RAJESH GOKULCHAND AGRAWAL,MUMBAI V. INCOME TAX OFFICER, WD-41(3)(3), MUMBAI

ITA 2257/MUM/2025

AI Insights

The case involves Rajesh Gokulchand Agrawal, the proprietor of G.N. Enterprises, who appealed against the order of the CIT(A) confirming the addition of Rs. 45,39,400 to his income under section 69C of the Income Tax Act, 1961. This addition was based on the allegation that the purchases from Rajshree Vanijya Udyog were non-genuine. The assessee argued that he had provided ample documentary evidence to prove the genuineness of the transactions, including purchase bills, sales bills, and bank statements. The Tribunal noted that the assessing officer had not rejected the books of account nor disputed the corresponding sales, and the only basis for the addition was the non-compliance of the supplier to a notice under section 133(6), which was deemed insufficient to disprove the transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 711393 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2018-2019
• Other Referred Cases: N.K. Proteins (2017-TIOL-23-SC-IT), Smit P. Sheth 356 ITR 461, DCIT vs Surendra Kumar Jain, ITO vs Khimchand Okchand Bhansali, ITO vs Mangalam Drugs & Organics Ltd., CIT vs Nikunj Eximp Enterprises (P) Ltd., PCIT vs Mohommad Haji Adam & Co., PCIT vs SVD Resins & Plastics (P) Ltd., PCIT vs Vaman International Pvt. Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANNAVARAMKOSURI
• Assessee Lawyers: PRAKASH JHUNJHUNWALA
• Keywords: Bogus purchase; Reason to believe; Opportunity of cross examination; Bogus
• Section: 147; 148; 133(6); 69C

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No. 2257/MUM/2025 (AY : 2018-19) (Physical hearing) Rajesh Gokulchand Agrawal G.M. Enterprises, 24,Old Hanuman Lane, Kalbadevi Road, Mumbai – 400002. [PAN No. AAWPA9648Q] Vs ITO, Ward-41(3)(3), KautilyaBhavan, BandraKurla Complex, Bandra (East), Mumbai-400051. Appellant / Assessee Respondent / Revenue Assessee by Shri Prakash Jhunjhunwala CA Revenue by Shri Annavaram Kosuri, Sr. DR Date of Institution 31.03.2025 Date of hearing 26.06.2025 Date of pronouncement 23.07.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of ld. CIT(A) / NFAC dated 14.02.2025 for A.Y. 2018-19. The assessee has raised following grounds of appeal: “1.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the confirming the validity of order passed u/s.148A(d) and notice issued u/s. 148, without having reason to believe of escapement of income, thereby the consequential re-assessment order passed u/s. 147 is bad-in-law; 2.0 On facts and circumstances of the case and in law, the re-assessment order passed u/s 147 is bad in law, since the Order u/s 148A(d) and notice u/s 148 had been issued by Jurisdictional Assessing Officer (JAO) and had not been issued by Faceless Assessing Officer (FAO), thereby violating the provision of Sec. 151A of the Act; 3.0 On facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming the addition u/s.69C of entire (100%) purchase of traded goods (fabrics) made from alleged non-genuine supplier M/s. RajshreeVanijyaUdyog of Rs.45,39,400/-; Printed from counselvise.com ITA No. 2257/Mum/2025 Rajesh Gokulchand Agrawal 2 4.0 The Ld. CIT(A), before confirming the addition of alleged non-genuine purchase of traded goods (fabrics) of Rs.45,39,400/-, erred seriously in ignoring the understated vital facts, being: a) The exhaustive documentary evidences being purchase bills, corresponding sale bills, confirmation of account, GST registration certificate of supplier, GST returns, bank statements, quantity tally and other documents filed on record had not been disputed by Ld. AO and Ld. CIT(A); b) The entire payments to the disputed supplier had been made through normal banking channel by A/c payee cheque/RTGS; c) Mere non-compliance to notice issued u/s.133(6) by the supplier, would not disprove the transactions of the appellant; d) The normal profits corresponding to disputed purchase had already been offered to tax in P & L account, therefore the addition made in assessment of entire purchase (100%) had resulted into double taxation; e) The Ld. AO had not rejected the appellant's books of account u/s.145(3) and had not brought any contrary material on record; f) The Ld. AO, in spite of specific written request, had not provided the copies of contrary material, evidence and statements of 3rd parties for rebuttal and also had not allowed an opportunity of cross examination; 5.0 Without prejudice, on adopting the concept of real income, the addition utmost could be sustained to the extent of reasonable profit @ 5% embedded on disputed purchase. 2. Brief facts of the case are that assessee is an individual, proprietor of G.N. Enterprises and engaged in the business of whole sales and trading in textile fabrics. The case of assesse for A.Y. 2018-19 was reopened on the basis of information received of that assessee is beneficiary of purchases from Rajshree Vanijya Udyog (Rajshree). Rajshree Vanijya Udyog was allegedly providing accommodation entry to various beneficiaries. The assessee has shown purchases / transaction of Rs. 45,39,400/- from Rajshree. During the assessment, the assessing officer noted that assessee in its return of income Printed from counselvise.com ITA No. 2257/Mum/2025 Rajesh Gokulchand Agrawal 3 has shown sundry creditor / outstanding liability from Rajshree of Rs. 47,66,370/-. The assessing officer was of the view that said entity has no creditworthy and the purchases shown from such entity lack genuineness. The assessee was asked to substantiate such purchases. In response to show cause notice, the assessee filed his reply dated 25.10.2025. In reply, the assessee stated that he is in wholesale and retail trade of textile fabrics. The assessee furnished profit and loss account, balance sheet and audit report. The assessee denied the allegation of assessing officer about the creditworthiness of seller party and furnished copy of invoices challans issued Rajshree, confirmation, bank statement showing details of payments to the said party. The assessee submitted that his purchases and source of expenditure is genuine. The identity of seller/creditor is authentic. The expenses of purchases should not be disallowed. The assessing officer disregarded the submission of assessee and proceeded on the basis of information available with him. The assessing officer recorded that notice under section 133(6) was issued to the seller party and that no reply was received from them. The assessing officer disallowed the purchases of Rs. 45,39,400/- under section 69C and added to the income of assessee while passing assessment order. 3. Aggrieved by the additions in the assessment, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the assessee filed details statement of facts. The assessee in his statement of facts submitted that he is proprietor of G.N. Enterprises and engaged in the business of trading in fabrics. The assessee while filing return of income declared total income of Rs. Printed from counselvise.com ITA No. 2257/Mum/2025 Rajesh Gokulchand Agrawal 4 47,66,370/-. The assessing officer reopened the case of assessee on the basis of information and inside portal. The case of assessee was reopened on the basis of information received from Investigation Wing that Rajshree is a paper entity and indulged in bogus transaction. The assessee during assessment furnished his written submission dated 31.03.2023 along with detailed documentary evidences. In order to prove the genuineness of purchases, the assessee furnished purchase bills, corresponding sales bill, GST returns, GST registration certificate, confirmation of account, bank statement, quantity details. The assessee also furnished copy of PAN Card and GST registration certificate of supplier to establish the genuineness of sale. The assessee has shown gross profit @ 3.23% which is similar to the G.P. disclosed in earlier years as well as in subsequent years. The assessee requested the assessing officer to provide the incriminating material and the statement to allow opportunity for cross examination of such party. Copy of incriminating material and statement was not provided. The assessing officer without any justification and in absence of contrary material made addition under section 69C of entire purchases shown from Rajshree. In addition to, the assessee submitted that books results were not rejected. The assessee furnished correspondence sales bills and submitted that assessee cannot be penalised for any non-genuine transaction entered by such disputed supplier. In alternative submission, the assessee stated that he has shown gross profit @ 7.25% and net profit @ 2.28% on sales which is at par to the gross profit and net profit shown in earlier and subsequent years. In other alternative submission, the assessee also stated that concept of real income be adopted Printed from counselvise.com ITA No. 2257/Mum/2025 Rajesh Gokulchand Agrawal 5 only real profit embedded in disputed purchases could only be brought to tax. The assessee is a trader in fabric and there is corresponding genuine sales. The assessee prayed to sustain estimation of suppressed profit @ 5% on disputed purchases. To support his submission, the assessee relied on various case laws. 4. The ld. CIT(A) on considering the submission of assessee recorded that assessee produced various documents. The same are self-serving and afterthought. Notice issued to the seller parties under section 133(6) remained not complied. The ld. CIT(A) confirmed the action of assessing officer by referring decision of Supreme Court in N.K. Proteins (2017-TIOL-23- SC-IT) and Gujarat High Court Smit P. Sheth 356 ITR 461. Further, aggrieved the assessee has filed present appeal before Tribunal. 5. We have heard the submission of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue. The ld. AR of the assessee submits that he has raised grounds against the validity of reopening, however, he is not pressing such ground no. 1 and 2 of appeal. Considering the submission of ld. AR of the assessee ground no. 1 and 2 of the appeal which relates to validity of notice under section 148 and passing of reassessment order under section 157 are dismissed as not pressed. 6. Ground no. 3 and 4 relates to addition under section 69C being hundred percent of alleged bogus purchases and ground no. 5 is alternative ground to sustain the addition of such disputed purchases to the extent of 5.00% of such disputed expenses of purchases. The ld. AR of the assessee submits Printed from counselvise.com ITA No. 2257/Mum/2025 Rajesh Gokulchand Agrawal 6 that during the assessment, the assessee furnished complete details of purchases which including the tax invoices, details of payment made through banking channel and all quantitative details of purchases and corresponding sales. The assessee has shown corresponding sales against the purchases. Sales of the assessee are not disputed. Sale is not possible in absence of purchases. The assessing officer has not rejected books of account. The assessing officer merely acted on the basis of information in his inside portal without supplying such information to the assessee. Mere non-compliance, by seller to notice under section 133(6) would not disprove the transaction where sales are supported with sufficient evidence as has been held by Jurisdictional High Court in CIT Vs Nikunj Eximp Enterprises (P) Ltd. (2013)35 taxmann.com 384 (Bom-HC). The ld. AR of the assessee submits that assessee has proved all such purchases beyond doubt by furnishing complete details of purchases. Once the assessee discharged his primary onus, the onus shifts on assessing officer to bring adverse material. So entire disallowance is liable to be deleted. 7. In alternative submissions, the ld. AR of the assessee submits that it is settled position under the income tax law that entire transaction cannot be treated as income of the assessee; rather only reasonable percentage of profit could be added to avoid the possibility of revenue leakage on such alleged tainted purchases. The ld. AR of the assessee submits that disallowance may be restricted to 5.00% of the impugned purchases. To support his various submissions, the ld. AR relied upon the following decisions: Printed from counselvise.com ITA No. 2257/Mum/2025 Rajesh Gokulchand Agrawal 7  DCIT vs Surendra Kumar Jain (ITA No. 931/Del/2024)  ITO vs Khimchand Okchand Bhansali (2025) 174 taxmann.com 148 (Mum-Trib)  ITO vs Mangalam Drugs & Organics Ltd. (ITA No. 5279/M/2015)  CIT vs Nikunj Eximp Enterprises (P) Ltd. 35 taxmann.com 384  PCIT vs Mohommad Haji Adam & Co. (2019) 103 taxmann.com 459 (Bom – HC)  PCIT vs SVD Resins & Plastics (P) Ltd. (2024) 166 taxmann.com 242 (Bom – HC)  PCIT vs Vaman International Pvt. Ltd. ITA No. 1940 of 2017 8. On the other hand, the ld. Sr. DR for the Revenue supported the order of lower authorities. The ld. Sr. DR for the revenue submits that assessee is a beneficiary of bogus purchases. The assessing officer was having information in incite portal that Rajshree was engaged in provided accommodation entry without actual delivery of goods. The assessee has shown purchases to inflate the expenses, thus, assessing officer as well as ld. CIT(A) disallowed the entire purchases shown from tainted party. The ld. Sr. DR for the revenue relied upon the decision of Supreme Court in N.K. Proteins relied by ld. CIT(A) in his order. 9. In the short rejoinder submission, the ld. AR of the assessee submits that overall purchases of assessee are of more than Rs. 9.50 crore and the disputed purchases are merely 5.00% of total purchases. The assessee has shown good profit ratio and prayed to restrict the disallowance @ 5.00% in a worst position so that the matter may be end. 10. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by both the parties. We find that the assessing Printed from counselvise.com ITA No. 2257/Mum/2025 Rajesh Gokulchand Agrawal 8 officer made addition of 100% of purchases shown from Rajshree. The action of the assessing officer is based the information available in his inside portal. Before assessing officer the assessee furnished purchase bills, corresponding sales bill, GST returns, GST registration certificate, confirmation of account, bank statement, and quantity details. The assessee also furnished copy of PAN Card and GST registration certificate of supplier to establish the genuineness of sale. No adverse comments were made against such evidence. The only allegation of assessing officer is that the seller party has not responded to his notice issued under section 133(6). It is not the case of assessing officer that the seller party is not available at the given address. 11. We find that Hon’ble Bombay High Court in CIT Vs Nikunj Eximp Enterprises (P) Ltd (supra) held that mere non-compliance, by seller to notice under section 133(6) would not disprove the transaction where sales are supported with sufficient evidence. We further find that neither the books profit is questioned by the assessing officer nor the corresponding sales of the assessee are disputed. We find that overall purchases of assessee during the relevant financial year is of more than Rs. 9.50 crore and the disputed purchases are merely 5.00% of total purchases No sale is possible in absence of purchases. We also find that the assessee has prima facia discharged his onus to substantiate the credit of purchases. Thus, in such circumstances, the disallowances of 100% of purchases from Rajshree are not justified. Therefore, considering overall facts and circumstance of the case in hand and in order to avoid the possibility of revenue leakage 12.5% of impugned Printed from counselvise.com ITA No. 2257/Mum/2025 Rajesh Gokulchand Agrawal 9 purchases will meet the end of justice. In the result, the grounds of appeal raised by the assessee are partly allowed. 12. In the result, the appeal of assessee is partly allowed. Order pronounced in the open Court on 23/07/2025. Sd/- PRABHASH SHANKAR ACCOUNTANT MEMBER Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 23/07/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai Printed from counselvise.com "