ARVIND KUMAR,PANIPAT V. PCIT, ROHTAK, ROHTAK

ITA 2178/DEL/2025

AI Insights

The case involves Arvind Kumar, the appellant, contesting an order by the PCIT, Rohtak, which was based on a re-assessment under section 148 of the Income Tax Act, 1961. The re-assessment was triggered by allegations that purchases claimed by the assessee from Kanheya Exports were not genuine. The Assessing Officer, after a detailed scrutiny including physical verification and collection of statements, disallowed certain expenses under section 37. The PCIT later contested this decision, suggesting the disallowance should be under section 69C with a higher tax rate as per section 115BBE, arguing that the initial assessment was prejudicial to the interest of the Revenue. The Tribunal, however, found that the Assessing Officer had conducted a thorough inquiry and taken a reasonable view, thus setting aside the PCIT's order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 775898 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2018-2019
• Appeal Filed On: 01-04-2025
• Other Referred Cases: CIT vs Amitabh Bachchan 384 ITR 200, Malabar Industrial Co Ltd 243 ITR 83, Shashikant Bhavajjibhai Rajpara vs PCIT, ITA 59/RJT/2022, Vijuba Jutubha Jadeja vs PCIT, ITA 105/RJT/2022, NK Proteins Ltd [2017] 84 taxmann.com 195 (SC)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JITENDER SINGH
• Assessee Lawyers: DHRUV GOEL
• Keywords: Set aside; Bogus purchase; Revision of order; Bogus
• Section: 147; 148; 263; 69C; 37

Judgement Text

"Page 1 of 7 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘A’ BENCH, NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER, AND SHRI NAVEEN CHANDRA, ACCOUNTANT MEMBER ITA No. 2178/DEL/2025 [A.Y 2018-19] Arvind Kumar Vs. The PCIT C/o Piyush International Rohtak 50-B, Sector -25, HUDA Panipat, Haryana PAN: AEMPK 1829 B (Appellant) (Respondent) Assessee By : Shri Dhruv Goel, CA Department By : Shri Jitender Singh, CIT-DR Date of Hearing : 26.08.2025 Date of Pronouncement : 26.08.2025 ORDER PER NAVEEN CHANDRA, AM :- This appeal by the assessee is preferred against the order of the Pr. CIT, Rohtak dated 21.03.2025 framed u/s 263 of the Income-tax Act, 1961 [the Act, for short] pertaining to Assessment Year 2018-19. Printed from counselvise.com ITA No. 2178 /DEL/2025 Arvind Kumar Vs PCIT [A.Y 2018-19] Page 2 of 7 2. The sum and substance of the grievance of the assessee is that the assessment order dated 27.03.2023 framed u/s 147 r.w.s. 144B of the Act is neither erroneous nor prejudicial to the interest of the Revenue. 3. Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules. 4. Briefly stated, the facts of the case are that the case of the assessee was reopened u/s 148 of the Act on the basis of the allegation that the assessee had claimed purchases from Kanheya Exports which was not a genuine entity. During the course of scrutiny assessment proceedings, the assessee furnished audited books of account, ledger accounts, purchase bills, bank statement and certificate from the auditor. The Assessing Officer also conducted physical verification from supplier and collected statement from the controller of the entity. Finally, the Assessing Officer held the expenses of Rs. 2,14,810/- claimed by the assessee to be not genuine and disallowed the same u/s 37 of the Act. 5. Assuming jurisdiction conferred upon by provisions of section 263 of the Act, the PCIT issued a show cause notice to the assessee stating that the disallowance was to be made u/s 69C and not section 37 and higher rate of 60% as per section 115BBE of the Act was applicable Printed from counselvise.com ITA No. 2178 /DEL/2025 Arvind Kumar Vs PCIT [A.Y 2018-19] Page 3 of 7 instead of normal rates and thus the assessment order was prejudicial to the interest of the Revenue. 6. Reply of the assessee did not find any favour with the PCIT, who was of the firm belief that the assessment order dated 27.03.2023 is not only erroneous but also prejudicial to the interest of the Revenue and set aside the order for fresh adjudication. The PCIT was of the view that the decision of the Hon'ble Supreme Court in the case of N K Proteins was not followed by the Assessing Officer, Assessing Officer failed to conduct proper enquiry and normal rate of tax was incorrectly charged by the Assessing Officer instead of special rate of 60 u/s 115BBE. 7. Before us, the ld counsel of the assessee argued that the assessment order was not erroneous as the Assessing Officer has taken a possible view and conducted adequate enquiry. The ld AR further contended that there is no mandate in law that all the disallowance of business expense is to be made u/s 69C only. The ld AR argued that the reliance on the decision of NK Protein is not entirely correct and that the PCIT failed to point out enquiry not conducted by the AO. The ld AR relied on the decision taken by hon’ble Supreme Court in CIT vs Amitabh Bachchan 384 ITR 200; Malabar Industrial Co Ltd 243ITR 83 Hon’ble Rajkot ITAT Bench in the case of Shashikant Bhavajjibhai Printed from counselvise.com ITA No. 2178 /DEL/2025 Arvind Kumar Vs PCIT [A.Y 2018-19] Page 4 of 7 Rajpara vs PCIT, ITA 59/RJT/2022 (dated 22.3.2023) and Vijuba Jutubha Jadeja vs PCIT, ITA 105/RJT/2022 (dated 2.8.2023). 8. Per contra the ld DR heavily relied on the order of the PCIT. 9. We have heard the rival submissions and have perused the materials on record. All that we have to see is whether the Assessing Officer has examined the issues considered by the PCIT in holding that the assessment order is erroneous and prejudicial to the interest of the Revenue. The quarrel is in respect of directions of the PCIT to the Assessing Officer to conduct required enquiry and pass fresh assessment order. 10. In our considered opinion, in this case, the Assessing Officer disallowed 100% purchases and PCIT has not doubted the same. Only issue is whether disallowance should be u/s 37 or 69C. Against this, Assessing Officer gave specific finding that as per his opinion, disallowance should be u/s 37 of the Act. Thus, possible view has been taken by Assessing Officer and in such cases, Courts have taken consistent view that action u/s 263 is invalid. The our view is fortified by the Hon'ble Supreme Court decision in case of Malabar Industrial Co Ltd and CIT vs Amitabh Bachchan (supra). The Assessing Officer has accepted a possible view and the PCIT wants to impose his view on the Printed from counselvise.com ITA No. 2178 /DEL/2025 Arvind Kumar Vs PCIT [A.Y 2018-19] Page 5 of 7 possible view taken by the Assessing Officer, which is against the cannons of law. 11. We are further of the considered view that Section 37 of the Act is specific provision which disallows business expense when it is found to be not wholly and exclusively for business. In contrast, section 69C applies where the explanation of assessee regarding nature and source of expense was not satisfactory to Assessing Officer. In this case, the nature of expense i.e. purchases and source of expense i.e bank payments are not doubted. Only doubt was regarding genuineness of expense and thus disallowance has been correctly made u/s 37 by AO. Our views are fortified by Hon’ble Rajkot ITAT Bench in the case of Shashikant Bhavajjibhai Rajpara vs PCIT, ITA 59/RJT/2022 (dated 22.3.2023) and Vijuba Jutubha Jadeja vs PCIT, ITA 105/RJT/2022 (dated 2.8.2023) where it was held that if purchase is held to be bogus then it is case of \"no expense\" and in such a position, disallowance cannot be u/s 69C of the Act. 12. We also find that the PCIT’s observation that the Assessing Officer has incorrectly ignored to apply ratio laid down by Hon’ble Supreme Court in c/o NK Proteins Ltd [2017] 84 taxmann.com 195 (SC) is not valid. The said decision was a non-speaking order where the Hon'ble Supreme Court dismissed SLP filed by the assessee against the order of Printed from counselvise.com ITA No. 2178 /DEL/2025 Arvind Kumar Vs PCIT [A.Y 2018-19] Page 6 of 7 the Hon'ble Gujarat High Court and it is a settled law that such an order does not get binding force not covered under the doctrine of merger finds force. The question before Gujarat High Court was regarding quantum of addition of bogus purchases i.e. 100% or 25% and section of disallowance (s.69C or s.37) was never in dispute. 13. We also find that the Assessing Officer had, in re-assessment u/s 143(3)/147 conducted physical verification from supplier, collected statement of alleged controller of supplier, considered reply of assessee and thereafter passed order disallowing expense u/s 37 of the Act. Thus, observation of PCIT that there is lack of enquiry on the part of AO, is not justified. We further find that the PCIT has failed to point out enquiry not conducted by Assessing Officer. 14. Considering the facts of the case in hand, in totality, in light of the judicial decisions discussed hereinabove, we set aside the order of the PCIT and restore that of the Assessing Officer dated 27.03.2023 framed under section 147 r.w.s 144B of the Act. 15. In the result, appeal of assessee in ITA No. 2178/DEL/2025 is allowed. Printed from counselvise.com ITA No. 2178 /DEL/2025 Arvind Kumar Vs PCIT [A.Y 2018-19] Page 7 of 7 Order pronounced in open court on 26.08.2025. Sd/- Sd/- [SATBEER SINGH GODARA] [NAVEEN CHANDRA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated : 09th SEPTEMBER, 2025. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) Asst. Registrar, 5. DR ITAT, New Delhi Sl No. PARTICULARS DATES 1. Date of dictation of Tribunal Order 2. Date on which the typed draft order is placed before the Dictating Member 3. Date on which the typed draft order is placed before the other Member [in case of DB] 4. Date on which the approved draft order comes to the Sr. P.S./P.S. 5. Date on which the fair Order is placed before the Dictating Member for sign 6. Date on which the fair order is placed before the other Member for sign [in case of DB] 7. Date on which the Order comes back to the Sr. P.S./P.S for uploading on ITAT website 8. Date of uploading, inf not, reason for not uploading 9. Date on which the file goes to the Bench Clerk 10. Date on which the file goes for Xerox 11. Date on which the file goes for endorsement 12. The date on which the file goes to the Superintendent for checking 13. Date on which the file goes to the Assistant Registrar for signature on the order 14. Date on which the file goes to the dispatch section for dispatch the Tribunal order 15. Date of Dispatch of the Order 16. Date on which the file goes to the Record Room after dispatch the order Printed from counselvise.com "