2024 (7) TMI 1176 - AT - Income Tax

Company wins deletion of bogus purchase addition after providing transport receipts and GST evidence

Mahavir Transmission Ltd. Versus DCIT, Central Circle-25, New Delhi And (Vice-Versa)

Mahavir Transmission Ltd. Versus DCIT, Central Circle-25, New Delhi And (Vice-Versa) - TMI Issues Involved:1. Validity of the assessment order passed by the AO.2. Alleged bogus purchases and the addition made by AO.3. Difference between purchase price and stamp duty value of the property.Detailed Analysis:1. Validity of the Assessment Order Passed by the AO:The assessee contended that the assessment order was invalid as it was passed without a Valid Document Identification Number (DIN), was undated, and not digitally signed. The CIT(A) rejected these contentions, stating that the assessment was conducted under section 153A r.w.s 143(3) and had valid jurisdiction. The Tribunal upheld the CIT(A)'s decision, confirming that the assessment order was legally valid and properly executed.2. Alleged Bogus Purchases:The primary issue was regarding the disallowance of purchases made by the assessee from various parties, which the AO considered bogus based on statements from Mr. Manoj Dudeja and post-search field inquiries.- Search and Seizure Operation: A search was conducted at the assessee's premises on 23.03.2021, but no incriminating material was found. The AO disallowed purchases from 19 parties based on statements and non-receipt of replies from some parties.- CIT(A) Decision: The CIT(A) partially sustained the AO's addition by applying a gross profit rate of 5.47% on the total purchases, rather than disallowing the entire amount. The assessee argued that no purchases could be treated as bogus, and the Tribunal agreed, stating that the AO's reliance on statements without corroborative evidence was insufficient. The Tribunal found that the assessee had provided substantial evidence, including invoices, transport receipts, and GST compliance documents, to prove the genuineness of the purchases.- Tribunal's Conclusion: The Tribunal concluded that the entire addition based on alleged bogus purchases was unsustainable. It directed the deletion of the gross profit addition determined by the CIT(A), as the assessee had adequately substantiated the genuineness of the purchases.3. Difference Between Purchase Price and Stamp Duty Value of the Property:The AO made an addition of Rs. 2,35,98,600/- for the difference between the purchase price of land and its stamp duty value, invoking section 50C.- Assessee's Argument: The assessee argued that the fair market value of the property was lower than the stamp duty value, supported by a valuation report from a registered government-approved valuer. The assessee contended that section 50C was inapplicable as it applies to the seller, not the purchaser, and that the AO should have referred the matter to the DVO for valuation.- CIT(A) Decision: The CIT(A) upheld the addition, applying section 56(2)(x) instead of section 50C, and stated that referring the matter to the DVO was at the AO's discretion.- Tribunal's Conclusion: The Tribunal found that the CIT(A) erred in changing the applicable section and that the AO was required to refer the valuation to the DVO when the assessee disputed the stamp duty value. The Tribunal cited multiple judicial precedents supporting mandatory reference to the DVO in such cases. Consequently, the Tribunal directed the deletion of the addition made by the AO and confirmed by the CIT(A).Conclusion:The Tribunal allowed all appeals filed by the assessee, rejecting the additions made by the AO on account of alleged bogus purchases and the difference in property valuation. The Tribunal dismissed the appeals filed by the Revenue, affirming that the assessee had provided sufficient evidence to substantiate its claims.