2023 (10) TMI 1020 - AT - Income Tax

Estimation of income - bogus purchases - AO applied gross profit rate of 7.99% on the purchases thereby making an addition - HELD THAT - We find that the assessee has executed a Government projects qua school buildings during the year. We note that the copy of the certificate of completion of the said works from the Executive Engineer, Social Sector, PW Directorate and PW(CB) Directorate were furnished certifying that the material purchased has been used in the construction of these buildings. We also note that the assessee has filed all the evidences before the AO as well as before CIT(A) and both the authorities below have failed to carry out any enquiry or investigation into the bills/evidences filed by the assessee and simply relied on the report of the Investigation wing. Order passed by Ld. CIT(A) confirming the addition without any substantive basis is wrong and cannot be sustained. Accordingly, we direct the AO to delete the said addition by setting aside the order passed by Ld. CIT(A). Assessee appeal allowed.

Summary

Issues involved:
The appeal against the order of the Learned Commissioner of Income-tax (Appeals)-NFAC, Delhi for the Assessment Years 2013-14 & 2014-15.

Issue 1: Addition of unexplained expenditure in respect of bogus purchases

The issue raised in ground no. 3 is against the confirmation of addition of Rs. 1,32,877/- being 7.99% of the disputed purchases as unexplained expenditure in respect of bogus purchases under section 69C of the Act.

The assessee, engaged in civil contracting for Govt projects, filed the return of income declaring total income of Rs. 18,80,230/-. The Assessing Officer (AO) converted limited scrutiny to complete scrutiny upon finding accommodation entries in the form of bogus bills amounting to Rs. 16,63,045/-. Despite the assessee's submissions with bills, vouchers, and government engineer certifications proving utilization of materials in project construction, the AO added Rs. 1,32,877/- to the income under section 69C. The Learned Commissioner of Income-tax (Appeals) upheld this decision without proper consideration.

Upon review, it was found that the material purchased was indeed used in Govt projects as certified by the Executive Engineer. The lower authorities failed to investigate the evidence provided by the assessee and solely relied on the investigation wing's report. The Tribunal held that the addition lacked substantive basis and directed the AO to delete it, thereby allowing the appeal filed by the assessee.

Issue 2: Similarity in decision for AY 2013-14

The issue in ITA No. 827/KOL/2023 mirrors that of ITA No. 828/KOL/2023. The Tribunal's decision in ITA No. 828/KOL/2023 applies mutatis mutandis to this appeal as well, resulting in the allowance of both appeals filed by the assessee.

In conclusion, the Appellate Tribunal ITAT Kolkata allowed the appeals filed by the assessee against the orders of the Learned Commissioner of Income-tax (Appeals) for the Assessment Years 2013-14 & 2014-15, directing the deletion of the addition of unexplained expenditure in respect of bogus purchases for the latter year and allowing both appeals based on the similarity of issues.