2024 (6) TMI 426 - AT - Income Tax

Revenue's appeal dismissed regarding section 69A additions and bogus purchases after assessee proved GST fraud victimization

ITAT Mumbai dismissed revenue's appeal regarding additions under section 69A and bogus purchases. For section 69A addition concerning sales to M/s. ... Addition made u/s 69A - sales to M/s. Gulathi Enterprises - AO added the sales to the assessee's income due to lack of corroborative evidence - sales of the assessee as per the GST return was higher than in the sales as per the Profit and Loss Account - HELD THAT:- From the perusal of the record, we find that the assessee furnished the letter as well as police complaint during the assessment proceedings and also furnished the cancellation of GST certificate of M/s. Gulathi Enterprises. From the copy of the letter of the AO to the Commissioner of CGST and Central Excise, we find that the same is dated 08/12/2022 and the assessment order was passed on 28/12/2022. Thus, the Department of GST had only 20 days to respond to the aforesaid letter by the AO. However, it is undisputed that no response was received from the Department of GST. As evident from the record that the AO did not conduct any other inquiry as noted by the learned CIT(A) - also evident from the record that the assessee furnished all the relevant documents and took all the necessary steps as could have been taken by the victim of the GST fraud. Undeniably purchases relating to M/s. Gulathi Enterprises amounts of Rs. 5.37 crore, while the sales are just Rs. 3.95 crore, and even if it is assume to be treated as transaction done by the assessee, no addition is warranted as the sales are anyway lesser than the purchases under the relevant GST number - assessee has also satisfactorily proved before lower authorities that the GST number assigned to it is different from the GST number of M/s. Gulathi Enterpris - no infirmity in the impugned order passed by the learned CIT(A) deleting the addition of sales of M/s. Gulathi Enterprises u/s 69A of the Act in the hands of the assessee. As a result, the ground no. 1, raised in Revenue appeal is dismissed. Addition on account of bogus purchases - AO has relied upon the statement recorded during the search and survey action conducted in the year 2017 & 2018 - HELD THAT:- Undisputedly, statements considered by the AO were recorded on dates 13/07/2017, 14/07/2017, 19/07/2017 and 11/08/2018. Thus, it is evident that none of these statements pertain to the year under consideration. Also during the assessment proceedings in order to examine the genuineness of the transaction, the AO issued notices u/s 133(6) of the Act as well as summons issued u/s 131 of the Act to Shri Pranav Jain, proprietor of M/s. Ankit International. We find that the notices and summon were duly responded by Shri Pranav Jain along with furnishing the corroborative evidences in respect of the sales made to the assessee. AO did not find any fault with the evidences so furnished. Therefore, we find that the findings of the AO are just based on the evidences and statements recorded during the search and survey action conducted in the year 2017 & 2018, and none of the findings are on the basis of evidences furnished by the assessee for the transaction undertaken in the year under consideration. Ground no. 2, raised by Revenue is dismissed. Issues Involved:1. Deletion of addition made u/s 69A on account of sales to M/s. Gulathi Enterprises.2. Deletion of addition on account of bogus purchases from M/s. Ankit International.Summary:Issue 1: Deletion of addition made u/s 69A on account of sales to M/s. Gulathi EnterprisesThe Revenue challenged the deletion of an addition of Rs. 3,95,15,327/- made u/s 69A of the Income Tax Act, 1961, on account of sales to M/s. Gulathi Enterprises. The assessee, engaged in trading steel products, claimed that M/s. Gulathi Enterprises fraudulently used his GST number. The assessee filed complaints with the Police and GST Department, and the GST number of M/s. Gulathi Enterprises was canceled. The Assessing Officer (AO) added the sales to the assessee's income due to lack of corroborative evidence. The learned CIT(A) deleted the addition, noting no verification of the sales and the discrepancy between sales and purchases. The Tribunal upheld the CIT(A)'s decision, finding no infirmity in the deletion of the addition u/s 69A.Issue 2: Deletion of addition on account of bogus purchases from M/s. Ankit InternationalThe Revenue contested the deletion of an addition of Rs. 91,07,200/- made u/s 69C of the Act for bogus purchases from M/s. Ankit International. The AO based the addition on statements from a 2017 search on M/s. Viraj Profile Ltd, which indicated accommodation entries. The assessee argued the purchases were genuine, supported by invoices and bank statements, and that the search findings were outdated. The learned CIT(A) deleted the addition, noting the AO relied on old statements irrelevant to the current year. The Tribunal upheld the CIT(A)'s decision, finding no adverse evidence against M/s. Ankit International for the year under consideration.Conclusion:The appeal by the Revenue was dismissed, with the Tribunal upholding the learned CIT(A)'s decisions on both issues.