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Facts
The assessee's case was scrutinized due to purchases from suppliers deemed suspicious by the AO. An addition of ₹12,73,85,064/- was made under Section 69C read with Section 115BBE, treating these purchases as non-genuine because suppliers did not respond to Section 133(6) notices, and their GST registrations were cancelled. The CIT(A) upheld this addition.
Held
The Tribunal ruled that the addition was unjustified, emphasizing that the assessee's books of account were not rejected under Section 145(3). It held that purchases cannot be entirely disallowed solely due to third-party non-compliance or cancelled GST registrations when sales are accepted and payments were made through banking channels.
Key Issues
Whether an addition under Section 69C for alleged bogus purchases is valid if the assessee's books of account are not rejected under Section 145(3), and sales are accepted, merely because suppliers did not respond to Section 133(6) notices or had cancelled GST registrations.
Sections Cited
69C, 115BBE, 133(6), 145(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH KOLKATA
O R D E R
PER SONJOY SARMA, JM :
This appeal by the assessee arises against the order of the learned Commissioner of Income Tax (Appeals), Kolkata, whereby the action of the Assessing Officer in making an addition of ₹1,27,38,506/- under section 69C read with section 115BBE of the Income-tax Act, 1961 was confirmed.
Brief facts of the case are that the case of the assessee was selected for scrutiny as it was noticed that the assessee had made substantial purchases from certain suppliers who were either non- filers of income tax returns, filed returns with abnormally low turnover, or whose GST registrations were either cancelled or suo motu suspended as per ADG (GST) data. Based on this information, the Assessing Officer formed a view that there was a possibility of the assessee booking bogus or inflated purchase expenses to reduce taxable profit, and accordingly, scrutiny proceedings were initiated by issue of statutory notices. During Pravesh Kumar Jaiswal the course of assessment, the Assessing Officer issued notices under section 133(6) to the suppliers seeking verification of the transactions. However, many of such notices remained unserved or unresponded, and in some cases, the e-mails were bounced back. The assessee was asked to produce these parties or furnish further evidence in support of genuineness of the purchases, but according to the Assessing Officer, the assessee failed to do so. In the absence of direct confirmation or verifiable evidence from the suppliers, the Assessing Officer treated the entire purchases amounting to ₹12,73,85,064/- as non-genuine and made addition under section 69C of the Act, taxing it under section 115BBE.
The assessee carried the matter in appeal. The learned CIT(A), however, sustained the addition made by the Assessing Officer, concurring that the assessee failed to prove the genuineness of the purchase transactions.
Aggrieved by the above order assessee preferred an appeal before this tribunal at the time of hearing Ld. AR submitted that the addition made under section 69C of the Act was bad in law, as the Assessing Officer did not reject the books of account maintained by the assessee under section 145(3) of the Act. Without such rejection, it was impermissible to disallow the entire purchases as non-genuine. The assessee had duly furnished books of account, purchase invoices, payment details through banking channels, and other supporting evidence during the assessment proceedings. The Assessing Officer relied solely on the non-response of suppliers to notices under section 133(6) and the alleged cancellation of their GST registrations, which are factors beyond the control of the assessee. Once sales have been accepted, the corresponding purchases cannot be disbelieved. It was further contended that the non-filing of income-tax returns or Pravesh Kumar Jaiswal cancellation of GST registration by the suppliers cannot, by itself, make the assessee’s purchases non-genuine, especially when payments were made through proper banking channels and quantitative details were duly maintained.
The learned DR supported the orders of the lower authorities, contending that the Assessing Officer had made the addition after providing sufficient opportunity and that the assessee failed to discharge the onus to prove the genuineness of purchases beyond doubt.
We have considered the rival submissions and perused the records. The addition in this case has been made merely on the ground that the suppliers did not respond to notices under section 133(6) and that their GST registrations were cancelled or suspended. It is well settled that an assessee cannot be penalized for non-compliance of third parties over whom he has no control. Further, we find that the books of account of the assessee were not rejected by invoking section 145(3) of the Act. Once the books have been accepted and sales are not doubted, the corresponding purchases cannot be disallowed in entirety. The Assessing Officer has not found any defect in quantitative tally or discrepancy in the trading account. The addition was made purely on presumptions and not based on any tangible material. The Hon’ble jurisdictional High Court and several coordinate Benches have consistently held that when payments are made through banking channels and sales are accepted, purchases cannot be treated as bogus merely because suppliers are untraceable or non-filers. The Coordinate Bench as in the case of Axora Resources Ltd. vs. ITO in held as under:
Pravesh Kumar Jaiswal “6.3 After hearing the rival contentions and perusing the materials available on record, we find that the ld. AO has made an addition of ₹7,29,48,478/- at the rate of 12% of the total purchases from 17 parties, who according to the ld. AO were non-filer of the returns. In our opinion, non-filing of return by the suppliers is not within the control of the assessee and if the said suppliers have not filed the returns of income , the department can proceed against these suppliers. In this case, we note that the assessee has given a complete detail along with the evidences before the ld. AO and the ld. AO issued notice u/s 133(6) of the Act to all 41 parties out of which only 3 responded. In our opinion, the addition cannot be made merely on the ground that the parties have not responded to the notice u/s 133(6) of the Act. Moreover, the disallowance made is on adhoc basis by applying a percentage of 12.5% on the total purchases from 17 parties. In our opinion, if the ld. AO was not relying the books of account then the ld. AO should invoke the provisions of Section 145(3) of the Act and only then the estimate disallowance of expenses or estimate the income, however, that was not done. Therefore, we are inclined to set aside the order of ld. CIT (A) and direct the ld. AO to delete the addition.” 6.1 We, therefore, hold that the addition made under section 69C read with section 115BBE of ₹12,73,85,064/- was unjustified. In view of the foregoing, we set aside the order of the learned CIT(A) and direct the Assessing Officer to delete the addition made under section 69C of the Act.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 16/10/2025.