2017 (7) TMI 805 - AT - Income Tax

Revenue appeal dismissed, confirming deletion of unproved creditors, bogus purchases, and unverifiable expenses.

The revenue's appeal was dismissed in its entirety, confirming the Commissioner of Income Tax (Appeals)'s deletion of additions for unproved sundry ... Addition being unproved sundry creditors - whether the assessee failed to prove their genuineness? - Held that:- CIT appeal has deleted the above addition with respect to for parties in whose case the notices were issued and were returned on served as the party could not be traced by the postal authorities for the addresses given were in complete. He further held that without rejecting the books of accounts of the assessee the additions made by the AO holding that the purchases and sales were bogus. He was further of the view that when the jewellery purchases have been sold it cannot be said that purchases were bogus. Even during the course of hearing before him he has also got confirmation of the parties and also put it across before the assessing officer and then after obtaining the remand report deleted the addition. Ld. DR could not point out any infirmity in the order of the learned 1st appellate authority, in view of this we confirm his finding in deleting the addition under section 68 of the act to the total income of the assessee in respect of sundry creditors. - Decided against revenue Addition being bogus purchases - Held that:- CIT appeal deleted the addition on the expression that all the such purchases were fully supported by purchase vouchers and the payments made substantially through account payee cheques. With respect to the 22 parties he has examined the details as furnished by the assessee wide Annexure 3 of the submission dated 12/09/2013 which was also put for the examination of the Ld. assessing officer also. He further obtained the conformation out of those 22 parties whereas the purchases from them were in excess of ₹ 10 Lacs and same was also forwarded to the Ld. assessing officer for his comments. In absence of specific comments from the AO he deleted the addition. Ld. departmental representative could not submit that when the full purchases, which were objected to by the Ld. assessing officer, were confirmed and also put for remand report by the assessee what infirmity in the order of the Ld. CIT appeal contained. This question could not be replied except relying upon the order of Ld. assessing officer. In view of this we confirm the finding of the Ld. CIT appeal in deleting the above addition - Decided against revenue Addition on account of non-reconciliation of purchases - Held that:- CIT appeal has deleted the above addition holding that the difference between the transactions recorded by the assessee with one of the party and as reported by that party there was a difference. However the conformation inadvertently provided by that party was in respect of change the Prashar Jeewan la jewellers private limited and not the assessee company and therefore after obtaining the fresh conformation of that party and putting before the assessing officer in remand proceedings the Ld. CIT appeal has deleted the addition. In view of this we do not find any infirmity in the order of the Ld. CIT (A) in deleting the above addition - Decided against revenue Disallowance on account of expenditure under the various head maintained by the assessee - Held that:- Departmental representative could not point out any infirmity in the order of the Ld. CIT (A) in deleting the above addition. He also could not point out any instances reported by the Ld. assessing officer where the expense was not supported by proper vouchers. In view of this we confirm the finding of the Ld. CIT (A) in deleting the addition of various shades. In the result we confirm the finding of the ld. CIT appeal in deleting the above disallowance.- Decided against revenue Issues Involved:1. Deletion of addition of Rs. 18,07,239/- for unproved sundry creditors.2. Deletion of addition of Rs. 4,94,31,314/- for bogus purchases.3. Deletion of addition of Rs. 1,97,850/- for non-reconciliation of purchases.4. Deletion of addition of Rs. 41,49,068/- for unverifiable expenses.Issue-wise Analysis:1. Deletion of Addition of Rs. 18,07,239/- for Unproved Sundry Creditors:The revenue challenged the deletion of Rs. 18,07,239/- added under Section 68 of the Income Tax Act for unproved sundry creditors. The Assessing Officer (AO) issued notices under Section 133(6) to 42 parties, and notices to four parties were returned unserved. The AO added the amounts related to these four parties, assuming the purchases were bogus. The Commissioner of Income Tax (Appeals) [CIT(A)] found that the purchases were of old jewellery, which were adjusted against sales of new jewellery to the same parties. The CIT(A) noted that the AO did not reject the books of accounts and did not consider the sales to these parties if the purchases were held to be bogus. Verification of one party confirmed the transactions. The Tribunal upheld the CIT(A)’s decision, noting no infirmity in the order and confirming the deletion of the addition.2. Deletion of Addition of Rs. 4,94,31,314/- for Bogus Purchases:The revenue contested the deletion of Rs. 4,94,31,314/- added for bogus purchases. The AO issued enquiry letters under Section 133(6) to several parties, which remained uncomplied. The CIT(A) found that the purchases were supported by vouchers and payments were made through account payee cheques. The CIT(A) also noted that the purchases were of old jewellery and the transactions were verified during the remand proceedings. The Tribunal confirmed the CIT(A)’s findings, noting that the purchases were fully supported by vouchers and payments were made through banking channels. The revenue could not point out any infirmity in the CIT(A)’s order, leading to the dismissal of the revenue’s appeal on this ground.3. Deletion of Addition of Rs. 1,97,850/- for Non-Reconciliation of Purchases:The revenue appealed against the deletion of Rs. 1,97,850/- added for non-reconciliation of purchases. The CIT(A) found that the difference in transactions was due to an inadvertent confirmation provided by a party for a different entity. After obtaining fresh confirmation and remand proceedings, the CIT(A) deleted the addition. The Tribunal found no infirmity in the CIT(A)’s order and dismissed the revenue’s appeal on this ground.4. Deletion of Addition of Rs. 41,49,068/- for Unverifiable Expenses:The revenue challenged the deletion of Rs. 41,49,068/- added for unverifiable expenses under various heads. The AO disallowed the expenses, stating they were supported only by self-made vouchers. The CIT(A) found that the expenses were for business promotion, printing and stationery, travelling and conveyance, and manufacturing, all supported by proper vouchers. The Tribunal upheld the CIT(A)’s decision, noting no specific instances reported by the AO where expenses were unsupported. The Tribunal confirmed the deletion of the addition and dismissed the revenue’s appeal on this ground.Conclusion:The appeal of the revenue was dismissed in its entirety, confirming the CIT(A)’s deletion of the additions for unproved sundry creditors, bogus purchases, non-reconciliation of purchases, and unverifiable expenses. The Tribunal found no infirmity in the CIT(A)’s order and upheld the deletions.