2016 (5) TMI 707 - AT - Income Tax

Addition made on account of bogus purchases - Held that - As decided in M/s Kolte Patil Developers Ltd Versus Dy. Commissioner of Income Tax 2015 (3) TMI 363 - ITAT PUNE once the assessee had prevented the Assessing Officer from carrying on any exercise of any kind of verification, then on a later date, the assessee cannot take the stand that no such addition is warranted in the absence of any verification exercise carried out by the Assessing Officer. The assessee has failed to furnish the confirmation from the parties and the Sales Tax Department has not been able to trace the said parties. In the absence of any confirmation being filed by the said parties or the evidence of the bank statement of the said parties having been placed on record by the assessee to prove its case, merely because such view has been taken in any other decision, the same cannot be applied where the assessee has not discharged its onus. Even before us, the assessee has not furnished any evidence of payment except for making the statement that the amounts were paid by way of cheques. In view thereof, we find no merit in the said stand of the assessee. Thus we reverse the order of CIT(A) and uphold the addition made by the Assessing Officer on account of bogus purchases - Decided against assessee. Addition made on account of commission expenses - Held that - The said amount was added as income of the assessee on the surmise that it was due as on close of the year. The assessee has furnished before the CIT(A) and also before the Assessing Officer sufficient evidence to prove that the liability of ₹ 1,50,000/- has been discharged in the succeeding year. In the totality of the above said facts and circumstances, where the amount of commission is claimed to have been paid after realization of the amount due to the assessee by the said commission agent, we find no merit in the grounds of appeal raised by the Revenue and the same are dismissed - Decided against revenue

Summary

Issues Involved:
1. Deletion of addition on account of bogus purchases from M/s. R.K. Ispat.
2. Deletion of addition on account of commission expenses.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Bogus Purchases from M/s. R.K. Ispat:

The Revenue's appeal contested the deletion of an addition of ?43,62,275/- made on account of bogus purchases from M/s. R.K. Ispat. The Assessing Officer (AO) noted that the purchases were made from M/s. R.K. Ispat, but the payment remained outstanding. The AO's letter to M/s. R.K. Ispat was returned undelivered, and the assessee failed to provide confirmation or delivery evidence. Consequently, the AO treated the purchases as bogus, adding ?43,62,275/- to the total income.

The CIT(A) considered the factual aspects and noted the assessee's claim that the material supplied was not of requisite standard, causing payment delays. The CIT(A) observed that the work executed by the assessee could not have been completed without the material and verified the utilization of goods with work orders. Hence, the CIT(A) found the purchases genuine and deleted the addition.

The Tribunal reviewed similar cases, including Shri Mukeshkumar Pukhraj Mehta Vs. ITO and M/s. Kolte Patil Developers Ltd. Vs. DCIT, where the Pune Bench of Tribunal upheld additions on account of bogus purchases. The Tribunal concluded that the assessee failed to provide sufficient evidence of delivery and payment, rendering the purchases unverifiable. Therefore, the Tribunal reversed the CIT(A)'s order and upheld the AO's addition of ?43,62,275/- as bogus purchases.

2. Deletion of Addition on Account of Commission Expenses:

The Revenue also appealed against the deletion of an addition of ?1,50,000/- on account of commission expenses. The AO added the amount, questioning the genuineness of the expenses as they were outstanding at the year's end and paid subsequently.

The CIT(A) allowed the claim, noting that the commission was paid in the succeeding year after realization of consideration for the work performed. The Tribunal upheld the CIT(A)'s decision, finding that the liability was discharged in the succeeding year with sufficient evidence provided by the assessee. Thus, the Tribunal found no merit in the Revenue's appeal on this issue and dismissed it.

Conclusion:

The Tribunal's final order partly allowed the Revenue's appeal, upholding the addition of ?43,62,275/- for bogus purchases while dismissing the addition of ?1,50,000/- for commission expenses. The judgment was pronounced on April 7, 2016.