Case Law Details
Rajendra Shangari Vs DCIT (ITAT Kolkata)
Income Tax Appellate Tribunal (ITAT) Kolkata bench has ruled in favor of assessee Rajendra Shangari, stating that an Assessing Officer (AO) cannot make additions to income based on alleged bogus purchases without first rejecting the assessee’s books of account or disputing reported sales. The Tribunal’s decision effectively deletes an addition of Rs. 38,46,188/- made by the AO for the assessment year 2018-19.
The case involved Rajendra Shangari, an individual engaged in contractual work for Tata Steel and the state government. For the assessment year 2018-19, Mr. Shangari filed his return declaring an income of Rs. 2,58,20,920/-. Subsequently, the AO initiated proceedings under Section 148 of the Income Tax Act, completing the assessment under Section 147 read with Section 144B. The AO added Rs. 38,46,188/- to Mr. Shangari’s income, categorizing this amount as “bogus purchase.”
Mr. Shangari appealed the AO’s order before the National Faceless Appeal Centre (CIT(A)), but his appeal was dismissed, and the reassessment order was upheld. Aggrieved by this decision, he then filed an appeal with the ITAT Kolkata.
The core of Mr. Shangari’s argument before the ITAT was that both the AO and the CIT(A) erred by upholding the addition when his books of account had not been rejected. His representative emphasized that the assessee’s audited books were accepted during the assessment proceedings, and the AO had accepted the declared income and sales figures. The contention was that it is impermissible to selectively dispute purchase figures without any cogent material, especially when the corresponding revenue from sales is accepted. The representative argued that such an approach violates principles of natural justice, as the AO cannot accept sales on one hand and reject corresponding purchases on the other.
The Departmental Representative, on the other hand, did not present any arguments to counter the factual submissions made by Mr. Shangari’s representative, merely supporting the decisions of the lower authorities.
After reviewing the submissions and available records, the ITAT found merit in the assessee’s arguments. The Tribunal observed that the AO’s addition was based solely on the claim of bogus purchases, while simultaneously not rejecting the books of account or disputing the sales or income declared by the assessee. The ITAT concluded that if the revenue declared by the assessee is accepted, the corresponding purchases must also be accepted. Therefore, the Tribunal held that the AO’s action of rejecting purchases while accepting sales was not legally sustainable.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
The present appeal has been preferred by the assessee against an order dated 16.11.2023 of the National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’).
2. Brief facts of the case are that the assessee is an individual who is engaged in contractual jobs to Tata Steel and state government wherein the final job is subject to strict scrutiny by officials and government inspectors and filed return of income declaring an income of Rs.2,58,20,920/- for the assessment year 2018-19. Subsequently, in the case of the assessee, the Assessing Officer invoked section 148 proceedings and completed the assessment u/s 147 r.w.s. 144B of the Act by adding an amount of Rs.38,46,188/- to the income of the assessee stating that the alleged sum was bogus purchase.
3. Dissatisfied with the above order, the assessee preferred an appeal before the ld. CIT(A) against the reassessment order, where the ld. CIT(A) dismissed the appeal of the assessee and upheld the reassessment order passed by the Assessing Officer.
4. Aggrieved by the said order, the assessee filed the present appeal before this Tribunal raising various grounds. However, the assessee’s primary contention is that the ld. CIT(A) erred in by upholding the order of the Assessing Officer when the books of account of the assessee was not rejected and without rejecting the purchase from the corresponding revenue declared by the assessee which is bad in law. The ld. AR stated that the books of account filed by the assessee were duly audited and not rejected during the assessment proceedings and the Assessing Officer accepted the income declared and sales figures reported by the assessee but solely disputed purchase figures to make the addition, which is not correct. He further argued that when the books of account are not rejected and revenue declared by the assessee is accepted, it is not permissible to treat the purchase as bogus without any cogent material. He also stated that the Assessing Officer cannot adopt selective approach accepting the sales on one hand and rejecting the corresponding purchase on the other, as such the approach violates the principles of natural justice.
5. On the other hand, the ld. DR could not controvert the factual submission made by the ld. AR and merely supported the decisions rendered by the authorities below.
6. We, after hearing of both the parties and perusing the materials available on record, find that the Assessing Officer has made the addition merely on the ground that the purchase amounting to Rs.38,46,188/-was bogus while at the same time not rejecting the books of account or disputing sales or income declared by the assessee when the revenue declared by the assessee is accepted by the Assessing Officer and the corresponding purchases also have to be accepted. Therefore, the action of the Assessing Officer in rejecting the purchase while accepting the sales is not legally sustainable. We, therefore, find merit in the submissions made by the assessee and view that the addition made by the Assessing Officer is not correct and accordingly we delete the addition made by the Assessing Officer.
7. In the result, the appeal of the assessee is allowed.
Kolkata, the 15th July, 2025.
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