Kuldeep Kumar Rao vs Income Tax Officer, Ward-60(6), Delhi

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short ‘the CIT(A)’] dated 26.12.2025, for Assessment Year 2018-19.

Shri Naman Gupta, appearing on behalf of the assessee submits that assessment for A.Y. 2018-19 in the case of the assessee was reopened alleging that the assessee had obtained bogus purchase entries amounting to Rs.9,51,12,719/- from RCI Industries and Technologies Ltd. The assessee is engaged in trading of steel. During the period relevant to assessment year under appeal, assessee had made purchases from RCI Industries and Technologies Ltd. The solitary reason for treating the purchases from the said company as bogus was that the said company had allegedly committed irregularities under GST provisions. The Assessing Officer (AO) made disallowance of 12.5% with respect to purchases made by the assessee from RCI Industries and Technologies Ltd. and made addition of Rs.4,28,323/- u/s 69C of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) as unexplained expenditure. Aggrieved by the assessment order dated 13.03.2023 passed u/s 147 r.w.s. 144 r.w.s. 144B of the Act, the assessee filed appeal before the CIT(A), but remained unsuccessful. The ld. AR submitted that the CIT(A), in ex-parte proceedings, upheld the addition made by AO. The ld. AR pointed that the supplier of steel, M/s RCI Industries and Technologies Ltd., may have been a defaulter under GST provisions, but that would not make the purchases made by the assessee from the said company bogus. The assessee had furnished all the relevant material including purchase register, sales register, copies of invoices vide which the purchases were made from the said company, e-way bills to show transportation of material, and bank statements to show payments made to the said company. The AO ignoring the documents and evidences furnished by the assessee held the purchases from RCI Industries and Technologies Ltd. as bogus.

Per contra, Shri Manoj Kumar, representing the Department vehemently supporting the impugned order, prayed for dismissing appeal of the assessee.

Both sides heard, orders of the authorities below examined. The CIT(A) in ex-parte proceedings has upheld findings of the AO and confirmed the addition on account of alleged bogus purchases by making disallowance @12.5% of the purchases made by the assessee from RCI Industries and Technologies Ltd.

A perusal of the assessment order reveals that the solitary reason for holding purchases made by the assessee from RCI Industries and Technologies Ltd. as bogus is that the assessee has not discharged onus in proving genuineness of purchases including actual/physical delivery of goods form the said company. The AO has not doubted the sales and the closing stock declared by the assessee. Even if it is presumed that the AO has treated the purchases as having been made from the grey market, addition cannot be made u/s 69C of the Act. The assessee has placed on record various documentary evidences to show purchase of material from RCI Industries and Technologies Ltd. In order to substantiate the purchases, the assessee has furnished tax invoices, e-way bills to show movement of goods, declarations under Excise and Taxation Department, Government of Himachal Pradesh, and bank statements to show payments made by the assessee to RCI Industries and Technologies Ltd. The assessee has placed on record relevant documents to discharge his onus in proving purchase of material from RCI Industries & Tech. Ltd. and also physical movement of goods from supplier to the assessee. Considering the evidences furnished by the assessee, I am of the view that no addition in respect of alleged bogus purchases can be made in the hands of the assessee. For the aforesaid reasons, addition of Rs.4,28,323/- is deleted.

In the result, impugned order is set aside and appeal of the assessee is allowed.