TaxTMI 
TaxTMI 
2026 (7) TMI 1810
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.... 7987/Del/2025 is taken as lead case. ITA No. 7987 / Del/2025 (Revenue) and CO No. 6/ Del/ 2026 3. The appeal of the Revenue is directed against order dated 18.09.2025 u/ s 250 r.w.s. 254 of the Act passed by ld. CIT(A)/NFAC, Delhi wherein the addition has made vide assessment order dated 13.01.2023 by way of variation, making addition of 12.5% of bogus transaction for Financial Year 2017-18 out of bogus purchase as VAT and GST purchase of Rs. 73,32,84,161/- i.e. Rs. 9,16,60,520/ -. 4. The facts in brief as culled out from the authorities below are that the assessee is a company filed his return of income for A.Y. 2018-19 declaring total income as Rs. Nil. During the year under consideration, information was received that assessee company had entered into the transaction of bogus purchases with Ms/ RCI Industries and Technologies Ltd. during the Financial Year 2017-18. Accordingly, the case was reopened u/s. 147 of the Act by issuance of notice u/s. 148 dated 31.03.2022. Further notices u/s. 143(2), 142(1) of the Act along with show-cause notices were also issued to the assessee. The assessee filed response and assessment was completed u/s. 147 r.w.s. 144/144B of the Ac....
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.... has wrongly concluded that the purchases were not made from the RCI Industries. It is further stated that the assessee has filed all necessary documents, including Sales tax/GST returns, (Pages 455 to 596). Apart from other documents, which include purchase advice, transport receipts, bank statements, showing payments and confirmation from supplier, GST returns of the supplier and party-wise sales of Rs. 241,92,66,934/ -. It is further stated that the purchase and sales are matching, with inflow and outflow stock, and there is no defect in the stock register. Purchase and sales are interlinked and inseparable. It is further stated that AO has disallowed 12.5% of the purchase value from RCI Industries and allowed 87.5% of the entire purchase as genuine business expenditure. Hence, it is stated that a purchase cannot be partly bogus and partly genuine and as such, no addition was required to be made on that account. It is further stated that the AO has wrongly relied on the cancellation of GST registration of RCI Industries, which was made by the GST officer only on 21.02.2023, however from retrospective effect. It is further stated that the GST registration of the RCI Industries wa....
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....red in deleting the addition of Rs. 9,16,60,520/- made by the Assessing Officer on account of bogus purchases from M/s RCI Industries & Technologies Ltd., without appreciating the detailed findings recorded in the assessment order based on credible and specific investigation reports received from the Directorate of Investigation and the DVU. 2. That the Ld. CIT(A) has erred in holding that since the books of account were not rejected under section 145(3), the addition could not be sustained, without appreciating that rejection of books is not a precondition for estimation of profits as bogus purchases claimed by assessee. 3. That the Ld. CIT(A) has erred in ignoring the fact that the addition made by the Assessing Officer was of the profit element embedded in the bogus purchases, computed at 12.5% in accordance with judicial precedents, and therefore represented a fair and reasonable estimation of income." 10. On perusal of these grounds, it is evident that the Revenue has not challenged the decision on additional grounds wherein the ld. CIT(A) has held the assessment order bad in law. 11. We have heard the ld. AR and the ld. DR and examined the record. The ....
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....A). 14. We have considered the rival submissions and examined the record. All the arguments raised by the Revenue with respect to the deleting the addition made @ 12.5% of the alleged bogus purchases has been considered and adjudicated upon as ground Nos. 5, 6 & 7 from para 7.1 onwards in the impugned order and the relevant findings from para 7.3 to 7.7 are extracted below as under: "7.3 I have carefully considered the submissions of the appellant. It has been claimed by it that the total purchases made during the year were to the extent of Rs. 247,93,48,111/- as per profit and loss account (Raw material Rs. 1,00,53,375 + Purchase of Stock in Trade 2,46,92,94,736). This includes purchases made from RCI Industries at Rs. 73,32,84,161/- as per statement filed before the A.O. which has been taken as Bogus purchase. The total sales made by the appellant during the year were Rs. 2,41,92,66,934/ -. It has also been claimed by the appellant that Books of accounts of the appellant have not been rejected. Also the sales figure has also not been rejected. 7.4 I have gone through the submissions of the appellant and other documents produced by him in the appellate proceed....
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....tantial amount of purchases. It has also been inferred that the same is irrational considering the volume of purchases. RCI Industries & Technologies Ltd. - Financial Background 1. 1. 1. 19): FY Revenue from Operations (Lakhs) EBITDA (Lakhs) PBT (Lakhs) PAT (Lakhs) Equity Capital (Lakhs) Reserves& Surplus (Lakhs) 2014-15 118,727 3,095 2,755 2,188 2,020 10,506 2015-16 142,471 3,506 3,285 2,625 2,020 12,812 2016-17 175,670 4,120 3,982 3,280 2,020 15,581 2017-18 204,403 6,450 4,037 3,280 1,344 10,311 2018-19 197,780 4,565 4,565 3,667 1,344 11,936 1. It is pertinent to highlight that RCI Industries & Technologies Ltd. was a listed company on the Bombay Stock Exchange during FY 2017-18 and FY 2018-19, engaged in significant trading and manufacturing activities. The company had a large turnover and positive profitability during these years, reflecting genuine commercial operations and not a shell entity. Subsequently, due to financial distress, RCI Industries was admitted into Corporate Insolvency Resolution Process (CIRP) by the Hon'ble NCLT....
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....appellant has also submitted date-wise and bill-wise details of other freight expenses of Rs. 11,49,048/- incurred on other purchases excluding RCI Industries and sales made at Page Nos. 288 to 299 of the paper book, which have been duly booked in the profit and loss account. 1. 1. goods purchased from RCI Industries, Delhi were transported from their godown located at Vishnu Gali, Vishwas Nagar, Shahdara, Delhi to the appellant's godown at Jhilmil, Shahdara, Delhi, which is merely around 4 kilometres in distance. Similarly goods purchase from RCI Industries, Bhiwadi Rajasthan were transported from their godown at RIICO Ind Area Bhiwadi Rajasthan to appellate's godown at same location i.e. at RIICO Ind Area Bhiwadi, Rajasthan. Considering this very short distance and the high value & low volume of the metals, the freight costs incurred were understandably minimal. 1. 1. are either borne by the supplier or the delivery is arranged at the buyer's godown as part of the sale terms. Furthermore, in some cases, the purchases were made with instructions for delivery at the appellant's godown, and sales were also made on a similar delivery basis. ....
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....the purchase and sales transactions from RCI industries for the impugned assessment year 2018-19: i. Captain Industries, C-6B/11, Janak Puri, New Delhi - 110058, assessed under PAN AAFFC0006K by the NFAC, Delhi order dated 23.03.2023. ii. Myco Electricals Private Limited, D-2/3 (Front Side), Okhla Industrial Area, Phase II, Tehkhand, Delhi - 110020, assessed under PAN AAACM1868P by the A.O. Assessment Unit, Income Tax Department, NFAC order dated 09.03.2023. 7.6 The appellant has also relied upon the following judgement of Hon'ble Courts with request that it should be treated equally and without discrimination: i. ITAT SMC Bench dated 07.10.2022 in the case of Rasilaben Yogeshbhai Patel vs. ITO Ward 5(3)(2), Ahmedabad in ITA No. 631/AHD/2019, ii. ITAT Delhi D Bench in the case of Madhurittu Puri vs. DCIT. Circle International Taxation 2(2)(2) New Delhi in ITA No. 3063/Del/2022, iii. ITAT Mumbai in the case of REKHA RAJESH JOGANI VS. INCOME TAX OFFICER WARD 19(3)(1), MUMBAI (ITAT MUMBAI 2025), iv. Hon'ble Delhi High Court in the case of PCIT Vs Forum Sales Pvt. Ltd. in Appeal Number: ITA 862/2019, dated 01/03/202....
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....tice u/s. 148A(b) and 148 of I. T. Act 1961 is without jurisdiction as the returned income was at a Loss of Rs. 4,22,818 being less than 15 Lacs and the correct jurisdiction falls with the Income Tax Officer Ward - 4(2), New Delhi, is thus unjust, illegal, arbitrary and against the facts and circumstances of the case. 2. Action of the CIT (A) in confirming the action of the A.O. who has failed to verify the correctness of the information received from the insight portal and has failed to showcase as to how information suggests that the income has escaped assessment making the assessment as illegal, arbitrary and against the facts and circumstances of the case (As per Ground of Appeal No. 5 before the CIT(A). 3. The impugned assessment order is bad in law as the same has been mechanically passed by the A.O. and does not provide any cogent explanation for making additions to the income of the appellant and the A.O. has failed to consider the replies of the appellant during the course of reassessment proceedings and also in the proceedings u/s. 148A(b) of I. T. Act 1961 and has mechanically passed the impugned assessment order (As per Ground of Appeal No. 7 and 8 bef....
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....orded by the assessee, M/s Bonlon Industries Ltd. with RCI Industries, without rebutting the detailed findings of the Assessing Officer regarding absence of complete transportation records, incomplete bilties, absence of purchase orders, non-confirmation of sales by the alleged buyer, and non-compliance by the transporters summoned during investigation." 20. For A.Y. 2019-20, the transactions with the M/s RCI Industries & Technologies Ltd. involved is as under: "2.1 In this case, information was received to the department that an entity M/s RCI Industries and Technologies Limited was found to be engaged in both availing and issuing of bogus Input Tax Credit to its beneficiaries. On verification of the purchase parties of M/s RCI Industries and Technologies Limited, it was observed that M/s Smita Global Pvt. Ltd (PAN: AAFCS2391Q) has made a sale transaction of Rs. 3,13,71,856/- and Bonlon Industries Ltd. has made a 'sale transaction of Rs. 55,38,21,013/ -. Further, on verification of the sale parties of M/s RCI Industries and Technologies Limited it was observed that the assessee company i.e. Bonlon Industries Ltd. made a purchase of Rs. 21,21,45,681/ -. Tra....
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....turned income of the assessee (i) M/s Bonlon Industries Ltd (ii) M/s Smita Global Pvt Ltd. (Rs. 3,87,95,027/-) Rs. 8,74,760/- (Rs. 3,79,20,267/-) Add: addition made in order u/s. 147 r.w.s. 143(3) of the Act (i) Addition u/s. 69C as per para 11 (ii) Addition u/s. 69A as per para 12 (iii) Addition u/s. 69A as per para 13 Rs. 21,21,45,681/- Rs. 59,60,843/- Rs. 10,52,25,992/- Rs. 32,33,32,516/- Income recomputed as per normal provisions of income tax act Rs. 32,33,32,516/- As per MAT provisions u/s. 115JB of the Act Particulars Amount in (Rs.) Amount in (Rs.) Returned income of the assessee (iv) M/s Bonlon Industries Ltd (v) M/s Smita Global Pvt Ltd. Rs. 3,44,34,682/- Rs. 8,52,959/- 3,52,87,641/- Add: addition made in order u/s. 147 r.w.s. 143(3) of the Act N/a Income recomputed as per MAT provisions u/s. 115JB of the Act 3,52,87,641/- 15. Hence, the total income of the assessee is assessed at Rs. 32,33,32,516/-under normal provision of income tax and Rs. 3,52,87,641/- ....
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.... 15.2 It is noted that the AO made the addition u/s. 69A and 690 of the Act, and as such, special tax rates as provided u/s. 115BBE are applicable to the addition. Since, in this order, the addition u/s. 69A and 690 of the Act has already been deleted, therefore, in this case the provisions of Section 115BBE of I. T. Act 1961 are not applicable. Thus, ground of appeal no. 18 of the appellant is "allowed". 16. In result, the appeal is "partly allowed." 24. We have noticed that the assessment order dated 30.03.2025 against which appeal was filed before the ld. CIT(A), which has been considered and allowed by ld. CIT(A) vide impugned order, a writ has been filed in the Hon'ble High Court of Delhi bearing No. WP(C) 5131/2025. It is further noticed from the impugned order that the Hon'ble High Court has passed interim order holding that CIT(A)'s order would be subject to outcome of the writ petition, for limitation for issue of notice u/s. 147 of the Act. Further the ld. CIT(A) can adjudicate the other matters for which the appeal has been filed. The ld. CIT(A) in the impugned order therefore held that ground Nos. 1, 2, 3 and 4 before him pertai....
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....ment of facts and other material available on record. 13.2 I have considered the submission of the appellant. On perusal of submission it is noted that In this case the notice issued under Section 148A(b) of the Income Tax Act, 1961, which states that the appellant company has availed of Input Tax Credit (ITC) of Rs. 76,59,66,694/- from M/s RCI Industries and Technologies Limited. It is seen that the total purchases made by the assessee from M/s RCI Industries and Technologies Limited during the Financial Year 2018-19 were only Rs. 21,21,45,681/ -. Based on these purchases, the ITC claimed by the assessee was Rs. 3,81,86,222/-, which is 18% of the purchases is in compliance with the relevant provisions of the GST Act. 13.3 During the year under consideration the assessee made purchases of Rs. 21,21,45,681/- from RCI Industries which have been treated as non genuine purchases on various grounds including low gross profit/net profit, long standing creditors, cancellation of GST registration made by the GST department of RCI Industries w.e.f 01.07.2017, non furnishing of the information by RCI Industries in response to notice u/s. 133(6) of I. T. Act 1961 including o....
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.... extent of Rs. 2,23,54,46,763/- giving average daily payment 61,24,512/- and the amount payable to RCI is only Rs. 7,54,39,459/- which is less than 13 days outstanding, which in any trade again is not very long outstanding. 13.10 It is thus seen that the creditors are not outstanding for a long time and therefore cannot raise any doubt on the legitimacy of the transaction between the appellant and the RCI Industries. The outstanding creditors are only for 17 and 13 days in both the two years and therefore cannot be treated as non genuine business transactions on this account. In view of the various documents filed, it is established the appellant made genuine purchases and sales, backed by transport receipts, E-way bills. The payments for purchase have been made by normal banking channel and the payment against sales has again been received through normal banking channel. The account with RCI is fully reconciled and the balances with each other have been duly confirmed. Further the allegation that fake input tax credit has been availed, which is not there in the profit and loss account. In-fact the input and output tax credit is outside the profit and loss account and in t....
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....ted before the A.O. that without examination of the seized records no one can come to a conclusion that the transactions with RCI were bogus. It is submitted that bogus purchases are entered into for reducing the profit. It involves obtaining bogus or inflated invoices from parties, who make bogus vouchers and charge nominal fees for these illegal services. Such is not the case with assessee for making purchases from RCI. Large amount of sales were made to RCI, which increases the income of the assessee. The sale is an income. No adverse inference on the facts and circumstances of the case called for. Actual/physical movement of goods from the Premises of assessee company to the premises of M/s. RCI Industries and Technologies Limited 13.13 As seen from the aforesaid the Copies of E-way bills for movement of goods from assessee's godown in Dilshad Garden, Delhi to RCI godown at Vishwas Nagar, Delhi which is hardly 2.5 KM away have been placed on record with sale invoices. The goods were sent/delivered through local transport vehicles for which no GR/LR copy were required for the purpose. However for inter state sales the LR/GR copies were available but have be....
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.... discrepancy in these documents. In-fact no further enquiry or verification was done by the A.O. 13.16 It is seen that the purchases made by the assessee from RCI are the sales made by them to the appellant, which have been fully reconciled. Similarly sales made by the assessee to the RCI is purchase by them from the assessee, which again fully reconciles. When purchase and sales made from and to with RCI fully reconciles with the appellant and RCI, they cannot be considered as bogus. Complete quantity-wise details have been maintained which have been placed on record. The A.O. has not pointed out any specific entry of purchase and sales which is not reconcilable either with assessee company and with RCI. When this is so, sales and purchases to or from RCI cannot be considered as bogus as the same represents the purchase and sales of the assessee company. Article 14 of the Indian Constitution, which guarantees equality before the law and equal protection of the laws, is applicable in income tax cases, meaning that taxation laws and their application must be fair and not discriminatory. It is seen that under similar circumstances purchases made from RCI In....
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....tted an order passed by a faceless unit, in other case reopened on basis of same information, who was the buyer of raw material from M/s RCI Industries & Technologies Ltd. The same has been perused. Considering the information available on record and documents/facts furnished by the assessee, the submission of the assessee is accepted. 13.18 It is further seen that assessment in the case of Myco Electricals Private Limited, D-2/3 (Front Side), Okhla Industrial Area, Phase II, Tehkhand, Delhi - 110020, assessed under PAN AAACM1868P by the A.O. Assessment Unit, Income Tax Department, NFAC, purchase transactions with RCI have been accepted. Copy of the relevant assessment order appears at Page No. 1315 to 1317 (i) In this case the assessment was reopened "based on information that the assessee has entered into non- genuine transactions in the form of purchase the case was reopened u/s. 147 of IT Act and order u/s. 148A(d) was passed on 23.03.2022. Later, notice u/s. 148 dated 23.03.2022 & intimation to assessee dated 17.08.2022 for completion of assessment in accordance with procedure of section 144B of the IT Act, 1961, was also issued". "....
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....sessee. Before us, the AR of the assessee vehemently submitted that in assessee's co-owner case, the revenue has accepted similar Long Term Capital Gain in the scrutiny assessment. Copy of the assessment order in respect of two co-owners is placed on record. We have noted that no counter to the submission of the assessee, was made by DR that similar Long Term Capital Gain was accepted in case of co-owner. 8. The Hon'ble Madras High Court in ICT v. Kumararani Meenakshi Achi (supra) held that during the same assessment year same quantity of wealth in possession of co-sharer is subjected to a lower rate of taxation, it would be highly improper to burden a similarly situated co-sharer with a higher rate of tax. If such an action on the part of the assessing authorities is sanctioned it would militate against the principle of equality of laws enshrined in Article 14 of the Constitution. By following the same principle, the Co-ordinate Bench of this Tribunal in Chetanbhai Prahladbhai Gami v. ITO in ITA No. 2082/AHD/2013 dated 19- 7-2019, the Tribunal granted relief to the assessee holding that while making the assessment of the same property the similar treatment should ....
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.... the assessee. The assessee has submitted valuation report of the property from Govt. Approved Valuer who has arrived value of property at Rs. 66,61,020 as on 1-4-1981. The value of the assessee's share comes to Rs. 4,16,314. Indexed cost as per section 48 of the Act is worked out at Rs. 24,22,947/ -. As per stamp duty authority the assessee's share being 6.25% of sale value in the property comes to Rs. 25,56,310/ -. Thus capital gain comes to Rs. 1,33,363/-, which was taxable in the hands of the assessee. The capital gain of Rs. 1,33,363 has now been shown by the assessee in the Return of Income filed in response to notice u/s. 148 of the Act. However, the assessee has not declared suo moto Long Term Capital Gain as he has not filed return of Income. The assessee has consciously not filed return of income to avoid payment of tax. Therefore, Penalty proceedings u/s. 271(1)(c) of the Act are initiated on this issue for concealment of income." 11. In view of the above aforesaid factual and legal discussion and respectfully following the decision of Madras High Court in Kumararani Meenakshi Achi (supra) and decision of Coordinate Bench in Prabhodh chandra Ambelal Desa....
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....that the impugned addition in the case of the assessee is not warranted at all when the same FMV has been accepted in the cases of other co-owners." We are further relying on the judgement of ITAT Mumbai in the case of REKHA RAJESH JOGANI VS. INCOME TAX OFFICER WARD 19(3)(1), MUMBAI (ITAT MUMBAI 2025) wherein it was held as under: 9.1. We also take note of the decision of Coordinate Bench in the case of Balkrisna Gajanan Thopte vs. DCIT, in ITA No. 3380/Mum/2019, dated 10.01.2024 for Assessment Year 2014-15 which also dealt with identical scrip of SRK Industries Ltd. deleting the addition made of similar account both u/s. 68 and 69C. There are several other decisions of Coordinate Benches which dealt with the same scrip of SRK Industries Ltd. holding in favour of the assessee on similar nature of transaction as undertaken by the assessee. The same are listed below: a. Shri Rakesh Shantilal Shah vs. ITO [ITA 1775/Mum/2019) b. Smt. Geeta Khare vs. ACIT [ITA 4267/Mum/2018] C. Shri Narendra Kumar Saraogi vs. DCIT [ITA 46 & 47/Kol/2018) d. Aditya Vikram Sureka HUF vs. L.T.O [ITA No. 1650/Kol/2018) e. Shree Shreyans Chopra vs....
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.... Coming then to the language of the Article it must be noted, first and foremost that this Article is, in form, an admonition addressed to the State and does not directly purport to confer any right on any person as some of the other Articles, e.g., Art. 19, do. The obligation thus imposed on the State, no doubt, enures for the benefit of all persons, for, as a necessary result of the operation of this Article, they all enjoy equality before the law. That is, however, the indirect, though necessary and inevitable, result of the mandate. The command of the Article is directed to the State and the reality of the obligation thus imposed on the State is the measure of the fundamental right which every person within the territory of India is to enjoy. The next thing to notice is that the benefit of this Article is not limited to citizens, but is available to any person within the territory of India. In the third place it is to be observed that, by virtue of Art. 12, "the State" which is, by Art. 14, forbidden to discriminate between persons includes the Government and Parliament of India and the Government and the legislature of each of the States and all local or other authorities with....
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....5,53,82,101/- u/s. 69A of the I. T. Act 1961 being Estimated G.P. @ 10% of the Total Sale of Rs. 55,38,21,013/- made by the appellant to RCI Industries and Technologies Limited, is unjust, illegal, arbitrary and against the facts and circumstances of the case. 14.2 Further, it has stated that addition of Rs. 28,23,557/- u/s. 69A of the I. T. Act 1961 being 50% of the GST @ 18% on the Total Sale of Rs. 3,13,72,856/- made by Smita Global Private Limited to RCI Industries and Technologies Limited, which was not the part of the Show-cause notice dated 24.03.2025 and addition of Rs. 4,98,43,891/- u/s. 69A of the I. T. Act 1961 being 50% of the GST @ 18% on the Total Sale of Rs. 55,38,21,013/- made by the appellant to RCI Industries and Technologies Limited, which was not the part of the Show-cause notice dated 24.03.2025. 14.3 I have considered the submission of the appellant. It is noted that Smita Global Private Limited was merged with the assessee company on 13.06.2018. The income from 14.06.2018 till 31.03.2019 is part and parcel of income of this company. Smita Global Private Limited have effected sales to RCI Industries at Rs. 3,13,71,856/- (being the correct fig....
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....es 14.8 It is seen that the addition for 50% of GST @ 18% on the total sales to RCI Industries has been made without issuance of a specific show-cause notice or providing an opportunity to the appellant to explain the alleged issue. The impugned addition, being based on assumptions, surmises, conjectures regarding GST, was not part of the show-cause notice dated 24.03.2025, thereby violating the principles of natural justice and the mandatory requirement of providing the assessee an opportunity to be heard on any proposed addition. Any addition made behind the back of the assessee or without putting the specific issue to notice is invalid in law. 14.9 The AO has made the addition assuming that 50% of the GST component charged on the total sales was allegedly routed back in cash to the invoice issuer. This finding is based purely on surmises, presumptions, and conjectures, without any credible evidence whatsoever. There is no statement or documentary evidence, no seizure, or any cash trail to support the claim that any portion of GST was routed back. The entire sales amount along with applicable GST was received through proper banking channels, and duly accounted f....
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.... genuine, logically enough there was no escape from the conclusion that the appellant had offered reasonable explanation as to the source of the 291 high denomination notes of Rs. 1,000 each which it encashed on 19th Jan., 1946. It was not open to the Tribunal to accept the genuineness of these books of account and accept the explanation of the appellant in part as to Rs. 1,50,000 and reject the same in regard to the sum of Rs. 1,41,000. Consistently enough, the Tribunal ought to have accepted the explanation of the appellant in regard to the whole of the sum of Rs. 2,91,000 and held that the appellant had satisfactorily explained the encashment of the 291 high denomination notes of Rs. 1,000 each on 19th Jan., 1946. [para 14] The Tribunal, however, appears to have been influenced by the suspicions, conjectures and surmises which were freely indulged in by the ITO and the AAC and arrived at its own conclusion, as it were, by a rule of thumb holding without any proper materials before it that the appellant might be expected to have possessed as part of its business, cash balance of at least Rs. 1,50,000 in the shape of high denomination notes on 12th Jan., 1946,-a mere conj....
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....e such that no person acting judicially and properly instructed as to the relevant law could have found, or the finding was, in other words, perverse and the Court is entitled to interfere. [para 23] 14.14 It is noted that, without prejudice to its claim that its purchases and sales are genuine, backed by compliance with GST returns, the income has already been shown in the books of accounts. The Turnover, Gross Profit, G.P. Ratio, Net Profit and Net Profit Ratio for the year under consideration and two preceding years is as under: Comparative Ratios: Particulars A. Y. 2019-20 A. Y. 2018-19 A. Y. 2017-18 Turnover 2,14,83,66,946 2,41,92,66,934 2,37,79,52,021 Gross Profit -14,38,802 2,21,738 1,24,18,042 G. P. Ratio -0.07 % 0.01 % 0.52 Net Profit 3,40,11,691 33,17,452 24,92,313 N. P. Ratio 1.58 % 0.14% 0.1% There is increased net profit shown during the year under consideration. 14.15 It is seen that recently similar issue arose for consideration in the case of Ashok Kumar Rungta Vs. Income Tax Officer 24(1)(1), Mumbai before the Bombay High Court in Income Tax Appeal No. 1753, ....
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....Tax Department, would not be a proper approach on the part of the AO, in the absence of strong documentary evidence, including a statement of the Sales Tax Department that qua the actual purchases as undertaken by the assessee from such suppliers the transactions are bogus. Such information, if available, was required to be supplied to the assessee to invite the response on the same and thereafter take an appropriate decision. Unless such specific information was available on record, it is difficult to accept that the AO was correct in his approach to question such purchases, on such general information as may be available from the Sales Tax Department, in making the impugned additions. This for the reason that the same supplier could have acted differently so as to generate bogus purchases qua some parties, whereas this may not be the position qua the others. Thus, unless there is a case to case verification, it would be difficult to paint all transactions of such supplier to all the parties as bogus transactions. 12. In our opinion, a full addition could be made only on the basis of proper proof of bogus purchases being available as the law would recognise before the AO,....
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....se if the Income-tax Authorities are of the view that there are questionable and/or bogus purchases, in that event, it is the solemn obligation and duty of the Income-tax Authorities and more particularly of the A.O. to undertake all necessary enquiry including to procure all the information on such transactions from the other departments/authorities so as to ascertain the correct facts and bring such transactions to tax. If such approach is not adopted, it may also lead to assessee getting away with a bonanza of tax evasion and the real income would remain to be taxed on account of a defective approach being followed by the department." The aforesaid analysis would squarely apply to the facts of the instant case. Not only has the Assessing Officer not conducted the exercise as expected of him, the CIT-A has effected a summary measure of disallowing 10% of the expenses and the ITAT has been happy to endorse the same as an equitable middle ground. Such an approach cannot be endorsed as a process known to law to disallow expenses on the premise of their being bogus. Another decision of a Division Bench of this Court in the case of Principal Commissioner of Income-ta....
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....e Appellant- Assessee under cloud was on the Respondent-Revenue, which has not discharged this burden in the first place. Apart from the inputs being received from the investigation wing, there is nothing concrete in the material on record that was used to confront the Appellant-Assessee. If the counterparties in these purchases could not be produced years later, simply adopting a 10% margin for disallowance, without any cogent or convincing evidence, in our opinion, would be unreasonable and arbitrary. It is repugnant for the ITAT to uphold such an addition of 10% of the allegedly bogus purchases to the income of the Appellant-Assessee, despite returning a firm finding that the AO Order was untenable not being backed by cogent and convincing evidence. 14.16 No addition is required to be made without appreciating the facts of the case, for the transactions of purchase and sale to RCI Industries. The assessee company has made Purchases and sales which are backed by proper purchase and sales bills and these purchases and sales have been confirmed by RCI Industries. The transactions were not entered into for decreasing the profit. No fake invoices have been taken/issued for a....
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....of Delhi in the case of National Industrial Corporation Limited 258 ITR 578. Since the addition is solely based on estimation without rejecting the books of accounts, we do not find any merit in the impugned addition the AO is directed to delete the same. 14.19 The appellant has duly filed the GST/Sales tax returns and other documents which establishes the genuineness of the transactions of sale. Books of accounts of the assessee have not been rejected. Similarly the sales have not been doubted. Purchase and sale invoices have been filed backed by stock tally and GST returns, which would indicate that the purchase and sales were genuinely made. The A. O. has accepted the findings of the sales tax department without conducting any independent enquiry. Input tax credit was claimed by the assessee on the purchases made from the RCI Industries. Output tax was paid on the sales made to RCI Industries. In a trade, trading is permissible and the profit shown on such sales is part of the trading results. The assessee is public limited company and the shares are quoted on the Bombay Stock Exchange. The trading done by the appellant did not result in revenue losses. In a trading bus....
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..... T. Act 1961 have duly furnished all the relevant documents in support of the purchases from RCI Industries & Technologies Ltd., including copy of ITR filed by RCI for A. Y. 2019-20, auditor's report, complete audited financial statement along with notes to accounts, confirmation of accounts / ledger accounts of Bonlon Industries Ltd. and Smita Global Pvt. Ltd. in the books of RCI, Bank statements showing receipts and payments, copies of sales and purchase invoices along-with bilty/LR. It is incorrect to state that no transportation records have been provided. The RCI as well as appellant have duly submitted copies of LRs/bilty and E-way bills evidencing movement of goods. Non- availability of transporter details from the supplier's end (RCI), especially given its status under CIRP, should not be held against the appellant when the appellant itself has provided such documentation. The fact that the supplier's GST registration was cancelled suo moto by the GST Department, and retrospectively, does not automatically render the transactions void or fictitious. Purchases were made during the period when the supplier was active, and payments were duly made through banking c....
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..... Act 1961 and issuance of CBDT Notification No. 18/2022 dated 29.03.2022, resulting in framing the illegal assessment and is thus required to be quashed in view of the recent decision of the Hon'ble Supreme Court in the case of ADIT vs. Deepanjan Roy dated 16.07.2025 wherein it has been held that issue of Notice u/s. 148 in faceless manner is mandatory. 2. Action of the CIT (A) in confirming the action of the A.O. who has failed to verify the correctness of the information received from the insight portal and has failed to showcase as to how information suggests that the income has escaped assessment making the assessment as illegal, arbitrary and against the facts and circumstances of the case (As per Ground of Appeal No. 5 before the CIT (A)). 3. The impugned assessment order is bad in law as the same has been mechanically passed by the A.O. and does not provide any cogent explanation for making additions to the income of the appellant and the A.O. has failed to consider the replies of the appellant during the course of reassessment proceedings and also in the proceedings u/s. 148A(b) of I. T. Act 1961 and has mechanically passed the impugned assessment ord....
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....und No s. 2 & 3 by the ld. CIT(A) in para 6.1 to 6.3 extracted below as under: "6.1 These grounds of appeal are directed against imposition of penalty of Rs. 6,06,11,434/- u/s. 270A of the Act for under reporting of income in consequences of misreporting of income. I have perused the AO's order, statement of facts and other material available on record. 6.2 It is noted that after considering the material on record, the CIT (A), NFAC vide his order ITBA/NFAC/S/250/2025-26/1080898285(1) dated 18.09.2025 has allowed the quantum appeal of the appellant in respect of the assessment order passed u/s. 144 r.w.s. 147 r.w.s 144B of the Act for the impugned A. Y. 2018-19 dated 19.05.2023. 6.3 Keeping in view of the above, since the quantum addition has been allowed in favour of appellant, the penalty order u/s. 270A of the Act does not survive. Once, the quantum addition is decided, penalty proceedings does not have legs to stand upon and cannot survive. Therefore, the present appeal of the appellant is hereby allowed." 32. While deciding the appeal in ITA No. 7987/Del/2025, we have confirmed the findings of the quantum appeal wherein the addition made in th....