ITAT Surat Strikes Down Section 68 and Section 69C Additions in Absence of Substantive Evidence of Bogus Transactions

Case Overview

Case Name: Hitesh Bhikhubhai Desai Vs ITO (ITAT Surat)
Assessment Year: 2019–20
Order Date: 06-04-2026
Forum: Income Tax Appellate Tribunal, Surat

Background and Factual Matrix

The present matter came before the Income Tax Appellate Tribunal (ITAT), Surat, as an appeal filed by the assessee challenging the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, dated 26-08-2025, pertaining to Assessment Year 2019–20.

The assessee, being an individual, had originally filed his return of income on 17-09-2019. The assessment was subsequently subjected to reopening proceedings after intelligence surfaced suggesting that M/s. Classic Industries, along with its partner Shri Gulam Salim Godi, were allegedly orchestrating a network of fictitious purchase and sale entries for the benefit of various parties. The assessee was identified as one of the purported beneficiaries of this alleged arrangement, on account of having recorded sales worth Rs. 21,82,940/- to M/s. Blue Moon Textiles, a firm reportedly controlled and managed by Shri Gulam Salim Godi.

Reassessment Proceedings and Assessee's Response

Pursuant to the issuance of notice under Section 148 of the Income Tax Act, 1961, the assessee duly filed a return for Assessment Year 2019–20 declaring a total income of Rs. 3,26,430/-. In the course of the reassessment proceedings, the assessee furnished comprehensive documentation in support of his transactions, including:

  • Ledger accounts reflecting purchase and sale entries
  • Item-wise details of goods sold
  • Bank transaction records evidencing payment through banking channels
  • Invoices and sale bills pertaining to the relevant transactions

Objections Raised by the Assessing Officer

Notwithstanding the documents submitted, the Assessing Officer (AO) proceeded to question the genuineness of the transactions on the following grounds:

  • Absence of transportation evidence: No documentary proof of physical movement of goods was placed on record.
  • Lack of delivery confirmation: The assessee failed to establish that physical delivery of the items actually took place.
  • Missing recipient acknowledgment: The sale invoices did not carry the signatures of the buyers, which the AO viewed as indicative of paper-based, non-genuine transactions.

On the basis of these observations, the AO concluded that the transactions in question were fictitious in nature and proceeded to make the following additions: