Mohan Lal Gupta vs ITO Ward 36(1), Delhi

This appeal of the assessee arises out of the order passed by the Commissioner of Income Tax (Appeals) NFAC, Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 6078/Del/2026 for A.Y. 2020-21 dated 21.01.2026 which in turn arises out of the order passed by the Assessing Officer, Assessment Unit, Income Tax Department (hereinafter referred to as ‘ld. AO’) passed u/s 143(3) r.w.s. 144B of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 09.09.2022.

At the outset, I find that there is a delay in filing of appeal by 59 days. Considering the reasons adduced in the condonation petition, in the interest of substantial justice, I hold that the assessee was prevented from sufficient cause from not filing the appeal in time before Tribunal. Hence I am inclined to condone the delay and admit the appeal of the assessee for adjudication.

Though the assessee has raised several grounds of appeal, the only effective issue to be decided in this appeal is as to whether the learned CITA was justified in confirming the addition in the sum of Rs 39,50,000/-on account of ingenuine purchases in the facts and circumstances of the instant case.

I have heard the rival submissions and perused the materials available on record. The assessee is a proprietor of M/s M.B. Silver having office at A-16/2, 1st floor, Vazirpur Industrial Area, New Delhi. The assessee filed his return of income for the assessment year 2020-21 on 22-11-2020 declaring total income of Rs 5,85,920 mainly from income from business and profession. The books of accounts of the assessee are audited and the assessee has declared profit of Rs 6,79,997 in the books. The total sales and purchases are Rs 2,63,51,520 and Rs 2,56,42,368 respectively. An information was received from the investigation wing of the department that the assessee has made bogus purchases of Rs 39,50,000. As per the appraisal report in the case of Shri Ankit Jain, Proprietor of M/s Rishabh Trading Company pursuant to the search / survey carried out in his case, it revealed that the said assessee is engaged in the business of trading of gold jewellery, gold bullion, silver bars etc. It was revealed that Shri Ankit Jain was engaged in providing accommodation entries of bogus purchases to several persons by charging commission. Shri Ankit Jain in his statement recorded under section 131(1A) of the Act on 3-12-2016 admitted that he had provided his unaccounted cash to Shri Atul Tyagi in his entities M/s Mac Allied Sales Corporation, M/s Kirpalu Enterprises, M/s Shri Krishna Enterprise and M/s Daksh Trade World Private Limited. These funds deposited in the form of cash were transferred to the account of M/s Rishabh Trading Company to the extent of Rs 7,81,40,000. Further during enquiries, it was found that at the business premises of Shri Ankit Jain, there was no actual business carried out. Shri Ankit Jain and his employees were prima facie engaged in providing all sorts of accommodation entries and counting cash with the help of cash counting machines. Shri Ankit Jain used to carry out his sales transactions in cash. Those parties which needed hard cash used to do RTGS in his proprietary concern’s bank account and Shri Ankit Jain used to give back equal amount in cash after charging commission. Shri Ankit Jain admitted bogus transactions with such parties.

On analysis of books of M/s Rishabh Trading Company for financial year 2019-20 relevant to assessment year 2020-21, bogus sale of silver and gold were booked in the names of 7 entities which are tabulated in page 3 of the assessment order totaling to Rs 6,93,77,500. In the said tabulation, the name of the assessee or his proprietary concern was not reflected. The Learned AO observed that Shri Ankit Jain had provided bogus sale accommodation entries during financial years 2017-18, 2018-19 and 2019-20 to some parties. Shri Ankit Jain was issued Summons under section 131 of the Act for explaining the transactions and to produce documentary supporting evidences, which was not complied by Shri Ankit Jain. The details of such bogus sales transactions in three financial years are tabulated in pages 4 and 5 of the assessment order. From the said table, it revealed that Shri Ankit Jain had made bogus sales to assessee's proprietary concern to the extent of 91.157 kg of silver valued at Rs 39,50,000. Based on this, the Learned AO sought to examine the veracity of the purchases shown by the assessee in the sum of Rs 39,50,000 from the entity of Shri Ankit Jain in the scrutiny assessment proceedings. The assessee submitted that M/s M.B. Silver, proprietary concern of the assessee, had made total purchase of Rs 2,56,42,368 during the year. Out of this, purchases of Rs 39,50,000 was made from M/s Rishabh Trading Company, Proprietor Shri Ankit Jain. The assessee submitted the purchase bills and the ledger account of the supplier before the Learned AO along with the confirmation of the supplier. The said supplier duly confirmed the fact of effecting the supplies to the assessee. The payments were made to the said supplier by cheque. It was submitted that there is absolutely no evidence to prove that the supplier after receipt of amounts from the assessee through banking channels had given back the cash back to the assessee. The purchases made by the assessee from Rishabh Trading Company had been duly entered as goods inward in the stock register maintained. The corresponding consumption made by the assessee out of the purchases from Rishabh Trading Company were also duly shown as outflow in the raw materials stock registers and the said consumption has not been doubted by the revenue. The assessee also submitted the quantitative details of purchases, consumption and sales of all the parties which includes the purchases made from disputed party Rishabh Trading Company. The assessee also placed on record an affidavit from Shri Ankit Jain, wherein he had confirmed the genuineness of the transaction carried out with the assessee. The assessee furnished the complete list of sale of silver articles made by M.B. Silver for the whole financial year 2019-20 date wise, invoice wise before the Learned AO which are also enclosed in pages 22 to 27 of the paper book filed before me. The assessee also furnished the purchase analysis mentioning the quantity and purchase value of each silver article before the Learned AO as under:-

The assessee also furnished the complete sales analysis of silver articles and silver coins duly mentioning the quantity and the sale value before the Learned AO as under:-

The assessee also furnished the complete stock details as on 31-03-2020 before the Learned AO as under:-

Despite all these details, I find that the Learned AO proceeded to treat the purchases made from M/s Rishabh Trading Company in the sum of Rs. 39,50,000 as a bogus transaction and made an addition under section 69C read with section 115 BBE of the Act and completed the assessment. This action of the Learned AO was upheld by the Learned CITA.

At the outset, I find that the purchases made in the sum of Rs. 39,50,000 from Rishabh Trading Company has been already accounted by the assessee in his books of accounts. The payments for the same were made through regular banking channels out of accounted sources traceable to disclosed bank account of the assessee. The sources for making such payment are not doubted by the revenue in the instant case. Further I find that the provisions of section 69C of the Act pre-supposes incurrence of actual expenditure for which source alone is not explained to the satisfaction of the Learned AO. In the instant case, the case of the revenue is that there was no genuine purchases made by the assessee from Rishab Trading Company in the sum of Rs 39,50,000. Hence according to the revenue, it is a bogus and sham transaction. Hence the incurrence of expenditure per se is doubted by the revenue. Then the provisions of section 69C of the Act per se could not be made applicable for framing an addition in the facts and circumstances of the instant case. Further, I find that the assessee had duly furnished all the requisite documents to prove the genuineness of the purchases. I find that assessee had made purchase of silver bars from M/s Rishabh Trading Company on the following dates:-13-06-2019 33,024 gms 21-09-2019 29,991 gms 10-10-2019 59,380 gms 20-10-2019 61,250 gms

These purchases are part of total purchase of silver bars made during the financial year 2019-20 totaling to 5,18,448 gms. There was an opening balance of silver bars of 2,26,560.60 gms. The said opening balance added with the current year purchase of 5,18,448 gms and after reducing the consumption of 5,61,658.20 gms gives the closing stock of silver bars at 1,83,350.40 gms.

These silver bars are used to make silver articles with mixture of copper in order to arrive at the production of silver articles which is as under:-Silver Consumption 5,61,658.20 gms Add: Copper Consumption 4,505 gms Total production of silver articles in financial year 2019-20 5,66,163.20 gms

The stock register maintained by the assessee shows that there is an opening stock of silver articles of 2,22,924 gms with current year purchases of 92,135.760 gms and manufactured silver articles of 5,66,163.20 gms. From all these figures, the sales made during the year of 6,15,852 gms are reduced and it gives a closing stock of silver articles at 2,65,370.96 gms. All these details are duly reflected in the stock registers maintained by the assessee for raw materials as well as for finished goods. The assessee had duly reflected all the purchases and sales in its books of accounts which had been duly subjected to audit. The assessee has furnished confirmation from Shri Ankit Jain along with an affidavit from Shri Ankit Jain confirming the sales made by him to the assessee. When all these facts and documentary evidences are staring on me, I do not find this as a fit case to confirm the addition. I hold that assessee had furnished all the relevant materials before the lower authorities in the instant case and hence no part of such purchase could be treated as unexplained or bogus or unverifiable. The confirmation and affidavit given by Shri Ankit Jain had not even been sought to be tested by the revenue in the instant case. Without carrying out minimum inquiry in that regard, merely relying on the original statement of Shri Ankit Jain, no addition could be confirmed in the hands of the assessee. Hence, I have no hesitation to delete the addition made in the sum of Rs. 39,50,000 even on merits apart from the inapplicability of the provisions of section 69C of the Act to the facts of the instant case. Accordingly, the grounds raised by the assessee are allowed.

In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 12/08/2026 Sd/-(M. BALAGANESH)

Dated: 12/08/2026 Copy forwarded to

Applicant

Respondent

CIT

CIT (A)

DR:ITAT

ITAT, New Delhi