DAKSHA VIMLESH DOSHI,MUMBAI V. INCOME TAX OFFICER, NAVI MUMAI

ITA 4160/MUM/2025

AI Insights

The case involves Daksha Vimlesh Doshi, who appealed against the order of the Commissioner of Income-Tax (Appeals) concerning the assessment year 2011-12. The primary contention was regarding the addition of Rs.15,72,759 as non-genuine purchases, which the Assessing Officer (AO) categorized based on information from the Investigation Wing and subsequent inquiries. The Tribunal found that while the purchases were from suspicious dealers, the entire purchase consideration could not be disallowed as corresponding sales were not disputed. The Tribunal referenced several precedents where only the profit element from such transactions could be added to the income.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 848505 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Mumbai
• Assessment Year: 2011-2012
• Appeal Filed On: 19-06-2025
• Other Referred Cases: Nitin Ramdeoji Lohia [2022] 145 taxmann.com 546 (Bombay), PCIT vs. Kanak Impex (India) Ltd. (ITA No.791 of 20212 dated 03.03.2025), Tagaram Ganeshram Prajapati in ITA No.1006/Mum/2026 dated 25.03.2026, Nikunj Eximp Enterprises (in Writ Petition no 2860, order dt. 18.6.2014)
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHAGIRATH RAMAWAT
• Assessee Lawyers: BHUPENDRA SHAH
• Keywords: Set aside; Bogus purchase; Third party statement; Accommodation entries; Opportunity of cross examination; Borrowed satisfaction; Bogus
• Section: 148; 143(3); 271(1)(c)

Judgement Text

"1 IN THE INCOME-TAX APPELLATE TRIBUNAL, MUMBAI “K (SMC)” BENCH, MUMBAI BEFORE SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No.4160/MUM/2025(AY:2011-12) Daksha Vimlesh Doshi, 119, Reena Complex, Nathani Road, Vidyavihar Mumbai- 400086. vs. Income tax officer, Tower 6, vashi station, Navi Mumbai, Mumbai-400703. PAN/GIR No: AHPPD0605A (Appellant) (Respondent) Assessee by Shri Bhupendra Shah Revenue by Shri Bhagirath Ramawat (SR DR) Date of Hearing 18.02.2026 Date of Pronouncement 27.03.2026 O R D E R PER BIJYANANDA PRUSETH, AM: This appeal filed by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘Act’) by the Commissioner of Income-Tax (Appeals), ADDL/JCIT(A)-6, Delhi [in short, ‘CIT(A)’], dated 30.04.2025 for the assessment year (AY) 2011-12. 2. The grounds of appeal raised by the assessee are as under: “1) In the facts and the circumstances of the case and in law, the learned A.O. erred in passing the order u/s 143(3) r.w.s 147 and therefore rendering the whole re-assessment bad in law, also on the basis of borrowed satisfaction, presumption and surmises and also erred in disregarding various objections raised in this regard. 2) In the facts and circumstances of the case and in law, the Assessing Officer erred in adding Rs.15,72,759/-as alleged non-genuine purchases being 100% of the total purchases made from the said parties a) Even though the payment for purchases is made from the books through banks and cannot be termed as bogus, Printed from counselvise.com ITA No.4160/MUM/2025/AY 2011-12 Daksha Vimlesh Doshi 2 b) Without appreciating the fact that no addition can be made even if the supplier is not traceable as per the judgment of the Bombay High Court c) Sales cannot be made without purchases d) Quantity records are available e) only on the basis of the information on the website www.mahavat.gov.in about 2 suspicious dealers whose copy of statement recorded were not furnished to the appellant and without affording cross examination u/s 131. f) No cash trail is established by the Assessing Officer g) Rejecting confirmations of suppliers E) h) Without rejecting books i) Without showing comparable case of GP of more than 100% in diamond trading business overlooking the jurisdictional Bombay High Court in the case of M/S Haji Mohd. Adam and also followed by the jurisdictional ITAT in several cases holding that only differential GP between verifiable and unverifiable purchases could only be added instead of whole amount of purchases which is not verifiable 3} In the facts and circumstances of the case and in law, the JCIT[A] erred in disregarding documents and written submissions filed by the Appellant and also disregarding various case laws quoted and also disregarding case law of Bombay high court in the case of Nitin Ramdeoji Lohia [2022] 145 taxmann.com 546 (Bombay) [21-10-2022]. 4) In the facts and circumstances of the case and in law, the Assessing Officer erred in initiating penalty u/s 271(1)(c) and charging interest u/s 234A, B C & D Relief Prayed 1) To quash the reopening u/s 1483. 2) To delete the addition of Rs1572759/- made out of purchases 3) To delete initiation penalty u/s 271(1)(c) and charging interest u/s 234A, B C & D.” 3. Facts of the case in brief are that the assessee has filed its return of income for the AY 2011-12 on 26.09.20211 declaring total income of Rs.3,91,488/-. Based on the information from the investigation levied that the assessee had taken accommodation bill for purchase through hawala operators, the case was Printed from counselvise.com ITA No.4160/MUM/2025/AY 2011-12 Daksha Vimlesh Doshi 3 reopened u/s 147 and notice u/s 148 of the Act was issued on 15.03.2016. The assessee was carrying on trading in plywood under the proprietary concern M/s Shree Ambika Plywood. Out of total purchase of Rs.80,83,554/-, purchases of Rs.19,63,688/- were from 2 suspicious dealers who issued accommodation entries. The assessee failed to furnish evidence such as delivery challans, transportation details etc. to substantiate her claim of purchases from the above parties. The appellant submitted details of subsequent payment of Rs.4,46,776/- to Victor Intercate Pvt. Ltd. However, it could not adduce details in respect of Om Corporation of Rs.15,16,912/-. The AO added the entries purchase and 12.5% and the above amount, totaling to Rs.15,72,759/- (Rs.15,16,912/- + Rs.55,847/-) and determined total income at Rs.19,95,630/- as against returned income of Rs.4,48,472/-. 4. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The CIT(A) observed that the findings of the AO are based on statements and documentary evidences gathered during the inquiry demonstrating that the seller was merely issuing invoices without any real trade activity. The assessee argued that addition was made solely based on third party statement without cross- examination. The CIT(A) did not agree with the contention of the assessee because opportunity was given to produce the parties for verification, which the appellant failed to do. The CIT(A) confirmed the addition, but set aside the addition of tax payment of Rs.33,410/- for verification by AO. Printed from counselvise.com ITA No.4160/MUM/2025/AY 2011-12 Daksha Vimlesh Doshi 4 5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The Ld. AR has filed a paper book giving details of purchases along with name, address of the parties. He has enclosed copy of the details filed before the lower authorities. He submitted that the purchases are genuine and hence, the addition made by the AO may be deleted. He also argued that the reopening u/s 147 of the Act was invalid. 6. On the other hand, the Ld. Sr. DR of the revenue has supported the order of the AO and CIT(A). 7. We have heard both parties and perused the materials on record. Ground No.1 pertains to validity of the reopening u/s 147 of the Act. It is seen that the original return was processed u/s 143(1) and no order u/s 143(3) was passed. Hence, the reasons for reopening was not before the AO for consideration. Based on the information from the Investigation Wing the case was reopened u/s 147 of the Act. The AO had credible information regarding escapement of income on account of bogus purchases from the two parties amounting to Rs.19,63,688/-. The Ld. AR has not seriously argued in support of the ground regarding validity of reopening u/s 147 of the Act. Hence, the ground is dismissed. 8. Ground No.2 and 3 are interrelated and pertain to addition of Rs.15,72,759/- on account of alleged non-genuine purchases, being 100% of the total purchases. The Ld. AR has filed a paper book containing the details submitted before the lower authorities. He has relied on the same documents and submitted that the entire purchases cannot be added when the sales are not disputed. 9. On the other hand, the Ld. CIT DR relied on the order of the lower authorities. He submitted that the appellant failed to file necessary details in Printed from counselvise.com ITA No.4160/MUM/2025/AY 2011-12 Daksha Vimlesh Doshi 5 support of the genuineness of the purchases before the AO as well as the CIT(A). The transactions involved dealings with hawala operator and the assessee failed to provide any independent evidence of the actual movement of the goods. The AO had also confronted the assessee with the adverse findings of the GST department that the purchases were not bogus, which could not be properly explained. The assessee also failed to produce the parties before the AO for examination. He also relied on the decision of Hon’ble Bombay High Court in case of PCIT vs. Kanak Impex (India) Ltd. (ITA No.791 of 20212 dated 03.03.2025). 10. We have heard both parties and perused the materials on record. We have also deliberated on the decisions relied upon by the Ld. AR. In this case, the AO has added Rs.15,72,759/-, being 100% of the total non-genuine purchases from M/s Om Corporation. The CIT(A) sustained the above addition on the ground that the AO has not merely made the addition based on the findings of the sale tax department, but the AO conducted own enquiries during assessment proceedings by confronting the assessee about the adverse finding of the GST. He asked the assessee to produce the party from whom the impugned purchase was made. He also required the assessee to produce evidence of subsequent payment to M/s Om Corporation which could not be produced by the assessee. Therefore, we are of the view that the appellant had not made purchase from the above party. However, corresponding sales have not been disputed by the AO. Therefore, the entire purchase consideration cannot be disallowed and only the profit element needs to be added. There are large number of decisions on similar line in cases of alleged bogus purchase where the books are not rejected and sales has been Printed from counselvise.com ITA No.4160/MUM/2025/AY 2011-12 Daksha Vimlesh Doshi 6 accepted. It would be relevant to reproduced the decision in case of Tagaram Ganeshram Prajapati in ITA No.1006/Mum/2026 dated 25.03.2026 where the addition was restricted to 12.5% of the bogus purchase and set off of the gross profit offered by the appellant was allowed to be reduced. For ready reference, the relevant part of the order is reproduced below: 11. As regards the merits, upon careful consideration 1 find that the assessee has provided the documentary evidence for the purchase. Adverse inference has been drawn due to the inability of the assessee to produce the suppliers. I find that in this case the sales have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from Hon'ble jurisdictional High Court decision in the case of Nikunj Eximp Enterprises (in Writ Petition no 2860, order dt. 18.6.2014). In this case the Hon'ble High Court has upheld 100% allowance for the purchases said to be bogus when sales are not doubted. However in that case all the supplies were to government agency. In the present case, the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation, in my considered opinion, on the facts and circumstances of the case, 12.5% disallowance out of the bogus purchases meets the end of justice. However, in this regard learned counsel of the assessee has prayed that when only the profits earned by the assessee on these bogus purchase transaction is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase. 12. Upon careful consideration I find considerable cogency in the submission of the learned Counsel of assessee as otherwise it will be double jeopardy to the assessee. Accordingly, I modify the order of the Id. CIT(A) and direct that the disallowance in this of assessee case be restricted to 12.5% of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transactions. The Ld. Counsel of the assessee fairly accepted this proposition.” Printed from counselvise.com ITA No.4160/MUM/2025/AY 2011-12 Daksha Vimlesh Doshi 7 8. The facts of the instant appeal are similar to the facts of the case reproduced above. Following the above decision, we direct the AO to add 12.5% of the non- genuine purchases and reduce therefrom the gross profit declared by the assessee on such non-genuine transactions. The ground is partly allowed. 9. Ground No.4 pertains to initiation of penalty u/s 271(1)(c) of the Act and levy of interest u/s 234A,B,C and D of the Act. The ground on initiation of penalty is pre-mature because no order u/s 271(1)(c) has been passed. Regarding, levy of interests u/s 234A, B and C, they are consequential in nature. The levy of interest under the impugned sections is mandatory in view of the decision of the Hon’ble Supreme Court in case of Anjum M.H. Ghaswala, 252 ITR 1 (SC). Hence, the ground is dismissed. 10. In the result, the appeal of the assessee is partly allowed. Order is pronounced on 27.03.2026. Sd/- Sd/- (RAHUL CHAUDHARY) (BIJYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER *Aniket Chand; Sr. PS MUMBAI Date: 27.03.2026 Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, MUMBAI 6. Guard File By Order Assistant Registrar ITAT, MUMBAI Printed from counselvise.com "