Arham Iron Ltd. Vs ITO (ITAT Delhi)
Delhi ITAT Restricts Bogus Purchase Addition to 6% Where Sales Were Accepted
The Delhi ITAT partly allowed the assessee’s appeal by restricting the addition on account of alleged bogus purchases to 6% of the purchase value instead of sustaining the entire disallowance under section 69C. The dispute related to purchases of ₹75.53 lakh from M/s Siddhi Ganesh Industries, which the Assessing Officer had treated as non-genuine.
The Tribunal observed that the assessee was engaged in the wholesale trading of iron and steel, and the Revenue had not disputed the corresponding sales. It further held that the possibility of the assessee procuring goods from unregistered dealers could not be completely ruled out. Taking note of recent judicial precedents adopting varying approaches in bogus purchase cases, the Tribunal concluded that only the profit element embedded in such purchases warranted disallowance.
Accordingly, the Tribunal directed that a lump-sum disallowance of 6% of the alleged bogus purchases would meet the ends of justice, while clarifying that the decision was rendered on the peculiar facts of the case and shall not be treated as a precedent. The assessee’s appeal was partly allowed.
Cases Discussed
- DCIT Vs. Kohinoor Foods Ltd. (Delhi ITAT), (2025) 178 taxmann.com 424 (Del. – Trib.)
- DCIT Vs. Tirupati Matsup (P.) Ltd. (Delhi ITAT), (2025) 177 taxmann.com 836 (Delhi-trib.)
- Ravjibhai Becharbhai Dhamelia vs. ACIT (Gujarat HC), (2025) 173 taxmann.com 592 (Guj.)
- PCIT Vs. Kanak Impex (India) Ltd. (Bombay HC), (2025) 172 taxmann.com 283 (Bom)
- PCIT Vs. Hitesh Mody (HUF) (Bombay HC), (2024) 160 taxmann.com 110 (Bom)
- PCIT Vs. Forum Sales (P.) Ltd. (Delhi HC), (2024) 160 taxmann.com 93 (Del)
FULL TEXT OF THE ORDER OF ITAT DELHI
This assessee’s appeal for assessment year 2019-20, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2025-26/1085063969(1), dated 22.01.2026 involving proceedings under section 147 of the Income tax Act, 1961 (hereinafter referred to as ‘the Act’).
Case called twice. None appears at the assessee’s behest. It is accordingly proceeded ex-parte.
2. It emerges during the course of hearing that the assessee presses for his sole substantive ground on merits challenging both the learned lower authorities’ action treating its purchases of Rs.75,53,225/- in AY 2019-20, sourced from M/s. Siddhi Ganesh Industries as bogus ones under section 69C of the Act, in the assessment order dated 28.02.2025, as upheld in the lower appellate discussion.
3. That being the case, both the parties vehemently reiterate their respective stands against and in support of the impugned bogus purchases disallowance. We wish to make it clear that there is no dispute in principle that the assessee is engaged in the business of wholesale trading of iron and steel all along wherein possibility of assessee sourcing its purchases from unregistered dealers per se could not be altogether ruled out as well. And that his corresponding sales have nowhere been questioned in both the lower proceedings. Various judicial precedents (2025) 173 taxmann.com 592 (Guj.) Ravjibhai Becharbhai Dhamelia vs. ACIT; (2024) 160 taxmann.com 110 (Bom) PCIT Vs. Hitesh Mody (HUF), (2024) 160 taxmann.com 93 (Del) PCIT Vs. Forum Sales (P) Ltd.; (2025) 172 taxmann.com 283 (Bom) PCIT Vs. Kanak Impex (India)Ltd; (2025) 178 taxmann.com 424 (Del. – Trib.) DCIT Vs. Kohinoor Foods Ltd.; and (2025) 177 taxmann.com 836 (Delhi-trib.) DCIT Vs. Tirupati Matsup (P.) Ltd. have recently decided the instant issue of bogus purchases with divergent views as well.
4. Faced with these peculiar facts, it is thus deemed appropriate in the larger interest of justice that a lumpsum disallowance @ 6% of the assessee’s alleged bogus purchases amounting to Rs. 75,53,225/-, would be just and proper with a rider that the same shall not be treated as a precedent. The assessee’s book entries are hereby rejected to the very extent. Necessary computation shall follow as per law.
5. This assessee’s appeal is partly allowed in above terms.
Order pronounced in the open court on 23rd July, 2026
