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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
This appeal arises from order dated 01.01.2026, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by NFAC.
In this case, there was an allegation that the assessee was involved in bogus purchases amounting to Rs.27,19,979/- with one M/s Gora Enterprises Private Limited. The ld. AO issued a notice u/s 148 of the Act on 07.04.2022 and thereafter the assessee filed a return of income on 14.04.2022. The Ld. AO relied on the enquiries conducted by the Investigation Wing to hold that the transaction amounting to Rs.27,19,979/- with M/s Gora Enterprises Pvt. Limited was bogus and thereafter he added the same u/s 69C of the Act.
The aggrieved assessee approached the Ld. CIT(A) where documents and details filed by the assessee including invoices, ledgers, band details, stock/transport related papers etc. were disbelieved as self-serving documents and thereafter the addition of Rs.27,19,979/- was confirmed, as also the addition of Rs.54,399/- by way of estimated commission for arranging bogus entries.
The assessee has now approached the ITAT with 12 grounds of appeal which challenge the action of authorities below.
The Ld. AR stated that the assessee had filed on all manner of documentation to convince the authorities below that the impugned transactions were genuine. It was the submission that the authorities below have largely relied on the enquiries conducted by the Investigation Wing to hold that the purchases were bogus. In this regard, the evidences filed by the assessee have been totally disregarded. It was submitted that the assessee’s plea for cross examination of third parties was also denied by the Ld. AO. The Ld. AR concluded his arguments by stating that the books of account of the assessee had not been rejected u/s 145 of the Act, meaning thereby that the same were in order. On the issue of estimated commission it was argued that this addition was made on surmises and conjectures and thus, was deserving to be deleted in full.
The Ld. DR supported the orders of authorities below and stated that the assessee had not made substantial compliance to the notices issued by the Ld. AO and a glance at the table of opportunities on page 2 of the Ld. AO’s order would show that the assessee was not very forthcoming in terms of filing material in his support.
We have heard the Ld.AR/DR and have gone through the records before us. We find that while the assessee has submitted the documents in his possession in support of his claim about the genuineness of the transaction but the critical evidence regarding the existence of M/s Gora Enterprises Pvt. Limited and the physical proof of the transaction were never supplied. However, we also note that the book results of the assessee have not been disturbed by the Ld. AO and it is also a trite position that even if the purchases are bogus then there would be some corresponding sale which would be reflected in the books of account. Considering the totality of facts and circumstances of the case, we deem it fit to direct the Ld. AO to confirm an addition amounting to 3% of the alleged bogus purchases and grant consequential relief on the amount remaining thereafter. We also direct that since the so called commission has been determined on an ad hoc basis, the addition on that account be deleted.
In the result, the appeal is partly allowed.