2024 (1) TMI 351 - AT - Income Tax

ITAT deletes bogus purchase additions after assessee provides comprehensive documentation including bills and bank records

Dy. CIT, Circle 7 (1) (1), Mumbai Versus M/s. Mota Trading Pvt. Ltd., Mumbai

Dy. CIT, Circle 7 (1) (1), Mumbai Versus M/s. Mota Trading Pvt. Ltd., Mumbai - TMI Issues Involved:1. Deletion of addition made on disallowance of Rs. 2,51,76,570/- being purchase made from M/s SAR Engineering Ltd.2. Violation of principles of natural justice by the CIT(A) in deciding against the AO without providing an opportunity of being heard when admitting the additional ground.Summary:Issue 1: Deletion of Addition on Disallowance of PurchasesThe Revenue challenged the deletion of the addition made on disallowance of Rs. 2,51,76,570/- for purchases from M/s SAR Engineering Ltd., which was deemed a suspicious entity. The AO had reopened the assessment based on information from the Dy. DIT (Inv.) indicating M/s SAR Engineering Ltd. was non-genuine. Despite the assessee providing extensive documentation, including tax invoices, bank statements, and VAT returns, the AO concluded the purchases were bogus due to the inability to trace M/s SAR Engineering Ltd. The CIT(A) quashed the assessment, stating the AO's findings were based on suspicion rather than conclusive evidence. The CIT(A) emphasized that all transactions were through banking channels and no evidence suggested the suppliers withdrew cash immediately after deposits, which would indicate the money was returned to the assessee. The CIT(A) also noted that the AO did not reject the assessee's books of accounts or doubt the purchases themselves but questioned the genuineness of the suppliers. The Tribunal upheld the CIT(A)'s decision, noting that the AO's adverse inference was based on past admissions unrelated to the current assessment year and party involved.Issue 2: Violation of Principles of Natural JusticeThe Revenue argued that the CIT(A) erred by deciding against the AO without providing an opportunity of being heard when admitting the additional ground. The Tribunal clarified that the validity of reopening u/s 147/148 was not an additional ground since the assessee had already raised objections against reopening, which the AO had addressed. The Tribunal found no merit in the Revenue's claim as the department did not challenge the quashing of the assessment order. Since the assessment itself was quashed, the challenge to the deletion of additions on merits was deemed academic.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decision to quash the assessment and delete the addition made on disallowance of purchases from M/s SAR Engineering Ltd. The Tribunal emphasized the lack of concrete evidence from the AO to substantiate the claim of bogus purchases and the proper adherence to principles of natural justice by the CIT(A).