TaxTMI 
TaxTMI 
2026 (9) TMI 42
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.....57,29,735/- Just because the purchase made by the Appellant were from a dealer who was declared Non-Genuine Tax Payer by the GST department, when infact the appellant has produced all the documentary evidences supporting the purchases during the course of Assessment proceedings as well as first appellate proceedings. 2. The Appellant craves leave to add, alter, amend, and modify the aforesaid grounds of appeal at or any time before the hearing as may be advised from time to time. B. RELIEF CLAIMED 1. The purchases being genuine the addition confirmed by the learned CIT to the tune of Rs.57,29,735/- may please be deleted. 2. Any other relief as deemed fit by the Authority. 3. The principal controversy arising for our consideration is whether the learned CIT(A) was justified in confirming the addition of Rs. 57,29,735/- made by the Assessing Officer under section 69C of the Act in respect of purchases made by the assessee from M/s Nahar Industries. 4. Facts in Brief 4.1. The assessee is a resident firm engaged in the business of builders and developers. It filed its original return of income for assessment year 2019-20 on 17.10.2019, decl....
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.... On appeal, the assessee reiterated that the purchases were duly supported by invoices, entries in the books of account, bank statements and GST returns, and that the addition could not be sustained merely because the supplier had been identified as a non-genuine dealer by the GST authorities. The learned CIT(A), however, held that these documents did not independently establish the actual movement and receipt of the goods. He further held that the decisions restricting additions to the profit element were inapplicable in the absence of evidence establishing actual purchase, consumption or utilisation of the material. The learned CIT(A), therefore, confirmed the addition of Rs. 57,29,735/- under section 69C and dismissed the appeal of the assessee by the impugned order dated 28.02.2026. 5. Aggrieved by the order of learned CIT(A), the assessee is in appeal before us. 6. Before us, the learned Authorised Representative (AR) filed an affidavit of Shri Rajesh Keshavlal Patel, partner of the assessee-firm, and reiterated the contents thereof. The deponent stated that the assessee was carrying on the business of builders and developers and was constructing a residential complex at....
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....gress of Rs. 6,86,77,200/- and purchases of Rs. 6,81,08,073.08/-. It further reflects net profit before interest and remuneration to partners of Rs. 1,38,54,862.91/-. The learned AR submitted that the aforesaid financial results demonstrated that the assessee had disclosed substantial income from the project and that the purchase of construction material was intrinsically connected with the construction activity and the corresponding sales and work-in-progress. 10. Without prejudice to the principal contention that the purchases were genuine, the learned AR reiterated the alternative plea raised before the Assessing Officer and the learned CIT(A) that the addition, if any, should be restricted to 12.5 per cent of the disputed purchases instead of sustaining the entire purchase amount. In support of this plea, he relied upon the decision of the Hon'ble jurisdictional High Court in Principal Commissioner of Income-tax v. Amcon Construction, Income Tax Appeal No. 46 of 2024 reported in (2026) 1 CTOCTR 511 (Bom). 11. Referring to paragraphs 12 to 14 of the said decision, the learned AR submitted that a full addition could be made only when proper material was available before the....
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....through banking channels was not sufficient to establish the genuineness of the purchases when the supplier had been identified by the Investigation and GST authorities as an accommodation-entry provider. The learned DR further relied upon the decision of the Hon'ble Gujarat High Court in N.K. Industries Ltd. and submitted that the addition is not required to be restricted merely to an estimated profit element and the entire amount of such purchases may be brought to tax. He accordingly urged that the order of the learned CIT(A) be upheld and the appeal of the assessee be dismissed. 16. We have considered the rival submissions and perused the material available on record. The Assessing Officer treated the entire purchases as unexplained expenditure principally on the basis of information received from the Investigation and GST authorities and the statements of persons connected with M/s Nahar Industries. According to the information, M/s Nahar Industries was engaged in issuing accommodation bills without actual supply of goods. The assessee, on the other hand, furnished copies of purchase invoices, its ledger account and bank statements demonstrating that payments against the in....
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....ed by the assessee. The books of account have also not been rejected under section 145(3) of the Act. 20. Sand, khadi and bricks are basic materials required for construction. Once the construction activity, corresponding sales and substantial work-in-progress are accepted, it necessarily follows that construction materials must have been procured and consumed. The Revenue has not demonstrated that the construction was undertaken without incurring the disputed expenditure or that the corresponding sales and work-in-progress were fictitious. There is also no finding that the amount paid through banking channels was received back by the assessee in cash. In these circumstances, even if the purchases are not accepted as having been made from the named supplier, the material on record supports the inference that the assessee procured the goods from other sources and obtained invoices from M/s Nahar Industries. 21. The Assessing Officer relied upon the statements recorded by the GST authorities to establish that M/s Nahar Industries was an accommodation-entry provider. However, there is no material in the assessment order demonstrating that an independent inquiry was conducted int....
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....d. and raised the question whether the entire purchases should have been added. Nevertheless, after considering the factual position, the Hon'ble jurisdictional High Court affirmed the restriction of the addition to the profit element. Thus, N.K. Proteins Ltd. applies where the evidence establishes that the transaction itself is wholly fictitious. It cannot be applied mechanically where the corresponding business activity, sales and consumption of material are accepted and the dispute is essentially regarding the identity of the supplier and the verifiability of purchases from the named party. 25. In the present case, complete deletion of the addition is not warranted because the assessee has not conclusively established that M/s Nahar Industries was the actual supplier of the goods. At the same time, addition of the entire purchase amount would result in taxing the gross expenditure despite the accepted construction activity, sales and work-in-progress. The proper course is, therefore, to bring to tax the profit element arising from purchases which may have been made from unverified or alternative sources. 26. The assessee itself had, without prejudice, offered before the As....