Principal Commissioner of Income Tax-18, Kolkata vs Pravesh Kumar Jaiswal

Sudip Deb, J.:-

This appeal is directed against the order dated 16^th October, 2025 passed by the Income Tax Appellate Tribunal, “B” Bench, Kolkata in I.T.A. No. 1269/Kol/2024 for the assessment year 2021-2022 at the behest of revenue.

The revenue has proposed the following substantial questions of law:-

At the outset, we have asked the learned advocate appearing for the appellant to satisfy us as to whether the substantial questions of law as formulated by the appellant are at all substantial questions of law or not.

The learned advocate for the appellant showed us the impugned order and argued that the Appellate Tribunal has committed an error while deleting the addition of Rs.12,73,83,064/- made under Section 69C read with Section 115BBE of the Act, despite the respondent/assessee’s failure to discharge the primary onus of proving the genuineness of the purchases, when suppliers were found to be non-existent, untraceable and had denied transactions during departmental verification.

It is also argued that the Appellate Tribunal committed an error in ignoring adverse material on record, including verification reports of the department, cancelled/suspended GST registrations of suppliers and absence of stock register/transportation evidence and thereby wrongly deleted the addition solely on the ground that sales were accepted. It is also argued that the Appellate Tribunal has erred in holding that rejection of books of account under Section 145(3) is precondition for invoking 69C when statute does not mandate such rejection for making additions on account of unexplained expenditure.

We have not called upon the respondent/assessee to address us since we are deciding as to whether questions formulated by the revenue are at all substantial questions of law or not.

Before deciding this issue, it is important to discuss the facts of the case which are narrated hereinbelow.

The respondent/assessee as an individual had filed his revised return of income for the assessment year 2021-2022 on 17.01.2022 declaring a total income of Rs.16,13,860/-. The said return was subsequently processed under Section 143(1) of the Income Tax Act, which is hereinafter referred to as “the said Act”. Thereafter, the case of the respondent/assessee was selected for scrutiny on the issue that the respondent/assessee had made substantial purchases from parties who were non-filers of the return or had filed non-business returns or had declared lower return in their return compared to turnover showed in GSTR-1 return filed leading to the possibility that the respondent/assessee had booked bogus expenses.

During the assessment proceedings, the Assessing Officer had issued notice under Sections 133(6) of the said Act to the purchasers calling for information. Since no response was received from any of the parties, the Assessing Officer finally came to the conclusion that not a single purchases were confirmed to have been made with the respondent/assessee in respect of all the cases to whom notices were issued under Section 133(6) of the said Act.

Finally, the Assessing Officer came to the conclusion that the transactions made by the respondent/assessee for purchases were all sham transactions and the assessment of the respondent/assessee was completed by the Assessing Officer vide order dated 29^th December, 2022 at Rs.12,89,98,924/-after making the total addition of Rs.12,73,85,064/- under Section 69C read with Section 115BBE of the said Act on account of bogus or un-explained purchases.

While passing the said order, the Assessing Officer did not accept the reply given by the respondent/assessee. While passing the said order, the Assessing Officer recorded that respondent/assessee had only submitted some of the purchase bills and some of the ledger confirmation.

The Assessing Officer while making the said addition of Rs.12,73,85,064/-had observed that payment made by the respondent/assessee for purchase to the extent of the said amount could not be verified are treated as sham transactions and non-genuine transactions and accordingly disallowed the same under Section 69C read with Section 115BBE of the said Act and directed the said amount to be added to the account of the respondent/assessee. Penalty proceedings under Section 271AAC(1) of the said Act were also initiated separately for same.

The said order was carried in appeal by the respondent/assessee and the Commissioner of Income Tax (Appeals) upheld the order of the Assessing Officer and dismissed the appeal.

Challenging the said order of the Commissioner of Income Tax (Appeals), the respondent/assessee had preferred an appeal before Income Tax Appellate Tribunal “B” Bench, Kolkata and by the impugned order dated 16^th October, 2025, the Income Tax Appellate Tribunal has allowed the appeal of the respondent/assessee holding that respondent/assessee had duly furnished books of account, purchase invoices, payment details through banking challans and other supporting evidence.

We have gone thought the impugned order. After careful examination of the impugned order, we find that the Appellate Tribunal has passed the order of deletion after being satisfied that the respondent/assessee had duly furnished books of account, purchase invoices, payment details through baking challans and other supporting evidence. The Appellate Tribunal has also correctly observed that the Assessing Officer had passed the order of addition solely on the non-response of the suppliers to the notice issued under Section 133(6) of the said Act and alleged cancellation of GST registrations. The Appellate Tribunal has correctly recorded that these things were beyond the control of the respondent/assessee.

In furtherance thereto, the Appellate Tribunal has also recorded after considering all the documents that once the sales have been accepted the corresponding purchases cannot be disbelieved.

In furtherance thereto, the Appellate Tribunal has also recorded that books of account of the respondent/assessee were not rejected by invoking Section 145(3) of the said Act.

We also find from the Appellate Tribunal’s order that after considering the entire evidence, the Appellate Tribunal has correctly recorded the fact that once the books have been accepted and sales are not doubted, the corresponding purchases cannot be disallowed in its entirety.

The Learned Tribunal after considering the entire evidence and the documents produced before it finally came to the conclusion that the finding of the Assessing Officer to the effect that the purchase was bogus, was incorrect and the addition was made purely on presumption and not based on any tangible material.

In our view, the Appellate Tribunal has correctly arrived at the finding that the explanation offered by the respondent/assessee was satisfactory and such finding of the Appellate Tribunal was made only after the documents were produced and books of account had been accepted and the sales were not doubted as there was no rejection of the same as contemplated under Section 145(3) of the said Act. In our view, the Tribunal has correctly held that the addition made under Section 69A of the said Act is bad in law as the respondent/assessee has offered proper explanation relating to the purchases made by the respondent/assessee.

The law is also well settled in this regard.

The Bombay High Court in the matter of Principal Commissioner of Income Tax vs. Nitin Ramdeoji Lohia [2022] 145 taxmann.com 546 (Bombay) has specifically held if the purchases are bogus, it would be impossible for the assessee to complete the business transaction and that if the purchase is bogus, the corresponding sale also must be bogus or else the transaction would be impossible to complete and as a necessary corollary, unless the corresponding sale is held to be bogus, the purchase also cannot be held to be bogus, rather it would be a case of purchase from bogus entities/parties. The ratio of the said judgment squarely applies in the instant case. Here, the sales are not doubted after examining the books of account and accordingly the question of disbelieving the purchase does not and cannot arise. Therefore, the finding of the Tribunal on this issue is correct.

According to us, these questions are pure questions of fact and the Appellate Tribunal being the last fact finding authority has correctly arrived at such finding and the deletion of Rs.12,73,85,064/- was justified.

In view of the above facts and circumstances of the case, we hold there is no substantial questions of law involved in the matter and accordingly, the instant appeal is dismissed.

There will be no order as to costs.

Urgent photostat certified copy of this order, if applied for, be given to the parties upon compliance with the all necessary formalities.