Mere accusations cannot entail Revenue to fasten Income tax liability u/s 69C: ITAT

Mere accusations cannot entail Revenue to fasten Income tax liability u/s 69C: ITAT

The appeal has been filed by the Income Tax Officer (ITO) against a taxpayer named Ashish Gupta in the ITAT Raipur. The tax department challenged an order dated August 29, 2025, passed by the CIT(Appeals)/NFAC, for the assessment year 2010-11. In the order, CIT(A) ruled in favour of the assessee. The department disagreed with the relief given to the assessee regarding alleged bogus purchases of Rs. 5.52 lakh from a dealer called M/s Laxmi Trading Co., Raipur.

The department submitted that at the time of the personal hearing, no one appeared on behalf of the assessee, and no application seeking adjournment was filed. The department claimed that the hearings were scheduled for November 3, 11, 14 and 21, 2025; however, the assessee did not appear on any of these dates. Thus, it can’t be said that reasonable opportunities were not provided to the assessee.

Previously, an addition of Rs. 5.52 lakh was made to the income of the assessee as unexplained expenditure under Section 69C by the assessing officer (AO) because the Commercial Tax Department had identified Laxmi Trading Co. As a bogus dealer giving only bills, not goods. The registration of the dealer was cancelled in 2011. A letter was also sent to the dealer; however, it was returned unserved. In conclusion, the assessing officer (AO) alleged that the assessee bought only bogus purchase bills from M/s. Laxmi Trading Company, Raipur. Hence, AO made an addition of the full purchase amount to the assessee’s income.

The aggrieved assessee filed an appeal before CIT(A) that since the AO had accepted the sales, the entire purchase amount could not be treated as bogus. He argued that only 12.5% of the purchase value should be added to the income, not the entire amount. CIT(A) accepted the arguments served by the assessee and reduced the addition amount made by the AO.

The dissatisfied Revenue then filed an appeal before ITAT Raipur, where the tribunal agreed with the ruling of CIT(A) because the AO only proved that the supplier was suspicious. However, it did not prove that the assessee personally benefited from this or that he was involved in any type of tax evasion racket. Only allegations were not enough to make the full purchase amount, as an addition of Rs. 5.52 lakh to the assessee’s taxable income. In these types of cases, the high courts in earlier judgments have allowed only percentage additions.

In the final decision, the tribunal found nothing wrong to uphold the CIT(A)’s decision to restrict the addition to 12.5%. Therefore, the appeal of the Revenue to restore the full addition of Rs. 5.52 lakh was dismissed.