LAVA INTERNATIONAL LIMITED,NOIDA V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, DELHI, DELHI

ITA 2000/DEL/2025

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Lava International Ltd. appealed against the order of the Commissioner of Income Tax (Appeals), which confirmed the disallowance of 5% on purchases made from M/s. Gryfon Commodities due to doubts about the genuineness of the transactions and the creditworthiness of the supplier. The Tribunal considered the evidence provided by the assessee, including purchase orders, invoices, and bank statements, and noted that the sales of goods purchased from Gryfon were not doubted. However, due to the cancellation of Gryfon's GST registration and non-compliance with a notice under section 133(6), the Tribunal found partial merit in the AO's disallowance and reduced it to 2%. The Tribunal also addressed issues related to the procedural adherence under sections 144 and 144B of the Income Tax Act, and the charging of interest under section 234C.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840098 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2026
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2021-2022
• Appeal Filed On: 28-03-2025
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANISH GUPTA
• Assessee Lawyers: GIRISH SANTHALIA; NEERAJ JAIN
• Keywords: Principle of natural justice; Bogus
• Section: 144; 133(6); 37

Judgement Text

"ITA No.2000/Del/2025 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “G” BENCH: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.2000/Del/2025 [Assessment Year : 2021-22] Lava International Ltd. A-56, Sector-64, Noida Uttar Pradesh-201301 PAN-AABCL5987H vs Assessment Unit Income Tax Department/ DCIT, Central Circle-1, Delhi APPELLANT RESPONDENT Appellant by Shri Girish Santhalia, CA & Shri Neeraj Jain, Adv. Respondent by Shri Manish Gupta, Sr. DR Date of Hearing 24.12.2025 Date of Pronouncement 25.02.2026 ORDER PER MANISH AGARWAL, AM : The present appeal is filed by assessee against the order dated 17.01.2025 by Ld. Commissioner of Income Tax (Appeals), Delhi-23 [“Ld. CIT(A)”] in Appeal No. NFAC/2020-21/10208683 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 27.12.2022 passed u/s 144 r.w.s. 144B of the Act pertaining to Assessment Year 2021-22. 2. Brief facts of the case are that the assessee company is engaged in the business of manufacturing and trading of mobile phone under the brand name of “LAVA” and filed its return of income of INR 1,24,57,90,880/-. The case of the assessee was selected for scrutiny under CASS and during the course of assessment proceedings, it was Printed from counselvise.com ITA No.2000/Del/2025 Page | 2 observed by the AO that assessee has claimed expenses towards purchases from M/s. Gryfon Commodities totaling to INR 62,61,59,739/- and the genuineness of the transaction and creditworthiness of the supplier party was not proved despite the fact that notice u/s 133(6) of the Act was issued to which no compliance was made. Accordingly, AO framed the opinion that purchases made from this supplier is not proved. Though the assessee has filed all the purchases, e-way bills, etc. however, since the GST No. of the said party was cancelled as per GST portal from July 2021, therefore, the AO disallowed 5% of the total transaction made with M/s. Gryfon Commodities and made the addition of INR 3,11,07,987/- being 5% of the total transaction of INR 62,21,59,739/- with the said party. 3. In first appeal, Ld. CIT(A) has confirmed the disallowance made vide impugned order dated 17.01.2025 and dismissed the appeal of the assessee. 4. Aggrieved by the said order, the assessee preferred the present appeal before the Tribunal and has raised following Grounds of appeal:- 1. “That the Ld. Commissioner of Income-tax Appeals, CIT(A), Delhi-23 ['CIT(A)'] erred on facts and in law in confirming the action of assessing officer to assess income of the appellant for the relevant assessment year at Rs.1,27,68,98,867 as against the returned income of Rs. 1,24,57,90,880. Re: Validity of the assessment order: 2. That the Ld. CIT(A) erred on facts and in law in confirming the action of assessing officer of passing assessment under section 144 read with section 144B, without appreciating that (a) the conditions specified in section 144 were not applicable in the appellant's case, Printed from counselvise.com ITA No.2000/Del/2025 Page | 3 and (b) even otherwise, procedure prescribed in section 144B of the Act was not followed. 3. That the Ld. CIT(A) erred on facts and in law in not appreciating that the assessment order, having been passed under the wrong section, was beyond jurisdiction, illegal and bad in law, and thus the disallowances made therein are void ab-initio. Re: Violation of principles of natural justice: 4. That the Ld. CIT(A) erred in law in passing order without affording an opportunity of personal hearing to the appellant thereby violating the principles of natural justice. Re: Disallowance of Rs.3.11,07,987 being 5% of purchases made from Gryfon: 5. That the Ld. CIT(A) erred on facts and in law in confirming the action of assessing officer to disallow Rs.3,11,07,987, being 5% of purchases made from M/s Gryfon Commodities ['Gryfon'] during the relevant assessment year on the ground that identity and creditworthiness of the party and genuineness of the transaction could not be proved. 6. That the Ld. CIT(A) erred on facts and in law in not appreciating that the expenditure incurred towards purchase of goods from Gryfon meets the conditions of section 37 of the Act, and therefore no disallowance is warranted. 7. That the Ld. CIT(A) erred on facts and in law in confirming the disallowance made by the assessing officer on mere suspicion/surmises, without judiciously considering the documentary evidence filed by the appellant. 8. That the Ld. CIT(A) erred on facts and in law in confirming adverse conclusion drawn by the assessing officer merely on account of non- receipt of response from Gryfon, which is a third party. 9. That the Ld. CIT(A) erred on facts and in law in not appreciating that the expenditure on purchase of goods was incurred wholly and exclusively for the purposes of business and was duly recorded in the books of accounts. Re: Interest under section 234C of the Act: 10. That the Ld. CIT(A) erred in not adjudicating on levy/ enhancement of interest under section 234C of the Act by the assessing officer in the computation sheet annexed to the assessment order. 11. That the Ld. CIT(A) erred on facts and in law in not appreciating that interest under section 234C of the Act is computed qua returned income. Printed from counselvise.com ITA No.2000/Del/2025 Page | 4 The appellant craves leave to add, alter, amend or vary from the aforesaid grounds of appeal before or at the time of hearing.” 5. Ground of appeal Nos. 1 to 4 raised by the assessee are with respect to the violation of principal of natural justice as the assessment order was passed u/s 144 of the Act. Before us, Ld.AR has not submitted any information in support of these Grounds of appeal therefore, these Grounds of appeal raised by the assessee are dismissed. 6. Regarding Ground of appeal Nos. 5 to 9 raised by the assessee, it is submitted by ld. AR that the assessee has filed all the necessary details to establish the purchases made as genuine such as purchase order, invoices, e-way bills, transportation bills, ledger, GST return, bank statements etc. in respect of the transaction carried out with M/s. Gryfon Commodities. Ld.AR further submits that the sales made of the goods purchased from this party were not doubted and therefore, no disallowance should be made. Ld.AR submits that it had no control over the affairs of the supplier party who had canceled its registration with the GST authorities. Ld. AR further submits that assessee has made the purchases during the period from 1st April to 30th June, 2020 during which, the GST registration of the supplier party was in force and valid and therefore, the purchase made cannot be held as bogus. Ld. AR further submits that the payments made against the purchases were through banking channel and has not been doubted by the authorities. In the last ld. AR submits that the AO has made the disallowance @5% out of the total purchases made from this party, and not disallowed the entire purchases. Therefore, Printed from counselvise.com ITA No.2000/Del/2025 Page | 5 it could not be held that the entire purchase made from this party are bogus and thus prayed for the deletion of the disallowance made. 7. Per Contra, Ld. Sr. DR for the Revenue submits that said parties had not made any compliance to the summon issued u/s 133(6) of the Act and, therefore, therefore its existence as well as the transactions made with this party are doubtful. Ld. Sr. DR submits that the AO has rightly made the disallowance and requested for the confirmation of the disallowance made. 8. Heard the contentions of both the parties at length and perused the material available on record. From the perusal of the orders of both the authorities and submission made by the assessee, it is observed that though the assessee has filed all the necessary evidences to establish the supply of the goods As genuine however, the facts remained that GST authorities has cancelled the registration of the supplier party and the last transaction was carried out by the assessee with that party was on 22.06.2020 i.e. before the cancellation of the registration. It is also a matter of fact that no purchases were made in any of the preceding years by the assessee from this party. Surprisingly, the assessee has made purchases of more than INR 60 crores from a party during the period of less than three months and the supplier party had not even made any compliance to the notice issued u/s 133(6) by the AO. Thus, looking to the entirety of the facts of the case and further keeping in mind that sales made of the goods purchased from the said party have not Printed from counselvise.com ITA No.2000/Del/2025 Page | 6 been doubted, in our considered opinion, disallowance @ 2% of the purchases would be sufficient to meet the end of the justice. Accordingly, we direct the AO to disallow 2% of the purchases made from M/s. Gryfon Commodities. The Ground of appeal Nos. 5 to 9 raised by the assessee are thus, partly allowed. 9. Ground of appeal Nos.10 & 11 raised by the assessee are with respect to the charging of interest u/s 234C of the Act. The AO is directed to charge the interest u/s 234C on the income declared by the assessee in the return of income filed. With these directions, the grounds of appeal No.10 & 11 raised by the assessee are allowed. 10. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 25.02.2026. Sd/- Sd/- (SATBEER SINGH GODARA) JUDICIAL MEMBER Date:- 25.02.2026 *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT 6. Guard File ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "