2025 (1) TMI 1527 - AT - Income Tax

Addition u/s 68 in respect of bogus purchases - assessee failed to prove the creditworthiness and genuineness of the transactions / purchases as assessee has not produced E-way bills copies of invoices stock register proofs of payment etc - CIT(A) deleted addition - HELD THAT - CIT(A) recorded a clear cut finding of the fact that the assessee has produced before the AO all the evidences and records to prove the identity and creditworthiness of the suppliers and genuineness of the transactions and therefore discharged its onus cast upon it by the Act and AO has failed to carry out any meaningful enquiry into the evidences filed by the assessee. AR during the course of hearing submitted before us in respect of first supplier the assessee has furnished all evidences along with confirmation of accounts from the supplier thereby furnishing the payment details evidence of purchases such as purchase bills along with transport details weighing slips E-way bills etc. Adhar of the supplier extra of B2B entries in GSTR-2A of the assessee reflecting the transactions with the said supplier. We note that said supplier even responded to the notice issued u/s 133(6) of the Act and trhus furnished all the evidences. Similarly in the case of other supplier all the evidences were filed before the AO. Thus it is evident from the above that AO instead of carrying out any meaningful enquiry into these transactions has merely concluded that the assessee has not filed any evidences before the ld. AO whereas as a matter of fact all materials/evidences were available before the ld.AO - Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment is whether the deletion of the addition of 2,45,59,316/- by the Commissioner of Income Tax (Appeals) [CIT(A)] was justified. This addition was initially made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, concerning alleged bogus purchases reported by the assessee.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The primary legal provision involved is Section 68 of the Income Tax Act, which deals with unexplained cash credits. The AO is required to verify the identity, genuineness, and creditworthiness of the transaction. The judgment also references the precedent set by the Supreme Court in CIT vs. Durga Prasad More, which establishes that the apparent state of affairs is considered real unless proven otherwise.

Court's Interpretation and Reasoning

The Tribunal examined the approach taken by the AO and the CIT(A) in assessing the genuineness of the purchases. The AO's decision to treat the purchases as bogus was based on the assessee's failure to provide complete documentation, such as E-way bills and confirmations from suppliers. The CIT(A), however, found that the assessee had provided sufficient evidence to establish the identity, genuineness, and creditworthiness of the transactions, and that the AO had not conducted a thorough inquiry into the evidence provided.

Key Evidence and Findings

The CIT(A) observed that the assessee had submitted comprehensive documentation, including purchase bills, transport details, weighing slips, E-way bills, and GST reconciliation. The suppliers had also responded to notices issued under Section 133(6) of the Act, further supporting the genuineness of the transactions. The Tribunal noted that the AO did not adequately consider these documents and failed to conduct a meaningful inquiry.

Application of Law to Facts

The Tribunal applied the principles of Section 68, emphasizing the necessity for the AO to conduct a detailed examination of the evidence provided by the assessee. The Tribunal found that the AO's reliance on the absence of certain documents was insufficient to substantiate the claim of bogus purchases, especially when substantial evidence had been furnished by the assessee.

Treatment of Competing Arguments

The Tribunal considered the arguments from both the assessee's representative and the Department's representative. The assessee's representative provided detailed evidence and explanations for the purchases, while the Department's representative argued that the lack of certain documents justified the AO's decision. The Tribunal ultimately sided with the assessee, finding that the evidence provided was sufficient to establish the legitimacy of the transactions.

Conclusions

The Tribunal concluded that the CIT(A) was correct in deleting the addition made by the AO, as the assessee had discharged its burden of proof under Section 68 by providing adequate documentation and evidence. The AO's failure to conduct a thorough inquiry into the evidence presented was a critical factor in the Tribunal's decision.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning

The Tribunal noted, "The ld. CIT (A) recorded a clear cut finding of the fact that the assessee has produced before the ld. AO all the evidences and records to prove the identity and creditworthiness of the suppliers and genuineness of the transactions and therefore, discharged its onus cast upon it by the Act."

Core Principles Established

The judgment reinforces the principle that the AO must conduct a comprehensive inquiry into the evidence provided by the assessee when making additions under Section 68. It also underscores the necessity for the AO to consider all available evidence before concluding that transactions are not genuine.

Final Determinations on Each Issue

The Tribunal upheld the order of the CIT(A), dismissing the appeal by the Revenue. The Tribunal found no infirmity in the CIT(A)'s decision to delete the addition of 2,45,59,316/- made by the AO, as the assessee had adequately demonstrated the genuineness of the purchases in question.