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2023 (10) TMI 188 - AT - Income TaxBogus purchases from certain entities - purchases made by the four Jammu based partnership firms belonging to the assessee group are non-genuine - HELD THAT - Once the CESTAT 2018 (12) TMI 1234 - CESTAT CHANDIGARH has held the purchases made by four Jammu bases entities to be genuine, the entire case of the Revenue based on the investigation carried out by Central Excise Department, Jammu would fall flat. While deciding the appeals filed by the Revenue in case of M/s. Jai Ambay Aromatics, one of the four Jammu based entities from whom the assessee had purchased raw materials, the Tribunal 2021 (8) TMI 936 - ITAT DELHI has upheld the decision of the first appellate authority in deleting the additions made by the Assessing Officer on account of bogus purchases. Thus, once, the CESTAT and the Tribunal have held the purchases made by the four Jammu based entities to be genuine, the corresponding sales effected by them to the assessee have to be accepted as genuine. In our considered view, FAA as justified in deleting the additions made on account of non-genuine purchases. Once the purchases are held to be genuine, then there cannot be any doubt regarding manufacturing activity of the assessee. Therefore, the manufacturing expenses claimed by the assessee have to be allowed. In this view of the matter, we do not find any infirmity in the decision of learned Commissioner (Appeals). Accordingly, we uphold the same by dismissing the grounds raised by the Revenue.
Issues Involved:
1. Deletion of addition on account of bogus purchases. 2. Disallowance of manufacturing expenses. Issue 1: Deletion of Addition on Account of Bogus Purchases The major issue in these appeals relates to the deletion of addition made on account of bogus purchases from certain entities. The assessee, a corporate entity engaged in manufacturing and trading Mentha Oil products, was alleged by the Assessing Officer to have made bogus purchases from four partnership firms located in Jammu, which were availing deduction under Section 80IB of the Income-tax Act, 1961. The Assessing Officer concluded that the transactions were bogus based on an investigation by the Central Excise Department, Jammu, which found that the entities from whom the purchases were made were non-existent. Consequently, the purchases were treated as bogus and added back to the income of the assessee. The assessee contested these additions before the Commissioner of Income Tax (Appeals), who observed that the purchases had been duly recorded in the books of account, supported by transportation details, quantitative details, and other relevant documents. The Commissioner (Appeals) noted that the purchases were genuine and deleted the additions. Before the Tribunal, the Departmental Representative argued that the purchases were bogus based on the findings of the Central Excise Department and the Income Tax Department. In contrast, the assessee's counsel emphasized that the purchases were genuine, supported by documentary evidence, and upheld by the Custom, Excise, and Service Tax Appellate Tribunal (CESTAT) and the Income Tax Appellate Tribunal (ITAT) in related cases. The Tribunal, after considering the submissions and materials on record, found that the assessee had furnished all necessary documentary evidence to establish the genuineness of the purchases. The Tribunal noted that the CESTAT had held the purchases made by the four Jammu-based entities to be genuine, thereby invalidating the Revenue's case based on the investigation by the Central Excise Department. Consequently, the Tribunal upheld the decision of the Commissioner (Appeals) in deleting the additions. Issue 2: Disallowance of Manufacturing Expenses The related issue of disallowance of manufacturing expenses was also addressed. The Tribunal observed that once the purchases were held to be genuine, there could be no doubt regarding the manufacturing activity of the assessee. Therefore, the manufacturing expenses claimed by the assessee had to be allowed. The Tribunal found no infirmity in the decision of the Commissioner (Appeals) and upheld the same, dismissing the grounds raised by the Revenue. Conclusion: The Tribunal dismissed all the appeals of the Revenue, upholding the decision of the Commissioner (Appeals) in deleting the additions made on account of non-genuine purchases and allowing the manufacturing expenses claimed by the assessee. Order Pronounced: The order was pronounced in the open court on 11th July, 2023.
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