ITAT Rules Addition Under Section 69C for Bogus Purchases Unsustainable

Cases Details: Ankit Gems (P.) Ltd. vs. Income-tax Officer - [2025] 178 taxmann.com 454 (Mumbai - Trib.)

Judiciary and Counsel Details

• Amit Shukla, Judicial Member
• Girish Agrawal, Accountant Member
• Rahul Sarda, Adv. for the Appellant
• Aditya M. Rai, Sr. DR for the Respondent

Facts of the Case

The assessee was a partnership firm engaged in the business of importing, manufacturing, and trading of cut and polished diamonds. The assessee converted into a private limited company during the relevant year. It filed its tax return for the relevant assessment year. Subsequently, the case was reopened based on information that the assessee had made accommodation entries of purchases from a particular concern. In response, the assessee denied having any purchase transactions with that concern.

The Assessing Officer (AO) didn’t find the assessee’s response satisfactory and made additions to the income of the assessee. On appeal, the CIT(A) upheld the additions, and the matter was then referred to the Mumbai Tribunal.

Tribunal Held

The Tribunal held that the assessee furnished a purchase register for both statuses, i.e., when it was a partnership firm and also for the period when its status was a private limited company. The purchase register for the entire year was split between the two statuses of a partnership firm and a private limited company, and there was no entry of purchases made by the assessee from the said entity.

The AO had mentioned in the assessment order only in respect of circumstantial evidence and statement recorded during the search survey action in the case of Bhanwarlal Jain Group to allege that the assessee made a bogus accommodation entry for purchase. The assessee was made to prove negative that it had not made the purchases from the alleged concern. It is a trite law that one cannot be made to prove negative. The burden to establish the conditions for bringing to charge any income in the hands of the assessee was on the AO.

Accordingly, the Tribunal held that the AO and CIT(A) have not been able to bring anything cogent to negate the claim of the assessee and demonstrate effectively and evidently that the assessee had in fact made a bogus purchase transaction from the said entity. Therefore, additions made by AO were deleted.

List of Cases Referred To 

• Collector Land Acquisition v. Master, Katiji [1987] 167 ITR 471 (SC) (para 3.2)
• K.P. Varghese v. ITO [1981] 7 Taxman 13/131 ITR 597 (SC) (para 6.1).