2024 (10) TMI 999 - AT - Income Tax

Bogus purchases u/s 69C - transaction with Shri Ganpati Enterprises, a non-existing concern - HELD THAT - Since assessee is dealing with scrap material it has to deal with unorganized sector and in that process, one of the suppliers who is a scrap vendor obtained certain bills from Shri Ganpati Enterprises. In the investigation in the case of Manoj Kumar who was controlling several entities which were not in existence and it is found that Shri Ganpati Enterprises is one of such enterprises through whom Manoj Kumar has issued bills to other parties. As per the facts on record, scrap vendors have received bogus bills from Mr. Manoj Kumar and submitted the same to the assessee. It is not clear whether these bills were obtained by the assessee or supplied by such scrap supplier who belongs to unorganized sector. It is also relevant to notice that assessee has purchased scraps from several parties to the extent of Rs. 24.23 crores and Assessing Officer has found discrepancy only in the case of Rs. 4,92,806/-. This is absolutely very negligent compared to total material purchased by the assessee i.e. it is only 0.2% of the total purchases. Thus we are inclined to treat the above purchases questionable but cannot be treated as non-genuine. In the result, we allow the grounds raised by the assessee.

Summary

Issues:
Appeal against addition of expenses as bogus purchases by Assessing Officer, Sustained additions by CIT (A), Grounds of appeal raised by assessee, Validity of purchases from Shri Ganpati Enterprises, Unorganized sector challenges in scrap material procurement, Allegations of obtaining bogus invoices, Treatment of purchases as questionable but not non-genuine.

Analysis:
The appeals were filed by the assessee against the order of the Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre for various assessment years. The case involved the addition of expenses as bogus purchases by the Assessing Officer based on information regarding accommodation entries from a non-existing concern, Shri Ganpati Enterprises. The Assessing Officer reopened the case under section 147 of the Income-tax Act, as the assessee could not substantiate the transactions with documentary evidence. The CIT (A) sustained the additions made by the Assessing Officer, leading to the appeal before the ITAT Dehradun.

During the hearing, the assessee's representative argued that the purchases from Shri Ganpati Enterprises were due to challenges in the unorganized scrap material sector, where suppliers may not have proper documentation. The representative contended that even if the purchases were questionable, only a certain percentage should be disallowed, not the entire amount. On the other hand, the Revenue's representative asserted that the invoices were bogus and obtained to reduce profits for tax purposes, supporting the lower authorities' findings.

Upon review, the ITAT observed that the assessee, engaged in manufacturing M.S. Ingots, had significant revenue and material consumption. It noted that the purchases from Shri Ganpati Enterprises constituted a negligible percentage of the total material purchased. The ITAT found that while the purchases were questionable, they could not be deemed non-genuine. Consequently, the ITAT allowed the grounds raised by the assessee and allowed the appeal for the assessment year in question.

The ITAT further extended its findings to other assessment years with similar facts, allowing the appeals for those years as well. The judgment concluded by allowing all the appeals filed by the assessee, indicating a favorable outcome for the assessee across multiple assessment years.