Section 260A permits no interference with Tribunal’s factual findings absent perversity or a substantial question of law.

The respondent-assessee, an individual carrying on bullion-trading business through his proprietorship concern, M/s. Shewpujan Rai Indrasen Rai and Grandsons, was assessed for assessment year 2020–21.

During assessment, the Assessing Officer treated purchases amounting to ₹85,13,92,096 as bogus and made an addition under Section 69C of the Income-tax Act, 1961.

The addition was based, inter alia, on the vendors’ alleged failure to file income-tax returns, the purported disconnect between their businesses and the assessee’s business, non-compliance with notices under Section 133(6), and discrepancies in documents and bank transactions.

The assessee relied upon purchase invoices, confirmations, banking records, GST records, stock registers and other supporting documents; the corresponding sales were not disputed

The Commissioner of Income-tax (Appeals) affirmed the addition.

On further appeal, the Income Tax Appellate Tribunal found that the assessee had maintained stock records, made payments through banking channels, recorded the transactions in GST records, and that the corresponding sales and closing stock had not been rejected.

It directed that the disputed purchases be assessed by applying a gross-profit rate of 0.15%, rather than treating the entire purchases as bogus

The Revenue challenged the Tribunal’s order under Section 260A

Whether the Tribunal erred in law in setting aside the order of the Commissioner (Appeals) without adequately considering the Assessing Officer’s circumstantial evidence concerning the vendors and the alleged mismatch between their businesses and the assessee’s business.

Whether the Tribunal erred in law in disregarding the Assessing Officer’s findings regarding allegedly fabricated GST returns, delivery confirmations and other business records of the vendors.

Whether the Tribunal was justified in determining the gross-profit rate at 0.15% where the Assessing Officer and the Commissioner (Appeals) had treated the corresponding purchases as bogus.

Section 260A of the Income-tax Act permits the High Court to interfere only where the appeal involves a substantial question of law; findings of fact based on appreciation of evidence ordinarily cannot be disturbed unless they are perverse, unsupported by evidence, or arrived at by ignoring material evidence.

Section 69C permits addition in respect of unexplained expenditure where the assessee cannot satisfactorily explain the source of expenditure, but the genuineness of purchases must be determined on the basis of the entire evidentiary record.

The Court also applied the principle that the reasonableness of the gross-profit rate is primarily a factual matter, particularly where the assessee is engaged in bullion trading involving narrow margins and the corresponding sales and stock position remain undisputed

The Tribunal had considered both the Assessing Officer’s objections and the assessee’s documentary evidence, including invoices, confirmations, bank statements, GST records and stock registers

The fact that certain vendors later failed to file income-tax returns, cancelled their GST registrations or allegedly carried on different businesses did not, by itself, establish that the entire purchases were fictitious, especially when the corresponding sales and closing stock had not been rejected and the payments had been made through banking channels

Given the peculiar nature of bullion trading and its ordinarily narrow profit margins, treating the entire purchases as bogus would produce an commercially unrealistic result.

The Tribunal therefore adopted a compensatory factual approach by applying a 0.15% gross-profit rate after considering the discrepancies and the material on record

The Revenue failed to demonstrate perversity, absence of evidence, or disregard of material evidence sufficient to raise a substantial question of law under Section 260A

The Tribunal was justified in declining to treat the entire purchases of ₹85,13,92,096 as bogus and in applying a gross-profit rate of 0.15% to the disputed purchases.

The appeal under Section 260A was dismissed, the connected application, G.A. No. 2 of 2026, was disposed of, and there was no order as to costs