Addition u/s 69C for Alleged Bogus Purchases: ITAT Restricts Disallowance to 8% Citing Accepted Sales and Audited Records [Read Order]
The Tribunal referred to legal principles which stated that in cases of suspected bogus purchases, only the profit element should be taxed, not the entire purchase amount, to avoid revenue loss.
![Addition u/s 69C for Alleged Bogus Purchases: ITAT Restricts Disallowance to 8% Citing Accepted Sales and Audited Records [Read Order]](https://images.taxscan.in/h-upload/2025/07/26/2069350-disallowance-taxscan.webp "Addition u/s 69C for Alleged Bogus Purchases: ITAT Restricts Disallowance to 8% Citing Accepted Sales and Audited Records [Read Order]")
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) restricted the disallowance to 8% under section 69C of Income Tax Act,1961, for alleged bogus purchases, citing accepted sales and audited records, and partly allowed the appeal. Ramjibhai Kesaraji Patel,appellant-assessee, had declared income of ₹4,96,960 in the return. The case was reopened, and...
The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) restricted the disallowance to 8% under section 69C of Income Tax Act,1961, for alleged bogus purchases, citing accepted sales and audited records, and partly allowed the appeal.
Ramjibhai Kesaraji Patel,appellant-assessee, had declared income of ₹4,96,960 in the return. The case was reopened, and reassessment was completed under section 147 read with section 144B on 15.03.2023, assessing total income at ₹21,25,604 after making an addition of ₹15,28,644 under section 69C for alleged bogus purchases.
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The Commissioner of Income Tax (Appeals) [CIT(A)] dismissed the appeal due to delay in filing and lack of any explanation from the assessee.
The assessee counsel argued that the purchases were genuine and all supporting documents, including details of purchases from Laxmiraj Enterprise and Raghav Traders, were submitted during the assessment through a paper book on 17.02.2023. It was submitted that the payments were made through banking channels, the books were audited, and the transactions were under the VAT regime.
The counsel also pointed out that the Assessing Officer (AO ) had accepted the sales and had not questioned the purchases. In the alternative, it was argued that disallowing the entire purchase amount was excessive, and only the profit element, if any, could have been disallowed.
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The two member bench comprising Dr.B.R.R. Kumar (Vice President) and Suchitra Kamble (Judicial Member) examined the submissions and documents on record, including VAT invoices, bank statements, and audited books. It noted that the Assessing Officer (AO) had not disputed the sales. However, doubts were raised about the genuineness of some suppliers, based on their past record as accommodation entry providers.
The appellate tribunal referred to settled legal principles laid down by the Gujarat and Bombay High Courts, which stated that in cases of suspected bogus purchases, only the profit element should be taxed, not the entire purchase amount, to avoid revenue loss.
Relying on these precedents and considering the facts of the case, the ITATl found it reasonable to restrict the disallowance to 8% of the purchase amount of ₹15,28,644.
The appeal was partly allowed.
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