2022 (11) TMI 406 - AT - Income Tax

Disallowance of purchases - allegation of accommodation entry - supplier being non genuine dealer - HELD THAT - Assessee has purchased M.S. plates from various dealers out of which M/s V3 Enterprises was alleged to be an accommodation entry provider. As evident from the record that the assessee has furnished the details of the suppliers along with their addresses and the price quoted for the materials purchased. The only contention of the department is that the alleged dealer s name appeared in the website of sales tax department, Government of Maharashtra to be non genuine dealer. Apart from this, AO has not shown any corroborative evidences to prove that the said transaction is only a bogus transaction for the purpose of providing accommodation entry. The assessee, on the other hand, has proved the genuineness by furnishing the details of cheque, the bank account number, the invoices, delivery challans and other details evidencing the purchase of M.S. plates. The assessee has relied on the decision of DCIT vs Adinath Industries. 1999 (10) TMI 8 - GUJARAT HIGH COURT which held that the assessee cannot be penalised for the action of supplier and that the assessee cannot be expected to know the commercial rationale on how this supplier operates its bank account which was considered by the Ld.CIT(A). CIT(A) has relied on the decision of the jurisdictional High Court in the case of CIT vs Nikunj Eximp Enterprises (P) Ltd 2013 (1) TMI 88 - BOMBAY HIGH COURT on the ground that the assessee cannot be faulted if the seller is not traceable and also that it is not the burden of the assessee to investigate the genuineness of the seller or their business transaction. Respectfully following the above judicial precedent, we hold that there is no infirmity in the order of Ld.CIT(A). The grounds of appeal filed by the Revenue are dismissed.

Summary

Issues:
1. Disallowance of purchases from V3 Enterprises by the Assessing Officer.

Analysis:
The appeal before the Appellate Tribunal ITAT Mumbai involved the issue of disallowance of purchases from V3 Enterprises made by the Assessing Officer. The Revenue filed the appeal against the order of the Ld. Commissioner of Income-tax (Appeals)-3, Mumbai pertaining to the assessment year 2009-10. The matter was recalled after being dismissed earlier due to low tax effect, and it was reconsidered on its merits. The main contention in the appeal was that the Ld. CIT(A) erred in deleting the disallowance of purchases from V3 Enterprises.

The assessee, engaged in manufacturing and installation of various industrial equipment, had filed its return of income declaring total income under normal provisions and section 115JB of the Income-tax Act, 1961. The case underwent scrutiny, and the assessment order determined the total income. Subsequently, the assessment was reopened under section 147, and a disallowance related to payments made to V3 Enterprises for M.S. plates was made. The Ld. CIT(A) dismissed the appeal regarding the reopening of the assessment but deleted the addition made by the Assessing Officer concerning purchases from V3 Enterprises.

The Revenue contended that V3 Enterprises was listed as a non-genuine dealer by the sales-tax department and was involved in issuing bogus sales invoices. The Revenue opposed the deletion of the addition made by the Assessing Officer, alleging that the transactions with V3 Enterprises were not genuine and were merely accommodation entries.

On the other hand, the assessee provided detailed documentation to support the genuineness of the transactions with V3 Enterprises. The assessee presented ledger accounts, invoices, delivery challans, payment details, and information on other suppliers of M.S. plates. The assessee argued that the transactions were legitimate and had fulfilled its burden of proof before the authorities.

After considering both parties' submissions and examining the evidence, the Tribunal concluded that the assessee had purchased M.S. plates from various dealers, including V3 Enterprises. The department's claim of V3 Enterprises being a non-genuine dealer was not substantiated with corroborative evidence. The Tribunal found that the assessee had provided sufficient documentation to prove the genuineness of the transactions. Relying on relevant judicial precedents, the Tribunal upheld the Ld. CIT(A)'s decision to delete the disallowance of purchases from V3 Enterprises. Consequently, the appeal filed by the Revenue was dismissed.

In conclusion, the Tribunal's decision favored the assessee by accepting the genuineness of the transactions with V3 Enterprises and dismissing the Revenue's appeal against the deletion of the disallowance made by the Assessing Officer.