JAGATJIT INDUSTRIES LIMITED,NEW DELHI V. ACIT, CENTRAL CIRCLE - 04, NEW DELHI

CO 98/DEL/2018

AI Insights

The case involves the Assistant Commissioner of Income Tax, Central Circle-4, New Delhi (Appellant) against M/s Jagatjit Industries Ltd. (Respondent) concerning three appeals and cross objections for the assessment years 2011-12 to 2013-14. The primary issues were the disallowance of alleged bogus purchases and the disallowance of rebates and discounts. The Tribunal examined the validity of the disallowances made by the Assessing Officer under sections 153A and 143(3) of the Income Tax Act, 1961, following a search operation on M/s Jaswant Group of cases. The Tribunal's decision was influenced by the lack of substantive evidence supporting the bogus nature of the purchases and the procedural impropriety in making protective additions without substantive ones.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 838239 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 9 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 03-05-2018
• Other Referred Cases: Ravjibhai Becharbhai Dhamelia vs. ACIT, PCIT Vs. Hitesh Mody (HUF), PCIT Vs. Forum Sales (P) Ltd., PCIT Vs. Kanak Impex (India) Ltd, DCIT Vs. Kohinoor Foods Ltd., DCIT Vs. Tirupati Matsup (P.) Ltd., Suresh K. Jajoo vs. ACIT, ITO Vs. Keshava Nanda Kakati, M.P. Ramachandran vs. DCIT, Gregory & Nicholas vs. ACIT, G.K. Consultants Ltd. vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONIKA SINGH
• Assessee Lawyers: M.K. MADAN
• Keywords: Bogus purchase; Reopening of assessment; Capital Gains; Accommodation entries; Bogus
• Section: 147; 143(3); 142(1); 153A; 131

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI Before Sh. Satbeer Singh Godara, Judicial Member & Sh. Naveen Chandra, Accountant Member ITA No. 83 & CO 97/Del/2018 : Asstt. Year: 2011-12 ITA No. 84 & CO 98/Del/2018 : Asstt. Year: 2012-13 ITA No. 85/Del/2018 : Asstt. Year: 2013-14 ACIT, Central Circle-4, New Delhi Vs M/s Jagatjit Industries Ltd., 5th Floor, Bhandari House, 91, Nehru Place, New Delhi-110019 (APPELLANT) (RESPONDENT) PAN No. AAACJ1525E Assessee by : Sh. M. K. Madan, CA Revenue by : Ms. Monika Singh, CIT-DR Date of Hearing: 03.02.2026 Date of Pronouncement: 18.02.2026 ORDER Per Bench: These Revenue’s three appeals along with assessee’s cross objections in former twin cases ITA Nos. 83 to 85/Del/2018 and CO Nos. 97 & 98/Del/2018, for assessment years 2011-12 to 2013-14, arise against the CIT(A)-23, New Delhi’s common order dated 31.10.2017, in case Nos. 294, 295 & 303/2016-17, in proceedings u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961 (in short “the Act”), respectively. 2. Heard both the parties at length. Case files perused. Printed from counselvise.com ITA Nos. 83, 84 & 85/Del/2018 CO Nos. 97 & 98/Del/2018 Jagatjit Industries Ltd. 2 3. It transpires during the course of hearing that there are two issues only which arises for our apt adjudication i.e. one each sought to be canvassed at the Revenue’s and the assessee’s behest i.e. allowability of alleged bogus purchase amounting to Rs.65,71,159/- and Rs.41,30,525/-; respectivey which was rejected in the Assessing Officer’s identical assessments and deleted in the lower appellate discussion. The Revenue has filed it’s former twin appeals ITA No. 83 & 84/Del/2018 seeking to revive the same before the tribunal. It’s third appeal ITA No. 85/Del/2018 as well as assessee’s twin cross objections; as the case may be, canvass yet another common/identical issue of disallowance rebate(s) and discounts involving various alleged discrepancy/offered to various party(ies) in sales and marketing etc. 4. It is in this factual backdrop that we first of all proceed to decide the above former issue of correctness of the assessee’s purchase claim amounting to Rs.65,71,159/- and Rs.41,30,525/- in assessment years 2011-12 and 2012-13, respectively. A combined perusal of the case records indicates that the learned assessing authority appears to have gone by the alleged incriminating statement of one Sh. Ashok Kumar Gupta (proprietor of the assessee’s supplier M/s Delhi Agro Printed from counselvise.com ITA Nos. 83, 84 & 85/Del/2018 CO Nos. 97 & 98/Del/2018 Jagatjit Industries Ltd. 3 Overseas) wherein he had admitted as having provided bogus billings in question. There is further no issue between the parties that all these cases have emanated from the learned departmental authorities’ search action conducted on M/s Jaswant Group of cases on 06.05.2014 which included the assessee as well. The Assessing Officer thereafter initiated section 153A proceedings and framed assessment(s) on 30.12.2016 thereby disallowing the assessee’s purchases allegedly as bogus ones on the ground that it had availed accommodation entries to the very effect. 5. We now advert to the CIT(A)’s lower appellate discussion which suggests that Sh. Ashok Kumar Gupta had given three statements (para 6.3.1 at page 60) i.e. dated 22.08.2014 u/s 153A and 20.12.2016 and 16.08.2017 in section 131 process initiated at the Revenue’s behest. The assessee pleaded before the learned CIT(A) that the Assessing Officer had nowhere provided cross-examination opportunities before disallowing it’s purchases. The CIT(A) sought a remand report. And that the Assessing Officer then allowed the assessee to cross-examine Sh. Ashok Kumar Gupta where from no clear cut indication supporting it’s purchase claim appears to have come. The Assessing Officer further deputed the departmental inspector(s) Printed from counselvise.com ITA Nos. 83, 84 & 85/Del/2018 CO Nos. 97 & 98/Del/2018 Jagatjit Industries Ltd. 4 to carry out on the separate verification wherein it was inter alia noticed that the above supplier firm stood closed 3-4 years back, it ran a small scale business without even having a godown as well. 6. Faced with this situation, the assessee filed it’s all documentary evidence of having made the impugned payments by banking channels, confirmation of account(s) as well as absence of any abnormality in GP ratio which led the learned CIT(A) to decide the impugned bogus purchase disallowance issue against the department. 7. We have given our thoughtful consideration the Revenue’s and the assessee’s respective vehement submissions. Learned counsel more particularly seeks to buttress the point that Mr. Gupta had nowhere supported the Revenue’s case all along which could result in disallowance of the assessee’s bogus purchase. The fact however remains that the assessee’s cross- examination availed before the Assessing Officer in remand proceedings also could not successfully prove it’s purchase claim as genuine as well. This is further coupled with the fact that various recent judicial precedents (2025) 173 taxmann.com 592 (Guj.) Ravjibhai Becharbhai Dhamelia vs. ACIT; (2024) 160 Printed from counselvise.com ITA Nos. 83, 84 & 85/Del/2018 CO Nos. 97 & 98/Del/2018 Jagatjit Industries Ltd. 5 taxmann.com 110 (Bom) PCIT Vs. Hitesh Mody (HUF), (2024) 160 taxmann.com 93 (Del) PCIT Vs. Forum Sales (P) Ltd.; (2025) 172 taxmann.com 283 (Bom) PCIT Vs. Kanak Impex (India) Ltd; (2025) 178 taxmann.com 424 (Del. – Trib.) DCIT Vs. Kohinoor Foods Ltd.; and (2025) 177 taxmann.com 836 (Delhi-trib.) DCIT Vs. Tirupati Matsup (P.) Ltd. have already decided the instant issue of bogus purchases with divergent views as well. And also that the assessee’s corresponding book result and sales turnover etc. have nowhere been disputed. Faced with this situation and keeping in mind these peculiar facts and circumstances of the case, we deem it appropriate that a further lump sum GP @5% of the assessee’s purchases herein would meet the ends of justice with a rider that the same shall not be treated as a precedent. We order accordingly. Necessary computation shall follow as per law. These Revenue’s former twin appeals ITA Nos. 83 & 84/Del/2018 partly succeed in foregoing terms. 8. Next comes the latter issue of disallowance of the assessee’s rebate and discount claims made on “protective” basis in all these three assessment years. Learned CIT-DR could hardly dispute that the Assessing Officer’s assessment Printed from counselvise.com ITA Nos. 83, 84 & 85/Del/2018 CO Nos. 97 & 98/Del/2018 Jagatjit Industries Ltd. 6 discussion at page 19 para 6.7 had first made the impugned protective addition than observed that the corresponding substantive addition ought to be made in the hands of Mr. Sanjay Duggal etc. Meaning thereby that the learned lower authorities have first made protective addition than a substantive one which itself is not sustainable in law going by (2010) 39 SOT 414 (Mum.) Suresh K. Jajoo vs. ACIT and (2021) 133 taxmann.com 316 (Gauhati-Trib.) ITO Vs. Keshava Nanda Kakati deciding the very issue against the department as follows: “This is an appeal preferred by the Revenue against the order of Ld. CIT(A), Guwahati-2 dated 30.09.2019 for assessment year 2016-17. 2. The sole ground raised by the Revenue is as under: “That in the fact and circumstances of the case and law in matter, the Ld. CIT(Appeals) is not justified in deleting the protective addition made by the Assessing Officer of Rs. 1,51,56,830/- for the A.Y. 2016-17.\" 3. From perusal of the aforesaid ground raised by the Revenue, it is taken note that the Revenue is aggrieved by the action of the Ld. CIT(A) who deleted the protective addition made by the AO of Rs. 1,51,56,830/-. 4. Brief fact of the case as noted by the AO is that the assessee has filed the return of income on 2.03.2018 showing total income of the assessee at Rs. 4,62,800/-. The AO noted that the case was selected for scrutiny through CASS and reason for scrutiny selection “substantial cash deposit in the bank account”. The assessee pursuant to the notice u/s 142(1) of the Act, in this regard brought to the notice of the AO that the savings bank account no. 33727278376 has been opened Printed from counselvise.com ITA Nos. 83, 84 & 85/Del/2018 CO Nos. 97 & 98/Del/2018 Jagatjit Industries Ltd. 7 for the purpose of Junior College and 2 ITA No. 460/Gau/2019 Keshava Nanda Kakati, A.Y. 2016-17 duly reflected about the same in the return of income of the Society of Education (Alpha Beta College) for the year under consideration which runs the Junior College ; and the sums deposited/withdrawn in the bank account are not pertaining to him and so he is not maintaining any details of the cash deposits or withdrawals in the said bank account. It was brought to the notice of AO that the deposit/withdrawal of sums are reflected in the books of Junior College and he was not in a position to produce the books of the Junior College during his assessment proceedings because the Junior College is managed by M/s Society of Education and, therefore it was submitted before the AO that it is not just and proper to consider the sum credited in the Savings Bank Account (supra) as his own. 5. After receipt of the reply from the assessee, the AO noted that there were withdrawals amounting to Rs. 94,55,938/- by the members on various dates. According to him, the assessee could not prove that the said bank account was exclusively used for the purpose of college and that the gross receipt shown by the assessee society (A.Y. 2016-17) does not match with the cash deposits as claimed by the assessee. Therefore, the AO was of the opinion that the total credit made in the said bank account amounting to Rs. 1,51,56,830/- need to be treated as “income from other sources” in the hands of the assessee and added to the total income of the assessee on protective basis to safeguard the interest of revenue and he also observed in the assessment order that the substantive addition would be made by the respective AO of M/s Society of Education (Alpha Beta College) and that the information regarding this is being passed to the that AO of the college and thus he made protective assessment in the hands of the assessee to the tune of Rs.1,51,56,830/-. 6. Aggrieved the assessee preferred an appeal before the Ld. CIT(A) who was pleased to hold that in the absence of any prior substantive addition in the case of M/s. Society of Education, no protective assessment could have been made by the AO in the hands of assessee and, therefore, the action of the AO is bad in law and, therefore, he deleted the same. Printed from counselvise.com ITA Nos. 83, 84 & 85/Del/2018 CO Nos. 97 & 98/Del/2018 Jagatjit Industries Ltd. 8 7. Aggrieved by the aforesaid action of the Ld. CIT(A), the revenue is before us. 8. We have heard both the parties and perused the records. We note that the Ld. CIT(A) has made a categorical finding of fact that there was no substantial addition of such an amount (Rs. 1,51,56,830/-) made prior in the case of M/s. Society of Education and this finding of fact has not been rebutted/controverted or assailed by the revenue before us by filing specific ground to this effect in this appeal. From a perusal of the grounds of appeal raised by the revenue (supra), it is clear that the revenue has only assailed the decision of the Ld. CIT(A) in deleting the protective addition made by the AO to the tune of Rs. 1,51,56,830/-. And it can be very well seen that the basis for deletion resorted by Ld CIT(A) to delete the protective assessment in the hands of assessee was because there was no substantial addition in the hands of M/s. Society of Education. This crucial fact has not been rebutted/controvered/assailed before us. Therefore, this finding of fact of Ld CIT(A) crystallizes (i.e. no substantive addition in the hands of M/s. Society of Education) and, therefore, we do not find any infirmity in the order passed by the Ld. CIT(A) on this issue on deletion of protective addition without substantial addition. We also take note that the Ld. CIT(A) to come to such a decision has taken note of relevant decisions of this Tribunal which reads as under: “In the case of ITO vs. Fussy Financial Services Private Limited [I.T.A. No.44/DEL/2014 dated 05/06/2017, it was held/averred, as follows, by the Hon’ble ITAT-Delhi: We further note that the analysis of the investment account reveal that the company has made investment of Rs.5,04,01,000/. The statement given by Sh. PN Jha assumes importance wherein he categorically admitted that the company was doing the business of investment and finance and during the year the bank accounts of the company have been used to provide the accommodation entries. The addition of Rs.3,17,67,951/- made by the Assessing Officer on protective basis, which is not sustainable in the eyes of law, because in this case the AO himself stated in the assessment order that the Department is looking after the cases of beneficiaries and the amounts channelized through this group would be taxed in the hands of the beneficiaries , the amount of total credits of Rs.3,17,67,951/- made in its bank Printed from counselvise.com ITA Nos. 83, 84 & 85/Del/2018 CO Nos. 97 & 98/Del/2018 Jagatjit Industries Ltd. 9 account with Kotak Mahindra Bank, KG Marg, New Delhi, during the year is added to the income of the assessee on protective basis. In this case we find that AO has not made any substantive assessment. There may be Substantive assessment without any protective assessment, but there cannot be any protective assessment without there being a substantive assessment. In the case of M.P. Ramchandran vs. DCIT [129 TTJ 190 at page 195], it was held/averred, as follows, by the Hon’ble ITAT: “In order to give a different colour, the ld. DR contended that this disallowance was made on protective basis only and hence cannot be equated with the substantive disallowance. We have noted above about the validity and presumption of the protective assessment in general. Protective assessment cannot be independent of substantive assessment. Thus protective assessment is always successive to the substantive assessment. There may be a substantive assessment without any protective assessment but there cannot be any protective assessment without there being a substantive assessment. In simple words there has to be some substantive assessment/addition first which enables the AO to make a protective assessment/addition. Substantive addition/assessment is made in the hands of the person in whose hands the AO prima facie holds the opinion that the income is rightly taxable. Having done so and with a view to protect the interest of the Revenue, if the AO is not sure that the person in whose hands he had made the substantive addition rightly, he embarks upon the protective assessment. Thus the protective assessment is basically based on the doubt of the AO as distinct from his belief which is there is the substantive assessment.” In the case of Gregory & Nicholas vs. ACIT [I.T.A. No.5102/Mum/2006 & IT(SS)A No.24/Mum/2009 dated 01/03/2007], it was held/averred, as follows, by the Hon'ble ITAT (Mumbai): “21. In the case of Suresh K. Jaju (2010) 39 SOT 414(Mum), E-Bench of the Tribunal at page 532 to 533 held as follows: “The AO made the following observations: Printed from counselvise.com ITA Nos. 83, 84 & 85/Del/2018 CO Nos. 97 & 98/Del/2018 Jagatjit Industries Ltd. 10 \"As the assessee has already offered this income in assessment year 2001-02, the same is assessed in this year to protect the interest of the revenue.\" Whether the above observations are enough to conclude that the assessment of the capital gains as long-term capital gain in assessment year 2001- 02 by the Assessing Officer was only a protective assessment? We have already seen the ratio laid down by the Hon'ble Supreme Court in the case of Lalji Haridas (supra) wherein the Hon'ble Supreme Court while recognizing the concept of protective assessment has very clearly laid down that there must be an exhaustive enquiry and the question as to who is liable to pay (in this case which year the capital gain is to be assessed and whether as long- term capital gain in assessment year 2001-02 or short term capital gain in assessment year 2000- 01) should be determined after hearing objections. He should determine the question in the case of one person (in this case of the other person (in this case in other year) in whose case assessment has to be made protectively. Thus, protective assessment has to be done only after substantive assessment is done. An assessment can be considered as protective only when there is substantive assessment. Thus, substantive assessment has to precede protective assessment.\" In the case of G.K. Consultants Ltd. vs. ITO [ITA No.1502/Del/2013 dated 27/06/2014], [upheld in CIT vs. G.K. Consultants Ltd., 2016 (6) TMI 136 Delhi High Court], it was held/averred, as follows, by the Hon'ble ITAT Delhi: “19. On careful consideration of above contention, we are of the view that there may be a substantive assessment without any protective assessment but there cannot be any protective assessment/addition without substantive assessment/addition, meaning thereby there has to be some substantive assessment/addition first which enables the AO to make a protective assessment/addition. In the present case, the AO proceeded to make protective assessment by way of reopening of assessment of the assessee appellant company without being a substantive assessment on the date of assumption Printed from counselvise.com ITA Nos. 83, 84 & 85/Del/2018 CO Nos. 97 & 98/Del/2018 Jagatjit Industries Ltd. 11 of jurisdiction u/s 147 of the Act which is not permissible as per decision of ITAT, Mumbai in the case of M.P. Ramachandaran vs. DCIT (supra) and Suresh K Jajo vs ACIT (supra).\" [Emphasis given by us] 9. In the light of the aforesaid decision of the Tribunal and based on the discussion, we do not find any infirmity in the action of Ld. CIT(A) to have deleted the protective assessment in the hands of the assessee when the fact was that there was no substantive addition in the hands of M/s. Society of Education or other assessee’s and ergo the same is confirmed. 10. In the result, the appeal of the revenue is dismissed.” 9. We accordingly deleted the impugned “protective” addition of rebate & discounts made in the assessee’s hands, in very terms. We thus uphold the learned CIT(A) findings granting relief to the assessee in A.Y. 2013-14 forming subject matter of adjudication in Revenue’s third appeal ITA No. 85/Del/2018; and, at the same time, it’s twin cross objections CO Nos. 97 & 98/Del/2018 (A.Ys. 2011-12 & 2012-13) also succeed in very terms. The impugned rebate and discount disallowance in other words shall henceforth be deemed to have been deleted in totality in other words. 10. No other ground or argument has been pressed before us. 11. To sum up, the Revenue’s twin appeals ITA Nos. 83 & 84/Del/2018 are partly allowed, it’s last appeal ITA No. Printed from counselvise.com ITA Nos. 83, 84 & 85/Del/2018 CO Nos. 97 & 98/Del/2018 Jagatjit Industries Ltd. 12 85/Del/2018 is dismissed and the assessee’s cross objections CO Nos. 97 & 98/Del/2018 are allowed in above terms. A copy of this common order be placed in the respective case files. Order Pronounced in the Open Court on 18/02/2026. Sd/- Sd/- (Naveen Chandra) (Satbeer Singh Godara) Accountant Member Judicial Member Dated: 18/02/2026 *Subodh Kumar, Sr. PS* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR Printed from counselvise.com "