[Cites 1, Cited by 0]
Gujarat High Court
The Principal Commissioner Of Income ... vs Mohit Pokharana Prop Of Yash Exports on 27 January, 2026
Author: A.S. Supehia
Bench: A.S. Supehia
NEUTRAL CITATION
C/TAXAP/1114/2024 ORDER DATED: 27/01/2026
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 1114 of 2024
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THE PRINCIPAL COMMISSIONER OF INCOME TAX 1
Versus
MOHIT POKHARANA PROP OF YASH EXPORTS
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Appearance:
KARAN G SANGHANI(7945) for the Appellant(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 27/01/2026
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE A.S. SUPEHIA)
1. Learned Senior Standing Counsel Mr. Karan Sanghani,
at the outset, has fairly pointed out that the proposed
substantial questions of law in the present Tax Appeal will not
arise in view of the judgment of this Court dated 23.09.2024
passed in Tax Appeal No. 832 of 2024, reported in [2024] 168
taxmann.com 528 (Gujarat), in case of Principal Commissioner
of Income-tax v. Keshri Exports.
2. In the present Tax Appeal, the appellant revenue has
assailed the order dated 19.07.2024 passed by the Income Tax
Appellate Tribunal, Surat in ITA No. 366/ SRT/2024 for A.Y.
2014-15 (for short 'the Tribunal').
3. The appellant has primarily questioned the impugned
judgment and order passed by the Tribunal which had
dismissed the appeal of the revenue by upholding the decision
of CIT (Appeals) restricting the disallowance @ 6% of the
bogus purchases against the addition made by the Assessing
Officer at the rate of 100% of bogus purchase amounting to
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Rs.1,23,84,050/-.
4. At this stage, we may refer to the decision of the
Coordinate Bench in case of Keshri Exports (supra). In an
appeal filed by the revenue, proposing the identical
substantial question of law, this Court has held thus:
"5. Considering the above submissions, the relevant extract
from the order of the Tribunal is reproduced herein below:
"18. As observed earlier not only there existed new
information with the AO from the credible sources, but
also he had applied his mind and recorded the
conclusion that the purchases claimed were non-
genuine/bogus and therefore bogus, (clearly meaning
that what was disclosed was false and untruthful). The
requirements of section 147 r.w.s. 148 have clearly
been met; and the reopening is held justified and legal.
Therefore, we dismiss the ground raised by the
assessee challenging the validity of reassessment.
19. In the result, appeals filed by assessees (ITA Nos.
889 to 893/AHD/2017 and ITA Nos. 761 to
762/SRT/2018) are dismissed, whereas the appeal filed
by the Revenue (ITA No.916 to 920/AHD/2017 and ITA
Nos. 753 to 754/SRT/2018) are partly allowed."
6. This Court in case of Pankaj K. Choudhary (Supra) while
dismissing the Tax Appeal No.617 of 2022 has held as under:
"5. The Assessing Officer noticed the contentions of the
assessee that confirmation, purchase bills, bank
statement, stock register, copy of ITR were already
filed. The Assessing Officer was, however, of the view
that transactions were bogus and merely that it routed
through the banking channel, was not sufficient to
conclude that they were the genuine transactions. The
contention of the assessee that he had not dealt with
the Bhanvarlal Jain group was also negatived. The
appellate Commissioner took the view that
disallowance was required to be sustained at 12.5% of
the purchase. The Assessing Officer was directed
accordingly to workout disallowance.
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In para 10.6, the Commissioner of Income Tax
(Appeals), recorded thus, "As held above, it is clear that
the appellants have made purchases from elsewhere,
but have obtained bills from the impugned suppliers.
From the Trading & P & L account and Audit report it
can be seen that the GP rate shown by appellant is
1.85% oil sales. In such circumstances the disallowance
of 100% of purchases cannot be justified. Also as held
above, the appellant would nave indulged in above
practice in order to get some benefit. And it is this
benefit derived by the appellant that need to be taxed.
What would be the magnitude of benefit derived by the
appellant is the mute question. In the appellant's case,
it is seen that GP rate shown is 0.78%".
5.1 The final view was expressed in para 10.10,
"Following the above judicial pronouncements and
views taken by Ld. CIT(A) & AOS in a few identical
cases. In a couple of identical cases, where the GP
shown by the appellants is more than 5%, I have
confirmed the disallowance of the impugned purchases
to the extent of 5% of the impugned purchases.
However in the instant case the appellant is showing
measly G.P. of only 0.78% on turnover. In view of this I
am of the considered opinion that disallowance of
12.5% of the impugned purchases would be reasonable
and would meet the ends of justice. Hence, the
disallowance is restricted to 12.5% of the impugned
purchases for the assessment year in appeal."
5.2 The disallowance at 100% was made in the
assessment order for the year under consideration to
the tune of Rs. 4,34,00,343/-, which was reduced to
12.5% at Rs. 54,25,040/-. Thereafter, the issue was
dealt with by the appellate Tribunal.
The appellate Tribunal endorsed to the view taken by
the appellate Commissioner. It was observed that
Assessing Officer failed to consider the evidence
furnished by the assessee.
5.3 Considering the facts and relevant aspect, the
Income Tax Appellate Tribunal partially allowed the
appeal of the assessee to further reduce the
disallowance at 6%. In so concluding, the Tribunal
observed in paragraph No.21 as under,
".......during the financial year under
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consideration the assessee has shown total
turnover of Rs. 66,09,62,458/-. The assessee has
shown Gross Profit @ 78% and net Profit @ 0.02%
(page 11 of paper Book). The assessee while filing
the return of income has declared taxable income
of Rs. 1,81,840/- only. We are conscious of the
facts that dispute before us is only with regard of
the disputed purchases of Rs. 4.34 Crore, which
was shown tohave purchased from the entity
managed by Bhanwarlal Jain Group. During the
search action on Bhanwarlal Jain no stock of
goods/material was found to the investigation
party. Bhanwarlal Jain while filing return of
income has offered commission income (entry
provider). Before us, the Ld. CIT-DR for the
revenue vehemently submitted that the ratio of
decision of Hon'ble Gujarat High Court in Mayank
Diamond Private Limited (supra) is directly
applicable on the facts of the present case. We
find that in Mayank Diamonds the Hon'ble High
Court restricted the additions to 5% of GP. We
have seen that in Mayank Diamonds P Ltd
(supra), the assessee had declared GP @ 1.03%
on turnover of Rs 1.86 Crore. The disputed
transaction in the said case was Rs. 1.68 Crore.
However, in the present case the assessee has
declared the GP @ 0.78%. It is settled law that
under Income-tax, the tax authorities are not
entitled to tax the entire transaction, but only the
income component of the disputed transaction, to
prevent the possibility of revenue leakage.
Therefore, considering overall facts and
circumstances of the present case, we are of the
view that disallowances @ 6% of impugned
purchases/ disputed purchases would be
sufficient to meet the possibility of revenue
leakage. In the result the ground No. 2 of appeal
raised by the assessee is partly allowed and the
grounds of appeal raised by revenue are
dismissed."
6. The view taken and the conclusion arrived at by the
appellant Tribunal are based on material before it and
after analysing the facts and figure available before it.
When the Tribunal has thought it fit to reduce the
disallowance at 6% from 12.5%, the Tribunal had
before it the facts which were duly analysed by it. No
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interference is called for in the said conclusion and
findings of the Tribunal in the present appeal by this
court.
6.1 The another weighing aspect is that the Tax Appeal
No. 674 of 2022 in Principal Commissioner of Income
Tax 1, Surat vs. M/s. Surya Impex which came to be
decided by the co- ordinate Bench on 16.1.2023 dealt
with the very issue of accommodation entries provided
byBhanwarlal Jain Group. The group involved in the
said case is the same group who is saddled with
allegations of providing accommodation entry to the
assessee. In M/s. Surya Impex (supra) the court held in
favour of the assessee. The questions of law involved in
the said case were of the same nature and were in the
context of similar facts involving the same group.
7. For all the above reasons, substantial questions of
law proposed by the appellant in this appeal stands
already answered. No question of law much less any
substantial questions of law arise in the facts of the
present case. No other substantial question of law
arises. The appeal is meritless. It is summarily
dismissed."
7. In view of the above, the substantial questions of law
proposed by the appellant in this appeal stands already
answered and therefore, no question of law much less any
substantial questions of law can be said to have arisen in the
facts of the present case. The appeal is accordingly
dismissed. No orders as to cost."
4. Thus, in light of the decision of the Coordinate Bench, no
question of law much less any substantial question of law
arise in view of settled legal precedent. Appeal is, accordingly,
dismissed.
(A. S. SUPEHIA, J)
(PRANAV TRIVEDI,J)
SAJ GEORGE/DB/68
