Addition under section 69C for alleged bogus purchases reduced to estimated 6% profit inclusion after factual calibration of precedent

Disallowance for unexplained purchases cannot rest solely on a director's statement absent independent enquiry or corroborative evidence; documentary proof and commercial practices (sale in transit) must be considered. A binding precedent requiring full disallowance applies only when its foundational facts exist, and cannot be mechanically applied here. The factual matrix showed opacity suggesting possible profit suppression but not wholly fictitious purchases, warranting calibration of the precedent and sustaining an estimated addition equal to the profit element (6% of purchases); appeal is partly allowed with the reduced addition upheld.

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Issues: (i) Whether the delay of 169 days in filing the appeal before the Tribunal should be condoned; (ii) Whether the addition of Rs. 10,22,92,928/- made under section 69C of the Income-tax Act, 1961 on account of alleged bogus purchases is sustainable or requires modification.

Issue (i): Whether the delay of 169 days in filing the appeal should be condoned.

Analysis: The assessee filed a sworn affidavit explaining delay due to seeking legal advice and serious ill health of a director's son; the delay was neither wilful nor deliberate; no mala fide intent or benefit from delay shown; Revenue raised no objection.

Conclusion: Delay of 169 days is condoned and the appeal is admitted for adjudication on merits.

Issue (ii): Whether the addition of Rs. 10,22,92,928/- under section 69C on account of alleged bogus purchases is sustainable.

Analysis: The assessee produced purchase invoices, consignment notes, purchase and sales registers, ledger entries, bank statements showing payments, audited accounts, one-to-one reconciliation and GST Form 2A which were not controverted by independent enquiry. The sole basis for treating purchases as bogus was a statement of the Director recorded under section 131 by another authority; that statement, read in entirety, indicated sale-in-transit (a recognised commercial practice) and did not record admission of receipt of cash, accommodation entries, or circular movement of funds. The Tribunal examined the binding precedent relied upon by Revenue (Kanak Impex) and held that its full-rigor application depends on presence of foundational incriminating material (e.g., sales-tax investigations, VAT fraud findings, hawala operator linkage, cash trails), which are absent here. The factual matrix warranted a calibrated approach between complete disallowance and full deletion.

Conclusion: The addition under section 69C cannot be sustained to the extent of the entire purchase amount. The addition is restricted to an estimated 6% of the impugned purchases to account for gross profit and possible suppression; the remainder (94%) of the addition is deleted. The Assessing Officer is directed to recompute accordingly.

Final Conclusion: The appeal is partly allowed; delay in filing is condoned and the section 69C addition is reduced to 6% of the impugned purchases, with directions for recomputation.

Ratio Decidendi: Where documentary evidence of purchases is complete and remains uncontroverted and there is no independent corroborative incriminating material (such as investigation reports, cash-trail or findings of VAT fraud), section 69C cannot be applied to disallow the entire purchase amount merely on the basis of a statement; in such factual matrices the addition may be restricted to a reasonable estimation of the profit/suppression element.

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