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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
ORDER
PER SATBEER SINGH GODARA, JM
1. This assessee’s appeal for assessment year 2013-14, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2023-24/1057875647(1), dated 10.11.2023 involving proceedings under section 147 r.w.s. 144 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Case called twice. None appears at the assessee’s behest. He is accordingly proceeded ex-parte.
Delay of 482 days in filing of the assessee’s instant appeal is condoned in larger interest of justice and in light of Collector, Land & Acquisition vs. Mst. Katiji & Others (1987) 167 ITR 471 (SC).
We next note with the able assistance coming from the Revenue side that the learned CIT(A)/NFAC has upheld the Assessing Officer’s action setting into motion section 148/147 proceedings against the assessee thereby disallowing his purchases of Rs. 4,02,55,000/-, reading as under:- “Ground No. 1 and 2 11. I have considered the written submissions, including the case laws relied upon, order of the AO and material available on record. In these grounds the appellant contended that the issue of the notice u/s 148 of the Act for A.Y. 2013-14 was expired on 31.03.2021. The appellant relied on judgments passed by Hon’ble Supreme Court in the case of Ashish Agarwal Vs Union of India in Civil Appeal no 3005/2022, Hon’ble Gujrat High Court in the case of Shree Durgasyntex Pvt Ltd Vs Acit IN Spl. Civil application no 4859 of 2023 and Hon’ble Allahabad High Court in the case of Rajiv Bansal Vs Union Of India & Another In Writ Tax NO 1086 OF 2022. 12. In this case notice u/s 148 of the Act was issued on 31.03.2021. The time limit for issue of notice u/s 148 of the Act, for the relevant assessment year was extended by the CBDT vide Notification No.38 of 2021-dated 27.04.2021 whereby the time limit was extended till 30.06.2021. Further, the cases relied by the appellant, examine and review the validity of notices u/s 148 of the Act which were issued from 01.04.2021 onwards for the A.Y. 2013- 14. However, in the instant case the notice u/s 148 of the Act was issued on 31.03.2021. Therefore, the judgements relied upon by the appellant are clearly not applicable to the facts of the instant case. Hence, these grounds of the appeal are dismissed. Ground No. 3 13. The appellant claimed that the AO issued notice u/s 148 of the Act on borrowed reasons without application of his own mind. In this regard, it is noticed that the AO has gone through the return of 2 | P a g e income furnished by the appellant on u/s 139 of the Act and considered the particulars of the income as reflected in the return of income in the light of information received. On the basis of these facts, the AO came to the belief that income chargeable to tax which was in the nature of transaction of Rs.4,02,55,000/ - with bogus entities has escaped assessment. Thus it is noted that there was live link between the information received by the AO and belief made that income chargeable to tax has escaped assessment. The reasons recorded by AO have been found on the basis of tangible material and with application of mind. At the stage of formation of belief u/s 147 of the Act, it is necessary to have existence of reasons to believe that income has escaped assessment, their sufficiency cannot be examined at that stage. Clearly in this case the AO was having tangible material to draw such inference. Reliance is hereby placed upon the decisions of Hon’ble Supreme Court in the case ofRAYMOND WOLLEN MILLS LTD. Vs. ITO 236 ITR 34 (SC) and ACIT VS. RAJESH JHAVERI STOCK BROKERS (P) LTD. 291 ITR 500 (SC), PHOOL CHAND BAJRANG LAL AND ANOTHER VS. ITO &ANOTHER 203 ITR 456 (SC) and Hon’ble Madras High Court in the case of STERLITE INDUSTRIES (INDIA) LTD. v ASSISTANT COMMISSIONER OF INCOME-TAX AND ANOTHER [2008] 302 ITR 275 (MAD.). It has been held by Hon’ble Supreme Court in the case of ITO vs. PurshotamDassBangur (1997) 224 ITR 362 (SC) that the information received from the Deputy Director (Inv.) constitutes valid information and reasons to believe that income has escaped assessment. Hon’ble Supreme Court in the case of Paramount Communication (P.) Ltd. Vs PCIT 2017-TIQL-253- SC-IT SLP has dismissed the SLP of assessee on the ground that Information regarding bogus purchase by assessee received by DRI from CCE which was passed on to revenue authorities was 'tangible material outside record' to initiate valid reassessment proceedings. Thus there was no borrowed satisfaction on the part of the AO. There was independent application of mind on the part of the AO.
Reliance is also placed upon the decision of Hon’ble Gujarat High Court order dated 07.01.2021 (2021) 127 taxmann.com 806 wherein it has been held that where Assessing Officer after receiving information from Investigation Wing that assessee had booked bogus expenses in names of certain entities, verified return of assessee and observed that expenses were inflated by assessee by booking bogus expenses without receiving any actual goods/services, reopening of assessment was justified. Further Reliance is also placed on rationale held in the cases of :-
1. The Hon’ble Rajasthan High Court in the case of Ankit Agrochem (P.) Ltd. Vs JCIT [2018] 89 taxmann.com 45 3 | P a g e (Rajasthan)/[2018] 253 Taxman 141 (Rajasthan) wherein it was held that where DIT informed that assessee-company had received share application money from several entities which were only engaged in business of providing bogus accommodation entries to beneficiary concerns, reassessment on basis of said information was justified.
1. The Hon’ble Gujarat High Court in the case of Pushpak Bullion (P.) Ltd. Vs DCIT (Entry Receiver) [2017] 85 taxmann.com 84 (Gujarat)/[2017] 250 Taxman 201 (Gujarat) wherein it was held that where investigation wing of department had during course of investigation in case of a third party found that he was indulged in providing accommodation entries and bogus bills, and assessee had made sizeable purchases from him, reopening notice against assessee was justified.
1. The Hon’ble Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO And Others [1999] 236 ITR 34 (SC)/[1999] 152 CTR 418 (SC) wherein it was held that in determining whether commencement of reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage.
1. The Hon’ble Gujarat High Court in the case of Amit Polyprints (P.) Ltd. Vs DCIT [2018] 94 taxmann.com 393 (Gujarat) wherein it was held that where reassessment proceedings were initiated on basis of information received from Investigation wing that assessee had received certain amount from shell companies working as an accommodation entry provider, reassessment could not be held unjustified.
1. The Hon’ble Gujarat High Court in the case of Ankit Financial Services Ltd. Vs DCIT [2017] 78 taxmann.com 58 (Gujarat) wherein it was held that where material recovered in search of another person indicated that assessee had received bogus share applications through accommodation entries, since assessee was beneficiary, initiation of re-opening was justified.
In the present case it has been found as above that the AO on the basis of tangible information before him, has recorded the facts while recording the reasons to believe. In view of the above facts and discussion it is found that there is no merit in the grounds of appeal Nos. 3 taken by the appellant and the same is hereby dismissed. Ground No. 4 & 5
16. In this ground the appellant has claimed that the confirmations letter of M/S Brave Traders and M/s Ashi Traders with list containing names of the suppliers were provided. Mere submission of name of supplier and confirmation on plain paper does not establish the authenticity of a huge purchase transaction particularly when the identity of supplier in absence of PAN, Address, ITR does not inspire such confidence. Mere submission of name and the fact that the purchases were through the banking channel, does not establish the genuineness of transactions.when entire purchases are establish unproved and rather are proved to be non genuine in view of alleged transactions with ficticious entites , the issue of applying GP rate does not arise. Further reliance is also placed on the following judgments:
1.
1. High Court Of Calcutta in the case of Principal Commissioner of Income-tax v. Mrs. Premlata Tekriwal 143 taxmann.com 173 (Calcutta) dated July 15, 2022 held that where name of assessee was found in list of beneficiaries of accommodation entries by way of bogus purchases bills and assessee did not produce any document to explain alleged purchase transactions but rather stated that 2 per cent of purported bogus purchase might be added to total income, entire amount of bogus expenditure was correctly added to income of assessee 2. The Hon’ble Bombay High Court in the case of Shoreline Hotels (P) Ltd. vs. CIT 98 Taxmann.com 234 for Asstt. Year 2011-12 had held that very reliable and genuine information was received from the VAT and sales tax authorities with regard to the operations with these dealers stated as ‘hawala traders’ and in this case relied upon, the appellant could not produce proof of any material purchased by it nor it could ensure the presence of supplier from who it allegedly purchased goods.
3. High Court Of Delhi, Commissioner of Income-tax, Delhi v. Globus Securities & Finance (P.) Ltd. IT APPEAL NO. 409 OF 2012 41 taxmann.com 465-Creditworthiness of shareholders and genuineness of transaction in all cases is not established by only showing that transaction is through banking channels or account payee instrument; surrounding and corroborative factual details are equally important 4. Hon’ble Delhi High Court in the case of N.R. Portfolio Pvt. Ltd. 87 DTR 0162 (Del) that the onus to prove the three factum is on the assessee as the facts are within his knowledge. Mere furnishing names address and PAN particulars or relying on entries in the ROC website is not enough. If upon verification or during the proceedings, the AO cannot contact the share applicant or information becomes unverifiable or there are further doubts in pursuit of such details, onus shifts back to the assessee to explain the same.
5. High Court Of Karnataka in the case of Commissioner of 5 | P a g e Income Tax, Bangalore v. Anantha Refinery (P.) Ltd 125 taxmann.com 163 (Karnataka) January 4, 2021 held that Where assessee claimed expenditure on account of purchases of certain materials, since assessee could not produce parties from whom it made such purchases and document relied upon by assessee viz., receipt for goods, weighment slips, inward slips were all self made, impugned expenditure was to be disallowed 6. Hon’ble Supreme Court in the case of State Bank of India vs. S.K. Sharma AIR 1996 SC 364 where the Hon'ble Apex Court observed: "Justice means justice between the parties. The interest of justice equally demand that the guilty should be punished and that technicalities and irregularities which do not occasion failure of justice are not allowed to defeat the ends of justice. Principles of natural justice are but the means to achieve the end of justice. They cannot be perverted to achieve from opposite end."
1. N K Proteins Ltd Vs CIT [2017] 84 taxmann.com 195 (SC)/[2017] 250 Taxman 22 (SC), 2017-TIOL-23-SC-IT wherein it was held that entire undisclosed income generated out of bogus transactions, deserves to be added to total income.
Nemi Chand Kothari v. CIT [2004] 136 Taxman 213 (Gauhati)/[2003] 264 ITR 254 (Gauhati)/[2003] 185 CTR 635 (Gauhati) wherein it was held that merely because a transaction takes place by cheque is not sufficient to discharge the burden. The assessee has to prove the identity of the creditors and genuineness of the transaction. "It cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct. Once the assessee has proved the identity of his creditors, the genuineness of the transactions which he had with his creditors, and the creditworthiness of his creditors vis-a-vis the transactions which he had with the creditors, his burden stands discharged and the burden then shifts to the revenue to show that though covered by cheques, the amounts in question, actually belonged to, or was owned by the assessee himself "
Regarding the case laws referred to by the appellant, it is found that facts of the present case and the cases referred by the appellant are entirely different.
In the case of ACIT v. Uday Bhagwan Industries, the hon’ble tribunal held that the purchases were supported by bills and vouchers. Therefore, the initial burden stood discharged to prove that the assessee entered into genuine transactions. However, in the instant case the appellant has not furnished GST No., voucher No., Bills, etc. in respect to the alleged purchases and has failed to 6 | P a g e discharge the onus by producing cogent evidence to prove the genuineness of the purchases.
Similarly, in the case of ITO v. Sunsteel it was held that he assessee had discharged all its onus and complied with his duties providing that purchases are genuine, parties are not bogus, goods have been received, whereas in the instant case the appellant has not able to substantiate the genuineness of alleged purchases. Further, the above decision of the Hon’ble ITAT was also relied on the fact that for the A.Y. 1994-95, the unexplained expenditure u/s 69C can be set off as deduction under the general provision of Section 37 of the Act. This provision has been amended by the Finance (No. 2) Act, 1998, w.e.f. 1-4-1999.
The ADIT (Inv) Surat made a detailed enquiry in the case of Samrat Dial Pvt. Ltd., which received credit through RTGS from various fictitious entities including M/s Asahi Trading Co. & M/s Brave Traders. The appellant failed to prove the details of goods supplied with cogent evidence from the said entities. The AO has made detailed enquiries by deputing ITI to serve summons to Samrat Dial Pvt. Ltd. Company, a nonfiler and to its directors & reported that entities doesn’t exist at the given address at Surat. The owner of the said premises stated that he used that premises and never gave on rent to said company or its director. This company directly dealt with the bogus entities, Asahi Trading Co. & M/s Brave Traders, which were also non-filers and the transactions were found to be non- genuine and without any business rationale. There was no genuine business transaction or relation of M/s Asharfi Empire Prop. Imran Ahmad, the appellant and thus, the nature & source of huge payments in the form of alleged purchases from ‘on paper’ entities could not be proved to be genuine. The appellant’s submission of handwritten confirmations remained an afterthought and unsubstantiated with any cogent evidence. Furthermore, the appellant also claimed that the AO had made addition of Rs.4,02,55,000/- based on irrelevant material and third party evidences which were not even confronted before being used against the assessee. In this regard, it is noticed that the reasons for reopening was intimated to the appellant against which, the appellant had raised no objections. Thereafter, various opportunities were provided to the appellant vide notices & show cause during the assessment proceedings but appellant avoided the statutory notices. Also before finalizing the assessment, the AO provided the final opportunity to the appellant vide Draft Assessment Order, however, the appellant did not respond to the same. Therefore, I find no merit in this ground of the appellant.
Thus, in view of above discussion and rationale held in the above cases, it is held that the appellant has failed to establish the genuineness of purchases amounting to Rs.4,02,55,000/-and entire bogus purchases are to be disallowed as there is no genuine sale and GP rate is not applicable here, hence, it is held that the AO has rightly disallowed the entire purchases. Ground No.4 & 5 of the appellant are dismissed.”
This what leaves the assessee aggrieved.
Coming to the assessee’s legal ground herein challenging validity of the impugned reopening, we note that he has not even filed his paper-book despite the fact that the instant appeal has been listed for hearing for the second time before the tribunal. This is indeed coupled with the fact that the learned CIT(A)/NFAC has already discussed the entire factual matrix at length; including various recent landmark precedents coming from the hon’ble apex court in Rajeev Bansal (supra), whilst upholding the impugned reopening. We thus reject the assessee’s legal ground raised
in the instant appeal.
6. Next comes the assessee’s sole substantive ground on merits that both the learned lower authorities have erred in law and on fact in disallowing his purchases sourced from the twin entities M/s. Brave Traders and M/s. Ashi Trading Co. involving Rs.1,31,25,000/- and Rs. 2,71,30,000/-; respectively, in 8 | P a g e assessment order dated 21.03.2022 and upheld in the lower appellate discussion. The Revenue vehemently argues in support of both the learned lower authorities’ respective detailed findings that his twin suppliers have been found to be a part of a well- orchestrated accommodation entry network wherein the assessee could not prove the genuineness of the impugned purchases. The fact, however, remains that neither both the learned lower authorities have rejected the assessee’s business activity and corresponding sales nor have they doubted the turnover declared at his behest. We are very much conscious of the fact that the assessee also failed to plead and prove the impugned purchases sourced from both the above entities as genuine ones all along. Be that as it may, various recent judicial precedents (2025) 173 taxmann.com 592 (Guj.) Ravjibhai Becharbhai Dhamelia vs. ACIT; (2024) 160 taxmann.com 110 (Bom) PCIT Vs. Hitesh Mody (HUF), (2024) 160 taxmann.com 93 (Del) PCIT Vs. Forum Sales (P) Ltd.; (2025) 172 taxmann.com 283 (Bom) PCIT Vs. Kanak Impex (India) Ltd; (2025) 178 taxmann.com 424 (Del. – Trib.) DCIT Vs. Kohinoor Foods Ltd.; and (2025) 177 taxmann.com 836 (Delhi-trib.) DCIT
9 | P a g e Vs. Tirupati Matsup (P.) Ltd. have recently decided the instant issue of bogus purchases with divergent views as well.
Faced with this situation and in the larger interest of justice, we deem it appropriate to restrict the impugned bogus purchases disallowance to a lumpsum GP @ 5% only with a rider that the same shall not treated as a precedent. Necessary computation shall follow as per law.