2024 (3) TMI 520 - AT - Income Tax

Estimation of income - Bogus purchases - non rejection of books of accounts - HELD THAT - AO has accepted the sale receipts but disallowed the entire purchases. There could not have been any sales without purchases. The books of accounts have not been rejected by the AO, as required u/s 145(3) of the Income Tax Act, 1961, without rejecting the books of accounts and without estimating any gross profit, while accepting the entire sales at the same time disallowing the entire purchases is beyond any rhyme reasons sans logic. Hence, the addition made is liable to be deleted. Appeal of the assessee is allowed.

Summary

Issues Involved:
The judgment involves the assessment of alleged bogus purchases made by the assessee, leading to additions in income. The primary issue is whether the purchases were genuine or not, based on the evidence and explanations provided by the assessee.

Assessment of Alleged Bogus Purchases:
The assessee, engaged in the export business, declared income of Rs. 7,91,720/- and made purchases totaling Rs. 42,90,585/- from two parties towards the end of the financial year. The Assessing Officer found these purchases to be bogus after conducting inquiries and examinations. Consequently, the amount was disallowed and added to the assessee's income.

Decision of CIT(A) and Tribunal:
The CIT(A) affirmed the AO's order, stating that the supplier firms were non-existent at the given addresses and the assessee failed to prove the genuineness of the transactions. The CIT(A) upheld the addition of Rs. 42,90,805/-, considering discrepancies in bills, lack of evidence for software export, and failure to produce complete books of account.

Tribunal's Analysis and Decision:
The Tribunal examined various aspects raised by the CIT(A) regarding the alleged bogus purchases. It found that the bills being computer-generated, similar font and design, and absence of telephone numbers did not conclusively prove the purchases were bogus. The Tribunal also noted discrepancies in the TIN number analysis and payment details, highlighting that some payments were made in the subsequent year.

Tribunal's Verdict and Rationale:
The Tribunal disagreed with the CIT(A)'s findings and concluded that the assessee had provided confirmations and details of transactions. It emphasized that sales could not occur without corresponding purchases and criticized the AO's decision to disallow all purchases without rejecting the books of accounts. Consequently, the Tribunal allowed the appeal, directing the deletion of the addition made by the AO.

This summary provides a detailed overview of the legal judgment involving the assessment of alleged bogus purchases by the assessee, the decisions of the CIT(A) and Tribunal, and the final verdict in favor of the assessee based on the Tribunal's analysis and rationale.