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Facts
The assessee filed an appeal against the order confirming an addition of Rs. 1,01,93,175/- made by the AO on account of bogus purchases. The AO reopened the case based on information that the assessee was a beneficiary of bogus purchases from M/s Ultra Trade Mart. The assessee provided purchase bills and other documents, but the AO noted that the supplier did not exist and its GST registration was cancelled.
Held
The Tribunal noted that the AO did not doubt the corresponding sales made by the assessee. The Tribunal also observed that the assessee maintained books of accounts and the purchases were accounted for. The mere cancellation of GST registration of the supplier cannot be a ground to treat entire purchases as bogus. The issue was covered by the decision of the Jurisdictional High Court and a coordinate bench.
Key Issues
Whether the addition made on account of bogus purchases u/s.69C of the Act is justified when the assessee maintained books of accounts and the corresponding sales were not doubted, despite the supplier's GST registration being cancelled.
Sections Cited
69C, 148, 148A(d), 148A(b), 143(2), 142(1), 133(6), 145(3)
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Income Tax Appellate Tribunal, “A” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR & SHRI PRADIP KUMAR CHOUBEY
आदेश / O R D E R
Per Rajesh Kumar, AM:
The assessee has filed this appeal against the order dated 17.09.2025, passed by the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2018-2019.
The only issue involved in this appeal of the assessee is against the order of the ld. CIT(A) confirming the addition of Rs.1,01,93,175/- as made by the AO on account of bogus purchases u/s.69C of the Act.
Facts in brief are that the case of the assessee was reopened after the AO received information from DDIT(Inv.), Unit-4(3), Kolkata that the assessee is beneficiary of bogus purchases to the tune of Rs.1,01,93,175/- from M/s Ultra Trade Mart. Accordingly, notice u/s.148 of the Act was issued on 26.03.2022 after passing the order u/s.148A(d) of the Act prior to which the show cause notice u/s.148A(b) of the Act was issued by the AO on 14.03.2022 for which there was no compliance. The assessee filed return of income declaring total income at Rs.19,14,534/- in compliance to the said notice. Thereafter notice u/s.143(2) & 142(1) of the Act along with questionnaires were issued. The assessee replied the questionnaires by filing the necessary evidences before the AO comprising purchase bills, payments through banking channels, quantity receipts, stock register etc. The AO also issued notice u/s.133(6) of the Act but no reply was received. Thereafter the Inspector was deputed and as per his report party did not exist on the said address. The AO reported that as per the inspector ‘s report the party could not be traced at the given address and no one in that area had heard of the supplier company. The AO also noted that M/s Ultra Trade Mart was bogus with no existence at its declared places of business as well as the places from where consignments were purportedly received. Accordingly, the AO added an amount of Rs.1,01,93,175/- to the income of the assessee by treating the same as bogus in nature u/s.69C of the Act .
4. In appellate proceedings, the ld. CIT(A) has also confirmed the order of the AO and also noted that the GST registration of this party was also cancelled.
After hearing the rival contentions of the parties and perusing the material available on record, we find in this case that the assessee has made purchases from M/s Altra Trade Pvt. Ltd. amounting to Rs.1,01,93,175/-. The assessee has duly maintained the books of accounts and the said purchases were duly accounted for in the books of accounts of the assessee. We note that the assessee produced before the AO the stock register, purchase account of M/s Ultra Trade Pvt. Ltd. in its books of accounts, copy of cash accounts etc.. As no reply was received to notice u/s.133(6) of the Act and also as per the inspector’s report the party was not in existence besides the GST registration was also cancelled, the ld. CIT(A) simply affirmed the order of the AO. We observe from the facts before us that the AO has not doubted the corresponding sales made by the assessee and only the doubted the purchases on the ground of bogus accommodation entries. We also observe that how the purchases could be disbelieved when the corresponding sales were not disbelieved. The mere ground that GST registration of the party was cancelled cannot be a ground to make addition u/s.69C of the Act by treating the entire purchases as bogus. The issue involved in this case of the assessee is squarely covered by the decision of the Hon’ble Jurisdictional High Court in the case of LGW Industries Limited & Ors Vs Union of India & ors WPA No. 23512 of 2019 and Ors wherein the Hon'ble High court has held as under: Considering the submission of the parties and on perusal of records available, these writ petitions are disposed of by remanding these cases to the respondents concerned to consider afresh the cases of the petitioners on the issue of their entitlement of benefit of input tax credit in question by considering the documents which thể petitioners want to rely in support of their claim of genuineness of the transactions in question and shall also consider as to whether payments on purchases in question along with GST were actually paid or not to the suppliers (RTP) and also to consider as to whether the transactions and purchases were made before or after the cancellation of registration of the suppliers and also consider as to compliance of statutory obligation by the petitioners in verification of identity of the suppliers (RTP). If it is found upon considering the relevant documents that all the purchases and transactions in question are genuine and supported by valid documents and transactions in question were made before the cancellation of registration of those suppliers and after taking into consideration the judgments of the Supreme Court and various High Courts which have been referred in this order and in that event the petitioners shall be given the benefit of input tax credit in question. These cases of the petitioners shall be disposed of by the respondents concerned in accordance with law and in the light of observation made above and by passing a reasoned and speaking order after giving effective opportunity of hearing to the petitioners and by dealing with the judgments petitioners want to rely at the time of hearing of the cases, within eight weeks from the date of communication of this order. These Writ Petitions being WPA No.23512 of 2019, WPA No.6768 of 2020, WPA No.7285 of 2020 with CAN No. 1-of 2020 and WPA No.8289 of 2021 are disposed of in the light of observation and directions as made above. Further, let these Writ Petitions being WPA No. 10776 of 2021, WPA No. 12964 of 2019, WPA No. 6771 of 2020 with CAN No. 1 of 2020 (Old CAN No. 5711 of 2020) and WPA No. 8195 of 2020 be listed for hearing two week after the Christmas Vacation.
Moreover, the books of accounts of the assessee were not rejected u/s.145(3) of the Act. Therefore, how the purchases can be disallowed in its entirety when the books are not rejected. The cases of the assessee finds supports from the decision of the coordinate bench of the Tribunal in the case of Rainbow Vanijya Pvt Ltd Vs ACIT order dated 31.12.2025 for A.Y. 2020-21. Considering these facts in the light of ratio laid in the above decisions , we are inclined to set aside the order of the ld. CIT(A) and direct the AO to delete the addition made u/s.69C of the Act.