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Facts
The assessee filed a return of income, and the case was reopened based on information that the assessee made fictitious purchases of Rs. 45,36,000/- from M/s Tradewell Enterprises, identified as a bogus accommodation entry provider. Despite the assessee furnishing supporting documents, the Assessing Officer added the entire purchase amount to the income as unexplained expenditure.
Held
The Tribunal held that while the purchases might be bogus, the entire amount could not be disallowed, especially when sales were not doubted and accounts were not rejected. The Tribunal directed the Assessing Officer to estimate the income at 3% on the bogus purchases, considering it as reasonable profit earned.
Key Issues
Whether the entire amount of alleged bogus purchases can be added to the assessee's income, or if only a notional profit should be estimated.
Sections Cited
147, 148, 148A, 142(1), 69C, 144, 144B, 145(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘GAUHATI BENCH’, GUWAHATI
IN THE INCOME TAX APPELLATE TRIBUNAL ‘GAUHATI BENCH’, GUWAHATI BEFORE SHRI DUVVURU RL REDDY, VICE PRESIDENT AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER (Assessment Year:2020-21) Nisha Rani, I.T.O., Bedi Market, AT Road, Ward-1(2), Vs. Guwahati-781001 (Assam) Guwahati. (Appellant) (Respondent) PAN No. AFJPR 7852 P Assessee by : Shri Vishesh Surana, FCA. Revenue by : Shri Santosh Kumar Karnani, Addl. CIT Date of hearing: 09/03/2026 Date of pronouncement: 13/03/2026 O R D E R
PER: BENCH
This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 29.10.2025 for the AY 2020-21.
The only issue raised by the assessee in the various grounds of appeal is against the order of the ld. CIT(A) in upholding the addition of Rs. 45,36,000/- as made by the Assessing Officer under Section 69C of the Income Tax Act, 1961 (in short, the Act) on account of bogus purchases by the assessee.
Nisha Rani Vs ITO 3. The facts of the case, in brief, are that the assessee filed return of income declaring total income of ₹ 45,50,680/-. The case of the assessee was reopened under Section 147 of the Act by issuing notice under Section 148 of the Act on 21/03/2024 after passing order under Section 148A(d) of the Act which was preceded by issuance of show cause notice under Section 148A(b) of the Act. In compliance of which, the assessee has not furnished any return of income. The Assessing Officer issued notice under Section 142(1) of the Act alongwith questionnaire which were complied by the assessee by furnishing various details/information as called for by the Assessing Officer pertinent to state that the case of the assessee was reopened after the Assessing Officer observed from the insight portal of the department that the assessee has made fictitious purchases of Rs. 45,36,000/- from M/s Tradewell Enterprises with PAN AKWPR8262P. The assessee furnished before the Assessing Officer the evidences qua the purchases made from the said party comprising copy of invoices, e-way bills, payment through banking channels etc.. However, all these evidences were disbelieved by the Assessing Officer on the ground that M/s Tradewell Enterprises is engaged in providing fraudulent/fake GST invoices for passing on wrong input tax credit to the business entities and the assessee is also the beneficiary of the same. Finally, the Assessing Officer added the entire purchases under Section 69C of the Act to the income of the assessee in the assessment framed under Section 147 r.w.s. 144/144B of the Act order dated 30/12/2024.
In the appellate proceedings, the ld. CIT(A) affirmed the order of the Assessing Officer by holding that the addition of bogus purchases was rightly
Nisha Rani Vs ITO made as unexplained expenditure under Section 69C as the Assessing Officer has concrete information in his possession that the supplier is engaged in providing fake/fictitious GST invoices to various parties for passing of wrong input tax credit and thus, justified the addition as made by the Assessing Officer.
We have considered the rival submissions and find that undisputedly, the assessee has made purchases to the tune of ₹ 45,36,000/- from M/s Tradewell Enterprises which is stated to be a bogus accommodation entry provider and is engaged in issuing fake GST invoices for giving fake input tax credit to various entities nonetheless, the assessee has furnished before the Assessing Officer the copies of invoices, transport receipts, e-way bills and payments through banking channels etc. In our opinion, even if, the assessee is engaged in the bogus purchases, the entire purchases cannot be disallowed specially when the corresponding sales were not doubted and books of account were not rejected under Section 145(3) of the Act. At the most, the addition can be made by applying a certain percentage on estimated basis in order to assess the extra profit which is earned by the assessee by making purchases from the grey market while the actual invoices were taken from the accommodation entry providers. Since the assessee has not placed before us the G.P. and N.P. rate pertaining to the business of the assessee, therefore, we apply a rate of 3% on these purchases towards the estimation of income embedded in the said purchases which we consider to be reasonable and justified. Consequently, we set aside the order of the ld. CIT(A) and direct the Assessing Officer to estimate the income at the rate of 3% on the bogus
In the result, this appeal of the assessee is partly allowed.
Order pronounced in the open court on 13/03/2026.