AI Drafter 
TaxTMI 
TaxTMI 
2025 (12) TMI 479
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.... case the Ld. CIT(A) is correct in restricting the addition on account of Unverifiable purchases of Rs. 5,07,64,711/- to Rs. 4,26,423/-. 4. Whether on the facts and in the circumstances of the case the Ld. CIT(A) is correct in deleting the addition of Rs. 1,23,82,913/- on account of difference of purchases. 5. It is prayed that the order of Ld. CIT(A) be set aside on the issued mentioned above and that of the assessing officer be restored. 6 That the appellant craves leave to add or amend any grounds of appeal before the appeal is heard and finally disposed off. 3. Briefly, the facts of the case are that the assessee, Shri Bhagwan Dass, an individual engaged in the business of trading in iron and scrap under the proprietorship concern M/s Bhagwan Steel, filed his return of income for A.Y. 2021-22 on 25.02.2022, declaring a total income of Rs. 11,05,810/-. The return was processed under section 143(1) of the Act. Subsequently, the case was selected for complete scrutiny under CASS, for complete scrutiny with the reason "Assessee has made substantial purchases from such suppliers who are either Non-Filer(s) or have filed non-business ITR or reflected a s....
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....le, or not operating at the stated addresses, and in certain cases, even the house numbers mentioned did not exist. In one case where summons under section 131 were served, no compliance was made. Based on these findings, the AO held that the alleged suppliers were not genuine and that the purchases were fictitious, warranting disallowance of the entire amount of Rs. 5,07,64,711/-. 3.4 The AO further compared the assessee's purchase data with the GST data available with the Department. While the assessee reported purchases of Rs. 41,92,68,077/-, the GST data reflected purchases of Rs. 40,68,62,366/- there is a difference of Rs. 1,24,05,711/-. Even after adding insurance entries of Rs. 22,798/-, a difference of Rs. 1,23,82,913/- still remained unexplained. The AO observed that ledger accounts received from suppliers in response to section 133(6) did not match the assessee's comparative chart and that the assessee appeared to have manipulated purchase figures. The AO accordingly held that the assessee had inflated purchases by recording false entries, attracting disallowance. 3.5 Based on these issues and the assessee's failure to give proper explanations or full documents, the....
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....mmissioner of Income Tax-17 Vs. M/s Mohhammad Haji Adam & Company in ITA No. 1004 of 2016 dt. 11/02/2019 the CIT(A) in its order held that "average rate of GP of FY 2017-18 to F Y 2020-21 being 0.84% which comes to Rs. 4,26,423/- being 0.84% of Rs. 5,07,64,711/- should be added. While modifying the addition made by AO, I am conscious that effective rate of GP on disputed purchase comes to 1.48% (0.65% declared by the appellant plus 0.84% now added by me). In the result the Ground no.5 of the appellant is partly allowed and the addition of Rs. 5,07,64,711/- is restricted to Rs. 4,26,423/-" 4.3 Regarding the addition of Rs. 1,23,82,913/- on account of differences in purchase figures, the CIT(A) has given his finding in para 5.5.2 of its order wherein the Ld. CIT(A) held that after careful examaination of the documents, the AO has made the addition based on complete misunderstanding of facts and without considering the reconciliation filed by the assessee during the course of assessment proceedings, specially when the reconciliation was given during the course of assessment proceedings and stands reproduced in the order of the AO. 5. Feeling aggrieved by the order of the Ld. CIT....
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....ance is placed on the findings of the Ld. CIT(A) in Para 5.1.2 by the assessee. 7.2 Ground No.2- Ld. AR submitted that the AO disallowed GST payment of Rs. 12,38,488/- GST expense crystallized during year, which is allowable u/s 36(1) (vii) or 37(1). Reference is made to Para 5.2 to 5.2.3 of the order of Ld. CIT(A) wherein the addition was deleted. The Ld. CIT(A), after referring to the provisions of CGST Act 2017 held that the assessee was duty bound to pay the GST which was not paid by his suppliers pertaining to FY 2018-19. Accordingly, the assessee correctly claimed the GST payment of Rs. 12,38,488/- as an expense. 7.3 Ground No.3-Alleged Bogus Purchases - Rs. 5,07,64,711/- In this regard reference is made to Para 5.4 to 5.4.4 of the order of Ld. CIT(A) wherein the addition was restricted to Rs. 4,26,423/-. The assessee had furnished complete evidence of genuineness tax invoices, E-way bills, stock register, GSTR-2A extracts, toll receipts, and banking proofs all of which were accepted during appellate proceedings before Ld. CIT(A) and placed on record, referred to during the course of arguments before ITAT. The Assessing Officer did not reject the books of account, di....
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....receding year. The assessee had written off the outstanding in FY 2022-23 and offered the same to tax in A.Y. 2023-24. In our considered opinion, once no sum is found credited in the books in the relevant previous year, section 68 cannot be invoked. The Ld. CIT(A) rightly followed Sanjay Mehta v. ACIT (ITAT Kolkata) and PCIT v. Topline Buildtech (P) Ltd. (Delhi HC). We find no infirmity in this conclusion, therefore this ground of appeal is dismissed. 8.2 Ground No. 2 - Disallowance of GST expense Rs. 12,38,488/- In this ground we find that the Assessing Officer disallowed the amount treating it as liability of others. The Ld. CIT(A) found that the assessee had deposited GST under statutory compulsion where suppliers failed to remit the collected tax, and the right to claim ITC had lapsed. The liability crystallized during the relevant year and was allowable either as bad debt u/s 36(1)(vii) or as business expenditure u/s 37(1). The Ld. CIT(A) relied upon Pr. CIT v. Khyati Realtors Pvt. Ltd. (SC, 2022) wherein similar business expenditure was held allowable. We concur that the payment was in the course of business and not capital or personal in nature. Therefore this gr....