Nitin Kaher Vs AO (ITAT Delhi)
Bogus Purchase Allegation Softened: ITAT Delhi Restricts Section 69C Addition to 10% Despite Entry-Operator Statement
The Delhi ITAT (A-Bench) partly allowed the assessee’s appeal for AY 2020-21, holding that a 100% disallowance of ₹16.65 lakh under Section 69C based solely on an investigation-wing statement was not justified. The Assessing Officer had treated purchases from Shri Govinda Enterprises as non-genuine on the basis of a third-party statement denying knowledge of transactions.
The Tribunal noted that the assessee had produced comprehensive documentary evidence: GST-compliant invoices and e-way bills evidencing physical delivery; banking-channel payments; reflection of purchases in GSTR-2A; quantitative stock records linking purchases to taxed sales; and regularly maintained books which were not rejected. Crucially, the AO did not supply the relied-upon statement nor allow cross-examination, and conducted no independent verification to rebut the evidences.
Applying a pragmatic approach for alleged accommodation purchases where sales are accepted, the ITAT held that only the profit element could be estimated. It therefore restricted the disallowance to 10% of the impugned purchases, deleting the balance. The appeal was partly allowed with a direction to recompute income accordingly.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is arising from the order of the NFAC, Delhi in appeal No. NFAC/2019-20/10452785 dated 10.7.2025. Assessment was framed by the AO u/s. 147 read with section 144B of the Income Tax Act, 1961 dated 14.5.2024 relating to assessment year 2020-21. The sole issue in this appeal is as under:-
“On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) has erred in sustaining the order of the Assessing Officer and confirming the demand of Rs. 20,98,332/-.”
2. Brief facts of the case are that the assessee had filed his return of income for AY 2020-21 on 24.3.2021, declaring total income at Rs. 4,90,740/-. As per the information available in insight portal and information received from the DDIT (Inv.), Unit 1(1), New Delhi, AO noted that the assessee had entered into “High Risk Transaction” during the year. Further, during the search action in the case of M/s Johnson Watch Group, M/s Kapoor Watch Group and others, it was noted that above two entities have taken accommodation entries from several shell entities and no-filers. On analysis of the GST data of those shell entities and non-filers, further such entities were identified who had also taken the benefits of such illegal / illegitimate accommodation entries. Various beneficiary entities have taken accommodation entries for bogus sales and purchases which are non-genuine. The assessee is involved in the sale transaction by dummy entity of Rs. 16,65,340/-. In view of the above, the assessee was asked to explain the same, but the assessee failed to explain the issue. Therefore, order u/s. 148A(d) of the Act was passed and a notice u/s. 148 of the Aft dated 27.3.2024 was issued and served upon the assessee. In response to the said notice the assessee filed his return of income by declaring total income at Rs. 4,90,740/-. During the course of assessment proceedings, the assessee was asked to explain the same with documentary evidences. The assessee before the AO submitted that it had made purchases with a party who had GSTIN No. filing proper GST return, payments were made using banking channel and there is no evidence against the assessee of transaction being not genuine. The AO noted that in search operation conducted on 31.10.2022 in the cases of M/s Johnson Watch Group and M/s Kapoor Watch Group, revealed large scale accommodation entries involving bogus purchase and sales through dummy entities. The assessee was found to have made purchases worth Rs. 16,65,340/- during FY 2019-20 from M/s Shree Govinda Enterprises, whose proprietor, Shri Sanjay, denied any knowledge of the entity or the transactions in his sworn statement recorded on 8.2.2023. Therefore, the AO noted if the entity itself was not aware of the transaction made, then the assessee’s contention of genuineness does not hold. Hence, the transaction entered by the assessee M/s Shree Govinda Enterprises was held as non-genuine by the AO. In view of the above, the AO passed an order by making disallowance of Rs. 16,65,340/- u/s. 69C of the Act and added back to the total income of the assessee. Against the action of the AO, the assessee preferred appeal before the Ld. CIT(A), who vide his impugned order dated 10.7.2025 has dismissed the appeal of the assessee. Aggrieved, assessee is in appeal before us.
