Bogus Purchase Addition Without Adequate Verification: ITAT Restores ₹8.79 Lakh Matter to AO for Re-adjudication with Opportunity to Taxpayer [Read Order]

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) restored the matter involving bogus purchase addition of Rs. 8.79 lakh to the Assessing Officer (AO) for fresh adjudication and held that the addition was made without adequate verification, directing the assessee to produce the suppliers before the AO.

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Asiatic Industries (assessee) was subjected to assessment for Assessment Year (AY) 2011-12, where the AO made an addition on account of alleged bogus purchases from three suppliers. The AO issued notices under Section 133(6) of the Income Tax Act, 1961, to the suppliers, which were returned unserved with remarks indicating non-existence.

The AO treated the purchases as bogus and added the amount to the assessee's income, noting that the assessee failed to substantiate the genuineness of the transactions despite providing ledger accounts showing running balances.

Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) confirmed the addition and upheld the AO's findings on the bogus nature of the purchases.

Aggrieved by the CIT(A)’s order, the assessee appealed to the ITAT. The assessee’s counsel argued that the AO erred in not issuing summons under Section 131 despite the assessee's request and relied solely on returned notices under Section 133(6) of the Income Tax Act.

The counsel submitted that the ledger accounts demonstrated ongoing business relations, and the addition should be deleted for lack of proper verification.

The single-member bench, comprising George Mathan (Judicial Member), observed that the AO had issued notices under Section 133(6) but did not exercise powers under Section 131 to summon the suppliers, despite the assessee's operational business and running ledger accounts.

The bench directed the assessee to produce the sellers/suppliers before the AO for verification, granting liberty to the AO to draw adverse inference if the assessee fails to comply. It restored the matter to the AO for fresh adjudication after providing the assessee a reasonable opportunity of being heard.

The appeal of the assessee was partly allowed for statistical purposes.

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