2022 (9) TMI 236 - AT - Income Tax

Bogus purchases - assessee has shown purchases from A but actually procured the material from B . In this exercise, the assessee might have saved Excise Duty etc. - HELD THAT - As observed that if an assessee is maintaining complete details of the traded items, then total amount of purchases should not be disallowed. It can be explained by way of example, namely an assessee is trading iron rods, gudder patty, etc. It has been maintaining the complete details of purchases and sales on some investigation, it can be revealed that the assessee has shown purchases from A but actually procured the material from B . In this exercise, the assessee might have saved Excise Duty etc. Sale figure could not be achieved, if the material was not sourced from any other concern, but no such details are available before us. The assessee has neither produced these details before the AO that in the accounts it might have debited the purchases qua M/s. Vijaypath Vincom Pvt. Limited but actually procured the material from X , Y , Z concern. If that factor has been proved demonstrating the complete details of purchases as well as sales, then 100% of the purchases by terming it as bogus could not be added. In the absence of these details, we do not have any option except to confirm the orders of the revenue authorities. Accordingly, we dismiss the appeal of the assessee.

Summary

Issues: Appeal against addition of Rs.26,74,050 for bogus purchases and interest expenditure disallowance.

Analysis:
1. The assessee appealed against the addition of Rs.26,74,050 for alleged bogus purchases. The ld. Assessing Officer found discrepancies in purchases made from M/s. Vijaypath Vincom Pvt. Limited. Despite multiple notices, the party could not be traced. The ld. CIT(Appeals) confirmed the addition, leading to the appeal before the Tribunal.

2. The assessee contended that the ld. CIT(Appeals) erred in confirming the addition. The Tribunal noted that the appeal was ex-parte as the assessee failed to appear despite notices. The Registry highlighted a 211-day delay in filing the appeal, attributed to lockdown and COVID issues. The Tribunal, considering the Supreme Court's directive on limitation during the specified period, condoned the delay and proceeded to decide the appeal on merit.

3. The Tribunal reviewed the case, where the assessee, engaged in manufacturing and trading, declared income of Rs.3,46,112. The ld. Assessing Officer deemed purchases from M/s. Vijaypath Vincom Pvt. Limited as bogus. The Tribunal observed that the onus to prove the genuineness of transactions lay with the assessee. The ld. CIT(Appeals) upheld the addition for bogus purchases but deleted the disallowance of interest expenditure.

4. The Tribunal deliberated on the issue of disallowance of purchases. It noted that if an assessee maintains complete details of traded items, total purchases should not be disallowed. However, in this case, the assessee failed to provide evidence that purchases from M/s. Vijaypath Vincom Pvt. Limited were genuine. Without such details, the Tribunal upheld the orders of the revenue authorities, dismissing the appeal.

5. Ultimately, the Tribunal dismissed the appeal of the assessee concerning the addition of Rs.26,74,050 for alleged bogus purchases. The decision was pronounced in open court on August 25, 2022.