No Bank Statements to Prove Transactions: Bombay HC orders Full Disallowance of Bogus Purchases u/s 69C [Read Order]
The Bombay High Court ruled that full disallowance of bogus purchases is mandatory in the absence of bank statements under Section 69C of the Income Tax Act
![No Bank Statements to Prove Transactions: Bombay HC orders Full Disallowance of Bogus Purchases u/s 69C [Read Order]](https://www.taxscan.in/wp-content/uploads/2025/03/Bank-Statements-Bank-Statements-to-Prove-Transactions-Bombay-HC-Bombay-HC-order-Disallowance-of-Bogus-Purchases-Bogus-Purchases-taxscan.jpg "No Bank Statements to Prove Transactions: Bombay HC orders Full Disallowance of Bogus Purchases u/s 69C [Read Order]")
In a recent ruling, the Bombay High Court ordered the full disallowance of bogus purchases under Section 69C of the Income Tax Act, citing the absence of bank statements to verify transactions. The case involved Shree Ganesh Developers, a real estate firm, which had declared an income of Rs. 61,05,420. During scrutiny, the Assessing Officer (AO) assessed the income at Rs....
In a recent ruling, the Bombay High Court ordered the full disallowance of bogus purchases under Section 69C of the Income Tax Act, citing the absence of bank statements to verify transactions.
The case involved Shree Ganesh Developers, a real estate firm, which had declared an income of Rs. 61,05,420. During scrutiny, the Assessing Officer (AO) assessed the income at Rs. 15,41,95,860, adding Rs. 14,30,90,442 as bogus purchases.
The Commissioner of Income Tax (Appeals) [CIT(A)] later deleted the additions for most suppliers but upheld a partial disallowance of 12.5% for purchases from Neptune Trading Co. and Hari Om Traders.
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The Revenue challenged this before the Income Tax Appellate Tribunal (ITAT), seeking full disallowance. The Revenue argued that the purchases from these two suppliers remained unexplained as they failed to submit their bank statements.
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They argued that, under Section 69C of the Income Tax Act, the entire expenditure should be disallowed if the source of the purchase is not satisfactorily explained. The Revenue relied on the Gujarat High Court’s ruling in N.K. Industries Ltd. vs. DCIT, which upheld 100% disallowance of such transactions.
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The assessee’s counsel countered that purchases from all other suppliers were accepted as genuine after remand proceedings, where bank verifications confirmed no cash withdrawals. They argued that the same principle should apply to Neptune Trading Co. and Hari Om Traders, and partial disallowance of 12.5% was appropriate.
A bench comprising Justice M.S. Sonak and Justice Jitendra Jainfound that, unlike other suppliers, Neptune Trading Co. and Hari Om Traders did not provide bank statements, making it impossible to verify whether payments were genuine.
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The court observed that the ITAT erred in restricting the disallowance to 12.5% when no proof of genuineness was available. The court ruled that under Section 69C, an assessee cannot claim deductions for unverified expenses.
The court reversed the ITAT’s order and directed full disallowance. The court capped the total additions at Rs. 1,00,10,773, ensuring no excess tax liability beyond the unverified purchases. For other suppliers, where purchases were substantiated with bank statements, the court upheld the ITAT’s decision.
To Read the full text of the Order CLICK HERE
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