GIRISH NARPATCHAND KANUNGO ,MUMBAI V. INCOME TAX OFFICER 19(1)(3), MUMBAI

ITA 1233/MUM/2025

AI Insights

The case involves an appeal by Girish Narpatchand Kanungo against the order of the National Faceless Appeal Centre (NFAC), which upheld the Income Tax Officer's (ITO) decision regarding alleged bogus purchases. The ITO had reopened the assessee's case based on information from the Sales-tax Department, leading to an addition of Rs. 59,23,413 to the assessee's income, calculated at a 12.5% gross profit rate on the alleged purchases. The assessee contested this rate, providing evidence of a lower average gross profit rate of 2.73% over several years. The Tribunal, referencing a similar case decided by the Bombay High Court, agreed with the assessee's contention and remanded the case back to the ITO to adjust the assessment accordingly.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 712170 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2011-2012
• Other Referred Cases: CIT-1, Mumbai vs M/s Nikunj Exim Enterprises Pvt Ltd
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWAPNIL CHOUDHARY
• Assessee Lawyers: PANKAJ JAIN
• Keywords: Bogus purchase; Bogus
• Section: 148; 143(3); 142(1)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “G”, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, ACCOUNT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No.1233/Mum/2025 (Assessment Year: 2011-12) Girish Narpatchand Kanungo Flat No.3, 2nd Floor, 5, Ramnivas Building, 2nd Parsiwada Lane, Opp. V.P. Road, Police Station, Mumbai- 400 004 PAN: AOAPK9201M vs Income-tax Officer, 19(1)(3), Mumbai, Piramal Chamber, Parel Mumbai- 400012 APPELLANT RESPONDENT Assessee by : Shri Pankaj Jain Respondent by : Shri Swapnil Choudhary – Sr AR Date of hearing : 21/07/2025 Date of pronouncement : 24/07/2025 O R D E R Per Anikesh Banerjee (JM): Instant appeal of the assesse was filed against the order of National Faceless Appeal Centre (NFAC), Delhi, [in short, ‘Ld.CIT(A)] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) for Assessment Year 2011-12, date of order 28/03/2024. The impugned order emanated from the order of the Income- tax Officer-19(1)(3), Mumbai [in short, “Ld. AO”] passed under section 143(3) r.w.s. 147 of the Act, 1961, date of order 26/06/2016. Printed from counselvise.com 2 ITA 1233/Mum /2025 Girish Narpatchnd Kanunga 2. the brief facts of the case are that the assesse filed the return under section 139(1) of the Act. The case was reopened under section 148 of the Act on the basis of information received from Sales-tax Department and the same has been forwarded by the DGIT (Inv), Mumbai to the Ld. AO. During the assessment proceedings, the Ld.AO found that the assesse has made bogus purchases amount Rs.4,73,87,306/-. The Ld.AO considering the assessee’s business and verified the few parties related to alleged purchases had confirmed the addition @12.5% of gross profit on alleged purchase which comes to Rs.59,23,413/-. The assessee prayed that the gross profit related to the impugned year & earlier years is far below the assessed rate of 12.5%. The assesse prayed that the addition should be confirmed @2.73% gross profit (in short “GP”) ratio. Accordingly, the assesse filed an appeal before the Ld.CIT(A). The Ld.CIT(A) upheld the order of the Ld.AO. Being aggrieved, assessee filed an appeal before us. 3. The Ld.AR filed a paper book which is kept on record. The assessee has submitted preceding 3 years and succeeding one year GP ratio, which is reproduced as below: - Particulars Assessment Years 2008-09 2009-10 2010-11 2011-12 2012-13 Turnover 13,75,75,895 9,45,95,436 8,04,76,094 14,64,44,990 21,44,67,975 Gross Profit 24,10,269 23,06,806 32,45,261 40,02,446 49,82,272 G.P.Ratio 1.75% 2.44% 4.03% 2.73% 2.32% Net Profit 5,98,165 5,99,774 6,23,463 10,27,663 11,42,425 N.P. Ratio 0.43% 0.63% 0.77% 0.70% 0.53% The Ld.AR further argued that considering above GP ratio, the average gross profit is determined to 2.73%, which is liable to be confirmed related to the alleged purchases, amount to Rs.4,73,87,306/-. The Ld.AR respectfully relied on the order Printed from counselvise.com 3 ITA 1233/Mum /2025 Girish Narpatchnd Kanunga of Hon’ble Bombay High Court in the case of CIT-1, Mumbai vs M/s Nikunj Exim Enterprises Pvt Ltd Income Tax Appeal No. 5604 of 2010, date of order 17/12/2012. The relevant para 7 is reproduced as below:- “7 We on have considered the submission behalf of the revenue. However, from the order of the Tribunal dated 30.04.2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement i.e. reconciliation statement, but also in view of the other facts. The Tribunal records that the Books of Accounts of the respondent-assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department i.e. Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were infact made. In our view, merely because the suppliers have not appeared before the Assessing Officer CIT(A), one cannot conclude that the purchases were on or the not made by the respondent-assessee. The Assessing Officer as well as CIT(A) have disallowed the deduction of Rs.1.33 crores on account of purchases merely the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs.1.33 crores was not bogus. No fault can be found with the order dated 30.04.2010 of the Tribunal.” 4. The Ld.AR further stated that the relevant documents are duly submitted before the Ld.AO related to evidence of the alleged purchases. The relevant para 6 of the assessment order is duly reproduced as below: - “6. Based on the information, an independent inquiry was made by this office and details were called for from the assessee as per notices u/s 142(1) dated 06.04.2016 and 16.12.2016. The assessee was asked to produce certain details and also the purchases from above mentioned parties as per Annexure- A. Printed from counselvise.com 4 ITA 1233/Mum /2025 Girish Narpatchnd Kanunga (a) Name of the Seller with current full address, (b) PAN (c) Bill and Voucher No. with date(d) Description of goods purchased (e) Quantity (1) Rate, (g) Amount (h) Goods dispatched from (name of the place) with date (i) Mode of transportation, if by Road Vehicle No. and also payments, detailed in the annexure-A.” 5. The Ld.DR fully stands in favour of the order of the revenue authorities but was unable to rebut by submitting any of the contrary judgement. 6. We have heard the rival submissions and perused the material available on record. The Ld. AO determined the gross profit rate at 12.5% on the alleged bogus purchases amounting to Rs. 4,73,87,306/-. The assessee submitted a year-wise chart analyzing the gross profit for Assessment Years 2008-09 to 2012-13, which reflects an average gross profit rate of 2.73% in the assessee’s line of business. Upon perusal of the impugned assessment order, we observe that the assessee had furnished all relevant documents in support of the purchases, and such evidence was not rejected by the Ld. AO. Respectfully following the decision of the Hon’ble Jurisdictional High Court in the case of M/s. Nikunj Exim Enterprises Pvt. Ltd. (supra), we restrict the addition to the extent of 2.73% gross profit rate on the alleged bogus purchases pertaining to the impugned assessment year. The Ld. DR had not made any strong objection against the submission of the Ld. AR. Accordingly, the matter is remanded to the file of the Ld. AO with a direction to modify the assessment order in light of the above observations and in accordance with law. Printed from counselvise.com 5 ITA 1233/Mum /2025 Girish Narpatchnd Kanunga 7. In the result, the appeal of the assesse bearing ITA No.1233/Mum/2025 is allowed for statistical purpose. Order pronounced in the open court on 24th day of July, 2025. Sd/- sd/- (NARENDRA KUMAR BILLAIYA) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, िदनांक/Dated: 24/07/2025 Pavanan Copy of the Order forwarded to: 1. अपीलाथ /The Appellant , 2. ितवादी/ The Respondent. 3. आयकर आयु\u0014 CIT 4. िवभागीय ितिनिध, आय.अपी.अिध., मुबंई/DR, ITAT, Mumbai 5. गाड फाइल/Guard file. BY ORDER, //True Copy// (Asstt. Registrar), ITAT, Mumbai Printed from counselvise.com "