AO Fails to Carry Out Adequate Verification with GST dept: ITAT Remands Alleged Bogus Purchase Addition of ₹10.51 Crore [Read Order]
The Tribunal noted that invoices, e-way bills, bank statements, and GST records supported the assessee’s claim but were insufficient to prove genuineness conclusively. Since the assessee did not fully discharge the burden of proof and the Assessing Officer failed to verify adequately, the case was remanded for fresh adjudication, with the appeal allowed for statistical purposes.
GST - ITAT - Alleged Bogus - TAXSCAN
GST - ITAT - Alleged Bogus - TAXSCAN
The Income Tax Appellate Tribunal (ITAT), Hyderabad remanded the matter of alleged Rs. 10.51 crore addition back to the Assessing Officer (AO) as it failed to verify the carry out the independent verification with the GST( Goods and Services Tax ) Department on the genuinity of the purchases.
The appellant, Basanth Lal Sah, an individual running proprietary concerns under the names M/s. Bhavani Oxide and M/s. Bhavani Industries, had filed his return of income for the Assessment Year 2021–22 declaring ₹44.59 lakh.
The Assessing Officer (AO)framed scrutiny assessment under Section 143(3) of the Income Tax Act, 1961, and disallowed purchases of ₹10.51 crore from four suppliers on grounds that the suppliers were non-filers of returns, their GST numbers were inactive or cancelled, and they did not respond to notices.
The Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre [CITA(A)], confirmed the addition, holding that the assessee had not proved genuineness of the purchases.
The appellant, represented by Advocate Narahari Biswal, argued that he had furnished sufficient evidence including invoices, e-way bills, purchase registers, and bank statements reflecting payments through RTGS.
It was submitted that the suppliers’ GST numbers were active at the time of transaction and e-way bills were validly generated. It was contended that sales corresponding to purchases were accepted and stock records were not disputed.
It was further argued that if purchases were assumed bogus, only the profit element could be taxed, relying on the Bombay High Court decision in Pr. CIT v. Mohammad Haji Adam & Co.. It was emphasized that disallowance of full purchases would result in an unrealistic gross profit margin of 38 percent, against the industry norm of around 8 percent.
The Revenue, represented by B. Bala Krishna, CIT-Departmental Representative, contended that the appellant had failed to discharge the primary burden of proof.
Since the suppliers neither filed income tax returns nor responded to notices under Section 133(6), and their GST registrations were cancelled, the purchases could not be treated as genuine.
It was argued that the AO was justified in disallowing the entire purchase amount.
The Bench comprises Judicial Member Ravish Sood and Accountant Member G. Manjunatha, held that the appellant had indeed filed invoices, e-way bills, and bank records, which prima facie supported the claim. However, the short lifespan of the suppliers’ GST registrations, their non-filing of returns, and non-compliance with statutory requirements created serious doubts.
The Tribunal concluded that the assessee had not fully discharged the burden of proof, but the AO too failed to carry out necessary independent verification, such as checking with the GST department or obtaining weighbridge records.
Accordingly, the Tribunal set aside the matter to the AO with directions to conduct fresh verification after affording reasonable opportunity of hearing.
The appeal was allowed for statistical purposes.
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