Unexplained expenditure under Section 69C cannot be sustained where books, bank payments and tax audit show recorded transactions.

Whether addition under Section 69C for alleged bogus purchases is sustainable: ITAT examined books, bank payments, invoices, stock records, VAT returns and tax-audit without finding defects; AO relied on a third party statement and lower purchase rates. Tribunal held that prerequisites for invoking the deeming provision were absent because transactions were recorded, payments routed through banking channels and overall turnover/profit did not indicate suppression, so addition rested on suspicion and conjecture and was deleted in favour of the assessee.

---

---

Issues: Whether the addition of Rs. 11,31,282 made under Section 69C of the Income-tax Act, 1961 on account of alleged bogus purchases from M/s Shubham Agro India is sustainable on merits.

Analysis: The Tribunal examined the material placed on record, including ledger account, bank statements, purchase invoices, stock register, party-wise and month-wise purchase/sale details, VAT returns and comparative rate charts. The Assessing Officer did not dispute the sales figures or point to any defect in the books of account and did not reject the books under Section 145(3). The AO's primary basis for addition was the statement of a third party from a search and the fact that purchase rates from the vendor were lower than other suppliers. The Tribunal found that payments were made through banking channels, purchases were recorded in regular books, tax audit had been conducted without adverse remarks and overall turnover and profit ratios did not indicate suppression. In these circumstances the preconditions for invoking the deeming provision of Section 69C (expenditure incurred outside books of account or unexplained source) were not satisfied and the addition rested on suspicion and conjecture.

Conclusion: The addition of Rs. 11,31,282 under Section 69C is deleted and the appeal is allowed in favour of the assessee.

---