2023 (10) TMI 445 - AT - Income Tax

Tribunal Upholds Assessee's Appeal: Purchases Deemed Genuine, Disallowance Reversed for AY 2013-14 Under Sufficient Evidence

The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal regarding the disallowance of unverifiable purchases for AY 2013-14. It ... Unverifiable purchases - AO, on perusal of the books of account of the assessee and on the basis of information received from the ld. Commissioner of Income-tax, Central Circle-4, Surat, observed that the assessee firm had obtained accommodation entry in the form of bogus purchases - HELD THAT:- When all these facts are staring on us, there is absolutely no scope of disbelieving the purchases made by the assessee from the five suppliers merely based on search statements recorded from certain third parties at Surat during the course of search conducted in AY 2008-09 which are absolutely not relevant for framing the assessment in the AY 2013-14 in the hands of the assessee. Hence, we hold that the ld. CIT(A) erred in bringing to tax the profit element of 19.84% on the value of disputed purchases. No addition could be made in these peculiar facts and circumstances of the case in view of the fact that the purchases made by the assessee together with the corresponding sales thereon and the profits derived thereon (which includes profit on disputed purchase and undisputed purchase) have already been disclosed by the assessee in the returns of income. Hence, we hold that the purchases made from five suppliers should be held as genuine. Purchase made from Anshika Jewellers - No adverse inferences were drawn on the aforesaid documentary evidence by the Revenue. When all these facts are staring on us, merely because the concerned supplier had not responded to the notice issued u/s 133(6) of the Act by the AO, the ld. AO was not justified in disbelieving the purchases made by the assessee. The assessee cannot be made responsible for producing the supplier in later years when transactions with the concerned supplier had been carried out in earlier years. In any case, non-production of a concerned supplier for examination by the assessee would not make the transaction ingenuine. Reliance in this regard is placed on the decision of Orissa Corporation Ltd., [1986 (3) TMI 3 - SUPREME COURT] There are other means to verify the existence of the said supplier by the Revenue in the manner known to law. The assessee had duly discharged its primary onus to prove the veracity of the purchases. The corresponding sales is also duly disclosed by the assessee. Hence, there is absolutely no justification for making any addition by disbelieving the purchase made from Anshika Jewellers. Assessee appeal allowed. Issues involved:The judgment involves the dispute regarding the disallowance made for unverifiable purchases in cross appeals by the assessee and the Revenue for AY 2013-14.Details of the judgment:1. The assessee, an ownership firm trading in jewellery, filed the return of income for AY 2013-14 declaring total income of Rs. 3,82,119. The ld. AO observed unverifiable purchases made through certain parties and disallowed a sum of Rs. 2,67,66,150.2. The assessee provided various details to prove the genuineness of purchases, including affidavits, bank statements, and VAT registration certificates. However, the ld. AO disbelieved the documents and treated the purchases as bogus.3. In the case of purchases from M/s Anshika Jewellers, the ld. AO disallowed Rs. 84,82,500 as the supplier did not respond to notices. The ld. CIT(A) upheld the disallowance based on a gross profit rate of 19.84%.4. The assessee appealed, presenting all relevant documents and arguing that the purchases were genuine. The ld. AO's reliance on search statements from previous years was challenged.5. The Tribunal found that the purchases were duly reflected in the books of account, supported by affidavits and responses from suppliers. It held that no addition could be made based on past search reports and that the purchases should be considered genuine.6. Regarding the purchases from Anshika Jewellers, the Tribunal noted that the assessee had provided sufficient evidence, and the non-response of the supplier to notices did not justify disallowance. The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal.7. The Tribunal pronounced the order on 26.07.2023, allowing the assessee's appeal and dismissing the Revenue's appeal.