2013 (1) TMI 88 - HC - Income Tax

Bogus purchases - suppliers were nonexistent and one of the parties had denied having any business dealings with the Assessee Company - ITAT deleted the addition made by AO - Held that - From the order of the Tribunal it can be concluded that it has deleted the additions on account of bogus purchases not only on the basis of stock statement i.e. reconciliation statement, but also in view of the other facts. Books of Accounts of the assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department i.e. Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were infact made. Merely because the suppliers have not appeared before the AO or the CIT(A), one cannot conclude that the purchases were not made by the assessee. Disallowance merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them is not warranted- thus the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of ₹ 1.33 crores was not bogus - in favour of assessee.

Summary

Issues:
Challenge to Tribunal's order under Section 260A of the Income Tax Act for Assessment Year 2001-02 - Deletion of addition for bogus purchases.

Analysis:
The appellant Revenue challenged the Tribunal's order dated 30.04.2010 concerning Assessment Year 2001-02 under Section 260A of the Income Tax Act. The main issue was whether the Tribunal was correct in deleting the addition made by the Assessing Officer of Rs.1,33,41,917/- towards bogus purchases, despite the suppliers being nonexistent and one party denying any business dealings with the Assessee Company.

The respondent-assessee had initially declared a total income of Rs.42.08 lacs for the Assessment Year 2001-02. However, the Assessing Officer disallowed an expenditure of Rs.1.33 crores due to non-genuine purchases from 7 parties, leading to an assessment of Rs.1.87 crores. The Commissioner of Income Tax (Appeals) upheld the disallowance of Rs.1.33 crores as bogus purchases in an order dated 19.08.2004.

Subsequently, the respondent-assessee appealed to the Tribunal, which, in its order dated 30.04.2010, found in favor of the respondent. The Tribunal considered various pieces of evidence provided by the respondent, including letters of confirmation of suppliers, bank statements showing payments, invoices for purchases, and stock reconciliation statements. Notably, a significant portion of sales was made to a Government Department, and the Books of Account were not rejected. Therefore, the Tribunal concluded that the purchases were genuine and deleted the disallowance of Rs.1.33 crores.

The appellant argued that the Tribunal should not have solely relied on the stock reconciliation statement to determine the genuineness of purchases. However, the High Court noted that the Tribunal's decision was well-reasoned, considering all relevant facts. The High Court emphasized that the absence of suppliers before the Assessing Officer or CIT(A) did not automatically invalidate the purchases. The Tribunal's order was deemed sound as it took into account all available evidence and circumstances.

Ultimately, the High Court found that the question raised was not a substantial question of law and dismissed the appeal, upholding the Tribunal's decision to delete the addition for bogus purchases. No costs were awarded in this matter.