INCOME TAX OFFICER, WARD - 50(1), NEW DELHI V. THE SILK FACTORY, NEW DELHI

ITA 6048/DEL/2024

AI Insights

The case involves an appeal by the Income Tax Officer against The Silk Factory, where the primary contention was regarding the addition made by the A.O. for unexplained expenditure linked to alleged bogus purchases. The A.O. had initially made a significant addition to the assessee's income based on the premise that the purchases were from non-existent entities. However, the Ld. CIT(A) later reduced this addition to 5%, acknowledging the evidence provided by the assessee, which included invoices, consignment notes, and other relevant documents. The Tribunal's decision leaned heavily on the fact that the corresponding sales from these purchases were undisputed, thereby implying the purchases could not be entirely bogus.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 839182 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2019-2020
• Appeal Filed On: 26-12-2024
• Other Referred Cases: NK Proteins Ltd vs DCIT(2017) 292 CTR 354(SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Unexplained expenditure; Bogus purchase; Accommodation entries; Bogus
• Section: 147; 69; 133(6); 69C

Judgement Text

" 1 ITA No. 6048/Del/2024 & C.O. No.231/Del/2025 The Silk Factory IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘G’ NEW DELHI) BEFORE YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI KRINWANT SAHAY, ACCOUNTANT MEMBER ITA No. 6048/DEL/2024 (A.Y. 2019-20) Income Tax Officer, Ward-50(1), Room No. 1408, E-2, Block, Dr. S. P. M. Civic Centre, New Delhi V s The Silk Factory Central Circle-29, Nehru Enclave, Kalkaji, New Delhi-110019 PAN: AAFFT7485F Appellant Respondent C.O No. 231/Del/2025 in ITA No. 6048/DEL/2024 (A.Y. 2019-20) The Silk Factory Central Circle-29, Nehru Enclave, Kalkaji, New Delhi-110019 PAN: AAFFT7485F V s Income Tax Officer, Ward-50(1), Room No. 1408, E-2, Block, Dr. S. P. M. Civic Centre, New Delhi Appellant Respondent Assessee by Sh. Ankit Kumar, Adv and Sh. Lalit Mohan, CA Revenue by Sh. Mahesh Gupta, CIT DR Date of Hearing 03/02/2026 Date of Pronouncement 18/02/2026 ORDER PER YOGESH KUMAR, U.S. JM: The present appeal and Cross Objection are filed by the Revenue and the Assessee respectively challenging the order of Ld. Commissioner of Income Tax (Appeals/ National Faceless Appeal Centre (‘Ld. CIT(A)/NFAC’ for short), New Delhi dated 29/10/2024 for the Assessment Year 2019-20. Printed from counselvise.com 2 ITA No. 6048/Del/2024 & C.O. No.231/Del/2025 The Silk Factory 2. There is a delay of 82 days in filing the Cross Objection filed by the Assessee. The Assessee filed an application for condonation of delay in filing the Cross Objection contending that, notice issued by the Tribunal in the Revenue’s Appeal was served on the Assessee on 23/06/2025. However, Assessee could not file the Cross Objection time as the Assessee has been advised to file the C.O. belatedly. 3. We heave heard on the delay. For the reasons stated in the application for condonation of delay, the delay of 82 days in filing the Cross Objection is hereby condoned. 4. Brief facts of the case are that, Assesses declared return of income declaring an income of Rs. 44,62,810/-. The case of the Assessee was reopened based on information received under risk management strategy of CBDT on the insight portal, indicating that the Assessee has purchased bogus purchase bills from M/s Rajshree Vanijaya Udyog- a non-existence concerned engaged in issuing fraudulent GST. A.O. passed assessment order on 12/03/2024 u/s 147 r.w. Section 144B of the Income Tax Act, 1961 ('Act' for short) by making an addition of Rs. 2,88,52,563/- on account of variation in respect of unexplained expenditure u/s 69 r.w. Section 1155BBE (1) of the Act. Printed from counselvise.com 3 ITA No. 6048/Del/2024 & C.O. No.231/Del/2025 The Silk Factory 5. As against the assessment order dated 12/03/2024, the Assessee preferred an Appeal before the Ld. CIT(A). The Ld. CIT(A) vide order dated 29/10/2024 deleted the addition made by the A.O. Aggrieved by the deletion of the addition the Department preferred the Appeal in ITA No. 6048/Del/2025 on following grounds of Appeal. “1. On the facts and circumstances of the case, the Ld. CIT(A) has erred in law by restricting the addition of bogus purchases of Rs.2,88,52,563/- made by AO on account of unexplained expenditure u/s 69C of the I.T. Act, to 5% ignoring the fact that it was well established by the AO that the alleged parties were non- existing and no actual purchases were made by the assessee and the assessee was utilizing bogus purchase bills to reduce its profitability. 2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the findings of Investigation Wing which suggested that the assessee was involved in bogus purchases as a beneficiary of accommodation entries 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not following the judgment of the Hon'ble Supreme Court in the case of NK Proteins Ltd vs DCIT(2017) 292 CTR 354(SC) which is squarely applicable to the facts of assessee case, where the Hon'ble Supreme Court dismissed appeal filed by assessee and confirmed the findings of Hon'ble Gujarat High Court in respect of bogus purchase, where the Hon'ble Gujarat High Court, after analyzing necessary facts at para 6 of the order, held that once the tribunal having come to a categorical finding that the purchases from certain parties are bogus, it was not incumbent on it to restrict the disallowance to the extent of 25% of such purchases. 4. The appellant reserves right to add, amend or alter the grounds of appeal on or before the date of the disposal of appeal.” 6. The Ld. Department's Representative vehemently submitted that the A.O. conducted detailed investigation and relied upon multiple intelligence report from the Investigation Wing, GST Records and third party confirmations to establish that the entities from whom Printed from counselvise.com 4 ITA No. 6048/Del/2024 & C.O. No.231/Del/2025 The Silk Factory purchases were claim to have been made were non-existent and being a shell entity with no actual business operations. The GST registration of M/s Rajshree Vanijaya Udyog was cancelled and the said entity was carrying out business of hardware and not the fabric. Further submitted that M/s Sarraf Enterprises was also not into textile business and the Assessee has failed to prove the source, supplier and actual movement of goods. The ld. Department's Representative relying on the assessment order sought for reversal of the finding and the conclusion of the Ld. CIT(A). 7. Per contra, the Ld. Assessee's Representative submitted that the Assessee has produced all the documents to prove the genuineness of the transaction. In order to prove the genuineness of the purchase, the Assessee produced invoices, consignment notes, ledger account, bank statement, stock register showing sales and purchases. Further submitted that, at no point of time the sales were not disputed by the A.O., in such scenario the A.O. cannot doubt the corresponding purchases. The ld. Counsel relying on plethora of judicial precedents, contended that the Ld. CIT(A) rightly deleted the addition made by the A.O. by restricting the same to 5% of the quantum of alleged bogus purchases. Thus, submitted that the order impugned requires no interference in the hands of the Tribunal. Printed from counselvise.com 5 ITA No. 6048/Del/2024 & C.O. No.231/Del/2025 The Silk Factory 8. We have heard both the parties and perused the material available on record. It is an admitted fact that the Assessee has declared its sales against the purchases made from 3 entities, which are claimed by the Revenue as non-existing entities. Assessee claimed that it undertook sales out of the alleged purchases.The said sales had been declared in the Profit and Loss account for the assessment year under consideration which has been accepted by the A.O., therefore, the said purchases cannot be in toto held to be bogus. If the purchases were entirely held to be bogus, it would be impossible for the Assessee to complete the sale and thus, the corresponding sales would also be bogus. Therefore, in such circumstances when corresponding sales remained undisputed, purchases cannot be held to be entirely bogus. 9. The Co-ordinate Bench of the Tribunal in Assessee’s own case for Assessment Year 2022-23 in ITA No. 987/Del/2025, while dismissing the Appeal of the Revenue held as under:- “6. We find that the above stated documents clearly establishes that there were substantial evidences on which assesse had claimed that purchases were genuine and as assessee has discharged the initial onus of furnishing primary evidence and in particular the invoice copy, e-way bill and transport consignment note, month wise purchase and sales, details of opening and closing stock in value as well as in quantity.The ld. CIT(A) has taken note of above said documents and evidence which sufficiently prove purchases and prove the receipt of stock by the assessee, which has been sold by the assessee as per financial results and as per stock register Printed from counselvise.com 6 ITA No. 6048/Del/2024 & C.O. No.231/Del/2025 The Silk Factory furnished in value and as well as in quantity.The fact of the matter is that stock register not only reflects the value and quantity of stock but also reflects the party from whom purchases made and to whom sales made. Certainly if sales and turnover is accepted by department then goods purchased by the Assessee qua sales made by him are also bound to be accepted and section 69C of the Act cannot be invoked for deeming income. Where addition of purchase in total is proposed resulting intoGP exceeding the sales department must justify the addition with evidences not just suspicion that suppliers were Non Filers or did not reply to Notice u/s 133(6) of the Act, that supplier had their GST. Neither suspended or suo motto cancelled or cancelled on the request of the supplier. Many of them had multiple GSTN in their names. Many of them were Transient Companies meaning thereby that they had their GST registration made on a particular date, showed crores of sale to the assessee on the same day or for few days, and then requested for cancellation of GSTN, sometimes even within a few days or a month or that the GST Database showed that almost all of themwere not dealing in fabrics (which was what the assessee had claimed to have purchased from them). These suspicious circumstances should be relied only after rejecting the books like stock and sales and other corresponding expenditures. There is no allegation of fabricated evidences being filed so to justify the contentions of ld. DR. Thus the conclusion of ld. CIT(A) require no interference. The grounds have no substance. The appeal deserves to be dismissed. Accordingly ordered.” 10. In view of the above discussion and also by following the order of the Tribunal in Assessee’s own case for Assessment Year 2022-23 (supra), we find no reason to interfere with the findings and the conclusion of the Ld. CIT(A) in restricting the addition made by the A.O. on account of unexplained expenditure u/s 69C of the Act to 5%. Accordingly, the Grounds of Appeal of the Revenue is dismissed as meritless. In the result, appeal of the Revenue in ITA No. 6048/Del/2024 is dismissed. Printed from counselvise.com 7 ITA No. 6048/Del/2024 & C.O. No.231/Del/2025 The Silk Factory 11. Since, we have dismissed the Appeal of the Revenue by sustaining the impugned order of the Ld. CIT(A), the Appeal filed by the Assessee becomes in-fructuous. Accordingly, C.O. No. 231/Del/2025 filed by the Assessee is dismissed. Order pronounced in the open court on 18th February, 2026 Sd/- Sd/- (KRINWANT SAHAY) (YOGESH KUMAR U.S.) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 18 .02.2026 Reshma Naheed, Sr.P.S Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "