2017 (10) TMI 1157 - AT - Income Tax

Bogus purchases - Held that - On this aspect the assessee is making a grievance that AO failed to verify the fact of the assessee paying an advance of ₹ 14,47,20,500/- to M/s A.K. Traders and as against the said advance amount M/s A.K. Traders supplied the material worth ₹ 2,91,28,413/-, as such, in respect of the balance, litigation before the Court was initiated while the balance amount of ₹ 11,55,92,087/- was shown in the balance sheet on the asset side as amount recoverable. The other grievance of the assessee is that the Ld. CIT (A) also failed to consider the written submission made by the assessee on 23.03.2015, where an attempt was made to prove the genuineness of the purchases from M/s A.K. Traders and M/s G.S. Steels by furnishing the bills, vouchers etc. Having considered opinion that the verification of the facts pleaded by the assessee will go to the root of the case and has a bearing on the just tax liability of the assessee. However, since it is not possible for verification of such fact in this forum, we deem it just and proper to set aside the matter to the file of the AO for verifying the facts pleaded by the assessee with reference to the documents produced by him before the Ld. CIT (A). With this view of the matter, we restore the matter to the file of the AO for consideration afresh on the above lines by giving an opportunity to the assessee to put forth their case and evidence. Since we dispose of the appeal itself, stay petition becomes infructuous. Hence, it is liable to be dismissed.

Issues Involved:
- Validity of order passed by Ld. Commissioner of Income Tax (Appeals)
- Addition of income based on alleged bogus purchases
- Addition of commission paid to suppliers
- Justification of addition on account of goods supplied by specific parties
- Lack of opportunity to examine suppliers
- Legality of penalty proceedings under section 271(1)(c) of the Act

Validity of Order Passed by Ld. Commissioner of Income Tax (Appeals):
The assessee challenged the order dated 16.01.2017 passed by the Ld. CIT (A) on various grounds. The Ld. AR argued that the AO relied on a statement obtained from a third party without providing the assessee an opportunity to cross-examine. The AR contended that no documentary evidence was found during the search to prove the purchases were not genuine. The assessee also claimed that the Ld. CIT (A) failed to consider submissions and passed the order confirming the addition of income without proper verification. The Ld. DR, however, supported the orders of the authorities below. The ITAT found that the verification of facts pleaded by the assessee was crucial for determining the tax liability. Consequently, the matter was remanded to the AO for fresh consideration based on the documents produced by the assessee.

Addition of Income Based on Alleged Bogus Purchases:
The AO disallowed an expenditure of ?2,91,28,413 treating it as bogus purchases. The assessee contended that the purchases were supported by bills and payments were made through account payee cheques. The AO, however, relied on statements from third parties suggesting accommodation entries. The ITAT observed that the assessee's low profit rate of less than 1% in Real Estate Development business raised concerns. The matter was remanded to the AO for verifying the facts related to the purchases and the advance given to suppliers.

Addition of Commission Paid to Suppliers:
The Ld. CIT (A) directed the AO to add a commission paid to one of the suppliers under section 69C of the Act. The assessee argued against this addition, claiming that the commission was legitimate. The ITAT did not provide a specific ruling on this issue in the summary.

Justification of Addition on Account of Goods Supplied by Specific Parties:
The Ld. CIT (A) confirmed the addition of ?2,91,28,413 for goods supplied by specific parties. The assessee contended that the balance amount was recoverable and pending litigation existed. The ITAT found that further verification was necessary, leading to the remand of the matter to the AO for detailed examination.

Lack of Opportunity to Examine Suppliers:
The assessee raised concerns about not being allowed a reasonable opportunity to examine the suppliers. The ITAT noted this grievance but primarily focused on the need for verification by the AO in the remand order.

Legality of Penalty Proceedings under Section 271(1)(c) of the Act:
The assessee challenged the legality of penalty proceedings initiated under section 271(1)(c) of the Act. The ITAT did not provide a specific ruling on this issue in the summary.

In conclusion, the ITAT remanded the matter to the AO for fresh consideration regarding the disputed additions and directed a thorough verification of the facts presented by the assessee. The stay petition was dismissed as infructuous, and the appeal of the assessee was allowed for statistical purposes.

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