Delhi ITAT Upholds Genuine Purchases Where J&K Toll Records Confirmed Goods Movement

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) in Jammu Pigments Limited Vs DCIT (ITA Nos. 3906 and 3907/DEL/2026, order dated 25/08/2026) has allowed the assessee’s appeals for Assessment Years (AY) 2012-13 and 2017-18. The Tribunal deleted additions aggregating to ₹11.89 crore, which had been made on account of alleged bogus accommodation-entry purchases and a related commission element.

Central to the Tribunal’s decision was the presence of Jammu & Kashmir toll receipts and movement records, which corroborated the physical transportation of goods into J&K. The ITAT found that these official toll records, along with purchase and transport documentation, were strong evidence that the impugned purchases were genuine. As a result, the additions made under Section 69C for unexplained expenditure, and the consequential denial of deduction under Section 80IB, were held to be unsustainable on merits.

The Tribunal also followed its own earlier ruling in the assessee’s case for AY 2018-19 in ITA No.6296/Del/2025 dated 08.07.2026, where similar factual circumstances and reliance on J&K toll data had led to deletion of comparable additions.

Background of the Appeals

Common Features Across Both Assessment Years

  • The assessee, Jammu Pigments Limited, is engaged in:
    • Manufacturing and trading of lead ingots, zinc oxide and other non-ferrous metal products
    • Transport business
  • Original assessments had been completed, and subsequently:
    • Reassessment proceedings under Section 147 were initiated based on information from the Investigation Wing pointing to alleged accommodation entries.
  • In both years, the Assessing Officer (AO) treated purchases from identified suppliers as bogus, and made additions under Section 69C as unexplained expenditure.
  • The assessee had maintained that:
    • Purchases were actual business transactions
    • Goods physically moved through the J&K border
    • Payments were routed via normal banking channels
    • Statutory levies such as VAT/CST and toll tax were duly paid.

The ITAT heard both appeals together since the assessee and core issues were common, and issued a consolidated order covering AY 2012-13 and AY 2017-18.

AY 2012-13 – ITA No. 3906/Del/2026

Original Assessment and Reopening

  1. An assessment under Section 143(3) dated 27.03.2015 had originally accepted returned income of ₹79,954 as assessed income.
  2. Information from the Investigation Wing alleged that Jammu Pigments Limited had availed accommodation entries from Misawa Impex Pvt. Ltd. (MIPL).
  3. On examining the records, the AO noted:
    • Purchases shown from MIPL: ₹5,27,75,136
    • Payments reflected through bank account no. 911020025200169 of MIPL:
      • Amount paid by the assessee via RTGS: ₹5,82,81,686
  4. The AO formed a belief that the assessee had manipulated its accounts and had not made a full and true disclosure of material facts.
  5. Notice under Section 148 dated 31.03.2019 was therefore issued to reopen the assessment.

AO’s Proceedings and Addition Under Section 69C

During the reassessment proceedings:

  • The AO:
    • Recorded reasons for reopening and reproduced the Investigation Wing’s report in detail in the assessment order.
    • Issued notices under Section 133(6) to MIPL, which initially remained non-complied.
    • Issued a show-cause notice dated 18.12.2019 proposing disallowance of purchases of ₹5,82,81,686 from MIPL.
  • The assessee responded on 21.12.2019, placing reliance on:
    • Purchase bills
    • Transport documents
    • VAT/CST payment records
    • J&K toll tax payment records
    • Stock records
    • Payment through proper banking channels.

Despite this, the AO:

  • Rejected the assessee’s explanation regarding the genuineness of purchases.
  • Relied heavily on:
    • Investigation Wing’s findings
    • Non-compliance / non-cooperation of MIPL.
  • Treated the full amount of ₹5,82,81,686 as bogus accommodation-entry purchases.
  • Made an addition under Section 69C as unexplained expenditure.
  • Consequently, denied deduction under Section 80IB, taking the view that purchases forming part of industrial unit’s production were bogus.

It is significant that the AO did not reject the books of account of the assessee.

Assessee’s Arguments Before the ITAT (AY 2012-13)

The assessee’s counsel advanced a detailed challenge to the reassessment and the quantum addition, focusing primarily on the merits of the purchase disallowance.

Key Submissions