Global Jewellery Vs Assessment Unit (ITAT Delhi)
Third-Party GST Data Alone Cannot Justify Section 69C Addition: Delhi ITAT Deletes Jewellery Firm’s Purchase Additions
Introduction
A purchase entry appearing in a supplier’s GST return cannot, by itself, establish that the purchaser incurred expenditure from undisclosed sources. Equally, purchases supported by invoices, banking transactions and regular books cannot be treated as unexplained merely on assumptions. These principles emerge from the Delhi ITAT’s decision in Global Jewellery v. Assessment Unit, Delhi, ITA No. 963/Del/2026, Assessment Year 2021–22, pronounced on 13 November 2026.
The Tribunal deleted two purchase-related additions under section 69C. Its reasoning distinguishes between an alleged transaction denied by the assessee and recorded purchases supported by documentary evidence.
Background of the Dispute
The assessee, a partnership firm trading in gold, bullion and jewellery, filed its return declaring income of ₹2,50,970. The case was selected for scrutiny concerning substantial purchases from non-filers or persons reporting low turnover.
The Assessing Officer added ₹1,60,73,404 relating to purchases from M/s Trend Jewels, whose proprietor was Boby Gupta, and ₹10 lakh concerning alleged purchases from Satish Gara. Both amounts were treated as unaccounted purchases under section 69C. An additional ₹95,611 was brought to tax as estimated gross profit on the alleged unaccounted purchases.
The assessment determined total income at ₹1,74,19,985. The CIT(A) upheld the additions, principally citing an unsatisfactory reconciliation between GST data and the books, and declined to admit additional evidence under Rule 46A.
Alleged Purchases Based Solely on Third-Party GST Returns
Regarding Satish Gara, the assessee maintained that no purchases had been made from him during the relevant year. It submitted that the appearance of its name in GST information resulted from an incorrect return filed by the third party.
The Tribunal found that the Department possessed no evidence beyond the third party’s GST return to establish the alleged purchases. No enquiry report had been placed on record, and no statement of Satish Gara had been recorded.
This absence of verification was decisive. The assessee had disputed the transaction itself, yet the Department had neither investigated that denial nor produced corroborative material.
The Tribunal accordingly held that an addition founded on presumptions and suspicion could not be sustained and allowed the assessee’s challenge on this issue. The ruling demonstrates that third-party reporting requires examination when the person against whom it is used specifically disputes its correctness.
Recorded Purchases Supported by Banking Transactions
The second dispute concerned purchases of ₹1,60,73,404 from M/s Trend Jewels. Unlike the first transaction, these purchases were acknowledged by the assessee and stated to be genuine.
The assessee explained that payments had passed through banking channels and that the purchases were duly recorded in its books. It further argued that the Department had accepted the corresponding sales and declared profits without rejecting the books.
The Tribunal noted that the CIT(A) had declined to accept additional material comprising account confirmations, bank statements and invoices, and had relied on the assessment findings.
On examining the details before it, the Tribunal found that payments were made through banking channels and the invoices and GST particulars were reflected in the books. It also recorded that the Revenue had not rejected the books of account.
In these circumstances, the Tribunal held that the entire purchases could not be denied and the corresponding addition under section 69C could not survive.
Decisions Referred to Before the Tribunal
The assessee relied on ITO v. Ritu Bhandula, ITA No. 2750/Del/2025, and Gargi Woolen Pvt. Ltd. v. PCIT, ITA No. 2771/Del/2025.
The Tribunal referred to these decisions as supporting the proposition that section 69C additions are inappropriate where purchase details are produced, payments pass through banking channels and the transactions are reflected in the books.
These references should be understood within the factual discussion in the present order. The ruling does not establish that a banking payment, standing alone, conclusively proves every disputed purchase.
Section 69C Requires Examination of the Source
Section 69C applies where an assessee has incurred expenditure and either offers no explanation about its source or provides an explanation which the Assessing Officer finds unsatisfactory. The statutory enquiry therefore concerns the expenditure incurred and the explanation of its source. 69C
The present case illustrates two different evidentiary failures: absence of corroboration that the disputed third-party transaction occurred, and failure to justify treating documented purchases as unexplained expenditure.
Author’s Comments
The decision provides useful protection against mechanical additions based on GST information. A mismatch can justify investigation, but the assessment must address the assessee’s explanation and the supporting records.
At the same time, the observation concerning non-rejection of books should be read with the Tribunal’s findings on banking payments, invoices and accounting entries. It should not be presented as an unrestricted rule insulating every purchase recorded in accepted books.
The Tribunal ultimately allowed the appeal. Although the grounds also challenged the ₹95,611 gross-profit addition, the operative reasoning separately addresses the two purchase additions; it contains no distinct discussion of that consequential amount.
For taxpayers, the practical lesson is clear: supplier confirmations, invoices, bank records and GST reconciliations remain essential for answering purchase-related enquiries effectively.
Cases Discussed
- ITO v. Ritu Bhandula, ITA No. 2750/Del/2025 — Delhi ITAT; date not verified.
- Gargi Woolen Pvt. Ltd. v. PCIT, ITA No. 2771/Del/2025 — Delhi ITAT; date not verified.
Alternative SEO Titles
GST Return Alone Cannot Prove Unaccounted Purchases: ITAT Delhi
ITAT Deletes ₹1.71 Crore Section 69C Additions in Jewellery Case
Banking Records and Books Defeat Unexplained Purchase Addition
Third-Party GST Mismatch Insufficient for Section 69C Addition
Global Jewellery Wins ITAT Appeal Against Purchase Additions
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is filed by the Assessee against the order dated 03-Dec-2025 passed by the Ld. CIT(A) /NFAC for the Assessment Year 2021-2022.
2. The Assessee has raised the following grounds of appeal:
1. Because, the orders passed by the authorities below are illegal, arbitrary, perverse, vexatious, erroneous, passed without application of mind, against the facts and circumstances of the case, just based on surmises and conjectures and hence is liable to be quashed.
2. Because, the CIT A has erred in law and on facts in confirming the illegal addition of Rs. 10,00,000 made by the AO alleged as unaccounted purchase from Shri Satish Gara under section 69C of the Act based on presumption is liable to be deleted.
3. Because, the CIT A has failed to appreciate that no purchases were made from Shri Satish Gara during the relevant previous year and that mere reflection of a name in GST data just based on GSTR return incorrectly filed by third party, without corroborative evidence, cannot justify an addition under section 69C.
4. Because, the CIT A has erred in confirming the addition of Rs. 1,60,73,404 on account of alleged unaccounted purchases under section 69C of the Act from Shri Boby Gupta, Trend Jewels, ignoring the fact that the purchases were genuine, paid through banking channels and duly recorded in the books of account, hence the additions made based on assumptions is liable to be deleted.
5. Because, the CIT A has erred in rejecting the Appellants reconciliation and in declining to admit additional evidences under Rule 46A without appreciating that the assessment proceedings were conducted in a faceless regime and sufficient opportunity was not effectively granted. The impugned order being passed in violation of principles of natural justice was to be quashed.
6. Because, the authorities below erred in invoking section 69C of the Act in the absence of any finding that the expenditure was incurred out of undisclosed sources and without disproving the sales corresponding to the alleged purchases.
7. Because, the CIT A has erred in confirming the addition of Rs. 95,611 towards alleged gross profit on unaccounted purchases, which is purely consequential and unsustainable once the primary additions are deleted.
8. Because, the CIT A erred in not deleting the addition, which was made without rejecting the books of accounts of the Appellant and without finding any such undisclosed purchases in the appellants records, which were duly maintained in the regular course of business and the books were not found to be false OR incorrect by the AO.
9. Because, the Authorities below have proceeded on mutually destructive and inconsistent stands, inasmuch as on one hand the sales recorded in regular books of account and returned income based on which has been accepted as correct, while on the other hand additions were made on account of unaccounted purchases made from undisclosed sources, without finding any
such purchase made from undisclosed sources, which is impermissible in law.
10. Because, the CIT A has erred in law and on facts in upholding the impugned additions, which are vitiated by the doctrine of vagueness and the doctrine of approbate and reprobate.
11. Because, the Authorities below are wrong in raising and upholding illegal and erroneous demands of tax, interest and penalties mechanically and perversely and all demands as well as penalty notices are liable to be quashed.
12. The appellant craves the leave to add, modify, amend OR delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other.
3. Brief facts of the case are as under :-
“The Appellant, M/s Global Jewellery, is a partnership firm engaged in the business of trading gold, bullion, and jewellery. For the Assessment Year 2021-22, the Appellant filed its return of income declaring a total income of Rs. 2,50,970/-, The return was processed under section 143(1) of the Act and accepted as correct. The case was selected for scrutiny on the grounds of “substantial purchases from non-filers or those with low turnover”. The Assessing Officer (AO) passed an order u/s 143(3) r.w.s 144B on 26.12.2022, making significant additions on account of “unaccounted purchases”. Specifically, the AO added Rs. 1,60,73,404/- for purchases from M/s Trend Jewels (Prop. Boby Gupta) and Rs. 10,00,000/- for purchases from Satish Gara, alleging these were unaccounted purchases. The AO further made an addition of Rs. 95,611/- towards estimated gross profit on the alleged unaccounted purchases without rejecting books of accounts and without disputing sales made and gross profit declared by the Appellant. The assessment was completed vide order dated 26.12.2022 determining total income at Rs. 1,74,19,985/-. Being aggrieved, the Appellant preferred an appeal before the Commissioner of Income Tax (Appeals), NFAC, Delhi and explained that no purchases were made from Shri Satish Gara during the relevant previous year as evidenced by GST input reconciliation. The Appellant explained the purchases from M/s Trend Jewels were genuine, paid through banking channels and duly recorded in books of account. The CIT(A), however, vide order dated 03.12.2025, dismissed the appeal primarily on the ground that the Appellant failed to reconcile the GST data with the books of account to his satisfaction and further declined to admit additional evidences under Rule 46A. The Appellant is aggrieved by the impugned appellate order, which is contrary to facts, law and principles of natural justice, and hence prefers the present appeal before this Hon’ble Tribunal.”
4. During proceedings before us the Ld. Counsel of the assessee argued against the confirmation of addition with respect to only two parties one an addition of Rs.100000/- made by the AO and alleged as unaccounted purchase from Sh. Satish Gara under section 69C of the Act and the addition of Rs.1,60,73,404/- on account of alleged unaccounted purchases under section 69C of the Act from Boby Gupta, Trend Jewels.
5. The Ld. Counsel argued that the addition on account of alleged purchases from Satish Gara is based on presumption only because no such purchase was make from Sh. Satish Gara during relevant previous year. The addition made by the AO was just based on reflection of a name in GST data just based on GSTR return incorrectly filed by 3rd party. The Ld. Counsel also argued that there is no corroborative evidence of the same, therefore, addition u/s.69C on this issue is not justified.
6. Per contra the ld. DR relied on the orders passed by the authorities below.
7. We have heard both the parties on this issue and we find that apart from GST return filed by a 3rd party there is no other evidence recorded to prove the purchases made by the assessee from one Sh. Satish Gara during relevant previous year. Even the revenue has not brought on record any enquiry report in this regard nor any statement of Sh. Satish Gara was recorded. So this addition has been made purely on the basis of 3rd party return which the assessee is claiming as a return filed 3rd party with some wrong information. Since no enquiry has been made in this regard by revenue nor any further evidence has been brought on record. Therefore, in our considered view addition on such presumptions and suspicion cannot be confirmed. Accordingly, assessee’s appeal on this issue is allowed.
8. Appeal on the second addition is against the addition of Rs.16073404/- on account of alleged unaccounted purchases from Sh. Boby Gupta of M/s. Trend Jewels.
9. During proceedings before us the ld. Counsel argued that all the purchases were genuine because the payments were made through banking channels and duly recorded in the books of account. It was further argued by the ld. Counsel of the assessee that the books of account of the assessee has not been rejected by the revenue or the corresponding sales of such alleged bogus purchases have been accepted by the revenue and profit declared on such sales has also been accepted. The Assessee has paid taxes thereon and that has also been accepted by the revenue. Therefore, it was argued that now rejecting the purchases made from M/s. Trend Jewels is tantamount to double taxation which is not acceptable.
10. We have heard both the parties on this issue and we have also gone through the papers and details filed by the assessee. We find that the Ld. CIT(A) did not accept additional evidence in the form of confirmation of accounts, bank statements, copy of invoices etc and relied on the findings given by the AO in the assessment order. The Ld. Counsel of the assessee relied heavily on the orders of the coordinate Bench of Delhi ITAT in the case of ITO Vs. Ritu Bhandula in ITA No. 2750/Del/2025 where such addition made u/s.69C has been dismissed, there is yet another order passed by the coordinate Bench of Delhi ITAT in the case of Gargi Woolen Pvt. Ltd. Vs. PCIT in ITA No. 2771/Del/2025 (supra). Although it has been held in these orders that if the assessee produced all the details of purchases made by it through banking channels duly reflecting the books of account then addition u/s.69C is not applicable.
11. We have heard both the parties on this issue and we have also considered the details filed by the Ld. Counsel of the assessee we find that the assessee had made all the purchases through baking channels and invoices/ GST are being duly reflected in the book of account. We also find that the revenue has not rejected the books of account of the assessee. Once books of account have not been rejected entire purchases made by the assessee cannot be denied and corresponding addition u/s. 69C cannot be sustained. Accordingly, assessee’s appeal on this issue is allowed.
12. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 13.11.2026.
