PAN, VAT Returns submitted before AO to ascertain Nature of Business Activity, can’t be blindly Ignored: ITAT [Read Order]

Self-Serving Documents - Business

The Income Tax Appellate Tribunal ( ITAT ), Delhi has held that if the assessee produces the details of PAN and the VAT Returns to ascertain the actual nature of the business, the Assessing Officer cannot blindly ignore the same.

While completing assessment against the assessee, the Assessing Officer noted that the assessee failed to produce books of accounts for verification of purchases nor have filed any copies of accounts of persons from whom the purchases were made for verification of creditors and purchasers. It was further noted by the AO that entities from whom purchases are shown are non-existent paper entities, who are not carrying any genuine regular business activity. On the basis of these conclusions, the AO made the addition of Rs.44,89,680/-on account of other income without allowing any expenditure.

Before the authority, the assessee submitted the details of confirmation from the parties of the account showing purchases and their income tax PAN duly signed and stamped, the Copy of ledger account for the subsequent year showing the detail of cheques etc. issued to the parties against their purchases and the copies of purchase bills showing the complete details of the supplies made along with detail of VAT registration details etc to prove the genuineness of the parties.

The department, on the other hand, contended that mere filing numbers or assessment particulars, VAT returns and the copy of sales tax RC etc., do not establish the identity of persons. It was further contended that actual and true identity of persons or company was business undertaken by them. PAN numbers/registration of VAT are allotted on basis of application, without actual defacto verification of identity or ascertaining the actual nature of business activity, and therefore cannot be blindly accepted.

After considering the arguments from both the sides, the Tribunal observed the “On further perusal of the remand report it is observed that Ld. AO himself has not taken up any steps to verify these details. In our considered opinion moment assessee filed various details regarding sellers, onus shifts upon Ld. AO to verify the same at his end. Further, it is observed that assessee has been having a progressive profit ratio from the preceding assessment years evident from page 240 placed in the paper book.”

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