BALAJEE LOHA PRIVATE LIMITED, RAIPUR,RAIPUR vs. ACIT, CIRCL1(1), RAIPUR, RAIPUR

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ITA 87/RPR/2026Status: DisposedITAT Raipur18 June 2026AY 2018-197 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s decision to restrict the disallowance to 12.5% of the purchases. The assessee did not provide sufficient evidence to prove the genuineness of the purchases and the actual movement of goods.

What were the facts?

The assessee challenged the disallowance of purchases claimed as bogus. The Assessing Officer disallowed 25% of purchases, which the CIT(A) reduced to 12.5% after admitting additional evidence. The assessee failed to provide evidence of actual movement of goods.

What were the issues?

Whether the disallowance of purchases is justified, and if so, to what extent, given the lack of evidence for actual movement of goods.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 143(1),Section 148,Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR

Before: SHRI PARTHA SARATHI CHAUDHURY, JM & SHRI AVDHESH KUMAR MISHRA, AM

Hearing: 07/04/2026Pronounced: 18/06/2026

आदेश / O R D E R Per Avdhesh Kumar Mishra, AM: This appeal for Assessment Year (‘AY’) 2018-19 filed by the assessee is directed against the order dated 07.11.2025 of Commissioner of Income Tax (Appeals), [CIT(A)], National Faceless Appeal Centre (NFAC), Delhi, passed under section 250 of the Income Tax Act, 1961 (‘Act’).

2.

In nutshell, the assessee, vide three grounds of appeal, has challenged the disallowance of bogus purchases of Rs.5,61,580/- upheld by the Ld. CIT(A).

3.

Facts, in brief, relevant for adjudication of this appeal are that the assessee is engaged in the business of manufacturing and trading of steel products. It filed its Income Tax Return (‘ITR’) of the relevant year on 26.03.2019 declaring income of Rs.7,13,26,490/-. The ITR was processed under section 143(1) of the Act at income of Rs.7,19,40,170/- wherein the employee’s contribution towards PF and ESIC paid after due date specified in the said Act was disallowed by the Assessing Officer (‘AO’) - CPC. Later, this case was reopened under section 148 of the Act on the reasoning that the assessee has taken bogus purchases of Rs.44,92,645/- from M/s Midest Integrated Steels Limited. During the course of reopened assessment proceedings, the Ld. AO show-caused the assessee to explain the genuineness of purchases of Rs.44,92,645/- from Midest Integrated Steels Limited done during the relevant year. In response to said show cause notice, the assessee filed its submission dated 10.03.2023, which is duly scanned at page Nos. 6 and 7 of the assessment order. Dissatisfied with the submissions of the assessee, the Ld. AO observing as under disallowed 25% of purchases of Rs.44,92,645/- made from Midest Integrated Steels Limited: “4.4 Point-wise rebuttal of reply of the assessee including analysis of any case law relied upon.  The Information called u/s 133(6) from the M/s. Mideast Integrated Steel Ltd. by this office has not being complied till date.  The assessee has submitted documents which cannot be relied upon as there is no Input/output analysis submitted so evidence that the raw material has been consumed in finished goods.  The documents submitted are self serving in nature between the parties who have entered into collusive transaction hence the paper work are mostly kept prepared.  There is information available with the department which has been shared with assessee and as per the same there is finding given that M/s. Mideast Integrated Steel Ltd. has indulged in purchase and sale only on paper without actual movement of goods.

 The assessee has not submitted GSTR-2A which is auto populated to evidence that the transactions are reported in GST.  The assesse has not given proof of delivery slips/gate pass to evidence the actual movement of goods.  Assessee has not submitted copy of purchase bill duly signed and stamped by the said party.  The assessee has not submitted any transport details or any other details pertaining to movement and delivery of goods.  There is information received from ITO(INV) (OSD2) (Unit2), Delhi which has been shared with assessee and as per the same there is finding given that above entities have indulged in purchase and sale only on paper without actual movement of goods. The information is reproduced as below:- ……………………………… ………………………………  Recently, Hon'ble Supreme Court in TS-99-SC-2023-VAT has held that for claiming and the aforesaid can be proved only by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax Invoices and payment particulars etc. SC clarifies that "mere production of the lonvoices and/or payment by cheque is not sufficient and cannot be said to be proving the burden as per section 70.." since tax invoice as per rule 27 and rule 29 cannot be proving the actual physical movement of the goods. However, SC adds that while the tax invoice and cheque can be said to be proving one of the documents, it is not sufficient to prove genuineness transaction and on this lines, SC categorically mentions that aforesaid information regarding actual physical movement of the goods would be in addition to tax invoices. particulars of payment etc.: SC In this case the acknowledgement of taking delivery of goods has not been furnished by the assessee.  In view of the above facts and circumstances of the case, the fictitious purchase transactions, the profit earned from the value of bogus purchases is fairly estimated at 25% of the bogus purchases and accordingly 25% of the entire fictitious purchases are disallowed u/s 37(1) as the same is not incurred for the purposes of the business.” 4. Aggrieved with the assessment order, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) admitting additional evidences, such as, (i) Copy of purchase invoices from M/s Mideast Integrated Steels Ltd., (ii) Delivery challans / gate passes, (iii) GSTR-2A reflecting corresponding input tax credit and (iv) Ledger and payment details through banking channel, restricted the disallowance @ 12.5% of purchases of Rs.44,92,645/- instead of @ 25% done by the Ld. AO. The relevant part of the impugned order reads as under: “7.3 Legal Position: Courts have consistently held that when purchases are supported by books, invoices, and payment through banking channels, merely because the supplier is found to be a "hawala" dealer. the entire purchases cannot be treated as bogus. At best, profit element can be estimated to cover possible inflation or non-genuine component.  CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. (2013) 35 taxmann.com 384 (Bom)  PCIT vs. Paramshakti Distributors Pvt. Ltd. (ITAT Kolkata)  CIT vs. Simit P. Sheth (2013) 356 ITR 451 (Guj.) However, the profit rate of 25% adopted by AO is arbitrary and excessive. In similar cases, Hon'ble Gujarat High Court in Simit P. Sheth (supra) and Bholanath Polyfab Pvt. Ltd. (355 ITR 290) restricted disallowance to 12.5% of such purchases to meet ends of justice. Considering the nature of business (steel trading with moderate margins), the supporting evidence produced, and absence of any finding that the corresponding sales are bogus, the disallowance of 25% is found to be unreasonably high. A fair estimation of profit embedded in such purchases is 12.5%. Accordingly, the disallowance is restricted to 12.5% of Rs. 44,92,645/- Rs. 5,61,581/-. Balance addition of Rs. 5,61,579/-is deleted.” 5. Before us, a petition for consolidation of Revenue’s appeal and assessee’s appeal was filed by the Ld. Authorized Representative of the assessee, which is reproduced hereunder:

6.

None attended on behalf of the assessee. So we heard Dr. Priyanka Patel, Ld. Sr. DR, who argued the case vehemently. She submitted that the assessee had failed to produce the truck details etc. through which the goods were actually transported at the factory premises of the assessee. She drew our attention to the case law mentioned at page No. 11 of the assessment order in the case of State of Karnataka Vs. Ecom Gill Coffee Trading Pvt. Ltd.; SLP (Civil) 2572/2022 [TS-99-SC- 2023-VAT], wherein the Hon’ble Supreme Court clarified that mere production of vouchers or payment by cheque were not sufficient and could not be said to be proving burden as per section 70 of the KVAT Act. She categorically submitted that the assessee had failed to demonstrate the actual physical movement of goods through any corroboratory evidence even during the appellate proceedings before the Ld. CIT(A). However, the Ld. CIT(A) deleted 50% of the disallowance made by the Ld. AO. She contended that the Ld. CIT(A), in principle, admitted the bogus purchases; therefore, he following the decisions of Hon’ble Gujrat High Court in the cases of Smith P Seth 356 ITR 451 and Bholanath Polyfab Pvt. Ltd. 355 ITR 290, sustained the disallowance @ 12.50% of bogus purchases. She submitted that the relief allowed by the Ld. CIT(A), keeping in view the finding of Hon’ble Supreme Court in the case of N. K. Protein reported in 250 Taxman 22 (SC), was not justified. She therefore, prayed for dismissal of this appeal. However, she showed her concern that any finding in this case should not have any direct/indirect bearing in the cross-appeal filed by Revenue which would be heard later.

7.

We have heard Ld. Sr. DR and have perused the materials available on the record. We have taken note of the fact that the assessee has produced only following four evidence/documents as additional evidences during the appellate proceedings before the Ld. CIT(A): (i) Copy of purchase invoices from M/s Mideast Integrated Steels Ltd., (ii) Delivery challans / gate passes, (iii) GSTR-2A reflecting corresponding input tax credit and (iv) Ledger and payment details through banking channel.

None of these evidence establishes the actual physical movement of goods from the premises of Midest Integrated Steels Limited to the assessee's premises. Further, we have also taken note of the fact that the assessee has not filed any document before the Ld. AO, which may demonstrate input or output analyses establishing the actual consumption of the said goods in the production. Since, the core document regarding the transportation of goods and consumption of goods in the production were not filed before the Authorities below; therefore, we do not find any infirmity in the order of the Ld. CIT(A) as far as upholding the disallowance @ 12.5% of bogus purchases are concerned. Accordingly, this appeal is dismissed. Before parting out, we make it clear that the above finding will not have any bearing on the Revenue’s cross-appeal.

8.

In the result, this appeal of assessee is dismissed.

Order pronounced in the open court on 18/06/2026.

Sd/- Sd/- (PARTHA SARATHI CHAUDHURY) (AVDHESH KUMAR MISHRA) �ाियक सद� / JUDICIAL MEMBER लेखा सद� / ACCOUNTANT MEMBER रायपुर / Raipur; िदनांक Dated 18/06/2026 HKS, PS आदेशकी �ितिलिप अ�ेिषत / Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. 2. ��थ�/ The Respondent 3. The Pr. CIT, Raipur (C.G.) िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, 4. रायपुर/ DR, ITAT, Raipur 5. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER, Hem Kumari Digitally signed by Hem Kumari //True copy// Shrivastava, Shrivastava, PS, PS, ITAT, ITAT, Raipur Date: 2026.06.18 Raipur (Private Secretary) 11:39:55 +05'30' आयकर अपीलीय अिधकरण, रायपुर / ITAT, Raipur

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