Paras Khurana Vs ITO (ITAT Delhi)
The Delhi ITAT held that mere cancellation of GST registration of suppliers or their non-compliance before the department cannot automatically render purchases bogus. In the case of the assessee, the AO had treated purchases of ₹8.77 crore as suspicious because several suppliers were GST non-filers, their GST registrations stood cancelled and notices issued by the department remained unanswered. However, instead of disallowing the entire purchases, the AO estimated profit element at 10% and made an addition of ₹87.75 lakh.
Before the Tribunal, the assessee argued that books of account were never rejected, sales were accepted and purchases were backed by invoices and banking transactions. The ITAT observed that although the non-compliance by suppliers and GST irregularities created suspicion and indicated possible delinquent transactions, these factors alone were insufficient to conclude that the entire purchases were bogus. The Tribunal further clarified that the CIT(A)’s observation treating the entire purchases of ₹8.77 crore as unexplained was merely a typographical mistake and not a valid enhancement of income. Balancing the surrounding circumstances, the ITAT reduced the estimated addition from 10% to 5% of the purchases and sustained disallowance only to the extent of ₹43.87 lakh as probable embedded profit element.
FULL TEXT OF THE ORDER OF ITAT DELHI
