ITAT Mumbai in Balaji Bullions & Commodities (I) Pvt. Ltd.: Bogus Purchases or Commission Income?

The Mumbai Bench “B” of the Income Tax Appellate Tribunal heard cross appeals for Assessment Year 2017–18 in the case of Balaji Bullions and Commodities India Private Limited. The dispute arose from reassessment proceedings initiated under Sections 147 and 148 of the Income-tax Act, 1961.

Reassessment and Addition under Section 69C

The Assessing Officer (AO) reopened the assessment based on investigation inputs alleging that the assessee was part of entities controlled by Shri Manoj Babulal Punamiya and engaged in providing accommodation entries. Survey actions and statements recorded under Sections 131 and 133A indicated that several concerns were paper entities with dummy directors and no genuine business activity.

The AO held that purchases aggregating to ₹417.87 crore were bogus and treated the entire amount as unexplained expenditure under Section 69C. The addition was made taxable at 60% under Section 115BBE, and penalty proceedings under Section 271AAC were initiated.

CIT(A)’s Findings: Section 69C Not Attracted

On appeal, the Commissioner of Income Tax (Appeals) upheld the validity of reopening, observing that the AO had “reason to believe” based on specifi c material. However, on merits, the CIT(A) held that Section 69C applies where unexplained expenditure is incurred outside the books. In this case, purchases and sales were recorded in the books and routed through banking channels. Hence, the essential conditions of Section 69C were not satisfi ed, and the addition of ₹417.87 crore was deleted.

Estimation of Commission Income

The CIT(A) concluded that the assessee was not engaged in genuine trading but acted as an accommodation entry provider. Rejecting the books under Section 145(3), income was estimated by applying a 0.5% commission rate on aggregate purchases and sales.

Accordingly, commission income of ₹3.14 crore was determined as taxable income.