2015 (4) TMI 708 - AT - Income Tax

Verification of expenditure - Parties not available for verification does not means purchases are bogus - AO failed to prove non genuineness of purchases - Held that - The DR merely relied on the order of the Assessing Officer. He could not point out any specific mistake in the above quoted order of the Commissioner of Income-tax (Appeals). In absence of the same, we do not find any good and justifiable reason to interfere with the order of the Commissioner of Income-tax (Appeals) which is confirmed and this ground of appeal of the Revenue is dismissed.In the result, the appeal of the Revenue is dismissed. Nothing contrary was brought to our knowledge on behalf of Revenue. Facts being similar so following same reasoning, we are not inclined to interfere in the finding of CIT(A) who has rightly granted relief to the assessee whereby deleting addition of ₹ 95,01,945/- on account of expenses for purchase of grey clothes. - Decided against the revenue.

Issues Involved:
1. Deletion of addition of Rs. 95,01,945/- on account of expenses for purchase of grey cloth.
2. Allegation of bogus purchases by the Assessing Officer.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 95,01,945/- on Account of Expenses for Purchase of Grey Cloth:

The core issue in this appeal was the deletion of an addition amounting to Rs. 95,01,945/- made by the Assessing Officer (AO) for the expenses claimed by the assessee for purchasing grey cloth. The AO had initially added this amount to the assessee's income, suspecting the purchases to be bogus. However, the Commissioner of Income Tax (Appeals) [CIT(A)] deleted this addition. The CIT(A) based their decision on a similar case for the Assessment Year (A.Y.) 2007-08, where the Tribunal had upheld the CIT(A)'s order granting relief to the assessee.

The Tribunal noted that in the previous year (A.Y. 2007-08), the AO had made an addition of Rs. 58,69,299/- for similar reasons, citing incomplete addresses on bills, uniform signatures, and immediate cash withdrawals by suppliers. The CIT(A) had deleted this addition, observing that the assessee had provided comprehensive evidence, including audited accounts, inventory details, and confirmations from suppliers. The Tribunal upheld this deletion, emphasizing that the AO's suspicion based on cash withdrawals did not suffice as evidence of bogus purchases.

2. Allegation of Bogus Purchases by the Assessing Officer:

The AO had alleged that the purchases of grey cloth were bogus, primarily because the bills from suppliers had incomplete addresses, and there were immediate cash withdrawals after cheque deposits. The AO's suspicion was further fueled by the uniformity in the preparation and signing of the bills by the same person for different suppliers.

Upon appeal, the CIT(A) meticulously reviewed the evidence provided by the assessee, including the audited financial statements, quantitative details of grey cloth purchases, sales, and consumption, and confirmations from suppliers. The CIT(A) found the assessee's explanations convincing, particularly noting the reasonable consumption of grey cloth (0.16% of total export sales) and the legitimate business requirement for packing materials.

The CIT(A) also emphasized that the AO had not conducted a thorough investigation, such as examining the suppliers or recording their statements. The CIT(A) concluded that the AO's addition was based on mere suspicion without concrete evidence. The Tribunal, upon review, found no infirmity or illegality in the CIT(A)'s order and upheld the deletion of the addition.

Conclusion:

The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s decision to delete the addition of Rs. 95,01,945/-. The Tribunal reiterated that the AO had failed to provide substantial evidence to prove the purchases were bogus and that the assessee had satisfactorily discharged its onus by providing detailed and corroborative evidence. The Tribunal's decision was pronounced in the open Court on March 13, 2015.

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