Ad hoc purchase disallowance under section 69C fails when audited books and quantitative records support genuine expenditure.

Delay in filing the appeal was condoned because the assessee had bona fide pursued rectification proceedings before appealing, which was accepted as sufficient cause. On the substantive issue, an ad hoc disallowance of 12.5% of purchases as non-genuine under section 69C was held unsustainable where the books were audited, purchases and sales were quantitatively reconciled, and the Revenue failed to prove that the recorded expenditure was bogus or that the books were unreliable. The absence of PAN for some vendors, by itself, was not enough to justify the addition, and the disallowance was deleted.

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Issues: (i) Whether the delay in filing the appeal could be condoned on the ground of sufficient cause; (ii) Whether an ad hoc disallowance of 12.5% of purchases as non-genuine under section 69C of the Income-tax Act, 1961 was sustainable.

Issue (i): Whether the delay in filing the appeal could be condoned on the ground of sufficient cause.

Analysis: The assessee had pursued rectification of the first appellate order before filing the appeal. The pending rectification proceedings were treated as an alternative remedy pursued in bona fide belief, and this explanation was accepted as a sufficient cause for the delay.

Conclusion: The delay was condoned and the appeal was admitted in favour of the assessee.

Issue (ii): Whether an ad hoc disallowance of 12.5% of purchases as non-genuine under section 69C of the Income-tax Act, 1961 was sustainable.

Analysis: The books of account were audited and the purchases and sales were quantitatively reconciled. The purchases from agriculturists were supported by bills and the Revenue did not establish that the books were unreliable or that individual purchases were bogus. In these circumstances, an ad hoc addition merely because some vendors did not have PAN was held unsustainable, and section 69C could not be invoked on such a basis.

Conclusion: The addition sustained by the first appellate authority was deleted and the disallowance was held to be unjustified in favour of the assessee.

Final Conclusion: The appeal succeeded on the substantive purchase-disallowance issue and the impugned addition was deleted, while the delay in filing the appeal was also condoned.

Ratio Decidendi: An ad hoc disallowance of purchases cannot be sustained under section 69C of the Income-tax Act, 1961 where the books are audited, the quantitative records reconcile, and the Revenue fails to prove that the recorded expenditure is non-genuine.

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