Raj Kalra vs Income Tax Officer

PER SHRI M BALAGANESH, ACCOUNTANT MEMBER:

The appeal in ITA No.6236/Del/2026 for AY 2018-19, arises out of the order of the Id National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as 'Id. CIT(A)', in short] dated 18.03.2026 against the order of assessment passed u/s 147 r.w.s. 144 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act') dated 18.03.2024 by the Assessing Officer, NFEC, Delhi (hereinafter referred to as 'Id. AO').

The only effective issue to be decided in this appeal is as to whether the Learned NFAC was justified in confirming the disallowance made on account of alleged bogus purchases under section 69C read with section 115BBE of the Act in the facts and circumstances of the instant case.

I have heard the rival submissions and perused the materials available on record. The Assessee is an individual and had filed his return of income for the assessment year 2018-19 on 22-10-2018 declaring total income of Rs. 5,33,850. The Learned AO received information from the Investigation Wing of Delhi Income Tax Department stating that the GST return filed by M/s Libra overseas for the financial 2017-18 revealed that it had made sales of Rs. 102,96,67,545 and purchases of Rs. 99,34,22,366. The information stated that Libra overseas has been issuing bogus input tax credit on fake sales bills and the same was forwarded to beneficiary entities to claim fraudulent input tax credit to dispose their output on GST liability with the help of fake input credit to suppress their income by showing fake purchases as their expense. The information revealed that Assessee Raj Kalra is one of the beneficiaries in these bogus transactions and had entered transactions to the tune of Rs. 10,59,406 with Libra overseas. Accordingly, the case of the Assessee was sought to be reopened by the Learned AO vide issuance of notice under Section 148 of the Act. The Assessee in the reassessment proceedings submitted written submissions along with copy of purchase register, stock register, Libra overseas purchase invoice, Libra overseas ledger with its bank statement evidencing the payment made to Libra overseas by regular banking channels, computation of income, trading account, balance sheet, profit and loss account, audit report, GSTR 2A and sales register. Despite furnishing of all these documents, the Learned AO proceeded to treat the purchases made from Libra overseas as ingenuine and made addition of Rs. 10,59,406 as unexplained expenditure under Section 69C read with Section 115BBE of the Act and completed the reassessment.

The Learned CITA noted that Assessee had declared total turnover of Rs. 2,97,05,751 against the purchases of Rs. 1,95,94,097. The Learned CITA noted that Libra Overseas had filed its ITR for assessment year 2018-19 . The GST returns of Libra Overseas were downloaded from the Insight portal for financial year 2017-18. The Learned AO merely relied on the information received from the Investigation Wing of Income Tax Department and proceeded to make the addition in the reassessment which was upheld by the Learned CITA.

I find that Assessee had furnished the complete documentary evidences showing the receipt of goods and subsequent sales made thereon. The sales made by the Assessee is not disputed by the revenue. Out of the total purchase of Rs. 1.97 crores, only the purchase of Rs. 10,59,406 is sought to be disputed by the revenue. The Assessee had also furnished the GSTR 2A returns wherein the name of the supplier and other relevant details thereon gets auto populated and these data gets auto populated only when relevant GST returns were filed by the supplier Libra Overseas and GST has been duly remitted by him to the account of the Central Government. Hence no adverse inference could be drawn in this regard qua GST compliance made by the supplier or by the Assessee herein. The Assessee has also furnished the stock register before the lower authorities. No defect whatsoever was found in the documentary evidences submitted by the Assessee before the lower authorities. The books of accounts and the book results of the Assessee were not sought to be rejected by invoking the provisions of section 145(3) of the Act. In these circumstances, the claim of Assessee account of deduction on account of purchases could not be treated as ingenuine. Absolutely, no evidence has been brought on record by the revenue in the instant case to prove the fact beyond reasonable doubt that the purchases made by the Assessee as ingenuine . On the contrary, the Assessee has furnished all the documentary evidences that could be placed from his side. No inquiry whatsoever was sought to be made by the Learned AO in the instant case with regard to the veracity of the documents submitted by the Assessee to ascertain the genuineness of the supply made by Libra Overseas to the Assessee. Merely relying on third-party information, no adverse inference could be drawn on the Assessee. The Learned AO has not brought any evidence on record to the fact as to whether any statement has been recorded from Libra Overseas stating that the supply made by it to the Assessee to the tune of Rs 10,59,406 is bogus . Even if there exist such statement, the said statement was not even confronted to the Assessee by the Learned AO. Hence reliance on such statement, if any, also and drawing adverse inference against the Assessee herein is not permissible in the eyes of law.

It is pertinent to note that the addition in the instant case has been made by applying the provisions of section 69C of the Act. At the outset, the purchases made by the Assessee from Libra Overseas had been duly accounted in the books of accounts of the Assessee. The payments were made to Libra Overseas through regular banking channels out of disclosed sources traceable to disclosed bank account. It is not the case of the revenue that the payments were made to Libra Overseas out of undisclosed sources. Hence the provisions of section 69C of the Act per se could not be made applicable for a transaction which is already accounted in the books of accounts of the Assessee. Hence the addition deserves to be deleted on that count also.

In view of the aforesaid observations, the addition made under section 69C read with section 115BBE of the Act on account of alleged ingenuine purchases is hereby deleted for more than one reason as detailed supra. Accordingly the grounds raised by the Assessee are allowed.

In the result, the appeal of the Assessee is allowed.