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Facts
The assessee, a government contractor, is in appeal against the CIT(A)'s orders upholding the disallowance of purchases from M/s. Sanjay Jain group as bogus under Section 69C of the Income-tax Act, 1961. The disputed purchase amounts are Rs. 7,83,720/- for AY 2018-19, Rs. 2,33,64,343/- for AY 2019-20, and Rs. 2,13,37,026/- for AY 2020-21.
Held
The Tribunal noted that while the nature of the assessee's business might allow for cash transactions, the issue of bogus purchases has been decided with divergent views by various judicial precedents. Considering the peculiar facts and the interest of justice, a lumpsum disallowance of 5% of the alleged bogus purchases or the assessee's regular GP, whichever is higher, is deemed appropriate.
Key Issues
Whether the purchases sourced from M/s. Sanjay Jain group were indeed bogus, and if so, the appropriate disallowance.
Sections Cited
153C, 143(3), 69C
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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
Date of hearing 27.01.2026 Date of pronouncement 27.01.2026 ORDER PER SATBEER SINGH GODARA, JM These assessee’s three appeals 1538 & 1537/Del/2025 for assessment years 2018-19, 2019-20 and 2020- 21, arise against the Commissioner of Income Tax (Appeals)-30 [in short, the “CIT(A)”], New Delhi’s orders, all dated dated 13.01.2025 having DINs and orders nos. ITBA/APL/M/250/2024- 25/1072121889(1), ITBA/APL/M/250/2024-25/1072122084(1) and ITBA/APL/M/250/2024-25/1072121248(1), involving proceedings under section 153C r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), respectively. Heard both the parties. Case files perused.
It emerges during the course of hearing that the assessee raises his sole substantive ground challenging both the learned lower authorities’ action treating his purchases amounting to Rs.7,83,720/- in AY 2018-19, Rs.2,33,64,343/- in AY 2019-20 and Rs.2,13,37,026/- in AY 2020-21 sourced from M/s. Sanjay Jain group, as bogus ones under section 69C of the Act, in assessment orders, all dated 20.03.2023, for AYs 2018-19, 2019-20 and 2020- 21 respectively, as upheld in the respective lower appellate discussion.
That being the case, both the parties vehemently reiterate their respective stands against and in support of the impugned bogus purchases disallowance. We wish to make it clear that there is no dispute in principle that the assessee is a govt. contractor and also engaged in construction of roads and buildings all along wherein possibility of cash turnover in such an unorganized activity could not be altogether ruled out. And that his
2 | P a g e corresponding receipts and sales therefrom have nowhere been questioned in both the lower proceedings. Various recent judicial precedents (2025) 173 taxmann.com 592 (Guj.) Ravjibhai Becharbhai Dhamelia vs. ACIT; (2024) 160 taxmann.com 110 (Bom) PCIT Vs. Hitesh Mody (HUF), (2024) 160 taxmann.com 93 (Del) PCIT Vs. Forum Sales (P) Ltd.; (2025) 172 taxmann.com 283 (Bom) PCIT Vs. Kanak Impex (India) Ltd; (2025) 178 taxmann.com 424 (Del. – Trib.) DCIT Vs. Kohinoor Foods Ltd.; and (2025) 177 taxmann.com 836 (Delhi-trib.) DCIT Vs. Tirupati Matsup (P.) Ltd. have decided the instant issue of bogus purchases with divergent views; both accepting or partly allowing or rejecting the same in entirety as well.
Faced with these peculiar facts, it is thus deemed appropriate in the larger interest of justice that a lumpsum disallowance @ 5% of the assessee’s alleged bogus purchases amounting to Rs.7,83,720/- in AY 2018-19, Rs.2,33,64,343/- in AY 2019-20 and Rs.2,13,37,026/- in AY 2020-21 or @ of his regular GP declared thereupon; whichever is higher, would be just and proper with a rider that the same shall not be treated as a precedent. The 3 | P a g e assessee’s book entries are hereby rejected to the very extent. Necessary computations shall follow as per law. No other ground or argument has been pressed.