2017 (2) TMI 1192 - AT - Income Tax

Bogus purchases addition - Held that - The information received from the sales tax authorities was a good starting point for making further investigation and to take it to logical end. But, he stopped at that juncture and did not collect further evidences. While making the disallowance of entire purchases, he did not doubt the sales made by the assessee. As per the established principles of tax jurisprudence no sales can be affected without purchases. Therefore, in our opinion there was no justification in disallowing the entire purchases. By producing the bank statement and stock statement, the assessee has discharged the burden cast upon her. We find that in all the cases, relied upon by the assessee, the Tribunal has held that where the AO accepts the sale made by the assessee, he cannot reject the entire purchases. It is true that the FAA has rejected the books, but, he has not given any reason for the rejection of the same. We would also like to mention that the FAA had without assigning any reason had disturbed the profit rates shown by the assessee. He should have called for an explanation of the assessee about fall in the GP for the year under consideration. There can be several reasons for variation in profit rates, so, only on that basis results of audited book should not be disturbed. - Decided in favour of the assessee.

Summary

Issues Involved:
Challenging the order of the CIT (A)-1, Thane, the assessee filed appeals for two AY.s, while another individual filed appeals for three AY.s. The main issue involved in all the appeals was the confirmation of addition of certain amounts related to purchases made from specific suppliers.

Detailed Analysis:

Issue 1: ITA/4696/Mum/2016, AY.2009-10:
The effective ground of appeal was the confirmation of an addition of ?6.35 lakhs related to purchases made from specific suppliers. The AO found that the suppliers were listed as suspicious dealers by the Sales Tax Department and were issuing bogus bills without delivering goods. The AO relied on affidavits/statements from the suppliers before the sales tax authorities. The FAA upheld the addition based on incomplete and unreliable books of accounts, invoking section 145(3) of the Act. During the hearing, the AR argued for the genuineness of purchases, while the DR highlighted the suppliers' admission of not having godowns. The ITAT found the AO lacked further investigation beyond initial suspicions and reversed the FAA's decision, citing established principles in tax jurisprudence.

Issue 2: ITA/4697/Mum/2016-AY.2010-11:
The appeal for this AY was similar to the previous one, with the only difference being the amount involved. Following the decision on the AY.2009-10 appeal, the ITAT allowed the appeal for this AY as well.

Issue 3: ITA/4693, 4694 & 4695/Mum/2016, AY.s. 2009-10; 2010-11 & 2011-12 (Manohar G. Kanda):
In this case, the appellant, husband of one of the earlier appellants, faced disallowances for different AY.s. The facts were identical to his wife's case, leading to the reversal of the FAA's decision in his favor.

In conclusion, all the appeals filed by the assessees were allowed based on the ITAT's analysis and reversal of the lower authorities' decisions.