ALPHA COMBINES,BADLAPUR vs. DCIT-1, CIRCLE-1, KALYAN

आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM:

This appeal by the assessee is directed against the order dated 28.02.2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [hereinafter referred to as "the CIT(A)"], under section 250 of the Income-tax Act, 1961[hereinafter referred to as "the Act"], for

2 ITA No. 4599/Mum/2026 Alpha Combines assessment year 2019-20. The impugned appellate order arises from the assessment order dated 18.03.2024 passed under section 147 read with section 144B of the Act.

A. GROUNDS OF APPEAL 1. The learned CIT Appeals has erred in confirming the addition made during the course of Assessment u/s 69C to the tune of ₹57,29,735/- Just because the purchase made by the Appellant were from a dealer who was declared Non-Genuine Tax Payer by the GST department, when infact the appellant has produced all the documentary evidences supporting the purchases during the course of Assessment proceedings as well as first appellate proceedings. 2. The Appellant craves leave to add, alter, amend, and modify the aforesaid grounds of appeal at or any time before the hearing as may be advised from time to time. B. RELIEF CLAIMED 1. The purchases being genuine the addition confirmed by the learned CIT to the tune of ₹57,29,735/- may please be deleted. 2. Any other relief as deemed fit by the Authority. 3. The principal controversy arising for our consideration is whether the learned CIT(A) was justified in confirming the addition of Rs.57,29,735/- made by the Assessing Officer under section 69C of the Act in respect of purchases made by the assessee from M/s Nahar Industries.

4.1. The assessee is a resident firm engaged in the business of builders and developers. It filed its original return of income for

3 ITA No. 4599/Mum/2026 Alpha Combines assessment year 2019-20 on 17.10.2019, declaring a total income of Rs.63,54,860/-. On the basis of information that the assessee had obtained alleged bogus purchase bills amounting to Rs.57,29,735/- from M/s Nahar Industries, proceedings under section 148A were initiated. After passing an order under section 148A(d), notice under section 148 was issued on 30.03.2023. In response thereto, the assessee filed its return on 19.04.2023, declaring the same income of Rs.63,54,860/-. 4.2. During the reassessment proceedings, the Assessing Officer recorded that M/s Nahar Industries was allegedly engaged in issuing accommodation bills without actual supply of goods. This allegation was based upon information received from the Investigation and GST authorities and the statements of persons connected with the said concern. The assessee was, therefore, called upon to establish the genuineness of purchases of sand, khadi and bricks amounting to Rs.57,29,735/- made from M/s Nahar Industries during financial year 2018-19. 4.3. The assessee furnished purchase invoices, the ledger account of M/s Nahar Industries, bank statements showing payment of the entire purchase consideration through banking channels, and GST returns. It explained that the supplier was registered under the GST law at the relevant time and that the purchases and corresponding payments were duly recorded in its books of account. As regards the absence of transport documents, the assessee submitted that the transportation and freight charges were borne by the supplier in accordance with the

4 ITA No. 4599/Mum/2026 Alpha Combines prevailing trade practice. Without prejudice, the assessee contended that, even if the purchases were regarded as not fully verifiable, only the profit element embedded therein could be brought to tax. 4.4. The Assessing Officer did not accept the explanation of the assessee on the ground that it had failed to produce independent evidence establishing the actual movement, receipt and utilisation of the goods, such as e-way bills, transport bills, delivery challans, inward records, stock-register reconciliation and godown records. He consequently treated the entire purchases of Rs.57,29,735/- as unexplained expenditure under section 69C and directed that the same be taxed under section 115BBE. The total income was accordingly assessed at Rs.1,20,84,595/- by an order dated 18.03.2024 passed under section 147 read with section 144B of the Act. 4.5. On appeal, the assessee reiterated that the purchases were duly supported by invoices, entries in the books of account, bank statements and GST returns, and that the addition could not be sustained merely because the supplier had been identified as a non-genuine dealer by the GST authorities. The learned CIT(A), however, held that these documents did not independently establish the actual movement and receipt of the goods. He further held that the decisions restricting additions to the profit element were inapplicable in the absence of evidence establishing actual purchase, consumption or utilisation of the material. The learned CIT(A), therefore, confirmed the addition of

5 ITA No. 4599/Mum/2026 Alpha Combines Rs.57,29,735/- under section 69C and dismissed the appeal of the assessee by the impugned order dated 28.02.2026. 5. Aggrieved by the order of learned CIT(A), the assessee is in appeal before us. 6. Before us, the learned Authorised Representative (AR) filed an affidavit of Shri Rajesh Keshavlal Patel, partner of the assessee-firm, and reiterated the contents thereof. The deponent stated that the assessee was carrying on the business of builders and developers and was constructing a residential complex at Kulgaon, Badlapur. The project was stated to have been undertaken over a prolonged period and completed in the year 2023. The income from the project was offered to tax by following the percentage completion method.The learned AR submitted that, in the locality concerned, sand, khadi and bricks required for construction were generally procured from local suppliers. The material in question was supplied directly at the construction site by a local supplier, whereas the invoices were issued in the name of M/s Nahar Industries. Payments against those invoices were made to M/s Nahar Industries through crossed account-payee cheques. It was contended that the assessee did not have any direct dealings with or prior knowledge of M/s Nahar Industries and made payments to that concern only because the invoices for the material supplied at the site were issued in its name. 7. Referring to the affidavit, the learned AR submitted that copies of the purchase invoices and evidence of the corresponding

6 ITA No. 4599/Mum/2026 Alpha Combines payments were furnished during the assessment proceedings. It was pointed out that several invoices also contained the registration numbers of the lorries through which the material was transported. The learned AR further submitted that the assessee had not claimed input-tax credit and was, therefore, unaware that M/s Nahar Industries had defaulted under the GST law or had subsequently been declared a hawala dealer by the GST Department. According to him, the assessee came to know of this fact only during the assessment proceedings. 8. The learned AR submitted that sand, khadi and bricks were essential construction materials and that construction of the project could not have been undertaken without their actual procurement and consumption. It was contended that the material covered by the disputed invoices was actually received at the construction site and utilised in the project. The allegation against M/s Nahar Industries, therefore, could not by itself establish that the assessee had not received the material or that its expenditure was fictitious. The learned AR accordingly contended that the entire addition of Rs.57,29,735/- under section 69C was unjustified. 9. The learned AR also referred to the construction profit and loss account for the year ended 31.03.2019. The account reflects sales of Rs.14,56,90,850/-, unsold stock of Rs.1,89,77,200/-, work-in-progress of Rs.6,86,77,200/- and purchases of Rs.6,81,08,073.08/-. It further reflects net profit before interest and remuneration to partners of Rs.1,38,54,862.91/-. The

7 ITA No. 4599/Mum/2026 Alpha Combines learned AR submitted that the aforesaid financial results demonstrated that the assessee had disclosed substantial income from the project and that the purchase of construction material was intrinsically connected with the construction activity and the corresponding sales and work-in-progress. 10. Without prejudice to the principal contention that the purchases were genuine, the learned AR reiterated the alternative plea raised before the Assessing Officer and the learned CIT(A) that the addition, if any, should be restricted to 12.5 per cent of the disputed purchases instead of sustaining the entire purchase amount. In support of this plea, he relied upon the decision of the Hon’ble jurisdictional High Court in Principal Commissioner of Income-tax v. Amcon Construction, Income Tax Appeal No. 46 of 2024 reported in (2026) 1 CTOCTR 511 (Bom). 11. Referring to paragraphs 12 to 14 of the said decision, the learned AR submitted that a full addition could be made only when proper material was available before the Assessing Officer which unequivocally established that the purchase transactions were wholly bogus. 12. The learned AR further relied upon the observations in the said decision that the Assessing Officer was required to carefully examine the material and undertake a proper inquiry before concluding that the transactions were bogus. He submitted that, in the present case, the Assessing Officer merely relied upon information received from the GST Department and did not

8 ITA No. 4599/Mum/2026 Alpha Combines conduct any independent inquiry into the assessee’s specific purchase transactions. According to him, the assessee had cooperated in the reassessment proceedings and had furnished the purchase invoices, ledger account and evidence of payment through account-payee cheques, but no defect in those documents was identified. 13. The learned AR further relied upon the observations in the said decision that the Assessing Officer was required to carefully examine the material and undertake a proper inquiry before concluding that the transactions were bogus. He submitted that, in the present case, the Assessing Officer merely relied upon information received from the GST Department and did not conduct any independent inquiry into the assessee’s specific purchase transactions. According to him, the assessee had cooperated in the reassessment proceedings and had furnished the purchase invoices, ledger account and evidence of payment through account-payee cheques, but no defect in those documents was identified. 14. The learned AR further referred to paragraph 15 of the decision in Amcon Constructionand submitted that, on comparable facts, the Hon’ble High Court had affirmed the Tribunal’s decision restricting the addition to 10 per cent of the alleged bogus purchases. He, however, maintained the alternative plea already raised before the lower authorities and requested that, if the purchases were held to be not fully verifiable, the addition be restricted to 12.5 per cent of Rs.57,29,735/-.

9 ITA No. 4599/Mum/2026 Alpha Combines 15. Per contra, the learned DR relied upon the orders passed by the authorities below. He submitted that the assessee had failed to produce contemporaneous and independently verifiable evidence establishing the actual movement, delivery, receipt and utilisation of the goods allegedly purchased from M/s Nahar Industries. According to him, the production of invoices, ledger accounts and evidence of payments through banking channels was not sufficient to establish the genuineness of the purchases when the supplier had been identified by the Investigation and GST authorities as an accommodation-entry provider.The learned DR further relied upon the decision of the Hon’ble Gujarat High Court in N.K. Industries Ltd. and submitted that the addition is not required to be restricted merely to an estimated profit element and the entire amount of such purchases may be brought to tax. He accordingly urged that the order of the learned CIT(A) be upheld and the appeal of the assessee be dismissed. 16. We have considered the rival submissions and perused the material available on record. The Assessing Officer treated the entire purchases as unexplained expenditure principally on the basis of information received from the Investigation and GST authorities and the statements of persons connected with M/s Nahar Industries. According to the information, M/s Nahar Industries was engaged in issuing accommodation bills without actual supply of goods. The assessee, on the other hand, furnished copies of purchase invoices, its ledger account and bank statements demonstrating that payments against the

10 ITA No. 4599/Mum/2026 Alpha Combines invoices were made through account-payee cheques. The purchases were also recorded in the regular books of account. 17. The affidavit filed by Shri Rajesh Keshavlal Patel, partner of the assessee-firm, explains the manner in which the construction material was procured. The deponent has stated that sand, khadi and bricks were supplied directly at the construction site by a local supplier, whereas the invoices were issued in the name of M/s Nahar Industries and payments were consequently made to that concern. It has also been stated that several invoices contained the registration numbers of the lorries through which the material was transported. This affidavit furnishes an explanation regarding the actual receipt of the construction material, but it does not conclusively establish that the material was supplied by M/s Nahar Industries itself. On the contrary, the explanation that the material was supplied by a local supplier while the invoices were issued in the name of M/s Nahar Industries indicates that the identity of the invoicing party and that of the actual supplier may not have been the same. 18. Therefore, the material on record is not sufficient to accept the assessee’s principal contention that the purchases from M/s Nahar Industries stand established in their entirety. The absence of e-way bills, delivery challans, transport receipts, inward registers and other contemporaneous evidence relating to the movement and receipt of goods remains a material deficiency. The assessee is, therefore, not entitled to complete deletion of the

11 ITA No. 4599/Mum/2026 Alpha Combines addition merely because invoices were recorded in the books and payments were routed through banking channels. 19. At the same time, the conclusion of the Assessing Officer that the entire expenditure of Rs.57,29,735/- was fictitious also cannot be sustained. The assessee was carrying on an actual construction activity. The construction profit and loss account for the year ended 31.03.2019 reflects sales of Rs.14,56,90,850/-, unsold stock of Rs.1,89,77,200/-, work-in-progress of Rs.6,86,77,200/- and total purchases of Rs.6,81,08,073.08/-. The account further reflects net profit before interest and remuneration to partners of Rs.1,38,54,862.91/-. Neither the Assessing Officer nor the learned CIT(A) has rejected the existence of the construction project, the sales, the unsold stock or the work-in-progress recorded by the assessee. The books of account have also not been rejected under section 145(3) of the Act. 20. Sand, khadi and bricks are basic materials required for construction. Once the construction activity, corresponding sales and substantial work-in-progress are accepted, it necessarily follows that construction materials must have been procured and consumed. The Revenue has not demonstrated that the construction was undertaken without incurring the disputed expenditure or that the corresponding sales and work-in-progress were fictitious. There is also no finding that the amount paid through banking channels was received back by the assessee in cash. In these circumstances, even if the purchases are not

12 ITA No. 4599/Mum/2026 Alpha Combines accepted as having been made from the named supplier, the material on record supports the inference that the assessee procured the goods from other sources and obtained invoices from M/s Nahar Industries. 21. The Assessing Officer relied upon the statements recorded by the GST authorities to establish that M/s Nahar Industries was an accommodation-entry provider. However, there is no material in the assessment order demonstrating that an independent inquiry was conducted into the assessee’s specific transactions or that the persons whose statements were relied upon were examined with reference to the invoices and payments of the assessee. The information may justify doubt regarding the identity of the supplier and the verifiability of the purchases, but in the absence of further corroborative material, it does not establish that no goods whatsoever were received or utilised in the assessee’s construction activity. 22. The issue is now covered by the decision of the Hon’ble jurisdictional High Court in Principal Commissioner of Income- tax-2 v. Amcon Construction, Income Tax Appeal No. 46 of 2024, dated 13.03.2026, wherein the Tribunal had restricted the addition to 10 per cent of the alleged bogus purchases. The Hon’ble High Court upheld that view and dismissed the appeal of the Revenue. While referring to its earlier decision in Principal Commissioner of Income-tax-1 v. SVD Resins & Plastics (P.) Ltd., reported in (2025) 474 ITR 151 (Bom), the Hon’ble jurisdictional High Court reiterated the following principle:

13 ITA No. 4599/Mum/2026 Alpha Combines “12. In our opinion, a full addition could be made only on the basis of proper proof of bogus purchasesbeing available as the law would recognise before the AO, of a nature which would unequivocallyindicate that the transactions were wholly bogus. In the absence of such proof, by no stretch ofimagination, a conclusion could be arrived, that the entire expenditure claimed by the petitioner qua suchtransactions need to be added, to be taxed in the hands of the assessee.” 23. The Hon’ble High Court further held that, in the absence of evidence unequivocally establishing that the transactions were wholly bogus, the entire expenditure could not be added merely on the basis of general information received from the Sales Tax authorities. It affirmed the Tribunal’s conclusion that only the profit element embedded in such purchases was liable to be brought to tax.

14 ITA No. 4599/Mum/2026 Alpha Combines cannot be applied mechanically where the corresponding business activity, sales and consumption of material are accepted and the dispute is essentially regarding the identity of the supplier and the verifiability of purchases from the named party. 25. In the present case, complete deletion of the addition is not warranted because the assessee has not conclusively established that M/s Nahar Industries was the actual supplier of the goods. At the same time, addition of the entire purchase amount would result in taxing the gross expenditure despite the accepted construction activity, sales and work-in-progress. The proper course is, therefore, to bring to tax the profit element arising from purchases which may have been made from unverified or alternative sources. 26. The assessee itself had, without prejudice, offered before the Assessing Officer and the learned CIT(A) that the addition may be restricted to 12.5 per cent of the disputed purchases. The same alternative plea has been reiterated before us. The construction profit and loss account reflects net profit before interest and remuneration to partners of Rs.1,38,54,862.91/- on sales of Rs.14,56,90,850/-, representing approximately 9.51 per cent of the sales. Considering the nature of the construction business, the financial results disclosed by the assessee, the possibility of purchases having been made from unverified sources, and the consequent saving in taxes and other incidental costs, estimation of the profit element at 12.5 per cent of the disputed purchases would be fair and reasonable.

15 ITA No. 4599/Mum/2026 Alpha Combines 27. We accordingly restrict the addition to 12.5 per cent of Rs.57,29,735/-, which works out to Rs.7,16,217/- after rounding off. The balance addition of Rs.50,13,518/- is directed to be deleted. The Assessing Officer shall recompute the total income accordingly.

Order pronounced in the open court on 19.08.2026.

Sd/- Sd/- (CHALLA NAGENDRA (MAKARAND VASANT PRASAD) MAHADEOKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 19.08.2026 ANKIT, PS

आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : अपीलाथी / The Appellant 1. प्रत्यथी / The Respondent. 2. 3. संबंधधत आयकर आयुक्त / The CIT(A) 4. आयकर आयुक्त(अपील) / Concerned CIT धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई/ DR, ITAT, Mumbai 5. 6. गार्ड फाईल / Guard file.

आदेशानुसार/BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai