ACIT Vs RMS Power Solutions Private Limited (ITAT Delhi)
Sales Accepted, Only Embedded Profit Taxable- Bogus Purchases Don’t Mean 100% Addition: Delhi ITAT Upholds 6% Profit Estimation
Accommodation Bills Case—Addition Restricted to Reasonable Margin, Not Entire Purchase
Delhi ITAT ‘C’ Bench in ACIT vs RMS Power Solutions Pvt Ltd (ITA No.696/Del/2025, AY 2018-19, order dated 23-12-2025) dismissed the Revenue’s appeal and upheld restriction of addition to 6% of alleged bogus purchases, holding that where sales are accepted, entire purchase value cannot be added u/s 69C.
Assessment was reopened on the allegation that the assessee had taken accommodation entries in the form of bogus purchases from RCI Industries & Technologies Ltd amounting to ₹80.91 lakh. AO treated the entire amount as unexplained expenditure u/s 69C. CIT(A), however, noted that AO had not disputed sales, transactions were routed through banking channels, and the defect was confined only to purchase genuineness. CIT(A) therefore estimated embedded profit at 6%, sustaining an addition of ₹4.85 lakh.
Before ITAT, Revenue argued that once purchases are found bogus, entire amount must be added, relying on certain High Court decisions. Tribunal rejected this approach, observing that trading results cannot be disturbed in isolation, and profit element alone can be brought to tax when sales are not doubted and business activity is established.
ITAT held that the CIT(A)’s estimation of 6% profit—considering nature of business, past margins and cost of arranging accommodation bills—was fair, reasonable and judicially sound, and therefore no interference was warranted.
Key takeaway: In bogus purchase cases, taxation is confined to embedded profit, not the entire purchase value, so long as sales are accepted and books are not rejected
FULL TEXT OF THE ORDER OF ITAT DELHI
