Atul Kumar Agarwal Vs National e-Assessment Centre (ITAT Dehradun)
Entire Bogus Purchases Cannot Be Added When Sales Accepted – ITAT Dehradun Restricts Addition to 4% Profit Element in Rice Mill Case
The Dehradun Bench of the ITAT partly allowed the appeal of a rice-milling proprietor for AY 2018-19 and held that 100% disallowance of alleged bogus purchases u/s 69C is unsustainable when production, quantitative records and sales are accepted. Only the profit element embedded in such purchases can be brought to tax.
The Assessing Officer, relying solely on third-party survey statements of alleged entry operators, treated ₹48.41 lakhs of purchases from one supplier as bogus and added the entire amount u/s 69C, which was confirmed by the CIT(A). The assessee had produced purchase invoices, bilties, stock register, bank statements showing RTGS/NEFT payments, and demonstrated that only about 11% of total purchases came from the disputed party, while books and quantitative records were never rejected.
The Tribunal held that:
- The AO made no independent enquiry, issued no summons to suppliers, and relied only on untested third-party statements without granting cross-examination, violating natural justice.
- When sales and production are accepted, entire purchases cannot be treated as bogus.
- At best, there could be profit suppression, not inflation of the whole purchase value.
- Statements recorded in survey have weak evidentiary value unless corroborated.
Considering the assessee’s gross profit of 7% and net profit of 1.5%, and to balance revenue interest, the ITAT estimated 4% of ₹48.41 lakhs as reasonable additional income instead of full disallowance.
Accordingly, the addition was restricted to 4% of alleged bogus purchases, interest grounds were held consequential, and penalty initiation u/s 271AAC was dismissed as premature. The appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT DEHRADUN
