Additions for bogus purchases under section 69C: compliance and banking evidence led to deletion of additions and appeal allowed.

Additions under section 69C for alleged bogus purchases were challenged on the ground that the revenue bears the burden to prove the income belongs to the assessee. The assessee had produced books of account (not rejected), bank-mediated payments, and supporting documents, which the tribunal treated as adequate proof. A cited high court decision was found materially distinguishable and inapplicable. Consequently, the tribunal directed deletion of additions made under section 69C and allowed the appeal, relieving the assessee of the challenged unexplained purchase additions.

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Issues: (i) Whether additions made under Section 69C of the Income-tax Act, 1961 treating purchases as bogus and deeming unexplained expenditure as income are sustainable where the assessee produced books, purchase invoices, bank statements showing payments through banking channel and VAT authorities accepted the transactions, and where the Assessing Officer relied on third-party information without providing opportunity for cross-examination.

Analysis: Section 69C addresses unexplained expenditure and permits deeming such expenditure to be income if the assessee offers no explanation or an explanation is unsatisfactory. The statutory scheme places onus on the revenue to demonstrate that the amount is truly the assessee's income. Relevant considerations include documentary evidence of purchases, proof of payments through banking channels, findings or acceptance by VAT authorities, and procedural compliance with principles of natural justice including opportunity to test third-party information. Reliance solely on third-party information from a sales tax department or non-response to notices under Section 133(6) without further inquiry or furnishing material for cross-examination does not discharge the revenue's onus. Where VAT appellate authority has verified and accepted transaction records (including audit reports and Form 704) that weigh in favour of genuineness, and the AO has not produced evidence to show payments were routed back to the assessee or that books were rejected, additions under Section 69C are not sustainable.

Conclusion: The addition made under Section 69C is unsustainable and is directed to be deleted; decision is in favour of the assessee on the issue raised.

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