2012 (5) TMI 366 - AT - Income Tax

Additions made by the AO due to non-submissions of confirmations by the parties against enquiry letters issued u/s 133(6) treating the entire transactions to the said 17 parties as bogus entries and made an addition of Rs.3,72,31,524/ - CIT(A) held the findings of the AO in the assessment order and in the remand report to be unsubstantiated Held that - AO s contention that there is no further verification possible due to absence of contact details provided in the affidavits of the concerned parties is not reasonable as he himself had issued inquiry letters u/s 133(6) verification of the books of accounts and bills and vouchers could be done during the remand - CIT(A) gave a finding that the books of account are found to be audited by the tax auditors, wherein no such infirmities are noted in the maintenance of the books of account and depicting no change in G.P - findings given by the CIT(A) are proper and no infirmity in the order - against revenue .

Summary

Issues:
Appeal against CIT(A) order for assessment year 2005-06 - Genuineness of purchases questioned - Verification of transactions with parties - Addition of expenses as bogus entries - Discrepancies in confirmations filed by parties - Failure to reconcile discrepancies - CIT(A) findings challenged by Revenue - Lack of specific findings by CIT(A) - Verification of existence of parties - Remand report and affidavits submitted - Failure to verify transactions - Disallowance of expenses - Dismissal of Revenue's appeal.

Analysis:
The appeal before the Appellate Tribunal pertains to the assessment year 2005-06, where the Revenue challenged the order of the CIT(A) regarding the genuineness of purchases made by the assessee. The Revenue raised concerns about the lack of specific findings by the CIT(A) regarding the purchases amounting to Rs.3,70,46,085. The AO had issued notices under section 133(6) to 28 parties with whom the assessee had transactions, but only 11 parties responded, leading to discrepancies in the reported expenses. The AO treated the unverified transactions as bogus entries and made an addition of Rs.3,72,31,254. The CIT(A) extensively reviewed the case, considering the submissions made by the assessee and the remand report of the AO. The CIT(A) found that the AO had not adequately verified the confirmations filed by the assessee and had not made efforts to reconcile the discrepancies. The CIT(A) concluded that the additions made by the AO were unjustified, as the transactions were supported by confirmations, bills, and vouchers, and were recorded in the books of account and bank statements. The CIT(A) disallowed only a portion of the claimed expenses, confirming the rest. The Revenue challenged the CIT(A)'s findings, arguing that the purchases were accepted without proper verification of the parties' existence and that the CIT(A) failed to provide detailed explanations for the accepted figures. However, the Tribunal upheld the CIT(A)'s order, noting that the sales against the purchases were not in question, the books were audited, and no significant discrepancies were found. The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision and upholding the disallowance of a portion of the expenses while deleting the rest.