Rahul M. Dalmia v. ITO

Case snapshot

Sections / provisions: 69C

Questions before the Court / Tribunal

• Bogus purchases; vendor appearance and evidence: The reported order concerns a purchase addition despite the vendor's appearance and supporting records. It reports deletion of an estimated addition after evaluating the evidentiary record.

Material facts and background

Brief facts of the case as culled out from records are that assessee

trades in craft papers and dyes and chemicals, having a propriety concern in the name of Packaging Paper Corporation and Perfect Sale Agency. Assessee filed his return of income on 29.08.2008 reporting total income at Rs.2,36,290/-. Case of the assessee was reopened u/s.147 of the Act on the grounds that assessee was engaged in the practice of implanting bogus purchases by taking accommodation entries. Based on information received by the Ld.AO, assessee had availed bogus purchase bills from M/s. Arun Paper and Iron Traders amounting to Rs.43,75,381/-. Assessee was asked to furnish details regarding purchases made from M/s. Arun Paper and Iron Traders. In response, assessee had submitted copies of purchase bills, copies of ledger account, sales inward and outward quantitative stock details. In this respect, written submission made by the assessee vide letter dated 05.01.2016, is placed on record in the paper book at page no.50. Relevant supporting documents as stated above also froms part of the paper book along with this letter. Ld.AO also called for details of delivery challans to demonstrate actual delivery of the goods purchased. 4.

According to the assessee, goods purchased by him are at landed

price i.e. price at factory which include transportation cost and the said transport service was provided and arranged by way the vendor by of local tempo. Assessee also stated that the payments to the vendor have been made by account payee cheque which establishes genuineness of purchase. Further, Ld.AO required the assessee to produce the vendor, in absence of which he took the adverse view that assessee has brought down its profitability by involving in the bogus purchase transaction. Thus, he completed the assessment by making an addition of

4 ITA No. 3883/Mum/2024 Rahul M Dalmia, A.Y. 2008-09

Rs.10,93,845/- by taking 25% of the alleged bogus purchases of Rs.43,75,381/- from vendor M/s. Arun Paper and Iron Traders. 5.

Aggrieved, assessee went in appeal before the Ld. CIT(A). In the

Appellant / assessee submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Revenue / respondent submissions

The judgment copy does not separately set out this component in a distinct section; refer to the full order and the reasoning section below.

Court / Tribunal analysis and reasoning

We observe that Ld.CIT(A) noted that assessee did not produce the party in the course of assessment proceedings. We also note that Ld.CIT(A) observed that assessee failed to produce stock register and supporting documents in support of delivery and receipts of goods. He also noted that vendor failed to appear before the Ld.AO in response to summon issued u/s.131 of the Act, in the remand proceedings. Ld.CIT(A) has also recorded its surprise about dealer having surrendered this sale tax registration. On the reliance placed by the assessee on the decision of Co-ordinate Bench in the case of spouse of the assessee i.e. Smt. Anuradha Dalmia which is on identical fact pattern wherein addition so made was deleted, Ld. CIT(A) observed that assessee has not furnished a copy of the order and therefore, could not take cognisance of the same. Ld.CIT(A) made certain observations to distinguish the order of Coordinate Bench in the case of Smt. Anuradha Dalmia by observing that Shri. Arun Agarwal had appeared before the Ld.AO and had confirmed the sale of goods to the assessee on statement under oath supported by ledger and bank statement. However, in the case of the assessee, Shri. Arun...

We have also given our thoughtful consideration to the submissions made before us, orders of the authorities below as well as judicial precedents relied upon by both the parties. At the outset, we note that Ld.AO has made the addition by taking 25% of the total alleged bogus purchases of Rs.43,75,381/- made from one supplier M/s. Arun Paper and Iron Traders, of which the proprietor is Shri. Arun Agarwal. We note that Ld.AO had called for details and explanation for which assessee had made due compliance vide his letter dated 05.01.2016, along with supporting documentary evidences. It is also a fact on record that in the remand proceedings taken up at the direction of Ld. CIT(A), Shri. Arun Agarwal proprietor of M/s. Arun Paper and Iron Traders had appeared before the Ld. AO and furnished the details which are already listed above. 9.1. Contrary to these facts, Ld. AO in the same remand report has noted that Shri. Arun Agarwal failed to appear before him to record his statement on oath. We fail to understand when Shri. Arun Agarwal had appeared and furnished all the required documents and evidences, what prevented the Ld.AO to record his statement on oath in the same appearance....

10.1. Hon’ble Court while referring to the decision of Mohammad Haji Adam & Co. [2019] 203 taxmann.com 459 (Bom) noted that in this case, assessee had participated in the assessment proceedings, Ld.CIT(A) compared the purchases and sales statement and there was a finding that purchases cannot be rejected since there was correlation between the purchases and sales. Based on the above observations and conclusion drawn by Hon’ble Court, the present facts of the case do not warrant its application as it is evidently demonstrated that assessee has diligently participated in the assessment proceedings as well as at the first appellate stage wherein remand proceedings were directed at the instant of Ld. CIT(A). Furthermore, the vendor Shri. Arun Agarwal had appeared in the remand proceedings, furnishing all the documentary evidences and confirming the transaction.

above on the facts and circumstance of the case along with judicial precedents, we hold that addition of Rs.10,93,845/- i.e. 25% of the total purchases of Rs.43,75,381/- made form M/s. Arun Paper and Iron Traders is not called for and is thus, deleted. Accordingly, grounds raised by the assessee in this respect are allowed. 12.

Operative decision and relief

10.1. Hon’ble Court while referring to the decision of Mohammad Haji Adam & Co. [2019] 203 taxmann.com 459 (Bom) noted that in this case, assessee had participated in the assessment proceedings, Ld.CIT(A) compared the purchases and sales statement and there was a finding that purchases cannot be rejected since there was correlation between the purchases and sales. Based on the above observations and conclusion drawn by Hon’ble Court, the present facts of the case do not warrant its application as it is evidently demonstrated that assessee has diligently participated in the assessment proceedings as well as at the first appellate stage wherein remand proceedings were directed at the instant of Ld. CIT(A). Furthermore, the vendor Shri. Arun Agarwal had appeared in the remand proceedings, furnishing all the documentary evidences and confirming the transaction.

above on the facts and circumstance of the case along with judicial precedents, we hold that addition of Rs.10,93,845/- i.e. 25% of the total purchases of Rs.43,75,381/- made form M/s. Arun Paper and Iron Traders is not called for and is thus, deleted. Accordingly, grounds raised by the assessee in this respect are allowed. 12.

In the result, appeal of the assessee is allowed. Order is pronounced in the open court on 29th May, 2025 Sd/(Pawan Singh) Judicial Member

Dated: 29th May, 2025 Divya R. Nandgaonkar Stenographer Copy to: 1 The Appellant 2 The Respondent 3 DR, ITAT, Mumbai 4 Guard File 5 CIT BY ORDER, (Dy./Asstt. Registrar) ITAT, Mumbai

Authorities and precedents appearing in the judgment

• Jurisdictional High Court of Bombay in the case of PCIT vs Kanak Impex

This list is machine-assisted from the judgment text and is not a substitute for checking the full citation chain in the PDF.

Ratio and legal principle

The decision turns on Bogus purchases; vendor appearance and evidence. The operative result is classified as Remanded Or Restored. Read the rule only with the statutory version, factual findings and precedent chain recorded in the full judgment.

Why this judgment matters

The case is relevant to taxpayers, advisers and litigators dealing with Bogus purchases; vendor appearance and evidence. Its practical value lies in the interaction between the statutory text, the evidentiary record and the procedural route followed in this case.

Practitioner action points

• Build a transaction-level evidence file: confirmations, bank trail, invoices, ledger, tax/GST records and counter-party material rather than relying on a generic explanation.
• Where the addition depends on a third-party statement or investigation report, record the request for the relied material and cross-examination at the earliest stage.
• For litigation, attach the full judgment/order to the working paper and cite the paragraph/page supporting the proposition rather than relying on a headnote alone.

Full judgment and source trail

Read / download the clean local judgment copy

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