Pravesh Kumar Jaiswal Vs ITO (ITAT Kolkata)
The assessee appealed against the order of the Commissioner of Income Tax (Appeals), Kolkata, which had upheld an addition of ₹12,73,85,064 under section 69C read with section 115BBE. The Assessing Officer had treated the entire purchases as non-genuine on the ground that several suppliers from whom the assessee purchased goods were either non-filers of income tax returns, had extremely low turnover, or had GST registrations that were cancelled or suspended. The scrutiny assessment was initiated after the department, based on ADG (GST) data, suspected possible booking of bogus or inflated purchases.
During the assessment, the Assessing Officer issued notices under section 133(6) to the suppliers to verify the transactions. Many notices remained unserved or unanswered, and in some cases, emails bounced back. The assessee was asked to produce the suppliers or furnish additional evidence of genuineness. According to the Assessing Officer, the assessee failed to do so. Relying mainly on the lack of supplier confirmations and adverse GST status of the suppliers, the Assessing Officer concluded that the purchases were not genuine and made the entire addition under section 69C.
The CIT(A) upheld this view, holding that the assessee did not sufficiently discharge the burden of proving the genuineness of the purchases.
Before the Tribunal, the assessee argued that the addition under section 69C was untenable because the Assessing Officer had not rejected the books of account under section 145(3). Without such rejection, the disallowance of entire purchases was legally unsustainable. The assessee submitted that it had produced books of account, purchase bills, bank payment details, and supporting documents. It was contended that the Assessing Officer acted solely on the non-response of suppliers to notices under section 133(6) and the cancellation of their GST registrations—factors beyond the assessee’s control. The assessee maintained that since sales were accepted, corresponding purchases could not be disbelieved. It also submitted that payment through banking channels and maintenance of proper quantitative records supported the genuineness of transactions.
The Departmental Representative supported the lower authorities, arguing that sufficient opportunities were given and that the assessee failed to prove genuineness beyond doubt.
The Tribunal examined the rival submissions and records. It observed that the addition rested only on the ground that suppliers failed to respond to notices or had adverse GST status. It held that an assessee cannot be penalised for the non-compliance of third parties over whom it has no control. It further noted that the Assessing Officer had not invoked section 145(3) to reject the books. Since the books were accepted and no defect was found in the quantitative tally or trading account, the entire purchases could not be disallowed. The Tribunal held that the addition was based on presumptions rather than concrete evidence. It also referred to a decision in a coordinate bench case (Axora Resources Ltd.) where similar additions were struck down on the ground that non-filing of returns by suppliers or non-response to notices does not justify treating purchases as bogus.
The Tribunal concluded that payments were made through banking channels, sales were not disputed, and no discrepancies were found in the books. Therefore, the purchases could not be treated as non-genuine solely due to supplier non-compliance. The addition of ₹12,73,85,064 under section 69C read with section 115BBE was held unjustified. Accordingly, the Tribunal set aside the CIT(A)’s order and directed the Assessing Officer to delete the addition.
The appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal by the assessee arises against the order of the learned Commissioner of Income Tax (Appeals), Kolkata, whereby the action of the Assessing Officer in making an addition of ₹1,27,38,506/- under section 69C read with section 115BBE of the Income-tax Act, 1961 was confirmed.
2. Brief facts of the case are that the case of the assessee was selected for scrutiny as it was noticed that the assessee had made substantial purchases from certain suppliers who were either non-filers of income tax returns, filed returns with abnormally low turnover, or whose GST registrations were either cancelled or suo motu suspended as per ADG (GST) data. Based on this information, the Assessing Officer formed a view that there was a possibility of the assessee booking bogus or inflated purchase expenses to reduce taxable profit, and accordingly, scrutiny proceedings were initiated by issue of statutory notices. During the course of assessment, the Assessing Officer issued notices under section 133(6) to the suppliers seeking verification of the transactions. However, many of such notices remained unserved or responded, and in some cases, the e-mails were bounced back. The assessee was asked to produce these parties or furnish further evidence in support of genuineness of the purchases, but according to the Assessing Officer, the assessee failed to do so. In the absence of direct confirmation or verifiable evidence from the suppliers, the Assessing Officer treated the entire purchases amounting to ₹12,73,85,064/- as non-genuine and made addition under section 69C of the Act, taxing it under section 115BBE.
3. The assessee carried the matter in appeal. The learned CIT(A), however, sustained the addition made by the Assessing Officer, concurring that the assessee failed to prove the genuineness of the purchase transactions.
4. Aggrieved by the above order assessee preferred an appeal before this tribunal at the time of hearing Ld. AR submitted that the addition made under section 69C of the Act was bad in law, as the Assessing Officer did not reject the books of account maintained by the assessee under section 145(3) of the Act. Without such rejection, it was impermissible to disallow the entire purchases as non-genuine. The assessee had duly furnished books of account, purchase invoices, payment details through banking channels, and other supporting evidence during the assessment proceedings. The Assessing Officer relied solely on the non-response of suppliers to notices under section 133(6) and the alleged cancellation of their GST registrations, which are factors beyond the control of the assessee. Once sales have been accepted, the corresponding purchases cannot be disbelieved. It was further contended that the non-filing of income-tax returns or cancellation of GST registration by the suppliers cannot, by itself, make the assessee’s purchases non-genuine, especially when payments were made through proper banking channels and quantitative details were duly maintained.
5. The learned DR supported the orders of the lower authorities, contending that the Assessing Officer had made the addition after providing sufficient opportunity and that the assessee failed to discharge the onus to prove the genuineness of purchases beyond doubt.
6. We have considered the rival submissions and perused the records. The addition in this case has been made merely on the ground that the suppliers did not respond to notices under section 133(6) and that their GST registrations were cancelled or suspended. It is well settled that an assessee cannot be penalized for non-compliance of third parties over whom he has no control. Further, we find that the books of account of the assessee were not rejected by invoking section 145(3) of the Act. Once the books have been accepted and sales are not doubted, the corresponding purchases cannot be disallowed in entirety. The Assessing Officer has not found any defect in quantitative tally or discrepancy in the trading account. The addition was made purely on presumptions and not based on any tangible material. The Hon’ble jurisdictional High Court and several coordinate Benches have consistently held that when payments are made through banking channels and sales are accepted, purchases cannot be treated as bogus merely because suppliers are untraceable or non-filers. The Coordinate Bench as in the case of Axora Resources Ltd. vs. ITO in ITA No.1275/Kol/25 held as under:
“6.3 After hearing the rival contentions and perusing the materials available on record, we find that the ld. AO has made an addition of ₹7,29,48,478/- at the rate of 12% of the total purchases from 17 parties, who according to the ld. AO were non-filer of the returns. In our opinion, non-filing of return by the suppliers is not within the control of the assessee and if the said suppliers have not filed the returns of income , the department can proceed against these suppliers. In this case, we note that the assessee has given a complete detail along with the evidences before the ld. AO and the ld. AO issued notice u/s 133(6) of the Act to all 41 parties out of which only 3 responded. In our opinion, the addition cannot be made merely on the ground that the parties have not responded to the notice u/s 133(6) of the Act. Moreover, the disallowance made is on adhoc basis by applying a percentage of 12.5% on the total purchases from 17 parties. In our opinion, if the ld. AO was not relying the books of account then the ld. AO should invoke the provisions of Section 145(3) of the Act and only then the estimate disallowance of expenses or estimate the income, however, that was not done. Therefore, we are inclined to set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition.”
6.1 We, therefore, hold that the addition made under section 69C read with section 115BBE of ₹12,73,85,064/- was unjustified. In view of the foregoing, we set aside the order of the learned CIT(A) and direct the Assessing Officer to delete the addition made under section 69C of the Act.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 16/10/2025.
