RAMJIBHAI KESARAJI PATEL,VADODARA V. THE ITO, WARD-1(2)(2), VADODARA

ITA 827/AHD/2025

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The case involves Ramjibhai Kesaraji Patel, who appealed against the order of the Commissioner of Income-tax (Appeals), which had dismissed his appeal in limine due to a delay in filing. The primary contention was regarding the addition of Rs. 15,28,644 under section 69C of the Income Tax Act, 1961, alleging bogus purchases. The assessee argued that the purchases were genuine, supported by VAT invoices, bank statements, and audited books of accounts. The Tribunal considered various precedents and legal principles, concluding that only the profit element from the questioned purchases should be taxed, not the full purchase amount.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708163 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Assessment Year: 2018-2019
• Other Referred Cases: CIT vs. Simit P. Sheth, Pr. CIT vs. Surya Impex, Pr. CIT vs. Jigisha Satishkumar Mehta, Vijay Trading Co. vs. ITO, Pr. CIT vs. S.V. Jiwani, Pr. CIT vs. Shah Virchand Govanji Jewellers Pvt. Ltd., Sanjay Oilcake Industries vs. CIT, Vijay Proteins Ltd. vs. CIT
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAMAL DEEP SINGH
• Assessee Lawyers: PRASHANT UPADHYAY
• Keywords: Set aside; Bogus purchase; Accommodation entries; Bogus
• Section: 147; 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER I.T.A. No. 827/Ahd/2025 (Assessment Year: 2018-19) Ramjibhai Kesaraji Patel, Shop No. 2, Amrut Complex, Nr. Shivaji Chowk, Chopdar Faliya Baranpura, Vadodara-390001, Gujarat [PAN : CPNPP 5302 N] Vs. Income Tax Officer, Ward 1(2)(2), Vadodara (Appellant) .. (Respondent) Appellant by : Shri Prashant Upadhyay, AR Respondent by: Shri Kamal Deep Singh, Sr DR Date of Hearing 08.07.2025 Date of Pronouncement 17.07.2025 O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT:- Delay Condoned. This appeal has been filed by the assessee against the order dated 24.12.2024 passed by the Ld. Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as \"CIT(A)\" for short), passed u/s 250 of the Income-tax Act, 1961, (hereinafter referred to as \"the Act\" for short) for the Assessment Year (AY) 2018-19. 2. The assessee has raised the following grounds of appeal: “1. The learned Assessing Officer has erred in making an addition of Rs. 16,28,644/ u/s 69C of the Income Tax Act, 1961, alleging bogus purchases without proper appreciation of the documents and evidence submitted by the appellant. 2. The learned CIT(A) erred in holding that there was no sufficient cause for delay in filing the appeal without making a proper inquiry into the facts and circumstances of the case. 3. The appellant prays that the delay in filing the appeal before the CIT(A) be condoned and the matter may kindly be restored back to the file of the CIT(A) for adjudication on merits, in the interest of justice and equity. ITA No. 827/Ahd/2025 Ramjibhai Kesaraji Patel Vs. ITO Asst. Year : 2018-19 - 2– 4. Alternatively, the appellant prays to restore the matter before the learned AO considering the provisions of amended section 251 of the Act whereby the CIT(A) may set aside the assessment and refer the case back to the Assessing Officer. 5. Your Appellant craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal.” 3. In the present case, the assessee filed return of income declaring Rs.4,96,960/-. The case was reopened and reassessment completed under section 147 r.w.s. 144B of the Act on 15.03.2023, determining total income at Rs.21,25,604/-, making an addition of ₹15,28,644/- under section 69C towards alleged bogus purchases. The details of the same are as under:- Date Amount (Rs.) Amount credited to the account of 23.06.2017 2,68,611 Raghav Traders 23.06.2017 3,33,715 Helly Enterprises 23.06.2017 1,38,818 Laxmiraj Enterprises 11.08.2017 3,07,500 Laxmiraj Enterprises 16.10.2017 4,80,000 Laxmiraj Enterprises Total 15,28,644 4. The Ld. CIT(A), however, dismissed the appeal of the assessee in limine, citing delay in filing the appeal and the assessee’s failure to furnish any explanation for the same. 5. Before us, the Ld. AR submitted that that the purchases made in question were genuine. It was further contended that during the course of the assessment proceedings, the assessee had furnished complete details of the purchases made from Laxmiraj Enterprise and Raghav Traders. These details were submitted to the Assessing Officer through a paper book uploaded on 17.02.2023. The Ld. AR submitted that a perusal of the documents, including the bank statements submitted, clearly substantiates the genuineness of the purchases. The Ld. AR contended that the books of accounts of the assessee are duly audited by accountant, the purchases are subject to VAT regime and payments have been made by banking channel. The Ld. AR also submitted that the Assessing Officer ITA No. 827/Ahd/2025 Ramjibhai Kesaraji Patel Vs. ITO Asst. Year : 2018-19 - 3– has accepted sales offered by the assessee and has not questioned the purchases claimed by the assessee. The Ld. AR therefore requested that, in view of the above facts, the addition made by the Assessing Officer may be deleted. 6. In an alternative submission, the Ld. AR submitted that the addition of entire purchase amount is unjustified; at the most, an estimated disallowance of profit embedded in purchases is warranted. 7. We have heard the rival contentions and perused the material available on record. 8. From the documentary evidence submitted by the assessee, including VAT invoices, bank statements, and audited books of accounts, it is evident that the sales disclosed by the assessee have not been disputed or doubted by the Assessing Officer with complete evidences. It is also fact on record that concerns have been raised regarding the genuineness of certain suppliers, particularly in light of the history and evidences of accommodation entry providers. In this context, it is a well-settled principle of law, as consistently upheld by the Hon’ble Gujarat High Court and Hon’ble Bombay High Court in the decisions cited before us, that in cases involving suspected bogus purchases, the entire value of such purchases should not be disallowed. Instead, only the profit element embedded within such purchases, being the portion that may represent unexplained or unverifiable expenditure, is liable to be brought to tax, so as to prevent the leakage of revenue. In support of these submissions, the Ld. AR relied upon the following judgments: - i. CIT vs. Simit P. Sheth [(2013) 356 ITR 451 (Guj.)] – Only profit embedded in purchases is taxable; upheld Tribunal’s 12.5% estimation. ii. Pr. CIT vs. Surya Impex [(2023) 451 ITR 395 (Guj.)] – When AO himself applied 3%-5% on similar parties, Tribunal rightly restricted addition to 6%. ITA No. 827/Ahd/2025 Ramjibhai Kesaraji Patel Vs. ITO Asst. Year : 2018-19 - 4– iii. Pr. CIT vs. Jigisha Satishkumar Mehta [(2023) 456 ITR 661 (Guj.)] – Without independent inquiry, only 5% disallowance upheld. iv. Vijay Trading Co. vs. ITO [(2016) 388 ITR 377 (Guj.)] – Only profit element of 25% added, not the full purchase value. v. Pr. CIT vs. S.V. Jiwani [(2022) 449 ITR 583 (Bom.)] – On accommodation entries, only 12.5% disallowance confirmed. vi. Pr. CIT vs. Shah Virchand Govanji Jewellers Pvt. Ltd. [(2023) 169 taxmann.com 89] vii. Sanjay Oilcake Industries vs. CIT [(2009) 316 ITR 274 (Guj.)] viii. Vijay Proteins Ltd. vs. CIT [(1996) 58 ITD 428 (Ahd.)] In light of the above legal proposition and in the interest of justice, keeping in view the peculiar facts of the instant case, we consider it fair and reasonable to restrict the disallowance to 8% of the impugned purchase amount of Rs.15,28,644/-. 9. In the result, the appeal of the Assessee is partly allowed. The order is pronounced in the open Court on 17.07.2025 Sd/- Sd/- (SUCHITRA KAMBLE) (DR. B.R.R. KUMAR) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 17.07.2025 btk आदेश की \u0007ितिलिप अ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u0007 / The Appellant 2. \b थ\u0007 / The Respondent. 3. संबंिधत आयकर आयु\u0015 / Concerned CIT 4. आयकर आयु\u0015(अपील) / The CIT(A)- 5. िवभागीय \bितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड फाईल / Guard file. आदेशानुसार/ BY ORDER, True Copy सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, , , , अहमदाबाद / ITAT, Ahmedabad "