Addition for bogus purchases under section 69 unsustainable sans rejection of books of accounts under section 145(3)

Delhi ITAT deletes addition under Section 69 made on account of alleged bogus purchases sans rejection of books of accounts; ITAT holds that assessment order itself clearly indicated that the transactions in question were routed through banking channels and recorded in the Assessee’s books of accounts; ITAT observes that AO neither rejected the books of account nor carried out any independent examination of stock or inventory to demonstrate that the purchases were fictitious; ITAT states that scope and applicability of Section 69 provides that provision applies only where the Assessee is found to have made investments not recorded in books of accounts and fails to satisfactorily explain their nature and source; ITAT clarifies that even if inventory were to be loosely treated as an ‘investment’, the Revenue was required to establish discrepancies in stock or unaccounted assets, which was conspicuously absent in the case; ITAT rejects Revenue’s contention that mere mention of a wrong section is not fatal, invocation of a specific deeming provision carries distinct legal and burden of proof; ITAT holds that Revenue neither invoked nor justified applicability of other provision such as Section 69C and the present case fails to meet the statutory conditions of Section 69, thus, the addition could not be sustained; ITAT observes that bogus purchases were drawn solely on the basis of an investigation report, bank statement of supplier and non-response of alleged entry provider without corroborative evidence from Assessee’s own records; ITAT states that in the present case, the purchases were admittedly recorded in the books of accounts and there was no allegation that the source of funds used for making payments was unexplained or outside the books;

Thus, allows Assessee’s appeal.
[In favour of assessee]
(Related Assessment year : 2012-13) – [**KDP Infrastructure (P) Ltd. v. DCIT [TS-1680-ITAT-2025(DEL)] – Date of Judgement : 12.12.2025 (ITAT Delhi)]