Tax authorities must focus on the income component of disputed transactions rather than imposing complete disallowance, ensuring a fair assessment while preventing revenue leakage.

ORDER :

PRANAV TRIVEDI, J.

1. Heard learned advocate Mr. Karan Sanghani for the appellant.

2. The present Tax Appeal is filed under Section 260A of the INCOME TAX ACT , 1961 (for short ‘the Act’) raising following substantial questions of law arising out of the Judgment and Order dated 28.03.2024 passed by the Income Tax Appellate Tribunal, Surat (for short ‘the Tribunal’) in ITA No.373/SRT/2023 in respect of the Assessment Year 2012-2013:-

a) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT has justified in dismissing the appeal of the Revenue against the decision of the Tribunal in deleting the addition made by the AO at the rate of 100% of bogus purchases amounting to Rs. 116,49,88,059/- ignoring the fact that these purchases are sham transactions fabricated through bogus paper concerns of Bhanwarlal Jain Group companies which were engaged in providing accommodation entries?

b) Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT has justified in dismissing the appeal of the Revenue, holding that there is no substantial question of law?

c) Whether, on the facts and in the circumstances of the case and in law, the Hon'ble ITAT is correct in not considering that the amount claimed as payment to hawala dealers was in effect suppression of profits by obtaining bogus purchase bills which was liable to be added to the income of the Assessee?

d) Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT has erred in not considering

➤ the judgment of Gujarat High Court in the case of N.K. Industries Ltd…

restricted addition to 25%, holding that such restriction goes against the principles of Sections 68 and 69C of INCOME TAX ACT ?

➤ the judgment of Calcutta High Court of in the case of PCIT vs. Premlata Tekriwal (143 taxmann.com 173) involving similar issue of purchase of bogus concern to suppress profits wherein the court held that "since it was established that unexplained/bogus, expenditure was entire amount of bogus expenditure was to be added to income of Assessee"?

➤ the ratio of judgement of Hon'ble Apex Court on the issue of unexplained expenditure (bogus purchase) in the case of N.K. Proteins v. Dy. CIT [2017] 84 taxmann.com 195/250 Taxman 22 (SC) wherein, the SLP filed by the assessee has been dismissed by the Hon'ble Apex Court?

e) Whether on the facts and circumstance of the case and in law, the Hon'ble ITAT is justified in dismissing the appeal of the revenue wherein the AO has made 100% addition of bogus transaction amounting to Rs. 116,49,88,059/- made by the Assessee with the entry provider not appreciating that non-genuineness of the expenditure booked was established by the information received from DIT(Inv)-II, Mumbai and the Assessee was not able to discharge its onus to establish the genuineness of transaction before the AO as well as before the Ld CIT(A)?”

3. Brief facts of the case are that:

3.1 The respondent-assessee filed his return of income for Assessment Year 2012-13 on 26.7.2012 declaring total income of Rs. 1,76,510/-. The return of income was processed under Section 143(1) of the Act on 6.3.2013. The Assessment order under Section 143(3) read with Section 147 of the Act was passed on 13.11.2019, assessing total income at Rs.118,84,64,330/- after making addition of Rs.116,49,88,059/- on account of accommodation entry of purchases and Rs.2,32,99,761/- on account of unaccounted cash paid as commission of such accommodation entry at the rate of 2% of the amount of accommodation.

3.2. Being aggrieved by the Assessment order, respondent preferred an appeal before CIT (Appeals), who, vide order dated 29.3.2023 dismissed the appeal of respondent.

3.3. Being aggrieved by the order passed by the