TaxTMI 
TaxTMI 
2026 (1) TMI 612
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.... arising out of the appeal before it against the order dated 21.03.2024 passed u/s 143(3) r.w.s 144B of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') by the Assessment Unit, Income Tax Department for Assessment Year 2022- 23. 2. Heard and perused the records. As from the submissions of ld. DR and the material on record it comes up that the assessee is a Firm involved in trading of fabrics. The case was selected under CASS for scrutiny on the ground that the assessee had shown purchases from persons who were non filers of Income Tax Returns as compared to their Turnover in GST Return. The AO found that the assessee had shown purchases of Fabrics from 9 suppliers, totaling 21.83 Crores which was found suspicious for reaso....
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....assessee were bogus and fabricated. However, despite such a conclusion, Ld CIT(A) proceeded to sustain disallowance of only 5% of the total bogus purchases on the ground that as the AO had not doubted the sales, complete purchases held as bogus cannot be doubted. Capital introduced by partner was deleted. Accordingly department is in appeal raising following grounds; 4. Ld. DR has submitted once the purchases have been proved fictitious, it is not incumbent upon the appellate authority to restrict the disallowance, and complete bogus purchases are required to be addedand reliance was placed on following judicial decisions; (i) N.K. Proteins (SC) 292 CTR 354 (ii) Kanak Impex (Bombay HC) 172 taxmann.com 283 (iii)....
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....hat he had actually made purchases and has not merely inflated the cost. This can be done by giving proof of purchases made from grey market, like a Kaccha receipt. Or the assessee can furnish details of the supplier from whom such purchases were made, and give source of cash spent on making such purchases. In the absence of any such evidence, it should not be presumed that the purchases were actually made from grey market. It was submitted that it is important to note that in the present case the assessee has not even made a claim that he had made such purchases from the grey market. The only claim that has been made by the assessee and that has also been accepted by Ld CIT(A) is that since the sales have been accepted by the AO, the purch....
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....hases were bogus. In view of such an acceptance, and the fact that the assessee has neither made any claim that purchases were made from alternate sources, nor has filed any evidence for the same, the addition made by the Assessing Officer of full bogus purchases amounting to 21.83 Crores should be sustained. 5. Ld. AR has submitted that the Assessee has filed all the documents in his possession to justify the claim of bonafide purchases from above said 10 parties, which clearly establishes the bonafide purchases and the said documents are acknowledged to have been filed by the AO in para 3.2 at internal page 2 of Assessment Order, where it is stated by AO as under:- "the assessee furnished the copies of audited financial statem....
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.... the assessee as per financial results and as per stock register furnished in value and as well as in quantity. The fact of the matter is that stock register not only reflects the value and quantity of stock but also reflects the party from whom purchases made and to whom sales made. Certainly if sales and turnover is accepted by department then goods purchased by the Assessee qua sales made by him are also bound to be accepted and section 69C of the Act cannot be invoked for deeming income. Where addition of purchase in total is proposed resulting intoGP exceeding the sales department must justify the addition with evidences not just suspicion that suppliers were Non Filers or did not reply to Notice u/s 133(6) of the Act, that supplier ha....