Bogus Purchases: Section 69C Addition Restricted to ₹6 Lakh, Delhi ITAT

Anuj Sharma Vs ITO (ITAT Delhi)

Sales Accepted—Entire Purchases Cannot Be Treated As Bogus: Delhi ITAT Restricts ₹60.14-Lakh Addition To ₹6 Lakh

Facts

The assessee filed his return declaring income of ₹4,86,570. Based on information received through the INSIGHT portal from CRIU/VRU, the Assessing Officer alleged that the assessee had obtained accommodation entries in the guise of purchases from M/s Gauri Shankar Trading Co.

The purchases recorded in the profit and loss account from the said concern amounted to ₹50,96,555. The Assessing Officer, however, considered an amount of ₹60,13,941, apparently after including GST of ₹9,17,386, and treated the whole amount as unexplained expenditure under section 69C.

The Department relied heavily upon the statement of the alleged proprietor of the supplier concern. The person concerned reportedly denied having carried on the business and claimed that his identity documents had been misused. The Assessing Officer also noticed that the supplier had substantial transactions in its GST records, whereas no corresponding turnover was reflected in its income-tax return.

The assessee furnished purchase invoices, GST returns and stock records and submitted that the purchases were duly recorded in the regular books of account. It was further contended that the corresponding sales had been accepted and that it was commercially impossible to make the sales without making the underlying purchases.