ITAT Quashes ₹3.97 Crore Income Addition Based on Supplier Non‑Responses and Tata Ace Scrap‑Load Capacity Doubts [Read Order]

In a recent ruling, the Income Tax Appellate Tribunal (ITAT) quashed a ₹3.97 crore income addition which was based on supplier non‑responses to statutory notices and held that the AO’s doubts over the carrying capacity of a Tata Ace used for scrap deliveries were speculative and unsupported by proper enquiry.

The matter arises from the assessing officer (AO)’s scrutiny of the assessees' 2 business for AY 2021–22. The AO rejected the books of accounts under Section 145(3) of the Income Tax Act, citing non-response from certain suppliers to notices under Section 133(6), inactive GST registrations, and doubts over vehicle capacity for deliveries. On this basis, the AO estimated net profit at 8% of turnover, raising taxable income from ₹25.8 lakh declared to ₹4.23 crore.

The assesse, Mahesh Kumar Aggarwal, appealed to NFAC, which ruled in his favour.

The revenue argued that the vehicle used was shown as a TATA Ace diesel, which has a lower carrying capacity than the quantity delivered mentioned in the invoices. Also pointed out that the suppliers from whom the assessee claimed purchases had not filed income tax returns despite reporting large sales, and that many of their GST registrations were found inactive.

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It was also included that although the Assessing Officer had issued notices under Section 133(6) of theIncome Tax Act, only two of the five suppliers furnished account copies, which, in his view, indicated that the purchases claimed by the assessee were not genuine

On the other hand assessee argued that he had fully discharged his burden of proof by furnishing purchase bills, bank statements, PAN and GST details of the suppliers. also duly discharged its initial burden of substantiating the genuineness of the purchase transaction by furnishing necessary documentary evidence.

After hearing both sides, the tribunal noted that while the Assessing Officer doubted the genuineness of the assessee’s purchases, no physical enquiries were conducted to verify the suppliers. Out of the five parties issued notices under Section 133(6), only two responded, but the non‑response of the others was not sufficient to treat the purchases as bogus.

It was also held that the assessee had already discharged his burden by producing bills, bank statements, and other records to establish genuineness. The AO also questioned the capacity of the Tata Ace vehicle used for deliveries, but again made no detailed enquiry to substantiate this doubt.

The bench of Sudhir Kumar (Judicial Member) and Renu Jauhri (Accountant Member) held that NFAC had correctly examined the matter, applied settled legal principles, and rightly deleted the ₹3.97 crore addition.

Accordingly, the tribunal upheld the NFAC’s order and dismissed the Revenue’s appeal.

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