ITAT Restricts Rs. 2.88 Crore Addition to 5% in Alleged Bogus Purchase Case; Dismisses Revenue Appeal
The tribunal dismissed the appeal of the Income Tax Department and upheld the CIT(A)’s order by restricting the addition to 5% of alleged bogus purchases.
The Income Tax Department has filed an appeal in the ITAT Delhi against a company, Silk Factory, challenging an order dated October 29, 2024, passed by the CIT(A)/NFAC, Delhi. The case pertains to the Assessment Year 2019-20. Challenging the same appeal, the assessee filed a cross objection late by 82 days. However, the tribunal condoned the delay, considering the reason for the delay as genuine.
The assessee had filed an income tax return (ITR) for the year in consideration, declaring the total income of Rs. 44.62 lakh. The Assessing Officer (AO) had reopened the case of the assessee based on the information received under the risk management strategy of CBDT on the insight portal, alleging that the assessee purchased bogus bills from M/s Rajshree Vanijaya Udyog, a non-existent entity issuing fraudulent GST invoices. Considering the same, the AO made an addition amounting to Rs. 2.88 crore to the assessee’s income under Section 69C read with Section 115BBE, on the grounds of unexplained expenditure.
When the assessee filed an appeal before the CIT(A), the CIT(A) deleted the impugned order and restricted the imposed addition to 5% of the alleged bogus purchases. In the end, it ruled in favour of the assessee. The tax authorities, aggrieved with the CIT(A)’s order, filed an appeal before the ITAT Delhi, arguing that the suppliers were shell entities and citing an earlier ruling of the Supreme Court judgement in a case titled NK Proteins Ltd vs. DCIT.
When the tribunal analysed the facts of the case, it noted that the assessee had declared corresponding sales, which were accepted by the AO. It held that when sales are not doubted, the related purchases cannot be treated as entirely fake. The assessee had also furnished all the relevant documentary proofs explaining the same, like produced invoices, transport documents, bank statements, and stock registers to support the transactions.
The tribunal cited its own earlier judgement in the assessee’s case for AY 2022-23 and found no reason to interfere with the CIT(A)’s ruling. Accordingly, the revenue’s appeal was dismissed, and the assessee’s cross objection was treated as valid.