Income Tax Appeal Dismissed; Gross Profit Rate of 0.15% in Bullion Trade Confirmed as Reasonable Finding of Fact
In a significant ruling dated September 22, 2026, the Division Bench of the Calcutta High Court, comprising Justices Rajarshi Bharadwaj and Sudip Deb, dismissed the appeal filed by the Principal Commissioner of Income Tax-13, Kolkata, against the Income Tax Appellate Tribunal’s order concerning the assessment year 2020-21. The appeal challenged the Tribunal’s decision to reject the addition of over Rs. 85 crore as bogus purchases made by the assessee, Mr. Utkarsh Rai, engaged in bullion trading.
The Assessing Officer had initially disallowed the purchases under Section 69C of the Income Tax Act, 1961, on grounds that the vendors involved were allegedly non-genuine, failed to file income-tax returns, had cancelled GST registrations, and were engaged in unrelated businesses. The AO also pointed to discrepancies in documents and non-compliance with notices under Section 133(6).
However, the Tribunal after a meticulous review of the evidence produced by the assessee—including purchase invoices, ledger accounts, bank statements, GST records, and stock registers—held that the entire purchases could not be treated as bogus. It noted that the corresponding sales and closing stock were undisputed, payments were routed through banking channels, and the nature of bullion trading involved narrow profit margins governed by market rates.
The Tribunal further directed that the gross-profit rate on the disputed purchases be taken at 0.15%, reflecting a realistic and commercially sound profit margin, rather than the unrealistic assumption of zero profit that would result if the purchases were wholly disallowed.
The High Court upheld these factual findings, emphasizing that the determination of gross profit rate and genuineness of vendors are questions of fact. The Court found no perversity or ignoring of material evidence in the Tribunal’s order and held that a mere difference in opinion by the Assessing Officer or Commissioner of Income Tax (Appeals) does not constitute a substantial question of law warranting interference under Section 260A.
This ruling reinforces the principle that in cases involving complex commercial transactions such as bullion trading, the factual matrix including documentary evidence and market realities must guide the tax authorities’ assessments. The judgment provides clarity on the limits of invoking bogus purchases additions where adequate evidence supports the genuineness of transactions.
Bottom Line:
Income Tax - Appeal under Section 260A - Bogus purchases - Where Tribunal, on appreciation of evidence, found that corresponding sales were undisputed, payments were through banking channels, transactions were reflected in GST records and stock records were maintained, entire purchases could not be treated as bogus - Estimation of gross-profit rate at 0.15% in bullion trade held to be a finding of fact - No substantial question of law arises.
Statutory provision(s):
Income Tax Act, 1961 Section 69C, Section 133(6), Section 260A
