STAR TRACK FOOTWEAR PRIVATE LIMITED,NEW DELHI V. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 22(2), NEW DELHI

ITA 5250/DEL/2025

AI Insights

The case involves Star Track Footwear Pvt. Ltd., the appellant, contesting an order by the Deputy Commissioner of Income Tax (DCIT), Circle 24(2), New Delhi, which disallowed Rs. 37,60,000 from the company's income, treating it as bogus sales. The disallowance was based on the assertion that transactions with Jyoti Products, a company identified as an entry provider, were not genuine. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) upheld this disallowance, citing lack of substantial evidence of genuine transactions. However, the Tribunal found that the appellant had adequately substantiated the genuineness of the sales through various documents and that the application of section 37 for disallowing sales was incorrect.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 781225 (ITAT-DELHI)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 27-08-2025
• Other Referred Cases: Sreelekha Banerjee v CIT (1963) 49 /TR 112, M.A. UnneeriKutty v CIT (1992) 198 ITR 150, NK Proteins, Vijay Proteins Ltd
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHOK KUMAR PANDEY
• Assessee Lawyers: ASHWANI KUMAR; ANKUR
• Keywords: Business income; Business expenditure; Onus to prove; Accommodation entries; Bogus
• Section: 147; 148; 133(6); 37

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH “SMC’’: NEW DELHI) BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT ITA No. 5250/Del/2025 Asstt. Year : 2012-13 Star Track Footwear Pvt. Ltd., vs. DCIT, Circle 22(2), 10714, Jandewalan Road, New Delhi Nabi Karim, New Delhi – 110 055 (PAN:-AALCS3783N) (Appellant) (Respondent) Appellant by : Shri Ashwani Kumar, CA & Sri Ankur Agarwal, CA Respondent by : Shri Ashok Kumar Pandey, Sr. DR. Date of Hearing 13.10.2025 Date of Pronouncement 22.10.2025 ORDER This appeal by the assessee is emanating from the order of CIT(A), NFAC, Delhi in Appeal No. ITBA/NFAC/S/250/2025-26/1079276517(1) dated 05.8.2025. Assessment was framed by the DCIT, Circle 24(2), New Delhi u/s. 147 read with section 143(2) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) for the assessment year 2012-13 vide his order dated 17.12.2019. 2. The first issue in this appeal is as regards to the order of the CIT(A) confirming the action of the AO in making the disallowance of Rs. 37,60,000/- being 25% of the total sales of Rs. 1,50,40,000/- made to Jyoti Products by treating the same as bogus sales by resorting to the provisions of section 37 of the Act. Printed from counselvise.com 2 | P a g e 3. I have heard the rival contentions and gone through the facts and circumstances of the case. The assessee company is engaged in trading of bag material like polyster/zippers/slippers/polyfiber etc. The Assessing Officer noticed from the information received from DDIT, Investigation Unit 1(2), New Delhi that Jyoti Products is a company who was an entry provider and associated with various assessees for providing accommodation entries and was not a real business company. According to the AO, even the copies of bank statements available on record, reveals that Jyoti Products is not having real business transaction with assessee as there was year-wise drop in the net profit of the assessee company. Further, he came to this conclusion upon comparison of income tax returns for A.Y. 2012-13 alongwith ITR for AY 2011-12. Upon perusal of the same, Assessing Officer noted that the assessee has received payments on account of bogus sales from one company Jyoti Product, who is only engaged in raisingthe bogus bills and purchases doing a non-genuine transactions of providing accommodation entry. Assessing Officer, hence, concluded that all these transactions made by this bogus firm is nothing but an accommodation entry. Assessing Officer further noted that assessee had financial transactions with paper company engaged in providing accommodation entries and therefore, received an amount of Rs. 1,50,40,000/- during the relevant financial year 2011-12. In response to notice u/s. 133(6) of the Act, Jyoti Products has neither appeared nor filed any reply. According to Assessing Officer, the evidences filed by the assessee in the shape of sales bills, invoices, purchase bills, books of accounts etc. are not substantiating the sales, Printed from counselvise.com 3 | P a g e and, hence, he made disallowed by estimating, without any basis, 25% of the payments received on account of sales as bogus sales by observing in para no 11 as under:- “11. In view of the above and after considering the facts of the case a disallowance of 25% of the amount of bogus sales/transactions amounting to Rs. 1,50,40,000/- which comes to Rs. 37,60,000/- is made to the income of the assesse u/s. 37 of the Act. Since the assessee has furnished the inaccurate particulars of income, and, thereby, concealed its income, therefore, the penalty proceedings are also initiated u/s. 271(1)© of the Act separately.” Aggrieved, assessee preferred the appeal before the Ld. CIT(A). 4. Ld. CIT(A) confirmed the action of the Assessing Officer by observing in para 5.4 as under:- “Appellant's Contention: The sales to M/s Jyoti Product were genuine, recorded in audited books, and supported by import documents and M/s Jyoti Product's order. Evidence Evaluation: Stock Ledgers: The ledgers confirm sales to M/s Jyoti Product on various dates however, the ledgers do not cover the full transaction value, and no delivery challans or transport records were provided to prove material movement. Bills of Entry and commercial invoices Printed from counselvise.com 4 | P a g e reflect imports from reputable suppliers, establishing that the appellant had goods to sell. However, they do not prove delivery to M/s Jyoti Product. The appellant claims this order confirms the purchases, but no such document was found in the paper book, without it, the claim lacks substantiation. The ledgers suggest transactions were recorded, but audited financials (e.g., balance sheet, profit-and-loss statement) were not provided to verify the full Rs. 1,50,40,000/-. Legal Analysis: Under section 68, the appellant bears the burden of proving the identity, creditworthiness, and genuineness of transactions (Sreelekha Banerjee v CIT (1963) 49 /TR 112, M.A. UnneeriKutty v CIT (1992) 198 ITR 150). The ledgers establish identity and partial transactions, but the absence of bank statements showing payments from M/s Jyoti Product fails to prove creditworthiness. The DDIT's findings, supported by unanswered section 133(6) notices, indicate M/s Jyoti Product as an entry provider. The appellant did not rebut this with evidence of M/s Jyoti Product's financial capacity or business operations. The AO applied a 25% disallowance, following NK Proteins and Vijay Proteins Ltd, assuming material receipt but disputing the source. The ledgers suggest some material was sold, but the lack of delivery or Printed from counselvise.com 5 | P a g e payment proof supports the AO's conclusion of non-genuine transactions. The appellant has not discharged its burden of proof under section 68. The stock ledgers and import documents are insufficient without evidence of delivery, payment, or M/s Jyoti Product's order. The DDIT's findings and unanswered section 133(6) notices justify the AO's conclusion. The 25% disallowance is reasonable, as it accounts for possible material movement while addressing the non-genuine source. This ground is dismissed.” Aggrieved, Assessee is in appeal before the Tribunal. 5. I have perused the paper book filed by the assessee consisting of pages 1 to 210. First of all, it is to be noted that assessee has enclosed copy of assessment order of Jyoti Products for the relevant assessment year 2012-13 in its paper book wherein the turnover of Jyoti Product was accepted at Rs. 3,58,48,669/-. Assessing Officer after considering all these submission accepted Jyoti Products turnover including purchase and sales but pointed out only the difference which could not be reconciled to the extent of Rs. 12,77,552/-. Assessing Officer of Jyoti Products in para 4 observed as under:- “4. As per information in the case the assesse had credit amounting to Rs. 4,94,59,421/- in a bank account. Information u/s. 133(6) of the Act was called from the HDFC Bank on 28.8.2019 for 02.9.2019 and 30.8.2019 as per bank statements Printed from counselvise.com 6 | P a g e were received which were placed on record. The case was reopened on the basis of STR and prima facie evidence of escapement of income. The firm has shown turnover amounting to Rs. 3,58,48,669/- and declaring income of Rs. 9,57,980/- in the ITR for AY 2012-13. During the submissions the assesse submitted total sales of Rs. 4,37,04,658/- out of which Rs. 34,39,020/- plus cash sales and having debtors of Rs. 1,21,85,811/-. After analyzing all the data, show cause notice was sent to the assesse on 27.12.2019. The assessee replied to the same on 28.12.2019 detailing the facts of the case which are part of the records. On perusal of the same, it is found that figures have been reconciled but the difference of Rs. 12,77,592/- still prevails for which the assesse has got no explanation. As the assesse has failed to explain the difference mentioned above, it means he has nothing to say and it is clear that this difference of Rs. 12,77,592/- is unexplained, undisclosed income of the assesse and added back to return income of the assesse.” 5.1 I have also gone through the accounts of Jyoti Products and noted that the assessee is one of the sundry creditors for an amount of Rs.55,48,270/- as disclosed in the books of accounts of Jyoti Products. Assessee has also enclosed copy of Printed from counselvise.com 7 | P a g e audited accounts along with Notes of accounts etc for the financial year ending 31.3.2019. The assessee has also enclosed copy of VAT returns and copy of ledger account of Jyoti Products for the relevant year. The assessee has also enclosed copy of sales invoices to prove the sales made by the assessee company to Jyoti Products and copy of bills for purchase/inputs made by the assessee company during the year under consideration along with copies of bills. Before me, it was claimed by the assessee that all these bills were filed before the Assessing Officer as well as CIT(A). I noted that Assessing Officer and CIT(A) admitted that all the sales made by the assessee to Jyoti Products is confirmed by the ledger accounts and have been provided bill of entry and commercial invoices which reflects inputs from suppliers and establishing that the assessee had goods to sell. I also noted that AO itself accepted the genuineness of Jyoti Products by resorting to estimating disallowing of 25% of sales on estimate basis. It means that the Assessing Officer is accepting the identity of the party and sales made by assessee to this party. There is no basis for disallowance of 25% of sales as unaccounted for providing entry. It means that Assessing Officer himself is not sure whether the transactions are bogus or not? In my view, the assessee is able to explain the entire sales by filing necessary documents and hence, I accept the same as genuine sales and delete the disallowance made by the Assessing Officer. Another facet of argument made by assessee is that the Assessing Officer has invoked the provisions of section 37 of the Act for making disallowance of sales and argued that the provision of section 37 apply only for business expenditure and not sales. I am of the view that for making Printed from counselvise.com 8 | P a g e disallowance of bogus sales, the provisions of section 37 of the Act cannot be applied. Hence, on this facet also, I delete the addition in dispute. 6. As regards to the issue of jurisdiction assumed by the Assessing Officer u/s. 148 of the Act , whether the same is bad in law or not, since, I have adjudicate the appeal on merits, I keep it open and do not adjudicate the same. Hence, accordingly, the same is dismissed academic. 7. The appeal of the Assessee is allowed. Order pronounced on 22.10.2025. Sd/- (MAHAVIR SINGH) VICE PRESIDENT SRBhatnagar Date: 22-10-2025 Copy forwarded to: - 1. Appellant 2. Respondent 3. DIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order, Assistant Registrar, ITAT, Delhi Bench Printed from counselvise.com "