Amit Agarwal vs Income Tax Officer Ward 70(1)

PER SHRI M BALAGANESH, ACCOUNTANT MEMBER:

The appeal in ITA No.4384/Del/2026 for AY 2019-20, arises out of the order of the Id National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as 'Id. CIT(A)', in short] dated 10.02.2026 against the order of assessment passed u/s 147 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') dated 19.03.2025 by the Assessing Officer, ITO, Ward-70(1), Delhi (hereinafter referred to as 'Id. AO').

The only issue to be decided on merits is challenging the disallowance of confirmation of disallowance of Rs 14,00,672 made under section 37 of the Act on account of alleged bogus purchases made by the assessee from M/s Forever Exim India Private Limited.

I have heard the rival submissions and perused the materials available on record. The assessee filed his return of income for the assessment year 2019-20 under section 139(1) of the Act on 31-08-2019 declaring total income of Rs 2,82,750. In the case of the assessee, an information was received on Insight Portal through High Risk CRIU / VRU for the assessment year under consideration stating that the assessee had entered purchase transactions with Shri Sanjay Jain for a value of Rs 14,00,672 who was found to be engaged in providing bogus purchase accommodation entries. On perusal of the information received in the schedule of Insight Portal of the department, it was noticed that a search operation was conducted under section 132 of the Act on 29 premises of Sanjay Jain, Giridhari Lal Mehta Constructions Private Limited, Inderjit Mehta Constructions Private Limited, BCC Cement Private Limited, Giridhari Lal Constructions Private Limited, wherein several documents, soft copies in laptop, mobile phone whatsapp chats, cash, jewellery and other information related with bogus financial transactions undertaken by these entities either directly by Sanjay Jain or through his associates were found. As per the information available during the preliminary financial analysis of several firms controlled and managed by Sanjay Jain, it prima facie appeared that Sanjay Jain is using these firms to provide accommodation entries in the form of bogus sales and purchases . Accordingly, it was alleged that Forever Exim India Private Limited was one such concern which is controlled by Shri Sanjay Jain and that such entity had supplied bogus sale bills to the assessee for a sum of Rs. 14,00,672. Accordingly, show cause notice under section 148A(b) of the Act stood issued to the assessee on 31-03-2023 requiring assessee to furnish the relevant details. In response to the said show cause notice, the assessee submitted is reply in the ITBA portal on 10-04-2023 and after considering the same, order under section 148A(d) of the Act stood passed on 17-04-2023 followed by issuance of notice under section 148 of the Act on 17-04-2023. The assessee filed his return declaring the same total income of Rs 2,82,750 for assessment year 2019-20 on 26-04-2023 in response to notice issued under section 148 of the Act.

Shri Sanjay Jain in his search statement recorded under section 132(4) of the Act had accepted and confirmed that he was in the business of cement and used to supply cement on commission basis. The assessee submitted that he is engaged in the business of repair and construction work and has admitted purchases of Rs 14,00,672 made from for Forever Exim India Private Limited which is one of the entities operated and controlled by Sanjay Jain. The assessee submitted copies of balance sheet and profit loss account for the year showing total purchase of Rs 19,81,600. Based on the search statement of Shri Sanjay Jain under section 132(4) of the Act, the purchases made by the assessee from Forever Exim India Private Limited was sought to be treated as bogus and disallowance was made under section 37 of the Act by the Learned AO in the reassessment proceedings completed under section 147 of the Act on 19-3-2025. This action of the Learned AO was upheld by the Learned CIT(A).

It could be seen that the main basis of making the disallowance under section 37 of the Act treating the purchases made by the assessee as bogus, was the reliance placed on search statement of Shri Sanjay Jain under section 132(4) of the Act and information stated to be flagged on the Insight Portal of the Income Tax Department. In this regard, the Learned AR placed on record the case related information detail as reflected in the Insight Portal of the Income Tax Department in page 10 of the paper book. On perusal of the same, no information is reflected thereon qua the assessee’s supplier Forever Exim India Pvt Ltd. Further, in the statement recorded under section 132(4) of the Act from Shri Sanjay Jain, in response to Question No. 12, he had categorically stated that genuine transactions are carried out in three entities and one such entity is for Forever Exim India Pvt Ltd with regard to cement transactions. Further in response to Question No. 22 of the statement of Shri Sanjay Jain, various entities which are involved in providing bogus accommodation entries are listed in which the name of Forever Exim India Pvt Ltd does not figure at all. Further, Shri Sanjay Jain in response to Question No. 61 had listed the complete list of beneficiaries of accommodation entries provided by him in which the assessee’s name does not figure at all. Hence, it is crystal clear that the sole basis of reliance placed by the department on the statement of Shri Sanjay Jain recorded under section 132(4) of the Act is actually in favour of the assessee herein wherein he had categorically stated that cement transactions carried out in Forever Exim India Private Limited are genuine. The assessee had made purchases from Forever Exim India Private Limited. Hence, the purchases made by the assessee cannot be treated as bogus. This is a classic case wherein the disallowance is made based on third party information without any independent application of mind by the Learned AO and even that third party information is actually in favour of the assessee. The assessee in the instant case has worked for Urja Interiors for carrying out contractual work and had received monies from Urja Interiors. The assessee had made purchase of cement from Forever Exim India Private Limited which are duly supported by tax invoices and the invoices duly contain the vehicle details in which the goods were transported by Forever Exim India Private Limited to the assessee. The entire purchase invoices are enclosed in pages 42 to 71 of the paper book. The GSTR 2A return is enclosed in page 74 of the paper book which contains the data wherein the data gets auto populated based on GSTR 1 return filed by the supplier Forever Exim India Private Limited. The Urja Interiors work order is enclosed in page 76 of the paper book which was also placed before the Learned AO. The name of the supplier Forever Exim India Private Limited is shown in the active category in the MCA portal. The books of accounts of the assessee filed before the Learned AO were not sought to be rejected by applying the provisions of Section 145(3) of the Act. In these facts and circumstances, I do not deem it fit to confirm the disallowance and I hold that assessee has discharged his onus completely in proving the genuineness of purchases made from Forever Exim India Private Limited in the sum of Rs 14,00,672. Hence, the disallowance made under Section 37 of the Act is hereby directed to be deleted. The grounds raised by the assessee on merits are hereby allowed.

Since the relief is granted to the assessee on merits, the other legal grounds raised by the assessee need not be adjudicated as it would be academic in nature and they are left open.

In the result, the appeal of the assessee is partly allowed.