2021 (9) TMI 995 - AT - Income Tax

Bogus purchases - Proof of identity, genuineness and creditworthiness of the parties - CIT-A confirmed addition in name of only one party - HELD THAT - Assessee during the appellate proceedings before the CIT(A) has filed details in respect of identity of the party, address of party, PAN details, mode of payment through banking channel along with copy of bank accounts as well as confirmations of the said accounts except in the case of purchases made from M/s Apex Marketing Company and the rest of the evidences related to each party were produced which was never doubted by the Assessing Officer when called for remand report. CIT(A) has given a categorical finding that the revenue has accepted the transactions from such parties in the past and the assessee had made purchases on regular basis and these were regular parties from preceding years. In fact the AO has taken cognizance of the opening balances of the purchases pertaining to earlier years which were not corresponding to year under consideration while making the addition. After perusal of the evidences it is found that the assessee has filed proper details before the Assessing Officer and has proved identity, genuineness and creditworthiness of the parties except the purchases made from M/s Apex Marketing Company. Thus, the CIT(A) was correct in reducing the addition to that extent - Decided against revenue.

Summary

Issues:
Appeal against CIT(A) order reducing addition on account of bogus purchases.

Analysis:
The appellant, a proprietor engaged in Civil Construction Activities, filed an appeal against the CIT(A) order reducing the addition from ?3,25,35,521 to ?9,76,321 made by the Assessing Officer on account of bogus purchases for the assessment year 2012-13. The Assessing Officer had made various additions including on account of bogus purchases, disallowances, and interest. The CIT(A) partly allowed the appeal of the assessee, leading to the current appeal by the Revenue.

During the proceedings, the Revenue argued that the confirmations provided by the assessee were not proper evidence as some were unsigned and lacked accompanying bills, casting doubt on the evidence. On the other hand, the assessee contended that the audited books of accounts were never questioned, and all purchases were used in the business to generate revenue, supported by banking channel payments. The assessee highlighted that the Assessing Officer's actions distorted the profit picture without adequate notice, violating natural justice principles.

After hearing both parties and examining the evidence, it was found that the assessee had provided proper details regarding the identity, address, and payment mode for most parties except one. The CIT(A) noted that the revenue had accepted transactions from these parties in the past, and the assessee had established the genuineness and creditworthiness of the parties. The CIT(A) correctly reduced the addition based on the evidence presented, leading to the dismissal of the Revenue's appeal.

In conclusion, the appeal by the Revenue against the CIT(A) order reducing the addition on account of bogus purchases was dismissed by the Appellate Tribunal ITAT Delhi. The Tribunal found that the assessee had substantiated the genuineness of most purchases, except for one party, justifying the reduction in the addition amount. The decision was based on the evidence provided and the past acceptance of transactions from the parties involved.