S. 69C : Unexplained expenditure-Bogus Purchases- Accommodation entries Assessing Officer disallowed 100% purchases as bogus purchases-CIT( A) restricted the disallowance to 8% of purchases against 100% of disallowed by the Assessing Officer-on appeal by Revenue the Tribunal affirmed the order of the Assessing Officer and confirmed 100% of bogus purchases. [S. 37, 68, 143(3), 147, 148]
The assessee, engaged in trading of cut and polished diamonds, was found to have obtained accommodation purchase bills from entities controlled by the Rajendra Jain Group, established by the Investigation Wing and the Maharashtra Sales Tax Department to be non-existent paper concerns issuing bogus invoices without actual supply of goods, with the entry operator himself admitting the modus operandi during search proceedings; the Assessing Officer accordingly made a 100% disallowance of the purchases u/s 69C as unexplained expenditure, which the CIT(A), despite accepting the purchases as bogus and noting that the assessee failed to discharge the burden of proving genuineness, restricted to 8% by applying profit-estimation precedents; on appeal by the Revenue, the Tribunal held that once purchases are proved to be non-genuine, no estimation of profit is permissible since such estimation indirectly allows a part of bogus expenditure, which is expressly prohibited under section 69C, and relying on binding decisions including PCIT v. Kanak Impex (India) Ltd. [(2025) 172 taxmann.com 283 / 474 ITR 175 (Bom)(HC), SLP rejected No. 47369/2025 dt. 21-11-2025], Shree Ganesh Construction (ITA No. 719/2028 dt. 5-3-2025 (Bom)(HC)), Shoreline Hotel (P.) Ltd. v. CIT (2018) 98 taxmann.com 234 (Bom)(HC), PCIT v. Premlata Tekriwal [(2022) 289 Taxman 337 (Cal)/ (2023) 456 ITR 671 (Cal)(HC)], ACIT v. Shanti Swarup Jain (2015) 230 Taxman 533 (All)(HC), N.K. Industries Ltd. v. Dy. CIT (2016) 72 taxmann.com 289 (Guj)(HC), SLP rejected (SLP No. 963/2017 dt. 16-1-2017) (SC) and N.K. Proteins Ltd. v. Dy. CIT (SLP No. 1952 dt. 16-1-2017; (2020) 421 ITR 15 (St)(SC)), held that the CIT(A)’s restriction to 8% was contrary to law and restored the AO’s order disallowing 100% of the bogus purchases in full. (ITA Nos. 2166 & 2167/Mum/2025, dt. 10-11-2025) (AYs 2010-11, 2011-12)
ITO v. Romil Diam (Mum)(Trib) www.itatonline.org
[Coram : Hon’ble Shri Sandeep Gosain, JM & Shri Prabhash Shankar, AM]