AO cannot Make Addition on Bogus Purchases without Rejecting Books or Reported Sales : ITAT says such Addition Legally Unsustainable [Read Order]
The assessee argued that such selective acceptance of sales while rejecting related purchases was not justified and went against the principles of natural justice.
![AO cannot Make Addition on Bogus Purchases without Rejecting Books or Reported Sales : ITAT says such Addition Legally Unsustainable [Read Order]](https://images.taxscan.in/h-upload/2025/07/18/2064934-itat-kolkata-bogus-purchases-bogus-purchases-taxscan.webp "AO cannot Make Addition on Bogus Purchases without Rejecting Books or Reported Sales : ITAT says such Addition Legally Unsustainable [Read Order]")
The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the addition of Rs. 38.46 lakh made towards bogus purchases, holding it legally unsustainable as the Assessing Officer (AO ) had not rejected the books of account or disputed the reported sales.
Rajendra Shangari,appellant-assessee, was engaged in contractual jobs for Tata Steel and the state government, where the final work was subject to strict scrutiny by officials and inspectors. He filed his return of income for the assessment year 2018-19, declaring a total income of Rs. 2,58,20,920/-.
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Subsequently, the AO initiated proceedings under section 148 and completed the reassessment under section 147 read with section 144B of the Act, adding Rs. 38,46,188/- to the income, alleging it as bogus purchases.
Aggrieved by the reassessment order, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)[CIT(A)]. However, the CIT(A) dismissed the appeal and upheld the additions made by the AO.
The assessee then appealed before the tribunal.
The assessee contended that the CIT(A) erred in upholding the addition without rejecting the books of account or the corresponding sales. It was submitted that the books were duly audited, not rejected during assessment, and the AO had accepted the declared income and sales but disallowed part of the purchases without any valid basis. The assessee argued that such selective acceptance of sales while rejecting related purchases was not justified and went against the principles of natural justice.
The departmental representative did not dispute these facts and only supported the orders of the lower authorities.
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The two member bench comprising Sonjoy Sarma ( Judicial Member) and Ratnesh Nandan Sahay ( Accountant Member) noted that the AO treated the purchases of Rs. 38,46,188/- as bogus without rejecting the books of account or questioning the reported sales and income. Since the sales were accepted, the related purchases should have also been accepted.
It held that accepting sales while disallowing corresponding purchases was not legally justified. Finding merit in the assessee’s arguments, the appellate tribunal deleted the addition.
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