INCOME-TAX OFFICER, WARD-1(3)(1), AHMEDABAD, AHMEDABAD V. RAMLAL MANEKCHAND HUF, AHMEDABAD

ITA 619/AHD/2025

AI Insights

The case involves an appeal by the Income Tax Officer against the order of the National Faceless Appeal Centre (NFAC), which had allowed the appeal of the assessee, Ramlal Manekchand HUF, for the Assessment Year 2021-22. The Revenue challenged the deletion of additions made under Section 69C of the Income Tax Act, 1961, concerning unexplained expenditures and non-genuine purchases. The Assessing Officer had initially made these additions based on the findings from the Designated Verification Units (DVU) and other inquiries, which suggested that the suppliers were not genuine and the transactions were not substantiated. The CIT(A) reversed these additions, leading to the Revenue's appeal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 716379 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2025
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2021-2022
• Appeal Filed On: 25-03-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ALPESH PARMAR
• Assessee Lawyers: K. M. MEHTA
• Keywords: Set aside; Business income; Opportunity of being heard; Unexplained expenditure; Bogus purchase; Bogus
• Section: 143(3); 133(6); 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH, AHMEDABAD BEFORE SHRI T.R. SENTHIL KUMAR, JUDICIAL MEMBER AND SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER ITA No.619/Ahd/2025 Assessment Year: 2021-22 Income Tax Officer, Ward – 1(3)(1), Ahmedabad, Room No.224, Aayakar Bhavan, Anand nagar Road, Vejalpur, Ahmedabad – 380 015. (Gujarat). Vs. Ramlal Manekchand HUF 58/1, Soni Ni Khadki, Madan Gopal Haveli Road, Manek Chowk, Gandhi Road, Ahmedabad – 380 001 (Gujarat). [PAN – AAEHR 1678 F] (Appellant) (Respondent) Assessee by Shri K. M. Mehta, AR Revenue by Shri Alpesh Parmar, CIT-DR Date of Hearing 04.08.2025 Date of Pronouncement 21.08.2025 O R D E R PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER: This appeal preferred by the Revenue is directed against the order of National Faceless Appeal Centre (NFAC) [hereinafter referred as ‘CIT(A)’] dated 25.02.2025 for the Assessment Year (A.Y.) 2021-22 in the proceedings under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). 2. The brief facts of the case are that the assessee had filed his return of income for the A.Y. 2021-22 on 17.01.2022 declaring income of Rs.18,91,730/-. The case was selected for scrutiny under CASS for the Printed from counselvise.com ITA No.619/Ahd/2025 (Assessment Year: 2021-22) ITO vs. Ramlal Manekchand HUF Page 2 of 7 reason that the assessee had made substantial purchases from suppliers who were either non-filers or had filed non-business Income-tax returns. The assessee is engaged in the business of trading of gold bullions, silver bullions and jewellery. In the course of assessment, the Assessing Officer had made verification in respect of purchases made by the assessee. Notices u/s 133(6) of the Act sent by the Assessing Officer was not responded by some of the suppliers. Thereafter, the matter was referred to the Designated Verification Units (DVU) who had conducted physical verification of the suppliers who had not responded to the notices u/s 133(6) of the Act. On the basis of the report of DVU, the Assessing Officer had made the following additions in the course of assessment: - (i) Two of the suppliers namely Pareshbhai Prabhudasbhai Tank and Rajeshbhai Maganbhai Badrakia were found working as labour (Mistry) and in furniture related work respectively and their business activities was not found commensurate with the purchases disclosed by the assessee from them. The total purchases of Rs.16,23,05,361/- made from them was treated as unexplained expenditure u/s 69C of the Act. In fact, the Assessing Officer had allowed gross profit relief on these purchases and net addition of Rs.16,13,74,905/- only was made in respect of purchases from these two parties. (ii) The other three parties namely Shri Bhavinbhai Bharatbhai Soni, Umadevi Rajapurohit and Bhartiben Vinodbhai Purohit were not found traceable, in the course of enquiry. The total purchases of Rs.8,94,18,577/- made from these three parties was treated as purchase from non-genuine suppliers and the Assessing Officer had treated 10% of the total purchase as Printed from counselvise.com ITA No.619/Ahd/2025 (Assessment Year: 2021-22) ITO vs. Ramlal Manekchand HUF Page 3 of 7 additional profit from these non-genuine purchases. Accordingly, an addition of Rs.89,41,858/- was made in respect of purchases from these three parties. The assessment was completed under Section 143(3) of the Act on 22.12.2022 at a total income of Rs.17,22,08,493/-. 3. Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the Ld. CIT(A) vide the impugned order and the appeal of the assessee was allowed. 4. Now, the Revenue is in appeal before us. The following grounds have been taken by the Revenue in this appeal: - “1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made of Rs.16,13,74,905/- u/s.69C of the Act without appreciating the fact that the assessee could not prove the creditworthiness, Identity and genuineness of the suppliers with whom it has carried out the transactions? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made of Rs.89,41,858/- on account of non-genuine purchases without appreciating the fact that the assessee could not prove genuineness of these parties with whom It has carried out the transactions? 3. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 4. It is, therefore, prayed that the order of Ld. CIT(A) may be set aside and that of the Assessing Officer be restored.” 5. Shri Alpesh Parmar, the Ld. CIT-DR submitted that the Ld. CIT(A) was not correct in deleting the addition of Rs.16,13,74,905/- made u/s 69C of the Act when the creditworthiness and genuineness of the two suppliers was not established. Similarly, the Ld. CIT(A) was also not correct in Printed from counselvise.com ITA No.619/Ahd/2025 (Assessment Year: 2021-22) ITO vs. Ramlal Manekchand HUF Page 4 of 7 deleting the addition of Rs.89,41,858/- in respect of the three parties which were not found traceable. The Ld. CIT-DR explained that the Ld. CIT(A) had allowed relief to the assessee on the basis of bills and invoices, ledger confirmation and bank statements, which doesn’t establish the creditworthiness of the parties and the genuineness of the transactions. He submitted that the adverse evidences collected by the Revenue in the course of enquiry caused during the assessment, was not dealt at all by the Ld. CIT(A). He further submitted that the creditworthiness of the parties and the genuineness of the transactions was not established merely on the basis of ledger confirmations and the bank statements. 6. Per contra, Shri K.M. Mehta, the Ld. AR of the assessee strongly supported the order of the Ld. CIT(A). He submitted that all the purchases were backed by proper bills and invoices and the payments were made through RTGS. He further submitted that the books of account were not rejected by the Assessing Officer before making the additions. 7. We have considered the rival submissions. It is found that the addition in this case was made on the basis of enquiry report of the DVU. While three of the parties were not found traceable at the given address, the other two parties were found engaged in labour (Mistry) and furniture related work and their turnover was not commensurate with the transactions, as disclosed by the assessee company. It is found that the ld. CIT(A) has not dealt with these adverse evidences brought on record in the course of assessment proceedings. He has merely considered the bills and invoices, ledger confirmations of the parties and bank statements to uphold the correctness of the transactions and to delete the additions as made by the Assessing Officer. Printed from counselvise.com ITA No.619/Ahd/2025 (Assessment Year: 2021-22) ITO vs. Ramlal Manekchand HUF Page 5 of 7 8. The core issue involved in this case is assessee’s failure to substantiate the genuineness of the purchases aggregating to Rs.25,17,23,938/- from five parties. The disallowance was made by the Assessing Officer considering the non-availability of the parties, serious concern regarding the identity of the supplier, credibility of the supporting documents and in the absence of evidence establishing the actual delivery of the goods and also the commercial substance of the transactions. In the course of hearing, we enquired from the Ld. AR about the status of input text credit (ITC) claimed under the GST regime in respect of purchases made from these five parties. The Ld. AR was unable to elucidate about the input credit in respect of these transactions under the GST regime. Neither the status of GST return of these five suppliers was clarified, so as to treat the transactions made with them as genuine. On the purchases of Rs.25,17,23,938/- from these five parties, GST component of Rs.75,51,718/- @ 3% was involved. It remains un- examined whether this GST credit was claimed and, if so, whether it was accepted or rejected by the GST Authorities. This is a material aspect which has a direct bearing on the genuineness of the underlying transactions. This aspect was neither examined by the Assessing Officer nor by the Ld. CIT(A). From the stand point of commercial rationality, it was required to be examined as to how the assessee had reconciled or sustained the economic burden of ITC loss, if the transaction to the extent of Rs.25,17,23,938/- was fictitious. 9. In view of the above facts, we deem it fit and proper to restore the matter to the file of Assessing Officer with a direction to reconcile the ITC claimed under the GST law in respect of bogus purchase of Rs.25,17,23,938/- from the five parties which were held as non-genuine in the course of original assessment. For this purpose, the AO may obtain Printed from counselvise.com ITA No.619/Ahd/2025 (Assessment Year: 2021-22) ITO vs. Ramlal Manekchand HUF Page 6 of 7 the information from the GST authorities about their GST returns and the status of ITC claims, if so required. Further, correlation with the assessment or proceedings, if any, of the five suppliers may also be made in order to examine the genuineness and correctness of the transactions. Further, the bank account of these five suppliers may also be called for and examined, to find out the ultimate destination of the funds transferred by the assessee to these five parties on account of purchases. The Assessing Officer is also directed to provide a reasonable opportunity of being heard to the assessee and to file the evidences and explanations, as required. The assessee is also directed to appear before the AO in the course of set aside proceeding and provide the required documents and clarifications, in order to establish the genuineness of these transactions. Thereafter, the Assessing Officer shall pass a speaking and reasoned order in accordance with law. 10. In the result, the appeal of the Revenue is allowed for statistical purpose. Order pronounced in the open Court on this 21st August, 2025. Sd/- Sd/- (T.R. SENTHIL KUMAR) (NARENDRA PRASAD SINHA) Judicial Member Accountant Member Ahmedabad, the 21st August, 2025 PBN/* Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File Printed from counselvise.com ITA No.619/Ahd/2025 (Assessment Year: 2021-22) ITO vs. Ramlal Manekchand HUF Page 7 of 7 By order TRUE COPYE C Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad Printed from counselvise.com "