What did the Tribunal hold?

The Tribunal held that in the case of a trader with corresponding sales not in doubt, the entire purchase amount cannot be added. Only the profit element embedded in such transactions can be added.

The assessee, a trader, made purchases of Rs. 50,33,695/- from entities suspected of providing accommodation entries. The Assessing Officer added the entire purchase amount to the assessee's income, a decision confirmed by the CIT(A).

What were the issues?

Whether the entire amount of purchases made from suspected bogus entities can be added to the income of a trader, or only the profit element embedded therein.

Pruthvi Singh Solanki, Vadodara vs ITO | ITAT Ahmedabad 2026

Income Tax Appellate Tribunal, “B” BENCH, AHMEDABAD

Before: Shri Sanjay Garg & Shri Narendra Prasad Sinha

For Appellant: Shri Prashant Upadhyay, AR

Hearing: 08/04/2026Pronounced: 23/06/2026

“बी”/ ‘िवशेष �ायपीठ’/ आयकर अपीलीय अिधकरण, अहमदाबाद �ायपीठ , अहमदाबाद IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD �ी संजय गग�, �ाियक सद� एवं �ी नरे� �साद िस�ा, लेखा सद� के सम� Before Shri Sanjay Garg, Judicial Member And Shri Narendra Prasad Sinha, Accountant Member आयकर अपील सं /ITA No.299/Ahd/2026 िनधा�रण वष� /Assessment Year : 2018-19 Pruthvi Singh Solanki, 490/B-1/3 The ITO, Chandan Complex, Opp. बनाम/ Ward 3(1)(2), Himalaya, GIDC Makarpura, Vadodara v/s. Vadodara-390010 �थायी लेखा सं./PAN: AWYPS1670G (अपीलाथ�/ Appellant) (�� यथ�/ Respondent) Assessee by : Shri Prashant Upadhyay, AR Revenue by : Shri Abhijit, Sr.DR सुनवाई की तारीख/Date of Hearing : 08/04/2026 घोषणा की तारीख /Date of Pronouncement: 23/06/2026 आदेश/O R D E R Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the Assessee against the order of the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘CIT(A)’] dated 09.12.2025 for the Assessment Year (AY) 2018-19. 2. The assessee in this appeal raised following grounds of appeal:

ITA No.299/Ahd/2026, AY 2018-19 Pruthvi Singh Solanki 2 “1. The learned CIT (A) has erred in confirming an addition of Rs. 50,33,695/- alleging bogus purchases without proper appreciation of the documents and evidence submitted by the appellant to learned assessing officer. 2. The learned CIT(A) erred in holding the transactions as accommodation entries merely on the basis of alleged discrepancies in transport documents and common transporters, without bringing any positive or independent evidence on record to establish that no goods were actually received by the appellant. 3. The learned CIT (A) failed to appreciate that the Assessing Officer neither rejected the books of account nor disputed the corresponding sales, stock records, or consumption of material, thereby rendering the addition of the entire purchase amount legally unsustainable. 4. The learned CIT(A) erred in relying upon third-party statements and general observations without providing the appellant an effective opportunity to cross-examine the persons whose statements were relied upon, in gross violation of the principles of natural justice. 5. The appellant craves leave to add, amend, modify, or withdraw any of the above grounds at the time of hearing”

A perusal of the above grounds of appeal would reveal that the Assessee in this case is aggrieved by the confirmation of the addition of Rs. 50,33,695/- made by the Assessing Officer, (for short, “the AO”) by holding that the purchases made by the Assessee were bogus.

The Assessee is an individual and is involved in the business of trading in ferrous and non-ferrous metals in the name of ‘Vinay Enterprises’. The Ld. AO got the information through the Insight portal that the Assessee had made certain purchase transactions with bogus/paper entities who were involved in providing accommodation entries. On the basis of such information, the assessment of the Assessee was reopened. During the assessment proceedings, the AO observed that as per the information available, the five entities as mentioned in the assessment order were

ITA No.299/Ahd/2026, AY 2018-19 Pruthvi Singh Solanki 3 involved in providing accommodation entries by way of fictitious/bogus invoices. The AO found that the Assessee had made total purchases of Rs. 50,33,695/- from the alleged entities involved in providing bogus billings. He added the entire purchases of Rs. 50,33,695 /- into the income of the Assessee. The Ld. CIT(A) confirmed the addition so made by the Ld. AO.

We have heard the rival contentions and gone through the record. The Assessee in this case, admittedly, is a trader and not a manufacturer. The Assessee had shown corresponding sales against the alleged purchases. The sales of the Assessee have not been doubted or disputed by the AO. There is also no allegation that any stock verification was done and that the stock of the Assessee was found less. Once the sales have been admitted in case of a trader, it is obvious that he had also made purchases that have been further sold to other parties. Therefore, as held time and again, the entire purchases in the case of a trader cannot be added. So far as the allegation that the Assessee had shown purchases from certain suspected entities, who were allegedly involved in providing bogus billing etc., the probability at the most can be that the Assessee might have made purchases from the grey market at a lower rate and would have obtained bogus bills at a higher rate from the alleged entities to suppress his profits. Under the circumstances, as held time and again by various courts of law, only the profit element embedded in such purchase/sales transactions can be added and not the entire purchase amount. It is also not the case of the Revenue that the Assessee had made the alleged purchases from any undisclosed sources of income. The purchases have been made through banking channels and duly recorded in the books of account. Hence, considering the overall facts and circumstances, only the profit element embedded in such purchases should have been added by the Ld. AO.

ITA No.299/Ahd/2026, AY 2018-19 Pruthvi Singh Solanki 4

Though the Ld. AR of the Assessee has contested the entire addition on merits, however, on discussion, he has fairly agreed that 8% of the purchases, on account of suppressed profits on such purchases, may be added.

The Ld. DR has also been fair enough to admit that the estimation of profit element at the rate of 8% of the alleged bogus purchases was quite reasonable.

Considering the above submissions, the addition is restricted to 8% of the alleged bogus purchase amount of Rs. 50,33,695 /-. 9. In the result, the appeal of the Assessee is partly allowed. Order pronounced in the Open Court on 23/06/2026.

Sd/- Sd/- ( Narendra Prasad Sinha ) ( Sanjay Garg ) Accountant Member Judicial Member अहमदाबाद/Ahmedabad, िदनांक/Dated 23/06/2026 DS, PS आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��थ� / The Respondent. 3. संबंिधत आयकर आयु� / Concerned CIT 4. आयकर आयु� ( ) / The CIT(A)- अपील 5. िवभागीय �ितिनिध , , अहमदाबाद/DR,ITAT, Ahmedabad. आयकर अपीलीय अिधकरण 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�ािपत �ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad

PRUTHVI SINGH SOLANKI,VADODARA vs. THE ITO, WARD-3(1)(2), VADODARA

What did the Tribunal hold?

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