The Mumbai Bench of Income Tax Appellate Tribunal(ITAT) upheld the Commissioner of Income Tax(Appeals)[CIT(A)]’s decision, dismissing the Revenue’s appeal against the deletion of a ₹94.3 crore addition on alleged bogus purchases, citing sufficient supporting evidence.
The Revenue-appellant challenged the 10/06/2024 order by the CIT(A) which allowed Jaideep Metallics and Alloys Pvt. Ltd.,respondent-assessee’s appeal against the 29/12/2022 Assessment Order for Assessment Year(AY)2021-2022 under Sections 143(3) and 144B of the Act.
The assessee, a private limited company manufacturing steel products, filed its return for the AY 2021-2022 on 15/12/2021, declaring income of INR 27,82,06,970. The case was selected for scrutiny. During assessment, the assessee provided details of its purchases from vendors as requested in a notice dated 18/10/2022.
A show-cause notice was issued on 15/12/2022 regarding purchases from non-filers, totaling INR 96,46,56,734. The assessee submitted supporting documents in response. The Assessing Officer(AO) issued notices to the vendors, but only three parties responded. Based on the information, the AO disallowed purchases totaling INR 94,30,14,937, treating them as bogus.
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The assessee challenged this addition before the CIT(A).
The assessee argued before the CIT(A) that the AO relied on information from notices under Section 133(6) without confrontation and disregarded submitted evidence, adding ₹94.30 crore under Section 37(1) without valid grounds. It contended that purchases could not be deemed bogus solely due to suppliers’ non-filing of returns or low profits and provided supporting documents, including invoices, e-way bills, lorry receipts, GST records, and bank statements. Payments had been made via account payee cheques, and GST had been duly paid.
Read More: Non-discharge of Onus of Proof by AO: Bombay HC quashes treatment of Purchase Expenses as Bogus
The CIT(A) deleted the addition after considering the assessee’s submissions, including detailed records for all seven suppliers. For major purchases—₹57.93 crore from Sandeep Garg & Sons HUF and ₹23.78 crore from Star Scrap Steel—the AO had disallowed claims solely due to suppliers’ non-filing of returns, without disputing the documents. Similar reasoning applied to other suppliers. The AO neither challenged the evidence nor conducted further inquiries.
Finding the disallowance unsustainable, the CIT(A) deleted the additions.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The Revenue appealed before the tribunal aggrieved by the relief granted by the CIT(A).
The tribunal agreed with the CIT(A) in deleting the addition of ₹94.30 crore on alleged bogus purchases. It noted that the assessee had provided sufficient evidence, such as e-way bills, lorry receipts, and truck photographs, to support the purchases and movement of goods. The Revenue had failed to identify any issues with these documents during the appeal.
The appellate tribunal also pointed out that the AO had not rejected the appellant’s books of accounts or disputed the reported sales and stock details. The assessee’s gross profit margin was 10%, and payments were made through proper channels, not in cash.
The two member bench comprising Rahul Chaudhary(Judicial Member) and Girish Agrawal(Accountant Member) supported the assessee’s argument that information under Section 133(6) could not be used against it without confrontation.
Since the evidence provided was strong and unchallenged, the tribunal upheld the CIT(A)’s decision and chose not to interfere.
In short,the appeal filed by the revenue was dismissed.
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