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Rudra Global Infra Products Ltd. appealed against the order of the Commissioner of Income Tax (Appeals), which upheld the disallowance of Rs. 39,00,60,232 as bogus purchases. The Assessing Officer had initially disallowed these purchases after finding them non-verifiable and linked to accommodation entries. The Tribunal, after considering the submissions and evidence, including the non-disputed sales figures in GST assessments, decided to restrict the addition to 10% of the alleged bogus purchases, citing similar cases where only the profit element of such purchases was added to the income.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 708155 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-07-2025
Appeal Filed By
Assessee
Order Result
Partly Allowed
Assessment Year
2018-2019
Judgement Text
" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.2069/Ahd/2024 (Assessment Year: 2018-19) Rudra Global Infra Products Ltd., Plot No. D/60, Rudra House, 2nd Floor, Nr. Ram Mantra Mandir, Kaliabid, Bhavnagar-364002 Vs. Assistant Commissioner of Income Tax, Circle-1, Bhavnagar [PAN No.AAGCM9245A] (Appellant) .. (Respondent) Appellant by : Shri Tushar Hemani, Sr. Advocate & Shri Parimalsinh B. Parmar, A.R. Respondent by: Shri Alpesh Parmar, CIT DR Date of Hearing 26.06.2025 Date of Pronouncement 17.07.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 18.10.2024 passed for A.Y. 2018-19. 2. The assessee has raised the following grounds of appeal: “1. The Ld. AO has erred in law and on facts of the case in reopening the assessment u/s. 147 of the Act. Under the facts and circumstances of the case, the action of reopening is without jurisdiction and in not permissible either in law or on facts. 2. The Ld. CIT(A) has erred in law and on facts of the case in upholding the disallowance of alleged bogus purchases of Rs. 39,00,60,232/- made by the Ld. AO. 3. The Ld. CIT(A) has erred in law and on facts of the case in invoking Section 69C of the Act when the Ld. AO has merely made a disallowance of business expenditure being alleged bogus purchases without any application of Section 115BBE ITA No. 2069/Ahd/2024 Rudra Global Infra Products Ltd. vs. ACIT Asst.Year –2018-19 - 2– of the Act as evident from the computation sheet issued along with the assessment order. 4. Alternatively and without prejudice, the Ld. CIT(A) has erred in law and on facts of the case in upholding the disallowance of alleged bogus purchases u/s. 69C of the Act. S.69C has no application in the present case as the purchases are recorded in the books of accounts, thus not being unexplained. 5. The Ld. CIT(A) has erred in law and on facts of the case in upholding the action of the Ld. AO in j disallowing the alleged bogus purchases without disturbing the sales made by the appellant. 6. The Ld. CIT(A) has erred in law and on facts of the case in making addition of the alleged bogus purchases without providing the information relied upon and opportunity of cross examination. 7. Alternatively and without prejudice, the disallowance of alleged bogus purchases shall be restricted to the element of profit embedded therein. 8. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in levying interest u/s. 234A/B/C/D of the Act. 9. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the Ld. AO in initiating penalty proceedings u/s. 270A of the Act. 10. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal.” 3. The brief facts of the case are that the assessee had filed their income tax return for the relevant assessment year declaring a total income of Rs. 17,03,07,320/-. The case was selected for scrutiny, and a notice under Section 148 of the Act was issued to reopen the assessment. This was done specifically to examine large-value transactions shown as “purchases” by the assessee from four parties - namely, Manish Kumar Naredi (Om Shiv Metallicks) for Rs. 21.51 crores, Manoj Kumar Pareek (Shakambari Metalicks) for Rs. 4.31 crores, Mahaveer Saini (Kanchan Alloys and Steel) for Rs. 6.59 crores, and Ashish Kumar Singh (Vishkarma Industries) for Rs. 6.59 crores – totaling to Rs.39,00,60,232/-. The assessee filed reply, which as per the Assessing Officer was inadequate since no confirmations from the parties were submitted despite ITA No. 2069/Ahd/2024 Rudra Global Infra Products Ltd. vs. ACIT Asst.Year –2018-19 - 3– being specifically asked for. To independently verify the claims, notices under Section 133(6) of the Act were sent to all the parties involved, and the Designated Verification Unit (DVU) was directed to conduct physical verification of these sellers (parties). The DVU reported that the addresses of M/s Om Shiv Metallicks and M/s Vishkarma Industries could not be found, and all notices sent to them returned undelivered. In the case of M/s Kanchan Alloys and Steel, though the notice was served, no response was received from the proprietor despite instructions to respond via email. As for M/s Shakambari Metalicks, a reply was received but it lacked critical documents such as invoices, e-way bills, and transport details. Therefore, in all cases, the DVU found that the transactions were not verifiable and that there was no actual movement of goods, implying that the purchases made by the assessee were fictitious. Further, the Assessing Officer noted that the reports uploaded by the Directorate of Investigation (Jamshedpur) further confirmed that the four supplier entities were involved in paper-based transactions - meaning they only created fake purchase- sale records without any genuine supply of goods. According to information received from the GST Department, these suppliers were well-known for issuing accommodation entries (i.e., bogus purchase bills) and the assessee was identified as one of the beneficiaries of such entries. Despite being issued a Show Cause Notice on 03.03.2023, the assessee did not provide any further explanation or documents. This lack of response further supported the conclusion that the transactions were not genuine. Based on the findings of the DVU and the Investigation Wing, the Assessing Officer held that the amount of Rs. 39,00,60,232/- claimed as purchases from these four parties was bogus. Accordingly, this amount was disallowed and added back to the total income of the assessee. ITA No. 2069/Ahd/2024 Rudra Global Infra Products Ltd. vs. ACIT Asst.Year –2018-19 - 4– 4. In appeal before CIT(Appeals), the assessee argued that the purchases were genuine, and furnished documents including purchase bills, GSTIN details, GST-2A returns, and bank statements showing payments. The assessee also contended that E-way bills were not mandatory during the financial years in question (2017-18 and 2018-19) and submitted that sales worth Rs. 394 crore were accepted by the GST Department, implying that corresponding purchases must have occurred. The Commissioner (Appeals), after examining the records and written submissions, noted that despite the paper documentation submitted by the assessee, there was no direct evidence of actual movement of goods. The verification conducted by the AO, DVU, and ADIT (Investigation), Jamshedpur, further corroborated that the suppliers in question were involved in paper transactions without actual supply of goods, and the assessee had availed accommodation entries. Ld. CIT(Appeals) held that merely producing paperwork without corroborative evidence of delivery, such as transport bills or proof of receipt of goods, does not substantiate the genuineness of the transactions. The findings of the AO were upheld, as they were based on detailed enquiry and clear evidence pointing to non-genuine purchases. Reliance was placed on various judicial precedents where Courts held that in cases of bogus purchases without actual delivery, the entire amount could be added under section 69C of the Act. Accordingly, the Commissioner (Appeals) dismissed the assessee’s ground relating to the addition of Rs. 39,00,60,232/-, finding no merit in the explanation and documentation offered. 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(A) confirming the addition in the hands of the assessee. 6. Before us, the Counsel for the assessee primarily reiterated the submissions made before Ld. CIT(A) stating that the purchases made in question ITA No. 2069/Ahd/2024 Rudra Global Infra Products Ltd. vs. ACIT Asst.Year –2018-19 - 5– were genuine. The Counsel for the assessee submitted that the assessee has been regularly filing GST returns and further, in the GST assessment for the impugned assessment year, the figure of turnover declared by the assessee has not been disputed by the GST Authorities. This necessary implies that since the sales have been accepted as genuine by the GST Authorities, the corresponding purchases are also genuine. Further, the Counsel for the assessee also stated that ledger of the four parties in question were furnished, the purchase bills had been furnished and assessee had also furnished Form GSTR-2A to demonstrate that the goods had been purchased by the assessee. Further, the Counsel for the assessee submitted that there is no specific findings that the evidences which have been furnished by the assessee have been fabricated. In the alternative, the Counsel for the assessee submitted that it is normal practice that where purchases are actually made from unregistered dealers or other suppliers, who did not issue any bills and hence, to regularize such bills accommodation bills may be obtained. Such accommodation bills, though may not be from the parties who actually supplied the goods, but that by itself would not render the entire purchases as bogus. The Counsel for the assessee placed reliance on various judicial precedents which have held that in such a scenario, addition could be confirmed, based on a reasonable estimate. 7. In response, Ld. DR placed reliance on the observations made by the Assessing Officer and Ld. CIT(A), in their respective orders. The Ld. DR submitted that the assessee has not submitted any permit of transportation and while the assessee has submitted substantial documentary / paper evidence, but no evidence has been furnished by the assessee to demonstrate actual movement of goods in question from these parties. This is further coupled with the fact that admittedly these parties were engaged in providing bogus accommodation entry ITA No. 2069/Ahd/2024 Rudra Global Infra Products Ltd. vs. ACIT Asst.Year –2018-19 - 6– and none of the notices served on these suppliers were responded. Accordingly, in light of these facts, the Ld. DR submitted that looking into the instant facts, there is no infirmity in the order of Ld. CIT(A) so as to call for any interference. 8. We have heard the rival contentions and perused material on record. 9. On going through the facts of the instant case, we are of the considered view that the Tax Department after taking due inquiry has noted that the assessee has not been able to demonstrate, with supporting evidences that actual supply of goods took place from these parties. Further, the DVU (Designed Verification Unit) also conducted physical verification of these parties by issuing notices under Section 133(6) of the Act and no response was received from these parties, which further lends support to the fact that these parties were not genuine. Accordingly, we are of the considered view that the genuineness of transaction made by the assessee from these parties remains un-verifiable. Further, the fact that in the GST assessment, the figure of turnover has not been disturbed cannot lead to the necessary implication that the aforesaid purchases from these parties was genuine. However, we also find force in the alternate argument of the Counsel for the assessee that entire purchases made by the assessee could not be added back as income where sale proceeds have been duly accounted in the books of accounts and offered to tax. In such type of cases, various Courts have held that addition should be restricted only to the profit element embedded in the value of disputed purchases. 10. In the case of Commissioner of Income-tax vs. Simit P. Sheth [2013] 38 taxmann.com 385 (Gujarat) / [2013] 219 Taxman 85 (Gujarat) (Mag.) / [2013] 356 ITR 451 (Gujarat), the assessee was engaged in business of trading in steel on wholesale basis. The Assessing Officer having found that some of ITA No. 2069/Ahd/2024 Rudra Global Infra Products Ltd. vs. ACIT Asst.Year –2018-19 - 7– alleged suppliers of steel to assessee had not supplied steel to the assessee but the assessee had only provided sale bills. Accordingly, the Assessing Officer held that purchases made from the said parties were bogus and added entire amount of purchases to the income of the assessee. In appeal, Commissioner (Appeals) having found that assessee had indeed made purchases, though not from named parties but other parties from grey market, sustained addition to extent of 30 per cent of purchase cost as probable profit of assessee. The Tribunal however, sustained addition to extent of 12.5 per cent of bogus purchases. In further appeal, the Gujarat High Court held that since purchases were not entirely bogus but were made from parties other than those mentioned in books of account, only profit element embedded in such purchases could be added to assessee's income. Hence, order of Tribunal needed no interference. 11. In the case of Principal Commissioner of Income-tax vs. Surya Impex [2023] 148 taxmann.com 154 (Gujarat) / [2023] 291 Taxman 591 (Gujarat) / [2023] 451 ITR 395 (Gujarat), the Gujarat High Court held that where AO received report from Investigation Wing that assessee-firm received accommodation entries in form of bogus purchases from one J group and made 100 per cent addition with respect to said purchases, however while dealing with case of J group and other parties involved in providing such entries AO chose to make addition at rate of 3 per cent to 5 per cent, Tribunal was justified in limiting the addition in hands of assessee at rate of 6 per cent of impugned purchases. 12. In the case of Principal Commissioner of Income-tax vs. Jigisha Satishkumar Mehta [2023] 155 taxmann.com 279 (Gujarat) / [2023] 456 ITR 661 (Gujarat), the Gujarat High Court held that where AO, on basis of an information received from State Sales Tax Authority relating to bogus purchases made by assessee from a hawala biller, made an addition under section 68 ITA No. 2069/Ahd/2024 Rudra Global Infra Products Ltd. vs. ACIT Asst.Year –2018-19 - 8– towards entire bogus purchases, since AO made addition only on basis of said information without carrying out any further inquiry as to genuineness of purchases made by assessee, additions on account of alleged bogus purchases was rightly restricted to 5 per cent. 13. In the case of Vijay Trading Co. vs. Income-tax Officer [2016] 76 taxmann.com 366 (Gujarat) / [2016] 388 ITR 377 (Gujarat), the Gujarat High Court held that in respect of bogus purchases, only profit element embedded therein would be subjected to tax. In this case, the Gujarat High Court restricted the disallowance to 25% of the cost of such purchases in this year. 14. In the case of Principal Commissioner of Income-tax vs. S.V. Jiwani [2022] 145 taxmann.com 230 (Bombay) / [2023] 290 Taxman 178 (Bombay) / [2022] 449 ITR 583 (Bombay), the assessee undertook civil contract works awarded mostly by Municipal Corporation of Greater Mumbai (MCGM). Pursuant to filing return of income, assessment in case of assessee was completed under section 143(3) of the Act. The case of assessee was reopened on basis of information received from Sales Tax Department that assessee had made purchases of Rs. 4.50 crores, which seemed to be accommodation entries. An order was passed making entire addition of Rs. 4.50 crores as bogus purchase under section 69C of the Act. Ld. CIT(Appeals) held that payments made by assessee were through banking channels and since sale proceeds of goods had also been duly accounted for in books and offered to tax, entire purchase amount could not have been added in present case and that with a view to plug any revenue leakage in aforementioned circumstances, disallowance at the rate of 12.5 per cent was held to be reasonable to safeguard interest of Revenue. On further appeal, Tribunal held that entire purchase made by assessee could not be added back as income, but only profit element embedded therein should be ITA No. 2069/Ahd/2024 Rudra Global Infra Products Ltd. vs. ACIT Asst.Year –2018-19 - 9– treated as income of assessee. The High Court held that order of Tribunal being well reasoned did not warrant any interference and accordingly confirmed disallowance to the extent of 12.5% of such bogus sales. 15. In the case of PCIT Vs. Pankaj Choudhary, TA 617 of 2022 (Gujarat), the Hon’ble Gujarat High Court held that in respect of bogus purchases, restricted the disallowance to 6% of the cost of such purchases in this year. 16. In the case of PCIT Vs. Jigisha Satishkumar Mehta, [2023] 155 taxman.com 273 (Gujarat), the Hon’ble Gujarat High Court upheld the decision of the ITAT affirming that the appellate authority have arrived at the concurrent findings of fact by holding that factum of said dealer already being engaged in bogus billing was not ruled out and therefore, sustained the addition by estimating 5% of alleged bogus proceedings. 17. In the case of PCIT Vs. Keshri Exports, [2024] 168 Taxmann.com 528 (Gujarat), the Hon’ble Gujarat High Court reaffirmed the decision in the case of PCIT Vs. M/s. Surya Impex restricted the disallowance in respect of bogus purchases to 6% of the cost of such purchases in this year. 18. In the case of PCIT Vs. R.K. Jain [2023] 156 Taxmann.com 52 (Gujarat), the Hon’ble Gujarat High Court reaffirmed the decision of the ITAT and held that the view taken and the conclusion arrived at by the Tribunal are based on material before it and after analysing the facts and figure available before it. The Hon’ble High Court held that when the Tribunal has thought it fit to reduce the disallowance at 6% from 12.5%, the Tribunal had before it ITA No. 2069/Ahd/2024 Rudra Global Infra Products Ltd. vs. ACIT Asst.Year –2018-19 - 10– the facts which were duly analysed by it. No interference is called for in the said conclusion and findings of the Tribunal in the present appeal by this Court. 19. In the case of PCIT Vs. Mohit Pukhraj Kawdiya, [2024] 167 taxmann.com 473 (Gujarat), the Hon’ble Gujarat High Court restricted the addition to extent of 6% of bogus purchases. In the case of Mayank Diamonds Pvt Ltd Vs. ITO, TA No. 200 of 2003 (Gujarat), the Hon’ble Gujarat High Court held that it is fit to direct the Assessing Officer to apply 5% GP rate as the rate of 12.5% is drastically higher and 1.03% is drastically lower. Similarly, in the case of CIT Vs. Gujarat Ambuja Export Ltd, TA No. 840 of 2013 (Gujarat), the Hon’ble Gujarat High Court held that gross ad-hoc addition of 25% may not be justified and affirmed determination of GP @ 5% of the purchases. 20. Accordingly, looking into various judicial precedents on the subject as cited above and the alternate argument of the Counsel for the assessee, it would be reasonable to restrict the disallowance to 10% of the alleged bogus purchases. 21. In the result, the appeal of the assessee is partly allowed. This Order pronounced in Open Court on 17/07/2025 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 17/07/2025 TANMAY, Sr. PS TRUE COPY ITA No. 2069/Ahd/2024 Rudra Global Infra Products Ltd. vs. ACIT Asst.Year –2018-19 - 11– आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 03.07.2025 (Half part dictated by Hon’ble Member on his dragon software) 2. Date on which the typed draft is placed before the Dictating Member 04.07.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S .07.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement 17.07.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 17.07.2025 7. Date on which the file goes to the Bench Clerk 17.07.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order…………………………………… "
Other Referred Cases
Commissioner of Income-tax vs. Simit P. Sheth, Principal Commissioner of Income-tax vs. Surya Impex, Principal Commissioner of Income-tax vs. Jigisha Satishkumar Mehta, Vijay Trading Co. vs. Income-tax Officer, Principal Commissioner of Income-tax vs. S.V. Jiwani, PCIT Vs. Pankaj Choudhary, PCIT Vs. Jigisha Satishkumar Mehta, PCIT Vs. Keshri Exports, PCIT Vs. R.K. Jain, PCIT Vs. Mohit Pukhraj Kawdiya, Mayank Diamonds Pvt Ltd Vs. ITO, CIT Vs. Gujarat Ambuja Export Ltd
Laws Referred To
Income Tax Act
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