MEENACHISUNDARAM BALAGURU,THENI vs. ASSESSING OFFICER, THENI

The Assessee raised the following grounds of appeal : “1. The Ld. CIT(A) had erred in law and on facts in confirming the actions of the Ld. Assessing Officer.

Briefly, the facts of the case are that the appellant is an Individual engaged in the business of Electrical Goods under name and style “New Power Electricals”. The Return of Income for the Assessment Year 2022-23 was filed u/s.139(1) of the Act on 28.09.2025 disclosing total income of Rs.46,58,440/-. Against the said Return of Income, the assessment was completed by the e-Assessment Unit of the Department (hereinafter called “AO”) vide order dated 01.03.2024 at total income of Rs.10,38,32,874/-. While doing so, the Assessing Officer made addition of purchases of Rs.9,91,74,434/- as unexplained expenditure for the failure of the suppliers to respond to notices issued u/s.133(6) of the Income Tax Act. The Assessing Officer rendered a finding that the appellant had submitted copies of E-bills, other information of the goods purchased from those suppliers.

Being aggrieved by the above addition, an appeal was filed before the ld.CIT(A) contending that the provisions of section 69C has non- application to the facts of the present case, in as much as, the appellant had maintained proper books of accounts, all the transactions with the suppliers in question were duly recorded in the books of accounts, the source of payment also shown in the books of accounts, all the payments for the purchases were made through account payee cheques. It is further submitted that the corresponding sales were accepted by the Assessing Officer. It is further contended that the Assessing Officer ought not have considered the purchases as bogus purchases merely because of failure of suppliers to respond to the notices issued u/s.133(6) of the Act. The appellant also placed reliance on the decision of Hon’ble Supreme Court in the case of Pr.CIT Vs. Tejua Rohitkumar Kapadia [2018] 94 taxmann.com 324. However, ld.CIT(A) considering the fact that all the five suppliers were “non-filers” and had failed to respond to notices issued u/s.133(6) of the Act reached conclusion that these purchases were bogus and following the law laid down by the Hon’ble Bombay High Court in the case of Pr.CIT Vs. Kanak Impex (India) Ltd. 474 ITR 175 and the Hon’ble Gujarat High Court in the case of M.K.Industries Vs. DCIT 72 taxmann.com 289 confirmed the addition.

Being aggrieved by the order of ld.CIT(A), the appellant is in appeal before us in the present appeal. The ld.AR submits that the appellant maintained regular books of accounts, got accounts audited under the provisions of Companies Act and also u/s.44AB of the Income Tax Act, 1961. When the appellant was called-upon to explain purchases, the appellant had filed comprehensive reply enclosing copies of invoices, GST Returns, Bank Statement, Ledger Account and other supporting evidence in an attempt to establish genuineness of the purchases. The Assessing Officer treated as the purchases as bogus merely because of the fact that the suppliers had not responded to the notices issued u/s.133(6) of the Act and made addition treating unexplained expenditure of the appellant. The approach of the Assessing Officer was assailed before the ld.CIT(A) on the ground that when the appellant had discharged the onus of proving the source of the payment for suppliers, it cannot be treated as an unexplained expenditure. The ld.CIT(A) ought not have treated the purchases as bogus, confirmed addition merely because the suppliers were non- filers. He further submits that the ratio of the decisions of Hon’ble Bombay High Court relied upon by learned CIT(A) has no application to the facts of the present case, in as much as, in those cases, the assessee had failed to explain the source of the payment for purchases made and there was conclusive evidence to show that purchases were not genuine. Whereas, in the present case, the source of the expenditure was duly explained and recorded in the books of accounts. He further submitted that the Hon’ble Bombay High Court in the case of Pr.CIT Vs. Swaraj Infrastructure Pvt. Ltd 156 taxmann.com 192 (Bom) had rejected the argument of the Revenue that merely because the suppliers were found to be non-genuine, not appeared before Assessing Officer in response to notice u/s.133(6) of the Act the entire purchases should be disallowed. Finally, he submits that no addition can be made merely on the basis of suspicion, external information, or assumptions when the assessee furnished relevant documentary evidence establishing the genuineness of the purchases. Thus, he prays that the orders of the Lower Authorities be set-aside and Assessing officer may be directed to delete the addition.

On the other hand, the Learned CIT-DR submits that the addition was made by the Assessing Officer based on the information received from external agencies, the suppliers failed to respond to notices issued u/s.133(6) of the Act. The Learned CIT-DR also filed copies of register of receipt of goods from the above parties and submitted that the M.S. Angles are not used in the business of the appellant and therefore, the Assessing Officer was right in reaching in conclusion that the purchases were bogus. The ld.CIT(A) had rightly confirmed the addition taking into consideration all relevant material. Thus, learned CIT-DR submits that no interference is warranted by this Tribunal.

We heard rival submissions and perused the material available on record. The issue that arises for our consideration is whether the ld.CIT(A) was correct in law in confirming the addition of 100% disallowance of expenditure incurred on purchases in the facts and circumstances of the present case. On mere perusal of the assessment order, it would suggest that the Assessing Officer had treated purchases made from the following five parties as bogus : 1. Shri Balaji Exports 2. Sri Sai Industries 3. Agarwal Enterprises 4. Sangeeta Industries and 5. Sakthi Enterprises

The Assessing Officer treated the purchases made from the above parties as bogus for the reason that suppliers had failed to respond to notices issued u/s.133(6) of the Act. The Assessing Officer also recorded finding that the appellant furnished the details of the purchase made such as E-way bills the proof of payment etc. This finding of the Assessing Officer clearly demonstrates that the appellant had discharged the onus cast upon it. The Assessing Officer nowhere records that the source for the above expenditure was not explained. The Assessing Officer merely made disallowance of the purchases made from the above parties for the reason that the suppliers had not responded to the notices issued u/s.133(6) of the Act. In this connection, it is relevant to extract the provisions of 69C, which reads as under : “Unexplained expenditure, etc.

On mere reading of the provisions of section 69C, it would be clear that where an assessee in a previous year incurred any expenditure, offers no explanation about the source of such expenditure or part thereof or such explanation offered by the assessee is found to be not satisfactory, in the opinion of Assessing Officer such expenditure may be deemed to be income of the assessee for such previous year.

In the present case, as stated by us(supra), the appellant had offered an explanation as to the source of the expenditure incurred by the appellant, nor was it the case of the Assessing Officer that there was no explanation about the source of the expenditure. The Assessing Officer merely treated the purchases as bogus for the failure of the suppliers to respond to the notices issued u/s.133(6) of the Act. It is settled position of law that merely because the suppliers had failed to respond to notices issued u/s.133(6) of the Act does not render the purchases non-genuine. Reliance in this regard is placed on the following decision of Hon’ble Bombay High Court in the case of CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd. 372 ITR 619 (Bom) at page no.621 held as under : “"We have considered the submission on behalf of the Revenue. However, from the order of the Tribunal dated April 30, 2010, we find that the Tribunal has deleted the additions on account of bogus pur-chases not only on the basis of stock statement, i. e., reconciliation statement, but also in view of the other facts. The Tribunal records that the books of account of the respondent-assessee have not been rejected. Similarly, the sales have not been doubted and it is an admit-ted position that substantial amount of sales have been made to the Government Department, i. e., Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the Commissioner of Income-tax (Appeals), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as the Commissioner of Income-tax (Appeals) have disallowed the deduction of Rs. 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a a reasoned order taking into account all the facts before concluding that the purchases of Rs. 1.33 crores was not bogus. No fault can be found with the order dated April 30, 2010 of the Tribunal." (emphasis¹ sup-plied).

The reliance placed by the ld.CIT(A) on the decision of Hon’ble Bombay High Court and Hon’ble Gujarat High Court referred(supra) have no application to the facts of the present case in as much as, those decisions were premised on the fact that the assessee had failed to discharge the onus of proving the genuineness of the purchases and the sources of the expenditure incurred. The decision of Hon’ble Bombay High Court in the case of Ashok Kumar Rungta Vs. ITO 474 ITR 160 is squarely applicable wherein, it is held as under : “19. Another decision of a Division Bench of this court in the case of Pr. IT v. Shapoorji Pallonji and Co. Ltd. is noteworthy. The relevant portions are extracted below (page 226 of 423 ITR):

We are of the considered opinion that the ratio of the decision of the Hon’ble Supreme Court in the case of Pr.CIT Vs. Tejua Rohitkumar Kapadia [2018] 94 taxmann.com 324 is squarely applicable to the facts of the present case. The ratio of decision of the Hon’ble Supreme Court in the case of CIT Vs. Odeon Builders (P) Ltd is equally applicable, wherein it was held that where assessee, substantiated the purchases through documentation like purchase bills, e-way Bills, Ledger copies, mode of payments, the purchases cannot be treated as bogus. In view of the above discussion, we are of the considered opinion that the provisions of section 69C have no application to the fact of the present case and accordingly, we direct the Assessing Officer to delete the addition of Rs.9,91,74,434/-

In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on 5th August, 2026.