IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, BANGALORE BEFORE SHRI NARENDER KUMAR CHODHRY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA No.247/Bang/2025 Assessment Year: 2020-21 Hanumanthappa Pathrera Laxmana, Vs. The Income Tax Officer, Proprietor of M/s Sri Om Traders, Ward – (1) & TPS, Shop No.2, 2/1-612/1, Ward No.27, Shimogga.

New Mandli, Shivamogga – 577 202. PAN – ADCPL 4413 F APPELLANT RESPONDENT ITA No.1066/Bang/2025 Assessment Year: 2020-21 The Income Tax Officer, Vs. Hanumanthappa Pathrera Ward – (1) & TPS, Laxmana, Shimogga. Proprietor of M/s Sri Om Traders, Shop No.2, 2/1-612/1, Ward No.27, New Mandli, Shivamogga – 577 202. PAN – ADCPL 4413 F APPELLANT RESPONDENT Assessee by : Shri Atul K Alur, Advocate Revenue by : Shri Shivanand H Kalakeri, JCIT (DR)

Date of hearing : 13.08.2025 Date of Pronouncement : 09.10.2025

O R D E R

PER WASEEM AHMED, ACCOUNTANT MEMBER:

These cross appeals, one by the assessee and the other by the Revenue, are directed against the order of the Commissioner of Income Tax (Appeals), NFAC, dated 01.01.2025 for the assessment year 2020-

21. Since both appeals pertain to the same order and involve common issues, they were heard together and are disposed of by this consolidated order.

First, we take up ITA No. 247/Bang/2025, an appeal by the assessee

2. The first issue raised by the assessee that the ld. CIT-A erred in treating the purchases to the extent of 10% as bogus (₹30,66,03,197) and further alleged that the ld. CIT-A erred in treating the sundry creditors (₹8,62,40,984) as bogus.

3. The Assessing Officer during the assessment proceedings found that there are certain purchases which do not seem to be genuine and accordingly disallowed such purchases of ₹30.66 crores on the ground that the suppliers were either non-filers, had negligible turnover, or their GST registrations were cancelled. The list of such supplier is placed on pages 3 to 4 of the assessment order. He concluded that the assessee failed to establish genuineness and treated the purchases as bogus u/s

69C of the Act.

3.1 Similarly. the AO further noted that the assessee has shown high amount of liabilities in the balance sheet whereas it has shown low-

income /receipt in the income tax return and therefore the AO added sundry creditors of ₹8.62 crores, treating them as unexplained liabilities. On appeal, the ld. CIT(A) noted that sales of ₹54.66 crores had been accepted. In a trading business, sales cannot be achieved without corresponding purchases. Therefore, the ld. CIT(A) held that complete disallowance of purchases was unsustainable. At the same time, since the suppliers were untraceable and their GSTINs were cancelled, he concluded that the purchases were not fully genuine and restricted the disallowance to 10% of purchases, treating it as profit element from grey market procurement.

4. Regarding sundry creditors, he deleted the addition, holding that once purchases were taxed through estimation of profit, a separate addition for creditors would amount to double taxation.

5. Being aggrieved by the order of the ld. CIT-A, both the assessee and Revenue are in appeal before us. The assessee is in appeal against the confirmation of the addition to the extent of 10% and the Revenue is in appeal in ITA No. 1066/Bang/2025 against the deletion of the addition of the purchases to the extent of 90% of alleged bogus purchases.

6. Before us, the ld. AR for the assessee filed a paper book having 361 pages and argued that once sales are accepted in entirety, purchases cannot be disbelieved. All purchases were recorded in books, supported by GST returns and bank payments. The ad hoc disallowance of 10% was arbitrary since books were not rejected u/s 145(3) of the Act.

6.1 It was also contended that sundry creditors represented outstanding trade balances arising out of the very purchases, and once purchases are accepted, creditors cannot be questioned.

7. The Revenue, on the other hand, argued that the ld. CIT(A) erred in granting