ITO Vs Pratap Engineering Works (ITAT Jodhpur)
Jodhpur ITAT Upholds Deletion of Bogus Purchase Addition Despite GST Investigation Report
The Jodhpur ITAT dismissed the Revenue’s appeal and upheld the deletion of an addition made under section 69C on account of alleged bogus purchases based on information received from the GST Department. The Tribunal observed that although the reassessment was triggered by an investigation alleging that the supplier was a bogus entity issuing accommodation bills, the Assessing Officer had mechanically relied on the GST investigation report without conducting any independent enquiry, furnishing the complete report to the assessee, or granting an opportunity of cross-examination, thereby violating the principles of natural justice. The Tribunal further noted that the assessee had produced a complete trail of documentary evidence, including purchase orders, invoices, transport bilties and bank payment records, to establish the genuineness of the purchases. Since the assessee’s sales had been accepted and the books of account had not been rejected under section 145, the Assessing Officer failed to bring any cogent evidence to disprove the purchases. Holding that mere reliance on third-party GST findings was insufficient to sustain the addition, the Tribunal affirmed the well-reasoned order of the CIT(A) deleting the addition and dismissed the Revenue’s appeal.
Cases Discussed
- Ashok Kumar Rungta vs. Income Tax Officer (Supra)
- Baba Bearings Pvt Ltd
FULL TEXT OF THE ORDER OF ITAT JODHPUR
The aforetitled appeal has been preferred by the assessee/appellant against the order dated 16 July 2025 u/s 143(3)/147 of the Income Tax Act, 1961 (in short referred as ‘the Act’) passed by National Faceless Appeal Centre (NFAC), Delhi [for the sake of convenience, hereinafter referred to as CIT(A)] by which appeal filed by the assessee was dismissed.
2. Facts of the case in chronological manner may be summarised as that As per information available, the assessee has taken purchase bills/accommodation entries amounting Rs.14,47,648/- from a bogus firm M/s Preet Enterprises, Prop. Sh. Gurkamal Singh (PAN CFXPG7711N) without actual purchase & supply of goods. The information flagged in this case is received from the Deputy Director of Income Tax (Inv.), Gandhidham Kutch which is originated from the investigation conducted by the anti-evasion wing of CGST Commissionerate, Kutch (Gandhidham) The case of the assessee is also flagged under the category “High Risk CRIU/VRU Information” in Insight Portal in accordance with the Risk Management Strategy. As per the information, the assessee has taken purchase bills of Rs. 14,47,648/- from a bogus firm M/s Preet Enterprises, Prop. Sh. Gurkamal Singh (PAN CFXPG7711N) without actual purchase & supply of goods, and accordingly, the assessee has inflated expenses of purchase. In response to the show cause notice, the assessee furnished detailed reply and denied the contents of the information. The assessee furnished copies of purchase bills, transportation bilty, account statement etc. to substantiate its claim that it received goods from M/s Preet Enterprises and made payment through banking channel. The assessee has stated that there was actual supply of the goods and payment was made through banking channel. The assessee has furnished various documents to substantiate its claim. However, as per the investigation conducted by the anti-evasion wing of the CGST Commissionerate, Kutch (Gandhidham), Shri Gurukamal Singh created 18 bogus firms including M/s Preet Enterprises in the name of different persons including himself which are involved in issuing only invoices to different recipients without supply of goods or services, showing GST amount and facilitating the receipt to avail ITC. Shri Gurukamal Singh fraudulently obtained the documents of different persons such as PAN, Aadhar card etc., and used the same for GST registration of the said bogus firms. Further, the bank accounts in the name of bogus firms were also opened in different banks. However, these firms were not operational at the said addresses and addresses of some firms were not found traceable. Hence, in view of the investigation conducted by the GST department, it is obvious that all the documents furnished by the assessee are colourable documents to establish the fake transaction as genuine transaction and the amount of Rs. 14,47,648/- was proposed to be added to the income of the assesse as unexplained expenditure for the relevant assessment year.
3. Heard rival submissions and carefully perused the material available on record.
4. Reiterating the grounds of appeal, the Ld. DR expressed grievance that the Ld. CIT(A) erroneously deleted the addition of Rs. 14,47,648/-made under Section 69C of the Act on account of bogus purchases (M/S Preet Enterprises) by failing to appreciate that it was established during investigation by anti-evasion wing of GST, Commissionerate, Kutch (Gandhidham) that M/S Preet Enterprises is involved in providing bogus entries and bogus ITC credits to CAMOUFLAG unaccounted income.
5. Ld. AR relied on the impugned order passed by Ld. CIT(A).
6. The Ld. AO observed that even though the assessee claimed that the transactions with the M/S Preet Enterprises is genuine but the claim of the assessee is not found tenable as the company operated by Shri Guru Kamal Singh and others have no actual business or establishment and no financial credentials well as per the investigation conducted by the company anti-evasion wing of the GST Commissionerate Kutch wrong time and in such case the Ld. AO has observed that there is no question of any genuine purchase. In this regard, the Ld. CIT(A) observed that while the reassessment proceedings were initiated based on information from a specialized anti-evasion agency, the Assessing Officer failed to conduct an independent inquiry and relied mechanically on the investigation report without providing the full report or allowing cross- examination to the appellant. This constitutes a violation of the principles of natural justice. The AO’s failure to consider the appellant’s detailed replies and the precedent of an identical case (Baba Bearings Pvt Ltd) further undermines the procedural validity of the assessment. On merits, despite the CGST findings regarding bogus firms, the appellant provided a comprehensive chain of documentary evidence, including purchase orders, invoices, transport bilties, and bank payments, to substantiate the genuineness of the transactions. The appellant’s sales were accepted, and it is a settled legal position that sales cannot occur without corresponding purchases. The AO failed to bring any specific, cogent, and convincing evidence on record to rebut the appellant’s documentary proofs or to establish that the transactions were indeed bogus, beyond mere suspicion. As held in Ashok Kumar Rungta vs. Income Tax Officer (Supra), the burden of proof lies on the Revenue, and a full addition can only be made on the basis of proper proof of bogus purchases, which was lacking in this case. Furthermore, the AO made the addition without rejecting the appellant’s duly audited books of accounts under Section 145, which is legally untenable when sales are accepted. The initiation of penalty proceedings also appears to be procedurally flawed due to the alleged non-compliance with Section 144B(xv).
7. On the basis of the foregoing discussions and submissions, we are of the opinion that Ld. CIT(A) was justified in deleting the addition made by the Ld. AO by passing detailed and well-reasoned order which does not require any interference. Hence, we uphold the same and appeal of the revenue is liable to be dismissed.
8. Consequently, the appeal of the revenue is dismissed.
Order pronounced on 29 / 07 / 2026 under Rule 34(4) of the Income Tax Appellate Tribunal Rules,1963.
