2017 (7) TMI 774 - HC - Income Tax

Addition of bogus purchases made by the Assessee Company from its group company - ITAT deleted the addition - Held that - Nothing incriminating was found in the search conducted qua the Assessee except two documents. The core document was the ledger account of PRPL in the books of accounts of the Assessee. This clearly reflected the sales made by PRPL to the Assessee on various dates on which payments had been made. This document did not create any doubt about the genuineness of the transactions, particularly in the face of the evidence and enquiries and the responses available on record. These included confirmed copies of all the 23 parties from whom purchases were made by PRPL. The Assessee had also placed detailed evidence for each of the said 23 parties. This was examined afresh by the ITAT. As an exhaustive and detailed factual enquiry has been undertaken, both, by the CIT(A) and the ITAT to arrive at concurrent factual findings which have not been shown to be perverse. - Decided against revenue.

Summary

Issues:
- Appeal by Revenue under Section 260A(1) of the Income Tax Act, 1961 against ITAT order for AY 2008-09.
- Deletion of addition of &8377; 19,39,60,866 for alleged bogus purchases made by Assessee from PRPL.
- Validity of findings by CIT(A) and ITAT regarding the genuineness of transactions.

Analysis:
1. Issue 1: Appeal by Revenue under Section 260A(1)
- The Revenue filed an appeal under Section 260A(1) of the Income Tax Act against the ITAT order for the Assessment Year 2008-09.

2. Issue 2: Deletion of addition for alleged bogus purchases
- The Revenue contended that the ITAT deleted the addition of &8377; 19,39,60,866 related to alleged bogus purchases made by the Assessee from PRPL. The AO concluded that PRPL was used as a conduit to inflate the Assessee's expenditure, leading to the addition.

3. Issue 3: Validity of findings by CIT(A) and ITAT
- The CIT(A) deleted the addition based on third-party information not independently verified by the AO. The ITAT upheld this decision based on various supporting documents:
- Photocopies of sale invoices to PRPL and confirmed account copies with PAN.
- VAT returns of parties selling material to PRPL and further to the Assessee.
- Detailed evidence of transportation of goods, GRs, and statutory documents supporting transactions.
- Ledger account of PRPL in Assessee's books, confirming sales and payments.
- Lack of incriminating evidence in search, with detailed evidence provided for all 23 parties involved.
- Examination of profit & loss, bank details, and account sales invoices by the AO.
- Assessee proving the identity of PRPL and genuineness of purchases.

4. The Court noted that both the CIT(A) and ITAT conducted exhaustive factual inquiries to reach concurrent findings, which were not shown to be perverse. No substantial question of law arose from the ITAT order, leading to the dismissal of the appeal by the Court.

This judgment highlights the importance of thorough factual inquiries and supporting documentation in tax-related disputes, emphasizing the burden of proof on the parties involved. The decision underscores the significance of independent verification and detailed examination of transactions to establish their genuineness and validity, ultimately leading to the dismissal of the Revenue's appeal in this case.