INCOME TAX OFFICER-42(1)(3),MUMBAI, MUMBAI V. KARTIK GUNWANTRAI SHAH, MUMBAI

ITA 2182/MUM/2025

AI Insights

The case involves an appeal by the Revenue against the order of the learned Additional / Joint Commissioner of Income Tax (Appeals)-2, Coimbatore, which had restricted the addition for bogus purchases to 5% of the total amount. The original assessment was based on information from the Sales Tax Department, Maharashtra, indicating that the assessee had obtained bogus purchase bills. The assessee did not respond to several notices during the assessment proceedings, leading to a best judgment assessment under section 144 of the Income-tax Act. The Tribunal found that the assessee should be given another opportunity to present its case and produce necessary documents, thus setting aside the previous order and remanding the case back to the Assessing Officer.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 793191 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 28-03-2025
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIKAS CHANDRA
• Keywords: Set aside; Additional evidence; Reasonable cause; Bogus purchase; Tax effect; Bogus
• Section: 147; 148; 144; 142(1)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.2182/Mum/2025 (Assessment Year : 2009-10) Income Tax Officer – 42(1)(3), Room No.735, 7th Floor Kautilya Bhavan, Bandra Kurla Complex, Bandra (E), Mumbai - 400051 ............... Appellant v/s Kartik Gunwantrai Shah, Prop. Gati Solvochem, B-3, Jalaram, Ganjawala Lane, Borivali (West), Mumbai - 400092 PAN : AWAPS4637D ……………… Respondent Assessee by : None Revenue by : Shri Vikas Chandra, Sr.DR Date of Hearing – 22/09/2025 Date of Order - 23/09/2025 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The Revenue has filed the present appeal against the impugned order dated 10/01/2025, passed under section 250 of the Income-tax Act, 1961 (“the Act”) by the learned Additional / Joint Commissioner of Income Tax (Appeals)-2, Coimbatore, [“learned Additional / Joint CIT(A)”], which in turn arose from the order passed under section 144 read with section 147 of the Act, for the assessment year 2009-10. Printed from counselvise.com ITA No.2182/Mum/2025 (A.Y. 2009-10) 2 2. In this appeal, the Revenue has raised the following grounds: – “On the facts and circumstances of the case and in law, the Ld. Addi. CIT(A) is erred in restricting the addition to 5% of the bogus purchases against the addition of 100% of bogus purchase of Rs. 3,51,358/-“. “On the facts and in the circumstances of the case, the Hon'ble ITAT is requested to entertain this appeal, though, the tax effect is below the monetary limit prescribed in the CBDT Circular No.5/2024 Dt. 15.03.2024 but the case falls within the exceptions laid down in clause (c) of Para 3.1 of the Board's Circular No.5/2024 Dt. 15.03.2024.” 3. We have considered the submissions of both sides and perused the material available on record. The brief facts of the case are that for the year under consideration, the assessee filed his return of income on 30.09.2009, declaring a total income of Rs.2,59,000/-. Subsequently, on the basis of information received from DGIT (Inv.), Mumbai, regarding certain persons who have been found by the Sales Tax Department, Maharashtra, to have provided entries of bogus purchase bills to a large number of taxpayers, it was noticed that assessee has obtained bills amounting to Rs.3,51,358/- from such entry providers which were declared as hawala by the Sales Tax Department, Maharashtra. Accordingly, notice under section 148 of the Act was issued to the assessee on 07.03.2014 on the basis that income to an extent of Rs.3,51,358/- has escaped assessment. However, the assessee did not respond to the notice issued under section 148 of the Act. Thereafter, various statutory notices under section 142(1) of the Act were issued to the assessee. The same were also not responded to by the assessee. The assessee also failed to respond to the show-cause notice issued during the assessment proceedings. Accordingly, in the absence of any details from the assessee, the Assessing Officer (“AO”) proceeded to conclude the assessment on the basis of the best judgment under section 144 of the Act. Vide order dated Printed from counselvise.com ITA No.2182/Mum/2025 (A.Y. 2009-10) 3 25.03.2015 passed under section 144 read with section 147 of the Act, the AO made an addition of Rs.3,51,358/- on account of bogus purchases in the absence of any details from the assessee. 4. During the appellate proceedings before the learned Additional / Joint CIT(A), the assessee filed additional evidence and prayed for consideration of the same under Rule 46A of the Income Tax Rules, 1962. Accordingly, the learned Additional / Joint CIT(A), following the procedure prescribed under section 46A of the Income Tax Rules,1962, forwarded the additional evidence filed by the assessee to the AO for its response. The AO, vide its remand report dated 29.01.2024, objected to the admission of the additional evidence on the basis that the assessee did not avail of any of the opportunities granted during the assessment proceedings and failed to respond to various notices issued by the AO. Further, the AO submitted that the assessee has not proved that he was prevented by sufficient and reasonable cause from complying with the notices issued during the assessment proceedings. Accordingly, the AO prayed that the additional evidence filed by the assessee should be rejected. The learned Additional / Joint CIT(A), after considering the remand report filed by the AO, denied the assessee's request for admission of additional evidence and proceeded to decide the appeal based on the details available on record. The learned Additional / Joint CIT(A), vide impugned order, upheld the initiation of proceedings under section 147 of the Act. However, granting partial relief to the assessee on merits, restricted the addition only to the extent of 5% of the bogus purchase of Rs.3,51,358/- by considering the Printed from counselvise.com ITA No.2182/Mum/2025 (A.Y. 2009-10) 4 estimate profit on the bogus purchases. Being aggrieved, the Revenue is in appeal before us. 5. When the matter was called for hearing, no one appeared, nor was any application seeking adjournment filed. From the perusal of the record, we find that only on one occasion the assessee was represented by an Authorized Representative and sought adjournment. However, we do not find any letter of authority in favour of the Authorized Representative. Thereafter, the present appeal was adjourned multiple times as no one appeared on behalf of the assessee. Accordingly, we proceed to decide the present appeal after hearing the learned Departmental Representative and perusal of the material available on record. 6. During the hearing, the learned Departmental Representative submitted that the assessee did not furnish any information regarding the purchases which were considered as bogus by the lower authorities. Accordingly, the learned DR submitted that the addition should be sustained at 100% instead of being restricted to 5%, as was done by the learned Additional / Joint CIT(A). 7. At this stage, it is pertinent to note that by the Finance (No.2) Act, 2024 w.e.f. 01.10.2004, the learned CIT(A) has been empowered under section 251(1)(a) of the Act to set aside the assessment and remand the case back to the AO for making a fresh assessment, in case the assessee files an appeal against an order of assessment made under section 144 of the Act. However, in the present case, as noted above in the appeal by the assessee against the order passed by the AO under section 144 read with section 147 of the Act, Printed from counselvise.com ITA No.2182/Mum/2025 (A.Y. 2009-10) 5 the learned Additional / Joint CIT(A) did not exercise the power granted to it to restore the case to the file of the AO. Further, it is evident from the record that the additional evidence filed by the assessee before the learned Additional / Joint CIT(A), justifying the purchases made from the alleged accommodation entry providers, was also rejected at the threshold by the learned Additional / Joint CIT(A). 8. Therefore, in the facts and circumstances as noted above, we are of the considered view that, in the interest of justice and fair play, the assessee should be granted one more opportunity to represent its case on merits and produce all the documents in respect of its claim. Accordingly, we deem it fit and appropriate to restore the matter to the file of the Jurisdictional AO for de novo adjudication, after considering all the details/submissions that may be filed by the assessee, and after providing a due opportunity of hearing to the assessee. The assessee is also directed to cooperate in the assessment proceedings and furnish all the details as may be sought by the AO for complete adjudication. Accordingly, the impugned order is set aside, and the grounds raised by the AO are allowed for statistical purposes. 9. In the result, the appeal by the Revenue is allowed for statistical purposes. Order pronounced in the open Court on 23/09/2025 Sd/- NARENDRA KUMAR BILLAIYA ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 23/09/2025 Printed from counselvise.com ITA No.2182/Mum/2025 (A.Y. 2009-10) 6 Prabhat Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "