2023 (11) TMI 338 - AT - Income Tax

Bogus purchases of tobacco - since the purchase details / invoices could not be produced by the assessee they should be considered as bogus purchases - Assessee submitted that the assessee did not claim any expenditure in the impugned assessment year for the purchase of tobacco - HELD THAT - It is an admitted fact that the assessee in his own deposition has stated that purchases of tobacco was made out of the withdrawals from the bank account of the assessee company to the extent of Rs. 14.47 Crs. We also find that the assessee has admitted the sale proceeds of Rs. 30 Crs towards the sale of property and has offered the capital gains tax while filing the return of income. AO has not disputed the source for the withdrawals however, has considered the purchases as bogus. From the submissions of the Ld. AR and from the materials placed before us, we find that the assessee has not claimed any expenditure with respect to purchases during the FY 2014-15 and has shown the entire purchases as stock-in-trade from AY 2015-16 to 2019-20. Further, during the AY 2019-20, the assessee has written off the stock worth Rs. 17,71,40,617/- as it was damaged due to wetness. AR also demonstrated that these written off of stock-in-trade has not been included in the expenditure claimed during the AY 2019-20. Further, we also find that the Search Team also could not find any stock of Tobacco worth Rs. 17,71,40,617/- during the course of search AO has not brought on record any material to corroborate the seized material warranting addition of bogus purchases to the extent of Rs. 14.47 Crs. In these circumstances, we find that the Ld. CIT(A) has rightly considered these facts and has deleted the addition made by the Ld. AO to the extent of Rs. 17.71 Crs. We therefore find no infirmity in the order of the Ld. CIT(A) and thereby dismiss the grounds raised by the Revenue.

Summary

Issues Involved:
The appeal by Revenue against the order of Ld. CIT (A) regarding addition of Rs. 17,71,40,617/- as bogus purchases for AY 2015-16.

Issue 1: Addition of Rs. 17,71,40,617/- as Bogus Purchases

The assessee, a Private Limited Company, filed its return for AY 2015-16 admitting total income of Rs. 24,01,89,770/-. The Ld. AO disallowed Rs. 5,86,00,000/- towards LTCG due to cost of improvement. Following a search operation, the Ld. AO made an addition of Rs. 17,71,40,620/- as bogus purchases. The Ld. CIT (A) allowed the appeal of the assessee. The Revenue appealed on grounds including erroneous deletion of the addition and lack of evidence regarding purchases or stock. The Ld. DR argued for upholding the Ld. AO's order, while the Ld. AR contended that the purchases were shown as stock-in-trade and not claimed as expenditure. The Tribunal found no basis for the addition, noting that the purchases were not claimed as expenditure and the stock write-off was not included in the P & L Account. The Ld. CIT (A) was upheld in deleting the addition.

Separate Judgment by Judges:
N/A