M/S J. T. Foods vs Income Tax Officer

PER MANISH AGARWAL, A.M.:

The present appeal is filed by assessee against the order dated 23.12.2025 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi [“Ld. CIT(A)”] in Appeal No. NFAC/2012-13/10070862 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 27.09.2021 passed u/s 147 r.w.s. 144B of the Act pertaining to Assessment Year 2013-14.

Brief facts of the case are that the assessee is a partnership firm engaged in the business of trading of foodgrains, pulses etc. The case of the assessee was re-opened u/s 147 of the Act on the basis of the information received from the Investigation Wing that the assessee has made certain transactions of purchase and sales with same parties which were found to be dummy/paper concern as a result of search carried out in the case of Hitesh Jain Proprietor M/s. Mittersain Rajesh Kumar, Karnal on 23.05.2017. During the course of search, Shri Hitesh Jain admitted in his statement that he was indulged in providing bogus purchases as well as bills through 39 shell/paper companies and the assessee has transacted from 4 of such firms from purchases of INR 20,16,900/- were made and sales of INR 75,14,028/- were made. Accordingly, after recording the reasons, notice u/s 148 was issued in response to which the assessee had filed return of income on 26.10.2020, declaring total income of INR 26,620/- i.e. the income as was declared in the return of income u/s 139(1) of the Act thereafter, AO issued various issues from time to time which were duly replied by the assessee. Main allegation of the AO is that notice issued to 04 parties namely, M/s. Pavitra Goods, Delhi and M/s. Anupam Enteprrises, Delhi from whom the assessee has made purchases of INR 10,80,000/- and INR 9,36,900/- respectively remained uncompiled with. Likewise, the notice issued u/s 133(6) to M/s. Jai Baharat Trading Company, Delhi and M/s. Shree Shiva Agro Traders to whom the assessee has made sales of INR 5,61,396/- and INR 69,52,632/- respectively, remained unanswered accordingly, the AO was of the opinion that purchases made from above 02 said parties of INR 20,60,900/- was bogus and made the disallowance u/s 37 of the Act. Similarly, by holding the sales of INR 75,14,028/-from aforesaid 02 parties as unexplained and made the addition u/s 68 of the Act and the total income was computed of INR 95,57,550/-.

Aggrieved by the said order, the assessee preferred appeal before ld. CIT(A) who in terms of the order dated 23.12.2025, has dismissed the appeal of the assessee thus, the assessee is in appeal before the Tribunal.

Aggrieved by the order of ld. CIT(A), the assessee is in appeal before the Tribunal by various Grounds of appeal mentioned in the appeal memo.

Ground of appeal Nos. 1 & 2 of the assessee wherein the assessee has challenged the re-opening of the assessment u/s 147 of the Act without following the mandatory conditions.

Before us, ld. AR for the assessee submits that the case of the assessee was re-opened based on the information received from the Investigation Wing that assessee has made purchase/sales transactions with the parties which are found to be dummy/shell/paper companies operated by Shri Hitesh. As per ld. AR, in the reasons recorded total sum of INR 2,59,52,751/- of the transactions carried out with aforesaid 04 parties are alleged as accommodation entries. However, in the reasons recorded that the AO has failed to specify the transactions carried out with each individual party from whom transactions of purchase or sales, and made general allegation that the assessee has entered into bogus transactions of purchase/sales/commissions with the aforesaid parties. Ld.AR further submits that in the reasons recorded, it was alleged that no reply was filed in response to notice issued u/s 133(6) to the assessee before re-opening of the assessment however, this fact was incorrect as the assessee has filed necessary replies on 04.03.2020 and 11.03.2020 copy of which are placed at page 3 & 4 of PB. He thus, submits that the case of the assessee was re-opened in mechanical manner without recording the satisfaction before appreciating the material available. He therefore, requested that the re-opening of the assessment is bad in law and consequent order passed deserves to be hold invalid.

On the other hand, ld. CIT DR for the Revenue vehemently supported the orders of the lower authorities and submits that a specific information was available with the AO that assessee has entered into certain transactions of purchase and sales with the parties which were found to be bogus or dummy paper concerns, managed and controlled by Shri Hitesh Jain. He further submits that the AO has made the additions with respect to the actual transactions carried out by the assessee with four parties whose names were stated in the reasons recorded and also admitted by the assessee that certain transactions of purchase as well sales were carried out with them. Once the information is matched with the actual transactions carried out by the assessee therefore, there is no reason to hold that the re-opening of the assessment is bad in law. He therefore, requested for the confirmation of the re-opening of the assessment.

Heard the contentions of both the parties at length and perused the material on record. it is a fact that assessee has made transactions of purchase and sales from the four parties which were referred in the reasons recorded for re-opening the assessment and were alleged as dummy/bogus concerns. It is further observed that amounts mentioned in the reasons recorded of the transactions with these parties are not matching with the transactions actually entered into with these parties. However, the fact remained that transactions were carried out between the assessee and these parties of purchase and sales of goods. Once the Department was in possession of the information that these Four parties were managed and controlled by one, Shri Hitesh Jain for providing accommodation entries of bogus purchase or sales therefore, there was some material to belief that income has escaped assessment. In the instant case, original assessment was not completed u/s 143(3) of the Act and therefore, it is not the case where all the facts were duly and fully disclosed therefore, we find no error in the order of re-opening of assessment and accordingly, Ground of appeal Nos. 1 & 2 of the assessee are dismissed.

Ground of appeal Nos. 3 & 4 of the assessee are with respect to the addition of INR 20,16,900/- made u/s 37 of the Act on account of purchases made from Two parties alleged as bogus and Ground of appeal No.5 of the assessee is with respect to the addition of INR 75,14,028/- made on account of sales to Two parties alleged as bogus.

Heard the contentions of both the parties at length and perused the material on record. It was the claim of the assessee that it had filed all the details including confirmed copy of the account, bank statements, delivery receipts, consignment sales accepted by Delhi VAT Authorities through Form F etc. The assessee has also filed copy of stock register, Form ST 38 for movement of the goods and copy of VAT returns filed. As per the assessee, none of these documents filed before the lower authorities were found to be incorrect.

On the other hand, the case of the Revenue was that all the Four firms were managed and controlled by Hitesh Jain for providing bogus entries for purchase and sales where all the Four parties were registered with the VAT Authorities and only bogus bills were issued for sale and purchase without actual movement of goods.

Considering the overall facts and circumstances of the case and further appreciating the facts that the assessee has filed all the details of movement of goods such as stock register etc. wherein goods so purchased/sold has been duly accounted for and the AO has not pointed out any defect for the same. Solely for reason that the information was received from the Investigation Wing that these firms were managed and controlled by Shri Hitesh Jain for providing accommodation entries, transactions made were doubted. At the same time, it is observed that the notices issued u/s 133(6) to these parties, remained unanswered. This creates doubts with respect to the transactions carried out. Accordingly, in the larger interest of justice, we are of the opinion that the profit rate of 6% would be fair and reasonable to apply on the sales of INR 75,14,028/-which has already been made in the case of the assessee itself for AY 2013-14. Accordingly, we direct the AO to re-compute the addition by applying profit rate of 6% on the sales alleged as bogus of INR 75,14,028/- with respect to the purchases of INR 20,16,900/-, it is further observed that said purchases have been made through banking channels and goods were duly recorded in the books of accounts thus, entire purchases cannot be added. There may be a case that the bills were obtained from the other parties in cash. Therefore, in the larger interest and to cover up the possible leakage, the profit rate of 6% is directed to be applied on such bogus purchases also. With these directions, Ground of appeal Nos. 3 to 5 raised by the assessee are partly allowed.

Ground of appeal No.6 of the assessee is with respect to the levy of interest u/s 234A which is consequential in nature.

Ground of appeal No.7 of the assessee is general in nature, hence not adjudicated.

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

Order pronounced in the open court on 03.09.2026.