2024 (10) TMI 1148 - AT - Income Tax

Estimation of income - Addition of Bogus Purchases - HELD THAT - The party listed as serial no. 20 by Ld. AO is others for Rs.209.82 Lacs for which even the names of the suppliers have not been identified by AO. The party wise list of others have nowhere been provided to the assessee and there is no finding with respect to these parties. Therefore, the addition, to that extent, has rightly been deleted by Ld. CIT(A). Purchases made from 4 entirely bogus parties aggregate to Rs.5,11,56,526/-. The purchases from remaining 15 parties are Rs.5,35,20.325/- which are partially bogus only. The assessee has already offered additional income of Rs.5,53,25,652/- in its return of income. Since the remaining purchases of Rs.5,35,20,325/- as made from 15 parties are partially bogus, to plug the leakage of revenue, we estimate addition against the same @10% which comes to Rs.53,52,032/-. The complete bogus purchase from 4 parties aggregate to Rs.5,11,56,526/- which stand sustained by us. Thus, the total addition as estimated by us would be Rs.5,65,08,558/-. The assessee has already offered additional income of Rs.5,53,25,652/-. Therefore, the balance addition as sustained by us would be Rs.11,82,906/-. No relief could be granted against GST component. The Ld. AO is directed to restrict the impugned additions to the extent of Rs.11,82,906/-. Disallowance of sub-contractor s expenses - We find that such expenses have been quantified at Rs.157 Lacs whereas the assessee has admitted partial income to the extent of Rs.140.18 Lacs only. The remaining component is GST component which also could not be allowed to the assessee on the ground that expense itself is bogus. The bogus GST component so paid has been adjusted from output GST liability.The assessee has avoided GST payment to that extent. Therefore, no interference is required in the orders of lower authorities, on this issue. The grounds raised by the assessee stand dismissed. Addition of unexplained investment u/s 69 - addition has been made solely on the basis of loose excel sheet found during search and statements record therein - HELD THAT - As in Kranti Impex Pvt. Ltd. 2018 (3) TMI 424 - ITAT MUMBAI held that when the seized papers were undated having no acceptable narration and did not bear the signature of any party, they are in the nature of dumb documents having no evidentiary value and could not be taken to be the sole basis for determination of undisclosed income of the assessee. The onus would be on revenue to collect cogent evidences to corroborate the nothings therein. Impugned additions as made by AO merely on the basis of loose sheets without any corroboration thereof, was not adequate enough to draw adverse inference of unaccounted loans by the assessee-firm. Therefore, we delete the same and allow the corresponding grounds as raised by the assessee. AO is directed to recompute the income of the assessee in terms of our adjudication.

Summary

Issues Involved:

1. Addition of Bogus Purchases for Rs.493.51 Lacs.
2. Disallowance of sub-contractor's expenses for Rs.16.82 Lacs.
3. Addition of unexplained investment u/s 69 for Rs.9190 Lacs.
4. Relief granted by Ld. CIT(A) on account of bogus purchases for Rs.209.82 Lacs.

Issue-wise Detailed Analysis:

1. Addition of Bogus Purchases:

The addition of Rs.493.51 Lacs was based on excel sheets found during a search, indicating bogus purchases. The sheets, seized from a personal computer, revealed cash received against bogus purchases recorded in the books. The CIT(A) sustained the addition of Rs.493.51 Lacs due to lack of evidence from the assessee to prove the genuineness of these purchases. However, the CIT(A) deleted the addition of Rs.209.82 Lacs categorized as "others" due to the absence of party-wise details provided by the AO. The Tribunal found that the purchases from four parties were entirely bogus, while those from fifteen other parties were partially bogus. The Tribunal estimated an addition of 10% on partially bogus purchases, leading to a total addition of Rs.5,65,08,558/-, with the assessee having already offered additional income of Rs.5,53,25,652/-. Thus, the Tribunal sustained a balance addition of Rs.11,82,906/- and directed the AO to restrict the additions accordingly.

2. Disallowance of Sub-contractor's Expenses:

The disallowance of Rs.16.82 Lacs pertained to the GST component on bogus sub-contractor expenses. The assessee had admitted additional income of Rs.140.18 Lacs, but the GST component was not offered to tax. The Tribunal found that the expenses were bogus, and the GST component was adjusted against output GST liability, effectively avoiding GST payment. Consequently, the Tribunal upheld the disallowance, dismissing the assessee's grounds.

3. Addition of Unexplained Investment u/s 69:

The addition of Rs.9190 Lacs was based on excel sheets indicating unaccounted loans. The sheets contained details of accounted and unaccounted loan transactions. The AO added the sum as unexplained investment, but the assessee contended that the sheets were for management information and not actual transactions. The Tribunal noted that the sheets lacked corroborative evidence, such as dates or parties involved, and deemed them as "dumb documents" without evidentiary value. The Tribunal also found inconsistencies in statements from key individuals, and concluded that the addition was based on suspicion and lacked corroborative evidence. Referring to legal precedents, the Tribunal deleted the addition, allowing the assessee's grounds.

4. Relief on Bogus Purchases for Rs.209.82 Lacs:

The CIT(A) granted relief for Rs.209.82 Lacs due to the absence of party-wise details and categorization as "others" without explanation. The Tribunal upheld this relief, finding no basis for sustaining the addition.

Conclusion:

The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal, directing a recomputation of the assessee's income in line with its findings. The Tribunal emphasized the need for corroborative evidence to substantiate additions and found the reliance on uncorroborated excel sheets insufficient for adverse inferences. The order was pronounced on 17th October, 2024.