2025 (3) TMI 1157 - AT - Income Tax

Tribunal Upholds Dismissal of Assessee's Appeals, Confirms Bogus Purchases and Disallows Related Claims Under Section 37

The Tribunal dismissed the assessee's appeals, affirming the findings of the AO and CIT(A) that the purchases from M/s. B.N. Trading Company were bogus. ... Disallowance of the claim of depreciation and additional depreciation claimed on alleged bogus purchases and addition on account of VAT incurred on the impugned bogus purchase HELD THAT:- It is trite law that the primary onus is on the assessee and the correctness of the return is a matter to be established by the assessee on whom the burden lies. For this proposition, we draw support from the decision of Smt. Jasvinder Kaur [2013 (10) TMI 837 - GAUHATI HIGH COURT] The assessee has only furnished copy of the invoices of M/s. B.N. Trading Company, which on verification has been found to be bogus. No further details have been furnished by the assessee demonstrating the exact location of the said company. Even the verification from the Good & Services Tax Department, Govt. of Maharashtra, mentioned elsewhere, revealed that the products in which M/s. B.N. Trading Company dealt with had no co-relation with the goods purchased by the assessee. The decision of SVD Resins & Plastics Pvt. Ltd [2024 (8) TMI 564 - BOMBAY HIGH COURT] relied upon by the ld. Counsel is entirely on different set of facts. Once the facts are distinguishable, the decision cannot be relied upon. Appeals of the assessee are dismissed. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include: Whether the purchases claimed by the assessee from M/s. B.N. Trading Company were genuine and whether the related depreciation and VAT claims were valid. The burden of proof on the assessee to substantiate the authenticity of the transactions recorded in their books of accounts.ISSUE-WISE DETAILED ANALYSIS1. Validity of Purchases from M/s. B.N. Trading CompanyRelevant Legal Framework and Precedents:The primary legal principle is that the burden of proof lies on the assessee to establish the correctness of their return, as supported by the precedent set in CIT Vs. Smt. Jasvinder Kaur (357 ITR 638). The assessee must provide sufficient evidence to substantiate the transactions recorded in their books.Court's Interpretation and Reasoning:The Tribunal noted that the assessee failed to provide convincing evidence to support the claim of genuine purchases from M/s. B.N. Trading Company. The address provided for the company was found to be a wedding invitation card distributor's shop, and local enquiries confirmed the absence of any such trading company at the location.Key Evidence and Findings:The investigation revealed that M/s. B.N. Trading Company was not engaged in trading the goods claimed by the assessee. The Goods & Services Tax Department's records indicated that the company dealt in unrelated commodities such as hair clips and handloom products, further discrediting the assessee's claim.Application of Law to Facts:The Tribunal applied the principle that the onus is on the assessee to prove the authenticity of the transactions. Given the lack of credible evidence and the discrepancies in the claimed purchases, the Tribunal upheld the findings of the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] that the purchases were bogus.Treatment of Competing Arguments:The assessee's reliance on the decision in SVD Resins & Plastics Pvt. Ltd. was dismissed by the Tribunal as the facts of that case were distinguishable and not applicable to the present circumstances.2. Disallowance of Depreciation and VAT ClaimsRelevant Legal Framework and Precedents:The disallowance of depreciation and VAT is contingent upon the legitimacy of the underlying asset acquisition. If the purchase itself is deemed bogus, any related claims for depreciation and VAT are automatically invalidated.Court's Interpretation and Reasoning:Since the purchases from M/s. B.N. Trading Company were found to be non-genuine, the Tribunal reasoned that the depreciation claimed on these assets and the VAT paid could not be allowed. The Tribunal emphasized that the onus was on the assessee to demonstrate the authenticity of the asset acquisition, which they failed to do.Key Evidence and Findings:The Tribunal relied on the evidence from the search and seizure operation, the GST Department's records, and the lack of credible documentation from the assessee to support the disallowance of the depreciation and VAT claims.Application of Law to Facts:The Tribunal applied the principle that without a valid purchase, no depreciation or VAT claim can be sustained. The evidence overwhelmingly indicated that the purchases were fictitious, thereby justifying the disallowance.Treatment of Competing Arguments:The assessee's arguments were found to lack merit due to the absence of substantial evidence to support the claimed transactions. The Tribunal upheld the AO's and CIT(A)'s decisions, finding no error or infirmity in their conclusions.SIGNIFICANT HOLDINGSCore Principles Established: The burden of proof lies with the assessee to substantiate the authenticity of transactions recorded in their books of accounts. In the absence of credible evidence, claims related to purchases, depreciation, and VAT cannot be sustained.Final Determinations on Each Issue: The Tribunal dismissed the appeals, affirming the findings of the lower authorities that the purchases from M/s. B.N. Trading Company were bogus. The related claims for depreciation and VAT were disallowed due to the non-genuine nature of the transactions.