DEEPAK PAWAR,NEW DELHI V. DCIT CIRCLE 43(1), DELHI, NEW DELHI

ITA 3489/DEL/2025

AI Insights

The case involves Deepak Pawar, the appellant, who contested the additions made to his income tax assessment by the National Faceless Appeal Centre (NFAC), Delhi, which were based on allegations of bogus purchases from M/s R.K. Polymers. The Assessing Officer (AO) made an adhoc disallowance of Rs. 1,39,60,535, which was later reduced by the CIT(A) to Rs. 40,76,476. The appellant argued that the additions were made on an estimation basis without rejecting the books of accounts, and that the proceedings were void ab initio as the AO did not apply his independent mind. The Tribunal, referencing a similar case in the appellant's favor for AY 2019-20, found that the appellant had provided sufficient evidence to substantiate the genuineness of the purchases, including invoices, e-way bills, and bank statements, which the revenue failed to counter.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 840109 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2026
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2022-2023
• Appeal Filed On: 27-05-2025
• Other Referred Cases: PCIT vs. Forum Sales Pvt. Ltd.  2024:DHC:1693-DB, Kishanchand Chellaram vs. CIT [1980] 125 ITR 713 (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKUSH KALRA
• Assessee Lawyers: RAGNI HANDA
• Keywords: Unexplained expenditure; Bogus purchase; Onus to prove; Principle of natural justice; Bogus
• Section: 143(3); 133(6); 69C; 234B

Judgement Text

"1 IN THE INCOME TAX APPELATE TRIBUNAL DELHI BENCH “E”: NEW DELHI BEFORE SHRI MAHAVIR SINGH, HON’BLE VICE PRESIDENT AND SHRI AMITABH SHUKLA, HON’BLE ACCOUNTANT MEMBER ITA No. 3489/Del/2025 A.Y. : 2022-23 DEEPAK PAWAR, VS. DCIT, CIRCLE 43(1), 4/78, FIRST FLOOR, CIVIC CENTRE, SUBHASH NAGAR, NEW DELHI NEW DELHI – 110 027 (PAN: AVAPP4384P) (Appellant) (Respondent) Assessee by : Ms. Ragni Handa, Adv. Department by : Ms. Ankush Kalra, Sr. DR. Date of Hearing 18.02.2026 Date of Pronouncement 25.02.2026 O R D E R PER MAHAVIR SINGH, VP: This appeal by the assessee is emanating from the order of the Ld. National Faceless Appeal Centre (NFAC), Delhi in Appeal No. NFAC.2021-22/10354866 dated 19.2.2025. Assessment was framed by NFAC, Delhi u/s. 143(3) r.w.s. 144B of the Act on 18.3.2024 relevant to assessment year 2022-23. 2. The assessee has raised the following grounds of appeal: 1. That on the facts and circumstances of the case and in law, the order dated 19.2.2025 passed by the Ld. CIT(A) under section 250 of the Act is erroneous and bad in law. Printed from counselvise.com 2 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining the addition of Rs. 40,76,476/- out of Rs. 1,39,60,535/- made by the AO under section 69C on account of bogus purchases. 3. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining the addition of rs. 40,76,476/- being 3.65% of the total purchases made from M/s R.K. Polymers on an estimation basis. 4. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate no addition can be made on estimation basis without rejecting the books of accounts, as held by the Hon’ble Delhi High Court in the case of PCIT vs. Forum Sales Pvt. Ltd. – 2024:DHC:1693-DB. 5. That on the facts and in the circumstances of the case and in law, the CIT(A) has erred in upholding the addition based on a satisfaction which is borrowed in nature without appreciating that the AO failed to apply his independent mind while forming an opinion, thereby rendering the proceedings void ab initio. 6. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to address the vital violation that any material or evidence proposed to be used against the assessee must be made available to him. It is a settled principle of natural justice that any document or information gathered at the back of the assessee cannot be relied upon without affording the assessee an opportunity to rebut Printed from counselvise.com 3 the same, as held by the Hon’ble Supreme Court in the case of Kishanchand Chellaram vs. CIT [1980] 125 ITR 713 (SC). 7. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in upholding the assessment without appreciating that the case of the appellant was selected based on VRU information pertaining to Shri Pradeep Bansal, Proprietor of M/s Royal Impex, allegedly a non-existent entity from whom M/s R.K. Polymers was stated to have received fictitious input tax credit. However, no specific information, material, or adverse evidence in this regard was ever confronted or provided to the appellant, thereby violating the principles of natural justice. 8. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has failed to appreciate that the Assessee had furnished all cogent and corroborative evidence to substantiate the genuineness of the purchases, and the same remained uncontroverted by the AO. 9. That on the facts and in the circumstances of the case and in law, the CIT(A) has failed to appreciate that the assessee had furnished all cogent and corroborative evidence to substantiate the genuineness of the purchases, and the same remained uncontroverted by the AO. 10. That on the facts and in the circumstances of the case and in law, the CTI(A) has failed to appreciate that while the sales declared by the assessee have not been disputed or doubted by the Assessing Officer, an addition solely on the basis of alleged bogus purchases is inconsistent and unsustainable in law, as it presupposes the impossibility of effecting genuine sales without genuine purchases. Printed from counselvise.com 4 11. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the AO failed to discharge the burden of proof which lies upon the revenue to substantiate the allegations of bogus purchase. 12. That the CIT(A) has failed to consider and adjudicate upon the detailed objections and submissions filed by the appellant during the appellate proceedings, thereby violating the principles of natural justice and fair hearing. 13. That on the facts and circumstance of the case and in law, the CIT(A) has failed to appreciate that addition was made on the basis of surmises and conjectures. 14. That on the facts and circumstances of the case and in law, the CIT(A) erred in sustaining charging interest u/s. 234A, 234B and 234C of the Act. 15. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in sustaining the penalty u/s. 271AAC(1) and 272A(1)(d) of the Act. 16. That the grounds of appeal are independent and without prejudice to each other. 17. The assessee craves leave to add, amend, alter, remove, rescind, forgo or withdraw any of the above grounds of appeal, which are without prejudice to one another, before or at the time of hearing of the appeal in the interest of natural justice. Printed from counselvise.com 5 3. Brief facts of the case are that the assessee is engaged in the business of trading in raw material for CPVC Pipe industry since 2016 under the name of “Deepjyoti Enterprises”. The assessee had filed its original return of income u/s. 139(1) of the Act on 31.8.2022, declaring an income of Rs. 56,16,900/-. Thereafter, the assessee’s case was selected in scrutiny due to the information received from DG-GST (Intelligence) that a search has been conducted on Royal Impex which is non-existent entity. AO noted that during investigation various parties had availed fictitious GST Input Tax Credit (ITC) from M/s Royal Impex, without actually receiving any goods or services. AO further noted that these parties had further issued fake invoices and allowed various beneficiaries to avail GST ITC without delivering any goods or services. AO observed that one of such intermediary entities was M/s RK Polymers who sold goods to assessee during FY 2021-22. Therefore, during the course of assessment proceedings, inter alia information was sought regarding the purchases made by the assessee to the same, the assessee submitted that to AY 2022-23 and produced sample copies of invoices of M/s RK Polymers, their E-way bills and bank statements to support the purchases made. However, the AO without taking cognizance of the aforesaid submission, vide its order dated 18.3.2024, made an adhoc disallowance of Rs. 1,39,60,535 (being 12.5% of alleged bogus purchase i.e. Rs. 11,16,84,280) as unexplained expenditure u/s. 69C r.w.s. 115BBE of the Act. Aggrieved by the assessment order passed by the AO for AY 2022-23 the assessee preferred the appeal before the Ld. CIT(A), who vide order dated 19.2.2025 has restricted the disallowance of purchases to an amount of Rs. 40,76,476/- (3.65% of purchases of Rs. 11,16,84,280) by partly allowing the appeal of the assessee. Aggrieved, assessee is in appeal before us. Printed from counselvise.com 6 4. Ld. AR for the assessee submitted that Ld. CIT(A) has erred in sustaining the addition of Rs. 40,76,476/- being 3.65% of the total purchases made from M/s R.K. Polymers on an estimation basis. It was further submitted that no addition can be made on estimation basis without rejecting the books of accounts, as held by the Hon’ble Delhi High Court in the case of PCIT vs. Forum Sales Pvt. Ltd. – 2024:DHC:1693-DB. It was further submitted that CIT(A) has also erred in upholding the addition based on a satisfaction which is borrowed in nature without appreciating that the AO failed to apply his independent mind while forming an opinion, thereby rendering the proceedings void ab initio. It was further submitted that Ld. CIT(A) has erred in upholding the assessment without appreciating that the case of the appellant was selected based on VRU information pertaining to Shri Pradeep Bansal, Proprietor of M/s Royal Impex, allegedly a non-existent entity from whom M/s R.K. Polymers was stated to have received fictitious input tax credit. However, no specific information, material, or adverse evidence in this regard was ever confronted or provided to the appellant, thereby violating the principles of natural justice. It was further submitted that Ld. CIT(A) has failed to appreciate that the Assessee had furnished all cogent and corroborative evidence to substantiate the genuineness of the purchases, and the same remained uncontroverted by the AO. It was further submitted that CIT(A) has failed to appreciate that the assessee had furnished all cogent and corroborative evidence to substantiate the genuineness of the purchases, and the same remained uncontroverted by the AO. He further submitted that sales declared by the assessee have not been disputed or doubted by the Assessing Officer, an addition solely on the basis of alleged bogus purchases is inconsistent and unsustainable in law, as it presupposes the impossibility of effecting genuine sales without genuine purchases. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the AO failed to discharge the burden of proof Printed from counselvise.com 7 which lies upon the revenue to substantiate the allegations of bogus purchase. He relied upon the order 27.8.2025 of the Delhi Tribunal in assessee’s own case for AY 2019-20 passed in ITA No. 3552/Del/2025 wherein, identical ground was adjudicated in favour of the assessee. Hence, he requested to follow the same ratio, the appeal of the assessee be allowed. 5. Ld. DR relied upon the orders of the authorities below. 6. We have heard the rival contentions and gone through the facts and circumstances of the case. Before us, Ld. AR has filed the Paper Book containing pages 1-628 and drew our attention especially towards Serial No. 19 (Pages 188- 626), wherein it has been submitted that assessee filed its submission on 4.2.2025 before the CIT(A) alongwith the annexures viz. (a) copy of invoices, e-way bills and transporter invoices, (b) copy of ledger of M/s RK Polymers in the books of assessee, (c) copy of bank statement of ICICI Bank showing all purchases made through banking channel, (d) copy of registration certificate of place of business, (e) copy of GSTR-2A of assessee highlighting all the invoices of the M/s RK Polymers and (f) copy of acknowledgement of reply dated 16.10.2023 filed by M/s RK Polymers in response to notice dated 12.10.2013 issued u/s. 133(6) of the Act. After perusing the aforesaid documents attached with the Paper Book, we note that assessee has furnished the sample copies of purchase invoices together with e- Way bills and the bank statement evidencing the fact of payment made to the suppliers by account payee cheque. We note that sales declared by the assessee have not been disputed or doubted by the Assessing Officer, thus, an addition solely on the basis of alleged bogus purchases is inconsistent and unsustainable. The lower authorities failed to discharge the burden of proof which lies upon the revenue to substantiate the allegations of bogus purchase. The assesse had even produced e-way bills evidencing the delivery of goods from the suppliers. Hence, Printed from counselvise.com 8 there is no question of disbelieving the purchase made by the assessee at all. Accordingly, no amount of addition could survive in the facts and circumstances of the instant case. It is noted that on exactly identical facts and circumstances, in assessee’s own case, the Delhi Tribunal vide its order dated 27.8.2025 for AY 2019-20 in ITA No. 3552/Del/2025 adjudicated the similar issue in favour of the assessee by holding as under:- “5. I am of the considered opinion that the assessee has furnished the sample copies of purchase invoices together with the e-way bills and the bank statement evidencing the fact of payment made to the suppliers by account payee cheque. The revenue was not able to bring on record any material or evidence to show that there had been cash withdrawal in the account of M/s RK Polymers, which had surfaced back to the assessee after the receipt of cheque from the assessee. No evidence has been brought on record by the revenue to prove that assessee had indeed made purchase of goods in grey market by paying cash and substituted the same by showing purchase from M/s RK Polymers. The assessee had even produced e-way bills evidencing the delivery of goods from the suppliers. Hence, there is no question of disbelieving the purchase made by the assessee at all. Accordingly, no amount of addition could survive in the facts and circumstances of the instant case. Accordingly, the grounds raised by the assessee on merits are hereby allowed.” 7. In the background of the aforesaid discussions and respectfully following the above precedent in assessee’s own case, we hold that addition in dispute is not sustainable in the eyes of law, hence, we delete the same and allow the grounds of appeal raised by the assesse on the merits of the case. Printed from counselvise.com 9 8. In the result, the Assessee’s appeal is allowed in the above terms. Order pronounced in the Open Court on 25.02.2026. Sd/- Sd/- (AMITABH SHUKLA) (MAHAVIR SINGH) ACCOUNTANT MEMBER VICE PRESIDENT SRBhatnaggar Date: 25-2-2026 Copy forwarded to: - 1. Appellant 2. Respondent 3. DIT 4. CIT (A) 5. DR, ITAT Assistant Registrar, ITAT, Delhi Benches Printed from counselvise.com "