INCOME TAX OFFICER, WARD-50(1), NEW DELHI vs. THE SILK FACTORY, DELHI

P a g e | The Silk Factory (AY: 2022-23) of the total bogus purchases on the ground that as the AO had not doubted the sales, complete purchases held as bogus cannot be doubted.Capital introduced by partner was deleted. Accordingly department is in appeal raising following grounds;

(iv) Drisha Impex (SC)(August 2025) 177 taxmann.com 808 4.1 It was submitted that issue of bogus or fictitious purchases have to be examined on facts of each case. In the submission filed ld. DR has submitted that once a purchase has been considered asBogus, it is not in the jurisdiction of the Assessing Officer or Judicial authorities to provide concessions by P a g e | The Silk Factory (AY: 2022-23) considering only a percentage of purchases as disallowance. In all such cases, the entire purchase is required to be disallowed.

4.2 Ld. DR submitted that bogus purchases can be of two types:

(i) No actual procurement of goods is made and the assessee obtainsfabricated invoices to artificially inflate purchases and reduce

Gross Profit.

(ii) Actual purchases are made from grey market at lower rate and/or in cash. And the assessee obtains fabricated invoices to artificially inflate the cost of goods purchased so as to reduce Gross Profit.

4.3 It is incumbent on the assessee to prove conclusively that actual purchases were made in cash/from grey market before he can make a plea for only a percentage of bogus purchases to be added.

4.4 Ld. DR submitted that in the present case, on the basis of investigation carried out by the AO, it was evident that the sellers were completely fictitious. Hence purchases shown as made from such sellers were also bogus.

This fact has been accepted by Ld. CIT(A) himself.The onus now lies on the assessee to prove that he had actually made purchases and has not merely

P a g e | The Silk Factory (AY: 2022-23) inflated the cost. This can be done by giving proof of purchases made from grey market, like a Kaccha receipt. Or the assessee can furnish details of the supplier from whom such purchases were made, and give source of cash spent on making such purchases. In the absence of any such evidence, it should not be presumed that the purchases were actually made from grey market. It was submitted that it is important to note that in the present case the assessee has not even made a claim that he had made such purchases from the grey market. The only claim that has been made by the assessee and that has also been accepted by Ld CIT(A) is that since the sales have been accepted by the AO, the purchases must have been made. Ld. DR has submitted that it is trite law that the party who makes the claim has to substantiate it with evidence. Therefore it is incumbent upon the assessee to prove that the said purchases were actually made from parties other than those mentioned in its books. Once it is proved that the suppliers shown by the assessee are fictitious, there can only be two situations: either no purchases were made, or the purchases were made from persons other than the fictitious ones. It is incumbent upon the assessee now to prove what has actually happened in his case. It is not for Revenue, or appellate authority to P a g e | The Silk Factory (AY: 2022-23) presume a scenario in the absence of any such claim made by the assessee or any evidence to support the claim given. Ld CIT(A) has rendered his decision based on the argument that once sales are not doubted, the purchases must be accepted. However, a perusal of the Assessment order shows that no stock register was produced before the AssessingOfficer, in the absence of which quantity of purchases made and their correlation with sales cannot be proved.

It was also submitted that Ld. CIT(A) has confirmed addition of 5% of total bogus purchases after giving a clear finding that the purchases of Rs 21.83 Crores discussed above were indeed bogus. The assessee has accepted this order of Ld CIT(A) and has not filed any appeal against this conclusion and confirmation of addition. This clearly proves that the assessee himself has accepted that the said purchases were bogus. In view of such an acceptance, and the fact that the assessee has neither made any claim that purchases were made from alternate sources, nor has filed any evidence for the same, the addition made by the Assessing Officer of full bogus purchases amounting to 21.83 Crores should be sustained.

P a g e | The Silk Factory (AY: 2022-23) parties, which clearly establishes the bonafide purchases and the said documents are acknowledged to have been filed by the AO in para 3.2 at internal page 2 of Assessment Order, where it is stated by AO as under:-

“the assessee furnished the copies of audited financial statements, computation of income, details of bank accounts, copy of TDS returns, details of month wise purchase and sales, details of opening andclosing stock in value as well as in quantity, copy of ledger account of all purchases and sales accounts, copy of form-26As etc.”

5.1 It was submitted that the AO in para 3.3 at internal page 4 of Assessment Order, further acknowledged the fact about more evidences being submitted by the assessee to substantiate the claim of purchases and where it is stated by AO as under:-

“the assessee furnished the copies of invoices, the copy of ledger account of said entity in the assessee's books of accounts, the copies of ledger accounts, invoice copy, e-way bill and transport consignment note, along with the bank statement. The assessee also furnished copy of audited financial statement, copy of tax audit report and copy of computation of income.”

P a g e | The Silk Factory (AY: 2022-23) 6. We find that the above stated documents clearly establishes that there were substantial evidences on which assesse had claimed that purchases were genuine and as assessee has discharged the initial onus of furnishing primary evidence and in particular the invoice copy, e-way bill and transport consignment note, month wise purchase and sales, details of opening and closing stock in value as well as in quantity.The ld. CIT(A) has taken note of above said documents and evidence which sufficiently prove purchases and prove the receipt of stock by the assessee, which has been sold by the assessee as per financial results and as per stock register furnished in value and as well as in quantity.The fact of the matter is that stock register not only reflects the value and quantity of stock but also reflects the party from whom purchases made and to whom sales made. Certainly if sales and turnover is accepted by department then goods purchased by the Assessee qua sales made by him are also bound to be accepted and section 69C of the Act cannot be invoked for deeming income. Where addition of purchase in total is proposed resulting intoGP exceeding the sales department must justify the addition with evidences not just suspicion that suppliers were Non Filers or did not reply to Notice u/s 133(6) of the Act, that supplier had their GST

P a g e | The Silk Factory (AY: 2022-23) Neither suspended or suo motto cancelled or cancelled on the request of the supplier. Many of them had multiple GSTN in their names. Many of them were Transient Companies meaning thereby that they had their GST registration made on a particular date, showed crores of sale to the assessee on the same day or for few days, and then requested for cancellation of GSTN, sometimes even within a few days or a month or that the GST Database showed that almost all of themwere not dealing in fabrics (which was what the assessee had claimed to have purchased from them). These suspicious circumstances should be relied only after rejecting the books like stock and sales and other corresponding expenditures. There is no allegation of fabricated evidences being filed so to justify the contentions of ld. DR.

Thus the conclusion of ld. CIT(A) require no interference. The grounds have no substance. The appeal deserves to be dismissed. Accordingly ordered.

Order pronounced in the open court on 09.01.2026