Addition u/s 145(3) and S. 69A due to Failure to Prove Genuineness of Purchases and Cash Deposits: ITAT upholds Additional [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, held that where the assessee fails to substantiate the genuineness of purchases, maintain proper books of accounts, and explain cash deposits, the rejection of books under Section 145(3) and 69A additions were upheld by the Tribunal.

The appellant, Deepanshu Srivastava, filed appeals against the orders of the Commissioner of Income Tax (Appeals) (CIT(A)) for Assessment Years (AY) 2017-18 and 2021-22 arising out of assessment orders passed under Sections 143(3) read with Section 144B of the Income Tax Act, 1961.

The appellant engaged in the business of scrap trading through proprietorship of Nishi Paper & Print Pack and Baba Industries, declared income of ₹23,54,280. The case was selected for scrutiny on the ground that purchases were made from parties who were either non-filers or had disclosed low turnover.

The Assessing Officer (AO) observed that despite repeated notices under Section 142(1), the appellant failed to furnish purchase bills, confirmations, or supporting documents. Notices issued under Section 133(6) to various parties remained uncomplied and most of such parties were found to be non-filers rendering the purchases doubtful.

The AO rejected the books of accounts under Section 145(3) and estimated the gross profit at 9.96% based on the average of preceding years, thereby making an addition of ₹1,75,68,862.

The CIT(A) upheld the addition, observing that the appellant failed to discharge the onus of proving the identity, creditworthiness, and genuineness of transactions. It was further noted that despite multiple opportunities, the appellant neither furnished evidence nor responded to notice.

Sumit Lalchandani, counsel for the appellant reiterated submissions made before the lower authorities. Manish Gupta, representing the Revenue Department.

Madhumita Roy, Judicial Member and Naveen Chandra, Accountant Member observed that the appellant failed to produce any supporting bills, vouchers, confirmations, or bank statements to substantiate the purchases.

The Tribunal further noted that the appellant did not maintain stock records and failed to explain discrepancies in financial statements as well as substantial cash withdrawals.

The Tribunal held that the appellant failed to discharge the burden cast upon him to prove the genuineness of transactions and correctness of accounts. Accordingly, the rejection of books of accounts under Section 145(3) and estimation of income was found to be justified.

In the light of facts and circumstances, the Tribunal dismissed the appeal.

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