Arvind Jain Vs ITO (ITAT Delhi)
No Basis, No Break-up, No Addition- TEP-Based Guesswork Collapses: Delhi ITAT Deletes Ad-hoc Profit Addition on Alleged Bogus Purchases-ITAT Quashes 2.5% Profit Estimation from ‘Bogus Purchases’
Delhi ITAT ‘E’ Bench in Arvind Jain vs ITO, Ward 5(1)(1), Noida (ITA No.5146/Del/2025, AY 2014-15, order dated 23-12-2025) deleted addition of ₹96.66 lakh made on account of ad-hoc profit estimation from alleged bogus purchases, holding that the entire exercise was without any factual foundation or cogent material.
Assessment was reopened based solely on a Tax Evasion Petition (TEP) alleging that assessee earned profits of ₹4 crore during FY 2013-14. AO, without identifying any specific bogus purchase parties, invoices, or transactions, reduced returned income from the alleged figure and treated the balance of ₹3.86 crore as bogus purchases, applying 2.5% profit rate to make the impugned addition. CIT(A) confirmed the action.
ITAT found that the TEP contained only lump-sum allegations and no actionable details. Neither the order u/s 148A(d) nor the assessment order explained how the figure of ₹3.86 crore was arrived at, or which purchases were non-genuine. Tribunal noted that books of account were not rejected, sales were accepted, and payments were routed through banking channels.
Crucially, ITAT relied on the fact that on identical TEP allegations, reassessment for AY 2013-14 had already been quashed, and for AY 2015-16 the AO himself dropped the issue after reopening, making no addition. In such circumstances, sustaining an ad-hoc addition for AY 2014-15 was held to be wholly unjustified.
Accordingly, ITAT deleted the entire addition, reiterating that additions cannot rest on conjectures, estimations, or unsubstantiated TEP inputs, and that profit estimation presupposes identification of actual bogus purchases, which was completely absent in the present case.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. This appeal is filed by the assessee is preferred against the order of the Ld. CIT(A), National Faceless Appeal Centre (for short, NFAC), passed in DIN & Order No. ITBA/NFAC/S/250/2025-26/1077784466(1), for A.Y. 2014-15, u/s 250 of the Income Tax Act, 1961(hereinafter referred to as, “Act”), order dated 25.06.2025. The Assessment was framed by AO u/s 147 r.w.s.144B of the Act, vide order dated 24.05.2023.
