DCIT CIRCLE-41(3)(1), MUMBAI, MUMBAI V. DEEPAK SHAH, MUMBAI

ITA 3870/MUM/2024

AI Insights

The case involves an appeal by the revenue against the order of the Ld. CIT(A), which had restricted the disallowance of bogus purchases to 15%. The assessee, Deepak Shah, engaged in property development, was found to have made purchases from five hawala dealers, all of whom were identified as non-genuine and untraceable. The AO initially disallowed the entire amount of these purchases, but the CIT(A) reduced the disallowance to 15%, citing that sales were not doubted. The Tribunal, however, reinstated the full disallowance for four of the five parties, emphasizing that the assessee failed to prove the genuineness of these transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 788527 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2025
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: K
• Assessment Year: misc
• Appeal Filed On: 02-08-2024
• Other Referred Cases: Pr. Commissioner of Income Tax-5, Mumbai vs. Kanak Impex (India) Ltd., Pr. Commissioner of Income Tax-12, Mumbai vs. M/s. Drisha Impex Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: BHAGIRATH RAMAWAT; DR
• Keywords: Bogus purchase; Accommodation entries; Bogus
• Section: 147; 131; 133(6)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “K” BENCH, MUMBAI BEFORE SMT. BEENA PILLAI (JUDICIAL MEMBER) AND SHRI OMKARESHWAR CHIDARA (ACCOUNTANT MEMBER) I.T.A. No. 3870/Mum/2024 Assessment Year: 2010-11 DCIT, Circle-41(3)(1), Mumbai Vs. Deepak Shah 3/C/309 Vrindavan Raheja Township Malad (East) Mumbai - 400097 PAN: AHAPS1283N (Appellant) (Respondent) Appellant by None Respondent by Shri Bhagirath Ramawat, Sr. D/R Date of Hearing 06.11.2025 Date of Pronouncement 24.11.2025 ORDER Per: Smt. Beena Pillai, J.M.: The present appeal filed by the revenue arises out of the order dated 21/06/2024 passed by NFAC, Delhi [hereinafter ‘Ld. CIT(A)’) for assessment year 2010-11. 2. At the outset, we find that the appeal was fixed for hearing on multiple dates. The order-sheet reflects that the matter was listed more than ten times. Despite repeated notices through RPAD and e-mail, none appeared for the assessee at any stage. 2.1. No adjournment request was filed either. It is also observed from the e-mail dated 06/03/2025 from ACIT -41(3)(1), Mumbai, who attempted to deliver the notice of hearing to the assessee physically. However, it is submitted that, the assessee has sold the Printed from counselvise.com 2 I.T.A. No. 3870/Mum/2024 Flat at 3/C/309, Vrindavan Raheja Township, Malad (E), Mumbai, and the current owner is unaware about the assessee. 2.2. Subsequently, the assessee on 18/09/2025 filed request from adjournment as he was under some medical treatment due to eye surgery. Considering the medical condition of assessee, the appeal was adjourned to 15/10/2025. However, on 15/10/2025 and thereafter on 03/11/2025, none appeared on behalf of the assessee 2.3. We are, therefore, satisfied that the assessee is not interested in prosecuting the matter. Accordingly, the appeal is being disposed of ex-parte qua the assessee, after hearing the learned DR. 3. Brief facts of the Case:- 3.1. The assessee is engaged in the business of Building & Developing properties and filed his return of income on 09/10/2010 declaring income of ₹9,89,590/-. Based on information received from ADIT(Inv.), Unit-7(3), Mumbai and Maharashtra Sales Tax Department, the Assessing Officer (“AO”) reopened the assessment u/s 147 on the finding that the assessee made purchases of ₹26,49,280/- from flowing five hawala dealers, all of whom were listed as non-genuine and untraceable:- Sr. No. Name of the Hawala Dealer Tin of Dealer F.Y. 2009-10 (in Rs.) 1 V3 Enterprises 27860613194 5,00.000/- 2 S K Trading Co. 26860065179 6,17,188/- 3 Ace International 27420614600 5,07,010/- 4 Liberty Trading Corporation 27290663802 5,12,720/- 5 Deep Enterprises 27750595164 5,11,862/- Total 26,49,280/- Printed from counselvise.com 3 I.T.A. No. 3870/Mum/2024 3.2. Summons u/s 131 and notices u/s 133(6) issued to all five parties were returned unserved. The assessee also failed to produce the parties. In statement u/s 131, the assessee admitted that the parties were hawala dealers. The assessee also submitted that it had not undertaken any transaction with S.K. Trading Co. The Ld. AO treated the purchases as non-genuine and made 100% disallowance of ₹26,49,280/- u/s 37(1), assessing total income at ₹36,38,870/-. Aggrieved the assessee carried the matter in appeal before the Ld. CIT(A). 4. The Ld. CIT(A) accepted that the parties were listed as hawala operators but held that entire purchases could not be disallowed since the sales were not doubted. The CIT(A) restricted disallowance at 15% of bogus purchases and further directed the Ld. AO to verify the alleged purchase from SK Trading Co., granting part relief to the assessee. Aggrieved by the order of the Ld. CIT(A), the revenue is in appeal before this Tribunal. 5. Before us, the Ld. DR challenged the action of the Ld. CIT(A) in restricting the disallowance to 15% especially when there were categorical findings of Investigation Wing and Sales Tax Department followed by non-service of notices u/s 133(6) of the Act. The revenue further contends that the assessee failed to prove Printed from counselvise.com 4 I.T.A. No. 3870/Mum/2024 identity and genuineness of all parties, and has also admitted in his own statement u/s 131 that they were bogus purchases. 5.1. The Ld. DR supported the assessment order and submitted that the Ld. CIT(A) ignored conclusive evidence from Sales Tax Department identifying the four suppliers as hawala dealers and also the fact that the assessee neither produced any of the parties nor any evidence to establish the genuineness of the transaction. He submitted that the Ld. CIT(A) granted relief mechanically without rebutting Ld. AO’s findings. He prayed that the assessment order be restored in full by placing reliance on the following decisions of Hon’ble Bombay High Court:- • Pr. Commissioner of Income Tax-5, Mumbai vs. Kanak Impex (India) Ltd. in Income Tax Appeal No. 791 of 2021; judgment dated 03/03/2025 • Pr. Commissioner of Income Tax-12, Mumbai vs. M/s. Drisha Impex Pvt. Ltd. in Income Tax Appeal No. 1240 of 2018 with 2087 of 2018; judgment dated 07/04/2025 We have heard the ld. DR in light of the records placed before us. There is no rebuttal from the assessee. 6. The undisputed facts that emerge in the present facts of the case are that all five purchase parties were identified as hawala dealers by Sales Tax Department and DGIT(Inv). The notices u/s 133(6) and summons u/s 131 returned unserved. Further the assessee neither produced the parties and nor any evidence in respect of the purchase from the four parties like transportation or delivery of goods, was furnished. Further, the assessee himself admitted during his statement u/s 131 that no material was Printed from counselvise.com 5 I.T.A. No. 3870/Mum/2024 supplied by these parties. The assessee also submitted that he did not have any transaction with S.K. Traders Co.. On these facts, the Ld. AO was justified in holding that the purchases from four parties excluding S.K. Traders to be entirely bogus that represented accommodation entries. The Ld. CIT(A) disregarded the specific findings of the Ld. AO and Investigation Wing and mechanically applied general case laws for profit estimation without there being any evidence to support the genuineness of the purchases. We find that, in cases where purchases are found completely non-genuine, the estimation theory does not apply. It is well settled that where purchases are sham and not merely unverifiable, entire addition is warranted. 6.1. Ld. DR is relying upon the ratio of the decision in the case of Kanak Impex (supra) wherein Hon’ble Bombay High Court examined identical issue in paragraphs 13 to 39 and confirmed the disallowance of the whole of the purchases. It is noted that Hon’ble Bombay High Court in the case of Kanak Impex (supra) observed that the assessee therein did not co-operate with the revenue, which was one reason for confirming the disallowance. Identical is the situation in the present facts of the case. We have also examined the legal position on this issue based on the findings of the Ld. CIT(A) and note that the ratio in the case of Kanak Impex (supra), squarely applies to the facts of the present case before us. 6.2. It is noted that, in the present facts assessee has not been able to place on record, any information regarding the purchases citing convenient inabilities. The documents and paperwork that would have invariably accompanied genuine transactions were missing or the assessee expressed inability to produce them. Printed from counselvise.com 6 I.T.A. No. 3870/Mum/2024 Therefore, no case is made out to distinguish the present facts from Kanak Impex (supra) or the principles therein. 6.3. In the present case, the Ld. AO established complete non- existence of suppliers while demonstrating the sham nature of transactions based on assessee’s admission. While doing so, the Ld. AO has discharged the burden of proving the bogus purchases. In contrast, the assessee furnished no evidence before us, and remained absent despite several opportunities. However, the statement of the assessee that it did not have any transaction with S.K. Traders Co., cannot be ignored as assessee’s admission cannot be accepted in piecemeal. We, therefore, are of the opinion that alleged transaction with S.K. Traders Co., is to be ignored. 6.4. For all the above reasons, we reverse the order passed by the Ld. CIT(A) and restore the addition made in the assessment order by the Ld. AO in respect of the following four parties:- Sr. No. Name of the Hawala Dealer 1 V3 Enterprises 2 Ace International 3 Liberty Trading Corporation 4 Deep Enterprises Accordingly, Grounds raised by the revenue stand partly allowed. In the result, appeal of the Revenue stands partly allowed. Order pronounced in the open court on 24/11/2025 Sd/- Sd/- (OMKARESHWAR CHIDARA) (BEENA PILLAI) Accountant Member Judicial Member Mumbai Dated: 24/11/2025 SC Sr. P.S. Printed from counselvise.com 7 I.T.A. No. 3870/Mum/2024 Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By order (Asstt. Registrar) ITAT, Mumbai Printed from counselvise.com "