ITAT Delhi’s Ruling on Alleged Bogus Purchases and GST ITC in Jammu Pigments Limited Vs Assessment Unit

1. Background of the Dispute

The Income Tax Appellate Tribunal, Delhi Bench, decided the appeal in the case of Jammu Pigments Limited Vs Assessment Unit, ITA No. 6296/DEL/2025, by order dated 08/07/2026, for Assessment Year 2018-19.

  • The assessee, Jammu Pigments Limited, is engaged in:

    • Manufacturing and trading of Lead metal Ingots & Alloys
    • Zinc oxide
    • Chemicals
    • Transportation

  • Return of income was filed on 28.10.2018 declaring total income of INR 8,48,94,303/-.

  • Reassessment proceedings were initiated:

    • Section 147 read with Section 144B assessment order dated 19.03.2025
    • Triggered through Section 148A proceedings (Section 148A(d) order dated 19.03.2024)

The Assessing Officer (AO) reopened the case on the basis of information alleging:

  1. Diversion of 22 consignments of Lead dross worth INR 5,20,83,109/-
  2. Incorrect input tax credit (ITC) claim under the GST laws
  3. Bogus purchases from certain suppliers treated as accommodation entries

The CIT(A), National Faceless Appeal Centre, Delhi, by order dated 12.09.2025, upheld the additions, which led the assessee to approach the ITAT.

2. Issues Before the Tribunal

The Tribunal considered, inter alia, the following grounds (after Grounds 1 and 2 were not pressed):

  • Ground No. 3: Disallowance of purchases of INR 10,13,27,894/- from:

    • M/s Mittal Pigment Pvt. Ltd., Kota
    • Jain Metal Rolling Mills, Tamil Nadu

    These were linked to 22 consignments of Lead dross alleged to be diverted and not used in manufacturing, with related allegation of bogus GST ITC.

  • Ground No. 4: Disallowance of INR 29,34,54,943/- of purchases from three parties:

    • INR 27,83,45,325/- – Shri Ajit Singh (Proprietor, R.R. Enterprises)
    • INR 88,63,965/- – Shri Anant Rastogi (Proprietor, Reliable Trading)
    • INR 46,50,000/- – Shri Ramesh Bansal (Proprietor, Agarwal Trading)

    These were treated as non-genuine on the basis of information about alleged accommodation entries and bogus bills.

  • Ground No. 5: Disallowance of INR 3,16,728/- under Section 36(1)(va) towards delayed employees’ contribution to PF & ESI.

3. Allegation of Diversion of 22 Lead Dross Consignments (Ground No. 3)

3.1 AO’s Basis for Reopening and Disallowance

The AO:

  • Relied on information that 22 consignments of Lead dross, aggregating to INR 5,20,83,109/-, received during 01.07.2017 to 20.12.2017 from:
    • M/s Mittal Pigments Pvt. Ltd. (14 consignments)
    • M/s Jain Metal Rolling Mills (08 consignments)
  • Alleged:
    • The assessee did not consume these consignments in its manufacturing activity
    • The goods were diverted to brokers and sold outside the books
    • Incorrect ITC was claimed under the GST Act
  • Further noted:
    • A payment of INR 75,00,000/- towards GST was made during survey by DGGI, Ludhiana, which in the AO’s view indicated acceptance of bogus ITC
  • Disallowed:
    • Not just the 22 consignments, but the entire purchases of INR 10,13,27,894/- from the two suppliers during the whole financial year.

3.2 Assessee’s Defence and Evidence

The assessee argued and produced evidence that:

  • All 22 consignments were:
    • Properly recorded in the books of account
    • Reflected in the stock register
  • Many consignments were under the mandatory e-way bill system:
    • Particularly 14 consignments from M/s Mittal Pigments Pvt. Ltd., Rajasthan, where e-way bills were compulsorily generated and verifiable
  • The Lead dross was of inferior quality:
    • Hence, it was sent for re-job work to convert it into Lead ingots
    • Sent to job worker M/s R.R. Pigments Pvt. Ltd. under proper job-work challans
  • Compliance under GST:
    • Movement for job work was duly reported in Form ITC-04 and relevant GST returns
    • All supporting documents, including GST returns, e-way bills, transport details, toll receipts, and stock records, were furnished
  • Regarding the INR 75,00,000/- GST payment:
    • It was deposited into the electronic cash ledger
    • It was never adjusted against the alleged bogus ITC
    • Copies of the electronic cash ledger were produced
  • On quantification:
    • The gross amount INR 5,20,83,109/- included GST of INR 79,44,881/-
    • Net purchase value: INR 4,41,38,228/-
    • Out of this, INR 52,76,115/- related to “Lead Secondary”, which was never alleged to be diverted; only Lead dross was under dispute.

3.3 Revenue’s Stand Before the ITAT

The Departmental Representative argued:

  • The assessee itself allegedly admitted non-utilisation of the material in manufacturing
  • Payment of INR 75,00,000/- into the GST cash ledger supported the AO’s view that incorrect ITC had been claimed
  • The AO’s disallowance ought to be sustained.

3.4 Tribunal’s Findings on Lead Dross Purchases

The Tribunal made the following key observations: