ITO Vs Sourabh Navalkishor Garg (ITAT Mumbai)
Mumbai ITAT upheld the CIT(A)’s decision quashing reassessment proceedings, holding that assessment framed by an AO without jurisdiction is void ab initio.
The Tribunal observed:
- Jurisdiction over the assessee was transferred u/s 127 on 20.10.2010 from ACIT, Ajmer to DCIT, Mumbai
- Despite this, the Ajmer AO issued notice u/s 148 (28.03.2014) and completed reassessment
- As highlighted in the timeline table (page 9), the entire reassessment was conducted by an officer who had already lost jurisdiction
The ITAT held:
- Once jurisdiction is transferred:
- The original AO becomes functus officio (no authority)
- Jurisdiction is a foundational requirement, not a procedural defect
- Participation by assessee does not cure lack of jurisdiction
Accordingly:
- Reassessment proceedings u/s 147 held void ab initio
- Entire assessment order quashed
Further:
- Once assessment is invalid, all additions (bogus purchases etc.) become academic
- Revenue’s appeal dismissed as infructuous
The ruling reinforces a crucial principle: Absence of jurisdiction strikes at the root-entire proceedings collapse regardless of merits
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Present appeals have been filed by the Revenue against the orders dated 12/06/2025 passed by the National Faceless Appeal Centre [hereinafter referred to as “Ld.CIT(A)”], for Assessment Years 2009-10 & 2010-11 on following grounds of appeal:
Assessment Year: 2009-10
“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that notice issued u/s. 148 and order under appeal passed by ACIT, Circle 2, Ajmer is without jurisdiction, without appreciating the facts that assessee has claimed bogus purchases of Rs.5,04,94,046/- from M/s. Kotsons Impex Pvt Ltd., M/s. Shree Jalaram Enterprises and M/s. Excellent Diamonds Pvt Ltd., a Hawala Bogus Entry Providers as per the Maharashtra VAT Department, that these groups, were involved in providing bogus bills without any actual supply of materials to assessee firm and has not appreciated the fact that PAN of the assessee lying at Ajmer and assessee has not objected to the reassessment proceedings and filed details for completion of the assessment, which has been done in the system using the assessee’s PAN. Thereafter, the PAN of the assessee had been transferred on 30.01.2015 to Mumbai charge for subsequent actions on system.”
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition on account of bogus purchases of Rs.5,04,94,046/-made from M/s. Kotsons Impex Pvt Ltd., M/s. Shree Jalaram Enterprises and M/s. Excellent Diamonds Pvt Ltd., a Hawala Bogus Entry Providers as per the Maharashtra VAT Department received through DGIT(Inv), Mumbai that these groups, were involved in providing bogus bills without any actual supply of materials to assessee firm and has not appreciated the fact that AO has given detailed reasoning for quantifying the additions made”
3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has not appreciated the fact action of the AO was based on information/report received from the Maharashtra VAT Department through DGIT (Investigation Wing), Mumbai that these groups, all are hawala traders who were indulged in the practice of providing accommodation entries of issuing bogus Sales/Purchase bill without supplying any goods and the assessee was found to be one of the beneficiaries of such practices, who have obtained accommodation entries of Rs.5,04,94,046/- from M/s. Kotsons Impex Pvt Ltd., M/s. Shree Jalaram Enterprises and M/s. Excellent Diamonds Pvt Ltd., a paper concerns without actual delivery or supply of materials to suppress the true profit.”
4. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.5,04,94,046/-, without appreciating that during the re-assessment proceedings despite of providing various opportunities, the assessee has failed to prove that he was not a beneficiary of alleged transactions, nor has provided any explanation or evidences which proves that such transactions are genuine?”
5. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) was justified in deleting the additions made from bogus purchase transactions, although there was no dispute that the bogus purchases were made and so act of infraction of law was committed by the assessee on provision of section 74(1A) of the Maharashtra Value Added Tax Act 2002 and such purchases are not allowable as per express provisions u/s. 37 of the Act ?”
6. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the disallowance of Rs.5,04,94,046/-, without appreciating the decision of the Hon’ble Supreme Court in the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj) 354, Dated. 16.01.2017, wherein the Hon’ble Court has held that once a findings of act has been given that entire purchases shown on the basis of fictitious invoices and debited in the P & L account are established as bogus, then restricting the addition to a curtailed percentage goes against the principles of section 68 and 69C of the Income Tax Act, 1961 ?”
7. Whether on the facts and circumstances of the case and in law, the order of the Ld. CIT(A) perverse in not considering the order of Hon’ble Supreme Court in the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, which is on the similar issue of bogus purchases, was already the law of the land when the Ld. CIT(A) has pronounced it’s order on 12.06.2025?”
8. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the addition without appreciating the fact that in the case of M/s. Swatamber Steels Ltd. (Supra), the Hon’ble ITAT, Ahmedabad had confirmed 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 by Hon’ble Gujarat High Court and also by the Hon’ble Supreme Court ?”
9. Whether on the facts and circumstances of the case and in law, the decision of the Ld. CIT(A), is right in view of the decision of the Hon’ble High Court Mumbai, in the case of Pr. Commissioner of Income-Tax-5, Mumbai Vs. Kanak Impex (India) Ltd (2025) 172 com283 (Bombay) Dated. 03.03.2025, wherein the decision of 100% addition made by AO has been allowed, by rejecting the ITAT’s decision of estimating the profit rate @3% on bogus purchases and thereby impliedly grant deduction of such unexplained expenditure incurred u/s. 69C of the Act, even though the assessee failed to discharge its onus to prove the genuineness of alleged purchases and has offered no explanation of the sources of expenditure incurred on account of such purchases ?”
10. The tax effect involved in this case is Rs. 3,16,20,740/- which is above the prescribed limit mentioned in the CBDT’s Circular F.No. 279/Misc.142/2007-ITJ(Pt) amended vide No. 09/2024 dated 17.09.2024. Further, the appeal is being filed before the Hon’ble ITAT as this case also falls under one of the exceptions specified in paragraph 3.1(h) of the of the CBDT’s Circular No. 05/2024 Dated. 15.03.2024, wherein it is stated that in cases involving “Organized Tax Evasion”, in such cases the decision to file appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit.”
11. The date for filing 2nd appeal before Hon’ble ITAT in this case was 31st of August, 2025 however, due to technical problem the appeal could not be filed before the due date and after resolving the technical issue, the said appeal order is being filed with delay by 22 days. The appellant prays that the delay in filing of appeal due to technical glitch, may kindly be condoned.”
12. The appellant craves, leave to amend or alter any grounds or add a new ground which may be necessary.”
Assessment Year: 2010-11
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in holding that notice issued u/s. 148 and order under appeal passed by ACIT, Circle 2, Ajmer is without jurisdiction, without appreciating the facts that assessee has claimed bogus purchases of Rs.9,76,80,105/- from M/s. Navpad Exports Pvt Ltd., M/s. Shree Jalaram Enterprises, M/s. Saileela Trading Pvt Ltd., and M/s. Trichipuram Trading Pvt Ltd., a Hawala Bogus Entry Providers as per the Maharashtra VAT Department, that these groups, were involved in providing bogus bills without any actual supply of materials to assessee firm and has not appreciated the fact that PAN of the assessee is lying at Ajmer and assessee has not objected to the reassessment proceedings and filed details for completion of the assessment, which has been done in the system using the assessee’s PAN. Thereafter, the PAN of the assessee had been transferred on 30.04.2015 to Mumbai charge for subsequent actions on system”.
2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition on account of bogus purchases of Rs.9,76,80,105/-made from M/s. Navpad Exports Pvt Ltd., M/s. Shree Jalaram Enterprises, M/s. Saileela Trading Pvt Ltd. and M/s. Trichipuram Trading Pvt Ltd., a Hawala Bogus Entry Providers as per the Maharashtra VAT Department received through the DGIT(Inv), Mumbai that these groups, were involved in providing bogus bills without any actual supply of materials to assessee firm and has not appreciated the fact that AO has given detailed reasoning for quantifying the additions made”.
3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has not appreciated the fact action of the AO was based on information/report received from the Maharashtra VAT Department through DGIT (Investigation Wing), Mumbai that these groups, all are hawala traders who were indulged in the practice of providing accommodation entries of issuing bogus Sales/Purchase bill without supplying any goods and the assessee was found to be one of the beneficiaries of such practices, who have obtained accommodation entries of Rs.5,04,94,046/- from M/s. Navpad Exports Pvt Ltd., M/s. Shree Jalaram Enterprises, M/s. Saileela Trading Pvt Ltd., and M/s. Trichipuram Trading Pvt Ltd., a paper concerns without actual delivery or supply of materials to suppress the true profit.”
4. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.9,76,80,105/-, without appreciating that during the re-assessment proceedings despite of providing various opportunities, the assessee has failed to prove that he was not a beneficiary of alleged transactions, nor has provided any explanation or evidences which proves that such transactions are genuine?”
5. Whether on the facts and circumstances of the case and in law, the Ld CIT(A) was justified in deleting the additions made from bogus purchase transactions, although there was no dispute that the bogus purchases were made and so act of infraction of law was committed by the assessee on provision of section 74(1A) of the Maharashtra Value Added Tax Act 2002 and such purchases are not allowable as per express provisions u/s. 37 of the Act ?”
6. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the disallowance of Rs.9,76,80,105/-, without appreciating the decision of the Hon’ble Supreme Court in the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj) 354, Dated. 16.01.2017, wherein the Hon’ble Court has held that once a findings of act has been given that entire purchases shown on the basis of fictitious invoices and debited in the P & L account are established as bogus, then restricting the addition to a curtailed percentage goes against the principles of section 68 and 69C of the Income Tax Act, 1961 ?”
7. Whether on the facts and circumstances of the case and in law, the order of the Ld. CIT(A) perverse in not considering the order of Hon’ble Supreme Court in the case of M/s. N. K. Proteins Ltd. Vs. Dy. CIT (2016) 292 CTR (Guj.) 354, Dated. 16.01.2017, which is on the similar issue of bogus purchases, was already the law of the land when the Ld. CIT(A) has pronounced it’s order on 12.06.2025?”
8. Whether on the facts and circumstances of the case and in law, Ld. CIT(A) has erred in deleting the addition without appreciating the fact that in the case of M/s. Swatamber Steels Ltd. (Supra), the Hon’ble ITAT, Ahmadabad had confirmed 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 by Hon’ble Gujarat High Court and also by the Hon’ble Supreme Court ?”
9. Whether on the facts and circumstances of the case and in law, the decision of the Ld. CIT(A), is right in view of the decision of the Hon’ble High Court Mumbai, in the case of Pr. Commissioner of Income-Tax-5, Mumbai Vs. Kanak Impex (India) Ltd (2025) 172 com283 (Bombay) Dated. 03.03.2025, wherein the decision of 100% addition made by AO has been allowed, by rejecting the ITAT’s decision of estimating the profit rate @3% on bogus purchases and thereby impliedly grant deduction of such unexplained expenditure incurred u/s. 69C of the Act, even though the assessee failed to discharge its onus to prove the genuineness of alleged purchases and has offered no explanation of the sources of expenditure incurred on account of such purchases ?”
10. The tax effect involved in this case is Rs. 4,82,66,860/-, which is above the prescribed limit mentioned in the CBDT’s Circular F.No. 279/Misc.142/2007-ITJ(Pt) amended vide No. 09/2024 dated 17.09.2024. Further, the appeal is being filed before the Hon’ble ITAT as this case also falls under one of the exceptions specified in paragraph 3.1(h) of the of the CBDT’s Circular No. 05/2024 Dated. 15.03.2024, wherein it is stated that in cases involving “Organized Tax Evasion”, in such cases the decision to file appeal/SLP shall be taken on merit without regard to the tax effect and the monetary limit.
11. The date for filing 2nd appeal before Hon’ble ITAT in this case was 31st of August, 2025 however, due to technical problem the appeal could not be filed before the due date and after resolving the technical issue, the said appeal order is being filed with delay by 22 days. The appellant prays that the delay in filing of appeal due to technical glitch, may kindly be condoned.”
“12. The appellant craves, leave to amend or alter any grounds or add a new ground which may be necessary.”
2. Brief Facts of the case are as under:
