2026 (2) TMI 640 - AT - Income Tax

Disallowance of purchases limited to 25% where sales, stocks and supplier GST corroborate; appellate reduction upheld.

Where trading books, admitted sales and quantified opening and closing stocks were accepted and supplier GST returns and account confirmations were ... Estimation of income - bogus purchases u/s 69C - CIT(A) restricting the impugned addition to the extent of 25% HELD THAT:- Assessee is engaged in trading activities and made sales and purchases. The books of accounts are duly audited as required under law. The assessee has furnished details of opening stock, closing stock and sales. The sales have been accepted by AO. The assessee as well as the suppliers has filed respective GST returns. The quantity details of sales and purchases were duly furnished by the assessee before lower authorities. It is quit logical that without purchases, there could not be any sales. The financial results in earlier years stood accepted in scrutiny assessment proceedings. The assessee has duly furnished confirmed copy of accounts before lower authorities. Adjudication of CIT(A) in restricting the impugned addition to the extent of 25% could not be faulted with. We see no reason to interfere in the same. Issues: Whether the Appellate Tribunal should interfere with the Commissioner of Income Tax (Appeals)'s decision to restrict the assessing officer's disallowance of purchases to 25% where sales, opening and closing stocks were accepted and certain supplier records and GST returns were produced but some supporting documents were deficient.Analysis: The facts show trading operations with audited books, quantified opening and closing stocks, accepted sales, and supplier GST returns and account confirmations produced before the authorities. Notices under the statute to suppliers remained uncomplied with and some transportation and other supporting documents were deficient as recorded in the remand report. The assessing officer made a full disallowance under the relevant income-tax provisions on the basis of alleged fabricated documents and non-compliance by suppliers. The appellate authority examined the available documentary matrix-accepted sales and stocks, GST filings, banking payments and supplier confirmations-while also noting deficiencies in transportation and other supporting evidence. On this factual and documental balance, complete disallowance was held to be not justified but the inability of the assessee to fully substantiate all purchases warranted a limited adjustment.Conclusion: The Tribunal concurs with the appellate authority's limitation of the addition to 25% and declines to interfere with that reduction of the assessing officer's disallowance.Ratio Decidendi: Where sales and stock figures are accepted and corroborative supplier GST returns and account confirmations are produced, complete disallowance of purchases is not warranted; a quantified limited disallowance is appropriate where material supporting documents are deficient.