Raghavendra Kumar Kunchala Vs ITO (ITAT, Hyderabad Bench)
Accepted Sales Could Not Rescue Alleged Bogus Purchases When the Assessee Himself Went Missing: Hyderabad ITAT Sustains ₹3.93 Crore Addition u/s 143(3) r.w.s. 144B
The controversy
The Hyderabad Bench of the ITAT dealt with an appeal involving an addition of ₹3,92,97,602, representing 25% of alleged bogus purchases. Although the assessee raised several substantial grounds concerning accepted sales, quantitative records, GST returns, banking channels & non-rejection of books, none of these arguments could be examined effectively because the assessee repeatedly failed to appear or furnish supporting material before both the CIT(A) & the Tribunal.
The assessee, Shri Raghavendra Kumar Kunchala, was engaged in the business of trading in iron & steel. He filed his return of income for AY 2021-22 on 31 March 2022, declaring a total income of ₹19,45,610. The case was selected for scrutiny under CASS & notice u/s 143(2) was issued by the AO.
Purchases of ₹15.72 crore treated as bogus
During assessment proceedings, the AO concluded that purchases aggregating to ₹15,71,90,411 made from various parties were bogus. Instead of disallowing the entire amount, the AO estimated the profit or unexplained component at 25% of the disputed purchases, resulting in an addition of ₹3,92,97,602.
The assessment was completed u/s 143(3) r.w.s. 144B by order dated 28 December 2022, determining the assessee’s total income at ₹4,12,43,212, as against the returned income of ₹19,45,610.
The assessee challenged the assessment before the CIT(A). However, despite notices issued during the appellate proceedings, he neither responded nor furnished any explanation, evidence or written submission in support of his appeal. The CIT(A), after considering the AO’s findings & the material available on record, sustained the addition.
Assessee’s grounds contained arguable propositions
Before the Tribunal, the assessee contended through his grounds of appeal that the purchases had been treated as bogus merely because certain suppliers had failed to respond to notices issued u/s 133(6) or were not traceable. According to the assessee, such circumstances, without proof that goods had not actually been received, could not justify the disallowance.
It was also claimed that the purchases were duly recorded in the books & supported by GST returns, sales records, banking transactions & quantitative details. No discrepancy was allegedly found in the stock records, turnover or gross-profit ratio. The assessee further argued that the AO had accepted the corresponding sales. Since sales could not have been effected without purchases, treating the purchases as bogus while leaving the sales undisturbed was stated to be inherently contradictory.
Another grievance was that the CIT(A) had dismissed the appeal for non-prosecution without properly deciding the issues on merits. The assessee claimed that he had not opted in Form No. 35 for service through email & that, during the transitional period of electronic appellate proceedings, notices should also have been served through other modes recognised u/s 282.
These contentions may have merited factual & legal examination. However, the assessee failed to place any evidence before the appellate authorities to establish them.
Four hearings before ITAT, but no appearance
The Tribunal fixed the appeal for hearing on 7 April 2026, 14 May 2026, 14 July 2026 & 20 August 2026. On each occasion, neither the assessee nor any authorised representative appeared. No application seeking adjournment was filed either.
Considering the repeated non-compliance & the opportunities already granted, the Tribunal proceeded to adjudicate the appeal ex parte qua the assessee, after hearing the Departmental Representative & examining the material available on record.
The Revenue argued that the AO had identified bogus purchases of ₹15.72 crore but had taken a liberal view by restricting the addition to 25%. It emphasised that the assessee had not produced any material before the CIT(A) or the Tribunal to rebut the findings recorded in the assessment order.
CIT(A) had not dismissed the appeal merely for non-prosecution
After examining the appellate order, the Tribunal rejected the assessee’s contention that the CIT(A) had dismissed the appeal solely because of non-prosecution. The CIT(A) had considered the findings recorded by the AO & decided the issue on the basis of the material available before him.
Thus, this was not a case where the first appellate authority had summarily dismissed the appeal merely because the assessee was absent. Rather, the addition was sustained after examining the assessment findings, which remained unrebutted due to the assessee’s failure to submit evidence.
Even before the Tribunal, despite four opportunities, the assessee did not furnish purchase invoices, stock registers, transportation records, payment evidence, supplier confirmations, GST reconciliation or any other material capable of controverting the findings of the lower authorities.
Grounds of appeal are not substitutes for evidence
The Tribunal observed that no explanation or documentary material had been placed before it to demonstrate any factual or legal error in the CIT(A)’s conclusions. Although the grounds asserted that purchases were supported by GST records, banking transactions & quantitative details, mere assertions in grounds of appeal could not substitute for actual evidence.
In the absence of any material rebutting the findings regarding alleged bogus purchases of ₹15,71,90,411, the Tribunal found no basis to interfere with the CIT(A)’s order. The addition of ₹3,92,97,602 was accordingly sustained & the appeal was dismissed.
The decision is a practical reminder that even potentially strong grounds—such as acceptance of corresponding sales, absence of book rejection & availability of stock records—must be supported through active representation & evidence. An appellate remedy may protect legal rights, but it cannot succeed when the appellant repeatedly declines to prosecute it.
Cases Discussed
- CIT Vs. Calcutta Agency Ltd. (1951) 19 ITR 191 (SC)
- Imperial Chemicals Ind. Ltd. (1969) 74 ITR 17 (SC)
- Transport Corporation of India Ltd., 269 ITR 701 (AP)
- Ramanand Sagar Vs. DCIT, 256 ITR 134 (Bom.)
- Laxminarayan Madanlal, 86 ITR 439 (SC)
- N.K. Protein Ltd. Vs. DCIT, (2017) 84 Taxmann.com 195 (SC)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, HYDERABAD BENCH
This appeal is filed by Shri Raghavendra Kumar Kunchala (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) (“Ld. CIT(A)”) dated 30.09.2025 for the A.Y. 2021-22.
2. The assessee has raised the following grounds of appeal:
“1. The order passed by Ld. Commissioner of Income-Tax (Appeals)/NFAC is provided to Appellant. bad in law, in as much as the appellate authority merely supported the order passed by Assessing Officer without appreciation of facts and legal position presented before him through statement of facts and grounds of appeal.
2. The Ld. Commissioner(Appeals)-NFAC erred in dismissing the Appeal on the ground of non-prosecution that too without properly considering and deciding merits of the case. In fact, in Form 35 Appellant had not opted for service of notice through email and thus there was no proper opportunity provided to the appellant.
3. The Ld. Commissioner(Appeals) -NFAC ought to have appreciated that service of notice through electronic mode, being a new phenomenon, during the transitory phase the Ld. Commissioner(Appeals) should have issued a notice through the other modes of service prescribed under section 282, particularly w.r.t. the businesses carried by Assessees in unorganized sector and thus a notice by registered post or a service through inspector ought to have been made before passing an Ex-parte order.
4. The Ld. Commissioner(Appeals)-NFAC erred in confirming the arbitrary addition of Rs.3,92,97,602/- made by the Assessing Officer referable to the purchases (i.e, 25% of the purchases) on account of alleged bogus purchases without independent examination, without verifying the evidences already filed, and without dealing with the specific contentions raised in grounds of appeal.
5. The Ld. CIT(A) erred in affirming the action of the Assessing Officer, wherein Assessing Officer erred in treating purchases as non-genuine merely because certain suppliers did not respond to notices issued u/s 133(6) or were not traceable, without proving that the goods were not received and without rejecting books of accounts as required under law.
6. The Assessing Officer as well as CIT(A) failed to appreciate that all purchases were duly recorded, supported by GST returns, sales records, banking transactions, and quantitative details, and no discrepancy was ever found in stock, turnover, or gross profit ratio.
7. The authorities below erred in ignoring the Appellant’s sales which have been fully accepted. Without purchases, accepted sales cannot exist; therefore, treating purchases as bogus without disturbing sales is contradictory and unsustainable.
8. For these and other grounds that may be urged at the time of hearing, the applicant submits that the Hon’ble ITAT may be pleased to quash the assessment order as it is bad in law or in the alternative delete the arbitrary additions upheld by the CIT(Appeals]-NFAC.”
3. The brief facts of the case are that the assessee is an individual engaged in the business of trading in iron and steel. The assessee filed his return of income for the assessment year 2021-22 on 31.03.2022, declaring total income of Rs. 19,45,610/-. The case of the assessee was selected for scrutiny under CASS and, accordingly, notice under section 143(2) of the Income-tax Act, 1961 (“the Act”) dated 28.06.2022 was issued by the Assessing Officer. During the course of assessment proceedings, the Assessing Officer observed that the assessee had made bogus purchases amounting to Rs. 15,71,90,411/- from various parties. Accordingly, the Assessing Officer made an addition of 25% of the alleged bogus purchases of Rs. 15,71,90,411/-, which worked out to Rs. 3,92,97,602/-. Consequently, the Assessing Officer completed the assessment under section 143(3) read with section 144B of the Act vide order dated 28.12.2022, assessing the total income of the assessee at Rs.4,12,43,212/-.
4. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A). During the appellate proceedings, the assessee did not respond to any of the notices issued by the Ld. CIT(A) and failed to furnish any explanation or evidence in support of his grounds of appeal. The Ld. CIT(A), after considering the findings recorded by the Assessing Officer and the material available on record, dismissed the appeal of the assessee and sustained the addition made by the Assessing Officer.
5. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal. The appeal was fixed for hearing on various dates, namely, 07.04.2026, 14.05.2026, 14.07.2026 and 20.08.2026. However, on all these occasions, neither the assessee nor any authorized representative appeared before us, nor was any application seeking adjournment filed. We further note that even before the Ld. CIT(A), the assessee had not complied with any of the notices issued during the appellate proceedings. Considering the repeated non-compliance on the part of the assessee and the opportunities already afforded to him, we proceed to adjudicate the appeal ex parte qua the assessee after hearing the Learned Departmental Representative (“Ld. DR”) and on the basis of the material available on record.
6. The Ld. DR, relying upon the orders of the lower authorities, submitted that the Assessing Officer had found purchases amounting to Rs. 15,71,90,411/- to be bogus and, taking a liberal view, had restricted the addition to 25% of such bogus purchases, amounting to Rs. 3,92,97,602/-. He further submitted that the assessee did not respond to the notices issued by the Ld. CIT(A) and failed to produce any material or evidence to rebut the findings recorded by the Assessing Officer. Therefore, according to the Ld. DR, there was no infirmity in the order of the Ld. CIT(A) in sustaining the addition. He further submitted that even before the Tribunal, despite several opportunities having been granted, the assessee has neither appeared nor furnished any submission, explanation or evidence in support of his grounds of appeal or in rebuttal of the addition sustained by the Ld. CIT(A). Accordingly, the Ld. DR prayed that the appeal of the assessee be dismissed.
7. We have heard the submissions of the Ld. DR and perused the material available on record. It is an admitted position that the assessee did not participate in the appellate proceedings before the Ld. CIT(A) despite several opportunities having been afforded to him. The assessee did not furnish any explanation, supporting material or evidence before the Ld. CIT(A) to rebut the findings of the Assessing Officer with regard to the bogus purchases of Rs. 15,71,90,411/- and the consequential addition of Rs. 3,92,97,602/-, being 25% thereof. In this regard, we have gone through the relevant portion of the order of the Ld. CIT(A) at page nos. 6 to 9, which is to the following effect:
The appellant has raised these grounds mainly against quantum addition made during assessment proceedings. Therefore, these grounds are being adjudicated together here:-
The facts and circumstances of above case was carefully perused and considered. In this case, the appellant has contended that the Assessing Officer ought to have considered the fact that assessee cannot be penalized for the purchases made by him with the parties who failed to file the respective Return of Income as per the Income Tax Act, 1961 and Assessing Officer failed to appreciate the documents and records supplied by the appellant. The appellant has further contended that the assessing Officer is not justified in disallowing the expenditure as it is not the burden of the assessee for non-availability of the sellers from whom purchases were made.
In this case, the AO has made addition of Rs. Rs.3,92,97,602/– on account of disallowance of bogus purchases. The relevant portion of the AO is being reproduced as under:-
“3.5 Considering the above discrepancies the assessee was show caused vide notice dated 08.12.2022 as to why purchase made from abovementioned parties should not be treated as bogus. Further the assessee was asked to submit the following details with regard to transportation Further assessee was asked to submit the following additional details regarding transportation of goods of each goods vehicle to substantiate assessee claim of purchase in all purchased goods.
1. Vehicle contract Note
2. Bility of Transport
3. Way bridge slip of empty vehicle and loaded vehicle
4. evidence of movement of goods like delivery challan,
5. lorry receipts and transportation bills etc.
3.6 Moreover assessee was also asked to submit E way bill of the said suppliers and other relevant details as called for vide various notices issued u/s 142(1) of IT Act on the date of compliance of show cause notice which was fixed on 15.12.2022.
3.7 The assessee has not complied at all the show cause notice, therefore it is presumed that assessee does not want submit any evidences or assessee do not possesses these documents as called for. Earlier submission which is filed on 01.12.2022 is being considered as a reply filed in response to notice issued as show cause.
4. On analysis of verification report submitted by the verification unit it is found that most of the suppliers either have not complied the notices or are non existent. Thus it is clear that assessee has booked bogus purchase in the name of these abovementioned parties. Further assessee has availed sufficient opportunities to submit the required details, but assessee in the name of evidence only submitted copy GSTR 3B return. The assessee has submitted copy of E way bill, transporation details of goods received, Vehicle contract Note, Billty of Transport, Way bridge slip of empty vehicle and loaded vehicle, evidence of movement of goods like delivery challan and lorry receipts and transportation bills etc which was specifically asked from the assessee to submit these details.
As discussion made in previous paras the suppliers have been provided opportunity through issuing notice u/s 133(6) of IT Act and as well opportunity also received through verification unit but most of them are not complied.
From the above, it is clear that, the assessee has failed to prove the genuineness of the transactions with above mentioned parties even though specific show cause notice has been issued.
The burden of proving the genuineness of the particular expenditure has been laid down or expended wholly and exclusively for the purposes of business is on the appellant as is held in the case of CIT Vs. Calcutta Agency Ltd. (1951) 19 ITR 191 (SC). The Hon’ble Supreme Court has also reiterated the same principle in the case of Imperial Chemicals Ind. Ltd. (1969) 74 ITR 17 (SC).
The burden of proof is always on the appellant. It is for the tax payer to establish by evidence that particular allowance is justified. It is not for the Department to independently collect evidence and prove that the deduction claimed by the appellant is baseless. This has been emphasized by the Hon’ble Andhra Pradesh High Court in the case of Transport Corporation of India Ltd., 269 ITR 701 (AP).
In the case of Ramanand Sagar Vs. DCIT 256 ITR 134 (Bom), the Hon’ble Mumbai High Court has held that mere fact that the accounts of the assessee contains a debit will not make the expenses deductible. The Assessing Officer is entitled to find out whether the sums so paid are wholly and exclusively laid down for the purposes of the business. Even the existence of an agreement does not prove that the payment is for business purpose as is held by Supreme Court in the case of Laxminarayan Madanlal 86 ITR 439 (SC).
4.1 On analysis of the submission received in response to notices issued u/s 133(6) of IT Act as well as reference report received from verification units, the following transactions have been verified:
i. K NOORJAHAN : Rs.48,800/
ii VENKATA NAGA RUKMINI KURICHETI : Rs.6,000/
iii Century Fibre Plates Pvt Ltd : Rs.87,615/
The facts as narrated above clearly shows that the assessee has booked bogus purchases in the name of various suppliers. During the course of assessment proceedings the assessee has been given sufficient opportunities but the assessee has failed to make required details. Considering the reply received from the suppliers through 133(6) of IT Act and report received through verification unit the amount which confirmed in third parties’ verification is being allowed and remaining amount of Rs.15,71,90,411/- is found bogus purchase which assessee has booked for the year under consideration. Relying on the decision in the case of in the case of N K protein Ltd. Vs Dy.CIT [2017] 84 taxmann.com 195 (SC)/[2017] 250 Taxman 22(SC) [16.01.2017] of Hon’ble Supreme Court 25% of total purchases as discussed above is disallowed and added to the total income of the assessee. Accordingly, an amount of Rs.3,92,97,602/- is added back to the total income of the assessee. Since the assessee mis-reported his income therefore penalty proceeding u/s.270A(9) of the income-tax act is separately initiated.
(Addition: Rs. 3,92,97,602/-).”
Further, it is relevant to mention here that during the appellate proceeding, the appellant has not submitted any documentary evidence in support of his defence/contention to controvert the findings of AO by filing any written submission. Therefore, the contention of the appellant is not found tenable.
In appellate proceedings, despite being provided a number of opportunities through notices issued to it, the appellant has not responded to any of the notices. It is, thus, evident that the appellant has no evidence to substantiate the grounds taken and it has not even once argued with any supporting, relevant and cogent arguments, constraining me to, therefore, go through the brief submission appearing in the grounds of appeal and statement of facts filed along with the impugned appeal to decide on the merits while adjudicating the same. The appellant has not furnished any justification or documentary evidence in order to substantiate his grounds of appeal, as mentioned earlier.
It is pertinent to state that to decide this appeal in timely manner several notices/communications through ITBA portal were sent to the appellant as noted above. Hence, in view of the aforesaid non-compliance of the notices/opportunities issued during the course of appellate proceedings by the appellant, the instant appeal is being adjudicated and disposed of, primarily on the basis of documents available on record.
In view of the above narrated facts, I find no infirmity in action of the Assessing Officer. Therefore, the addition made by the Assessing Officer is hereby upheld. Consequently, these grounds of the appellant are dismissed.
8. On a perusal of the above, we find that the Ld. CIT(A), after considering the findings recorded by the Assessing Officer and the material available on record, sustained the addition and dismissed the appeal of the assessee. Thus, the appeal was not dismissed merely for want of prosecution; rather, the Ld. CIT(A) considered the findings of the Assessing Officer and decided the issue on the basis of the material available before him. Before us also, despite repeated opportunities on 07.04.2026, 14.05.2026, 14.07.2026 and 20.08.2026, the assessee has failed to appear or to furnish any explanation, submission, documentary evidence or other material to controvert the findings recorded by the Assessing Officer or to demonstrate any error in the findings of the Ld. CIT(A). In the absence of any material brought on record by the assessee to rebut the findings of the lower authorities, we find no basis to interfere with the order of the Ld. CIT(A). Accordingly, we find no infirmity in the order of the Ld. CIT(A) sustaining the addition of Rs. 3,92,97,602/- made by the Assessing Officer. The order of the Ld. CIT(A) is, therefore, upheld and the grounds raised by the assessee are dismissed.
9. In the result, the appeal of the assessee is dismissed.
Order pronounced in the Open Court on 4th September, 2026.
