Harish Narang Vs PCIT (ITAT Delhi)
Bogus Purchases Mean 69C, Not 37(1):Wrong Section, Short Tax: PCIT Right in Invoking 263
GST Scam Meets Income-Tax Law: 115BBE Hits Bogus Purchases- Accommodation Entries Can’t Get Normal Rate Shield-Section 69C Reigns Supreme Where Goods Never Arrived
In Harish Narang Vs. PCIT , ITA No.3637/Del/2025, AY 2018-19, order dated 31.12.2025, Delhi ITAT upheld revision u/s 263 & dismissed Assessee’s appeal, holding that AO’s assessment u/s 147 r.w.s. 144B was erroneous & prejudicial to the interest of Revenue for wrongly invoking section 37(1) instead of section 69C r.w.s. 115BBE in case of bogus purchases.
Assessee was found, on basis of GST Department inputs, Investigation Wing material & independent enquiries, to have taken bogus purchase bills of ₹1.04 crore from paper concerns controlled by Shri Rajesh Mittal, who had admitted before GST authorities that such firms were issuing accommodation entries with cash-back after commission. AO conclusively established that no goods were ever supplied, invoices were deficient, transport details were fake & suppliers were non-existent. Despite this, AO merely disallowed purchases u/s 37(1) as non-business expenditure, instead of treating them as unexplained expenditure u/s 69C attracting 60% tax u/s 115BBE.
Tribunal held that once bogus purchases & non-receipt of goods are established, source of expenditure itself becomes unexplained, squarely attracting section 69C, & reliance on CIT v. Radhika Creations (Del HC) was misplaced as that decision applies where source is explained & expenditure is genuine. ITAT endorsed PCIT’s reliance on Kanak Impex (Bom HC), N.K. Proteins (SC) & AAA Teleshopping (ITAT), & held that non-application of correct charging provision resulting in short levy of tax fully justifies revision u/s 263 under Malabar Industrial Co. (SC) principles. Revision order was thus confirmed & Assessee’s appeal dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
