In Geolife Organics v. ACIt, the Mumbai ITAT held that AO cannot reach to a conclusion that the purchases are “bogus” merely on ground of information from Sales Tax Department and non-production of Suppliers before him when the assessee had produced all the relevant materials before him to prove the genuineness of the transaction.
The sole grievance of the assessee in the instant case was that the AO made addition under Section 69C against the assessee on the basis of information from the sales tax department that the assessee had bogus purchases during the assessment years under consideration. During the course of assessment proceedings, the suppliers of the alleged purchases were not appeared before the AO and therefore, he confirmed the addition. On appeal, the first appellate authority sustained the above order.
After hearing both sides, the bench found that the basis on which AO disallowed the alleged bogus purchases is the non-appearance of the suppliers before the AO to verify the purchases. Relying upon various ITAT and Hon’ble High Courts decisions, wherein it was held that when purchases are supported by sufficient documentary evidences then merely because of non-appearance before the AO, one cannot conclude that the purchases were not made by the assessee.
It was noted that though the assessee failed to produce the alleged suppliers before the AO, he cannot suspect the genuineness of the purchase by producing confirmed ledger copies of concerned parties, bank account statement, purchase bills, delivery challans etc. Furthermore, the AO has not suspected the sales made by the assessee and has not brought any material on record to conclusively establish the fact that purchases are bogus.
“Merely relying upon the information from the Sales Tax Department or the fact that parties were not produced the Assessing Officer could not have treated the purchases as bogus and made addition. If the Assessing Officer had any doubt with regard to purchases made, it was incumbent upon him to make further investigation to ascertain the genuineness of the transactions. Without making any further enquiry or investigation the Assessing Officer cannot sit back and make the addition by simply relying upon the information obtained from the Sales Tax Department and issuing notices under section 133(6) of the Act.”
Quashing the order, the bench concluded that “As the Assessing Officer has failed to make any enquiry or investigation to prove the fact that the purchase transactions are not genuine whereas the assessee has brought documentary evidences on record to prove genuineness of such transactions which are not found to be fabricated or non-genuine, the action of the Assessing Officer in ignoring them cannot be accepted. When the payment to the concerned parties are through proper banking channel and there is no evidence before the Assessing Officer that the payments made were again routed back to the assessee, the addition made by estimating further profit of 12.5% earned by the assessee is not sustainable in law and facts.”
Read the full text of the Order below.
