2020 (8) TMI 760 - AT - Income Tax

Bogus purchases - Unexplained expenditure - purchases have shown to be made are bogus and non-existent - HELD THAT - Purchases were actually made and the same was not disputed by the Revenue Authorities at any point of time. From the perusal of the assessment order, these purchases were reflected in subsequent Assessment Year i.e. 2012-13, the purchases were shown by the assessee in subsequent year. In fact, during the search no incriminating documents were found. AO proceeded on the basis of mere assumption that purchases were bogus despite knowing the fact that the purchases were reflected in the books of accounts for A.Y. 2012-13. The Assessee established before the Assessing Officer that the purchases were genuine and the Assessing Officer has also accepted the same, therefore, Section 69C will not be applicable in the present case for making such additions. Hence, the CIT(A) correctly deleted the addition. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition on account of unexplained expenditure.
2. Verification of the existence of entities from which purchases were made.
3. Opportunity for the Assessing Officer (AO) to rebut the submissions made by the assessee.
4. Applicability of Section 69C for disallowance of purchases.

Detailed Analysis:

1. Deletion of Addition on Account of Unexplained Expenditure:
The Revenue challenged the CIT(A)'s decision to delete an addition of ?7,17,95,500 made by the AO on account of unexplained expenditure. The AO had concluded that the purchases of TMT Bars from M/s Ganesh Traders and M/s Trade Link were not genuine, as the shops were either closed or nonexistent. However, the CIT(A) found that the purchases were recorded as advances in the books for AY 2011-12 and were debited in AY 2012-13. The CIT(A) held that the disallowance should be considered in the year the purchases were debited, thus deleting the addition for AY 2011-12.

2. Verification of the Existence of Entities:
The AO's investigation revealed that the shops of M/s Ganesh Traders and M/s Trade Link were either closed or nonexistent. Despite this, the CIT(A) noted that the goods were delivered and payments were made through banking channels. The CIT(A) emphasized that the non-availability of the sellers did not negate the fact that the goods were received and paid for, thus rejecting the AO's claim of bogus purchases.

3. Opportunity for AO to Rebut Submissions:
The Revenue contended that the CIT(A) accepted the assessee's contentions without giving the AO an opportunity to rebut the submissions. However, the CIT(A) had considered the AO's findings and the assessee's evidence, including bank statements and transport documents, before arriving at the decision to delete the addition.

4. Applicability of Section 69C:
The CIT(A) concluded that Section 69C, which pertains to unexplained expenditure, was not applicable in this case. The AO had accepted that the goods were delivered and payments were made through banking channels. The CIT(A) found no evidence of unaccounted cash transactions during the search, thus deeming the AO's addition as based on conjectures and surmises.

Conclusion:
The ITAT upheld the CIT(A)'s decision to delete the addition of ?7,17,95,500 for both AY 2011-12 and AY 2012-13. The Tribunal agreed that the purchases were genuine, recorded in the books, and paid for through banking channels. The AO's claims of bogus purchases were dismissed due to lack of substantial evidence. Consequently, both appeals filed by the Revenue were dismissed.