Bogus Purchase Disallowance

Expenses treated as non-genuine

The Income Tax Department, especially in states like Maharashtra and Gujarat, maintains lists of hawala dealers and accommodation entry providers. If your vendor appears on such a list, your purchases from them can be disallowed under Section 69C as unexplained expenditure, even if you have valid invoices and payment records.

⏱ 30 days from notice; appeal within 30 days of order

⚠️ 30% tax on disallowed amount + interest + penalty up to 200%

Common Issues in This Type of Notice

Vendor on hawala list

Non-existent suppliers

Cash payments above threshold

No delivery proof

How We Handle It — Step by Step

Upload notice

Upload scrutiny notice or assessment order

Vendor analysis

Expert checks if vendor is actually on hawala/bogus list

Evidence gathering

Collect all proof of genuine transaction

Legal submission

Case laws cited distinguishing genuine vs accommodation entries

Appeal if needed

If order is adverse, appeal filed before CIT(A) / ITAT

Documents You Will Need

Purchase invoices and bills

Payment proofs (bank transfer / cheque)

E-way bills and delivery challans

Vendor GST registration certificate

Goods inspection / receipt notes

Vendor's ITR or financial details (if available)

Relevant Case Laws & Precedents

Rajan Enterprises vs DCIT

ITAT Delhi

Purchases cannot be treated as bogus merely because seller did not pay tax, if buyer has valid invoices, transport documents and payment evidence.

N.K. Proteins vs DCIT

Gujarat High Court

When sales are accepted, corresponding purchases from the same vendor cannot be disallowed without strong contrary evidence.

Frequently Asked Questions

What if my vendor is on the sales tax department's hawala list?

Being on a list alone is not conclusive. Courts have held that the AO must examine actual transactions before disallowing.

Can I claim only GP (gross profit) addition instead of full disallowance?

Yes. Several tribunal decisions support limiting the addition to GP percentage instead of full purchase amount.

Do I need to produce the vendor?

The burden is on the department to prove transactions are bogus. You need to produce your own records; producing the vendor is not mandatory.