ITO-19(3)(1), MUMBAI V. RAMNIKLAL SHIVJI SAVLA, MUMBAI

ITA 3525/MUM/2025

AI Insights

The case involves an appeal by the Revenue against the order of the Commissioner of Income-tax (Appeals) - National Faceless Appeal Centre, which had restricted the addition on account of bogus purchases from 25% to 8%. The purchases in question, amounting to Rs. 1,73,63,923, were identified as bogus by the Maharashtra State Sales Tax Department. The Tribunal's decision was influenced by previous judgments which suggested that only the profit element from such purchases should be taxed, not the entire purchase amount.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840241 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2026
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 20-05-2025
• Other Referred Cases: CIT v. Simit P. Seth, CIT v. Nikunj Eximp, Bholanath Polyfab Pvt. Ltd vs. CIT, M/s. N. K. Proteins Ltd. Vs. Dy. CIT, Pr. Commissioner of Income-Tax-5, Mumbai Vs. Kanak Impex (India) Ltd
• Laws Referred To: Maharashtra Value Added Tax Act, 2002, Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PRAVIN SALUNKHE
• Assessee Lawyers: KHUSHALI PANDYA
• Keywords: Set aside; Unexplained expenditure; Bogus purchase; Onus to prove; Tax effect; Accommodation entries; Bogus
• Section: 68; 69C; 37

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “H (SMC)” MUMBAI BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI SANDEEP SINGH KARHAIL (JUDICIAL MEMBER) ITA No. 3525/MUM/2025 Assessment Year: 2009-10 ITO-19(3)(1), 405, 4th floor, Piramal Chamber, Parel, Mumbai-400012. Vs. Ramniklal Shivji Savla, Parag Steel, 74, Mulji Bhai Building, Khetwadi Road, Mumbai-400 004. PAN NO. AACPS 7486 C Appellant Respondent Assessee by : Ms. Khushali Pandya Revenue by : Mr. Pravin Salunkhe, Sr. DR Date of Hearing : 22/01/2026 Date of pronouncement : 27/02/2026 ORDER PER OM PRAKASH KANT, AM This appeal by the Revenue is directed against order dated 06.03.2025 passed by the Ld. Commissioner of Income-tax (Appeals) – National Faceless Appeal Centre, Delhi [in short ‘the Ld. CIT(A)’] for assessment year 2009-10, raising following grounds: 1. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in restricting the addition to the extent of 8% Printed from counselvise.com as against the 25% addition made by the AO, on account of bogus purchases amounting to Rs.1,73,63,923/ Metal Corpn. M/s. Mercury Metal Corpn. M/s. Goodluck Metals, M/s. Mahalaxmi Steel(India), all are identified as bogus entiti the Maharashtra State Sales Tax Department under MVAT 2002, involved in practice of providing accommodation entries for bogus purchases?\" 2. \"Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in restricting the addit as against the 25% addition on Rs. 1,73,63,923/ fact that action of the Assessing officer was based on the information received from office of the DGIT (Investigation Wing) Mumbai, that all four were bogus and fraud only in the business of providing accommodation entries for bogus purchases and the assessee was found to be one of beneficiary, obtained accommodation entries of bogus purchases without actual delivery of any goods and this transac to generate paper tail only ?\" 3. \"Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in restricting the addition to the extent of 8% as against the 25% addition on Rs. 1,73,63,923/ fact that the assessee has failed to prove the genuineness and creditworthiness of transactions and parties for verification, by not producing any documents/evidences/delivery challans, stock registers etc. before Assessing officer during the assessment proceedings ?\" 4. \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in relying the decision of the Hon'ble. ITAT in assessee's own case in A.Y. 2011 holding that the income from bogus purchas be restricted to 8% of total value of purchase transactions from four bogus parties, although there was no dispute that the bogus purchases were made and so act of infraction of low was committed by the assessee on provision of section Maharashtra Value Added Tax Act, 2002 and such purchases are not allowable as per express provision u/s. 37 of the Act ?\" 5. Whether on the facts and circumstances of the case and in law, Ld. CITIA) has erred in restricting the addition to without appreciating the decision of the Hon'ble. Supreme Court in the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, wherein the Hon'bLd. Court has held that once a findings of act has been give purchases shown on the basis of fictitious invoices and debited in as against the 25% addition made by the AO, on account of bogus purchases amounting to Rs.1,73,63,923/- made with M/s. Metalix Metal Corpn. M/s. Mercury Metal Corpn. M/s. Goodluck Metals, M/s. Mahalaxmi Steel(India), all are identified as bogus entiti the Maharashtra State Sales Tax Department under MVAT 2002, involved in practice of providing accommodation entries for bogus 2. \"Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in restricting the addition to the extent of 8% as against the 25% addition on Rs. 1,73,63,923/- by ignoring the fact that action of the Assessing officer was based on the information received from office of the DGIT (Investigation Wing) Mumbai, that all four were bogus and fraudulent entities, engaged only in the business of providing accommodation entries for bogus purchases and the assessee was found to be one of beneficiary, obtained accommodation entries of bogus purchases without actual delivery of any goods and this transaction were undertaken to generate paper tail only ?\" 3. \"Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in restricting the addition to the extent of 8% as against the 25% addition on Rs. 1,73,63,923/-, by ignoring the fact that the assessee has failed to prove the genuineness and creditworthiness of transactions and parties for verification, by not producing any documents/evidences/delivery challans, stock registers etc. before Assessing officer during the assessment oceedings ?\" 4. \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in relying the decision of the Hon'ble. ITAT in assessee's own case in A.Y. 2011-12, thereby the Ld.CIT(A) in holding that the income from bogus purchase transaction should be restricted to 8% of total value of purchase transactions from four bogus parties, although there was no dispute that the bogus purchases were made and so act of infraction of low was committed by the assessee on provision of section 74(1A) of the Maharashtra Value Added Tax Act, 2002 and such purchases are not allowable as per express provision u/s. 37 of the Act ?\" 5. Whether on the facts and circumstances of the case and in law, Ld. CITIA) has erred in restricting the addition to the extent of 8% without appreciating the decision of the Hon'ble. Supreme Court in the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, wherein the Hon'bLd. Court has held that once a findings of act has been given that entire purchases shown on the basis of fictitious invoices and debited in Ramniklala Shivji Savla 2 ITA No. 3525/MUM/2025 as against the 25% addition made by the AO, on account of bogus made with M/s. Metalix Metal Corpn. M/s. Mercury Metal Corpn. M/s. Goodluck Metals, M/s. Mahalaxmi Steel(India), all are identified as bogus entities by the Maharashtra State Sales Tax Department under MVAT 2002, involved in practice of providing accommodation entries for bogus 2. \"Whether on the facts and circumstances of the case and in law, ion to the extent of 8% by ignoring the fact that action of the Assessing officer was based on the information received from office of the DGIT (Investigation Wing) ulent entities, engaged only in the business of providing accommodation entries for bogus purchases and the assessee was found to be one of beneficiary, obtained accommodation entries of bogus purchases without tion were undertaken 3. \"Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in restricting the addition to the extent of 8% , by ignoring the fact that the assessee has failed to prove the genuineness and creditworthiness of transactions and parties for verification, by not producing any documents/evidences/delivery challans, stock registers etc. before Assessing officer during the assessment 4. \"Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is right in relying the decision of the Hon'ble. ITAT in 12, thereby the Ld.CIT(A) in e transaction should be restricted to 8% of total value of purchase transactions from four bogus parties, although there was no dispute that the bogus purchases were made and so act of infraction of low was 74(1A) of the Maharashtra Value Added Tax Act, 2002 and such purchases are not allowable as per express provision u/s. 37 of the Act ?\" 5. Whether on the facts and circumstances of the case and in law, the extent of 8% without appreciating the decision of the Hon'ble. Supreme Court in the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, wherein the Hon'bLd. Court has n that entire purchases shown on the basis of fictitious invoices and debited in Printed from counselvise.com the P & L account are established as bogus, then restricting the addition to a curtained percentage goes against the principle of section 68 and 69C of the Income Tax Act, 196 6. \"Whether on the facts and circumstances of the case and in law, the order of the Ld. CIT(A) perverse in not considering that the order of Hon'bLd. Supreme Court in the case of M/s. N. K. Proteins Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01. is on the similar issue of bogus purchases, was already the law of the land when the Ld. CIT(A) has pronounced it's order on 06.03.2025 ?\" Ltd. 7. \" Whether on the facts and circumstances of the case and in law, the decision of the Ld. CIT(A), of the Hon'bLd. High Court Mumbai, in the case of Pr. Commissioner of Income Ltd(2025)172 Taxmann.com 283 (Bombay) Dated. 03.03.2025, wherein the decision of 100% addition made by AO ha allowed, by rejecting the ITAT's decision of estimating the profit rate @12.5% on bogus purchases and thereby impliedly grant deduction of such unexplained expenditure incurred u/s. 69C of the Act, eventhough the assessee faild.d to discharge its on prove the genuineness of alLd.ged purchases and has offered no explanation of the sources of expenditure incurred on account of such purchases?\" 8. \"Whether on the facts and circumstances of the case and in law, Ld. CITIA) has erred in restricting th appreciating the fact that in the case of M/s. Swetamber Steels Ltd. (Supra), the Hon'bLd. ITAT Ahmadabad, had conformed the disallowance of the bogus purchase, by stating that the purchases shown from respective parties were found non g decision of the ITAT was upheld by Hon'bLd. Gujarat High Court and thereafter also by the Hon'bld. Supreme Court?\" 9. The tax effect involved in this case is Rs.13,02,294/ below the prescribed limit as mentioned in the CBDT's Circ F.No.279/Misc. 142/2007 dated. 17.09.2024. However, the appeal is being fild.d before the Hon'bLd. ITAT, as this case also falls under one of the exceptions specified in paragraph 3.1(h) of the of the CBDT's Circular No.05/2024 Dated. 15.03.2024, wherein it is stated that in cases involving \"Organized Tax Evasion\", in such cases the decision to fild. appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit. the P & L account are established as bogus, then restricting the addition to a curtained percentage goes against the principle of section 68 and 69C of the Income Tax Act, 1961 ?\" 6. \"Whether on the facts and circumstances of the case and in law, the order of the Ld. CIT(A) perverse in not considering that the order of Hon'bLd. Supreme Court in the case of M/s. N. K. Proteins Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01. is on the similar issue of bogus purchases, was already the law of the land when the Ld. CIT(A) has pronounced it's order on 06.03.2025 ?\" Ltd. 7. \" Whether on the facts and circumstances of the case and in law, the decision of the Ld. CIT(A), is right in view of the decision of the Hon'bLd. High Court Mumbai, in the case of Pr. Commissioner of Income-Tax-5, Mumbai Vs. Kanak Impex (India) Ltd(2025)172 Taxmann.com 283 (Bombay) Dated. 03.03.2025, wherein the decision of 100% addition made by AO ha allowed, by rejecting the ITAT's decision of estimating the profit rate @12.5% on bogus purchases and thereby impliedly grant deduction of such unexplained expenditure incurred u/s. 69C of the Act, eventhough the assessee faild.d to discharge its on prove the genuineness of alLd.ged purchases and has offered no explanation of the sources of expenditure incurred on account of such purchases?\" 8. \"Whether on the facts and circumstances of the case and in law, Ld. CITIA) has erred in restricting the addition without appreciating the fact that in the case of M/s. Swetamber Steels Ltd. (Supra), the Hon'bLd. ITAT Ahmadabad, had conformed the disallowance of the bogus purchase, by stating that the purchases shown from respective parties were found non genuine and the decision of the ITAT was upheld by Hon'bLd. Gujarat High Court and thereafter also by the Hon'bld. Supreme Court?\" 9. The tax effect involved in this case is Rs.13,02,294/ below the prescribed limit as mentioned in the CBDT's Circ F.No.279/Misc. 142/2007-ITJ(Pt) amended vide No. 09/2024 dated. 17.09.2024. However, the appeal is being fild.d before the Hon'bLd. ITAT, as this case also falls under one of the exceptions specified in paragraph 3.1(h) of the of the CBDT's Circular o.05/2024 Dated. 15.03.2024, wherein it is stated that in cases involving \"Organized Tax Evasion\", in such cases the decision to fild. appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit. Ramniklala Shivji Savla 3 ITA No. 3525/MUM/2025 the P & L account are established as bogus, then restricting the addition to a curtained percentage goes against the principle of 6. \"Whether on the facts and circumstances of the case and in law, the order of the Ld. CIT(A) perverse in not considering that the order of Hon'bLd. Supreme Court in the case of M/s. N. K. Proteins Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, which is on the similar issue of bogus purchases, was already the law of the land when the Ld. CIT(A) has pronounced it's order on 7. \" Whether on the facts and circumstances of the case and in is right in view of the decision of the Hon'bLd. High Court Mumbai, in the case of Pr. 5, Mumbai Vs. Kanak Impex (India) Ltd(2025)172 Taxmann.com 283 (Bombay) Dated. 03.03.2025, wherein the decision of 100% addition made by AO has been allowed, by rejecting the ITAT's decision of estimating the profit rate @12.5% on bogus purchases and thereby impliedly grant deduction of such unexplained expenditure incurred u/s. 69C of the Act, eventhough the assessee faild.d to discharge its onus to prove the genuineness of alLd.ged purchases and has offered no explanation of the sources of expenditure incurred on account of 8. \"Whether on the facts and circumstances of the case and in law, e addition without appreciating the fact that in the case of M/s. Swetamber Steels Ltd. (Supra), the Hon'bLd. ITAT Ahmadabad, had conformed the disallowance of the bogus purchase, by stating that the purchases enuine and the decision of the ITAT was upheld by Hon'bLd. Gujarat High Court 9. The tax effect involved in this case is Rs.13,02,294/-, which is below the prescribed limit as mentioned in the CBDT's Circular ITJ(Pt) amended vide No. 09/2024 dated. 17.09.2024. However, the appeal is being fild.d before the Hon'bLd. ITAT, as this case also falls under one of the exceptions specified in paragraph 3.1(h) of the of the CBDT's Circular o.05/2024 Dated. 15.03.2024, wherein it is stated that in cases involving \"Organized Tax Evasion\", in such cases the decision to fild. appeal/SLP shall be taken on merit without regard to the tax Printed from counselvise.com 2. In the grounds raised, the the addition made by the Assessing Officer in respect of bogus purchases from 25% to 8% of the bogus purchases. 3. We have heard rival submissions of the parties and perused the relevant materials on record assessee submitted that in the case in first round of the proceedings before the ITAT, the complete copy of the order of the Ld. First Appellate Authority was not available and therefore, ITAT restored the matter back to the file 1261/Mum/2020 with the direction to follow the order of the Tribunal in the case of the assessee for assessment year 2011 passed in ITA No. 6696/Mum/2019 for assessment year 2011 wherein the Tribunal following the decis High Court in the case of CIT v. Simit P. Seth [38 taxmann.com 385] and Hon’ble Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171] directed to restrict the addition to the profit element from non consequently passed the impugned order and restricted the disallowance of bogus purchases to the 8% as against 25% determined by the Assessing Officer. The relevant finding of the Ld. CIT(A) is reproduced as under: “7. The Grou purchases to the tune of Rs. 1,73,73923/ making addition at 25% of such alleged non This appeal has been preferred by the assessee against the order of the Assessing Offi In the grounds raised, the sole issue in dispute is restricting the addition made by the Assessing Officer in respect of bogus purchases from 25% to 8% of the bogus purchases. We have heard rival submissions of the parties and perused the relevant materials on record. Before us, the Ld. counsel for the assessee submitted that in the case in first round of the proceedings before the ITAT, the complete copy of the order of the Ld. First Appellate Authority was not available and therefore, ITAT restored the matter back to the file of the Ld. CIT(A) vide ITA No. 1261/Mum/2020 with the direction to follow the order of the Tribunal in the case of the assessee for assessment year 2011 passed in ITA No. 6696/Mum/2019 for assessment year 2011 wherein the Tribunal following the decision of the Hon’ble Gujarat High Court in the case of CIT v. Simit P. Seth [38 taxmann.com 385] and Hon’ble Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171] directed to restrict the addition to the profit element from non-genuine purchases @ 8%. The Ld. CIT(A) passed the impugned order and restricted the disallowance of bogus purchases to the 8% as against 25% determined by the Assessing Officer. The relevant finding of the Ld. CIT(A) is reproduced as under: 7. The Ground No. 1 is that the AO was wrong in holding purchases to the tune of Rs. 1,73,73923/-, as non genuine and making addition at 25% of such alleged non- genuine purchases. This appeal has been preferred by the assessee against the order of the Assessing Officer (AO) making an addition of 25% of the Ramniklala Shivji Savla 4 ITA No. 3525/MUM/2025 sole issue in dispute is restricting the addition made by the Assessing Officer in respect of bogus We have heard rival submissions of the parties and perused , the Ld. counsel for the assessee submitted that in the case in first round of the proceedings before the ITAT, the complete copy of the order of the Ld. First Appellate Authority was not available and therefore, ITAT of the Ld. CIT(A) vide ITA No. 1261/Mum/2020 with the direction to follow the order of the Tribunal in the case of the assessee for assessment year 2011-12 passed in ITA No. 6696/Mum/2019 for assessment year 2011-12 ion of the Hon’ble Gujarat High Court in the case of CIT v. Simit P. Seth [38 taxmann.com 385] and Hon’ble Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171] directed to restrict the addition to the @ 8%. The Ld. CIT(A) passed the impugned order and restricted the disallowance of bogus purchases to the 8% as against 25% determined by the Assessing Officer. The relevant finding of the Ld. nd No. 1 is that the AO was wrong in holding , as non genuine and genuine purchases. This appeal has been preferred by the assessee against the order of cer (AO) making an addition of 25% of the Printed from counselvise.com purchases treating them as non the information received from the Sales Tax Department, concluded that the assessee had made purchases from certain dealers providing accommodation e Consequently, the AO made an addition of Rs. 43,40,981/ 25% of the alleged bogus purchases. Subsequently, on appeal before the CIT(A), the appellate authority has restricted the addition to 12.5% of such non 7.1. Against the same, the \"SMC\" Bench, Mumbai. In the decision pronounced, the Hon'ble ITAT has directed the appellate authority to adjudicate the matter by considering the order passed by the Hon'ble ITAT, in its own case for A.Y. 2011 records, it is seen that the Hon'ble Income Tax Appellate Tribunal (ITAT), Mumbai, has passed an order in ITA No. 6696/Mum/2019, dated 03.08.2021, for A.Y. 2011 this regard, it is important to reproduce t judicial decision for A.Y. 2011 \"6. Heard Ld.DR, perused the orders of the authorities below. It is not in dispute that sales have been accepted as genuine from out of these purchases. When the sales have accepted as genuine the entire purchases cannot be treated as non of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when the assessee made purchases and sold the finished goods as a natural corol purchases would be subject to tax but only the profit element embedded therein. Hon'ble Gujarat High Court in the case of CIT [38 taxman.com 385). Simply beca produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171). I agree with the view of the lower authorities that there should be an estimation of profit element from these purchases and should be estimated reasonably as the assessee could not conclusively prove that the purchases made are from the parties as claimed, especially in the absence of any confirmations from them. Taking the totality of facts and ci view the nature of business of the assessee i.e. trader in Ferrous and non profit element embedded in those purchases are estimated at 8%. Accordingly, I direct the Assessing Officer to e profit element from the non restrict the disallowance of purchases to 8% and compute the income accordingly. purchases treating them as non-genuine. The learned AO, based on the information received from the Sales Tax Department, concluded that the assessee had made purchases from certain dealers providing accommodation entries without actual supply of goods. Consequently, the AO made an addition of Rs. 43,40,981/ 25% of the alleged bogus purchases. Subsequently, on appeal before the CIT(A), the appellate authority has restricted the addition to 12.5% of such non-genuine Purchased. 7.1. Against the same, the \"SMC\" Bench, Mumbai. In the decision pronounced, the Hon'ble ITAT has directed the appellate authority to adjudicate the matter by considering the order passed by the Hon'ble ITAT, in its own case for A.Y. 2011-12. On perusal of records, it is seen that the Hon'ble Income Tax Appellate Tribunal (ITAT), Mumbai, has passed an order in ITA No. 6696/Mum/2019, dated 03.08.2021, for A.Y. 2011-12 in the assessee's own case. In this regard, it is important to reproduce the relevant portion of the judicial decision for A.Y. 2011-12, which is as under: \"6. Heard Ld.DR, perused the orders of the authorities below. It is not in dispute that sales have been accepted as genuine from out of these purchases. When the sales have accepted as genuine the entire purchases cannot be treated as non-genuine. The Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded therein. Similar view has been taken by the Hon'ble Gujarat High Court in the case of CIT v. Simit P. Seth [38 taxman.com 385). Simply because the parties were not produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171). I agree with the view of the lower authorities that there should be an estimation of profit ment from these purchases and should be estimated reasonably as the assessee could not conclusively prove that the purchases made are from the parties as claimed, especially in the absence of any confirmations from them. Taking the totality of facts and circumstances, keeping in view the nature of business of the assessee i.e. trader in Ferrous and non-Ferrous Metals, it would be justified if the profit element embedded in those purchases are estimated at 8%. Accordingly, I direct the Assessing Officer to e profit element from the non-genuine purchases at 8% and restrict the disallowance of purchases to 8% and compute the income accordingly. Ramniklala Shivji Savla 5 ITA No. 3525/MUM/2025 genuine. The learned AO, based on the information received from the Sales Tax Department, concluded that the assessee had made purchases from certain dealers ntries without actual supply of goods. Consequently, the AO made an addition of Rs. 43,40,981/-, being 25% of the alleged bogus purchases. Subsequently, on appeal before the CIT(A), the appellate authority has restricted the addition 7.1. Against the same, the \"SMC\" Bench, Mumbai. In the decision pronounced, the Hon'ble ITAT has directed the appellate authority to adjudicate the matter by considering the order passed by the 12. On perusal of records, it is seen that the Hon'ble Income Tax Appellate Tribunal (ITAT), Mumbai, has passed an order in ITA No. 6696/Mum/2019, 12 in the assessee's own case. In he relevant portion of the \"6. Heard Ld.DR, perused the orders of the authorities below. It is not in dispute that sales have been accepted as genuine from out of these purchases. When the sales have been accepted as genuine the entire purchases cannot be treated genuine. The Hon'ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd [355 ITR 290] held that when the assessee made purchases and sold the finished goods as lary not the entire amount covered under such purchases would be subject to tax but only the profit element Similar view has been taken by the v. Simit P. Seth use the parties were not produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp [216 Taxman.com 171). I agree with the view of the lower authorities that there should be an estimation of profit ment from these purchases and should be estimated reasonably as the assessee could not conclusively prove that the purchases made are from the parties as claimed, especially in the absence of any confirmations from them. rcumstances, keeping in view the nature of business of the assessee i.e. trader in Ferrous Metals, it would be justified if the profit element embedded in those purchases are estimated at 8%. Accordingly, I direct the Assessing Officer to estimate the genuine purchases at 8% and restrict the disallowance of purchases to 8% and compute the Printed from counselvise.com 7. In the result, appeal of the assessee is partly allowed.\" 7.1.1. In the above said order, the Hon'ble IT sales are not disputed, the entire purchases cannot be disallowed, and it is only the profit element embedded in such purchases that should be brought to tax. Accordingly, the ITAT restricted the addition to 8% of the total purchases 7.2. During the present appellate proceedings, the appellant has made detailed submission and requested to delete the addition of 12.5% as held by the Hon'ble CIT(A) same cannot be considered as the directions of the Hon'ble ITAT is specific and clear that to consider the matter for present year in line with the decision of Hon'ble ITAT for A.Y. 2011 the issue involved in the present appeal is identical to that adjudicated by the ITAT in A.Y. 2011 Hon'ble ITAT is binding on this appellate authority, I am inclined to follow the same principle. Therefore, the addition on account of non genuine purchases is restricted to 8% of the total purchases made by the assessee during the year under co addition is restricted to 8% of the total purchases instead of 25% as determined by the AO. The AO is directed to recompute the income accordingly. Hence, the Ground No. 1 is partly allowed 3.1 The Ld. Departmental Representativ subsequent judicial developments Hon’ble Bombay High Court in 5, Mumbai Vs. Kanak Impex (India) Ltd(2025)172 Taxmann.com 283 (Bombay) reconsideration of the issue, and that the entire bogus purchases ought to be disallowed in view of the principles emerging from N. K. Proteins Vs. Dy. CIT (2016) 292 CTR (Guj.) 354 16.01.2017. 3.2 The Ld. Counsel for the assessee, on the other hand, submitted that the Ld. CIT(A) merely followed the specific direction 7. In the result, appeal of the assessee is partly allowed.\" 7.1.1. In the above said order, the Hon'ble ITAT held that when sales are not disputed, the entire purchases cannot be disallowed, and it is only the profit element embedded in such purchases that should be brought to tax. Accordingly, the ITAT restricted the addition to 8% of the total purchases. . During the present appellate proceedings, the appellant has made detailed submission and requested to delete the addition of 12.5% as held by the Hon'ble CIT(A)-30, Mumbai. However, the same cannot be considered as the directions of the Hon'ble ITAT is pecific and clear that to consider the matter for present year in line with the decision of Hon'ble ITAT for A.Y. 2011-12. Considering that the issue involved in the present appeal is identical to that adjudicated by the ITAT in A.Y. 2011-12, and the decis Hon'ble ITAT is binding on this appellate authority, I am inclined to follow the same principle. Therefore, the addition on account of non genuine purchases is restricted to 8% of the total purchases made by the assessee during the year under consideration. As such, the addition is restricted to 8% of the total purchases instead of 25% as determined by the AO. The AO is directed to recompute the income accordingly. Hence, the Ground No. 1 is partly allowed The Ld. Departmental Representative submitted that subsequent judicial developments—particularly the decision of the Hon’ble Bombay High Court in Pr. Commissioner of Income 5, Mumbai Vs. Kanak Impex (India) Ltd(2025)172 Taxmann.com 283 (Bombay) Dated. 03.03.2025 n of the issue, and that the entire bogus purchases ought to be disallowed in view of the principles emerging from N. K. Proteins Vs. Dy. CIT (2016) 292 CTR (Guj.) 354 The Ld. Counsel for the assessee, on the other hand, ed that the Ld. CIT(A) merely followed the specific direction Ramniklala Shivji Savla 6 ITA No. 3525/MUM/2025 7. In the result, appeal of the assessee is partly allowed.\" AT held that when sales are not disputed, the entire purchases cannot be disallowed, and it is only the profit element embedded in such purchases that should be brought to tax. Accordingly, the ITAT restricted the . During the present appellate proceedings, the appellant has made detailed submission and requested to delete the addition of 30, Mumbai. However, the same cannot be considered as the directions of the Hon'ble ITAT is pecific and clear that to consider the matter for present year in line 12. Considering that the issue involved in the present appeal is identical to that 12, and the decision of the Hon'ble ITAT is binding on this appellate authority, I am inclined to follow the same principle. Therefore, the addition on account of non- genuine purchases is restricted to 8% of the total purchases made nsideration. As such, the addition is restricted to 8% of the total purchases instead of 25% as determined by the AO. The AO is directed to recompute the income accordingly. Hence, the Ground No. 1 is partly allowed.” e submitted that particularly the decision of the Pr. Commissioner of Income-Tax- 5, Mumbai Vs. Kanak Impex (India) Ltd(2025)172 Dated. 03.03.2025, warrant n of the issue, and that the entire bogus purchases ought to be disallowed in view of the principles emerging from M/s. N. K. Proteins Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated The Ld. Counsel for the assessee, on the other hand, ed that the Ld. CIT(A) merely followed the specific direction Printed from counselvise.com of the Tribunal in the assessee’s own case and could not have taken a contrary view. 4. We have heard the rival submissions and perused the record. The Revenue’s primary contention is that the legal landscape has shifted significantly following the recent decision of the Bombay High Court in (supra). In that ruling, the Hon'ble High Court critiqued the routine practice of estimating a 12.5% or 8% profit rate when the assessee fails to discharge the primary onus of proving the genuineness of the source and the transaction. 4.1 In the present case, the examine whether the facts align with the stricter line of authority emerging from later judgments. The restriction to 8% was made solely on the basis of the earlier order of the Tribunal in A.Y. 2011 12, without examining w 10 is identical or whether subsequent binding precedent alters the legal position. 4.2 Accordingly, the impugned order on this issue is set aside, and the matter is restored to the file of the Ld. CIT(A) for fresh adjudication in accordance with law, after affording due opportunity of hearing to the assessee. The Ld. CIT(A) shall examine the issue afresh in the light of applicable binding precedents and record a reasoned finding. of the Tribunal in the assessee’s own case and could not have taken We have heard the rival submissions and perused the record. The Revenue’s primary contention is that the legal landscape has shifted significantly following the recent decision of the Bombay High Court in Pr. CIT v. Kanak Impex (India) Ltd In that ruling, the Hon'ble High Court critiqued the routine practice of estimating a 12.5% or 8% profit rate when the assessee fails to discharge the primary onus of proving the genuineness of the source and the transaction. In the present case, the Ld. CIT(A) did not independently examine whether the facts align with the stricter line of authority emerging from later judgments. The restriction to 8% was made solely on the basis of the earlier order of the Tribunal in A.Y. 2011 12, without examining whether the factual position for A.Y. 2009 10 is identical or whether subsequent binding precedent alters the Accordingly, the impugned order on this issue is set aside, and the matter is restored to the file of the Ld. CIT(A) for fresh adjudication in accordance with law, after affording due opportunity of hearing to the assessee. The Ld. CIT(A) shall examine the issue afresh in the light of applicable binding precedents and record a Ramniklala Shivji Savla 7 ITA No. 3525/MUM/2025 of the Tribunal in the assessee’s own case and could not have taken We have heard the rival submissions and perused the record. The Revenue’s primary contention is that the legal landscape has shifted significantly following the recent decision of the Hon'ble Pr. CIT v. Kanak Impex (India) Ltd In that ruling, the Hon'ble High Court critiqued the routine practice of estimating a 12.5% or 8% profit rate when the assessee fails to discharge the primary onus of proving the genuineness of Ld. CIT(A) did not independently examine whether the facts align with the stricter line of authority emerging from later judgments. The restriction to 8% was made solely on the basis of the earlier order of the Tribunal in A.Y. 2011– hether the factual position for A.Y. 2009– 10 is identical or whether subsequent binding precedent alters the Accordingly, the impugned order on this issue is set aside, and the matter is restored to the file of the Ld. CIT(A) for fresh adjudication in accordance with law, after affording due opportunity of hearing to the assessee. The Ld. CIT(A) shall examine the issue afresh in the light of applicable binding precedents and record a Printed from counselvise.com 5. The issue in dispute raised by th appeal is accordingly allowed for statistical purposes. 6. In the result, the appeal of the Revenue is allowed for statistical purposes. Order pronounced in the open Court on Sd/- (SANDEEP SINGH KARHAIL JUDICIAL MEMBER Mumbai; Dated: 27/02/2026 Rahul Sharma, Sr. P.S. Copy of the Order forwarded to 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// The issue in dispute raised by the Revenue in the ground of appeal is accordingly allowed for statistical purposes. In the result, the appeal of the Revenue is allowed for ounced in the open Court on 27/02/2026. Sd/ (SANDEEP SINGH KARHAIL) (OM PRAKASH JUDICIAL MEMBER ACCOUNTANT MEMBER Copy of the Order forwarded to : BY ORDER, (Assistant Registrar) ITAT, Mumbai Ramniklala Shivji Savla 8 ITA No. 3525/MUM/2025 e Revenue in the ground of appeal is accordingly allowed for statistical purposes. In the result, the appeal of the Revenue is allowed for /02/2026. Sd/- OM PRAKASH KANT) ACCOUNTANT MEMBER BY ORDER, (Assistant Registrar) ITAT, Mumbai Printed from counselvise.com "