2025 (8) TMI 1514 - AT - Income Tax

Revenue appeal dismissed; assessee's purchases accepted where invoices, ledgers and payments proved despite suppliers' non-filing under s.69C read with s.115BBE

ITAT PATNA - AT dismissed the Revenue's appeal and upheld the CIT(A)'s decision allowing the assessee's appeal against additions under s.69C read with ... Addition 69C r.w.s.115BBE - unproved and unsubstantiated purchases - CIT(A) allowed the appeal of the assessee by observing that the assessee submitted all the evidences qua the said purchases comprising the ledger accounts along with the copy of invoices - HELD THAT:- We find that in this case the assessee has made purchases from the seven parties which according to the AO have not filed their returns of income and also have not replied to the notices u/s 133(6) of the Act. We note that the assessee has filed all the evidences qua the purchases including the invoices, payment details and other bills and vouchers. AO has only made addition on the ground that the suppliers were non-filers of the returns of income and the purchases were not confirmed. We note that even the CIT (A) in the appellate proceeding has called for remand report from the AO. AO did not file any remand report despite the CIT (A) specifically asking the AO to submit the remand report. Assessee upon direction of the CIT (A) have furnished all the evidences before the AO and CIT (A) after examination and appreciation of the same allowed the appeal of the assessee by relying on the series of decisions as have been noted above. Therefore, we do not find any infirmity in the order of the Learned CIT (A). Appeal of the Revenue is dismissed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether additions under section 69C read with section 115BBE can be sustained in respect of purchases aggregating Rs.4,98,11,922/- where the suppliers were non-filers of income-tax returns and did not respond to notices under section 133(6), but the assessee produced invoices, ledger accounts, payment details, books of account and GST returns. 2. Whether the burden of proof shifts to the Revenue once the assessee furnishes invoices, banking/payment evidence, accounting records and GST returns relating to the purchases. 3. Whether absence of replies from suppliers to notices under section 133(6) is by itself sufficient to treat purchases as bogus or unsubstantiated. 4. Whether failure of the Assessing Officer to file a remand report as directed by the appellate authority is material to the appellate conclusion on the genuineness of the purchases. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Sustenance of additions under section 69C read with section 115BBE where suppliers are non-filers but assessee furnishes documentary evidence Legal framework: Section 69C deals with unexplained expenditure and permits additions where claimed purchases are not satisfactorily explained. Section 115BBE prescribes special taxability for unaccounted income in certain circumstances. The statutory and evidentiary exercise requires the AO to establish that alleged purchases are not genuine before invoking these provisions. Precedent treatment: The Tribunal relied on higher court decisions holding that mere non-filing by suppliers does not render transactions bogus if the assessee produces invoices, payment proofs, accounts and banking/GST records. The decision follows authorities that: once the assessee produces complete transaction details, the onus shifts to the revenue to prove non-genuineness (followed). Interpretation and reasoning: The Court examined the record and found the assessee had produced invoices, ledger accounts, payment details, bills and GST returns auto-populated from the portal. The AO's addition rested solely on the suppliers being non-filers and non-responsive to section 133(6) notices; no defect was pointed out in the assessee's books or documentary evidence. In absence of any material demonstrating fabrication or non-existence of transactions, the addition under section 69C/115BBE could not be sustained. Ratio vs. Obiter: Ratio - Where the assessee furnishes contemporaneous invoices, payment evidence, accounting records and GST returns, mere non-filing by suppliers and their non-response to notices is insufficient to treat purchases as unsubstantiated; the burden is on Revenue to prove non-genuineness. Obiter - Observations on the sufficiency of specific types of GST auto-populated returns as conclusive proof are persuasive but not elevated beyond context of the record. Conclusions: The addition under section 69C read with section 115BBE was not maintainable on the facts; the Tribunal upheld deletion of the addition by the appellate authority. Issue 2 - Burden of proof and onus shift once assessee furnishes invoices, banking/payment evidence, accounting records and GST returns Legal framework: General evidentiary principle in income-tax matters: taxpayer must explain entries in books; once explanation is supported by documentary evidence, the onus shifts to Revenue to rebut and establish mala fides or non-genuineness. Precedent treatment: The Tribunal expressly followed decisions holding that production of invoices, payment details and accounting records shifts burden to Revenue to prove non-genuineness (followed). Interpretation and reasoning: The Tribunal noted that the assessee produced detailed vouchers and GST returns and that AO did not point to any deficiency in these records. In such circumstances, the Revenue was required to provide positive evidence that transactions were sham; mere suspicion arising from non-filing status of suppliers was inadequate. Ratio vs. Obiter: Ratio - Documentary proof by assessee that is not shown to be defective displaces the presumption of bogusness and places burden on Revenue to rebut. Obiter - Emphasis on the sufficiency of specific documentary combinations (e.g., invoice + bank payment + GST) is contextual but supports the main ratio. Conclusions: On the presented material, the onus shifted to the Revenue; Revenue failed to discharge it, requiring deletion of the addition. Issue 3 - Sufficiency of non-response by suppliers to section 133(6) notices and non-filing of returns as ground for addition Legal framework: Section 133(6) empowers enquiries and summonses to third parties; responses may be relevant evidence but are not conclusive in themselves. Non-filing of income-tax returns by counterparties is a relevant fact but not determinative of transaction bona fides. Precedent treatment: The Tribunal relied on authorities that reject a rule of automatic disallowance/addition merely because suppliers did not file returns or did not respond to enquiries; such facts do not replace required positive evidence of bogusness (followed). Interpretation and reasoning: The AO's reliance solely on non-filing and non-response was held inadequate. The appellate authority had directed remand and the assessee had further furnished documents; absence of supplier reply did not outweigh contemporaneous evidence produced by the assessee. The Court emphasized that non-response to section 133(6) cannot be a substitute for positive proof of fabrication by Revenue. Ratio vs. Obiter: Ratio - Non-response by suppliers to enquiries and their non-filing status are not by themselves sufficient grounds to treat purchases as bogus where cogent documentary and accounting evidence exists. Obiter - Practical guidance on weight of section 133(6) replies within the overall evidence matrix. Conclusions: The lack of supplier responses did not justify sustaining additions; the addition was rightly deleted. Issue 4 - Effect of Assessing Officer's failure to furnish remand report directed by the appellate authority Legal framework: Appellate authorities may call for remand reports to enable verification; failure to file such report may be relevant to appellate fact-finding if it results in absence of contrary material from the Revenue. Precedent treatment: Courts have taken failure to comply with appellate directions into account where it impairs the Revenue's ability to rebut the assessee's evidence (followed/distinguished as factual exercise). Interpretation and reasoning: The Tribunal observed that the CIT(A) had called for a remand report and the AO did not file it despite direction. The assessee nonetheless furnished the requested evidence before the AO and the CIT(A) found the documents satisfactory. The AO's non-compliance was material because the Revenue did not produce any contrary material or point to defects in the evidence; accordingly, appellate reliance on the produced material was reasonable. Ratio vs. Obiter: Ratio - Where an AO fails to comply with a directed remand and does not furnish contrary material, the appellate authority may legitimately accept the assessee's documentary evidence in absence of rebuttal. Obiter - Remarks about procedural expectations from AO are contextual. Conclusions: The AO's failure to produce the remand report reinforced the conclusion that Revenue did not discharge its burden; this supported upholding the appellate deletion. Cross-reference: Issues 1-3 are interlinked: the core evidentiary principle applied across them is that production of invoices, payment evidence, books of account and GST returns by the assessee shifts onus to Revenue, and absence of supplier replies or non-filing status cannot, in isolation, establish that purchases are bogus; Issue 4 reinforces the practical consequence when Revenue fails to provide contrary material on remand.