2025 (1) TMI 1164 - AT - Income Tax

Bogus purchases - HELD THAT - We delete the addition made by the ld. AO in respect of purchases made from the 10 parties which were held as non-genuine purchases since nothing cogent have been brought on record to controvert the corroborative documentary evidences placed on record and pointing out any discrepancies or defects in the same. Accordingly ground no.1 taken by the assessee is allowed. Disallowance u/s. 40(a)(ia) for not furnishing Form-15G/H - as submitted Forms-15 G/H produced by the assessee during the remand proceedings - HELD THAT - Since authorities below have recorded non furnishing of these documents before them we find it appropriate to remit this issue before the file of ld. Jurisdictional Assessing Officer (JAO) for the limited purpose of verification of Form - 15G/H in respect of the disallowance made u/s. 40(a)(ia). Ld. JAO is directed to verify and examine the same and if found proper in accordance to the provisions of the law consider the claim of the assessee accordingly. Thus ground no.2 raised by the assessee is allowed for statistical purposes.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment were:

• Whether the addition of Rs. 3,71,36,606/- as non-genuine purchases from ten parties was justified.
• Whether the disallowance of Rs. 13,36,294/- under Section 40(a)(ia) for interest expenditure was valid, given the Forms-15G/H produced by the assessee during remand proceedings.

ISSUE-WISE DETAILED ANALYSIS

Non-Genuine Purchases

• Relevant Legal Framework and Precedents: The assessment involved the genuineness of purchases claimed by the assessee, which were disallowed by the Assessing Officer (AO) due to non-verification of suppliers. Relevant precedents include the Bombay High Court's rulings in CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. and Mohommad Haji Adam & Co., which addressed the treatment of purchases when suppliers are unresponsive.
• Court's Interpretation and Reasoning: The Tribunal considered the documentary evidence provided by the assessee, including sales invoices, custom shipping bills, and bank realization certificates, which mapped purchases to export sales. The Tribunal found that merely because suppliers did not appear before the AO, it could not be concluded that the purchases were not genuine.
• Key Evidence and Findings: The assessee provided detailed documentary evidence, including ledger accounts, payment proofs, and export documentation, which were not disputed by the Revenue. The Tribunal noted that the Revenue accepted similar transactions in the subsequent assessment year.
• Application of Law to Facts: The Tribunal applied the legal principles from the cited precedents, emphasizing that purchases cannot be rejected without disturbing the sales in cases of traders. It concluded that the addition should be limited to the profit element on alleged bogus purchases.
• Treatment of Competing Arguments: The Tribunal considered the AO's findings and the CIT(A)'s agreement with those findings but ultimately found the assessee's evidence compelling enough to overturn the disallowance.
• Conclusions: The Tribunal deleted the addition made by the AO, finding that the assessee adequately demonstrated the genuineness of the purchases with corroborative evidence.

Disallowance under Section 40(a)(ia)

• Relevant Legal Framework and Precedents: The disallowance was made due to the alleged non-filing of Forms-15G/H, which are required to claim exemption from tax deduction at source on interest payments.
• Court's Interpretation and Reasoning: The Tribunal noted that the assessee claimed to have submitted these forms, and the disallowance was based on the AO's assertion of non-filing.
• Key Evidence and Findings: The assessee provided loan confirmation letters and Forms-15G/H in the appellate proceedings, which were not verified by the lower authorities.
• Application of Law to Facts: The Tribunal found it appropriate to remit the issue back to the Jurisdictional Assessing Officer for verification of the forms.
• Treatment of Competing Arguments: The Tribunal acknowledged the AO's position but allowed for the possibility that the forms were submitted, directing a re-examination.
• Conclusions: The Tribunal remitted the issue to the AO for verification of the Forms-15G/H, allowing the ground for statistical purposes.

SIGNIFICANT HOLDINGS

• Core Principles Established: The Tribunal emphasized the principle that purchases cannot be deemed non-genuine solely due to non-appearance of suppliers if corroborative evidence supports the transactions. It also reinforced the need for verification in cases of procedural disallowances like those under Section 40(a)(ia).
• Final Determinations on Each Issue: The Tribunal allowed the appeal on the issue of non-genuine purchases by deleting the addition. On the disallowance under Section 40(a)(ia), the Tribunal remitted the matter for further verification.