2023 (1) TMI 493 - HC - Income Tax

High Court affirms Tribunal decision in tax appeal case, contractor proves transaction genuineness. Evidence accepted, procedural irregularities noted.

Principal Commissioner of Income Tax-32, Mumbai, Versus Mr. Sanjay Dhokad, Hi Rock Construction Co.,

Principal Commissioner of Income Tax-32, Mumbai, Versus Mr. Sanjay Dhokad, Hi Rock Construction Co., - [2023] 456 ITR 77 (Bom) Issues Involved: 1. Justification of Tribunal's decision on non-genuine purchases.2. Consideration of evidence from Sales Tax Department.Issue-Wise Detailed Analysis:1. Justification of Tribunal's Decision on Non-Genuine Purchases:The appeal under Section 260A of the Income Tax Act, 1961 challenges the order dated 31.03.2017 by the Income Tax Appellate Tribunal, Mumbai, which upheld the deletion of disallowance amounting to Rs.4,99,27,664/- under Section 69C of the Act. The central question was whether the Tribunal was justified in upholding the deletion of the addition made on account of non-genuine purchases. The Respondent, a civil contractor, had filed his return for the Assessment Year 2010-11, declaring a total income of Rs.37,60,430/-. During scrutiny, the Assessing Officer identified 21 dealers as 'suspicious' and issued a show cause notice to the Respondent. The Respondent failed to provide evidence of actual delivery of materials from these suppliers. Consequently, the Assessing Officer treated the entire amount as unexplained expenditure under Section 69C and added it to the Respondent's income, also initiating penalty proceedings.The Commissioner of Income Tax (Appeals) overturned this decision, noting that the Respondent had provided books of accounts, bank statements, and proof of payments through proper banking channels. The Tribunal upheld this view, stating that the Respondent had shown gross and net profits accepted by the Assessing Officer, and without rejecting the book entries, such additions were untenable. The Tribunal further noted that the Assessing Officer had not issued summons to the suppliers or provided the Respondent with the statements recorded by the Sales Tax Department, thus violating procedural fairness. The Tribunal concluded that the Respondent had sufficiently discharged the burden of proving the transactions.2. Consideration of Evidence from Sales Tax Department:The Appellant argued that the Tribunal and the Commissioner (Appeals) erred by not considering evidence from the Sales Tax Department, which indicated that the suppliers provided only accommodation bills. The Appellant cited the Supreme Court judgment in Principal Commissioner of Income-Tax (Central)-1 vs. NRA Iron and Steel (P.) Ltd., arguing that the burden of proving the transactions was on the Respondent. However, the Tribunal found that the Respondent had provided sufficient documentary evidence, and the Assessing Officer had not discredited this evidence. The Tribunal held that merely being listed as suspicious on the Sales Tax Department's website was insufficient to prove the transactions were bogus.The Tribunal also referred to the Bombay High Court judgment in The Commissioner of Income Tax-1, Mumbai vs. M/s. Nikunj Eximp Enterprises Pvt. Ltd., which held that producing books of accounts, invoices, and bank statements sufficed to prove genuine purchases, even if the suppliers did not appear before the Assessing Officer.Conclusion:The Tribunal and the Commissioner (Appeals) both found that the Respondent had satisfactorily discharged the initial burden of proving the genuineness of the transactions. The Tribunal's application of the ratio in The Commissioner of Income Tax-1, Mumbai vs. M/s. Nikunj Eximp Enterprises Pvt. Ltd. was deemed appropriate. The High Court concluded that the substantial questions of law proposed by the revenue did not arise and dismissed the appeal with no order as to costs.