2019 (4) TMI 419 - HC - Income Tax

Power of Tribunal - AO made addition as non-genuine purchases of two parties - enquiry letters issued to the aforesaid two parties, had been returned unserved - CIT(A) direct AO to conduct an inquiry with the AO having jurisdiction over the PAN of the said parties and ascertain whether return of income has been filed for the relevant year by the party and if so, he had disclosed the turnover of business in such return, in excess of amount of purchases, shown by the assessee, as have been made from the said party - HELD THAT - The Tribunal, being the last court of fact and law, ought to have considered the materials on record, especially, when it has come on record that the said party has not filed the return of income. The Tribunal was swayed away by the contention of the respondent assessee, but lost sight of the fact that the Revenue has also raised the issue of addition of ₹ 3,38,72,852/- to be non-genuine purchases. The matter is remanded back to the Tribunal concerned to re-hear the matter afresh and decide the appeal on merits.

Summary

Issues:
1. Whether the ITAT erred in not setting aside the issue of addition of non-genuine purchases to the file of the CIT(A)?
2. Whether the CIT(A) erred in deleting the addition made by the AO on account of unproved purchases?
3. Whether the CIT(A) erred in deleting the addition made by the AO on account of inflated purchases?

Analysis:

1. The appellant filed an appeal against the ITAT's judgment regarding the addition of non-genuine purchases to the file of the CIT(A). The respondent, engaged in the business of wheat products, declared income for the year under consideration. Notices under sections 143(2) and 142(1) were issued, and verification notices under section 133(6) were sent to parties with unverified purchases. The Assessing Authority found discrepancies and added the amount to the income as non-genuine purchases. The CIT(A) partly allowed the appeal, directing further inquiry. The Tribunal set aside the direction for an inquiry by the Assessing Officer. The High Court remanded the matter back to the Tribunal for a fresh hearing, emphasizing the importance of considering the non-filing of income returns by the concerned party.

2. The CIT(A) had deleted the addition made by the AO on account of unproved purchases, citing lack of proof of transactions and unserved notices to suppliers. The High Court noted that the CIT(A) directed an inquiry by the Assessing Officer, but the subsequent assessment revealed non-filing of returns by the suppliers. The High Court found the CIT(A) overlooked the issue of non-genuine purchases, leading to the remand of the matter for a fresh hearing by the Tribunal.

3. The CIT(A) also deleted the addition made by the AO on account of inflated purchases, despite unserved notices to suppliers. The Tribunal's decision to set aside the direction for an inquiry was challenged. The High Court found that the Tribunal should have considered the non-filing of income returns by the concerned party. Consequently, the High Court set aside the Tribunal's judgment and remanded the matter for a fresh hearing to decide the appeal on merits, ruling in favor of the Revenue against the respondent.

In conclusion, the High Court remanded the case back to the Tribunal for a fresh hearing, emphasizing the significance of considering the non-filing of income returns by the suppliers in determining the genuineness of purchases, ultimately ruling in favor of the Revenue against the respondent.