Deepak Pawar Vs ACIT (ITAT Delhi)
Once Sales Accepted, No Scope for Bogus Purchase Addition- Suspicion No Substitute for Proof- 69C Addition Falls Flat
ITAT Delhi Deletes Bogus Purchase Addition – Once Sales & E-Way Bills Accepted, No Basis for Profit Estimation
Delhi ITAT allowed the appeal of Deepak Pawar, deleting addition sustained by CIT(A) on alleged bogus purchases from M/s R.K. Polymers.
Assessee, engaged in trading raw material for CPVC pipe industries under proprietorship Deepjyoti Enterprises, filed return declaring income of ₹7,69,120/-. Case was reopened based on allegation of bogus purchases of ₹2,09,39,760/- from M/s R.K. Polymers. AO accepted sales but estimated profit element @12.5% of disputed purchases, making addition of ₹26,17,470/- u/s 69C as unexplained expenditure.
CIT(A) held that s.69C was inapplicable but still estimated profit element @3.04% (average GP of surrounding years + 0.5% grey market margin), thereby sustaining addition of ₹6,36,568/-.
Assessee’s Defence was that Purchases were supported by invoices, e-Way bills & bank payments through account payee cheques. Sales mapped to purchases were accepted by AO. No evidence existed of cash withdrawals or routing back of funds from supplier. Therefore, purchases were genuine & no addition could survive.
Tribunal noted that Revenue failed to bring any evidence showing cash trail or grey market purchase substitution. E-Way bills & invoices confirmed delivery of goods. Once sales are accepted & purchases are supported by documentary evidence, there is no basis for estimating profit or invoking s.69C. CIT(A)’s partial sustenance of addition was unwarranted.
