S. 69C : Unexplained expenditure -Bogus Purchases – Only profit element to be taxed- Addition restricted to 12.5% of alleged bogus purchases- Bombay High Court ruling in PCIT v. Kanak Impex(India) Ltd [2025] 474 ITR 175 / 172 taxmann.com 283 (Bom)(HC) is distinguished. [ S. 133(6), 147 , 148 ]
The assessee, engaged in construction, filed return declaring income of ₹5.36 crore. Assessment was reopened u/s 148 on the basis of Investigation Wing information alleging bogus purchase bills. The AO issued notices u/s 133(6) which returned unserved as suppliers were non-existent and treated purchases of ₹42.82 lakh as bogus, disallowing 100%. CIT(A) confirmed the addition. On appeal, the Tribunal noted that in assessee’s own case when it was a partnership firm (M/s. Quality Construction Co., ITA No. 1403/Mum/2024, AY 2010–11, order dated 05/12/2024), addition on identical facts had been restricted to 12.5% of alleged bogus purchases, following the Bombay High Court ruling in Pr. CIT v. Suraj Infrastructures (P.) Ltd. [2023] 156 taxmann.com 192 (Bom)(HC) Tribunal further held that reliance placed by Revenue on PCIT v. Kanak Impex(India) Ltd [2025] 474 ITR 175 / 172 taxmann.com 283 (Bom)(HC) was distinguishable since in that case assessee failed to cooperate with investigation and could not prove genuineness of purchases, whereas present assessee had participated in proceedings and filed details. Accordingly, addition was restricted to 12.5% of the alleged purchases representing profit element, and balance deleted. On denial of TDS credit of ₹24.46 lakh, matter was remitted to AO for verification of Form 26AS and TDS certificates. Ground challenging reopening was not pressed. Addition restricted to 12.5% of alleged bogus purchases; TDS credit issue restored to AO. Appeal partly allowed. (ITA No. 1489/Mum/2025, dt.07/05/2025)(AY. 2010–11)
Quality Heightcon Pvt. Ltd. v. DCIT (Mum)(Trib) www.itatonline.org
[Coram : Hon’ble Shri Saktijit Dey, VP and Hon’ble Shri Narendra Kumar Billaiya, Hon’ble AM]