2019 (4) TMI 2153 - AT - Income Tax

Disallowance of bogus purchase - Maharashtra State Sales Tax / VAT department had found all the parties in issue to have been engaged in giving purchase entries to their respective suppliers - HELD THAT - This tribunal s co-ordinate bench s decision in ITO vs. Paresh Arvind Gandhi 2015 (7) TMI 362 - ITAT MUMBAI holds purchase made from most of the parties in issue as genuine in view of the corresponding details submitted at the concerned assessee s behest. Case file(s) suggest that the department has also not furnished the relevant materials information as well as the alleged admissions if any of the party in issue to the assessee. We further notice that this assessee is engaged in iron and steel trade business. As filed all the relevant evidence(s) in the nature of purchase bills, delivery challan, weigh bridge certificates, transportation details, cheque payments to suppliers as well as transporters, TDS deduction certificates, stock register, steel bills and bank statement in support of the impugned purchases claims right from assessment till the instant second appeal proceedings. All the said details have nowhere been rebutted at the AO s end. Revenue fails to dispute the clinching fact that the assessee s corresponding sales have already been accepted as correct. We therefore see no reason to restore the impugned bogus purchase disallowance canvassed in Revenue s former appeal. 10% ad hoc estimated disallowance by comparing the corresponding figures of the impugned assessment year vis-a-vis preceding assessment year - HELD THAT - We afforded ample opportunities to the learned departmental representative for pin-pointing any specific defect; head-wise in the impugned claims comprising of clearing charges, computer repair, container rent, custom duty, CWC charge, DEPB premium, doc clearing charges, interest paid, service and testing charges and TDSC transportation charges alongwith other heads. There is no such discussion on the assessment order pointing out any such defect in all these specific heads. AO had not put even a single head to factual verification from recipient side as well. We conclude in these facts that the CIT(A) has rightly concluded that the impugned disallowance merely based on comparison of relevant figures in the two assessment years is not sustainable. Addition of unexplained cash deposits addition - HELD THAT - CIT(A) s findings in his order under challenge hold that the assessee had filed its ledger account as well as cash flow statement indicating re-deposit of cash sums already withdrawn. AO s remand report as well not disputing all these clinching supporting evidence. We therefore reject Revenue s instant second substantive ground as well as the latter main appeal

Summary

Issues Involved:
1. Bogus purchases disallowances/additions.
2. Import direct expenses disallowance.
3. Unexplained cash deposits addition.

Issue-wise Detailed Analysis:

1. Bogus Purchases Disallowances/Additions:
The Revenue's appeals for assessment years 2009-10 and 2010-11 sought to reverse the CIT(A)'s action deleting bogus purchases disallowances/additions of ?73,35,068/- and ?46,56,078/- respectively. The Assessing Officer (AO) had disallowed these purchases based on information from the Maharashtra State Sales Tax Department/VAT, which indicated that the payee parties had provided purchase entries to the taxpayer. The AO concluded that the assessee failed to prove the genuineness of these purchases. However, the CIT(A) reversed the AO's decision, noting that the assessee provided substantial documentary evidence, including purchase bills, delivery challans, weighment certificates, bank statements, and transport vouchers, to support the genuineness of the purchases. The CIT(A) also referenced similar cases where the ITAT had accepted such purchases as genuine. The tribunal found no merit in the Revenue's arguments, noting that the assessee's corresponding sales were accepted as correct, and upheld the CIT(A)'s decision to delete the bogus purchase disallowances.

2. Import Direct Expenses Disallowance:
The Revenue's appeal also sought to revive the import direct expenses disallowance of ?13,36,322/-. The AO had disallowed 10% of the expenses on an estimated basis, alleging them to be bogus due to a significant increase compared to the preceding year. The CIT(A) found that the AO's disallowance was based on a biased approach and an erroneous observation of disproportionate increase due to regrouping and different presentation of expenses. The CIT(A) noted that all expenses were supported by bills, vouchers, and cheque payments, and there was no specific defect pointed out by the AO. The tribunal agreed with the CIT(A), concluding that the disallowance based on mere comparison of figures without specific defects was not sustainable and upheld the deletion of the disallowance.

3. Unexplained Cash Deposits Addition:
The Revenue's appeal also included an issue of unexplained cash deposits amounting to ?13.10 lac. The CIT(A) found that the assessee had provided a ledger account and cash flow statement indicating the re-deposit of cash sums already withdrawn. The AO's remand report did not dispute this evidence. The tribunal found no reason to overturn the CIT(A)'s findings, noting that the assessee had submitted detailed evidence during the remand proceedings, which was not disputed by the AO. The tribunal affirmed the CIT(A)'s decision to delete the unexplained cash deposits addition.

Conclusion:
The tribunal dismissed both of the Revenue's appeals, affirming the CIT(A)'s findings on all three issues. The order was pronounced in open court on 23/04/2019.