INCOME TAX OFFICER-19(1)(1), MUMBAI, MUMBAI vs. BABULAL MISHRIMALJI MEHTA, MUMBAI

PER PAWAN SINGH, JUDICIAL MEMBER:

“1. "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 33,70,713/-made by the AO under section 69C of the Income tax Act, 1961, without appreciating that the assessee failed to explain the source and genuineness of the expenditure incurred purchases from non-existent parties"

2. "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred by disregarding the credible and verifiable information available on the department's portal, which conclusively established that the suppliers of the alleged purchases were non-existent, and the transaction were not genuine,"

3. "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that if the purchases were to be treated as non- existent, the corresponding sales would also have to be considered non- existent. This is contrary to established legal principles, as the addition was made under section 69C for unexplained expenditure, and the assessee failed

4. "Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred by substituting its own opinion for the well-reasoned findings of the AO without any corroborative tangible concrete material evidence."

5. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), has erred in restricting the restricting the GP rate to the extent of 8%, without appreciating the decision of the Hon'ble Supreme Court in the case of M/s. N. K. Proteins Ltd. Va. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017. wherein the Hon'ble Court has held that once a findings of act has been given that entire purchases shown on the basis of fictitious invoices and debited in the P & L account are established as bogus, then restricting the addition to a curtained percentage goes against the principles of section 68 and 69C of the Income Tax Act, 1961."

6. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), has erred in restricting the addition without appreciating the fact that in the case of M/s. Swetamber Steels Ltd. (Supra), the Hon'ble ITAT, Ahmadabad had conformed the disallowance of the bogus purchase, by stating that the purchases shown from respective parties were found non genuine and the decision of the ITAT was upheld by Hon'ble Gujarat High Court and also by the Hon'ble Supreme Court."

7. "Whether on the facts and circumstances of the case and in law, the Ld. CIT(A), has ignored the fact that, the Hon'ble ITAT is perverse in not considering the order of Hon'ble Gujarat High Court in case of N.K. Proteins Ltd (2016) 72 Taxman.co 289 (Guj.) relating on similar issue of bogus purchase, which have been confirmed by the Hon'ble Supreme Court big dismissing SLP in SLPICC) of 963/2017 dated 01 07 2025"

The Ld. CIT (A) deleted the entire addition by relying upon the submission of assessee by holding that no independent investigation was carried out by Assessing Officer against the evidences furnished by the assessee though the Assessing Officer was having sufficient material to treat such purchases as Babulal Mishrimalji Mehta (A.Y. 2019-20) unexplained. The ld. Senior DR for the revenue prayed for setting aside the order of ld. CIT (A) and to restore the order of Assessing Officer.

The sale is not possible in absence of purchase. The books of accounts of assessee was not rejected. The ld. CIT (A) thus, rightly appreciated the fact in concluding that once the assessee discharged his onus, the onus was on Assessing Officer to make further independent inquiry. The Assessing Officer simply relied on the information available in Insight Portal which is not sufficient to disprove the genuineness of purchases. The ld. AR for the assessee prayed that appeal may be dismissed.

Such facts are recorded on page No.3 of assessment order. The reply of assessee was not accepted by Assessing Officer by taking view that NSG Metal Trading and Octagen Trading Company have been identified as the parties involved in fraud input tax credit, which were not engaged in any genuine business activities and merely provided accommodation entries for the purpose of booking bogus expenses for reducing taxable income. During post search investigation the key person of such entities in their statement accepted that they were paper entities so the transaction with entry provider cannot be accepted. The Assessing Officer recorded that evidence furnished by assessee cannot be accepted as it has already been proved by Investigation Wing that such seller parties are paper entity. Transaction routedthrough banking channel does not prove the transaction as genuine.

The Assessing Officer on the basis of information in Insight Portaltreatedboth the entities as accommodation entry provider and disallowed the expenses incurred for purchases of Rs.33,70,713/- and added under Section 69C in the assessment order dated 13.03.2025. On appeal before ld. CIT (A) the assessee reiterated his submission and contended that evidence furnished by assessee was not considered. Mere non-responsive to the notice under Section 133(6), it does not automatically imply that transaction is not genuine, specifically when assessee provided complete corroborative

14258/2024& CM APPL 59722/2024 dated 22.05.2025,wherein it was held that when the assessee made direct sale in respect of purchases made and shown profit in respect of the same. In such case, if the purchases are considered non-existent, sales would have to be considered non-existent.