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Facts
The assessee's appeal for AY 2018-19 concerns proceedings under section 147 r.w.s. 144 of the Income-tax Act, 1961. The lower authorities treated purchases of Rs. 53,48,116/- from M/s. RCI Industries and Technologies Ltd. as bogus under section 69C of the Act. The CIT(A)/NFAC restricted the disallowance to 12.5% of purchases, amounting to Rs. 6,68,515/-.
Held
The Tribunal acknowledged that the assessee is in the business of manufacturing electrical wires and cables and could source purchases from unregistered dealers. While noting divergent views on similar issues, the Tribunal deemed a lumpsum disallowance of 10% of the alleged bogus purchases (Rs. 6,68,515/-) as just and proper in the interest of justice. However, this disallowance was made with a rider that it should not be treated as a precedent.
Key Issues
Whether purchases treated as bogus by the lower authorities are indeed bogus, and if so, what disallowance is appropriate.
Sections Cited
147, 144, 69C
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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI S. RIFAUR RAHMAN
ORDER
PER SATBEER SINGH GODARA, JM
This assessee’s appeal for assessment year 2018-19, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2024-25/1072279511 (1), dated 17.01.2025 involving proceedings under section 147 r.w.s. 144 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’). Heard both the parties. Case file perused.
It emerges during the course of hearing that the assessee presses for its sole substantive ground on merits challenging both the learned lower authorities’ action treating its purchases amounting to Rs.53,48,116/- sourced from M/s. RCI Industries and Technologies Ltd., as bogus one under section 69C of the Act, in the assessment order dated 11.03.2023. The CIT(A)/NFAC has restricted the disallowance to 12.5% of purchases coming to Rs.6,68,515/-.
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 engaged in the business of manufacturing of electrical wires and cables all along wherein possibility of assessee sourcing its purchases from unregistered dealers per se could not be altogether ruled out as well. And that his corresponding sales 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
2 | P a g e 424 (Del. – Trib.) DCIT Vs. Kohinoor Foods Ltd.; and (2025) 177 taxmann.com 836 (Delhi-trib.) DCIT Vs. Tirupati Matsup (P.) Ltd. have recently decided the instant issue of bogus purchases with divergent views as well.
Faced with these peculiar facts, it is thus deemed appropriate in the larger interest of justice that a lumpsum disallowance @ 10% of the assessee’s alleged bogus purchases restricted to Rs.6,68,515/- by the CIT(A), would be just and proper with a rider that the same shall not be treated as a precedent. The assessee’s book entries are hereby rejected to the very extent. Necessary computation shall follow as per law. No other ground or argument has been pressed.