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2026 Supreme(Online)(ITAT) 9711
INCOME TAX APPELLATE TRIBUNAL (MUMBAI BENCH)
Sandeep Gosain, Judicial Member, Bijayananda Puruseth, Accountant Member
Jagdishkumar Madanlal Gupta – Appellant
Versus
Dy. Commissioner of Income Tax Central Circle 5(1) – Respondent
ITA No. 2136/Mum/2025 | ITA No. 2671/Mum/2025
For the Appellants/Petitioners: Dr K Shivram
For the Respondents: Shri Vivek Perampurna
Additions on account of bogus purchases cannot be made on an estimate basis without rejecting the books of accounts under Section 145(3). Furthermore, once the source and ownership of assets are documented via banking records, the tax authorities cannot deem them unexplained based purely on presumptions.
Headnote:(A) Income Tax Act, 1961 - Section 37(1), 69A, 131(1A), 132(4), 143(3), 145(3) - Addition on account of bogus purchases and unexplained money (gold bullion) - Assessee claimed purchases to be genuine and supported by invoices, e-way bills, and bank statements - Co-ordinate bench of ITAT had previously held the supplier as a genuine party - Revenue failed to prove defects in documentation or provide corroborative evidence - Additions on estimation basis held bad in law without formal rejection of books of account - Protective addition regarding gold bullion deleted as substantive addition already made and ownership by group company established and confirmed - Burden of proof under Section 69A and evidentiary value of statements recorded by AO discussed.
Facts of the case:
The assessee, a sole proprietor, challenged the addition of bogus purchases under Section 37(1). Simultaneously, the Revenue challenged the deletion of addition regarding unexplained gold bullion seized during the search. The CIT(A) restricted the purchase disallowance and deleted the addition for unexplained gold, noting it was part of the substantive addition in the hands of a group company.
Findings of Court:
Additions made on an estimate basis without rejecting books of account are void. Allegations regarding the gold bullion were based on presumptions (WhatsApp chats, diary entries) rather than evidence, whereas the assessee provided reconciliation and substantiated ownership by a group company.
Issues: Whether the disallowance of purchases on an estimate basis is permissible without rejecting books of account; whether the gold bullion seized during a search constitutes unexplained money under Section 69A.
Ratio Decidendi: An Assessing Officer cannot make additions on an estimate basis without recording satisfaction under Section 145(3) to reject books of account. Regarding Section 69A, where ownership is established by books and payment through banking channels, and substantive evidence is produced by the assessee, additions cannot be upheld based on mere surmises or conjectures.
Result: Assessee's appeal allowed; Revenue's appeal dismissed.
| Table of Content |
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| 1. disallowance on estimate basis without rejecting books of account is invalid. (Para 8) |
| Date of Hearing | 21.01.2026 |
| Date of Pronouncement | 16.04.2026 |
आदेश / ORDER
PER SANDEEP GOSAIN, JM:
The present appeals have been filed by the assessee and the Revenue respectively thereby challenging the impugned order dated 18.02.2025 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the Office of the Commissioner of Income Tax, Appeal, CIT(A) 53, Mumbai for the assessment years 2023-24.
Since all the issues involved in these appeals are common and identical, therefore, they have been clubbed, heard together and consolidated order is being passed for the sake of convenience and brevity.
The following grounds raised by the Assessee are reproduced below:
“1. On facts and circumstances of the case and law on the subject, the learned assessing officer erred in making addition of Rs.30,37,081/-u/s 37(1) on account of bogus purchase. The learned CIT(A) erred in confirming addition of Rs. 3,79,635/-of addition against Rs.30,37,081/-, on estimate basis without correct appreciation of the facts of the case and law on the subject. In view of the facts and circumstances of the case, the addition be deleted.”
The following grounds raised by the Revenue are reproduced below:
1. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in restricting/deleting the addition/disallowance of bogus purchase made by the AO in respect of purchases made from bogus parties by restricting 100% disallowance made by the AO to 12.5%, ignoring the facts and circumstances of the case established by the Assessing Officer.
2. Whether on the facts and circumstances of the case and in law, the Ld.CIT(A) erred in appreciating the ration laid down by the Hob'ble apex court in the case of N.K. Protein [2017] 84 taxmann.com 195 (SC)/[2017] 250 Taxman 22 (SC), 2017-TIOL-23-SC-IT while finalizing the order in the case of assessee wherein 100% of the bogus purchases were held liable to be added in the hands of the assessee.
3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in providing relief on the issue of unexplained money on account of Gold Bullion seized during the search by deleting the addition of Rs. 8,28,39,000/- Value of Gold Bullion seized from the premises of the assessee), by ignoring the facts and circumstances of the case established by the Assessing Officer.
4. The appellant craves leave to add, delete, modify the grounds of appeal before or at the time of hearing.
Ground no. 1 raised by the Assessee and ground nos. 1 and 2 raised by the department are interrelated and interconnected, therefore, we have decided to adjudicate these grounds through the present consolidated order.
We have heard the counsels for both parties, perused the material placed on record, the judgments cited before us, and the order passed by the Revenue Authorities. From the records, we noticed that the Assessee is a sole proprietor engaged in the business of hording advertisement and the total revenue during the year of the consideration from the hording business is Rs.8,97,72,000/-, however, AO made the additions u/s 37 of the Act on account of bogus purchases made by the Assessee from one party i.e. Jineshwer Enterprises to the tune of Rs. 30,37,081/-, however, on appeal Ld. CIT (Appeal) restricted the said addition @ 12.5 % of the total purchases which comes to Rs. 3,79,635/-.
After meticulously going through the facts of the present case we found that Assessee had purchased iron and steel from the said party i.e. Jineshwer Enterprises to the tune of Rs. 30,37,081/- and in this regard Assessee had already placed on record all the related documents in order to substantiate that the purchases made by the Assessee were genuine. Assessee had placed on record a copy of invoices, e-way bills, ledger accounts and bank statements which are at paper book page no. 499 to 505 of paper book no. 1 placed on
