Dwijs Overseas LLP Vs ITO (ITAT Mumbai)
Summary: The Mumbai Bench of the Income Tax Appellate Tribunal dismissed the assessee’s appeal against the order dated 18.06.2025 passed by the National Faceless Appeal Centre, Delhi, for Assessment Year 2022-23. The assessee, an LLP engaged in trading rough and polished diamonds, had filed its return of income on 31.12.2022 declaring total income of Rs.5,98,140/-. The case was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 was issued on 01.06.2023. The Assessing Officer issued several statutory notices and communications seeking details concerning, inter alia, quantitative particulars of goods traded, substantial creditors vis-à-vis purchases, purchases from non-filers or lower-return filers, high liabilities compared with income and compliance with ICDS, but the assessee furnished only partial details in response to the show-cause notice under section 144. The assessment was completed under section 143(3) read with section 144B, resulting in an addition of Rs.10,74,83,565/- by estimating net profit at 2% of turnover of Rs.540,40,88,078/- and an addition of Rs.1,76,25,85,811.65/- under section 69A, treating the corresponding sales to M/s Sharnam Jewels LLP as accommodation entries. The CIT(A) dismissed the appeal, observing that the assessee had not effectively controverted the Assessing Officer’s findings or substantiated the entries reflected in its books with supporting evidence. Before the Tribunal also, no one appeared on behalf of the assessee and no adjournment was sought, resulting in the appeal being heard ex parte qua the assessee. The Tribunal found that despite repeated opportunities, the assessee failed to furnish requisite primary evidence substantiating the nature of its purchases, sales, creditors and other relevant trading particulars. Although a sales register was produced, the corresponding transactions were not supported by adequate transaction-wise documentary evidence. The Tribunal therefore found no basis to interfere with the Assessing Officer’s estimation of net profit at 2%, particularly as the assessee had not produced material demonstrating that the estimated result was contrary to facts or that the disclosed profit was supported by complete and verifiable books and underlying records. Regarding the Rs.1,76,25,85,811.65/- addition under section 69A, the Tribunal held that mere entries in the books or sales register could not, by themselves, establish the genuineness of the disputed transactions in the absence of primary and corroborative evidence. Finding no material warranting disturbance of the concurrent factual findings of the Assessing Officer and CIT(A), the Tribunal upheld both additions and dismissed the assessee’s appeal.
Allotment Letter Can Be “Agreement” for Section 56 Valuation: Mumbai ITAT Restores ₹33.28 Lakh Addition for Verification
The Mumbai ITAT held that a developer’s allotment letter can constitute an agreement fixing the sale consideration for applying the proviso to Section 56(2)(vii)(b). The assessee’s claim could not be rejected merely because the document was styled as an allotment letter and was not a registered agreement.
The assessee, engaged in trading rough and polished diamonds, declared total income of only ₹5.98 lakh against a turnover of approximately ₹540.41 crore. The case was selected for scrutiny over issues including quantitative details, substantial creditors, purchases from non-filers or low-return filers, high liabilities and compliance with ICDS.
Despite several statutory notices and opportunities, the assessee furnished only partial details. The AO therefore completed the assessment under Sections 143(3) read with 144B and made two principal additions: ₹10.75 crore by estimating net profit at 2% of turnover, and ₹176.26 crore under Section 69A, treating the purported sales to Sharnam Jewels LLP as accommodation transactions.
The CIT(A) confirmed both additions because the assessee failed to rebut the AO’s findings or substantiate the entries appearing in its books. The assessee also remained absent before the Tribunal despite notice, and the appeal was decided ex parte after hearing the Revenue.
The Tribunal observed that although the assessee had produced a sales register, it failed to furnish invoices and other adequate transaction-wise primary and corroborative evidence establishing the genuineness and commercial substance of the disputed sales.
The Tribunal held that mere entries in books of account or a sales register cannot, by themselves, establish the genuineness of a transaction. Since the assessee had not demonstrated that the declared profit was supported by complete and verifiable records, the estimation of net profit at 2% was also upheld.
Finding no material contradicting the concurrent factual findings of the AO and CIT(A), the Tribunal upheld both the ₹10.75 crore profit addition and the ₹176.26 crore addition under Section 69A and dismissed the appeal.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the assessee is directed against order dated 18.06.2025 passed by the learned National Faceless Appeal Centre, Delhi (hereinafter shall be referred as ‘learned CIT(A)’) for Assessment Year 2022-23, raising following grounds:
1. The Ld. AO has erred in rejecting the book of accounts as the assessee has not maintained the books of accounts, whereas he himself has mentioned that the assessee has filed the tax audit report.
2. The Ld. AO has erred in treating the sales as bogus.
3. The Ld. AO has grossly erred in making an addition of 176,25,85,812/- as bogus accommodation sales to M/s Sharnam Jewels LLP u/s 69A and the Ld. CIT(A) has an error in confirming the same.
4. The appellant reserves the right to add, alter, amend, or withdraw any grounds of appeal.
2. Briefly stated, the assessee, an LLP engaged in the business of trading in rough and polished diamonds under the name and style of DWIJS Overseas LLP, filed its return of income on 31.12.2022 declaring total income of Rs.5,98,140/-. The return case was selected for scrutiny and notice u/s 143(2) of the Income-tax Act, 1961 ( in short the Act) was issued on 01.06.2023. The reasons for selection includes inter-alia, issues relating to quantitative details of goods traded, substantial creditors vis-à-vis purchases, purchases from non-filers/lower-return filers, high liabilities compared with income and compliance with ICDS. The Assessing Officer issued several statutory notices and communications. The assessee, however, did not furnish the requisite details in response to most of the notices. In response to the show-cause notice under section 144, only partial details were furnished.
2.1 The assessment was accordingly completed under section 143(3) read with section 144B of the Act. The Assessing Officer made, inter alia, two additions: (i) an addition of Rs.10,74,83,565/- by estimating net profit at 2% of the turnover of Rs.540,40,88,078/-, as against the profit disclosed by the assessee; and (ii) an addition of Rs.1,76,25,85,811.65/- under section 69A, treating the corresponding sales to M/s Sharnam Jewels LLP as accommodation entries.
3. The learned CIT(A) dismissed the appeal, observing, inter alia, that the assessee had not effectively controverted the findings recorded by the Assessing Officer and had failed to substantiate the entries reflected in its books by producing supporting evidence. The learned CIT(A) accordingly found no reason to interfere with the assessment. After discussion, the learned CIT(A) dismissed the appeal of the assessee observing as under:
To this order, there is no counter argument/evidence by the appellant. This case where the AO made all possible efforts to arrive at fact finding does not reek of a case where there is rush to judgement based on flimsy evidence. Therefore, all the grounds of appeal raised by the appellant stand dismissed.
4. At the outset, we note that despite notifying, neither anyone attended on behalf of the assessee, nor was any adjournment sought, and therefore, we were of the opinion that assessee was not interested in prosecuting the appeal. Accordingly, same was heard ex-parte qua the assessee after hearing the arguments of the learned Departmental Representative (DR) .
5. We have heard the learned Departmental Representative and perused the material available on record. The assessment records show that the assessee was afforded repeated opportunities to substantiate the nature of its purchases, sales, creditors and other relevant trading particulars, but the requisite primary evidence was not furnished. Although a sales register was produced, the assessee did not substantiate the corresponding transactions with supporting documentary material when called upon to do so. The failure was not confined to a single notice but continued through several stages of the assessment proceedings.
6. As regards the estimation of profit, the Assessing Officer found the material furnished by the assessee inadequate for reliable determination of its trading results and, having regard to the turnover and the deficiencies noticed in the accounts and supporting records, estimated the net profit at 2%. The assessee has not placed before us any material to demonstrate that the estimated result is contrary to the facts or that the profit disclosed by it is supported by complete and verifiable books and underlying records. We, therefore, find no basis to interfere with the estimation sustained by the learned CIT(A).
7. As regards the addition of Rs.1,76,25,85,811.65/- under section 69A, the Assessing Officer treated the alleged sales to M/s Sharnam Jewels LLP as accommodation transactions on the basis of the material available in the assessment proceedings. The assessee was required to establish the genuineness and substance of the transactions by producing the relevant underlying evidence. However, apart from the entries reflected in the sales register, no adequate transaction-wise material has been brought on record to controvert the findings of the Assessing Officer. Even before the learned CIT(A), the assessee did not effectively rebut the adverse findings or furnish supporting evidence sufficient to establish the genuineness of the impugned transactions.
8. In the absence of primary and corroborative evidence supporting the disputed transactions, mere entries in the books or sales register cannot, by themselves, establish their genuineness. We also find no material before us which would justify disturbing the factual findings recorded by the Assessing Officer and affirmed by the learned CIT(A).
9. We accordingly find no infirmity in the order of the learned CIT(A) in sustaining the additions made by the Assessing Officer. The grounds raised by the assessee are accordingly dismissed.
10. In the result, the appeal of the assessee is dismissed.
Order pronounced in the open Court on 24/08/2026.
