The Pune bench of the Income Tax Appellate Tribunal (ITAT) has held that the genuineness of the purchases cannot be suspected if the Assessing Officer has not discarded the sales.
The assessment against the assessee was re-opened by the Assessing Officer by making an addition of Rs.2,78,55,984/- as bogus purchases.
On first appeal, the Commissioner of Income Tax (Appeals) restricted the addition to 3% of the said purchases, i.e. Rs.8,35,680/-.
Before the Tribunal, the assessee produced the evidence in the form of Lorry receipts, weighment slips, Octroi receipts etc.
It was noted that the assessee has failed to substantiate movement of goods from the suppliers to the assessee. The Assessing Officer during assessment proceedings has not discarded total sales of the assessee.
The Tribunal observed that the sales of the assessee have been accepted by the Department.
“Without purchases, there cannot be sales. Thus, entire alleged bogus purchases cannot be added in the hands of the assessee,” the Tribunal said.
“Under such circumstances, the possibility of assessee purchasing the goods from grey market and procuring bills from the Hawala dealers cannot be ruled out. The CIT(A) after considering catena of judgments on various facets including the GP ratio to be applied in different set of industries estimated 3% of GP addition on account of bogus purchases in the hands of the assessee. We find the impugned order is reasoned and hence, requires no interference. Taking into consideration entirety of facts, the impugned order is upheld,” the Tribunal added.
