NAVEEN AGGARWAL,DELHI V. ITO WARD 44(6), DELHI

ITA 703/DEL/2025

AI Insights

The case involves Naveen Aggarwal, the appellant, who contested the assessment order passed by the Income Tax Officer (ITO) under sections 147, 144, and 144B of the Income Tax Act, 1961, for the assessment year 2019-20. The AO had re-opened the case based on information suggesting that the assessee was making purchases from dummy concerns. During the assessment, the assessee failed to substantiate these purchases and requested cross-examination of witnesses, leading to the addition of INR 46,98,167 as unexplained income under section 69A of the Act. The first appellate authority dismissed the appeal for non-prosecution, prompting the assessee to appeal before the Tribunal. The Tribunal found that only the profit element of the unverifiable purchases should be added to the income, not the entire purchase amount.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315749 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2019-2020
• Other Referred Cases: N.K. Proteins vs DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH
• Assessee Lawyers: GURJEET SINGH
• Keywords: Opportunity of being heard; Bogus purchase; Principle of natural justice; Capital asset converted into stock in trade; Bogus
• Section: 147; 148; 144; 133(6)

Judgement Text

"ITA No.703/Del/2025 Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI “C” BENCH: NEW DELHI BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT & SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.703/Del/2025 [Assessment Year : 2019-20] Naveen Aggarwal, A-2/103, Paschim Vihar, Delhi-110063. PAN-AFOPA3203J vs ITO, Ward-44(6), Delhi. APPELLANT RESPONDENT Appellant by Shri Gurjeet Singh, CA Respondent by Shri Om Prakash, Sr.DR Date of Hearing 13.05.2025 Date of Pronouncement 13.05.2025 ORDER PER MANISH AGARWAL, AM : The present appeal has been filed by the assessee seeking to assail the First Appellate order dated 09.12.2024 of Ld. Commissioner of Income Tax (A), National Faceless Appeal entre (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No.NFAC/2018-19/10335700 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 26.03.2024 passed u/s 147 r.w.s 144 r.w.s.144B of the Act pertaining to assessment year 2019-20. 2. Brief facts of the case are that the case of the assessee was re-opened by issuing notice under section 148 based on the information available INSIGHT portal of the assessee that the assessee is making purchases from the parties which are dummy concerns. During the course of assessment proceedings, the opportunity was provided to the assessee to explain the purchases made from M/s. Modern Traders/M/s. Modern Enterprises totaling to INR 46,98,167/- as the notices issued u/s 133(6) were uncomplied with. Since the assessee has failed to substantiate the purchases made and requested for cross-examination of the witnesses whose statements were relied upon by the AO, the AO has made the addition of INR 46,98,167/- as unexplained income u/s 69A of the Act in the hands of the assessee. In first appeal, the Ld.CIT(A) has dismissed ITA No.703/Del/2025 Page | 2 the appeal of the assessee for non-prosecution. Thus, the assessee is in appeal before the Tribunal by taking following grounds of appeal:- 1. “Because the action for initiation, continuation and conclusion of assessment proceedings u/s 147 r.w.s 144 at an assessed income of Rs 50,47,516 is being challenged on facts and law. 2. Because the action of CIT(A)-NFAC is being challenged on facts and law for not providing reasonable opportunity of being heard. The assessment order being passed is in violation of the principle of natural justice and without giving adequate time and opportunity to the appellant to present the case. 3. Because the action is being challenged on facts and law for making addition of Rs. 46,98,167 treating genuine purchases as bogus purchases u/s 69A whereas per assessee documents in support of genuine purchases has been duly submitted and additionally in the alternative the quantum thereof too is being disputed. 4. Because the action is being challenged on facts and law for making addition on account of disallowance of purchases amounting Rs. 46,98,167 without rejecting the books of accounts u/s 145(2) hence unsustainable addition and additionally in the alternative the quantum thereof too is being disputed. 5. For any consequential relief and/or legal claim arising out of this appeal and for any addition, deletion, amendment and modification in the grounds of appeal before the disposal of the same in the interest of substantial justice to the assessee.” 3. From the perusal of orders of the lower authorities, we find that in the present case, the additions were made by holding the purchases of INR 46,98,167/- as unverifiable and in-genuine purchases. The sales made against the purchases alleged as bogus has neither been doubted by the AO nor the sales declared by the assessee is disturbed and for the reason that certain purchases could not be established addition towards such purchases was made. Under these circumstances, it could not be fair and appropriate to ITA No.703/Del/2025 Page | 3 make the addition for the entire unverifiable purchases. The Hon’ble Supreme Court in the case of N.K. Proteins vs DCIT reported in 292 CTR 354 (SC) has held that in case of unverifiable purchases, the profit element embedded should be taxed and not the entire amount of purchases. It is also seen that if the entire purchases alleged as in-genuine is added to the total income of the assessee, it would give an absurd result. 4. Under these circumstances, we are of the view that as against the total purchases alleged as in-genuine, the profit embedded should be added to the total income of the assessee. 5. Looking to the facts of the instant case, in our view, addition to the extent of 10% of profit on the purchases alleged as bogus would be fair and reasonable looking to the nature of the business of the assessee who is a trader in the steel items. Therefore, the AO is directed to make the addition of 10% of unverifiable purchases of INR 46,98,167/-. Accordingly, the grounds of appeal raised by the assessee are partly allowed. 6. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open Court on 13.05.2025. Sd/- Sd/- (MAHAVIR SINGH) VICE PRESIDENT *Amit Kumar, Sr.P.S* (MANISH AGARWAL) ACCOUNTANT MEMBER Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "