2022 (11) TMI 1218 - AT - Income Tax

Bogus purchases u/s 69C - receipt of information from DGIT(Inv.), Mumbai that the assessee company had received bogus entry in the form of purchases from three shell companies - CIT- A deleted the addition - HELD THAT - CIT(A) has categorically discussed the evidences furnished by the assessee in respect of each of the party and has recorded that the assessee was maintaining proper books of accounts including all details such as stock register, bills and vouchers in respect of manufactured and traded goods and further that the assessee had furnished details of purchases together with quantity rate and value. The payments were made through banking channel. It is not the case of the Revenue that the assessee had made purchase out of his unaccounted money as the purchases were made through account payee cheque/banks. The sales also have not been doubted by the AO. Even, as observed above, the diamond being of very particular quality, weight, clarity etc. and in the facts and circumstances of the case have also not been doubted to be the purchase from grey market. In view of this, we do not find any infirmity in the order of the ld. CIT(A) Addition of unsecured loans and advances u/s 68 - CIT- A deleted the addition - HELD THAT - We note that the ld. CIT(A) has given details of the documents furnished by the assessee in respect of each of the party and thereby has arrived at a conclusion that the assessee has duly established the identity and creditworthiness of the parties and genuineness of the transaction. Even the ld. CIT(A) has noted that subsequently the said loan has repaid by the assessee to the concerned parties. Since the CIT(A) has not only discussed in details the various evidences proving the identity, creditworthiness of the parties and genuineness of the transaction but also the fact that assessee has subsequently repaid the loan amount to the concerned parties and TDS was also deducted on the interest paid to the parties on such loan amount. In view of this, we do not find any reason to interfere with the order of the CIT(A) on the above issue also. This ground of the Revenue is also dismissed. Disallowance u/s 14A - Purpose of investment made - CIT- A deleted the addition - HELD THAT - Investments were made by the assessee not for the purpose of earning of exempt income, rather the investment, in question, was made in immovable property, therefore, the provisions of section 14A were not attracted. CIT(A), therefore, rightly deleted the addition in respect of disallowance made by the AO in relation to the investment in immovable property. Therefore, there is no merit in this ground of the Revenue and the same is accordingly dismissed.

Issues Involved:
1. Deletion of addition made under Section 69C of the Income Tax Act.
2. Non-compliance with the principle of natural justice regarding the retraction of statements under Section 132(4).
3. Failure to fulfill criteria of identity, creditworthiness, and genuineness of transactions.
4. Deletion of addition made under Section 68 for unsecured loans and interest.
5. Deletion of addition related to disallowance under Section 14A.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made Under Section 69C:
The Revenue challenged the deletion of Rs.1,49,20,200/- added under Section 69C for bogus purchases. The Assessing Officer (AO) had received information that the assessee received bogus entry in the form of purchases from three shell companies. The assessee argued that diamonds were physically brought and examined, and the purchases were recorded in the stock register. The CIT(A) found that the assessee provided all relevant documents, including purchase invoices, bank statements, and stock registers. The CIT(A) also noted that the sales from these purchases were not doubted, and the books of accounts were duly audited. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide any specific error in the CIT(A)'s order.

2. Non-compliance with the Principle of Natural Justice:
The Revenue contended that the CIT(A) erred by not following the principle of natural justice in considering the retraction of statements under Section 132(4) without giving the AO an opportunity to be heard. The CIT(A) observed that the statements relied upon by the AO were retracted, and the assessee was not given an opportunity to cross-examine the individuals whose statements were used. The Tribunal found that the CIT(A) had thoroughly examined the evidence and upheld the deletion of the addition.

3. Failure to Fulfill Criteria of Identity, Creditworthiness, and Genuineness:
The Revenue argued that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions. The CIT(A) found that the assessee provided comprehensive documentation, including purchase invoices, bank statements, and stock registers. The Tribunal noted that the CIT(A) had examined the evidence and found that the assessee had maintained proper books of accounts and provided all necessary details. The Tribunal upheld the CIT(A)'s decision, noting that the AO did not provide any specific error in the CIT(A)'s order.

4. Deletion of Addition Made Under Section 68 for Unsecured Loans and Interest:
The Revenue contested the deletion of Rs.1.30 Crore and interest of Rs.7,18,357/- added under Section 68 for unsecured loans. The CIT(A) found that the assessee provided all necessary documents to establish the identity, creditworthiness, and genuineness of the transactions. The CIT(A) noted that the loans were repaid by account payee cheques, and TDS was deducted on the interest paid. The Tribunal upheld the CIT(A)'s decision, noting that the assessee had discharged the initial onus and provided all necessary documentation.

5. Deletion of Addition Related to Disallowance Under Section 14A:
The Revenue challenged the deletion of Rs.2,42,83,488/- related to disallowance under Section 14A. The assessee argued that the investment was made in immovable property and not for earning exempt income. The CIT(A) agreed and deleted the disallowance. The Tribunal upheld the CIT(A)'s decision, noting that the investment was not made for earning exempt income and the provisions of Section 14A were not attracted.

Conclusion:
The Tribunal dismissed all the appeals of the Revenue, upholding the decisions of the CIT(A) in favor of the assessee. The Tribunal found that the CIT(A) had thoroughly examined the evidence and provided detailed reasoning for the deletion of the additions. The Tribunal noted that the Revenue did not provide any specific errors in the CIT(A)'s orders and upheld the decisions accordingly.

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