In cases of bogus purchases involving accommodation entries, Section 69C of the Income Tax Act applies, and the entire amount of unexplained expenditure should be added under the deeming provision, as estimating gross profit would incorrectly grant a deduction for expenditure that was never actually incurred.

ORDER

PER RAKESH MISHRA, ACCOUNTANT MEMBER:

This appeal filed by the assessee is against the order of the Ld. Addl/JCIT(A)-5, Mumbai [hereinafter referred to as “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2011-12 dated 07.03.2025, which has been passed against the assessment order u/s 144 r.w.s. 147 of the Act, dated 03.12.2018.

2. The assessee is in appeal before the Bench raising the following grounds of appeal:

“Ground-1: That the Ld. CIT(A) erred in law and in facts in considering the assessment order as valid and good in law, in as much as the facts and circumstances of the case, when he confirmed the actions of the Ld. AO the Ld. A.O. in addition of Rs. 11,49,794/- on account of "unaccounted income" u/s 68 of the Income Tax Act, 1961, based on doubt, suspicion and surmise and when the Ld. AO did not reject the books of accounts and therefore such addition is liable to be deleted.

Ground-2: That without prejudice to the aforesaid grounds, even assuming but without admitting, the Ld. CIT(A) erred in law and in facts in treating the additions of Rs. 11,49,794/- as valid, in as much as in the facts and circumstances of the case, the Ld. CIT(A) was not justified in confirming addition of entire alleged bogus purchases when the appellant has made submissions that out of the total alleged purchases, he has not carried out any transaction with the alleged parties (i) Jayshree Sales Corporation of Rs. 4,30,100/- and (ii) Metal and Alloy Syndicate of Rs. 4,74,247/- during the F.Y. under consideration and hence the additions are liable to be deleted.

Ground-3: That without prejudice to the aforesaid grounds, even assuming but without admitting, the Ld. CIT(A) erred in law and in facts in treating the additions of Rs. 11,49,794/- as bogus purchases although the additions have been made u/s 68 of the Income Tax Act, 1961, as unaccounted income out of total purchases of Rs. 15,71,509/- as valid, being 73% of the total purchases and accepting the sales of Rs. 17,19,600/-, without considering the gross profit earned by the appellant in its business and hence such additions are liable to be deleted.

Ground-4: For that on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming subject additions without appreciating that the Ld. AO should have estimated the income u/s 144 of the Income Tax Act, 1961, after taking into account all relevant material including gross profit earned by the appellant in preceding and subsequent years.

Ground-5: For that on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming subject additions without appreciating that the modus operandi relied extensively in impugned order is never co-related even remotely to the facts of the present case as there is no iota of evidence brought on record which can display that appellant conducted any dubious action and that the theoretical discussion made by the Ld. AO without any trail of wrong doing has remained inchoate completely nullifying the entire basis of the addition.

Ground-6: That the Ld. AO and the Ld. CIT(A) erred in law and in facts in treating the reopening as valid, in as much as in view of the facts and circumstances of the case, the basis of findings of the Ld. A.O. is 'suspicion' and 'human probabilities' only which is never converted to reliable and trustworthy material and the entire assessment order is passed on sole basis of 'borrowed satisfaction' and without an