ACIT , MUMBAI V. E EYRES RUBBER CHEMICALS PVT. LTD., MUMBAI

ITA 2631/MUM/2025

AI Insights

The case involves an appeal by the revenue and a cross objection by the assessee, E Eyres Rubber Chemicals Pvt Ltd, against the order passed by the National Faceless Appeal Centre, Delhi / CIT(A), for the Assessment Year 2009-10. The primary issue was the restriction of additions to 10% of bogus purchases by the CIT(A), whereas the AO had made a 100% addition. The AO had identified bogus purchases amounting to Rs. 15,56,997 from various parties, which were deemed non-genuine based on investigations and the cancellation of their TINs by the Sales Tax Department. The CIT(A) reduced the addition to 10% without sufficient consideration of the evidence and admissions made by the assessee during the assessment. The ITAT found that the CIT(A)'s decision did not align with the facts and the legal precedents, particularly in light of the Supreme Court's decision in NK Protein Vs. DCIT and the Bombay High Court's decision in PCIT Vs. Kanak Impex (India) Ltd, which upheld 100% disallowance on bogus purchases.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711396 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Assessment Year: 2009-2010
• Other Referred Cases: PCIT Vs. Jagadish Thakkar, NK Protein Vs. DCIT, PCIT Vs. Kanak Impex (India) Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HEMANSHU JOSHI
• Assessee Lawyers: PRAKASH JHUNJHUNWALA
• Keywords: Condonation of delay; Bogus purchase; Bogus

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “E” BENCH MUMBAI BEFORE HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER & SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER ITA No. 2631/Mum/2025 (Assessment Year: 2009-10) ACIT – 4(2)(1) Room No. 640, Aayakar Bhavan, Mumbai – 400020 Vs. E Eyres Rubber Chemicals Pvt Ltd Office No. 5 7 Marine Lines Jolly Bhavan 2 Mumbai – 400020. PAN/GIR No. AAACE2257J (Applicant) (Respondent) CO. No. 151/Mum/2025 (Assessment Year: 2009-10) E Eyres Rubber Chemicals Pvt Ltd Office No. 5 7 Marine Lines Jolly Bhavan 2 Mumbai – 400020. Vs. ACIT – 4(2)(1) Room No. 640, Aayakar Bhavan, Mumbai – 400020 PAN/GIR No. AAACE2257J Assessee by Shri Prakash Jhunjhunwala Revenue by Shri Hemanshu Joshi, Sr. DR Date of Hearing 02.07.2025 Date of Pronouncement 23.07.2025 आदेश / ORDER PER SANDEEP GOSAIN, JM: The present appeal and cross objection has been filed by the revenue and CO the assessee respectively Printed from counselvise.com 2 ITA No.2631/Mum/2025 & CO No. 151/Mum/2025 E Eyres rubber Chemicals Pvt Ltd., Mumbai. challenging the impugned order dt. 17.02.2025 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi / CIT(A), for the A.Y 2009- 10. First of all we take up revenue appeal in ITA No. 2631/Mum/2025. ITA No. 2631/Mum/2025, A.Y 2009-10 2. Grounds of appeal Nos. 1 & 2 raised by the revenue are interrelated and interconnected and relates to challenging the order Ld. CIT(A) in restricting the additions to 10% of the bogus purchases as against 100% of the bogus purchases made by the AO. Therefore we have decided to adjudicate these grounds through the present consolidated order. 3. We have heard the counsels for both the parties, perused the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. 4. From the records, we noticed that the addition in the present case was made by the AO on account of the fact that the assessee had made bogus purchases of Rs. 15,56,997/- during the year under consideration from the following parties: Srl No Name of the concern F.Y Amount 1 Alpesh Trading Co. 2009-10 3,46,281 Printed from counselvise.com 3 ITA No.2631/Mum/2025 & CO No. 151/Mum/2025 E Eyres rubber Chemicals Pvt Ltd., Mumbai. 2 Growell Enterprises 2009-10 4,00,972 3 Caprihans Trade Centre 2009-10 6,77,664 4 Shreeji Sales 2009-10 1,32,080 Total Bogus purchases 15,56,997 5. It is important to mention here that it was noticed by the AO while making the additions that assessee had accepted that the purchases have been made from the above parties and had only produced the invoices in respect to such purchases. However, it was found that such invoices carry primarily (i) TIN allotted to the party from whom the purchase has been made, (ii) address of the party making the sale, (iii) details of the materials supplied to the assessee, and (iv) signature of the authorized person making the sale. However, the genuineness of such invoices cannot be ascertained, and because of the following reasons it was inferred by the AO that such documents are false and fictitious: (i) The very reason of reopening the case of the assessee is that such parties have been found to be non-genuine by the Sales Tax Department, and their TIN (which is so depicted on the invoices) has been cancelled. Thus, the TIN and its genuineness cannot be admitted as conclusive evidence of the existence of the party making the sale. (ii) The inquiry conducted by the Inspector of Income Tax, has yielded that no such party exists at the disclosed address. Thus, the address given on such documents Printed from counselvise.com 4 ITA No.2631/Mum/2025 & CO No. 151/Mum/2025 E Eyres rubber Chemicals Pvt Ltd., Mumbai. cannot be considered as genuine for the want of verifiability. (iii) Whether the materials were really supplied or not i.e. whether there was an actual delivery of goods or not, cannot be ascertained. The invoices so produced do not carry the seal / stamp of any check-post or the Commercial Tax Department to enable the AO to conclude that physical delivery of goods actually took place. (iv) The assessee has been unable to produce the party which made the sale. As such, the signatures also cannot be verified. (v) In the instant case, the assessee, in his audited accounts, has asserted that he has made purchases from the parties mentioned earlier. As mentioned earlier, the burden of proving the same lies on him. He has been confronted with all evidence that undoubtedly points towards the purchases being bogus. He has been provided full opportunity to rebut the same. However, he has failed to discharge this burden by way of bringing any incontrovertible evidence on record in support of his claim. 6. It is important to mention that the, assessee during the course of assessment also accepted that since the confirmations are not available therefore himself admitted Printed from counselvise.com 5 ITA No.2631/Mum/2025 & CO No. 151/Mum/2025 E Eyres rubber Chemicals Pvt Ltd., Mumbai. and accepted the amount paid to ‘the parties may be made as addition to his assessed income’. 7. However Ld. CIT(A) without considering these facts more particularly the ‘admission made by the assessee’ himself and also in the absence of any documents regarding actual delivery of the goods had restricted the additions to 10%. 8. Although Ld. AR supported his arguments for restricting the additions @ 10% of the purchases by Ld. CIT(A) by relying upon the decision of the Coordinate Bench of ACIT Vs. E Eyres Rubber Chemicals Pvt. Ltd in ITA No. 4723/Mum/2023. 9. After having gone through the facts of the entire case and also considering the arguments put forth before us, we found that the assessee has primarily relied upon the decision of Coordinate Bench of ITAT in ITA No. 4723/Mum/2023 for A.Y 2010-11, wherein the Coordinate Bench according to the assessee in the similar facts had restricted the additions @ 10% which is in line with the decision of Hon’ble Jurisdictional Bombay High Court in the case of PCIT Vs. Jagadish Thakkar in ITA No. 781/2018 dated 05.08.2022 10. However in our considered view the said decision of the Coordinate Bench of ITAT is of no help to the assessee Printed from counselvise.com 6 ITA No.2631/Mum/2025 & CO No. 151/Mum/2025 E Eyres rubber Chemicals Pvt Ltd., Mumbai. as in the decision of the Coordinate Bench the facts are quite different. As in that case there was a specific proof regarding the movement of the material through delivery challans and also other corroborative sales. However in the present case there is no proof of movement of the goods coupled as delivery challans. In addition to the above in the year under consideration there a ‘categorical admission’ of assessee himself during the course of assessment wherein the assessee himself had admitted to make addition of the entire amount paid by the assessee to the parties in his assessed income. Since the said facts were not there while passing the order of assessment for the A.Y 2010-11. Therefore, the decision in the case of ACIT Vs. E Eyres Rubber Chemicals Pvt. Ltd (Supra). 11. We have further noticed that Ld. DR has raised specific ground to the effect that the decision of the Hon’ble Supreme Court in the case of NK Protein Vs. DCIT which has also been recently followed by the Hon’ble Bombay High Court in the case of PCIT Vs. Kanak Impex (India) Ltd in ITA No. 791 of 2021 decided on 03.03.2025 wherein 100% of disallowance on bogus purchase were upheld. 12. To our mind the arguments raised by the Ld. DR carries substance and has merits in it. Although when the present appeal was decided by Ld. CIT(A) by that time the Printed from counselvise.com 7 ITA No.2631/Mum/2025 & CO No. 151/Mum/2025 E Eyres rubber Chemicals Pvt Ltd., Mumbai. decision of the Hon’ble Bombay High Court in the case of Kanak Impex (India) Ltd (Supra) was not available, but the decision of Hon’ble Supreme Court in the case of NK Protein Vs. DCIT (supra) was available. Since now when the latest decision of Hon’ble Jurisdictional Bombay High court in the case of Kanak Impex (India) Ltd (Supra). Therefore considering the entire facts of the present case, we are of the view that the matter in question requires to be restored back to the file of AO with a direction to consider the facts of the present case and while keeping in view the decision of the Hon’ble Jurisdictional High Court in the Kanak Impex (India) Ltd (Supra) decide the matter afresh, needless to say after providing opportunity of hearing to both the parties. The assessee shall not seek any adjournment on frivolous grounds and shall remain cooperative during the course of proceedings. 13. The assessee has also filed cross objection, however the same are not within the limitation for which a separate application for seeking condonation of delay has been filed. Thus after considering the facts and also the contents of the application we noticed that no prejudice shall be caused to the department and moreover the appeal filed by the department is still pending. Therefore, while condoning the delay, we admit the CO filed by the assessee for adjudication on merits. Printed from counselvise.com 8 ITA No.2631/Mum/2025 & CO No. 151/Mum/2025 E Eyres rubber Chemicals Pvt Ltd., Mumbai. Since we have restored the matter back to the file of Ld.AO therefore we also restore this cross objection to the file of AO for afresh adjudication and the assessee shall be at liberty to raise the grounds raised in the present CO before the Ld.AO who shall adjudicate the same afresh on merits. 14. Before parting, we make it clear that our decision to restore the matter back to the file of the AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the Ld. AO independently in accordance with law. 15. In the result, the appeal filed by the revenue and CO filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 23.07.2025 Sd/- Sd/- (OM PRAKASH KANT) (SANDEEP GOSAIN) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 23/07/2025 KRK, PS Printed from counselvise.com 9 ITA No.2631/Mum/2025 & CO No. 151/Mum/2025 E Eyres rubber Chemicals Pvt Ltd., Mumbai. आदेश की \bितिलिप अ\u000eेिषत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. \u000eथ / The Respondent. 3. संबंिधत आयकर आयु\u0019 / The CIT(A) 4. आयकर आयु\u0019(अपील) / Concerned CIT 5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण,मु\u0003बई/ DR, ITAT, Mumbai 6. गाड फाईल / Guard file. आदेशानुसार/BY ORDER, स\u000eािपत ित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु\u0003बई मु\u0003बई मु\u0003बई मु\u0003बई / ITAT, Mumbai Printed from counselvise.com "