"IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 728/MUM/2025 (AY: 2010-11) (Physical hearing) ITO – 19(1)(1), Mumbai 501 5th Floor Income Tax Office Piramal Chambers Lalbaug, Maharashtra-400012. Vs Dahyabhai Purshotamdas Chauhan DM 30-9 Near Patra Shed Near Yavalkar Street Tulsiwadi P.O. Tardeo, Mumbai – 400034. [PAN: ACYPC6704F] Appellant / Revenue Respondent / Assessee Assessee by None Revenue by Sh. Mahesh Dattatraya Londhe, Sr. DR Date of hearing 02.07.2025 Date of pronouncement 03.07.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by revenue is directed against the order of Ld. CIT(A)-51, Mumbai dated 14.11.2024 for assessment year (AY) 2010-11. The revenue has raised following grounds of appeal: “1. Whether on the facts and in the circumstances of the case and in law, the Ed. CITA) has erred in restricting the addition uptoRs. 28,889/ being 1% of total addition of Rs. 28,88,935/-and deleted the balance addition of Rs. 28,60,046/ made by the AO on account of accommodation entries of bogus purchases?\" 2 Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) has erred in ignoring the fact that the action of the Assessing Officer was based on the report from the DDIT(Inv) Unit-7(4), Mumbai post search and seizure action conducted u/s 132 of the I.T. Act, on Mr. VipulVidur Bhatt, who was admitted in his recorded statement that, he was an entry operator and all the entities/concerns as well as directors were bogus and these companies are controlled and managed by him only and were used only for providing bogus accommodation entries to the various beneficiaries and the assessee was found to be one of the beneficiary who has availed benefit of bogus accommodation entries to the extent of Rs. 28,88,935/-?\" ITA No. 728/Mum/2025 Dahyabhai Purshotamdas Chauhan 2 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIF(A) has erred in ignoring the fact that in such cases, when the onus to prove the allegations was entirely on assessee, but he has not responded or submitted any reply or submissions to the notices issued on 07.07.2017, 12.10.2017 & 16.11.2027, and also has not made compliance to the final show cause notice Dated. 27.11.2017, włuch attracts the Assessing Officer to complete the assessment u/s 144 r.ws 147 of the Act, on the basis of available materials and evidences before him on the date of order? 4. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) has erred in restricting the addition uptoRs 28,889/-being 1% of total addition of Rs. 28,88,935/-and deleted the balance addition of Rs. 28,60,046/ by ignoring the fact that the assessee could neither submit the quantity tally of day to day purchases, Sales, Stock, delivery Challans, Lorry Receipts etc. not could produce any parties for verification, in-spite of adequate opportunities provided before passing the Best Judgment Assessment Order u/s 144 r.ws 147 of the Act?\" 5. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition uptoRs. 28,889/-being 1% of total addition of Rs. 28,88,935/-and deleted the balance addition of Rs 28,60,046/ by ignoring the fact that that the assessee has availed accommodation entries from bogus entities, however has failed to prove the genuineness of the alleged transactions as well as creditworthiness of the parties from whom the alleged purchases were purportedly made ?\" 6 Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that the assessee's role as one of the many conduits in the accommodation entry business does not absolve it from the responsibility of providing accurate and legitimate Income details, therefore the original assessment was rightly made and the assessing office was well within nights to make an addition based on the total value of accommodation entries especially considering the assessee's involvement in the facilitation of such fraudulent transactions ?\" 7 Whether on the facts and in the circumstances of the case and in law, the Ld. CITTA) has erred in restricting the addition uptoRs. 28,889/-being 1% of total addition of Rs. 28,88,935/- and deleted the balance addition of Rs. 28,60,046/- without appreciating the fact that the nature of transactions by accepting the documentation presented by the assessee ut face value without adequately considering the underlying fraudulent intent and the orchestrated steps taken to present these transactions as genuine. The assessment of the true character and intent behind these transactions was crucial and has been overlooked?\" ITA No. 728/Mum/2025 Dahyabhai Purshotamdas Chauhan 3 8. Whether on the facts and circumstances of the case and in law, the Ld. CITIA) has erred in considered the written submissions along with the documentary evidences filed by the appellant during the appellate proceedings without asking remand report from Assessing Officer, as prescribed in rule 468 of Income Tax Rule 1962 ?\" 9. Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) has erred in restricting the addition uptoRs. 28,889/-being 1% of total addition of Rs. 28,88,935/-and deleted the balance addition of Rs. 28,60,046/ made by the AO, without appreciating the decision of the Hon'ble Supreme Court in the case of M/s. N. K. Proteina Ltd. Va. Dy. CIT (2016) 292 CTR (Gul) 354, Dated. 16.01.2017, wherein the Hon'ble Court has held that when the purchases mode are from bogus suppliers or concerns, the entire purchases are liable to disallowed ? 10. Whether on the facts and circumstances of the case and in low, the order of the Ld. CITIAL perverse in not considering that the order of Hon'ble Supreme Court in the case of M/s. Ν. Κ. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, which is on the similar issue of bogus purchases mode are from bogus suppliers or concerns, was already the law of the lard when the Ld. CITYA) has pronounced its order on 14.11.2024?\" 11. Whether on the facts and in the circumstances of the case and in law, the Ld. CITYA) has erred in not appreciating the fact that in the case of M/s. Swetamber Steels Ltd. (Supra), the Hon'ble ITAT, Ahmadabad had conformed the disallowance of the bogus purchase, by stating that the purchases shown from respective parties were found non- genuine and the decision of the ITAT was upheld try Hon'ble Gujrat High Court and also by the Hon'ble Supreme Court P\" 12 Whether on the facts and in the circumstances of the case and in law, the Ld. CITIA) has erred in not appreciating the ratio of the decision of the Hon'ble Bombay High Court in case of PCIT VS S. V. Jiwani [2022) 145 taxmann.com (Bombay) and Hon'ble Gujarat High Court in case of CIT Vs Simit Sheth, wherein the Court upheld the decision of the Hon'ble ITAT. Mumbai and Ahmadabad respectively, which had held that entire purchases made by the assessee could not be added back as income, but only as profit element embedded therein and had restricted the addition to 12.5% of the purchases ?\" 13. \"Whether on the facts and in the circumstances of the case and in law, the id. CITA, has erred in not considered that after invocation of provisions of section 145(3) of the Act, the Assessing Officer acquired the mandate even to add the whole amount of purchases found as bogus to the total income of the assessee and without considering the decision in Sri. Ganesh Rice Mills Vs. CIT ITA No. 728/Mum/2025 Dahyabhai Purshotamdas Chauhan 4 294 ITR 316 (All), wherein the entire amount of bogus purchases from bogus entities was disallowed and same was also upheld?” 2. None appeared on behalf of the assessee despite service of notice of hearing on more than two occasions as well as through the office of learned Senior Departmental Representative (ld. Sr. DR). Notice sent through registered post is returned back with the remark of postal authorities “not known”. Hence I left no option except to decide the appeal on the basis of material on record and hearing the submission of learned Senior Departmental Representative (ld. Sr. DR). The ld. Sr. DR for the revenue submits that assessee is one of the beneficiaries of accommodation entries availed from Vipul Vidur Bhatt, who is a known entry provider. A search action was carried out on various bogus entities managed by Vipul Bhatt. His statement was recorded under section 132(4) wherein he has admitted to have provided accommodation entry to a number of person. The assessee has received accommodation entry of Rs. 28,88,935/-. Before assessing officer, the assessee has not explained the nature of transaction. The ld. CIT(A) restricted the addition to the extent of 1.00 % without giving any opportunity to the assessing officer or seeking his remand report on the submission of assessee. The ld. Sr. DR submits that order of ld. CIT(A) may be set aside and assessment officer may be restored. 3. I have considered the submissions of learned Senior Departmental Representative (ld. Sr. DR) for the revenue and perused the order of lower authorities carefully. Since this case relates to accommodation entry related to Vipul Vidur Bhatt, therefore, the list of various entities of Vipul Vidur Bhatt ITA No. 728/Mum/2025 Dahyabhai Purshotamdas Chauhan 5 was examined, which is filed by ld SR DR for the revenue. On perusal of such list of details, I find that the name of assessee is at serial no. 49 of list of various entities of Vipul Vidur Bhatt. I find that while hearing similar appeal in case of Narendra K Rawal (HUF) in ITA No. No. 6537/M/2024, I have enhanced the addition of commission income from 1.00% to 5.00 % by following decision of SMC Bench in Amisha Sudhir Bhatt in ITA No. 6313 & 6314/M/2024 dated 10.06.2025. The relevant part of decision in Narendra K Rawal (HUF) is extracted below: “7. At the time of conclusion of submissions of both the parties, I directed both the learned representative to file the list of various entities of Vipul Vidur Bhatt and his statement if any. In compliance of my direction, the ld. Sr. DR for the revenue as well as ld AR of the assessee filed the list of 347 various entities allegedly managed by Vipul Vidur Bhatt on record. 8. I have considered the rival submissions of both the parties, order of lower authorities and the material placed before me. I find that assessing officer while making addition of Rs. 46,76,800/- has not specified the nature of transaction whether it was in the form of sales of any goods or against purchase of any material or in the name of loan secured or unsecured. The assessing officer simply in the reasons recorded mentioned that assessee availed accommodation entry from Vipul Vidur Bhatt. It is also an admitted fact that during assessment, the assessee except filing return of income has not filing any explanation to substantiate or explain the transaction. I find that before ld. CIT(A), the assessee relied on the statement of Vipul Vidur Bhatt. 9. At the time of hearing I specifically called the statement of Vipul Bhatt, which if filed on record. On perusal of statement of Vipul Vidur Bhatt and the list of various entities, which is part of a statement, I find that the name of assessee appeared at serial no. 228. Vipul Vidur Bhatt in his statement specifically stated that he was using this entity (assessee/ Narendra Kumar Rawal-HUF) for providing bogus accommodation entries to various ITA No. 728/Mum/2025 Dahyabhai Purshotamdas Chauhan 6 beneficiaries, control of entire activities of income tax related the matter, accounting matter, bank account transaction and share transaction etc. of assessee was managed for bogus accommodation entries. I find that at the time of recording statement no specific question was asked by Authorised Officer about the nature of specific entry whether in the form of sale, purchase or loan or share application etc. Thus, from the record of revenue it is an admitted fact that assessee-HUF is also a part of a conduit of Vipul Vidur Bhatt and cannot be treated independently. I find that even before ld. CIT(A), the assessee has not explained the nature of transaction. The assessee is a conduit of Vipul Bhatt and entire transaction cannot be added his income. Similarly, making addition @ 1.00 % of transaction of commission income is not justified unless the nature of transaction is explained. Thus following the decision of SMC Bench in Amisha Sudhir Bhatt (supra), the order of ld. CIT(A) is modified and the reasonable percentage of income of assessee is estimated @ 5.00 % in place of 1.00% as estimated by ld. CIT(A). Thus, the revenue is allowed part relief. In the result, the grounds of appeal raised by the revenue are partly allowed.” 4. Considering the decision in case of Narendra K Rawal (HUF) (supra) and following principle of consistency, the order of ld. CIT(A) is modified and estimation of commission income is increased to 5.00% in place of 1.00% estimated by ld. CIT(A). In the result, the grounds of appeal of the revenue is partly allowed. 5. In the result, the appeal of revenue is partly allowed. Order was pronounced in the open Court on 03/07/2025. Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 03/07/2025 Biswajit ITA No. 728/Mum/2025 Dahyabhai Purshotamdas Chauhan 7 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "