2026 (3) TMI 1563 - AT - Income Tax

Bogus purchase addition fails where invoices, bank records and ledgers establish genuineness and Revenue makes no effective rebuttal.

Documentary evidence including purchase invoices, sales invoices, ledger accounts, bank statements and registers was treated as sufficient to discharge ... Bogus purchases u/s 69C - Unexplained expenditure - Burden of proving genuineness of purchases - Independent enquiry by Assessing Officer Bogus purchases - Unexplained expenditure - HELD THAT: - The Tribunal found that, though the AO proceeded on information alleging accommodation entries, he did not deal with the documents stated to have been produced by the assessee, did not show how those documents failed to establish the purchases, and did not carry out reasonable verification such as issuing notices to the supplier, examining confirmations, or checking the stock, sales and banking trail. Since the assessee had produced documentary material including accounts, ledger confirmations and bank statements, and there was no contrary finding discrediting those documents, the addition u/s 69C could not be sustained merely on general or vague observations. The decisions in Drisha Impex Pvt. Ltd. [2025 (4) TMI 482 - BOMBAY HIGH COURT] and Kanak Impex (India) Ltd. [2025 (3) TMI 230 - BOMBAY HIGH COURT] were held distinguishable because, in the present case, the assessee had furnished the relevant supporting evidence. [Paras 8] The Revenue's challenge to deletion of the purchase addition for A.Y. 2015-16 failed. Bogus purchases - addition u/s 69C r.w.s. 115BBE - Commission on accommodation entries - CIT(A) deleted the impugned addition on the ground that the Ld. AO has failed to conduct any independent enquiry and has also not called for information from the alleged parties by issuing notice u/s 133(6) of the Act nor has it conducted any physical enquiry to examine the identity of the suppliers and buyers - HELD THAT: - AO has himself recorded the same but had specified certain discrepancies in the documents filed by the assessee and has also held that the assessee has not furnished the details of the transportation of goods, for which the assessee has contended that it has purchased goods on “landed in warehouse” terms where LRs are not received by them from the suppliers as per the trade practice where the assessee sale is on “Ex-warehouse” terms in which case the customer arranges for loading and pick up. Beyond this, we do not find any independent enquiry or rather to say further enquiry as to the existence of these parties or verifications carried out by the Ld. AO. AO has extensively relied on the statement of the parties whom the assessee had requested during the assessment proceeding to cross examine. It is observed that the assessee’s request for cross examining the parties was also denied by the Ld. AO on various grounds. There is no iota of doubt that the assessee has discharged its onus of proving the fact that the purchases are genuine by cogent documentary evidences which ought to have been rebutted by the AO, the failure to do so will benefit the assessee in holding that the Revenue has not controverted the assessee’s claim.[Paras 11, 12] The Revenue's challenge to deletion of both the alleged bogus purchase addition and the related commission addition for A.Y. 2017-18 was rejected. Final Conclusion: Both Revenue appeals were dismissed. The Tribunal held that, once the assessee had produced supporting material for the purchases, the additions could not be sustained on the basis of general information and unverified allegations without proper enquiry or rebuttal by the Assessing Officer. Issues: Whether the Revenue was justified in sustaining the addition made on account of alleged bogus purchases and related commission expenditure, and whether the assessee had established the genuineness of the purchases through documentary evidence.Analysis: The addition was founded on information suggesting accommodation entries and on alleged deficiencies in the purchase evidence. The assessee, however, produced purchase and sales invoices, ledger accounts, bank statements, registers and other supporting material to discharge the initial onus. The assessment order did not show any meaningful rebuttal of those documents, nor any adequate independent enquiry, verification of the suppliers, or effective linkage between the alleged accommodation entry information and the assessee's purchases. The absence of concrete adverse findings against the documentary evidence led to the conclusion that the Revenue had not disproved the assessee's claim. The precedents relied upon by the Revenue were found distinguishable on facts.Conclusion: The addition on account of alleged bogus purchases and commission expenditure was not sustained, and the assessee succeeded.