ITAT Reopens Rs. 76 Lakh Bogus Purchase Case, Slams CIT(A) for Ignoring Fraud Red Flags
ITAT Reopens Rs. 76 Lakh Bogus Purchase Case, Slams CIT(A) for Ignoring Fraud Red Flags
The Income Tax Appellate Tribunal (ITAT), Raipur Bench, has set aside the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Delhi (NFAC), in a case involving alleged bogus purchases by M/s Shanta Techno Private Limited, Raipur, and remanded the matter for fresh adjudication.
"The CIT(A) has failed to appreciate the distinct nature of this case and overlooked glaring inconsistencies and admissions by the assessee. Reliance on legal precedents without factual correlation renders the order perverse," the bench Partha Sarathi Chaudhury (Judicial Member) and Arun Khodpia (Accountant Member) observed.
The ruling came in an appeal filed by the Deputy Commissioner of Income Tax (DCIT)-1(1), Raipur, against partial relief granted to the assessee for Assessment Year 2018–19.
The case stemmed from the reopening of assessment proceedings under Section 147/144B of the Income Tax Act, where the Assessing Officer (AO) found that Shanta Techno had booked purchases worth ₹76.21 lakh from M/s Shree Shyam Sales Corporation—an entity identified by both Income Tax and GST departments as a bogus billing operator in the iron and steel trade.
The AO, citing lack of documentary evidence and non-cooperation from the assessee during reassessment proceedings, invoked Section 69C (unexplained expenditure) and disallowed the entire purchase amount, terming it a sham transaction. It was noted that the company had reversed corresponding Input Tax Credit (ITC) and paid the GST liability via challan—implicitly admitting the purchases were not genuine.
On appeal, the CIT(A) acknowledged that the purchases appeared non-genuine but held that only the profit element embedded in such purchases should be taxed. Citing various tribunal and High Court decisions—including PCIT vs S.V. Jiwani (Bombay High Court)—the CIT(A) restricted the disallowance to 12.5% of the disputed purchases, a sum of approximately ₹9.52 lakh.
The Tribunal disagreed with the CIT(A)’s approach, finding that the appellate order had selectively applied legal precedents without engaging with the specific facts and evidence in the case. It noted that the CIT(A) had simultaneously accepted the AO’s finding that the purchases were bogus, yet estimated the income on a presumptive basis without factual reconciliation.
The ITAT remanded the matter to the CIT(A) for fresh adjudication, directing that the assessee be given one final opportunity to substantiate the genuineness of its purchases. The appellate authority has been instructed to decide the case within three months, factoring in both documentary evidence and applicable legal principles.
Case Details
Case Title: Deputy Commissioner of Income Tax- 1(1), Raipur, C.G. Versus Shanta Techno
Case No.: ITA No: 155/RPR/2025
Date: 18.06.2025
Counsel For Appellant: Dr. Priyanka Patel, Sr. DR
Counsel For Respondent: None
