ITAT Mumbai upholds assessee's evidence, rejects AO's appeal on alleged bogus purchases

The ITAT Mumbai dismissed the AO's appeal and upheld the FAA's decision to reject the addition under section 69C for alleged bogus purchases of Rs. 3.15 crores. The tribunal found that the assessee had fulfilled the burden of proof, with payments made through account payee cheques and supported by bills and delivery challans. The ITAT concluded that the AO failed to counter the evidence presented, affirming that section 69C did not apply to the purchases, emphasizing the importance of meeting the burden of proof in such cases.

---

---

Issues:
1. Addition made under section 69C for bogus purchases of Rs. 3.15 crores.

Analysis:
The Assessing Officer (AO) completed the assessment of the individual assessee, who had declared total income at Rs. 31.18 lacs, determining his income at Rs. 3.46 crores. The key issue in the appeal was the addition made under section 69C of the Act for alleged bogus purchases amounting to Rs. 3.15 crores. The AO received information that the assessee had made purchases from parties listed as hawala dealers by the Sales Tax Department. Despite the assessee providing ledger accounts and bank statements, the AO deemed the purchases as non-genuine, adding the amount to the total income.

The assessee challenged the AO's decision before the first appellate authority (FAA), citing various cases to support the genuineness of the purchases. The FAA held that the onus to prove the genuineness of the expenditure lay with the assessee, and by providing bills and delivery challans, the assessee had discharged this onus. The FAA emphasized that payments were made through account payee cheques, purchases were reflected in stock reconciliation, and the AO had not doubted the sales or GP ratio. The FAA concluded that no addition could be made under section 69C.

Upon further appeal, the ITAT Mumbai upheld the FAA's decision, noting that the AO had not challenged the exports, accepted book results, and acknowledged banking channel payments. The ITAT found that the assessee had fulfilled the initial burden of proof, and the AO failed to counter the evidence presented. Consequently, the ITAT affirmed that section 69C did not apply to the alleged bogus purchases, dismissing the AO's appeal.

In conclusion, the ITAT Mumbai dismissed the appeal filed by the AO, upholding the FAA's decision to reject the addition under section 69C for the alleged bogus purchases. The tribunal found no legal or factual flaws in the FAA's order and ruled in favor of the assessee, emphasizing the importance of fulfilling the burden of proof in such cases.

---