2020 (8) TMI 506 - AT - Income Tax

Tribunal rules in favor of assessee, deems purchases genuine, deletes disallowed amount

Parminder Singh Versus ITO Ward 3 (2) Gurgaon

Parminder Singh Versus ITO Ward 3 (2) Gurgaon - TMI Issues Involved:1. Disallowance of purchase amounting to Rs. 13,09,552/- from M/s Maa Durga Trading Company.2. Reopening of the assessment under sections 143(3)/147.3. Adequacy of evidence provided by the assessee to substantiate purchases.4. Validity of the Assessing Officer's reliance on unserved notices issued under section 133(6).5. Evaluation of the assessee's stock and profit records.Detailed Analysis:1. Disallowance of Purchase from M/s Maa Durga Trading Company:The assessee challenged the disallowance of Rs. 13,09,552/- made by the Assessing Officer (AO) on the grounds that these purchases were considered bogus. The AO noted that the assessee did not respond adequately to notices and failed to produce supporting evidence for the purchases. The AO issued notices under section 133(6) to M/s Maa Durga Trading Company, which were returned unserved. Consequently, the AO treated the entire purchase as bogus.2. Reopening of Assessment Under Sections 143(3)/147:The assessee's case was reopened under section 147 based on information that the purchases from M/s Maa Durga Trading Company were accommodation entries. The AO issued a notice under section 148 on 27.03.2015, leading to the reassessment.3. Adequacy of Evidence Provided by the Assessee:Before the CIT (A), the assessee provided various documents to substantiate the purchases, including bills, transit challans, VAT assessment orders, ledger accounts, and details of payments made by cheques. Despite this, the CIT (A) dismissed the appeal, noting inconsistencies in the purchase and sale figures and the lack of a day-to-day stock register.4. Validity of AO's Reliance on Unserved Notices Issued Under Section 133(6):The AO's decision to treat the purchases as bogus was primarily based on the fact that notices issued under section 133(6) to M/s Maa Durga Trading Company were returned unserved. The assessee argued that the notice was issued after a gap of 8 years, and it was difficult to provide the current address of the supplier.5. Evaluation of Assessee's Stock and Profit Records:The CIT (A) observed significant variations in the profit margins and noted discrepancies in the purchase and sale figures. The CIT (A) also compared the rates of alloy steel purchased from different suppliers and found inconsistencies. However, the assessee contended that different qualities of steel alloys were purchased at varying rates, and the books of account were not rejected.Final Judgment:The Tribunal found that the assessee had provided sufficient evidence to substantiate the purchases, including transit challans issued by the VAT Department, payment details through cheques, and stock registers. The Tribunal noted that the AO and CIT (A) did not consider these documents adequately. The Tribunal also observed that the non-service of notices under section 133(6) after 8 years could not be the sole basis for treating the purchases as bogus. The Tribunal concluded that the purchases were genuine and deleted the addition of Rs. 13,09,552/-. The appeal of the assessee was allowed.