Purchase disallowance fails when primary records, banking payments and accepted sales support genuineness of purchases.

Purchase disallowance could not be sustained where the assessee produced tax invoices, vendor registration details, ledger accounts, banking-channel payments and other primary records, the sales were accepted, and the books were not rejected. The Tribunal held that these documents sufficiently discharged the assessee's onus to explain the purchases, and that mere third-party sales tax/VAT information, without independent corroboration by the Revenue, was insufficient to treat the purchases as non-genuine. It also found that insisting on production of suppliers after a long lapse of time was neither practical nor justified. The disallowance was deleted and the addition on disputed purchases was set aside.

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Issues: Whether the disallowance of purchases on the ground of alleged non-genuineness and absence of transportation evidence was justified.

Analysis: The assessee produced tax invoices, vendor registration details, ledger accounts, banking-channel payments, and other supporting documents to substantiate the purchases. The purchases were from registered dealers, sales and overall books were not rejected, and no independent material was brought by the Revenue apart from sales tax/VAT information regarding the vendors. On the facts, the Tribunal found that the assessee had discharged the onus to explain the purchases and that it was not practical or justified to insist upon production of the vendors after a long lapse of time.

Conclusion: The disallowance of purchases was deleted and the issue was decided in favour of the assessee.

Final Conclusion: The appeal succeeded and the addition made on account of disputed purchases was set aside.

Ratio Decidendi: Where purchases are supported by primary documentary evidence, payments are made through banking channels, sales are accepted, and the books are not rejected, a purchase disallowance cannot be sustained merely on third-party information or inability to produce the suppliers after a long lapse of time.

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