Purchases Cannot Be Disbelieved When Books Not Rejected and Payments Made Through Banking Channels: ITAT Deletes ₹12.73 Cr Addition u/s 69C [Read Order]
The ITAT deleted the ₹12.73 crore addition made under Section 69C, holding that purchases cannot be disbelieved when books are not rejected and payments are made through banking channels.
ITAT Deletes ₹12.73 Cr Addition as Purchases Backed by Books, Bank Proofs
The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeal filed by Pravesh Kumar Jaiswal for Assessment Year (AY) 2021–22, deleting the addition of ₹12,73,85,064 made under Section 69C read with Section 115BBE of the Income TaxAct, 1961.
The assessee’s case was selected for scrutiny on the basis that he had made substantial purchases from suppliers who were either non-filers of income-tax returns, had abnormally low turnover, or whose GST registrations were cancelled or suspended.
Based on this information, the Assessing Officer (AO) suspected that the assessee had booked bogus or inflated purchases to reduce taxable profit.
During the assessment proceedings, notices under Section 133(6) were issued to verify the transactions, but many of them remained unserved or unresponded. The AO, finding no direct confirmations or verifiable evidence from the suppliers, treated the entire purchases of ₹12.73 crore as non-genuine and made an addition under Section 69C of the Act.
On appeal, the Commissioner of Income Tax (Appeals) (CIT(A)) sustained the addition, agreeing that the assessee had failed to prove the genuineness of the purchase transactions.
Before the Tribunal, the assessee contended that the addition made under Section 69C was bad in law as the AO had not rejected the books of account under Section 145(3), and without such rejection, disallowance of the entire purchases was impermissible.
The assessee argued that all books of account, invoices, and payment proofs through banking channels were duly furnished and that non-response of suppliers or cancellation of their GST registrations were factors beyond the assessee’s control.
The Bench comprising Rajesh Kumar (Accountant Member) and Sonjoy Sarma (Judicial Member), observed that the addition was made merely because suppliers did not respond to Section 133(6) notices and their GST registrations were cancelled.
The Tribunal held that the assessee cannot be penalized for the non-compliance of third parties over whom he has no control, particularly when the books of account were not rejected and sales were accepted.
The Bench noted that no defect was found in the quantitative tally or trading account and that the addition was based purely on presumptions without tangible evidence.
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The Tribunal relied on consistent judicial precedents, including Axora Resources Ltd. v. ITO (2025), the Tribunal held that when payments are made through banking channels and sales are accepted, purchases cannot be treated as bogus merely because the suppliers were untraceable or non-filers.
Accordingly, the ITAT set aside the order of the CIT(A) and directed deletion of the ₹12.73 crore addition under Section 69C of the Income Tax Act, allowing the appeal in favour of the assessee.
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