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2024 (7) TMI 1176 - AT - Income TaxEstimation of income - Bogus purchases - CIT(A) who determined the profit @ 5.47% on the total purchases - HELD THAT - It is a case where the appellant company has produced sufficient evidences in respect of the purchases made by it. Sufficient evidences have also been produced in respect of actual movement of the goods by filing the copy of the transport receipt, copy of Form C, trip sheet, e-way bill, kantaparchi, weighing slip, transportation bills, vehicle RC status. In fact it has also filed the GST paid by it by way of Reverse Charge Mechanism applicable on transportation charges. The assessee has also produced evidences regarding the expenses relating to the freight which has been duly accounted in the books of account and which has not been doubted by the AO and in fact deduction of the same has also been allowed. There is no evidence whatsoever even to suggest that the payment made to the suppliers have been routed back to the assessee in any form. The supplier s bank account quoted by the assessing officer nowhere shows that cash has been withdrawn from these accounts. On the contrary, the payments have been made to the various parties. The appellant company has also submitted the detailed analysis of the stock register, yield, production, sale, complete quantitative details. Revenue has not doubted on quantitative details of sale declared by the appellant company which has also been accepted. The profit earned by the appellant company from these sales have also been taxed. CIT(A) has also endorsed above contention of the appellant company. However, the ld. CIT(A) having endorsed the entire contentions of the assessee erred in directing to apply gross profit rate on the purchases which defies logic. CIT(A) having not pointed out any defect in any of the document or explanation submitted by the assessee in respect of the purchases made by it, the entire addition has to be deleted. Assessee has duly discharged their onus relating to purchases made by it from those purchase which have not been doubted by the AO by submitting the necessary evidence in support thereof. Hence, we decline to interfere with the order of the ld. CIT(A) to the extent of deletion of addition made on account of alleged bogus purchases. Thus, abundant evidences furnished by the assessee in order to substantiate the genuineness of the purchases, there was nothing whatsoever for the ld. CIT(A) to sustain gross profit addition on alleged purchases over and above the gross profit declared by the assessee. Gross profit determined by the CIT(A) is directed to be deleted. Addition made u/s. 56(2) - Addition of difference in purchase price and the stamp duty value of the property purchased by the assessee - Estimation of value of assets by Valuation Officer - HELD THAT - Addition has been made u/s 56(2)(x) of the Act, in such circumstances also, the addition made by the AO and confirmed by the CIT(A) is bad in law and liable to be deleted in the absence of the valuation being referred to the DVO for determination of the value of the property. It is pertinent to note here the provisions of Section of 56(2)(x) which also states that in case the assessee disputes the stamp duty value of the immovable property, the AO has no option but to refer the same to the Valuation Officer - CIT(A) has gone wrong in interpreting the word may so as to hold that assessing officer has an option to make or not to make a reference to the DVO. It is pertinent to note here that the assessee has repeatedly submitted that it was a distressed sale and therefore the value of such immovable property was less than the stamp duty value. The submission of the assessee has been arbitrarily ignored by the AO as well as by the CIT(A) and no efforts had been made to find out the value of the property either by the AO or CIT(A). In such circumstances of the case where the assessee has been continuously stating that the fair market value of the property is much lower than the stamp duty value, the AO has to mandatorily refer the valuation of the property to the Valuation Officer and having failed to do so, the addition made by the AO is unsustainable and liable to be deleted. There are a number of judgments on this issue wherein it has been held that once the assessee has disputed the stamp duty value and has submitted the valuation report, AO is duty bound to refer the valuation to DVO in case he proposes to make an addition. Having failed to do so, the addition is not sustainable and liable to be deleted. Addition made by AO and confirmed by CIT(A), in the absence of reference to the DVO is unsustainable and hence liable to be deleted. Decided in favour of assessee.
Issues Involved:
1. Validity of the assessment order passed by the AO. 2. Alleged bogus purchases and the addition made by AO. 3. Difference between purchase price and stamp duty value of the property. Detailed Analysis: 1. Validity of the Assessment Order Passed by the AO: The assessee contended that the assessment order was invalid as it was passed without a Valid Document Identification Number (DIN), was undated, and not digitally signed. The CIT(A) rejected these contentions, stating that the assessment was conducted under section 153A r.w.s 143(3) and had valid jurisdiction. The Tribunal upheld the CIT(A)'s decision, confirming that the assessment order was legally valid and properly executed. 2. Alleged Bogus Purchases: The primary issue was regarding the disallowance of purchases made by the assessee from various parties, which the AO considered bogus based on statements from Mr. Manoj Dudeja and post-search field inquiries. - Search and Seizure Operation: A search was conducted at the assessee's premises on 23.03.2021, but no incriminating material was found. The AO disallowed purchases from 19 parties based on statements and non-receipt of replies from some parties. - CIT(A) Decision: The CIT(A) partially sustained the AO's addition by applying a gross profit rate of 5.47% on the total purchases, rather than disallowing the entire amount. The assessee argued that no purchases could be treated as bogus, and the Tribunal agreed, stating that the AO's reliance on statements without corroborative evidence was insufficient. The Tribunal found that the assessee had provided substantial evidence, including invoices, transport receipts, and GST compliance documents, to prove the genuineness of the purchases. - Tribunal's Conclusion: The Tribunal concluded that the entire addition based on alleged bogus purchases was unsustainable. It directed the deletion of the gross profit addition determined by the CIT(A), as the assessee had adequately substantiated the genuineness of the purchases. 3. Difference Between Purchase Price and Stamp Duty Value of the Property: The AO made an addition of Rs. 2,35,98,600/- for the difference between the purchase price of land and its stamp duty value, invoking section 50C. - Assessee's Argument: The assessee argued that the fair market value of the property was lower than the stamp duty value, supported by a valuation report from a registered government-approved valuer. The assessee contended that section 50C was inapplicable as it applies to the seller, not the purchaser, and that the AO should have referred the matter to the DVO for valuation. - CIT(A) Decision: The CIT(A) upheld the addition, applying section 56(2)(x) instead of section 50C, and stated that referring the matter to the DVO was at the AO's discretion. - Tribunal's Conclusion: The Tribunal found that the CIT(A) erred in changing the applicable section and that the AO was required to refer the valuation to the DVO when the assessee disputed the stamp duty value. The Tribunal cited multiple judicial precedents supporting mandatory reference to the DVO in such cases. Consequently, the Tribunal directed the deletion of the addition made by the AO and confirmed by the CIT(A). Conclusion: The Tribunal allowed all appeals filed by the assessee, rejecting the additions made by the AO on account of alleged bogus purchases and the difference in property valuation. The Tribunal dismissed the appeals filed by the Revenue, affirming that the assessee had provided sufficient evidence to substantiate its claims.
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