2018 (3) TMI 2034 - ITAT MUMBAI

Bogus purchases - addition made on account of purchases made from five parties which were declared by Sales Tax Department as suspicion suppliers - AO made the addition of the purchases on the ground that VAT authorities have treated the sales as non-genuine since these suppliers had not paid VAT on the sales effected by them - CIT(A) deleted addition - HELD THAT:- CIT(A) observed that the assessee has requested the AO to give them copies of all the materials/ information/ evidences, on the basis of which AO has formed his opinion to make disallowance of such referred purchases. No such materials were supplied to the assessee before using the same against it. CIT(A) further observed that no infirmity has been pointed out in the documents submitted by the assessee.

CIT(A) observed that assessee has produced the proof of such payment through banking channel but the AO has failed to substantiate that the assessee received it back in cash. During the year the GP was higher as compared to the last three years which clearly indicates that the current year income is not understated. As per CIT(A) if the suppliers have not paid VAT charges to the Govt. but taken the same from the purchases, such differential amounts need to be added in the hands of dealer and they are liable for any action for their defaults.

CIT(A) also stated that the assessee on its part has submitted purchase invoice, stock movement records, VAT registration number, ledger account, bank statement reflecting entries made to the said parties against the purchases from it etc., however, no fault has been found in all these documents by the AO.

Thereafter CIT(A) recorded detailed finding which has not been controverted by learned DR by bringing any positive material on record. We also found that GP rate of the assessee during the year has doubled as compared to the earlier year. Accordingly, we do not find any reason to interfere in the finding so recorded by CIT(A) resulting into deletion of addition made on account of purchases made from suspicion parties. Decided against revenue.