INCOME TAX OFFICER, WARD-I, MANDI GOBINDGARH V. ROHIT, MANDI GOBINDGARH

ITA 905/CHANDI/2025

AI Insights

The case revolves around an appeal by the revenue against the decision of the CIT(A) which had deleted the addition of Rs. 15,09,90,967 made by the Assessing Officer (AO) on account of alleged bogus purchases by the assessee, Shri Rohit, a trader of iron and steel. The AO had initially added this amount to the assessee's income under Section 69C, suspecting the purchases due to the non-filing of income tax returns by some suppliers and discrepancies in turnover. However, the CIT(A) found that the assessee had provided substantial documentary evidence, including tax audit reports, bank statements, and invoices, which the AO failed to adequately scrutinize. The Tribunal agreed with the CIT(A)'s decision, emphasizing that the burden of proof lies with the revenue to disprove the assessee's claims, which was not met in this case.

• Counselvise Citation: [2026] 140 COUNSELVISE.COM (IT) 828843 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2026
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Chandigarh
• Assessment Year: misc
• Appeal Filed On: 11-07-2025
• Other Referred Cases: Odeon Builders Pvt. Ltd. vs. Revenue, Vaman International Pvt. Ltd. vs. Revenue, Tejua Rohitkumar Kapadia vs. Revenue, Radhika Creation vs. Revenue, Prime Steel Industries (P.) Ltd. vs. DCIT
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARAT BHUSHAN GARG LD. VIRTUAL
• Assessee Lawyers: ASHOK GOYAL LD
• Keywords: Corroborative evidences; Bogus purchase; Principle of natural justice; Accommodation entries; Bogus
• Section: 143(3); 133(6); 69C

Judgement Text

"1 IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, CHANDIGARH HYBRID HEARING BEFORE HON’BLE SHRI RAJPAL YADAV, VICE PRESIDENT AND HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं. / ITA No.905/CHANDI/2025 (िनधाŊरण वषŊ / Assessment Year: 2021-22) ITO-Ward-1 Mandi Gobindgarh At Sirhind, New Libra Kothi Railway Road, Sirhind Fatehgarh Sahib – 147301 बनाम/ Vs. Shri Rohit Shop No.308, Sec-26A Amloh Road, Gobindgarh Fatehgarh Sahib - 147301 ̾थायीलेखासं./जीआइआरसं./PAN/GIR No. ASOPR-3001-Q (अपीलाथŎ/Appellant) : (ŮȑथŎ / Respondent) Assessee By : Shri Ashok Goyal (CA) – Ld. AR Revenue By : Shri Bharat Bhushan Garg (CIT) – Ld. DR (Virtual) सुनवाईकीतारीख/Date of Hearing : 10-11-2025 घोषणाकीतारीख /Date of Pronouncement : 13-01-2026 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year (AY) 2021-22 arises out of an order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 12-06- 2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) r.w.s 144B of the Act on 24-12-2022. The sole grievance of the revenue is deletion of addition of Rs.1509.90 Lacs as made by Ld. AO on Printed from counselvise.com 2 account of alleged bogus purchases while framing the assessment. The sole ground of appeal read as under: - Whether on the facts and in the circumstances of the case, the CIT(A) / NFAC was right in law in deleting the addition of Rs.15,09,90,967/- as shown purchases expenses claimed by the assessee and NeFAC has added to the total income and taxed as income from other sources u/s 69C of the Act? 2. The Ld. CIT-DR advanced arguments supporting the assessment order whereas Ld. AR drew attention to various documentary evidences as filed by the assessee in support of impugned purchases. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Assessment Proceedings 3.1 The assessee’s case was subjected to scrutiny on the ground that the assessee made substantial purchases from suppliers who did not file Income Tax Return or reflected substantially low turnover in their respective Income Tax Returns. The assessee carried out trading of iron and steel in its proprietorship concern namely M/s Neelkanth Steel Enterprises and reflected turnover of Rs.1544.79 Lacs. The purchases were for Rs.1509.90 Lacs. To substantiate its purchases, the assessee, inter-alia, furnished Tax Audit Report, Vouchers, Bank Statements evidencing payment through banking channels, ledger extracts of each of the supplier, copies of purchase invoices along with e-way bills, toll tax receipt and registration certificate of the vehicle etc. The assessee also furnished name and addresses of all the suppliers. The assessee had made purchases from 19 suppliers, the details whereof has been tabulated at Page No.3 of the assessment order. Printed from counselvise.com 3 3.2 To verify the purchases, notices u/s 133(6) were issued and physical verification was carried out by verification unit in few cases. However, the same did not elicit satisfactory response. It was also observed by Ld. AO that GST registration of many of the suppliers was suspended by GST department establishing that the sales made by them were not genuine. No credible supporting evidence was furnished by the assessee in support of purchases. Therefore, the books were rejected u/s 145(3) and the entire purchase of Rs.1509.90 Lacs was added u/s 69C and the assessment was framed. Appellate Proceedings 4.1 During first appeal, the assessee assailed the verification as carried out by Ld. AO and again furnished various documents in support of the purchases. The assessee’s submissions were subjected to remand proceedings. After considering assessee’s reply and remand report, Ld. CIT(A) concurred that the assessee placed on record comprehensive documentary evidences to substantiate the purchases. The Ld. AO did not undertake any transactional level scrutiny of assessee’s accounts or documentation. Instead of confronting the assessee with specific cases of non-filing, mismatched turnover or other discrepancies, Ld. AO relied on broad assumption that if a supplier had not file its Income Tax Return or reflected lessor turnover in ITR than in GST returns, then the purchases must be bogus. However, the impugned purchases were duly recorded in regular books of accounts and supported by GST invoices and e-way bills. The purchases were linked to verifiable transport documents and the purchases were followed by recorded sales which have been accepted to Printed from counselvise.com 4 be genuine by Ld. AO. At no stage of the proceedings, Ld. AO had undertaken a comparative analysis of the documentary evidences as filed by the assessee. The documents were not examined / verified and no evidence was brought on record to show that the assessee did not actually receive the goods. The verification by verification-unit was limited only to three suppliers and the report of the same was not shared with the assessee. There was no finding that the purchases were routed through accommodation entries or fictitious parties. The compliance history of the suppliers could not be used to invalidate the genuine business transactions of the buyer especially when the same was supported by documentary evidences. 4.2 It was finally held by Ld. CIT(A) that entire exercise of assessment was based on presumptions rather than a systematic transaction-based verification. The assessment order failed to demonstrate any cogent analysis or justification for such an extraordinary addition. It is settled principle of law that when an assessee had furnished primary evidences, the burden shifts to the revenue to dispute the claim with credible counter material. However, this burden was not discharged in the present case. Further, no adequate opportunity was granted to the assessee on the precise allegations. Therefore, such an assessment could not be upheld in law and was liable to be struck down in its entirety. The Ld. AO could have restricted the proposed addition only to the extent of specific transactions pertaining to those suppliers for whom enquiries had been conducted by verification unit. However, even in such a situation, any adverse inference could not be formed on the basis of such verification unless the same was Printed from counselvise.com 5 duly confronted to the assessee in a clear, specific and unambiguous manner and a reasonable opportunity was afforded to rebut the same. The importance of such an opportunity is underscored by the possibility that the suppliers may have changed their address / ceased operations or continued business in other names. The failure to do so would make the additions unsustainable. Accordingly, the impugned additions were deleted against which the revenue is in further appeal before us. Our findings and Adjudication 5. From the facts, it clearly emerges that the assessee is engaged in trading of iron and steel. The assessee has achieved turnover of Rs.1544.79 Lacs which has duly been accepted by Ld. AO and no discrepancy has been found in the same. To make these sales, the assessee has made purchases of Rs.1509.90 Lacs which has been disallowed in its entirety by Ld. AO on the allegation that such purchases were bogus. However, the books of the assessee were duly audited under law. There could be no sales without actual purchases. In support of purchase transactions, the assessee furnished plethora of documents which include name, addresses and GST registration details of all the 19 suppliers. The assessee also furnished bank statements evidencing payment through banking channels. The ledger extracts of each of the suppliers, copies of purchase invoices along with e-way bills, toll tax receipt and registration certificate of the vehicle etc. was duly furnished by the assessee. By furnishing these documents, the assessee, in our considered opinion, had duly discharged the onus of substantiating these purchases and it was the onus of Ld. AO to contradict the same and bring Printed from counselvise.com 6 on record cogent material evidences to prove its allegations. However, no such exercise is shown to have been carried out by Ld. AO. The verification by verification unit has been conducted only in three cases and that too, remain inconclusive. Further, the report of verification unit has not been confronted to the assessee which is in gross violation of principle of natural justice. 6. As rightly observed by Ld. CIT(A), the assessee had placed on record comprehensive documentary evidences to substantiate the purchases. However, Ld. AO did not undertake any transactional level scrutiny of assessee’s accounts or documentation. Instead of confronting the assessee with specific cases of non-filing, mismatched turnover or other discrepancies, Ld. AO relied on broad assumption that if a supplier had not file its Income Tax Return or reflected lessor turnover in ITR than in GST returns, then the purchases must be bogus. The said conclusion is clearly fallacious one and unsustainable in law. The impugned purchases have duly been recorded in regular books of accounts and supported by GST invoices and e-way bills. The purchases were linked to verifiable transport documents and the purchases were followed by recorded sales which has been accepted to be genuine by Ld. AO. At no stage of the proceedings, Ld. AO had undertaken a comparative analysis of the documentary evidences as filed by the assessee. The documents have not been examined / verified and no evidence was brought on record to show that the assessee did not actually receive the goods. There is no finding that the purchases were routed through accommodation entries or fictitious parties. The compliance history of the supplier could not be used Printed from counselvise.com 7 to invalidate the genuine business transactions of the buyer especially when the same was supported by documentary evidences. Thus, the entire exercise of assessment was based on presumptions rather than a systematic transaction-based verification. The Ld. AO failed to demonstrate any cogent analysis or justification for such an extraordinary addition. Therefore, the impugned additions could not be sustained in law. 7. Our aforesaid view is duly supported by the decision of Hon’ble Apex Court in the case of Odeon Builders Pvt. Ltd. (110 Taxmann.com 64) dismissing revenue’s SLP against the decision of lower appellate forums holding that where the assessee had submitted purchase bills, transportation bills, confirmed copy of accounts and VAT Registration of sellers as also their Income-tax Return and payment was made through cheques, purchases could not be disallowed. The lower courts deleted the similar disallowance of purchases by observing that disallowance merely on the basis of third-party information denying cross-examination to the assessee who had prima-facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques & VAT Registration of the sellers & their Income Tax Return, would not be sustainable. Similar is the decision of Hon’ble Bombay High Court in the case of Vaman International Pvt. Ltd. (422 ITR 520); the decision of Hon’ble Gujarat High Court in the case of Tejua Rohitkumar Kapadia (2018 ITL 4828); the decision of Hon’ble Delhi High Court in the case of Radhika Creation (47 DTR 60). The Chandigarh Tribunal in the case of Prime Steel Industries (P.) Ltd. vs. Printed from counselvise.com 8 DCIT (174 taxmann.com 547), on similar facts, deleted the full disallowance as made by Ld. AO on account of alleged bogus purchases. The bench referred to various judicial decisions while arriving at its conclusion. This case law also supports the case of the assessee. The other decisions as placed on record are on similar lines and duly support the case of the assessee. 8. Considering the entirety of facts and circumstances of the case, we uphold the order of Ld. CIT(A) in deleting the impugned addition as made by Ld. AO invoking the provisions of Sec.69C. The impugned order would not require any interference on our part. 9. The appeal stands dismissed. Order pronounced on 13th January, 2026. -Sd- -Sd- (RAJPAL YADAV) (MANOJ KUMAR AGGARWAL) VICE PRESIDENT ACCOUNTANT MEMBER Dated: आदेश की Ůितिलिप अŤेिषत /Copy of the Order forwarded to : 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3. आयकरआयुƅ/CIT 4. िवभागीयŮितिनिध/DR 5. गाडŊफाईल/GF ASSISTANT REGISTRAR ITAT CHANDIGARH Printed from counselvise.com "