sources of expenditure incurred on account of explanation of the sources of expenditure incurred on account of such purchases?" such purchases?" 8. "Whether on the facts and circumstances of the case and in law, 8. "Whether on the facts and circumstances of the case and in law, 8. "Whether on the facts and circumstances of the case and in law, Ld. CITIA) has erred in restricting th Ld. CITIA) has erred in restricting the addition without e addition without appreciating the fact that in the case of M/s. Swetamber Steels appreciating the fact that in the case of M/s. Swetamber Steels appreciating the fact that in the case of M/s. Swetamber Steels Ltd. (Supra), the Hon'bLd. ITAT Ahmadabad, had conformed the Ltd. (Supra), the Hon'bLd. ITAT Ahmadabad, had conformed the Ltd. (Supra), the Hon'bLd. ITAT Ahmadabad, had conformed the disallowance of the bogus purchase, by stating that the purchases disallowance of the bogus purchase, by stating that the purchases disallowance of the bogus purchase, by stating that the purchases shown from respective parties were found non g shown from respective parties were found non genuine and the enuine and the decision of the ITAT was upheld by Hon'bLd. Gujarat High Court decision of the ITAT was upheld by Hon'bLd. Gujarat High Court decision of the ITAT was upheld by Hon'bLd. Gujarat High Court and thereafter also by the Hon'bld. Supreme Court?" and thereafter also by the Hon'bld. Supreme Court?"

“7. The Grou 7. The Ground No. 1 is that the AO was wrong in holding nd No. 1 is that the AO was wrong in holding purchases to the tune of Rs. 1,73,73923/ purchases to the tune of Rs. 1,73,73923/-, as non genuine and , as non genuine and making addition at 25% of such alleged non making addition at 25% of such alleged non- genuine purchases. genuine purchases. This appeal has been preferred by the assessee against the order of This appeal has been preferred by the assessee against the order of This appeal has been preferred by the assessee against the order of the Assessing Offi the Assessing Officer (AO) making an addition of 25% of the cer (AO) making an addition of 25% of the Ramniklala Shivji Savla purchases treating them as non purchases treating them as non-genuine. The learned AO, based on genuine. The learned AO, based on the information received from the Sales Tax Department, concluded the information received from the Sales Tax Department, concluded the information received from the Sales Tax Department, concluded that the assessee had made purchases from certain dealers that the assessee had made purchases from certain dealers that the assessee had made purchases from certain dealers providing accommodation e providing accommodation entries without actual supply of goods. ntries without actual supply of goods. Consequently, the AO made an addition of Rs. 43,40,981/ Consequently, the AO made an addition of Rs. 43,40,981/ Consequently, the AO made an addition of Rs. 43,40,981/-, being 25% of the alleged bogus purchases. Subsequently, on appeal 25% of the alleged bogus purchases. Subsequently, on appeal 25% of the alleged bogus purchases. Subsequently, on appeal before the CIT(A), the appellate authority has restricted the addition before the CIT(A), the appellate authority has restricted the addition before the CIT(A), the appellate authority has restricted the addition to 12.5% of such non to 12.5% of such non-genuine Purchased. 7.1. Against the same, the "SMC" Bench, Mumbai. In the decision 7.1. Against the same, the "SMC" Bench, Mumbai. In the decision 7.1. Against the same, the "SMC" Bench, Mumbai. In the decision pronounced, the Hon'ble ITAT has directed the appellate authority to pronounced, the Hon'ble ITAT has directed the appellate authority to pronounced, the Hon'ble ITAT has directed the appellate authority to adjudicate the matter by considering the order passed by the adjudicate the matter by considering the order passed by the adjudicate the matter by considering the order passed by the Hon'ble ITAT, in its own case for A.Y. 2011 Hon'ble ITAT, in its own case for A.Y. 2011-12. On perusal of 12. On perusal of records, it is seen that the Hon'ble Income Tax Appellate Tribunal records, it is seen that the Hon'ble Income Tax Appellate Tribunal records, it is seen that the Hon'ble Income Tax Appellate Tribunal (ITAT), Mumbai, has passed an order in (ITAT), Mumbai, has passed an order in (ITAT), Mumbai, has passed an order in dated 03.08.2021, for A.Y. 2011 dated 03.08.2021, for A.Y. 2011-12 in the assessee's own case. In 12 in the assessee's own case. In this regard, it is important to reproduce t this regard, it is important to reproduce the relevant portion of the he relevant portion of the judicial decision for A.Y. 2011 judicial decision for A.Y. 2011-12, which is as under: "6. Heard Ld.DR, perused the orders of the authorities below. "6. Heard Ld.DR, perused the orders of the authorities below. "6. Heard Ld.DR, perused the orders of the authorities below. It is not in dispute that sales have been accepted as genuine It is not in dispute that sales have been accepted as genuine It is not in dispute that sales have been accepted as genuine from out of these purchases. When the sales have been from out of these purchases. When the sales have from out of these purchases. When the sales have accepted as genuine the entire purchases cannot be treated accepted as genuine the entire purchases cannot be treated accepted as genuine the entire purchases cannot be treated as non as non-genuine. The Hon'ble Gujarat High Court in the case genuine. The Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when the assessee made purchases and sold the finished goods as the assessee made purchases and sold the finished goods as the assessee made purchases and sold the finished goods as a natural corol a natural corollary not the entire amount covered under such lary not the entire amount covered under such purchases would be subject to tax but only the profit element purchases would be subject to tax but only the profit element purchases would be subject to tax but only the profit element embedded therein. embedded therein. Similar view has been taken by the Similar view has been taken by the Hon'ble Gujarat High Court in the case of CIT Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth v. Simit P. Seth [38 taxman.com 385). Simply beca [38 taxman.com 385). Simply because the parties were not use the parties were not produced the entire purchases cannot be added as held by produced the entire purchases cannot be added as held by produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp the Bombay High Court in the case of CIT v. Nikunj Eximp the Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171). I agree with the view of the lower [216 Taxman.com 171). I agree with the view of the lower [216 Taxman.com 171). I agree with the view of the lower authorities that there should be an estimation of profit authorities that there should be an estimation of profit authorities that there should be an estimation of profit element from these purchases and should be estimated ment from these purchases and should be estimated ment from these purchases and should be estimated reasonably as the assessee could not conclusively prove that reasonably as the assessee could not conclusively prove that reasonably as the assessee could not conclusively prove that the purchases made are from the parties as claimed, the purchases made are from the parties as claimed, the purchases made are from the parties as claimed, especially in the absence of any confirmations from them. especially in the absence of any confirmations from them. especially in the absence of any confirmations from them. Taking the totality of facts and ci Taking the totality of facts and circumstances, keeping in rcumstances, keeping in view the nature of business of the assessee i.e. trader in view the nature of business of the assessee i.e. trader in view the nature of business of the assessee i.e. trader in Ferrous and non Ferrous and non-Ferrous Metals, it would be justified if the Ferrous Metals, it would be justified if the profit element embedded in those purchases are estimated at profit element embedded in those purchases are estimated at profit element embedded in those purchases are estimated at 8%. Accordingly, I direct the Assessing Officer to estimate the 8%. Accordingly, I direct the Assessing Officer to e 8%. Accordingly, I direct the Assessing Officer to e profit element from the non profit element from the non-genuine purchases at 8% and genuine purchases at 8% and restrict the disallowance of purchases to 8% and compute the restrict the disallowance of purchases to 8% and compute the restrict the disallowance of purchases to 8% and compute the income accordingly. income accordingly.

3.2 The Ld. Counsel for the assessee, on the other hand, The Ld. Counsel for the assessee, on the other hand, The Ld. Counsel for the assessee, on the other hand, submitted that the Ld. CIT(A) merely followed the specific direction ed that the Ld. CIT(A) merely followed the specific direction ed that the Ld. CIT(A) merely followed the specific direction

Ramniklala Shivji Savla of the Tribunal in the assessee’s own case and could not have taken of the Tribunal in the assessee’s own case and could not have taken of the Tribunal in the assessee’s own case and could not have taken a contrary view.

4.1 In the present case, the In the present case, the Ld. CIT(A) did not independently Ld. CIT(A) did not independently examine whether the facts align with the stricter line of authority examine whether the facts align with the stricter line of authority examine whether the facts align with the stricter line of authority emerging from later judgments. The restriction to 8% was made emerging from later judgments. The restriction to 8% was made emerging from later judgments. The restriction to 8% was made solely on the basis of the earlier order of the Tribunal in A.Y. 2011– solely on the basis of the earlier order of the Tribunal in A.Y. 2011 solely on the basis of the earlier order of the Tribunal in A.Y. 2011 12, without examining w 12, without examining whether the factual position for A.Y. 2009 hether the factual position for A.Y. 2009– 10 is identical or whether subsequent binding precedent alters the 10 is identical or whether subsequent binding precedent alters the 10 is identical or whether subsequent binding precedent alters the legal position.

4.2 Accordingly, the impugned order on this issue is set aside, and Accordingly, the impugned order on this issue is set aside, and Accordingly, the impugned order on this issue is set aside, and the matter is restored to the file of the Ld. CIT(A) for fresh the matter is restored to the file of the Ld. CIT(A) for fresh the matter is restored to the file of the Ld. CIT(A) for fresh adjudication in accordance with law, after affording due opportunity adjudication in accordance with law, after affording due opportunity adjudication in accordance with law, after affording due opportunity of hearing to the assessee. The Ld. CIT(A) shall examine the issue of hearing to the assessee. The Ld. CIT(A) shall examine the issue of hearing to the assessee. The Ld. CIT(A) shall examine the issue afresh in the light of applicable binding precedents and record a afresh in the light of applicable binding precedents and record a afresh in the light of applicable binding precedents and record a reasoned finding.

Order pronounced in the open Court on ounced in the open Court on 27/02/2026. /02/2026.