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Judgment
PER AMITABH SHUKLA, AM
This appeal filed by the Assessee is directed against the order of Ld. Commissioner of Income Tax(Appeals)/NFAC, Delhi, dated 17.12.2025 arising out of assessment order dated 27.01.2025 passed under section 147 r.w.s. 143(3) r.w.s. 144B of the Act for the Assessment Year 2019-20. The word ‘Act’ herein this order would mean Income Tax Act, 1961.
The assessee has raised following grounds of appeal:-
1.On the facts and circumstances of the case, the notice issued by the learned Assessing Officer (AO) under Section 143(2) of the Act is illegal and bad in law.
2.On the facts and circumstances of the case, the order passed by the Ld. AO under Section 143(3) r.w.s. 144B of the Act is illegal and bad in law.
3.That on the facts and in the circumstances of the case and in law, the order passed by the Learned Commissioner of Income Tax (Appeals) under Section 250 of the Income-tax Act, 1961 is illegal, arbitrary, bad in law and liable to be set aside.
4.That the Ld. CIT(A) has erred, both in law and on facts, in enhancing the addition made merely on the basis of suspicion, surmises and conjectures, without any cogent material OR evidence on record.
5.That on the facts and circumstances of the case and provisions of the law the Ld. CIT(A) has erred in sustaining the act of the Ld. AO in not providing the verification report to the assessee which obtained from the verification unit
6.That the Ld. AO has erred, both in law and on facts, in making an ad hoc disallowance of 20 percent of the purchases made from six parties merely on the ground that no replies to the notices issued under Section 133(6) of the Income-tax Act, 1961 were received from such parties which was later enhanced by the Ld. CIT(A) to 100 percent making this whole assessment as illegal and bad in law. 7. That the Ld. CIT(A) has erred, both in law and on facts, in enhancing the disallowance from 20 percent as made by the Learned Assessing Officer to 100 percent amounting to Rs 6,42,88,654/- without any valid basis OR cogent material, rendering the enhancement illegal and bad in law.
8.That on the facts and circumstances of the case and provisions of the law, the Ld. AO has erred in treating the purchases of Rs 35,83,661/- made from m Shri Akash Khokhar (M/s Kanhaiya Sales Corporation) as unexplained and has made the addition of the same u/s 69C of the IT Act on which no finding was given by Ld. CIT(A). 9. That on the facts and circumstances of the case and provisions of the law, the Ld. CITA(A) has erred in enhancing the addition made by the Ld. AO.
10.That the Ld. CIT(A), NFAC, has erred in law and on facts in not affording a proper opportunity of personal hearing by way of video conferencing before passing the order under Section 250 of the Income-tax Act, 1961, thereby rendering the impugned order illegal and bad in law. 11. That the Ld. AO and the Ld. CIT(A) have erred, both in law and on facts, in disregarding the settled jurisprudence laid down by the Honourable higher judicial authorities, thereby rendering the impugned additions unsustainable in law.
12.That the Ld. AO and CIT(A) has erred both in law and on facts in initiating penalty proceedings under Sections 270A and 271AAC of the Income Tax Act 1961. 13. That the Ld. AO has erred both in law and on facts in levying interest under section 234A, 234B and 234C of the Income Tax Act 1961.
14.That the impugned assessment order as well as the order passed by the Ld. CIT(A) are arbitrary, illegal, bad in law and in gross violation of the principles of natural justice and settled principles of jurisprudence, and therefore liable to be quashed.
Brief factual matrix as culled out from the order of the lower authorities is that the assessee is an individual engaged in the business of metal through a proprietary concern. The case was selected for complete scrutiny for reasons of purchases from high risk billers vide notice u/s 143(2) dated 02.06.2023. Vide notice u/s 142(1) dated 11.08.2023, the ld. Assessing Officer requested the assessee for submission of following information :-
| Kindly furnish the details of the purchases in the format given below | ||||||
| Name of the party | PAN of Party | Total purchases | Total payment | Total payment | Invoices, e-way bills | Mode of payment/ |
from whom the made made made furnishe transaction purchases made during during one d Y/N year the year the year prior to relevant FY
You are also requested to furnish the stock register month wise, invoices, e-way bills, name and PAN of the transporter, invoices of the payment made to transporter , weighment slips, mode of payment to the transporter along with highlighted bank statements showing proof of payments.
It is also requested to provide the party wise Purchase ledger along with the documentary evidences as sought above
Kindly furnish documentary evidences for the above information in order to substantiate your claims. …….”
In response, the assessee, as evident from page -4-7 of the assessment order submitted following information
“In response to above notice, the assessee replied on 19.08.2023 and the relevant portion of the response is reproduced as under
3.1.1 Summary of information/evidence collected which proposed to be used against it :
During the assessment year under consideration, the asssessee has claimed purchases expenditure of Rs. 9,02,93,503/- as seen from the trading account of the assessee.
The assessee was asked to furnish the details of the purchases such as Name of the party from whom the purchases made, PAN of Party, Total purchases made during the year, Total payment made during the year, Total payment made one year prior to relevant FY, Invoices, Mode of payment/ transaction. Further, the assessee was also requested to furnish the stock register month wise, invoices, e-way bills, name and PAN of the transporter, invoices of the payment made to transporter, weighment slips, mode of payment to the transporter along with highlighted bank statements showing proof of payments.
The assessee was asked to provide the party wise Purchase ledger along with the documentary evidences as sought above.
The assessee in its response furnished the details of the purchases and the same is as below:
The assessee has furnished Purchase register containing date, account name, address , PAN, GSTIN No, taxable amount and GST details.
To verify the genuineness of the purchases undertaken with the assessee, this office issued notices u/s 133(6) to the following major parties about the nature of transaction entered by them with the assessee and other relevant documents evidences in support of the transactions of purchases made with the assessee during F.Y.2021-22 through ITBA.
S No Party PAN Party Name Purchases claimed Value(Rs.) excluding GST 1 EOOPK8378R AKASH KHOKHAR (KANHAIYA SALES CORPORATION) 35,83,661 NYMPHAEA 2 AAGCN0585N TRADEMART PRIVATE 3,26,09,651 LIMITED
77,36,587
NAND KISHOR (SIGNATURE Enterprises 21,36,934
/SUNSHINE International ) (Total: 98,73,521) 3 JIQPK4711R
SUSHIL KUMAR (Global 4 DPGPK3988P Rising Enterprises) 51,19,446
SUMAN TYAGI 5 ANQPT6992H (INFOSYS 1,56,36,240 ENTERPRISES)
SONU 6 NJUPS1265M (GROOFER 10,49,796 ENTERPRISES)
The said notices u/s 133(6) were duly served through available email of these parties.
None of the parties has responded to the notice u/s 133(6). It is to be underlined
that none of the parties as mentioned in above table have confirmed the
transactions undertaken with the assessee…..”
5. The ld. Assessing Officer had further issued a show-cause dated 04.03.2024
in response to which the assessee submitted its response vide letter dated
3 JIQPK4711R NAND KISHOR (SIGNATURE Enterprises
/SUNSHINE International )
77,36,587
21,36,934
(Total: 98,73,521)
4 DPGPK3988P SUSHIL KUMAR (Global Rising Enterprises) 51,19,446 5 ANQPT6992H SUMAN TYAGI (INFOSYS ENTERPRISES) 1,56,36,240 6 NJUPS1265M SONU (GROOFER ENTERPRISES) 10,49,796 08.03.2024 as under:-
Reg: Show Cause Notice in the case of Shri Ashok Garg PAN No. AAGPK4346P for A.Y. 2022-23 under DIN No. ITBA/AST/F/143(3)(SCN)/2023-24/1061913902(1) dt. 04.03.2024 Sir,
This has reference to your Show Cause Notice under DIN ITBA/AST/F/143(3)(SCN)/2023-24/1061913902(1) dt. 04.03.2024. Following is submitted with respectfully:-
1.The proposed disallowance of Rs. 13574463/- i.e 20% of purchased claimed to the extent of Rs. 67872315/- is unwarranted as the estimated/adhoc disallowance is based on assumption, presumption and not considering properly the actual facts submitted.
2.All the details asked for related to purchases made during the relevant A.Y. 2022-23 have since been submitted under our earlier submissions.
3.It seems that notices were served to (1) Sh. Akash Khokhar (M/s Kanhaiya Sales Corporation) (2) Nymphaea Trademart Pvt. Ltd. (3) Sh. Nand Kishore (M/s Signature Enterprises and M/s Sunshine International) (4) Sh. Sushil Kumar (M/s Global Rising Enterprises) (5) Sh. Suman Tyagi (M/s Infosys Enterprises) (6) Sh. Sonu (M/s Groofer Enterprises) u/s 133(6) through available email addresses and not responded may be due to the following reasons:-
(a) Out of six parties, two parties viz Sh. Suman Tyagi and Sh. Nand Kishore have since expired.
(b) It is made to understand that none of the parties have received any notice u/s 133(6) through mail and thus could not respond.
(c) The available mail ID's seems to be either wrong or not updated.
4.Purchases from Shri Akash Khokhar (M/s Kanhaiya Sales Corporation) PAN No. EOOPK8378R has made of Rs. 3583661/- and not of Rs. 4228720/-. The amount of Rs. 4228720/- is inclusive of GST element @ 18% i.e Rs. 645059/-. It may kindly be appreciated that the whole purchases of Rs. 3583661/- were made in the month of March 2022 and Rs. 450000/- was paid in that very month and rest amount was duly paid as and when it became due in the next F.Y. 2022-23. Copies of ledger accounts for 2021-22 and 2022-23 are enclosed herewith indicating that purchased amount was duly paid.
5.It is correct that amount payable as on 31.03.2022 to M/s Nymphaea Trademart Pvt. Ltd. was Rs. 22891949/- and as per balance sheet total sundry creditors as on 31.03.2022 stands for Rs. 17367191/-. It is hereby clarified that total sundry creditors shown in the balance sheet on netting basis i.e after deducting advances to the suppliers remain outstanding as on 31.03.2022. Summary of which is given below:-
Gross Sundry Creditors as on 31.03.2022 33559839 Less: Advance to Suppliers 16192648 Net Sundry Creditors 17367191 List showing details of Sundry Creditors and advance to suppliers as on 31.03.2022 is enclosed herewith. Hence the balance of this party i.e Rs. 22891949 is included in the gross amount of sundry creditors of 33559839/-.
6.It is true that Shri Nand Kishore (since expired) was having two prop. firms under GST Act i.e Signature Enterprises (GST No. 07JIQPK4711R2ZB) and Sunshine International (GST No. 07JIQPK4711R1ZC). As the Prop. is no more in existence and hence confirmation of the purchases from the party may be done from the relevant documents viz invoices, e-way bills, confirmed ledger copy form no. 2A, 2B & 8A (annual return) download from the GST Portal, stock register etc. which have already been submitted to establish the geniuses of purchases. However, these documents are again submitted herewith in support of our claim.
7.As already mentioned that Shri Sushil Kumar (M/s Global Rising Enterprises) did not receive any notice u/s 133(6) and hence could not reply. Confirmation copy alongwith all other relevant details already on the records to establish the geniuses of purchases. We are enclosing again all the documents as mentioned at S. No. 6 above for this party also in support of our claim.
8.Sh. Suman Tyagi (M/s Infosys Enterprises) PAN No. ANQPT6992H has since expired and could not respond but all the relevant documents related to purchases have already been submitted to establish the genuine of purchases. Again the same documents/confirmation etc. as mentioned at S. No. 6 above for this party are enclosed herewith in support of our claim.
9.Sh. Sonu M/s Groofer Enterprises PAN No. NJUPS1265M did not received any notice u/s 133(6) on mail and could not respond and the relevant documents for purchases made have already been submitted to establish the genuine of such purchases. Again alongwith confirmation all the relevant documents as mentioned above at S. No. 6 for this party also are being enclosed herewith in our support of claim.
The ld. Assessing Officer conducted his enquiries under section 133(6) as well as through the verification unit (VU). The VU reported that the parties were not operating from the given addresses at the time of its enquiries and/or were incapable of doing any genuine business. The ld. Assessing Officer accordingly concluded that the purchases made by the assessee from Shri Akash Khokkar amounting to Rs.35,83,661/- were ingenuine and proceeded to add the same u/s 69C of the Act. Further, as regards balance five parties in respect of whom the appellant had claimed to made purchases of Rs.6,42,88,654/-, again considering the VU’s report, the ld. Assessing Officer made an estimated addition u/s 37(1) amounting to 15% of the total purchases and thus proceeded to add an amount of Rs.96,43,298/-. The matter travelled to the ld. First Appellate Authority, who concurred with the findings of the Assessing Officer on the bogus nature of the purchases in the light of report of the views. The ld. CIT(A) however placed reliance upon the decision of Hon’ble Bombay and Gujarat High Court postulating that in cases of bogus purchases, no percentage estimation is permissible and that rather the whole amount of purchases deemed as bogus need to be added back. Accordingly, the ld. CIT(A) enhanced the addition and directed the ld. Assessing Officer to add the entire purchases of Rs.6,42,88,654/- as against the amount of 15%. The ld. CIT(A) also confirmed the purchases made by the assessee from Shri Akash Khokkar amounting to Rs.35,83,661/-.
The ld. Counsel for the assessee submitted that the action of ld. Assessing Officer and ld. CIT(A) is patently flawed as the same is resting upon the report of the VU’s. It was contended that the impugned report was never supplied to the assessee by the ld. Assessing Officer and therefore would constitute conduct and consideration of enquiries at the back of the assessee. It was argued that it is trite law that any addition resting upon enquiries conducted at the back of an assessee can never be taken as a justified addition. The ld. Counsel argued that to this extent, the argument of ld. CIT(A) that the Assessing Officer was not bound to provide VU’s report to the assessee is not correct. The ld. Counsel further argued that as far as its affairs are concern, it has made genuine purchases from the said parties and that in support of its transactions, it has provided the copies of bills, ledger extracts, copies of bank account through which amounts were paid, GST details, ebay bills, copies of invoices, copies of product-wise stock register, copies of sales registers, confirmations of major suppliers. It was submitted that in spite of assessee providing all these documents to the Assessing Officer, the ld. Assessing Officer records non-submission of relevant documents by the assessee. It was contended that mere non-compliance of the impugned parties to Assessing Officer notices or their non-filing of personal Returns of Income cannot be a justified ground for making addition in the appellant’s case. It was contended that out of six parties chosen for his enquiry by the ld. Assessing Officer, two had unfortunately died thus justifying their non-compliance. The ld. Counsel argued that out of total purchases of Rs.9 Crores approximately, purchases of as high as Rs.6 Crores app. doubted thus making 2/3rd purchases as doubtful. It was contended that the case laws relied by the ld. CIT(A) were purely distinguished on facts.
The ld. DR vehemently argued in favour of order of ld. CIT(A) submitted that the purchases were bogus as GST of the impugned parties was cancelled and that the ratio of Hon’ble Bombay High Court in Kanak Impex, applied by ld. CIT(A), was purely applicable in this case.
We have heard rival submissions in the light of material placed on records. We have noted from the order of the ld. Assessing Officer that as Assessing Officer’s own enquiries u/s 133(6) went unanswered in respect of the six parties, it took help of VU unit for doing enquiries. We have also noted that the conclusions drawn by the ld. Assessing Officer for making the impugned addition is primarily resting upon the enquiry reports of VU. We have also noted that there is nothing on records so as to allude that the contents of the VU report were confronted to the assessee. Thus, it is evident that the appellant was not given an opportunity to defend its case qua report of VU authorities. We are also not convinced with the conclusion drawn by ld. CIT(A) that enquiries conducted by VU are internal matter of the department between the Assessing Officer and the VU and the Assessing Officer is not obligated to share the enquiry report with the assessee before drawing any adverse conclusions. We are convinced that the right to natural justice of the assessee has thus got adversely impacted. We are also at loss to comprehend as to why the ld. Assessing Officer has written his order that the assessee has not provided it requisite details of the said parties even though the Assessing Officer has himself recorded in his orders that the assessee had provided purchase registers, stock registers, GST details, etc. Further, we failed to comprehend as to when the assessee had provided explicit details and evidences alluding prima facie genuineness of purchases, conclusions qua their bogus character can be drawn by the ld. Assessing Officer.
We have also noted that the ld. CIT(A) has relied upon the judicial precedents of Hon’ble Bombay and Gujarat High Court presuming that the purchases were bogus. This conclusion was drawn in spite of the fact that the assessee had contended that the VU report upon which the addition was resting was not provided to it. Thus, in the absence of assessee being confronted the report of VU authorities, a conclusion qua ingenuine character of the impugned purchases can at best be regarded as a premature and half-baked conclusion. Accordingly, we are of the considered view that the addition made by the ld. Assessing Officer cannot survive in the event of existence of such circumstances. The action of the ld. CIT(A) in enhancing the addition made by the ld. Assessing Officer by relying upon the decision of Hon’ble Bombay High Court and Gujarat High Court has also been considered and not found to be inconformity with contemporaneous law. The argument of the ld. CIT(A) is that in the case of Kanak Impex, Hon’ble Bombay High Court has held that in cases of bogus purchases, estimations of bogus purchases are not permissible and that the whole amount of bogus purchases reserves to be added. In the absence of compliance to due process of law, the conclusion drawn of bogus purchases by the ld. Assessing Officer has been found to be premature. Thus, since the purchases did not conclusively suffer from any element of bogus, the decision relied upon by the ld. CIT(A) would not be applicable. Accordingly, the action of the ld. CIT(A) in making the impugned enhancement has also been found to be devoid of any legal satisfaction. We, therefore, direct the ld. Assessing Officer to delete the impugned addition of Rs.35,83,661/- and Rs.96,43,298/- made by the ld. Assessing Officer u/s 69C and u/s 37(1) of the Act. The grounds of appeal nos.3 to 7 challenging the merits of the addition of these amounts as well as on the issue of making addition relying upon unconfronted VU report are therefore allowed.
The ground of appeal no.1 and 2 were not pressed by the appellant assessee and hence are dismissed as infructuous.
The ground of appeal no.8 is regarding non-grant of opportunity of personal hearing through video conferencing. The appellant assessee has not adduced any evidence to suggest that it had asked for view conferencing and that the same were denied by the ld. Assessing Officer. In the absence of any such evidence the ground raised by the assessee is dismissed as infructuous.
The ground of appeal no.9 regarding invocation of penalty proceedings and charging of interest u/s 234A, 234B and 234C have been found to be consequential and hence dismissed as infructuous.
The ground of appeal no.10 is general in nature and hence dismissed.
In the result, the appeal of the assessee is partly allowed.