ACIT, CIRCLE-6(1)(2), MUMBAI, MUMBAI V. THE OFFICIAL LIQUIDATOR IN THE CASE OF MS. ASIAN ELECTRONICS LTD. , MUMBAI

ITA 3357/MUM/2023

AI Insights

The case involves the Revenue's appeal against the CIT(A)'s decision which reduced the addition made by the Assessing Officer (AO) on alleged bogus purchases by M/s. Asian Electronics Ltd. The AO had initially added the entire amount of purchases as bogus based on information from the Sales Tax department, which was routed through DGIT(Inv). The CIT(A) found that only a portion of the purchases could be considered as bogus and applied a 25% disallowance. The tribunal agreed with the CIT(A), noting that the assessee had provided sufficient documentation to substantiate the purchases, and merely the absence of confirmation from the suppliers was not a ground to treat all purchases as bogus.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 669165 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RITESH MISRA
• Assessee Lawyers: MANGESH THAKORE
• Keywords: Bogus purchase; Accommodation entries; Bogus
• Section: 143(3)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘E’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.3357/Mum/2023 (Assessment Year :2009-10) Asst. Commissioner of Income Tax Circle 6(1)(2), Mumbai Vs. The Official Liquidator in the case of M/s. Asian Electronics Ltd., 5th Floor, Bank of India Building, Mahatma Gandhi Road, Fort, Mumbai-400 023 PAN/GIR No.AABCA0832C (Appellant) .. (Respondent) Assessee by Shri Mangesh Thakore Revenue by Shri Ritesh Misra, CIT DR Date of Hearing 11/06/2025 Date of Pronouncement 26/06/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the Revenue against order dated 28/06/2023 passed by NFAC, Delhi for the quantum of assessment passed u/s. 143(3) r.w.s. 147 for the A.Y.2009-10. ITA No.3357/Mum/2023 The Official Liquidator in the case of M/s.Asian Electronics Ltd., 2 2. The only ground raised by the Revenue is that ld. CIT(A) was not correct in directing the ld. AO for restricting the addition of 25% with regard to bogus purchases. 3. The brief facts are that in this case original return was filed u/s.139(1) on 30/09/2009 declaring ‘Nil’ income. Assessment order was passed u/s.143(3) on 30/12/2011 assessing the total income at Nil after allowing deduction u/s.80IC and book profit of Rs.12,04,52,123/-. Thereafter, assessee’s case was reopened u/s.147 and notice u/s.148 was issued on 18/02/2013 on the ground that there was an information received from DGIT(Inv.) that assessee had made purchases of Rs.23,31,57,521/- from the following two parties:- Sr. No. Name of the Supplier Amount (Rs.) 1 Siddhi Enterprise 6,07,65,784 2 Saileela Trading Pvt. Ltd., 17,23,91,737 Total 23,31,57,521 4. This information was received from Sales Tax department and accordingly, ld. AO had reason to belief that income to the tune of Rs.23,31,57,521/- had escaped assessment. The ld. AO simply based on the information received, has made the entire addition of the purchases. Whereas, the case of the assessee was that it has furnished the copies of ledger account, purchase bills, delivery challans, corresponding sales alongwith VAT etc., The ld.AO has confirmed the addition on the ground that production of invoice and delivery challan is not relevant and assessee has not furnished the confirmation from the said parties. Further ITA No.3357/Mum/2023 The Official Liquidator in the case of M/s.Asian Electronics Ltd., 3 simply making the purchases through account payee cheques from the books, the source of which has been shown in the books is not sufficient. Apart from that assessee has not produced the parties before the ld. AO. After detailed discussion he has made the entire addition of bogus purchases not only of Rs.23,31,57,521/- but also purchases of Rs.18,54,96,002/- made from Siddhi Vinayak Traders and accordingly, addition of Rs.41,86,53,520/- was made. He also made alternate addition by holding that it is an undisclosed investment. 5. The ld. CIT(A) has restricted the disallowance to 25% of the bogus purchases of Rs.41,86,53,523/- and has restricted addition to Rs.10,46,86,380/-. 6. We have heard ld. DR and also perused the relevant finding given in the impugned order. The entire premise of the addition which had been made by the ld. AO on account of unexplained purchases of Rs.41,86,53,523/- is based on information received from Sales Tax department rooted through DGIT(Inv) that two parties namely Siddhi Enterprises and Saileela Trading Pvt. Ltd., were indulged in providing accommodation entries and assessee is one of the beneficiaries. Based on this, case was reopened u/s.147. Before the ld. AO, assessee furnished ledger accounts, bank statement, delivery challan, corresponding sales and tax invoices. The ld. AO has rejected these documents holding that ledger accounts are own prepared documents and delivery challan does not mention any truck, lorry number or any other ITA No.3357/Mum/2023 The Official Liquidator in the case of M/s.Asian Electronics Ltd., 4 mode of transportation. Apart from that, he had also stated that assessee had not provided the present address. Even the VAT bill and VAT assessment has not been treated to be a material evidence by the ld. AO. Simply based on the information of the Sales Tax department, ld. AO has made the addition. Now once the assessee has shown source of the purchases from the books reflecting in the bank statement and corresponding sales has not been disputed then, to infer that entire purchases are outside the books so as to make entire addition is unjustified. At the most it could be a case of suppression of profits whereby even if it is accepted that assessee might have paid the cheque to such parties and after receiving the cash back has purchased the material from the grey market, it only leads to suppression of profits. In such a scenario application of GP rate is sufficient. Here in this case ld. CIT(A) has already applied huge GP rate of 25% of such purchases which itself is at a much higher side. Accordingly, we do not find any infirmity in the order of the ld.CIT(A) and the same is confirmed. 7. In the result, appeal of the Revenue is dismissed. Order pronounced on 26th June,2025. Sd/- (GIRISH AGRAWAL) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 26/06/2025 KARUNA, sr.ps ITA No.3357/Mum/2023 The Official Liquidator in the case of M/s.Asian Electronics Ltd., 5 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// "