Topic
Bogus purchases under Indian income tax law refer to fictitious or unverified expenses claimed to reduce taxable income, often triggering additions under Section 69C.
ITAT Delhi upholds addition of Rs. 16.5 lakh as unexplained expenditure under Section 69C, ruling the assessee failed to discharge the burden of proving the legitimacy of purchases from a hawala operator. The judgment reinforces that mere book entries without corroborative evidence are insufficient to avoid tax additions.
ITAT Surat holds that penalties under Section 271(1)(c) of the Income Tax Act cannot be levied on ad-hoc or estimated additions, even in cases of alleged bogus purchases. The ruling reinforces that penalty provisions require concrete evidence of concealment, not mere presumptive additions, impacting tax assessments involving disputed transactions.
ITAT Delhi has sanctioned a 5% disallowance of Rs.31 lakh in alleged bogus purchases under Section 69C, treating it as a fair, non-precedential middle ground where full disallowance lacks evidentiary support but complete acceptance is untenable. This nuanced approach affects exporters and cash-intensive businesses facing disputed purchase trails, offering a new benchmark for adjudicating borderline cases without setting binding precedent.
ITAT Agra struck down an ad hoc disallowance of nearly Rs 98 lakh, holding that the Assessing Officer cannot estimate expenses under Section 37 without first rejecting the assessee’s books of account. This reinforces a critical procedural safeguard for businesses, ensuring estimation is a last resort-not a shortcut-protecting taxpayers from arbitrary adjustments.
ITAT Mumbai upholds the addition of only 12.5% of alleged bogus purchases, relying on Bombay and Gujarat High Court rulings that limit tax liability to the profit element. The ruling dismisses the Revenue’s appeal for lack of material contradiction, reinforcing a standardized approach for hawala transaction cases under the Income Tax Act.
ITAT Delhi sets a precedent by quashing reassessment proceedings under Section 147 of the IT Act where no new addition is made beyond the unexplained cash credit already assessed. The ruling reinforces that reassessment powers cannot be mechanically invoked without substantive new findings, impacting tax authorities' reassessment strategies.
ITAT Kolkata sets aside reassessment proceedings initiated under Section 147 where the Assessing Officer relied exclusively on an investigation wing report without independent scrutiny. The ruling reinforces that procedural fairness mandates personal satisfaction of the AO, not borrowed satisfaction, to uphold reassessment validity.
ITAT Mumbai rules that when an assessee voluntarily discloses a portion of bogus purchases, only 12.5% profit margin-not the entire purchase amount-can be added under Section 69C. The decision aligns with jurisdictional High Court precedent, offering relief to taxpayers facing reassessment for non-genuine expenditures where partial disclosure is made.
ITAT Kolkata rules that when an assessee fails to prove the existence of suppliers, delivery, or transactional genuineness, the entire purchase amount is taxable as unexplained expenditure under Section 69C. The ruling underscores the burden of proof on taxpayers to substantiate transactions, even with banking evidence, to avoid full disallowance.
The ITAT Kolkata ruled that when sales are accepted, corresponding purchases cannot be disallowed based solely on uncorroborated WhatsApp chats or suspicions of shell company links. This sets a critical precedent for taxpayers facing revenue scrutiny, reinforcing that mere association with flagged entities is insufficient without concrete, corroborated evidence of fabrication.
ITAT Delhi rules that if sales are accepted but purchases are alleged to be bogus, disallowance under Section 69C must be restricted to the gross profit margin rather than the entire purchase value. The ruling reinforces judicial precedent, protecting assessees from excessive additions where sales legitimacy is not challenged.
ITAT Mumbai rules that where sales are accepted, disallowance of bogus purchases under Section 69C is restricted to the profit element (12.5%) rather than the entire purchase amount. This narrows tax liability for taxpayers facing allegations of accommodation entries, providing clarity on the treatment of unexplained expenditure.
ITAT Delhi holds that where sales from alleged bogus purchases are accepted, full disallowance under Section 69C is unjustified; addition must be restricted to a reasonable proportion.