ITAT Kolkata: Purchases Valid When Books Accepted and Payments Made Through Banks

ITAT Kolkata: Purchases Valid When Books Accepted and Payments Made Through Banks

Tribunal Deletes ₹12.73 Crore Addition Under Section 69C, Says Suspicion Cannot Replace Evidence

Judgment Strengthens Investor Confidence, Clarifies Burden of Proof in Bogus Purchase Cases

By Our Legal Reporter

New Delhi: November 29, 2025:

In a landmark ruling, the Income Tax Appellate Tribunal (ITAT), Kolkata Bench, has held that purchases cannot be disbelieved when the assessee’s books of accounts are not rejected and payments are made through proper banking channels. The Tribunal deleted an addition of ₹12.73 crore under Section 69C of the Income Tax Act, 1961, providing relief to the taxpayer and setting a precedent for similar disputes.

Also Read: High Court Says Illness of Consultant Can Justify Delay in GST Appeal Filing

The case highlights the growing tension between tax authorities and businesses over alleged bogus purchases, particularly in sectors where small suppliers or inactive GST registrations raise suspicion.

Background of the Case

• The assessee, Pravesh Kumar Jaiswal, filed returns for Assessment Year 2021–22.
• The Assessing Officer (AO) made an addition of ₹12,73,85,064 under Section 69C, alleging that purchases were bogus.
• The AO relied on investigation reports suggesting that certain suppliers were issuing fake invoices.
• However, the assessee produced books of accounts, invoices, stock records, and proof of payments made through banking channels.
• The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s addition, leading to an appeal before the ITAT.

ITAT’s Observations

Also Read: Supreme Court Calls for Pre-Screening of Social Media Content to Prevent Misinformation Spread

The Tribunal made several important observations:

• Books not rejected: Since the AO did not reject the assessee’s books of accounts under Section 145, purchases recorded therein could not be disbelieved.
• Payments through banks: All payments were made via banking channels, proving the genuineness of transactions.
• Sales accepted: The Revenue accepted the sales corresponding to these purchases, which logically required acceptance of the purchases.
• Suspicion insufficient: Mere suspicion or reliance on investigation reports cannot justify additions without direct evidence.
• Burden of proof on Revenue: The Tribunal emphasized that the onus lies on the department to prove collusion or manipulation, not on the assessee to disprove suspicion.

The ITAT concluded that the addition under Section 69C was unsustainable and deleted it in full.

Wider Legal Context

This ruling aligns with several earlier judgments:

Also Read: DoT Issues Strict Guidelines: SIM Misuse Can Lead to Punishment for Subscribers

• Delhi ITAT (October 2025): Deleted additions where suppliers had “inactive” GST status, holding that genuine purchases backed by invoices and bank payments cannot be treated as bogus.
• Bombay High Court (2019): Clarified that when sales are accepted, corresponding purchases cannot be disallowed unless tangible evidence of falsity exists.
• ITAT Mumbai (2024): Held that suspicion, however strong, cannot replace evidence in bogus purchase cases.

Together, these rulings strengthen taxpayer rights and limit arbitrary additions by tax authorities.

Impact on Businesses and Taxpayers

The ruling has far-reaching implications:

• Relief for taxpayers: Genuine businesses will not face arbitrary taxation when purchases are properly documented.
• Burden on Revenue: Tax authorities must provide concrete evidence of bogus transactions before making additions.
• Market confidence: The judgment reassures investors and businesses that legitimate transactions will be respected.
• Reduced litigation: Clear guidelines on evidentiary standards may reduce disputes reaching appellate forums.

Also Read: Delhi High Court Rebukes GST Authorities for Mechanical Cancellation of boAt Parent Company’s Registration

Expert Reactions

Tax experts and legal professionals welcomed the ruling:

• Chartered accountants: Said the judgment will help clients facing scrutiny over purchases from small or inactive suppliers.
• Tax lawyers: Emphasized that the ruling restores fairness by requiring evidence before penalizing taxpayers.
• Market analysts: Noted that the judgment could improve confidence in sectors where small suppliers are common.

Conclusion

The ITAT Kolkata’s ruling that purchases cannot be disbelieved when books are not rejected and payments are made through banking channels is a landmark in tax jurisprudence. By deleting the ₹12.73 crore addition under Section 69C, the Tribunal reinforced the principle that evidence, not suspicion, must guide taxation.

For taxpayers, the judgment provides relief and clarity. For the Revenue, it sets a higher bar for proving bogus purchases. Ultimately, the ruling strengthens trust in India’s tax system and ensures that genuine businesses are not unfairly penalized.

Suggested Keywords for SEO (Google + ChatGPT)

Also Read: Delhi High Court Orders Removal of Obscene Deepfakes Targeting Ajay Devgn, Protects Actor’s Personality Rights

• ITAT Kolkata bogus purchase ruling Section 69C
• Purchases banking channels ITAT judgment
• ITAT deletes ₹12.73 crore addition Section 69C
• Suspicion does not evidence bogus purchase case India
• ITAT Pravesh Kumar Jaiswal AY 2021–22
• Section 69C unexplained expenditure ITAT ruling
• Bogus purchase addition deleted ITAT Kolkata
• ITAT relief for taxpayers’ bogus purchase cases
• Landmark ITAT ruling November 2025 purchases
• Genuine purchases banking proof ITAT India

Also Read: Supreme Court Clarifies: High Courts Cannot Use Article 226 to Overturn Civil Court Orders