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Facts
The assessee challenged an addition made by the Assessing Officer (AO) and sustained by the CIT(A) for purchases from M/s. Sidhi Vinayak Metal & Salt Co. Pvt. Ltd., which were treated as bogus. The AO's action was based on information that the supplier was an entry operator providing bogus sales bills. The assessee claimed the purchases were genuine, supported by invoices, transport documents, and bank payments.
Held
The Tribunal held that the assessee failed to discharge the burden of proof to establish the genuineness of the supplier and the transactions. Despite opportunities, crucial documents like E-way bills and transit passes were not provided. The supplier's failure to respond to notices further weakened the case. The Tribunal found the addition under Section 69C to be factually and legally sustainable.
Key Issues
Whether the purchases made from M/s. Sidhi Vinayak Metal & Salt Co. Pvt. Ltd. were genuine or bogus, and whether the addition under Section 69C as unexplained expenditure was justified.
Sections Cited
147, 144B, 148, 69C, 115BBE, 143(2), 142(1), 133(6), 148A, 151A, 37
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No.1038/JP/2025
ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM On being aggrieved by the order of the National Faceless Appeal Centre, Delhi [ for short CIT(A)] dated 30/05/2025 the captioned assessee preferred the present appeal. The dispute relates to the assessment year 2018-19. The said order of the ld. CIT(A) arises because the assessee has challenged the assessment order dated 31.03.2023 passed under section
In this appeal, the assessee has raised following grounds: - “1. Ld. CIT(A) was not justified in sustaining the addition of Rs.89,03,956/- for the goods (sponge Iron) purchased through different consignments from M/s. Sidhi Vinayak Metal & Salt Co. Pvt. Ltd., Bokaro (Jharkhand) which are backed by genuine evidences like transport bilties, transit declaration forms of area- Commercial taxes Department, stock register and other relevant evidences, ignoring the fact that total sales to different buyers out of said purchase were accepted as genuine to whom input credit of GST was not doubted by GST Department.
1. 2. Ld. CIT(A) further erred in sustaining addition made by the Id. AO under section 69C of I.T. Act as unexplained expenditure, avoiding the fact that all the payments for the purchases from said M/s. Sidhi Vinayak Metal & Salt Co. Pvt. Ltd. were made through banking channel therefore, sec. 69C of Act cannot be made applicable.
3. Without prejudice to ground No. (1) & (2) above, ld. CIT (A) has acted against the provisions of I.T. Act in sustaining addition under sec. 69C of Act as unexplained trade purchases only to apply the provision of section 115BBE of Act.
Succinctly, the fact as culled out from the records is thata notice u/s 148 of the I.T. Act, 1961 was issued to assessee on 30.03.2022. In response to this notice, the assessee filed its return of income u/s 148 for the A.Y. 2018-19 and declaring total income of Rs. 5,22,080/- on 27-04- 2022. The reasons for selection of case were as under:- "The information received from ADIT(Inv) Jamshedpur that M/s Sidhi Vinayak Metal & Salt Company Pvt. Ltd. Engaged in providing bogus sales bills ( Durga Prasad Sharma vs. ITO purchases for the beneficiary) A list of beneficiary is provided by the department for the F.Y. 2017-18 relevant to A.Y. 2018-19. The assessee is one of the beneficiary among them and obtained entries in the form of bogus purchases without actual supply of goods of Rs.89,03,956/-.
During the year assessee was engaged in the selling of sponge iron. Further, assessee submitted his return of income in response to notice u/s 148 of the IT. Act, 1961. As per reason the assessee has made purchases from M/s Sidhi Vinayak Metal & Salt Compnay Pvt. Ltd. Engaged in providing bogus sales bills (purchases for the beneficiary) A list of beneficiarywas provided by the department for the F.Y. 2017-18 relevant to A.Y. 2018-19 which was required to be verified. During the e-assessment proceedings the assessee was asked to submit various details as per reasonsof selection. The assessee vide submission dated 15.02.2023, 23.03.2023 filed copy of ITR alongwith computation of income, balance sheet, audit report, Ledger of M/s Sidhi Vinayak Metal & Salt Company, Purchase bills and Transporter, GSTR-2A, Copy of Transportation slip with invoice, Copy of stock register. The assessee also submitted copy of bank account statements of saving and current bank accounts for the F.Y. 2017- 18 for the year under assessment.A complete reply/details alongwith attachment submitted by the assessee has been examined. The assessee was asked to furnish details regarding the bogus purchases from M/s Sidhi Durga Prasad Sharma vs. ITO Vinayak Metal & Salt Company (AAICS7786E) of amounting Rs.89,03,956/- in the F.Y. 2017-18 On the issue the assessee was issued to a show cause notice on 16.03.2023.In response to said show case notice dated 16.03.2023 the assessee has submitted his reply on 22.03.2023. Ld. AO noted that submission filed by the assessee have been perused, examined and found not acceptablebecause in this case information was received that during the course of investigation conducted by ADIT (Inv) Jamshedpur M/s Sidhi Vinayak metal & Salt company Pvt. Ltd has admitted that it has provided bogus purchase accommodation entry to a number of beneficiaries, from which the assessee company has also acquired such entries under disguise of purchases of Rs.89,03,956/-. During the course of assessment proceedings it has been noticed that the assessee has made purchases amounting Rs.89,03,956/- from M/s Sidhi Vinayak Metal & Salt Company (AAICS7786E). In this connection, various notices were issued as per above table. In response to these notices the replies have been filed on15.02.2023 & 23.03.2023. The perusal of the documentary evidence by the assessee has revealed that assessee has failed to furnish the transit pass issued by Department of Steels and mines Jharkhand. The assessee has also failed to produce to E-way bills regarding purchases made. Further, information was called for by issuing notice dated 25.03.2023 u/s Durga Prasad Sharma vs. ITO 133(6) of the I.T Act, 1961 to M/s Sidhi Vinayak Metal & Salt Company (AAICS7786E). to verify the genuineness of the above transactions but no reply has been received from M/s Sidhi Vinayak Metal & Salt Company (AAICS7786E) which could prove the genuineness of transaction. Therefore, in absence of receipt of information from M/s Sidhi Vinayak Metal & Salt Company, identity, creditworthiness & genuineness of the party (M/s Sidhi Vinayak Metal & Salt Company (AAICS7786E) to whom payment amounting Rs.89,03,956/- against alleged purchases was made remain unexplained. Accordingly, the same is disallowed under the provisions of section 37 of the Act. Therefore, the amount of Rs.89,03,956/- is to be treated as bogus purchase form M/s Sidhi Vinayak Metal & Salt Company. Further perusal of GSTR-1 data of assessee has revealed that M/s Sidhi Vinayak Metal & Salt Company Pvt. Ltd has not filed its ITR for A.Y. 2018-19, accordingly the purchase made by the assessee amounting Rs.89,03,956/- was disallowed and was added in the income of assessee as unexplained expenditure u/s 69Cr.w.s 115BBE of the Act.
Aggrieved from the order of Assessing Officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds raised the relevant finding of the ld. CIT(A), is reiterated here in below:
Durga Prasad Sharma vs. ITO 6. Decision 6.1 I have considered the facts of the case, assessment order and the submissions made by the appellant. In this regard, it is apposite to mention here that the appellant filed his return of income under section 148 of the Income Tax Act, 1961, on 27.04.2022 declaring total income of Rs. 5,22,080, in response to a notice issued on 30.03.2022 under section 148 of the Act. The case was selected for reassessment on the basis of credible and specific information received from the Directorate of Income Tax (Investigation), Jamshedpur, and corroborated by the Commercial Taxes Department, Government of Jharkhand, indicating that M/s Sidhi Vinayak Metal & Salt Company Pvt. Ltd. was a known entry operator engaged in issuing bogus purchase bills without actual supply of goods. A list of beneficiaries of such accommodation entries included the appellant, and the value of such alleged bogus purchases was Rs. 89,03,956/-.
During the assessment proceedings conducted under section 147 read with section 144B of the Act, multiple statutory notices were issued under sections 143(2) and 142(1), and responses were received from the appellant along with supporting documentation such as ledger accounts, purchase invoices, transport bilty copies, stock registers, bank statements, and GST returns. The appellant strongly asserted that all purchases were genuine and duly recorded in the books of account, and further claimed that payments were made through account-payee cheques and that goods had been duly sold to various buyers whose ITC claims were accepted by the GST department.
However, a close scrutiny of the assessment record reveals that the appellant failed to discharge the burden of proof required under the Income Tax Act to establish the genuineness, identity, and creditworthiness of the alleged supplier. Despite repeated opportunities, the appellant failed to furnish essential corroborative documents, including E-way bills and transit passes from the Department of Mines, Jharkhand, which are standard documentation required under law to demonstrate the physical movement of goods, especially for bulk commodities like sponge iron. Further, a notice issued under section 133(6) of the Act to M/s Sidhi Vinayak Metal & Salt Company Pvt. Ltd. received no response, and there is no evidence of that company filing its income tax return for the relevant assessment year. These facts severely impair the credibility of the transactions.
The Assessing Officer has correctly invoked the provisions of section 69C of the Act. Section 69C provides that where an assessee has incurred any expenditure and fails to offer a satisfactory explanation about the source of such expenditure Durga Prasad Sharma vs. ITO or if the explanation is not found acceptable, the said expenditure shall be deemed to be the income of the assessee. In the instant case, while the appellant submitted documents showing that payments were made through banking channels, he failed tosubstantiate the actual receipt of goods, which forms the core of any genuine purchase transaction. The absence of E-way bills, transport confirmations from independent third parties, and the complete lack of response from the supplier raise a strong presumption that the purchase entries were mere book entries intended to inflate expenses and reduce taxable profits.
The revenue's reliance on third-party information from the Commercial Tax Department of Jharkhand is well-founded. The Supreme Court in the case of N.K. Proteins Ltd. v. DCIT (2017) 292 CTR 354 (SC) upheld the disallowance of entire bogus purchases from a known entry operator and reversed a partial relief previously granted by the ITAT. The Gujarat High Court in the same matter emphasized that where the supplier is non-existent or not traceable, and where goods are not proved to be delivered, the entire claim of purchase is liable to be disallowed under sections 68 or 690.
In the present case, the appellant's argument that sales were accepted and GST ITC was allowed to buyers does not alter the conclusion under the Income Tax Act. As held in CIT v. P. Mohankala (SC), the acceptance of accounting entries or tax credits in other statutory regimes does not suffice to prove genuineness under the Income Tax Act. The onus lies on the assessee to establish the nature and source of the transaction with credible, independent, and verifiable evidence.
Moreover, the appellant's assertion that issuance of notice under section 148 without compliance with the provisions of section 148A renders the proceedings void is not acceptable. The notice was issued on 30.03.2022, during the transitional period following the Finance Act, 2021 amendments. Judicial pronouncements such as Union of India v. Ashish Agarwal (SC) [2022] have clarified that such notices are deemed valid and shall be treated as show-cause notices under section 148A(b). Accordingly, the procedure adopted by the Assessing Officer does not suffer from any legal infirmity.
The appellant also contended that no addition could be made under section. 69C when payments were made through banking channels. This argument is misplaced. Section 69C is not limited to cash payments but covers any unexplained or unsubstantiated expenditure, regardless of mode. Even where payments are made by cheques, the section applies if the corresponding expenditure is found to be fictitious or lacking commercial substance. In Tejua Durga Prasad Sharma vs. ITO Rohit Kumar Kapadia v. DCIT (2018) 256 Taxman 213 (SC), the Supreme Court held that if purchase bills are not backed by actual transactions, they can be disallowed under section 69C despite banking transactions.
The appellant also relied on certain decisions including CIT v. Sunrise ToolingSystems (2014) 361 ITR 206 (Del) and Pr. CIT v. Shapoorji Pallonji & Co. Ltd. (2020) 423 ITR 220 (Bom), which are distinguishable on facts. Those cases involved parties where the suppliers were traceable, transactions were verified, and books were not rejected. In contrast, here the supplier is a proven entry operator, and the appellant has not furnished sufficient material to verify the identity or authenticity of the supplier.
In light of the foregoing facts, legal provisions, and judicial pronouncements, it is evident that the addition of Rs. 89,03,956/- made under section 69C of the Act is factually and legally sustainable. The appellant has failed to prove the genuineness of the impugned purchases. The AO has acted on specific, corroborated information and has followed due process under law. Accordingly, the appeal is dismissed and the assessment order dated 31.03.2023 passed under section 147 read with section 144B of the Income Tax Act, 1961 is upheld in full.
6.2 In the result, the appeal is dismissed.
5. Feeling dissatisfied with the above finding so recorded in the order of the ld. CIT(A) the assessee appellant has preferred the present appeal before this tribunal on the grounds as reiterated herein above. In support of the various grounds raised
by the assessee, ld. AR of the assessee, has filed the following written submissions: In the capacity as proprietor of Shree Nath Steel Traders, assessee was trading in sponge Iron on wholesale basis. During the relevant period, 493.640 Tons of Sponge Iron was purchased from Sidhi Vinayak Salt Company Pvt. Ltd., Bokaro (Jharkhand) through total seventeen purchase invoices. The goods so purchased were transported through Trucks, involving UP State. On the basis of information from Commercial taxes Department to ADI (Inv), Jamshedpur that M/s. Sidhi Vinayak Metal & Salt Company Pvt. Ltd. is engaged in providing bogus sale Durga Prasad Sharma vs. ITO invoices, in avoidance of supporting evidence(s) submitted to ld. AO like transport bilties, transit declaration Forms issued Commercial taxes Department of UP State, weighing slips in some cases but without making any investigation, ld. AO prejudged the issue by stating at page (5) as under: “In response to you have filed reply dated 14.02.2023. I have gone through your reply dated 14/02/2023 which has been filed along with documentary evidence in which you have claimed that purchases made by you amounting to Rs.89,03,956/- from Sidhivinayak Metal & Salt Ltd. are genuine purchases but information received from Commercial Taxes Department Jharkhand State regarding GST evasion cannot be ignored (attachment enclosed)” With the above brief facts, the grounds of appeal are discussed hereunder: GROUNDS OF APPEAL: Ground No. (1)Ld. CIT(A) was not justified in sustaining the addition of Rs.89,03,956/- for the goods (sponge Iron) purchased through different consignments all from M/s. Sidhi Vinayak Metal & Salt Co. Pvt. Ltd., Bokaro which are backed by genuine evidences like transport bilties, transit declaration forms of area-Commercial taxes Department, stock register and other relevant evidences ignoring the fact that total sales to different buyers out of said purchase were accepted as genuine to whom input credit of GST was not doubted by GST Department. There are seventeen purchase invoices for purchase of goods of Rs.89,03,956/- from M/s. Siddhi Vinayak Metal and Salt Co. Pvt. Ltd. Almost every purchase is supported by transport bilty, Transit declaration form and/or other supporting documents. Payments of all purchases were made through banking channel. Input credit of self as well as of customers was allowed by GST Department without doubting the genuineness of purchase/sale. The available details of each consignment of Sponge iron purchased by assessee from M/s. Siddhi Vinayak Metal And Salt Co. Pvt. Ltd are as under : S.No. Date Invoice No. Amount Bilti No. Transit No. issued by P.B. page C.T.O., (UP) (with GST) No. 1. 03.10.2017 SVMS/2017-18/GST/902 5,45,443 529 - 1 and 2 2. 03.10.2017 SVMS/2017-18/GST/903 6,19,783 530 - 3 and 4 3. 04.10.2017 SVMS/2017-18/GST/909 5,35,460 533 T20171000042615 5 to 7 4. 05.10.2017 SVMS /2017-18/GST/919 6,07,889 542 Weighing slip 8 to 10 5. 05.10.2017 SVMS /2017-18/GST/920 5,26,115 543 T20171000059357 11 to 13 6. 05.10.2017 SVMS /2017-18/GST/921 5,94,720 544 T20171000059210 14 to 16. Durga Prasad Sharma vs. ITO 7 05.10.2017 SVMS /2017-18/GST/922 5,32,487 545 - 17 and 18 8. 10.10.2017 SVMS /2017-18/GST/959 6,08,738 207 Weighing slip 19 to 21 9. 11.10.2017 SVMS /2017-18/GST/967 6,18,509 571 T20171000139368 22 to 24 10. 14.10.2017 SVMS/2017-18/GST/1043 5,27,998 652 T20171000178150 25 to 27 11. 14.10.2017 SVMS/2017-18/GST/1044 7,51,061 653 T20171000186564 28 to 30 12. 14.10.2017 SVMS/2017-18/GST/1045 7,56,700 654 T20171000186428 31 to 33 13. 14.10.2017 SVMS/2017-18/GST/1046 7,31,637 655 T20171000186317 34 to 36 14. 14.10.2017 SVMS/2017-18/GST/1079 6,03,814 678 - 37 and 38 15. 17.10.2017 SVMS/2017-18/GST/1212 6,22,349 773 T20171000226274 39 to 42. Also weight slip 16. 23.10.2017 SVMS/2017-18/GST/1294 6,56,906 860 - 43 and 44 17. 26.10.2017 SVMS/2017-18/GST/1337 6,67,060 952 T20171000305405 47 to 48. Also weight slip Total purchases including GST @ 18% 1,05,06.669* * Purchase price without GST is Rs.89,03,956/- i.e. 105,06,669X100 */. 118) The other documentary proofs proving genuine purchases and sales are: S. No. Nature of records P.B. page
1. Purchase / sales of goods of M/s. Siddhi Vinayak Metal 49 2 Ledger account of said M/s. Siddhi Vinayak Metal & Salt 50
3. Bank statement with SBI evidencing cheque payments of said M/s. Siddhi Vinayak 51 to 59 Metal And Salt Co. Pvt. Ltd. No evidence that payments so made or part thereof has come back to assessee 4 GST reconciliation statement for purchase made from Siddhi Vinayak Metal – input 60 to 64 credit allowed by GST Deptt.
Quantitative tally of goods (purchased from Siddhi Vinayak- in terms of weight and 65 rates per Ton).
Without disproving the authenticity of above documents, ld. AO was not justified in treating the total purchases of Rs.89,03,956/- from M/s. Sidhi Vinayak Metal & Salt Co. Pvt. Ltd. Bokaro (Jharkhand) as unexplained expenditure u/s. 69C.
Durga Prasad Sharma vs. ITO Ground No. (2)Ld. CIT(A) further erred in sustaining addition made by the ld. AO under section 69C of I.T. Act as unexplained expenditure, avoiding the fact that all the payments for the purchases from said M/s. Sidhi Vinayak Metal & Salt Co. Pvt. Ltd. were made through banking channel therefore, sec. 69C of Act cannot be made applicable. In case of ACIT Vs. Kalpatru Gems (2010) XLIII TAX WORLD 41 (JP) has held that even for purchases from URDs, if the payment is made by a/c. payee cheques/Bank transfers, addition under section 69C cannot be made. Assessee had purchased sponge iron from M/s. Sidhi Vinayak Metal & Salt Co. Pvt. Ltd. Bokaro and goods were transported through public transport system and major goods were evidenced through Transit declaration forms (serially numbered) issued by Commercial taxes office of UP state. All the payments for purchases were made through bank transfers (P.B. page 51 to 59). Since the payment of purchase consideration was by explained sources, provisions of section 69C of Act cannot be applied. More so when ld. AO had accepted the declared profit of Rs.5,20,080/-, the major part was out of trading of goods purchased from M/s. Siddhi Vinayak & Salt Co. Pvt. Ltd. Ground No. (3)Without prejudice to ground No. (1) & (2) above, ld. CIT (A) has acted against the provisions of I.T. Act in sustaining addition under sec. 69C of Act for explained trade purchases only to bring the same within the mischief of provisions of section 115BBE of Act. Without prejudice to ground No. (1) and (2) above, when the payments are from explained sources on which provisions of section 69C of I.T. Act (applicable to unexplained expenditure etc.) are not applicable. Otherwise also for addition relating to trading activities, it cannot be taxed under section 115BBE of I.T. Act for levying higher rate of Income tax on the additions so made. Additional Ground No.(4) (already raised in Form 35- which goes to the root of the matter): Ld. CIT(A) has erred in law and on facts in sustaining reassessment proceeding as legal in which mandatory procedure as per amended provisions for reassessment w.e.f. 01.04.2021 (notice u/s. 148A(a) and u/s. 148A(b) fo IT Act) were not followed by the ld. AO. After 31.03.2021 for reassessments, it is mandatory on part of the Assessing Officer to follow the procedure of newly inserted provisions of section 148A of Income tax Act, i.e. to conduct enquiry with the prior approval of specified authority (section 148A(a) of Income tax Act), thereafter under section 148A (b)
Durga Prasad Sharma vs. ITO of Act to serve a notice of being heard on the assessee. After considering the reply under sec 148A(C) of Act the AO has to decide on the basis of material available on record, including reply of the assessee, whether or not it is fit case to issue notice under section 148 of Act. However, in Appellant’s case, no such legal procedure (as per amended provisions for reassessment) was followed by the ld. AO and notice under sec. 148 of I.T. Act was directly issued on 30.03.2022 therefore, the reassessment, consequent notices and raising demand are void. Reliance is placed on the following judicial pronouncements (giving head notes): (1) Kandoi Metal Powder Manufacturing Co. Pvt. Ltd. Vs. ACIT (2022) Vol. 19 ITR OL 787 (Raj): Reassessment. Notice, Change of law. Insertion of new provisions by Finance Act 2021. Imposition of stringent conditions for issuance of notice for reassessment. Failure to follow required procedure. Notice invalid. (2) Studio Virtues Vs. I.T.O. (2022) Vol 20 ITR OL 216 (Guj): Reassessment. Notice- validity. Law applicable. . Effect of amendment with effect from 01.04.2021. Assessee must be given opportunity to be heard before issue of notice of reassessment under section 148. (3) Aten Capital Pvt. Ltd. Vs. ACIT (2022) 447 ITR 346 (Del) & First Solar Power India Pvt. Ltd. Avs. ACIT (2022) 447 ITR 337 (Del): Reassessment- Notice. Change of law. New procedure. Condition precedent for issue of order directing issuance of notice of reassessment. Consideration of assessee’s reply to show-cause notice. Failure to consider. Order and subsequent notice for reopening of assessment quashed. (4) Alkem Laboratories Ltd. Vs. Pr. CIT (2023) 459 ITR 551 (Pat): Reassessment. Notice- validity. New procedure- effect of amendments to provisions relating to reassessment by Finance Act 2021. Notice must disclose information leading to belief that income had escaped assessment. Information must be definite and not vague. Except issuance of notice under section 148 of Income tax Act by ld. AO, no opportunity was provided to the assessee which is mandatorily required under section 148A(b) of Income tax Act nor provisions of section 151A of I.T. Act were followed as the notice u/s. 148A of Act was issued by JAO.
To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions:
S. No. Particulars/Short description P. B. Page 1 Written synopsis in support of grounds of appeal
A to D 2. Purchase from Siddhi Vinayak – proof & supporting documents 1 to 49 3. Ledger a/c of Sidhi Vinayak Metal & Salt Co. Ltd. in books of 50 assessee 4. Bank statement evidencing payments of Sidhi Vinayak & Salt Co. 51 to 59
5. GST quarterly returns-input credit of assessee not doubted by 60 to 64. GST Department Case laws relied upon:
Pr. CIT Surat vs. Tejua Rohit Kumar Kapadia in Tax Appeal No. 691 of 2017 dated 18/09/2017
The ld. AR of the assessee in addition to the above written submission so filed vehemently argued that the assessee in support of purchases submitted the transport slip/lorry slip & weighted slips. He also submitted that all the payments to the supplier were duly made and recorded in the books of accounts. The assessee also submitted transit declarations form wherein the details of transport has been verified and therefore, the contentions of the revenue that the assessee has not purchased the goods from the said party was not correct. The assessee from the said purchase made sales which was not disputed by the revenue. As regards the alleged invoices of purchase the assessee submitted all the evidence from paper book nos. 1 to 48 which shows that purchases are genuine the assessee submitted quantitative details which are also not Durga Prasad Sharma vs. ITO disputed (Paper book page No. 49). Ld. CIT(A) has sustained the additions u/s 69C without considering the fact that receipt to the extent of purchase has already been taxed. Therefore, that cannot be double additions in the hands of the assessee. The ld. AR also relied upon the decisions of Hon’ble Gujarat High Court in the case of Pr. CIT Surat vs. Tejua Rohit Kumar Kapadia in Tax Appeal No. 691 of 2017 dated 18/09/2017 and in and he also submitted that as decided by the Hon’ble Gujarat High Court (supra) decision, the assessee is supposed to comply the following five requirements ; 3. It can thus be seen that the appellate authority as well as the Tribunal came to concurrent conclusion that the purchases already made by the assessee from Raj Impex were duly supported by bills and payments were made by Account Payee cheque. Raj Impacts also confirmed the transactions. There was no evidence to show that the amount was recycled back to the assessee. Particularly, when it was found that the assessee the trader had also shown sales out of purchases made from Raj Impex which were also accepted by the Revenue, no question of law arises.
Per contra, ld. DR has relied upon the finding recorded in the orders of the lower authorities. He vehemently argued that the ld. AO issued the notice u/s 133(6) of the Act which was not served. The assessee could not support the fact that the purchases are not bogus the finding of GST authorities were not disputed by the assessee and thereby he supported the finding recorded in the order of the ld. CIT(A).
Durga Prasad Sharma vs. ITO 9. We have heard the rival contentions and perused the material placed on record. The bench noted that the assessee has raised the solitary issue of addition of Rs.89,03,956/- for the goods (sponge Iron) purchased through different consignments from M/s. Sidhi Vinayak Metal & Salt Co. Pvt. Ltd., Bokaro (Jharkhand) which were backed by evidences like transport bilties, transit declaration forms of area-Commercial taxes Department, stock register and other relevant evidences, ignoring the fact that total sales to different buyers out of said purchase were accepted as genuine to whom input credit of GST was not doubted by GST Department also. On the issue disputed before us the bench noted that the case of the assessee was reopened based on the information received from ADIT(Inv) Jamshedpur that M/s Sidhi Vinayak Metal & Salt Company Pvt. Ltd. Engaged in providing bogus sales bills ( purchases for the beneficiary). A list of beneficiary was provided. The assessee was amongst that beneficiary and obtained entries in the form of bogus purchases without actual supply of goods of Rs.89,03,956/- and thereby the ld. AO made the addition as per provision of section 69C of the Act. The assessee in the assessment proceeding submitted that they have made purchases from M/s Sidhi Vinayak Metal & Salt Compnay Pvt. Ltd. The assessee vide submission dated 15.02.2023, 23.03.2023 filed copy of ITR alongwith Durga Prasad Sharma vs. ITO computation of income, balance sheet, audit report, Ledger of M/s Sidhi Vinayak Metal & Salt Company, Purchase bills and Transporter, GSTR-2A, Copy of Transportation slip with invoice, Copy of stock register etc., the assessee also submitted copy of bank account statements of saving and current bank accounts for the F.Y. 2017-18 for the year under assessment.A complete reply/details alongwith attachment submitted by the assessee has been examined. The assessee was asked to furnish details regarding the bogus purchases from M/s Sidhi Vinayak Metal & Salt Company (AAICS7786E) of amounting Rs.89,03,956/- in the F.Y. 2017-18. In response to said show case notice dated 16.03.2023 the assessee has submitted his reply on 22.03.2023. Ld. AO noted that submission filed by the assessee have been perused, examined and found not acceptable because in this case information was received that during the course of investigation conducted by ADIT (Inv) Jamshedpur M/s Sidhi Vinayak metal & Salt company Pvt. Ltd has admitted that it has provided bogus purchase accommodation entry to a number of beneficiaries, from which the assessee company has also acquired such entries under disguise of purchases of Rs.89,03,956/-. Ld. AO noted that the assessee has not submitted the documentary evidence as to transit pass issued by Department of Steels and mines Jharkhand. The assessee has also failed Durga Prasad Sharma vs. ITO to produce to E-way bills regarding purchases made. Further, information was called for by issuing notice dated 25.03.2023 u/s 133(6) of the I.T Act, 1961 to M/s Sidhi Vinayak Metal & Salt Company (AAICS7786E) to verify the genuineness of the above transactions but no reply has been received from M/s Sidhi Vinayak Metal & Salt Company (AAICS7786E) which could prove the genuineness of transaction. Therefore, in absence of receipt of information from M/s Sidhi Vinayak Metal & Salt Company, identity, creditworthiness & genuineness of the party (M/s Sidhi Vinayak Metal & Salt Company (AAICS7786E) to whom payment amounting Rs.89,03,956/- against alleged purchases was made remain unexplained. Accordingly, the same was disallowed and the amount of Rs.89,03,956/- was treated as bogus purchase form M/s Sidhi Vinayak Metal & Salt Company. Further perusal of GSTR-1 data of assessee has revealed that M/s Sidhi Vinayak Metal & Salt Company Pvt. Ltd has not filed its ITR for A.Y. 2018-19, accordingly the purchase made by the assessee amounting Rs.89,03,956/- was disallowed and was added in the income of assessee as unexplained expenditure u/s 69Cr.w.s 115BBE of the Act. When the matter challenged by the assessee before the ld. CIT(A) who also confirmed the view of the ld. AO and thereby upheld the addition on the ground that the supplier was not treaceable.
Durga Prasad Sharma vs. ITO The bench noted that the dispute is related to the addition made under section 69C of the Act and therefore, before we proceed on the issue it would be appropriate to go through the provision of the Act which reads as follows; Unexplained expenditure, etc. 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year : Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.
Here the case of the assessee the assessee has accounted the purchase explained the source and the same are duly explainable from the books of account placed on record. Not only that based on these purchases so accounted by the assessee the subsequent sale made by the assessee was accepted and therefore, considering that fact that the same are not unaccounted and the source is already explained by the assessee the addition cannot be made in the hands of the assessee under the provision of the Act. The bench noted that in support of the claim of purchase the assessee submitted all the bills and transport receipt. The ld. AO though issued a letter to party u/s. 133(6) but no to the transporter. The assessee has also submitted the transit declaration of Uttar Pradesh state wherein Durga Prasad Sharma vs. ITO the truck no is same [ page 7] with that of the transport receipt of the Pappu Roadways [ page6 ] of the paper book this independent evidence support the claim of the assessee. Not only that the heavy reliance was placed by the revenue for Eway bill the provision of that requirement was not applicable for the year under consideration. Thus, as serviced the decision of the Gujarat High Cour tin the case of PCIT Vs. Tejua Rohtkumar Kapadia the assessee has fulfiled the requirement to held the purchase to be made by furnishing the following documents; a. The purchases are supporting by bills b. Payment made by the assessee. c. The transaction is duly supported by transport receipt d. No evidence to show that the amount was recycled back e. Purchase are consequent to sales which was not disputed.
Thus, now only grievance that the party with whom the party made purchases does not comply to the notice u/s. 133(6) of the Act on this issue is also decided by the co-ordinate bench of Mumbai in the case of ITO 31(1)(5) Vs. Gold Finger Establishment in wherein the bench observed that ; 10. So far as the issue raised as regards the deletion of Rs.1,14,16,135/- is concerned, the Ld. CIT(A) has recorded a finding of fact that the assessee has proved the identity of the suppliers as notices under section 133(6) were issued nonetheless not replied. The ld CIT(A) has noted that the AO has not doubted the transactions at all. The fact is that the party has failed to reply the notices issued under section 133(6) of the Act cannot be sole basis for disallowance of purchases from these parties.
Durga Prasad Sharma vs. ITO In the light of the above discussion the ground no. 1 & 2 raised by the assessee are allowed. Ground no. 3 is consequential. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 20/11/2025.